Acct 429 Week 2 Home Work

1. (TCOs 1, 2, and 3) A characteristic of FICA is that (Points : 5) |

       it is imposed only on the employer.

       it applies when one spouse works for the other spouse.

       it provides a modest source of income in the event of loss of employment.

       it is administered by both state and federal governments.

       None of the above 

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2. (TCOs 2 and 3) Both economic and social considerations can be used to justify (Points : 5) |

       various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain additional education.

       disallowance of any deduction for expenditures deemed to be contrary to public policy (e.g., fines, penalties, illegal kickbacks, bribes to government officials).

       favorable tax treatment for accident and health plans provided for employees and financed by employers.

       allowance of a deduction for state and local income taxes paid.

       None of the above 

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3. (TCOs 1, 2, 3, and 5) The annual increase in the cash surrender value of a life insurance policy (Points : 5) |

       is taxed when the individual dies and the heirs collect the insurance proceeds.

       must be included in gross income each year under the original issue discount rules.

       reduces the deduction for life insurance expense.

       is not included in gross income each year because of the substantial restrictions on gaining access to the policy's value.

       None of the above 

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4. (TCOs 1, 2, 3, and 5) With respect to the prepaid income from services, which of the following is true? (Points : 5) |

       The treatment of prepaid income is the same for tax and financial accounting.

       A cash basis taxpayer can spread the income over the period in which services are to be provided if all of the services will be completed by the end of the tax year following the year of receipt.

       An accrual basis taxpayer can spread the income over the period in which services...