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CHAPTER 7

ACCOUNTING PERIODS AND METHODS AND DEPRECIATION

Group 1 - Multiple Choice Questions

1. C (1/12 of $150,000) x 2 8. C (20% x $35,000) 16. D (Section 7.9)

(Section 7.1) (Sections 7.4, 7.5) 17. A (Section 7.9)

2. D (Section 7.1) 9. B ($14,000 x 7.14%) (Section 7.4) 18. C (Section 7.9)

3. D (Section 7.1) 10. C (Section 7.4) 19. C (40% + 35%)

4. D (Section 7.2) 11. A (Section 7.4) (Section 7.9)

5. B (Section 7.2) 12. C (Section 7.5)

6. C ($100,000 x 1.364%) 13. C (Section 7.6)

(Sections 7.3, 7.4) 14. D (Section 7.8)

7. A (Sections 7.4, 7.6) 15. D (Section 7.8)

Group 2 - Problems

1. a. $11,000 = ($300,000 / 12 x 2 x (35% maximum rate + 1%)) – $7,000.

b. May 15, 2009. (Section 7.1)

2. Sales income $65,000

Expenses:

Other than rent and interest –40,000

Rent ($12,000 x 1/6) –2,000

Interest –0

Net Income $23,000

(Section 7.2)

3. Income:

Other than rental $220,000

Rental 21,000

Expenses:

Other than rental –170,000

Rental ($12,000 / 6) –2,000

Net Income $ 69,000

(Section 7.2)

4. a. Even though the contribution is paid in cash in 2009, it is deductible in 2008 if it is designated as a contribution for 2008.

b. If an election has been made, the increase in value of savings bonds is included in income each year even though no cash is received.

c. The half-year prepayment of interest for 2009 is not allowed as a deduction on her 2008 tax return.

d. All of the standard business expenses which have already been invoiced and are paid at year end are deductible in 2008.

e. Even though the work was performed in 2008, the income is not recognized until it is received in cash in 2009. (Section 7.2)

5. Land is not allowed to be depreciated. It is held on...