Multiple Choice Questions
1. Accountants recognize revenue when it is both realized and
a. Recorded.
b. Accumulated.
c. Collected.
d. Earned.
2. For tax purposes, one of the requirements to recognize income is that
a. The income must be tax-exempt.
b. There must be an economic benefit.
c. The transaction must occur but completion of the transaction is not necessary.
d. There must be a cash transaction.
3. Income may be realized in the form of
a. Money or services.
b. Only money.
c. Money, services, or property.
d. None of the above.
4. When filing their tax returns, almost all individuals use
a. The cash receipts and disbursements method.
b. The accrual method.
c. The recognition method.
d. The hybrid method.
5. An individual must complete Schedule B (Forms 1040A or 1040) if the following situation occurs:
a. Receives child support payments of $1,600.
b. Receives interest income over $1,500.
c. Receives qualified dividends of $1,050.
d. Receives interest income of $1,450.
6. The basis of the property received as a dividend by a shareholder of a corporation is
a. The book value at the date of distribution.
b. The original cost at the date of purchase.
c. The accounting value at the date of distribution.
d. The fair market value at the date of distribution.
7. When an individual’s marginal ordinary income tax rate is 25%, the tax rate on qualified dividends is
a. 0%.
b. 15%.
c. 25%.
d. 5%.
8.Graciela, who is single, reported itemized deductions of $6,200 on her 2013tax return. Her itemized deductions included $200 of state taxes paid. In 2014, she received a $150 refund of state taxes paid in 2013. What is the amount that Graciela needs to report on her 2014 tax return? Use the Internet (www.irs.gov) to find out how much the standard deduction was for 2013.
a. $200.
b. $100
c. $0.
d. She needs to amend her 2013 tax return.
9. Provisional income is calculated by starting with Adjusted Gross Income (AGI) before social security benefits and adding back specific items. One of these items is
a. Employer-provided adoption benefits.
b. Taxable interest income.
c. Wages earned.
d. Qualified dividends.