1. Speak Corporation, a calendar-year accrual basis taxpayer, sells packages of foreign language lessons to individuals planning to work overseas. In December 2014, it sold and received payment for $600,000 of 24-month lesson packages to be provided evenly through 2015 and 2016. Speak Corporation will recognize the $600,000 of income

A) all in 2014

B) half in 2015 and half in 2016

C) all in 2015

D) all in 2016

2. Rebecca is the beneficiary of a $500,000 insurance policy on her husband's life. She elects to receive $52,000 per year for 10 years rather than receive the entire amount in a lump sum. Of the amount received each year

A) $2,000 is taxable income.

B) $$50,000 is taxable income.

C) $52,000 is taxable income.

D) $5,000 per year is tax free as a death benefit.

3. Britney is beneficiary of a $150,000 insurance policy on her father's life. Upon his death, she may elect to receive the proceeds in five yearly installments of $32,000 or may take the $150,000 lump sum. She elects to take the lump sum payment. What are the tax consequences in year one?

A) All $32,000 each year is taxable.

B) $10,000 interest is taxable in the first year.

C) There is no taxable income.

D) The lump sum payment is taxable.

4. In December 2014, Max, a cash basis taxpayer, rents an apartment to Kadeem. Max receives both the first and last months' rent totaling $1,800 plus a security deposit of $400. The amount of income reported as taxable in 2014 is

A) $400

B) $1,300

C) $1,800

D) $2,200

5. Nora's Music Lessons Inc. is a calendar-year taxpayer using the accrual method of accounting. On October 1 of this year, the corporation received $1,200 for a 1-year contract beginning on that date to provide 10 lessons. The company provided six lessons this year under the contract. How much should the corporation include in income this year with respect to this contract?

A) $480

B) $360

C) $720

D) $1,200

Answer rating: 100% (QA)

1 C all in 2015 2 A 2000 is taxable in... View the full answer