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Exam 6: Business Expenses

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Question 61

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Carl,age 59,and Cindy,age 49,are married and file a joint return.During the current year,Carl had a salary of $41,000 and Cindy had a salary of $35,000.Both Carl and Cindy are covered by an employer-sponsored pension plan.Their adjusted gross income for the year is $94,000.Determine the maximum IRA contribution and deduction amounts. ​ Maximum Maximum Contribution Deduction

A) $12,000 $12,000
B) $11,000 $11,000
C) $12,000 $11,000
D) $11,000 $9,000
E) $13,000 $13,000

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Question 62

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Sandra,who owns a small accounting firm,pays $1,500 to the local country club for food and entertainment for her annual employee Christmas party.How much of the $1,500 in meals and entertainment cost can Sandra deduct?

A) $- 0 -
B) $500
C) $750
D) $1,000
E) $1,500

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Question 63

Multiple Choice

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Mathew works for Levitz Mortgage Company.The company has an accountable reimbursement plan.During the year Levitz reimburses Mathew $5,400 for his business expenses.Mathew's adjusted gross income for the year is $45,000.His business expenses are as follows: ​ What amount will Mathew be able to deduct as a miscellaneous itemized deduction?

To be deductible,employee compensation must be for services actually performed by the employee and the amount must be reasonable.

Rodrigo works as a salesperson for a auto parts manufacturer.His job requires that he spend most of his time outside the office calling on customers.In addition,to supplement his income he works 1 night a week and on weekends as a waiter at an exclusive seafood restaurant in the city.During the year,he keeps the following record of his travel: ​ If he uses the standard mileage rate,what amount can she deduct as a business automobile expense?

Melissa is a corporate sales representative for Computer City.Melissa receives a monthly travel allowance from Computer City to cover her travel costs (transportation,food,lodging,entertainment,etc. ) .If Melissa is required to account to Computer City for the use of the travel advance and to return any excess travel advance I.Melissa will not have to show any aspect of the travel reimbursement or expenses incurred if she spends all of the reimbursement on valid travel expenses. II.Melissa will have gross income to the extent her travel allowance used for travel expenses reimbursed. ​

Fred and Irma are married with salaries of $49,000 and $44,000,respectively.Their combined AGI is $109,000.Both are active participant in their companies' qualified pension plans.Determine their maximum combined IRA contribution and deduction amounts? ​ Maximum Maximum Contribution Deduction

Which of the following taxes paid by the Fowlers Company can be deducted during 2017? I.State sales tax on utilities. II.Federal income tax paid in 2017 when filing Fowlers' 2016 corporate tax return. ​

Kyle is married and a self-employed landscaper.During the current year,Kyle pays $3,000 for health insurance coverage for himself.He pays another $400 for coverage for his employee,Tabatha.How should Kyle deduct the health insurance cost? i.Kyle deducts a total of $3,400 for AGI.II.Kyle cannot deduct any portion of his premium of $3,000 for AGI if his spouse is covered by a health plan through her employer. ​

Carlotta pays $190 to fly from Santa Fe to Denver.She spends three days finalizing a contract with the management of El Rancho Restaurant for the delivery of green chili in the upcoming year.Because she finalized the contract,Carlotta spends two-days attending the National Western Stock Show.Hotel costs are $108 per night and meals are $22 per day.How much can Carlotta deduct as business expenses from her trip?

Chelsea is an employee of Avondale Company.Chelsea's adjusted gross income for the current year is $66,000.Chelsea would like to make the maximum contribution to her individual retirement account this year.Which of the following statements about Chelsea's contribution and deduction amounts is (are) true? I.If Chelsea is single and is covered by a qualified pension plan,she is allowed to contribute $5,500 to her IRA account,but she is allowed a deduction for only $3,300 of the contribution because her adjusted gross income is greater than $62,000. II.If Chelsea is married and covered by a qualified pension plan and her husband does not work,they can contribute and deduct $5,500 to two separate IRA accounts (one for herself and one for her husband) . ​

Which of the following business expenses is/are subject to a 50% deduction limit for 2017? I.Gifts II.Incidental expenses while traveling ​

Darlene and Devin are married.Darlene earns $48,000 and Devin earns $41,000.Their adjusted gross income is $97,000.Darlene's employer provides her with a qualified pension plan,Devin's does not.What are Darlene and Devin's maximum combined IRA contribution and deduction amounts? ​ Contribution Deduction

George is a full-time student at Indiana State University majoring in accounting.He works 12 to 20 hours per week at a local CPA firm inputting data for spreadsheets to prepare monthly financial statements for the firm's clients.George's tuition,fees,books,and supplies related to his education are $3,000 for the current year. I.The educational costs are deductible from AGI because they prepare him for a new trade or business. II.The education costs are deductible because it is part of a program that will qualify George to become a CPA. ​

Walter is a cash basis taxpayer with a drapery cleaning business.In the current year he determines he will never receive payment from Davis for cleaning services provided to Davis.Can Walter record a deduction for the bad debt? Explain.

Sally and Kelly are both enrolled in a graduate accounting course at Deacon University.Discuss how it is possible that Sally can deduct the cost of her tuition as an education expense while Kelly's tuition is not deductible.

Caroline is a doctor in Little Rock.She travels to Atlanta to attend a two-day seminar for health professionals about investing in real estate.Transportation expenses are $400,the hotel cost $104/day,and meals cost $50/day.How much can Caroline deduct for travel to the seminar?

Phil and Faye are married and have 3 children ages 11,14,and 17.Phil and Faye's adjusted gross income for the year is $200,000.The maximum they can contribute to their children's Coverdell Education Savings accounts is Each Account Total Contribution

Three years ago Edna loaned Carol $80,000 to help her get started in the TV repair business.Carol gave Edna a 5-year,9% note with semiannual repayment terms.Edna and Carol have been friends for over 35 years.Edna is a recently retired college professor with a significant portfolio of investments.During the current year,Carol became ill and couldn't continue operating the business.She has repaid $10,000 of the debt owed Edna.Because Carol has no remaining assets,no additional payments will be made to any of her creditors.For the current year,Edna realizes a

Aaron is a 34-year-old head of household and a self-employed taxpayer.He contributed the maximum amount to his IRA account during the current year,and his net earnings from his business totaled $29,000.How much can Aaron deduct for AGI this year?