61) In April 2009 of this year, Emma acquired a machine for $50,000 for use in her business. The machine is classified as 7-year property. Emma elects out of bonus depreciation and does not expense the asset under Sec. 179. Emma's depreciation on the machine this year is
62) During the current year, a corporation sells equipment for $300,000 that it had purchased and placed in service in 2007. The equipment cost $270,000, and $60,000 of depreciation deductions was allowed. The results of the sale are
A. ordinary income of $90,000.
B. Sec. 1231 gain of $90,000.
C. ordinary income of $60,000 and LTCG of $30,000.
D. ordinary income of $60,000 and Sec. 1231 gain of $30,000.
63) Susie owns a ranch in Wyoming, which Pat offers to purchase. Susie is not willing to sell the ranch but is willing to exchange the ranch for an apartment complex in Louisiana. The complex is available for sale. Pat purchases the apartment complex in Louisiana from Jody and transfers it to Susie in exchange for Susie's ranch. The ranch and the complex each have a $1,000,000 fair market value. Which of the following is true?
A. The transaction qualifies as a like-kind exchange for Pat but not for Susie.
B. The transaction qualifies as a like-kind exchange for both Pat and Susie.
C. The transaction qualifies as a like-kind exchange for Susie but not for Pat.
D. The transaction does not qualify as a like-kind exchange for either Pat or Susie.
64) A married person who files a separate return can claim a personal exemption for his or her spouse if the spouse is not the dependent of another and has
A. gross income that is less than the personal exemption.
B. adjusted gross income that is less than the personal exemption.
C. no gross income.
D. no taxable income.
65) Ricky has rented a house from Sarah since last year. The rent is usually $800 per month, but Sarah reduced the monthly rent down to $600 for all 12 months this year in exchange for Ricky constructing an addition to the house. The addition has a fair market value of $3,500. How much total rental income must Sarah report this year?
66) Alex is a calendar-year sole proprietor. He began business on December 1 of this year. He uses the accrual method of accounting. Alex had the following collections in the same month: He collected $7,000 in December from clients who paid cash for services to be performed next year. He collected $5,000 in December for services performed during December, which he deposited in an operating account on December 31 of this year. He collected $9,000 in December on accounts receivable for services performed in December, which he deposited in an operating account on January 2 of next year. What is the amount Alex must include in his income for December?
(Question 66- 74 are also there. Due to lack of space, have not included them here.)
75) Which of the following would terminate a Subchapter S election?
A. Estate becomes a shareholder.
B. Grantor trust becomes a shareholder.
C. Voting trust becomes a shareholder.
D. Partnership becomes a shareholder.
76) The function of auditing is
A. to locate every financial error
B. to provide interested parties with added assurance that the financials are not materially inaccurate
C. to provide more precise accounting information for accurate tax reporting
D. to locate every dollar misappropriated
77) Auditing is based on the assumption that financial data are verifiable. Data are verifiable when two or more qualified individuals,
A. working together, prove, beyond doubt, the data’s accuracy
B. working independently, reach similar conclusions
C. working independently, prove, beyond doubt, the data’s truthfulness
D. working together, agree on the data’s accuracy
78) Statement on Quality Control Standards No. 2 identifies certain quality control elements that should be considered when performing which types of services?
A. Auditing, accounting, and review services
B. Auditing, tax, and review services
C. Accounting, tax, and review services
D. Auditing, accounting, and tax services
79) Internal auditors are primarily involved with
A. compliance audits
B. operational audits
C. compliance audits and operational audits
D. financial statement audits
80) The statement that the reviewer “is not aware of any material modifications that should be made to the statements in order for them to be in conformity with GAAP” is known as
A. reasonable assurance
B. negligent performance
C. negative assurance
D. necessary ignorance
81) The assessment of inherent risk requires considering matters that have a pervasive effect on assertions for all or many accounts and matters that may pertain only to assertions for specific accounts. Which of the following is an example of a pervasive effects matter?
A. Complexity of calculations
B. Management turnover, reputation, and accounting skills
C. Susceptibility to misappropriation
D. Sensitivity of operating results to economic factors
82) Specific audit objectives are normally
A. the same as the categories of management’s financial statement assertions
B. developed for each item in the financial statements and derived from the categories of management’s financial statement assertions
C. management’s assertion of fairness.
D. broken down into eight types.
83) The Committee of Sponsoring Organizations (COSO) report identified five interrelated components of internal control. Since then, a sixth category has been identified, which is
B. risk assessment
C. information and communication
D. antifraud programs and controls
84) Which of the following necessary controls would address a potential misstatement arising from a voucher being paid twice?
A. Periodic independent bank reconciliations
B. Electronic cancellation of vouchers and supporting information when a check is issued
C. Separate duties for approving payment vouchers and signing checks
D. A computer comparing the sum of checks issued with the entry to cash disbursements
85) An effective accounting system should identify and record only the valid transaction of the entity that occurred in the current period, which relates to the
A. rights and obligations assertion
B. presentation and disclosure assertion
C. valuation or allocation assertion
D. existence or occurrence assertion
.......(Qs 86-89 are also there. Due to lack of space have not included here)..........
90) Audit sampling is involved whenever an auditor
Examines 100% of the population
inference about a population characteristic based on a partial examination
of that population
Performs tests of controls
Performs tests of details
91) How can long-term assets best be tested for ownership?
Examining documents of title
Reviewing the ledger to ensure the item is listed
92) How can long-term assets best be tested for current present value?
Reviewingthe depreciation schedule for accuracy and completeness
Physically examining the assets and appraising the assets
Applying time value of money analysis
Performing an analytical review
93) Because of the effects of
circulation, some audit evidence is more reliable than other evidence. Which
of the following is generally considered to be most reliable?
C.Receipted bank deposit slips
D.Cutoff bank statements
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