Homework Es Week2
1. Question:
(TCOs 1, 2, and 3) Ted is the sole shareholder of a C corporation, and Sue owns a sole proprietorship. Both businesses were started in 2010, and each business sustained a $5,000 net capital loss for the year. Which of the following statements is correct? Your Answer: Ted’s corporation can deduct the $5,000 capital loss in 2010. Ted’s corporation can deduct $3,000 of the capital loss in 2010. Sue can carry the capital loss back three years and forward five years. Sue can deduct the $5,000 capital loss against ordinary income in 2010. None of the above. CORRECT Instructor Explanation: E. A corporation cannot deduct a net capital loss in the year incurred (options a. and b.). Individuals cannot carry back net capital losses (option c.), and can deduct net capital losses against ordinary income only to the extent of $3,000 in any year (option d.). Page 1-18. Points Received: 5 of 5 2. Question:
(TCOs 2 and 3) Which, if any, of the following provisions cannot be justified as mitigating the effect of the annual accounting period concept? Your Answer: Nonrecognition of gain allowed for involuntary conversions. CORRECT ANSWER Net operating loss carryback and carryover provisions. Carry over of excess charitable contributions. Use of the installment method to recognize gain. INCORRECT Carry over of excess capital losses. Instructor Explanation: A. The involuntary conversion provision is based on the wherewithal to pay concept (choice a.). Page 1-30. Points Received: 0 of 5 3. Question:
(TCOs 1, 2, 3, and 5) Turner, a successful executive, is negotiating a compensation plan with his potential employer. The employer has offered to pay Turner a $720,000 annual salary, payable at the rate of $60,000 per month. Turner counteroffers to receive a monthly salary of $50,000 ($600,000 annually)
(TCOs 1, 2, and 3) Ted is the sole shareholder of a C corporation, and Sue owns a sole proprietorship. Both businesses were started in 2010, and each business sustained a $5,000 net capital loss for the year. Which of the following statements is correct? Your Answer: Ted’s corporation can deduct the $5,000 capital loss in 2010. Ted’s corporation can deduct $3,000 of the capital loss in 2010. Sue can carry the capital loss back three years and forward five years. Sue can deduct the $5,000 capital loss against ordinary income in 2010. None of the above. CORRECT Instructor Explanation: E. A corporation cannot deduct a net capital loss in the year incurred (options a. and b.). Individuals cannot carry back net capital losses (option c.), and can deduct net capital losses against ordinary income only to the extent of $3,000 in any year (option d.). Page 1-18. Points Received: 5 of 5 2. Question:
(TCOs 2 and 3) Which, if any, of the following provisions cannot be justified as mitigating the effect of the annual accounting period concept? Your Answer: Nonrecognition of gain allowed for involuntary conversions. CORRECT ANSWER Net operating loss carryback and carryover provisions. Carry over of excess charitable contributions. Use of the installment method to recognize gain. INCORRECT Carry over of excess capital losses. Instructor Explanation: A. The involuntary conversion provision is based on the wherewithal to pay concept (choice a.). Page 1-30. Points Received: 0 of 5 3. Question:
(TCOs 1, 2, 3, and 5) Turner, a successful executive, is negotiating a compensation plan with his potential employer. The employer has offered to pay Turner a $720,000 annual salary, payable at the rate of $60,000 per month. Turner counteroffers to receive a monthly salary of $50,000 ($600,000 annually)