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Version 1 1 Test Bank for McGraw-Hill's Taxation of Business Entities 2023 Edition, 14e Brian Spilker Chapter 1 (All Answers at the end of the Chapter) 1) Smith operates a roof repair business. This year, Smith's business generated cash receipts of $32,000, and Smith made the following expenditures associated with his business: Advertising $ 500 Car and truck expenses 1,360 Depreciation 3,200 Employee compensation 5,000 Education 1,000 The education expense was for a two-week, nighttime course in business management. Smith believes the expenditure should qualify as an ordinary and necessary business expense. What net income should Smith report from his business? Smith is on the cash method and calendar year.
2) Smith operates a roof repair business. This year, Smith's business generated cash receipts of $32,660, and Smith made the following expenditures associated with his business: Advertising $ 535 Car and truck expenses 1,332 Depreciation 3,222 Employee compensation 5,175 Education 1,700 The education expense was for a two-week, nighttime course in business management. Smith believes the expenditure should qualify as an ordinary and necessary business expense. What net income should Smith report from his business? Smith is on the cash method and calendar year.
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3) Bryon operates a consulting business and he usually works alone. However, during the summer Bryon will sometimes hire undergraduate students to collect data for his projects. This past summer Bryon hired Fred, the son of a prominent businessman, for a part-time summer job.The summer job usually pays about $17,000, but Bryon paid Fred $27,000 to gain favor with Fred's father. What amount of Fred's summer wages can Bryon deduct for tax purposes? Bryon is on the cash method and calendar year.
4) Bryon operates a consulting business and he usually works alone. However, during the summer Bryon will sometimes hire undergraduate students to collect data for his projects. This past summer Bryon hired Fred, the son of a prominent businessman, for a part-time summer job.The summer job usually pays about $17,350, but Bryon paid Fred $28,400 to gain favor with Fred's father. What amount of Fred's summer wages can Bryon deduct for tax purposes? Bryon is on the cash method and calendar year.
5) Werner is the president and CEO of Acme, Incorporated, and this year, he took a prospective client to dinner. During the dinner, Werner and the client discussed a proposed contract for over $6 million as well as personal matters. After dinner, Werner took the client to a football game and no business was discussed. Werner paid $1,220 for an expensive (but not extravagant) dinner at a restaurant and spent $600 for tickets to the game. What is the deductible amount of these expenses? 2 / 4
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6) Crystal operates a business that provides typing and delivery services. This year, Crystal spent $2,500 to purchase special shirts that identify her employees and provide some notoriety for her business. The shirts are especially colorful and include logos on the front pocket and the back. Besides salary payments, Crystal also compensates her employees by offering to pay whole life insurance premiums for any that want to provide insurance coverage for their beneficiaries. This year, Crystal paid $5,000 in life insurance premiums. What amount of these payments can Crystal deduct? Crystal is on the cash method and calendar year.
7) Crystal operates a business that provides typing and delivery services. This year, Crystal spent $2,570 to purchase special shirts that identify her employees and provide some notoriety for her business. The shirts are especially colorful and include logos on the front pocket and the back. Besides salary payments, Crystal also compensates her employees by offering to pay whole life insurance premiums for any that want to provide insurance coverage for their beneficiaries. This year, Crystal paid $5,350 in life insurance premiums. What amount of these payments can Crystal deduct? Crystal is on the cash method and calendar year.
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Version 1 4 8) Judy is a self-employed musician who performs for a variety of events. This year, Judy was fined $250 by the city for violating the city's noise ordinance with a relatively loud performance. As a result, Judy contributed $1,000 to a campaign committee formed to recall the city's mayor. Judy normally hires three part-time employees to help her schedule events and transport equipment. Judy paid a total of $33,000 to her employees through June of this year. In June, Judy fired her part-time employees and hired her husband to replace them. However, Judy paid him $55,000 rather than $33,000. Judy is on the cash method and calendar year, and she wants to know what amount of these expenditures is deductible as business expenses.
9) Judy is a self-employed musician who performs for a variety of events. This year, Judy was fined $305 by the city for violating the city's noise ordinance with a relatively loud performance. As a result, Judy contributed $890 to a campaign committee formed to recall the city's mayor. Judy normally hires three part-time employees to help her schedule events and transport equipment. Judy paid a total of $34,100 to her employees through June of this year. In June, Judy fired her part-time employees and hired her husband to replace them. However, Judy paid him $53,900 rather than $34,100. Judy is on the cash method and calendar year, and she wants to know what amount of these expenditures is deductible as business expenses.
10) Danny owns an electronics outlet in Dallas. This year, he paid $600 to register for a four- day course in management in Chicago. Danny paid $800 in airfare and $1,000 for five nights' lodging. After the course, Danny spent the last day sightseeing. During the trip, Danny also paid $140 a day for meals at restaurants, and $80 a day for a rental car. What amount of these travel expenditures may Danny deduct as business expenses?
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