LSU ACCT 3221 Chapter 3

LSU ACCT 3221 Chapter 3
True/False: For tax purposes, income is recognized if the transaction meets three
conditions: economic benefit, occurrence and completion, and not exempt from tax.
True
True/False: Marie performed bookkeeping services for Donald charging him $350.
Donald agreed that he would pay Marie's credit card bill for the same amount. Marie has
received an economic benefit and must report $350 in income on her tax return.
True
True/False: John owns 200 shares of Coca Cola common stock that have increased in
value by $5 each. He must report the increase in income because a transaction has
occurred.
False
True/False: If the process of a transaction begins and ends with an economic benefit for
the taxpayer, he or she must report it in income even though the income is specifically
exempt from tax.
False
True/False: Almost all individuals use the cash receipts and disbursements method of
accounting.
True
True/False: Constructive receipt means the income is available to or in the control of the
taxpayer regardless of whether the taxpayer chooses to utilize the income.
True
True/False: Income can only be realized in money or services.
False
True/False: If Marc, an accountant, agrees to provide tax services to a neighbor in
exchange for the neighbor agreeing to fix his pool, Marc but not his neighbor will have to
report income on this transaction at fair market value.
False
True/False: There are some instances where a cash-basis taxpayer can report income
as though he or she is an accrual basis taxpayer.
True
True/False: For most individuals, interest income comes from interest-earning deposits
at banks, savings and loans, or credit unions.
True