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MULTIPLE CHOICE- PROBLEM Spartan Corporation had office supplies valued at 40,000 on January 1 2020. At the end of the first calendar quarter it had 80,000 worth of office supplies. Total supplies purchased were 250,000 during the period. Compute the supplies expense to be deducted during the first ...

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MULTIPLE CHOICE- PROBLEM

1. Spartan Corporation had office supplies valued at 40,000 on January 1 2020. At the end of the first calendar quarter it had 80,000 worth of office supplies. Total supplies purchased were 250,000 during the period.

Compute the supplies expense to be deducted during the first quarter. 280,000 250,000 210,000 (40K+250K-80K) 290,000

2. A non-resident alien not engaged in business incurred business expenses of 100,000 and personal expenses of 20,000.

How much is expense deductible from his gross income? 100,000 20,000 0 120,000

3. taxpayer paid the following salaries during the year:

Salaries of administrative employees

80,000

Salaries of sales and marketing employees

70,000

Salaries of factory production workers

120,000

Compute the deductible salary expense 120,000

270,000 150,000 (80K+70K) 200,000

4. On July 1 2018, a taxpayer purchased equipment for 500,000 which was estimated to be useful until July 1 2023, with an expected 100,000 residual value.

Compute the 2018 depreciation expense using the straight-line method. 80,000 40,000 50,000 0

5. On September 30 2020, a taxpayer borrowed 1 million at 10% annual interest to finance his acquisition of a luxury car.

Compute the deductible interest expense in 2020. 50,000 0 75,000 25,000

6. A taxpayer paid 45,000 property insurance having a 12 month coverage starting March 1, 2018.

Compute the deductible insurance expense in 2018. 37,500 (45K/12mos x 10) 45,000 7,500 0

7. A storm resulted in the loss of the following livestock:

Value of two heifers (purchased at 15,000 each)

40,000

Value of a bull (purchased for 18,000)

24,000

Value of 12 calves worth 6,000 each

72,000

Total value of lost livestock

136,000

Determine the deductible loss for taxation purposes. 0 120,000 48,000 (15k x 2=30k+18k) 64,000

8. Mr. Jun, a professional practitioner, incurred the following expenses during the period:

Salaries of household maids

50,000

Salaries of office staf

30,000

Office utilities

12,000

Office supplies

8,000

Depreciation of personal car

15,000

Depreciation of office equipment

Compute the total deductible expenses 135,000 70,000 (30K+12K+8K+20K) 50,000 100,000

20,000

9. The following relate to the building of a taxpayer

Fair market value

6,000,000

Purchase price

5,000,000

Carrying amount

4,500,000

Remaining useful life

9 years

Depreciation method

Straight line

What is the deductible amount of depreciation expense? 555,555 500,000 (4.5M/9) 666,667 0

10. The personal car of the taxpayer had the following data

Fair market value

6,000,000

Purchase price

5,000,000

Estimated useful life

10 years

500,000 250,000 0 600,000 11. The following relate to the inventory of tools held by the taxpayer

Inventory of tools, January 1, 2019

120,000

Purchases of tools

300,000

Inventory of tools, December 31, 2019 140,000

What is the amount of deductible tools expense? 0 280,000 (120K+300K-140K) 300,000 120,000...