DeVry ACCT 324Midterm Exam

DeVry ACCT 324Midterm Exam

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1. Question : (TCO 9) In terms of probability, which of the following taxpayers would least likely be audited by the IRS?

Student Answer: Taxpayer owns and operates a check-cashing service.

Taxpayer is a self-employed electrician.

Taxpayer just received a $3 million personal injury award as a result of a lawsuit.

Taxpayer just won a $1 million slot machine jackpot at a Las Vegas casino.

Taxpayer is employed as a special agent by the IRS.

2. Question : (TCO 9) A characteristic of fraud penalties is:

Student Answer: Civil fraud can result in a fine and a prison sentence.

When negligence and civil fraud apply to a deficiency, both penalties are imposed.

The criminal fraud penalty is 75% of the deficiency attributable to the fraud.

The IRS has a greater burden of proof in the case of criminal fraud than with civil fraud.

None of the above

3. Question : (TCO 1) Federal tax legislation generally originates in what body?

Student Answer: Internal Revenue Service

Senate Finance Committee

House Ways and Means Committee

Senate floor

None of the above

4. Question : (TCO 1) Subchapter S covers which specific area of tax law?

Student Answer: Tax rates

Partnerships

Capital gains and losses

Corporations

None of the above

5. Question : (TCO 11) Kyle, whose wife died in December 2009, filed a joint tax return for 2009. He did NOT remarry, but has continued to maintain his home in which his two dependent children live. What is Kyle's filing status regarding 2012?

Student Answer: Head of household

Surviving spouse

Single

Married filing separately

None of the above

6. Question : (TCO 11) Arnold is married to Sybil, who abandoned him in 2008. He has NOT seen or communicated with her since April of that year. He maintains a household in which their son, Evans, lives. Evans is age 25 and earns over $20,000 each year. For tax year 2011, Arnold's filing status is:

Student Answer: married filing jointly.

married filing separately.

head of household.

surviving spouse.

single.

7. Question : (TCO 7) Orange Cable TV Company, an accrual basis taxpayer, allows its customers to pay by the year in advance ($350 per year), or two years in advance ($680). In September 2011, the company collected the following amounts applicable to future services: