ACC 307 WK 5 Midterm Exam Chapter 4

May 8th, 2015
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ACC 307 WK 5 Midterm Exam Chapter 4

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CHAPTER 4Student: ___________________________________________________________________________1.The realization requirement gives an incentive to own assets that have increased in value and to sell assets whose value has decreased.TrueFalse2.A sole proprietorship purchased an asset for $1,000 in 2012 and its value was $1,500 at the end of 2012. In 2013, the sole proprietorship sold the asset for $1,400. The sole proprietorship realized a taxable gain of $400 in 2013 but an economic loss of $100 in 2013.TrueFalse3.Judy is a cash basis attorney. In 2012, she performed services in connection with the formation of a corporation and received stock with a value of $4,000 for her services. By the end of the year, the value of the stock had decreased to $2,000. She continued to hold the stock. Judy must recognize $4,000 of gross income from the stock for 2012.TrueFalse4.Barney painted his house which saved him $3,000. According to the realization requirement, Barney must recognize $3,000 of income.TrueFalse5.Nicholas owned stock that decreased in value by $20,000 during the year, but he did not sell the stock. He earned $45,000 salary, but received only $34,000 because $11,000 in taxes were withheld. Nicholas saved $10,000 of his salary and used the remainder for personal living expenses. Nicholass economic income for the year exceeded his gross income for tax purposes.TrueFalse6.The fac

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