ACC 307 WK 5 Midterm Exam Chapter 7

May 8th, 2015
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ACC 307 WK 5 Midterm Exam Chapter 7

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CHAPTER 7 Student: ___________________________________________________________________________1.James is in the business of debt collection. He purchased a $20,000 account receivable from Green Corporation for $15,000. During the year, James collected $17,000 in final settlement of the account. James can take a $2,000 bad debt deduction in the current year.TrueFalse2.If a business debt previously deducted as partially worthless becomes totally worthless this year, only the amount not previously deducted can be deducted this year.TrueFalse3.Last year, taxpayer had a $10,000 nonbusiness bad debt. Taxpayer also had an $8,000 short-term capital gain and taxable income of $35,000. If taxpayer collects the entire $10,000 during the current year, $8,000 needs to be included in gross income.TrueFalse4.A cash basis taxpayer can deduct the cost of a product sold even though the purchaser of the product ultimately does not pay the purchase price.TrueFalse5.If an account receivable written off during the current year is subsequently collected during the current year, the write-off entry is reversed.TrueFalse6.A nonbusiness bad debt deduction can be taken any year after the debt becomes totally worthless.TrueFalse7.A business bad debt is a debt unrelated to the taxpayers trade or business either when it was created or when it became worthless.TrueFalse8.

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