Kaplan University AC 507 Unit 4 Quiz

1. The adjusted basis of an asset is: (Points : 5)
        Its acquisition price only
        Acquisition cost less cost recovery
        Acquisition cost less selling price
        Only the cash used to purchase the asset

2. Momee Corporation, a calendar-year corporation, bought only one asset in 2006, a crane it purchased for $700,000 on November 24. It disposed of the asset in April, 2011. What is its depreciation deduction for this asset in 2011 if cost recovery was determined using only regular MACRS?
               (Points : 5)
        $62,510
        $61,110
        $31,255
        $22,916

3. Coley Corporation has an $800 net short-term capital loss and a $6,000 net long-term capital gain in the current year. It also has an $8,000 long-term capital loss carryover from the prior year. What is Coley’s capital loss carryover to the next year? (Points : 5)
        $0
        $2,000
        $2,800
        $8,800

4. Alpha Corporation had income from operations of $30,000. What is the corporation’s taxable income including the following property transactions: Gain on investment stock = $8,000; loss on machinery held three years = $6,000; $4,000 loss on equipment held 10 months; $4,000 gain on land used for six years for storage of trucks. (Points : 5)
        $25,000
        $27,000
        $30,000
        $32,000

5. All of the following are characteristics of percentage depletion except:
               (Points : 5)
        Depletion is determined using a statutory percentage times gross income.
        Percentage depletion can exceed the property’s cost.
        Depletion in excess of cost results in a negative basis for property.
        Is an investment incentive provision.

6. Angel sells the following depreciable assets from her sole proprietorship:
 
Asset Cost Age         Gain/Loss
Office furniture   $10,000 4 years ($2,400)
Truck $20,000 5 years 3,100
Bakery equipment $25,000 9 months (4,500)

 
What should Angel report on her income tax return relative to these property transactions? (Points : 5)
        $3,800 capital loss
        $3,100 Section 1245 recapture; $2,400 Section 1231 loss; $4,500 ordinary loss
        $3,800 ordinary loss
        $700 Section 1231 gain;  $4,500 ordinary loss
        None of the above

7. Jack did not depreciate one of his machines that cost $40,000 because he had net operating losses for the last two years. Which of the following statements is true?
               (Points : 5)
        Jack’s basis in the asset is $40,000 this year.
        Jack can deduct three year’s depreciation in the current year.
        Jack must file amended returns to claim the depreciation for prior years.
        If Jack sells the machine for $20,000 this year, he has a $20,000 loss.