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Juan recently started operating a flower shop as a proprietorship. In its first year of operations, the shop had a taxable income of $60,000. Assuming that Juan had no other employment-related earnings,

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Juan recently started operating a flower shop as a proprietorship. In its first year of operations, the shop had a

taxable income of $60,000. Assuming that Juan had no other employment-related earnings,

Question 15 options:

A) 

Juan will be exempt from self-employment taxes for the first three years of operations.

B) 

Juan must pay self-employment tax on the earnings of the business.

C) 

Juan will be exempt from the Medicare tax because the business earnings are below the threshold amount.

D) 

The flower shop must withhold FICA taxes from Juan’s earnings.

A married couple abandoned their principal residence in May. They had purchased the house five years ago for $350,000. The house had a current fair market value of $300,000. What is the maximum loss, if any, that they are allowed to deduct on the current-year’s tax return for the abandoned property?

Question 14 options:

A) $50,000

B) $350,000

C) $0

D) $300,000

 
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One January 2, 2016, Alpha Company purchased 10,000 shares of Bravo Company stock, as trading securities, for $10 per share.

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One January 2, 2016, Alpha Company purchased 10,000 shares of Bravo Company stock, as trading securities,

for $10 per share. On July 3, 2016 the securities were trading on the open market for $12.50 per share. On December 31, 2016, the closing market price for these securities was $9.00 per share. What value should the trading securities be reported for Alpha Company’s FY 2016 balance sheet?

 
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Alpha Company uses aging to estimate uncollectibles. At the end of the fiscal year, December 31, 2016, Accounts Receivable has a balance that consists of: Dollar Value

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Alpha Company uses aging to estimate uncollectibles.  At the end of the fiscal year, December 31, 2016,

Accounts Receivable has a balance that consists of: 

Dollar Value

Age of Account

Estimated Collectible

$125,000 

< 30 days old

98%

85,000 

30 to 60 days old

85%

50,000 

61 to 120 days old

50%

10,000 

> 120 days old

10%

The current unadjusted Allowance for Uncollectable Accounts balance is a credit balance of $1,575 and the Bad Debt Expense accounts has an unadjusted balance of zero. After the adjusting entry is made, what will be the dollar balances in the:

1. Accounts Receivable

2. Allowance for Doubtful Accounts

3. Bad Debt Expense

 
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Alpha Company used the percentage of sales method, with an historical rate of 2.5% for determining their bad debt expense.

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Alpha Company used the percentage of sales method, with an historical rate of 2.5% for determining their

bad debt expense. During 2016, sales were $1,500,000, and the January 1 Allowance for Doubtful Accounts had a normal balance of $25,000. $18,600 of accounts were written off during the year. What are the year end dollar amounts for:

 
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