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Tax Accounting Chapter 3: Tax Accountability of Commercial and Industrial Profit

10 Questions

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Tax Accounting Chapter 3: Tax Accountability of Commercial and Industrial Profit

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Questions and Answers

Which of the following must be evaluated at cost?

Compensations awarded by court

Interest revenues

Ending inventory (correct)

Gains realized from fixed assets transactions

What is the tax treatment of cash subsidies according to the text?

Taxable at the market value of the asset received

Not subject to tax

Excluded from taxable revenues

Taxable on cash basis (correct)

What type of revenue is interest derived from transactions with customers?

Incidental revenue

Capital gains

Operating revenue (correct)

Non-taxable revenue

Which gains are realized only to the extent that the excess over book value is treated as taxable revenues?

Gains realized from fixed assets transactions Signup and view all the answers

What is the tax treatment of compensations related to fixed assets according to the text?

Taxable at the entire amount of insurance compensation Signup and view all the answers

Which of the following is considered a non-documented expense for tax purposes?

Fines and penalties Signup and view all the answers

What is the tax treatment of sales when there are sales returns, allowances, and sales discounts?

Net sales = Sales + Sales R&A - Sales Discount Signup and view all the answers

How are withdrawals of goods recorded for tax purposes?

Recorded as sales at the market value of the goods Signup and view all the answers

What is the formula for calculating taxable gross profit?

Sales - Cost of Goods Sold Signup and view all the answers

How is the beginning inventory for the current year calculated?

By taking the ending inventory of the previous year Signup and view all the answers