here - ASCE

Transcription

here - ASCE

545 Westcott Road
Eagan, MN 55123-1396
ASCE
American Society for
Continuing Education
CPE: EASY. AFFORDABLE. SO START NOW.
PRESORTED
STANDARD
U.S. POSTAGE
PAID
WEST
One of the Largest
CPE Providers with
Thousands of
Satisfied Customers
Now Part of Thomson Reuters
© 2016 Thomson Reuters/Tax & Accounting.
All Rights Reserved.
Company, products and service names may be trademarks
of their respective owners.
AFFORDABLE CPE: ONLY ASCE MAKES IT THIS EASY!
ASCE 2016 – 2017
See inside back cover.
Complete CPE Coverage
for You and Your Firm!
ASCE
NEW!
for
2016
Now Part of
Thomson Reuters
Affordable.
Easy. Fast.
Don’t put your license in jeopardy.
Get your CPE from ASCE!
Share With Your Firm and Save!
CPE
One of the Largest CPE Providers With Thousands of Satisfied Customers
VIP and CPE
SO START NOW!
Earn CPE Starting at
$5.75 Per Credit Hour
Block Specials Inside!
See page ii or call
800.231.1860

 True/False Quizzers

 391 Credits Inside + Hundreds

 Instant Online Grading
• Earn CPE With Materials You Already Own
• Hundreds of Credits Available Online
•Credits as Low as $5.75 Per Hour
More Online
• 100% Satisfaction Guaranteed
 Use Your Own Materials or

Free Resources Online
The Credits You Need.
The Price You Want.
asce.com
Fast! Convenient! Affordable! 800.231.1860
CATASCP 16 / 41928151
| asce.com
 Share Credits and Save Even More

| asce.com
ASCE
ASCE
 ASCE PRE-PAID CREDIT BLOCKS ARE
 FAST, AFFORDABLE CPE.
ONLY ASCE MAKES IT THIS EASY.
Earn CPE credit in an instant for
as low as $5.75 per hour!
IDEAL FOR INDIVIDUALS AND FIRMS!
Save with ASCE pre-paid credits and earn CPE even faster!
With ASCE’s convenient quizzers, you can start earning CPE credits immediately. Simply choose your format
(catalog or online), select a quiz, complete a series of true/false questions and submit your answers. ASCE
quizzers are based on popular books, software and publications you already own or can access free on the
internet — and they even include references to help you locate relevant information.
ASCE pre-paid credit blocks provide the perfect way for individuals, firms and groups to maximize
their savings by reserving all their annual CPE credits now and then taking their courses at any
time during the year! Credits are good for one year and can be shared firm-wide and used
toward any of our ASCE quizzers*.
55 Lock in your CPE costs NOW for the entire year — there’s nothing more to pay
55 Share credits with as many colleagues and staff members as you want
55 Use pre-paid credits only when you pass the ASCE quizzers
a.
From Start to Finish in 4 Easy Steps!
1. Select
Enjoy Flexibility and Convenience
4. Submit
55 Use credits at your convenience — anytime for one year
Choose from any of the quizzers in this catalog
or visit asce.com
for additional quizzers available online.
To receive credits for your ASCE quizzer(s), submit your answers
and payment via one of the following methods:
55 Choose which ASCE quizzers to take whenever you’re ready to complete them — no need to decide now
2. Read
Complete all questions and required fields — including
your ASCE block credit number (available from your sales
representative) or credit card number — then click to submit
your answers and receive your CPE credits.
Handy references direct you to relevant
information you can read and review
before answering each question.
Visit asce.com for
links to online resources.
3. Answer
Fill out the answer sheet(s) on page
A-1 of this catalog to record your
responses to the true/false questions.
Or log on to asce.com for
online quizzers with instant grading.
PHONE 800.231.1860 | VISIT asce.com
55 Get immediate online grading — ideal when you need to earn last-minute CPE credit
Online:
ASCE pre-paid credit block discounts
for individuals and firms:
Credit Hours
Mail: Send your answer sheet(s) and payment to:
ASCE
Harris Bank
36786 Treasury Center
Chicago, IL 60694-6700
AS LOW
List Price
$ Per Credit Cost
40
$250
$6.25
80
$492
$6.15
120
$714
$5.95
160
$936
$5.85
200
$1,150
$5.75
*
PER CR
Please see your order confirmation email for pre-paid credit terms and conditions.
Please call your sales representative to purchase pre-paid credit blocks.
AS
$5.75
EDIT!
È YOUR SATISFACTION GUARANTEED!
ASCE will issue a certificate of completion when you achieve a passing score of 70% or better. To obtain CPE credit, you
must submit a CPE reporting form to your state board of accountancy or professional organization indicating the amount
of CPE for which you are applying. Contact your state board for complete information regarding status requirements.
ASCE courses are written in accordance with various state boards of accountancy standards on formal self-study
continuing professional education.
We guarantee* that ASCE courses are acceptable for CPE credit in the following:
States where we have entered into formal sponsor agreements with the State Board of Accountancy
5 Hawaii (00004-06)
5 New York (000821)
5 Illinois (158-001402)
5 Pennsylvania (PX-001076-L)
We guarantee* that ASCE courses are acceptable for CPE credit in the following:
States that do not offer formal sponsor agreements
5 Alabama
5 Iowa
5 Montana
5 Virginia
5 Alaska
5 Kentucky
5 Nevada
5 Washington
5 Arizona
5 Maine
5 New Hampshire
5 Wisconsin
5 Indiana
5 Michigan
5 North Dakota
5 Wyoming
*ASCE guarantees you will receive CPE credit from your state board or your money back! Call for details.
Contact your state board or professional association for details on your specific requirements or appropriate use of our
courses. For further assistance, please call our customer service department at 800.231.1860.
This publication contains CPE quizzers for professional reference books: from CCH, Thomson Reuters, J.K. Lasser and the IRS. However, the American Society for
Continuing Education (ASCE) is in no way affiliated with reference material publishers CCH, J.K. Lasser (Wiley Publishers) and the IRS, product and service names
may be trademarks of their respective owners. Furthermore, this ASCE catalog is designed to provide accurate and authoritative information in regard to the
subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service.
“If legal advice or other expert assistance is required, the services of a competent professional person should be sought.” — From a declaration of principles jointly
adapted by a Committee of Publishers and Associates
© 2016 Thomson Reuters/Tax & Accounting. All Rights Reserved.
Company, products and service names may be trademarks of their respective owners.
i
CALL 800.230.1860 OR VISIT asce.com
È ASCE 2016 TABLE OF CONTENTS
Rcmd. CPE
Credit Hours
Quizzer Page #
Available
Online
CCH 2016 U.S. Master Tax Guide®
40
1
$198.00
CCH 2016 U.S. Master Tax Guide®
24
9
$150.00
RIA 2016 Federal Tax Handbook
40
14
$198.00
RIA 2016 Federal Tax Handbook
24
22
$150.00
JK Lassers Your Income Tax 2016
20
27
$125.00
IRS Publication 17: Your Federal Income Tax
15
32
$93.75
IRS Publication 590A: Contributions to Individual Retirement Arrangements (IRAs)
4
36
$25.00
Taxation
Quizzer Price
IRS Publication 590B: Distributions from Individual Retirement Arrangements (IRAs)
4
38
$25.00
IRS Publication 334: Tax Guide for Small Business
8
40
$50.00
IRS Publication 463: Travel, Entertainment, Gift and Car Expenses
5
Online only
$31.25
IRS Publication 550: Investment Income and Expenses
12
Online only
$75.00
IRS Publication 225: Farmer's Tax Guide
12
Online only
$75.00
IRS Publication 535: Business Expenses
8
Online only
$62.50
IRS Publication 970: Tax Benefits for Education
8
Online only
$50.00
PPC's Guide to Compilation and Review Engagements
24
43
$150.00
CCH 2016 GAAP Guide (Volumes I and II)
24
49
$150.00
PPC's Guide to Preparing Financial Statements
24
55
$150.00
CCH 2016 U.S. Governmental GAAP Guide
24
60
$150.00
PPC's Guide to Audits of Nonprofit Organizations
24
66
$150.00
CCH 2016 Revenue Recognition Guide
20
72
$125.00
PPC's Guide to Audits of Nonpublic Companies
24
76
$150.00
PPC's Guide to Single Audits
24
82
$150.00
PPC's Guide to Cash, Tax, and Other Bases of Accounting
20
88
$125.00
PPC's Guide to Audits of Employee Benefit Plans
24
Online only
$150.00
PPC's Guide to Quality Control
24
Online only
$150.00
4
92
$25.00
Accounting and Auditing
Special Topics
Journal of Accountancy Articles (Mar 2015–Feb 2016)
See inside back cover for pre-paid credit block discounts
Instant Grading Online at asce.com
All of the ASCE quizzers listed here — and many more — are available online. Visit asce.com for a complete list.
Prices and courses are subject to change without notice.
ii
Course No. ASC346
40 Credit Hours
$198.00
CPE Quizzer for
®
CCH 2016 U.S. MASTER TAX GUIDE
Recommended CPE Credit: 40 Hours (Tax)
Prerequisite: None
Recommended Study Time: 80 Hours
Knowledge Level: Basic
Directions:
x Review the reference book.
x Answer the 200 true/false questions below, using the combination registration form/answer sheet.
x Mail your completed registration form/answer sheet, along with your payment to ASCE.
x A Certificate of Completion will be mailed back to you, in accordance with AICPA and your State Board’s
Standards on Formal Self-Study CPE, when you achieve a passing grade of 70% or better.
x Earning CPE with ASCE is really that simple!
Learning Objectives:
x Identify federal taxation changes that affect 2015 individual and corporate income tax returns
x Identify changes affecting income taxes for partnerships and estates and trusts
1. For 2015, an individual may deduct up to $104.90 per month of Medicare Part B premiums as medical expenses.
[¶49]
2. For 2016, an individual under 65 who would qualify as head of household for filing status purposes need not file a
return if s/he has less than $10,350 of gross income. [¶101]
3. For 2015, an individual with $100,000 or more of taxable income must use Form 1040. [¶105]
4. A taxpayer may obtain an extension of time to pay her/his taxes if s/he files Form 4868 for an automatic extension of
time to file. [¶109]
5. The net investment income tax does not apply to nonresident aliens. [¶129]
6. The personal exemption amount for 2016 is $4,000. [¶135]
7. Same-sex couples in registered domestic partnerships, civil unions, and formal relationships other than marriage do
not qualify to file a joint return. [¶152]
8. A corporation’s shareholders cannot be trusts. [¶203]
9. A corporation need not pay estimated tax payments unless it expects to owe a tax liability of more than $1,000.
[¶215]
10. An affiliated corporation receiving qualifying dividends from an affiliated group member may claim a 100-percent
dividends-received deduction for such dividends. [¶229]
11. Exempt-interest income is not included in determining whether earnings and profits have been accumulated beyond
the reasonable needs of the business for purposes of the accumulated earnings tax. [¶253]
12. A personal holding company is subject to a 20-percent tax on its undistributed personal holding income for tax years
beginning in 2013. [¶275]
13. A 70-percent dividends-received deduction is permitted for distributions from a brother-sister corporation. [¶289]
14. S corporations may not file consolidated returns. [¶295]
15. The deferral of losses on intercompany transactions is an advantage of a consolidated return. [¶297]
16. Grantor trusts and voting trusts are not eligible to be shareholders of an S corporation. [¶304]
17. An S corporation can have just one class of stock outstanding. [¶305]
CCH 201 U.S. Master Tax Guide® (40 hours)
1
2016–2017
18. An S election that has terminated may not be reestablished without IRS consent until the fifth year following the
year of revocation. [¶307]
19. The passive activity loss rules are generally applied at the shareholder level, but some determinations affecting the
application of the rules are made at the entity level. [¶309]
20. S corporation shareholders may not claim the domestic production activities deduction. [¶312]
21. Each S corporation shareholders stock basis is increased by their portion of distributions includible in the
shareholder’s income. [¶317]
22. An S corporation cannot carry forward a net operating loss from a year in which it was not an S corporation. [¶319]
23. The itemized deductions of an S corporation are separately stated items that are not subject to the 2-percent floor at
the shareholder level. [¶321]
24. To avoid termination of S corporation status for excess passive investment income, an S corporation may elect to
treat distributions as taxable dividends. [¶333]
25. An S corporation generally may elect a tax year other than its required tax year if the deferral period is not more than
four months. [¶355]
26. A limited partnership can have only one general partner and not more than 100 limited partners. [¶401A]
27. An unincorporated organization may choose not to be treated as a partnership if the entity is used only for
investment purposes. [¶402]
28. A limited liability company may elect to be treated as a partnership to avoid being treated as an association taxable
as a corporation for federal income tax purposes. [¶402B]
29. A partnership need not file Form 1065 when it does not have taxable income for the tax year. [¶406]
30. A partnership is considered technically terminated if within a 12-month period 50 percent or more of the total
interests in partnership capital and profits is sold or exchanged. [¶410]
31. Innocent spouse relief is not available to partnership-level proceedings. [¶415]
32. Generally, a partnership must use the “majority-interest taxable year.” [¶416]
33. Any guaranteed payments made to a partner without regard to partnership income are treated as a return of capital
that is not taxable to the partner. [¶421]
34. A disproportionate distribution will result in capital gain rather than ordinary income. [¶430]
35. Partnership contributions and distributions made within two years of each other are presumed to be a sale. [¶432]
36. A partnership must file an information return describing any exchanges of partnership interests involving unrealized
receivables or inventory. [¶435]
37. A partner that receives a profits interest in exchange for services must report the value of the interest as ordinary
income. [¶443]
38. A limited partner generally may not be allocated recourse liabilities in excess of her/his capital contributions. [¶448]
39. Generally, no gain or loss is recognized by a partnership on a distribution of property to a partner. [¶453]
40. An electing large partnership terminates for tax purposes if 50 percent or more of its interests are sold or exchanged
within 12 months. [¶482]
41. Trusts and decedents’ estates are separate taxable entities for federal income tax purposes. [¶501]
42. The income from a unit investment trust set up to hold mutual fund shares for investors is taxed directly to the
investors. [¶502]
43. A liquidating trust formed to liquidate and distribute assets is taxed as an association. [¶503]
44. The taxable income of a bankruptcy estate is subject to the same tax rate as a married individual filing separately.
[¶505]
45. An estate is only recognized as a taxable entity during the period of administration or settlement. [¶507]
2
2016–2017
46. An estate that has been in existence for more than two years must pay estimated income tax payments similar to
individuals. [¶510]
47. Discharge of a fiduciary terminates the fiduciary’s personal liability for payment of debts of the estate without
satisfying prior tax claims. [¶512]
48. Income from a trust or estate is reported on Form 1041. [¶514]
49. The net investment income tax does not apply to estates or trusts. [¶517]
50. An estate’s gross income is generally determined in a manner similar to that of an individual. [¶520]
51. The estate of a nonresident alien is taxed on its U.S. income, but excludes dividends and capital gains. [¶527]
52. Generally, an estate or trust may deduct reasonable amounts paid for fiduciary fees and litigation expenses only if it
is engaged in a trade or business. [¶529]
53. Neither an estate nor a trust may claim an IRC §179 deduction. [¶530]
54. Interest paid or accrued in a tax year is deductible by an estate or trust. [¶533]
55. An estate can claim a personal exemption of $600. [¶534]
56. The deduction allowed to a trust or estate for distributions to beneficiaries is limited to distributable net income.
[¶543]
57. The fiduciary of a complex trust can elect to treat distributions to a beneficiary made within the first 100 days of a
tax year as having been distributed in the previous tax year. [¶546]
58. Unused loss carryovers and excess deductions of an estate or trust are allowed to certain beneficiaries when the
estate or trust terminates. [¶556]
59. If an estate or trust has more than one beneficiary and is to be administered in well-defined and separate shares, the
amount of distributable net income allocable to the beneficiaries must be determined as if the shares were separate
estates or trusts. [¶557]
60. Upon termination of an estate, unused capital loss carryover of the estate is available to the beneficiaries. [¶562]
61. A qualified funeral trust is a funeral trust that is not a foreign trust or a grantor trust. [¶575]
62. Retaining the power to revoke a trust will cause the trust income to be taxed to the grantor. [¶582]
63. Form 3520 must be filed by U.S. persons who are treated as owners of foreign trusts under the grantor rules. [¶588]
64. Form 8940 is used by tax-exempt organizations to request a determination regarding a change in the type of
supporting organization. [¶607]
65. If an organization fails to file a notice with the IRS about its intention to claim public charity status, it will be
considered a private foundation. [¶623]
66. A farmers’ tax-exempt cooperative is required to file Form 1065. [¶625]
67. Net investment income of private foundations is subject to a two-percent excise tax. [¶633]
68. A private foundation generally must distribute 3 percent of its net investment assets annually. [¶637]
69. Private foundations are subject to a termination tax. [¶649]
70. Generally, a social club is tax-exempt only if it is supported entirely by membership fees, dues, and assessments.
[¶692]
71. Any portion of an employee’s vacation expenses paid by the employer is taxable to the employee. [¶713]
72. Several U.S. Courts of Appeal view salary payments to a deceased employee’s surviving spouse as tax-free gifts,
while the IRS and Tax Court view them as taxable income. [¶719]
73. In order for a dividend to be taxable income to a shareholder, the distribution must be made from the distributing
corporation’s earnings and profits. [¶747]
74. Alimony is deductible only if the taxpayer itemizes her/his deductions. [¶771]
3
2016–2017
75. Income earned from a hobby is taxable, and related expenses are generally unlimited. [¶785]
76. Income received from property acquired by bequest, devise, or inheritance is excludable from gross income. [¶847]
77. Qualified disaster relief payments must be included in the victim’s gross income. [¶887]
78. Publicly held corporations generally may not deduct compensation paid in excess of $1 million to certain covered
employees. [¶906]
79. Business gift deductions are limited to $50 per recipient per year. [¶918]
80. A length of service award given to an employee within her/his first five years is not deductible by the employer.
[¶919]
81. A $10 million limit applies to the deduction of interest incurred annually on debt used by a corporation to acquire
stock or two-thirds of another corporation’s operating assets. [¶937]
82. A taxpayer who works in two places in one day may not deduct the commuting expenses for getting from the first
place to the second. [¶945]
83. The standard mileage rate for business travel is 57.5 cents per mile for 2015. [¶947]
84. Even though an advertising program may extend over several years, the cost is deductible when paid or incurred.
[¶969]
85. Medical expenses that a taxpayer has pre-paid are deductible only after the services have been provided. [¶1015]
86. Generally, assessments for streets and sidewalks are fully deductible by the property owners. [¶1026]
87. Employees and self-employed individuals who move to start work in a new location may deduct the reasonable
expenses of moving as an above-the-line deduction. [¶1073]
88. Taxpayers who are union members may not deduct membership costs such as union dues. [¶1080]
89. Losses sustained during demolition of buildings may be deducted by the taxpayer. [¶1105]
90. Professional gamblers may deduct gambling losses as an adjustment to gross income. [¶1113]
91. A disaster loss may be deducted on the taxpayer’s return for the previous tax year. [¶1133]
92. A three-year net operating loss carryback period applies to both farming and qualified disaster losses. [¶1151]
93. The passive activity loss rules do not apply to closely held C corporations. [¶1173]
94. If more than 75 percent of a closely held corporation ‘s annual gross receipts are from real property trades or
businesses in which it materially participates, it qualifies as a real estate professional for purposes of the passive
activity loss rules. [¶1185]
95. The maximum amount that may be expensed under IRC §179 for the cost of a new SUV is $25,000. [¶1214]
96. The Modified Accelerated Cost Recovery System must be used for depreciation for most tangible property placed
into service after 1986. [¶1216]
97. Components and improvements placed in service after 1986 must be depreciated using MACRS unless the building
is not MACRS property. [¶1267]
98. A loss may not be claimed on the disposal of an amortizable IRC §197 intangible if another IRC §197 intangible
acquired in the same transaction is retained. [¶1288]
99. Form 8880 is used to calculate the retirement savings contributions credit. [¶1304]
100. A taxpayer may deduct foreign income taxes paid or accrued as an itemized deduction, or s/he may claim them as a
credit against her/his U.S. income tax liability. [¶1361]
101. Estates and trusts are not subject to the Alternative Minimum Tax Liability. [¶1401]
102. For a corporation to qualify as an exempt small business for AMT purposes, it must have been in operation for three
or more years. [¶1415]
103. An individual taxpayer is not allowed to claim personal exemption deductions for AMT purposes. [¶1435]
4
2016–2017
104. The AMT does not apply to partnerships. [¶1455]
105. Common trust funds must use the calendar year as their tax year. [¶1501]
106. Tax is calculated on an annualized basis if a short period return is filed due to a change in accounting period.
[¶1505]
107. In order to correct the use of an improper tax year, a taxpayer may file Form 1128 and an amended tax return
prepared on the calendar year basis. [¶1513]
108. The IRS may prescribe an accounting method that clearly reflects income if the method used by the taxpayer does
not do so. [¶1529]
109. Real property held for sale, capital assets, equipment, accounts, notes, investments, and similar assets may not be
inventoried. [¶1557]
110. A taxpayer is required to obtain advance permission from the IRS to use the LIFO method. [¶1565]
111. Taxes paid on the acquisition of property are treated as part of the cost of the property. [¶1611]
112. The basis of property inherited from a decedent is generally the property’s fair market value on the date of death or
the alternate valuation or special use valuation date. [¶1633]
113. A taxpayer takes a fair market value basis in property acquired in a tax-free exchange. [¶1651]
114. The basis of property securing debt is decreased by any amount of debt discharged for which no amount was
included in gross income. [¶1672]
115. Married taxpayers filing jointly may exclude from gross income up to $500,000 of gain realized on the sale of a
principal residence. [¶1705]
116. Under IRC §1035, the exchange of two life insurance contracts does not trigger gain or loss. [¶1724]
117. If a person transfers property to a corporation solely in exchange for stock and, immediately after the transfer, is in
control of the transferee corporation, gain or loss must be recognized. [¶1731]
118. The capital gains rate on net capital gains and qualified dividend income for an individual is 0 percent if s/he is in the
10- or 15-percent income tax brackets. [¶1736]
119. S corporations are treated as real estate dealers if they subdivide a tract of land for sale. [¶1762]
120. Amounts paid for the transfer of a franchise, trademark, or trade name are amortized over 20 years. [¶1774]
121. Depreciation recapture is never required when depreciable property is involuntarily converted. [¶1779]
122. Depreciation recapture is calculated and reported on Form 4562. [¶1779]
123. The installment method is a way of reporting losses from sales of property when at least one payment is received in a
tax year after the year of sale. [¶1801]
124. A real or personal property dealer generally cannot report gain from dealer dispositions under the installment
method. [¶1808]
125. A special interest charge applies to certain nondealer installment sales of property over $75,000. [¶1813]
126. The installment method generally may not be used for a sale of depreciable property to a related person. [¶1835]
127. The mark-to-market rules generally apply to all securities held as inventory by a broker/dealer. [¶1903]
128. The value of a nonqualified stock option may be deducted by the employer as a business expense the tax year in
which the option is included in the employee’s gross income. [¶1921]
129. Stock options used as an employee incentive plan must be granted within five years of the date the plan was adopted.
[¶1927]
130. An employee stock purchase plan cannot grant options to an employee who already owns more than 2 percent of the
voting power/value of the employer’s stock. [¶1931]
131. A short sale is a transaction in which the taxpayer sells property at a loss. [¶1944]
5
2016–2017
132. Mark-to-market rules do not apply to hedging transactions that are part of a mixed straddle if an election is made to
exclude them from such treatment. [¶1947]
133. Hedging transactions generally result in capital gain or loss. [¶1949]
134. Premiums paid for conversion features on convertible bonds may not be amortized. [¶1967]
135. In an established stock exchange transaction, a cash-basis taxpayer realizes gain or loss on the settlement date, not on
the trade date. [¶1973]
136. A securities broker/dealer may treat the payment of commissions as an ordinary and necessary cost of doing
business. [¶1983]
137. A full-time employee for purposes of the employer health insurance mandate is an employee who works at least 30
hours of service per week or 130 hours in a calendar month. [¶2001]
138. Health insurance coverage offered by an employer is considered “affordable” if the employee’s share of the premium
for family coverage does not exceed 10 percent of the employee’s household income. [¶2005]
139. Same-sex spouses are considered married for federal tax purposes only if they live in a state that recognizes such
marriages. [¶2015]
140. The maximum amount allowed to be contributed to a health flexible spending account for 2016 is $3,550. [¶2041]
141. Up to $2,500 of dependent care assistance benefits are excludable from an employee’s gross income if the employee
is married and files separately from her/his spouse. [¶2065]
142. No-additional-cost services provided to employees free of charge are excludable from the employee’s income if the
services are available to employees on a nondiscriminatory basis. [¶2087]
143. An employer with 5,000 or fewer employees may combine a defined benefit plan with a 401k plan. [¶2105]
144. The maximum catch-up contribution to an IRC §§401(k), 403(b), and 457 plans is $3,000 for 2016. [¶2121]
145. Generally, all types of qualified retirement plans must satisfy a minimum distribution requirement by April 1 of the
calendar year following the calendar year in which the participant retires or reaches age 70-1/2, whichever is later.
[¶2127]
146. An individual who fails to take her/his required minimum distributions is subject to a 25-percent excise tax on the
amount that should have been distributed. [¶2127]
147. A qualified retirement plan generally must provide detailed information on Form 5500 every year. [¶2137]
148. A penalty of 10 percent generally applies to early distributions from a retirement plan. [¶2151]
149. An individual may take a 10-year loan from her/his IRC §401(k) plan to refinance her/his home without it being
treated as a distribution. [¶2152]
150. Calendar year taxpayers generally have until April 15 of the following year to make contributions to their IRAs for
the tax year. [¶2155]
151. Excess contributions to an IRA are subject to a cumulative 6-percent excise tax. [¶2161]
152. A distribution from a traditional IRA is excluded from gross income if it is transferred to another traditional IRA or
returned to the same IRA within 60 days of the withdrawal. [¶2167]
153. Losses on investments in Roth IRAs are not deductible. [¶2171]
154. Qualified distributions from a Roth IRA are not subject to income tax or the additional tax for early withdrawal.
[¶2173]
155. Form 2169 is used to report distributions from Roth IRAs. [¶2173]
156. An individual can recharacterize a contribution originally made to a traditional IRA as a Roth IRA contribution, or
vice versa, if certain conditions are met. [¶2177]
157. Employee contributions to a SIMPLE IRA under a salary reduction agreement are limited to $12,500 for 2016.
[¶2183]
158. Distributions from a simplified employee pension (SEP) are taxed under the same rules as traditional IRAs. [¶2189]
6
2016–2017
159. Certain tax-exempt entities, such as county public school systems, are allowed to provide retirement benefits to
employees by using an IRC §403(b) plan. [¶2191]
160. A Type G reorganization is a change in the identity, form, or place of the organization of one corporation. [¶2209]
161. To qualify as a recapitalization, a transaction must include a reshuffling of the capital structure of the corporation.
[¶2225]
162. Form 966 must be filed by a liquidating corporation within 60 days of adopting a plan of liquidation. [¶2259]
163. Carrybacks of net operating losses and net capital losses are permitted in any type of reorganization. [¶2277]
164. Net operating losses and other carryforwards may be disallowed by the IRS if an acquisition is made for tax
avoidances purposes. [¶2281]
165. Tax-exempt interest cannot be passed through to the shareholders of mutual funds. [¶2307]
166. Foreign corporations are eligible to be real estate investment trusts (REITs). [¶2326]
167. Net operating losses of a real estate investment trust (REIT) may only be carried back to tax years in which the entity
was a REIT. [¶2329]
168. A real estate mortgage investment conduit (REMIC) is subject to income taxation. [¶2343]
169. A taxable mortgage pool may not file a consolidated return with any other corporation. [¶2368]
170. Net capital gains of a life insurance company generally are taxed at a rate of 35 percent. [¶2370]
171. A life insurance company may carry an operational loss back five years and forward ten years. [¶2377]
172. Banks are not subject to the capital loss limitations with respect to the worthlessness of debt securities; they may treat
them as bad debts. [¶2383]
173. For 2016, a qualifying U.S. citizen who works abroad generally may exclude up to $14,182 of foreign housing
expenses. [¶2403]
174. A person cannot be both a resident alien and a nonresident alien during a tax year. [¶2411]
175. A 30-percent branch profits tax may apply to a foreign corporation that operates a trade or business in the United
States. [¶2433]
176. A nonresident alien who is temporarily present in the United States under immigration laws on an F, J, M, or Q visa
as a visiting student, teacher, trainee, or specialist is considered to be engaged in a U.S. trade or business. [¶2448]
177. All U.S. source income paid to a foreign individual is subject to a 40-percent withholding rate. [¶2455]
178. A U.S. person must disclose any financial interest in a foreign bank account, securities account, or other financial
account electronically on FinCEN Form 114 if the aggregate value of the accounts exceeds $20,000 at any time
during the calendar year. [¶2465]
179. An individual must file Form 1118 to claim the foreign tax credit. [¶2476]
180. An individual with up to $300 of creditable foreign taxes is exempt from the overall foreign tax credit limitation if
s/he has no foreign source income other than qualified passive income and s/he elects the de minimis exemption
directly on Form 1040. [¶2479]
181. Generally, employers who withhold taxes from their employees must file Form 941 on a quarterly basis. [¶2501]
182. A trust is required to file a tax return by the fifteenth day of the fourth month following the close of the tax year.
[¶2505]
183. An S corporation can obtain a nine-month extension of the time to file its tax return by filing Form 7004. [¶2509]
184. For tax years beginning in 2016, a tax return preparer is subject to a $510 penalty if s/he endorses or negotiates a
taxpayer’s refund check . [¶2518]
185. An individual should use Form 1040-V to pay the balance due on her/his Form 1040. [¶2525]
186. The IRS accepts income taxes paid by VISA credit cards. [¶2545]
7
2016–2017
187. Any return or other document filed with the IRS is considered to have been timely filed if it is properly mailed in the
United States and the postmark date falls on or before the due date. [¶2553]
188. If an employer fails to withhold income taxes from an employee’s wages, the employer will be held liable for the
amount not withheld. [¶2601]
189. Amounts paid to an employee under an accountable plan are required to be reported on the employee’s Form W-2.
[¶2607]
190. Wages paid to newspaper carriers under the age of 18 are exempt from income tax withholding. [¶2609]
191. An individual may be subject to a $500 civil penalty for claiming excess withholding allowances on Form W-4.
[¶2634]
192. Form 945 is used to report back-up withholding. [¶2645]
193. For 2016, the additional 0.9-percent Medicare tax applies to wages in excess of $250,000 for a single individual.
[¶2648]
194. In 2016, employers are required to withhold and pay FICA taxes on all wages paid to domestic workers. [¶2652]
195. No self-employment tax is due if net earnings from self-employment are less than $400. [¶2664]
196. A taxpayer generally has 90 days after a notice of deficiency is mailed to file a petition with the Tax Court for a
redetermination of her/his tax deficiency. [¶2711]
197. A $5,000 penalty is imposed on a person who files a frivolous return. [¶2811]
198. The IRS is not required to abate penalties that result from a taxpayer’s reliance on incorrect advice provided by the
Service. [¶2813]
199. A 30-percent accuracy-related penalty applies to the portion of an underpayment of tax attributable to negligence.
[¶2854]
200. The annual exclusion for a gift to a donor’s spouse who is not a U.S. citizen is $146,000 for 2016. [¶2905]
8
2016–2017
Course No. ASC346
24 Credit Hours
$150.00
CPE Quizzer for
®
CCH 2016 U.S. MASTER TAX GUIDE
Prerequisite: None
Directions:
x Identify federal taxation changes that affect 2015 individual and corporate income tax returns
x Identify changes affecting income taxes for partnerships and estates and trusts
1. For 2015, an individual may deduct up to $104.90 per month of Medicare Part B premiums as medical expenses.
[¶49]
2. For 2016, an individual under 65 who would qualify as head of household for filing status purposes need not file a
return if s/he has less than $10,350 of gross income. [¶101]
3. For 2015, an individual with $100,000 or more of taxable income must use Form 1040. [¶105]
4. The net investment income tax does not apply to nonresident aliens. [¶129]
5. Same-sex couples in registered domestic partnerships, civil unions, and formal relationships other than marriage do
not qualify to file a joint return. [¶152]
6. A corporation’s shareholders cannot be trusts. [¶203]
7. Exempt-interest income is not included in determining whether earnings and profits have been accumulated beyond
the reasonable needs of the business for purposes of the accumulated earnings tax. [¶253]
8. A 70-percent dividends-received deduction is permitted for distributions from a brother-sister corporation. [¶289]
9. Affiliated corporations are treated as one corporation for purposes of the IRC §280G golden parachute rules. [¶297]
10. An S election that has terminated may not be reestablished without IRS consent until the fifth year following the
year of revocation. [¶307]
11. The passive activity loss rules are generally applied at the shareholder level, but some determinations affecting the
application of the rules are made at the corporate level. [¶309]
12. S corporation cannot claim the domestic production activities deduction. [¶312]
13. An S corporation cannot carry forward a net operating loss from a year in which it was not an S corporation. [¶319]
14. To avoid termination of S corporation status for excess passive investment income, an S corporation may elect to
treat distributions as taxable dividends. [¶333]
15. A limited partnership can have only one general partner and not more than 100 limited partners. [¶401A]
16. An unincorporated organization may choose not to be treated as a partnership if the entity is used only for
investment purposes. [¶402]
17. A limited liability company may elect to be treated as a partnership to avoid being treated as an association taxable
as a corporation for federal income tax purposes. [¶402B]
18. Innocent spouse relief is not available to partnership-level proceedings. [¶415]
19. Any guaranteed payments made to a partner without regard to partnership income are treated as a return of capital
that is not taxable to the partner. [¶421]
20. A disproportionate distribution will result in capital gain rather than ordinary income. [¶430]
9
2016–2017
21. A partnership must file an information return describing any exchanges of partnership interests involving unrealized
receivables or inventory. [¶435]
22. A partner that receives a profits interest in exchange for services must report the value of the interest as ordinary
income. [¶443]
23. Generally, no gain or loss is recognized by a partnership on a distribution of property to a partner. [¶453]
24. An electing large partnership terminates for tax purposes if 50 percent or more of its interests are sold or exchanged
within 12 months. [¶482]
25. Trusts and decedents’ estates are separate taxable entities for federal income tax purposes. [¶501]
26. A liquidating trust formed to liquidate and distribute assets is taxed as an association. [¶503]
27. The taxable income of a bankruptcy estate is subject to the same tax rate as a married individual filing separately.
[¶505]
28. An estate that has been in existence for more than two years must pay estimated income tax payments similar to
individuals. [¶510]
29. Income from a trust or estate is reported on Form 1041. [¶514]
30. The net investment income tax does not apply to estates or trusts. [¶517]
31. An estate’s gross income is generally determined in a manner similar to that of an individual. [¶520]
32. Generally, an estate or trust may deduct reasonable amounts paid for fiduciary fees and litigation expenses only if it
is engaged in a trade or business. [¶529]
33. The deduction allowed to a trust or estate for distributions to beneficiaries is limited to distributable net income.
[¶543]
34. The fiduciary of a complex trust can elect to treat distributions to a beneficiary made within the first 100 days of a
tax year as having been distributed in the previous tax year. [¶546]
35. Unused loss carryovers and excess deductions of an estate or trust are allowed to certain beneficiaries when the
estate or trust terminates. [¶556]
36. If an estate or trust has more than one beneficiary and is to be administered in well-defined and separate shares, the
amount of distributable net income allocable to the beneficiaries must be determined as if the shares were separate
estates or trusts. [¶557]
37. A qualified funeral trust is a funeral trust that is not a foreign trust or a grantor trust. [¶575]
38. Retaining the power to revoke a trust will cause the trust income to be taxed to the grantor. [¶582]
39. Form 3520 must be filed by U.S. persons who are treated as owners of foreign trusts under the grantor rules. [¶588]
40. Form 8940 is used by tax-exempt organizations to request a determination regarding a change in the type of
supporting organization. [¶607]
41. If an organization fails to file a notice with the IRS about its intention to claim public charity status, it will be
considered a private foundation. [¶623]
42. A farmers’ tax-exempt cooperative is required to file Form 1065. [¶625]
43. Several U.S. Courts of Appeal view salary payments to a deceased employee’s surviving spouse as tax-free gifts,
while the IRS and Tax Court view them as taxable income. [¶719]
44. Alimony is deductible only if the taxpayer itemizes her/his deductions. [¶771]
45. Income earned from a hobby is taxable, and related expenses are generally unlimited. [¶785]
46. Income received from property acquired by bequest, devise, or inheritance is excludable from gross income. [¶847]
47. Publicly held corporations generally may not deduct compensation paid in excess of $1 million to certain covered
employees. [¶906]
48. A length of service award given to an employee within her/his first five years is not deductible by the employer.
[¶919]
49. A $10 million limit applies to the deduction of interest incurred annually on debt used by a corporation to acquire
stock or two-thirds of another corporation’s operating assets. [¶937]
50. A taxpayer who works in two places in one day may not deduct the commuting expenses for getting from the first
place to the second. [¶945]
51. The standard mileage rate for business travel is 57.5 cents per mile for 2015. [¶947]
10
2016–2017
52. Medical expenses that a taxpayer has pre-paid are deductible only after the services have been provided. [¶1015]
53. Employees and self-employed individuals who move to start work in a new location may deduct the reasonable
expenses of moving as an above-the-line deduction. [¶1073]
54. Taxpayers who are union members may not deduct membership costs such as union dues. [¶1080]
55. A disaster loss may be deducted on the taxpayer’s return for the previous tax year. [¶1133]
56. The passive activity loss rules do not apply to closely held C corporations. [¶1173]
57. If more than 75 percent of a closely held corporation’s annual gross receipts are from real property trades or
businesses in which it materially participates, it qualifies as a real estate professional for purposes of the passive
activity loss rules. [¶1185]
58. A loss may not be claimed on the disposal of an amortizable IRC §197 intangible if another IRC §197 intangible
acquired in the same transaction is retained. [¶1288]
59. Form 8880 is used to calculate the retirement savings contributions credit. [¶1304]
60. A taxpayer may deduct foreign income taxes paid or accrued as an itemized deduction, or s/he may claim them as a
credit against her/his U.S. income tax liability. [¶1361]
61. For a corporation to qualify as an exempt small business for AMT purposes, it must have been in operation for three
or more years. [¶1415]
62. The AMT does not apply to partnerships. [¶1455]
63. Common trust funds must use the calendar year as their tax year. [¶1501]
64. Tax is calculated on an annualized basis if a short period return is filed due to a change in accounting period.
[¶1505]
65. In order to correct the use of an improper tax year, a taxpayer may file Form 1128 and an amended tax return
prepared on the calendar year basis. [¶1513]
66. Real property held for sale, capital assets, equipment, accounts, notes, investments, and similar assets may not be
inventoried. [¶1557]
67. The basis of property inherited from a decedent is generally the property’s fair market value on the date of death or
the alternate valuation or special use valuation date. [¶1633]
68. A taxpayer takes a fair market value basis in property acquired in a tax-free exchange. [¶1651]
69. The basis of property securing debt is decreased by any amount of debt discharged for which no amount was
included in gross income. [¶1672]
70. Under IRC §1035, the exchange of two life insurance contracts does not trigger gain or loss. [¶1724]
71. If a person transfers property to a corporation solely in exchange for stock and, immediately after the transfer, is in
control of the transferee corporation, gain or loss must be recognized. [¶1731]
72. The capital gains rate on net capital gains and qualified dividend income for an individual is 0 percent if s/he is in the
10- or 15-percent income tax brackets. [¶1736]
73. Amounts paid for the transfer of a franchise, trademark, or trade name are amortized over 20 years. [¶1774]
74. Depreciation recapture is calculated and reported on Form 4562. [¶1779]
75. A real or personal property dealer generally cannot report gain from dealer dispositions under the installment
method. [¶1808]
76. The installment method generally may not be used for a sale of depreciable property to a related person. [¶1835]
77. Stock options used as an employee incentive plan must be granted within five years of the date the plan was adopted.
[¶1927]
78. An employee stock purchase plan cannot grant options to an employee who already owns more than 2 percent of the
voting power/value of the employer’s stock. [¶1931]
79. In an established stock exchange transaction, a cash-basis taxpayer realizes gain or loss on the settlement date, not on
the trade date. [¶1973]
80. A securities broker/dealer may treat the payment of commissions as an ordinary and necessary cost of doing
business. [¶1983]
81. A full-time employee for purposes of the employer health insurance mandate is an employee who works at least 30
hours of service per week or 130 hours in a calendar month. [¶2001]
11
2016–2017
82. Health insurance coverage offered by an employer is considered “affordable” if the employee’s share of the premium
for family coverage does not exceed 12 percent of the employee’s household income. [¶2005]
83. Same-sex spouses are considered married for federal tax purposes only if they live in a state that recognizes such
marriages. [¶2015]
84. The maximum amount allowed to be contributed to a health flexible spending account for 2016 is $3,550. [¶2041]
85. Up to $2,500 of dependent care assistance benefits are excludable from an employee’s gross income if the employee
is married and files separately from her/his spouse. [¶2065]
86. No-additional-cost services provided to employees free of charge are excludable from the employee’s income if the
services are available to employees on a nondiscriminatory basis. [¶2087]
87. The maximum catch-up contribution to an IRC §§401(k), 403(b), and 457 plans is $3,000 for 2016. [¶2121]
88. Generally, all types of qualified retirement plans must satisfy a minimum distribution requirement by April 1 of the
calendar year following the calendar year in which the participant retires or reaches age 70-1/2, whichever is later.
[¶2127]
89. An individual who fails to take her/his required minimum distributions is subject to a 25-percent excise tax on the
amount that should have been distributed. [¶2127]
90. An individual may take a 10-year loan from her/his IRC §401(k) plan to refinance her/his home without it being
treated as a distribution. [¶2152]
91. Calendar year taxpayers generally have until April 15 (or their tax return due date) of the following year to make
contributions to their IRAs for the tax year. [¶2155]
92. Excess contributions to an IRA are subject to a cumulative 6-percent excise tax. [¶2161]
93. Losses on investments in Roth IRAs are not deductible. [¶2171]
94. An individual can recharacterize a contribution originally made to a traditional IRA as a Roth IRA contribution, or
vice versa, if certain conditions are met. [¶2177]
95. Distributions from a simplified employee pension (SEP) are taxed under the same rules as traditional IRAs. [¶2189]
96. Certain tax-exempt entities, such as county public school systems, are allowed to provide retirement benefits to
employees by using an IRC §403(b) plan. [¶2191]
97. A Type G reorganization is a change in the identity, form, or place of the organization of one corporation. [¶2209]
98. Form 966 must be filed by a liquidating corporation within 60 days of adopting a plan of liquidation. [¶2259]
99. Carrybacks of net operating losses and net capital losses are permitted in any type of reorganization. [¶2277]
100. Net operating losses and other carryforwards may be disallowed by the IRS if an acquisition is made for tax
avoidances purposes. [¶2281]
101. Net operating losses of a real estate investment trust (REIT) may only be carried back to tax years in which the entity
was a REIT. [¶2329]
102. A real estate mortgage investment conduit (REMIC) is subject to income taxation. [¶2343]
103. Net capital gains of a life insurance company generally are taxed at a rate of 35 percent. [¶2370]
104. Banks are not subject to the capital loss limitations with respect to the worthlessness of debt securities; they may treat
them as bad debts. [¶2383]
105. For 2016, a qualifying U.S. citizen who works abroad generally may exclude up to $14,182 of foreign housing
expenses. [¶2403]
106. A 30-percent branch profits tax may apply to a foreign corporation that operates a trade or business in the United
States. [¶2433]
107. A nonresident alien who is temporarily present in the United States under immigration laws on an F, J, M, or Q visa
as a visiting student, teacher, trainee, or specialist is considered to be engaged in a U.S. trade or business. [¶2448]
108. A U.S. person must disclose any financial interest in a foreign bank account, securities account, or other financial
account electronically on FinCEN Form 114 if the aggregate value of the accounts exceeds $20,000 at any time
during the calendar year. [¶2465]
109. An individual with up to $300 of creditable foreign taxes is exempt from the overall foreign tax credit limitation if
s/he has no foreign source income other than qualified passive income and s/he elects the de minimis exemption
directly on Form 1040. [¶2479]
110. A trust is required to file a tax return by the fifteenth day of the fourth month following the close of the tax year.
12
2016–2017
[¶2505]
111. An S corporation can obtain a nine-month extension of the time to file its tax return by filing Form 7004. [¶2509]
112. For tax years beginning in 2016, a tax return preparer is subject to a $510 penalty if s/he endorses or negotiates a
taxpayer’s refund check. [¶2518]
113. Any return or other document filed with the IRS is considered to have been timely filed if it is properly mailed in the
United States and the postmark date falls on or before the due date. [¶2553]
114. If an employer fails to withhold income taxes from an employee’s wages, the employer will be held liable for the
amount not withheld. [¶2601]
115. Amounts paid to an employee under an accountable plan are required to be reported on the employee’s Form W-2.
[¶2607]
116. An individual may be subject to a $500 civil penalty for claiming excess withholding allowances on Form W-4.
[¶2634]
117. For 2016, the additional 0.9-percent Medicare tax applies to wages in excess of $250,000 for a single individual.
[¶2648]
118. In 2016, employers are required to withhold and pay FICA taxes on all wages paid to domestic workers. [¶2652]
119. A taxpayer generally has 90 days after a notice of deficiency is mailed to file a petition with the Tax Court for a
redetermination of her/his tax deficiency. [¶2711]
120. A 30-percent accuracy-related penalty applies to the portion of an underpayment of tax attributable to negligence.
[¶2854]
13
2016–2017
Course No. ASC354
40 Credit Hours
$198.00
CPE Quizzer for
RIA 2016 FEDERAL TAX HANDBOOK
Prerequisite: None
Directions:
x Identify federal taxation changes that affect 2015 and 2016 returns
x Determine changes affecting income taxes for partnerships and corporations
x Identify federal income tax requirements for estates and trusts
1. The marginal tax rate for 2015 is 39.6 percent for a single taxpayer whose taxable income is over $413,200 or for a
married couple filing jointly whose taxable income is over $464,850. [¶1102, 1103]
2. The 2016 income tax rate for trusts with income under $2,550 is 18%. [¶1106]
3. Certain unearned income of individuals, trusts, and estates is subject to a 3.8% surtax. [¶1107]
4. The OASDI tax rate imposed on self-employed individuals on the first $118,500 of self-employment income is 12.4
percent for 2015. [¶1109]
5. Income from the sale of illegal drugs is excluded from gross income. [¶1200]
6. Each co-owner in a tenancy in common is taxed on half of the income from the co-owned property. [¶1202]
7. Electronic health record incentive payments made to health care professionals for using patients’ electronic health
records are taxable. [¶1206]
8. An employee who receives restricted stock must recognize the income immediately. [¶1217]
9. For employee stock purchases plans (ESPP), the employee pays no tax on the option or stock until disposal. [¶1220]
10. Rental allowance paid to a member of the clergy as compensation may be excluded from the minister’s gross
income. [¶1226]
11. The cents-per-mile valuation method is not allowed for 2015 if the fair market value of the employer-provided auto
exceeds $16,000. [¶1236]
12. Employer-provided airline flights for an employee’s personal purposes are nontaxable fringe benefits. [¶1238]
13. No-additional-cost services are included in an employee’s gross income. [¶1243]
14. A qualified employee discount is excluded from an employee’s gross income. [¶1244]
15. Insurance premiums paid for partners and more-than-2 percent S corporation shareholders are excludable from gross
income. [¶1255]
16. An employee is not taxed on employer paid group-term life insurance premiums if total coverage is less than
$100,000. [¶1262]
17. Employees are not taxed on employer-provided meals that are furnished for the employer’s convenience. [¶1267]
RIA 2016 Federal Tax Handbook (40 hours)
14
2016–2017
18. The maximum amount an employee can contribute to a health flexible spending account for 2016 is $2,550. [¶1269]
19. Payments incurred by an employer under a written plan for dependent care assistance are included in the employee’s
gross income. [¶1270]
20. Unemployment benefits are fully taxable. [¶1278]
21. The highest tax rate on qualified dividends to noncorporate shareholders received in 2015 is 20 percent. [¶1286]
22. Generally, stock dividends are taxable to the shareholder. [¶1295]
23. All interest received by or credited to a taxpayer is taxable as ordinary income unless specifically exempt. [¶1302]
24. Original issue discount (OID) is defined as the excess (if any) of a debt instruments stated redemption price at
maturity over its issue price. [¶1314]
25. The issue price of a publicly offered debt instrument issued for money is the initial offering price to the public at
which a substantial amount of the instruments are sold. [¶1317]
26. Rent paid in property is taxed at the property’s fair market value upon receipt. [¶1339]
27. Life insurance proceeds payable to an individual by reason of an insured’s death must be included in the gross
income of the recipient. [¶1347]
28. Amounts paid under a life insurance contract on the life of a terminally ill individual are excluded from gross
income. [¶1351]
29. For variable annuities, the excludable portion of each payment is computed by dividing the investment amount by
the total number of anticipated payments. [¶1359]
30. A 15 percent penalty is generally imposed on premature distributions from annuity contracts. [¶1367]
31. Property that is received as a gift, bequest, devise, or inheritance is not taxable to the recipient. [¶1370]
32. With the exception of qualified scholarships, all prizes and awards are includible in gross income. [¶1373]
33. If an insolvent taxpayer has debt discharged, the income is excluded from the taxpayer’s income to the extent of the
insolvency. [¶1389]
34. Start-up expenditures are amortized over a 180-month period if the taxpayer does not elect to expense them. [¶1501]
35. A corporation that incurs expenses in searching for or investigating a new business venture that proves fruitless
cannot deduct these expenses as a loss when it abandons the effort. [¶1504]
36. To meet the “necessary” requirement for a deductible business expense, an expense must be essential to the
taxpayer’s business. [¶1507]
37. A corporation may deduct payment of shareholders’ personal expenses. [¶1509]
38. Business promotion costs relating to an existing business cannot be deducted in the current period if the benefits they
generate extend beyond the tax year. [¶1512]
39. Reasonable wages paid by a parent to her/his unemancipated minor child are deductible if paid for personal services
rendered as a bona fide employee in the business. [¶1516]
40. The unreasonable portion of compensation paid to a shareholder may be treated as a dividend. [¶1517]
41. The test for reasonable compensation is normally applied to total compensation paid to a group of employees rather
than a particular individual. [¶1518]
42. A more-than-2 percent-shareholder of an S corporation can deduct 100 percent of medical insurance premiums as a
business expense. [¶1532]
43. A corporation accrued its 2015 employee bonuses on December 31, 2015, but paid them on March 1, 2016. The
amounts to be paid were determined with reasonable certainty, and the economic performance creating them had
occurred. These bonus payments may be deducted on the company’s 2015 accrual method calendar year tax return.
[¶1539]
15
2016–2017
44. The cost of attending a business convention held aboard a cruise ship is nondeductible. [¶1548]
45. The business standard mileage rate for 2015 is 57.5¢. [¶1558]
46. A taxpayer cannot deduct the cost of entertaining her/his own spouse, even if a clear business purpose can be
established. [¶1561]
47. Membership dues paid for professional and trade associations are not deductible. [¶1566]
48. The deductible percentage of meals for truck drivers when working away from home is limited to 50 percent.
[¶1567]
49. In general, travel and entertainment expenses must be substantiated in order to be deducted. [¶1577]
50. Meals and incidental expenses reimbursed to an employee under an optional per diem allowance are substantiated by
providing the business purpose and receipts. [¶1579]
51. The maximum deduction an employer may take for an employee achievement award is $600 per employee. [¶1589]
52. Lease acquisition costs are deductible in the year paid. [¶1595]
53. Research and experimental expenditures must be capitalized. [¶1600]
54. Penalties paid in connection with federal taxes are deductible business expenses. [¶1611]
55. Royalties paid for the right to use patents, copyrights, or other similar rights are deductible. [¶1616]
56. The cost of software purchased alone is capitalized and amortized over 60 months using the straight-line method.
[¶1621]
57. Taxpayers are allowed to deduct mining exploration expenditures as percentage depletion for minerals, excluding oil
and gas, if elected and if allowed under IRC §617. [¶1624]
58. A deduction is allowed for only two-thirds of any treble damage or settlement payments paid to private parties
resulting from a criminal proceeding for violation of federal anti-trust laws in which the payor is convicted or pleads
guilty or no contest. [¶1628]
59. Accountants may deduct the cost of a CPA review course as well as the CPA exam. [¶1634]
60. For employees, home-office expenses are deducted on Form 1040 Schedule A if allowable. [¶1636]
61. To qualify for the moving expense deduction, the new job site must be more than 100 miles farther from the
taxpayer’s old residence than was the old job site. [¶1647]
62. Generally, an expense must be capitalized if it betters or improves a unit of property, restores it, or adapts it to a new
or different use. [¶1659]
63. Interest paid on delinquent sales tax related to the taxpayer’s business is deductible. [¶1708]
64. For joint owners of mortgaged property, if interest payments are made from a joint bank account, each owner is
presumed to have paid an equal amount absent evidence to the contrary. [¶1713]
65. Individual taxpayers may not deduct interest paid on personal credit card debt. [¶1715]
66. Individual taxpayers are allowed to deduct interest on debt incurred to buy tax-exempt securities. [¶1723]
67. A noncorporate taxpayer is permitted to deduct investment interest to the extent of net investment income. [¶1726]
68. Qualified residence interest includes interest paid during the tax year on home equity indebtedness. [¶1732]
69. A qualified residence for the qualified residence interest deduction may consist of the taxpayer’s primary residence
plus a second residence, such as a vacation home. [¶1735]
70. Deductible taxes for taxpayers who itemize include state, local, and foreign real property taxes. [¶1755]
71. For a taxpayer who does not itemize, the only taxes that are deductible are “above the line” taxes. [¶1757]
16
2016–2017
72. A cash basis taxpayer pays her/his 2015 property taxes that are due on January 31, 2016, on December 31, 2015. The
taxpayer may deduct this good faith advance payment of tax on her/his 2015 tax return. [¶1766]
73. In determination of whether an activity is “engaged in for profit,” a taxpayer who hasn’t engaged in an activity for
more than five years can elect to postpone the determination by filing Form 2553. [¶1778]
74. A home must be rented for 15 days or more in a year in order to deduct any rental expenses. [¶1780]
75. Gambling losses from horse racing may offset the taxpayer’s poker winnings for the same tax year. [¶1786]
76. An individual tax payer may elect to treat a loss on a frozen bank account as a theft or casualty loss. [¶1792]
77. The at-risk rules apply to the exploration for oil and gas resources. [¶1805]
78. Spouses filing a joint return generally are treated as one taxpayer for purposes of the passive activity rules. [¶1812]
79. A taxpayer’s work as an investor is considered participation if the person is directly involved in day-to-day
management or operations. [¶1830]
80. The general rule that all rental activities are presumed to be passive activities does not apply to those who actively
participate in rental real estate activities or to certain real estate professionals. [¶1832]
81. Bad debts are deductible only if they are connected with the taxpayer’s business. [¶1848]
82. A proratable depreciation deduction is allowed for MACRS property place in service and disposed of in the same
year. [¶1905]
83. An improvement of any real property is to be depreciated in the same manner as the depreciation deduction for the
real property if the real property were placed in service at the same time as the improvement. [¶1921]
84. The maximum amount that can be expensed under IRC §179 for tax years beginning in 2014 is $500,000. [¶1941]
85. Franchises, trademarks, and trade names are amortizable Section 197 intangibles. [¶1971]
86. A taxpayer that sells property to a charity and receives less than the fair market value for the property sold in the
transaction may deduct the “bargain” element as a charitable contribution. [¶2112]
87. Charitable deductions are allowed for a taxpayer’s charitable travel expenses even if there are elements of recreation
and vacation. [¶2121]
88. Charitable contributions that cannot be used on a decedent’s final return are lost. [¶2130]
89. LASIK eye surgery to correct defective vision is a deductible medical expense. [¶2144]
90. Costs incurred for transportation to a health facility for essential medical care are deductible as medical expenses.
[¶2148]
91. Alimony payments are deductible by the payor spouse and taxable by the payee spouse in the year received by the
payee spouse . [¶2153]
92. Distributions from a qualified tuition program are nontaxable to the extent that they are used to pay for qualified
higher education expenses. [¶2209]
93. Qualifying individuals may deduct up to $5,500 of their own qualified student loan interest paid as an above-the-line
deduction. [¶2222]
94. The general business credit has a one-year carryback and a 20-year carryforward. [¶2304]
95. Taxpayers are allowed a renewable electricity production credit for electricity produced by wind and solar energy.
[¶2324]
96. Foreign income taxes may be deducted in the same year a credit is claimed for foreign income tax. [¶2362]
97. A taxpayer must recognize gain, but not loss, on exchanges of preferred stock for other preferred stock of the same
corporation. [¶2414]
98. For purposes of IRC §1031, the IRS provides that cars and light general-purpose trucks are like-kind property.
[¶2419]
17
2016–2017
99. Any liabilities assumed in a like-kind transaction are treated as boot. [¶2422]
100. A disposition due to the threat or imminence of condemnation is not considered an involuntary conversion. [¶2435]
101. The replacement period for livestock sold on account of drought in an area designated as eligible for assistance by
the federal government is four years. [¶2441]
102. The exclusion of gain on a principal residence does not apply if the exclusion was applied to another home sale by
the taxpayer within the two-year period ending on the date of sale. [¶2442]
103. Where property is transferred between spouses or former spouses incident to divorce, all gains and losses are
recognized. [¶2447]
104. No deduction is allowed on a loss from a sale or exchange between a brother and sister. [¶2448]
105. The wash sale disallowance period is 90 days before the date of the sale and 90 days after the date of the sale.
[¶2462]
106. A taxpayer’s cost of property includes mortgages and other liability assumed in connection with the purchase.
[¶2465]
107. For a cash basis taxpayer, accounts receivable have a zero basis. [¶2471]
108. When a residence is converted to a rental, the basis is the lower of the adjusted basis or the fair market value on the
date of conversion. [¶2473]
109. A stockholder’s basis for his corporate stock is increased by his contribution to the capital of the corporation.
[¶2475]
110. The basis of property received in complete liquidation of a corporation is the fair market value at the time of the
distribution if gain or loss was recognized on the receipt of the property. [¶2490]
111. The basis of property received in a like-kind exchange is the adjusted basis of the property traded assuming no gain
is recognized on the exchange. [¶2501]
112. The basis in property received via inheritance is generally the fair market value of the property on the date of the
death of the decedent. [¶2512]
113. Property is considered acquired from a decedent if it is received by bequest, devise, or inheritance. [¶2515]
114. Property passing without full and adequate consideration under a general power of appointment exercised by the
decedent in her/his will is considered property acquired from a decedent. [¶2520]
115. Unrecaptured IRC §1250 gain is subject to a maximum tax rate of 35 percent. [¶2605]
116. Noncorporate taxpayers may deduct capital losses to the extent of capital gains plus the excess of the losses over the
gains up to $3,000. [¶2611]
117. Inventory is considered a capital asset. [¶2617]
118. Hedging transactions produce capital gains or losses. [¶2618]
119. The sale or exchange of tax-exempt obligations is exempt from tax. [¶2636]
120. A short sale occurs when a security is sold for delivery in the future. [¶2639]
121. For qualified small business stock (QSBS) acquired after September 27, 2010 and before 2015, a noncorporate
taxpayer may exclude 75% of the gain realized on the disposition of the stock. [¶2648]
122. An option to acquire stock is considered qualified small business stock (QSBS). [¶2649]
123. Holding a capital asset for one year or less results in a short-term capital gain or loss on the sale or exchange of that
asset. [¶2667]
124. Property inherited from a decedent that has basis that was determined based on the fair market value of the property
on the decedent’s date of death which is sold within one year or less is given long-term capital gain treatment.
[¶2672]
18
2016–2017
125. Assets used in a taxpayer’s trade or business that have been held for over a year at the time of their disposition are
IRC §1231 assets. [¶2686]
126. Property held for rent is generally treated as IRC §1231 property, unless the rental activity is minimal. [¶2686]
127. If a sale of depreciable property is made between related persons the gain is considered ordinary income. [¶2690]
128. IRC §1250 property includes MACRS residential real property. [¶2694]
129. A reduction of business use of listed property from more-than-50 percent to 50 percent or less triggers recapture of
excess depreciation. [¶2700]
130. Taxpayers do not have to compute taxable income on the basis of their tax year. [¶2801]
131. An individual with a fiscal year tax year can change their accounting period to a calendar year tax year without
obtaining IRS approval. [¶2815]
132. Under the cash method, a check is not considered paid until it is cashed by the recipient. [¶2823]
133. Under the accrual method of accounting, security deposits are taxable when received. [¶2831]
134. A deduction for a contested liability is allowed until resolved by agreement or final court decision. [¶2834]
135. A change from the LIFO inventory valuation method to the FIFO valuation inventory method is not considered an
accounting method change. [¶2838]
136. If a taxpayer’s records are inadequate, then the IRS must reconstruct the taxpayer’s income using the net worth
method. [¶2856]
137. The IRS has authority to reallocate deductions among two organizations, owned by the same person in order to
reflect the true income of the organizations. [¶2857]
138. The taxpayer must have the title for an item to be included in inventory. [¶2863]
139. Consistency in the inventory valuation procedure is of first importance. [¶2864]
140. An employee who had no tax liability in the prior year may be excused from income tax withholding if s/he expects
to have no income tax liability for the current year. [¶3018]
141. The OASDI tax rate is 1.45%. [¶3025]
142. Mandatory withholding is not required for eligible rollover distributions if the total distribution paid to the
distributee under an employee plan within the tax year is expected to be less than $400. [¶3036]
143. A dividend or interest payment is a reportable payment that may be subject to backup withholding. [¶3046]
144. The personal exemption amount for 2016 is $4,050. [¶3115]
145. In 2016, the phase-out of personal exemptions for heads of households begins to apply when adjusted gross income
reaches $285,350. [¶3117]
146. A nonresident alien cannot qualify for head of household status. [¶3134]
147. Under the “kiddie tax” rules, children can be taxed at their parent’s highest tax rate on the child’s unearned income
over $3,100 for 2016. [¶3135]
148. For 3.8% surtax purposes, net investment income includes royalties. [¶3152]
149. There is no penalty for an individual for underpayment of estimated tax if the amount of tax due on the return after
withholding is less than $5,000. [¶3154]
150. A C corporation may deduct 80% of dividends received from domestic corporations. [¶3307]
151. Qualified personal service corporations (PSCs) are subject to a flat 35% tax rate. [¶3329]
152. Corporations owing $500 or more in income tax for the year will be subject to a penalty if they do not make
estimated tax payments. [¶3343]
19
2016–2017
153. Only small business corporations are eligible to be S corporations. [¶3351]
154. An S corporation shareholder who reports a Subchapter S item differently must inform the IRS of the inconsistency
on Form 8082. [¶3370]
155. The accumulated adjustments account (AAA) contains the amount of corporate earnings that have been previously
taxed to the corporation’s shareholders, but never distributed to them. [¶3374]
156. Reorganizations and other tax-free distributions do not reduce E&P if the distributee recognizes gain. [¶3523]
157. If a redemption is substantially disproportionate, it will be treated as a sale or exchange of stock. [¶3526]
158. If shareholders control two corporations and they sell the stock of one corporation to the other for cash, the sale is
treated as a stock redemption. [¶3533]
159. A merger or consolidation is a Type B reorganization. [¶3544]
160. A Type F organization may be used for identity changes. [¶3549]
161. A shareholder who receives a series of distributions in a complete liquidation of a corporation does not report any
gain until all of her/his basis in the stock is recovered. [¶3575]
162. If a partnership with two members is reduced to one member, the entity becomes disregarded as an entity separate
from its owner. [¶3701]
163. An electing large partnership must have at least 50 partners. [¶3702]
164. LLCs are a creation of federal law. [¶3703]
165. For family partnerships where capital is a material income-producing factor, a valid family partnership may be
created by gift of a capital interest. [¶3704]
166. If a taxpayer receives a capital interest in a partnership in exchange for services performed for that partnership, that
interest would be treated as compensation paid to that taxpayer. [¶3712]
167. Retroactive allocations of partnership items of income, expense, etc., are permitted when a new partner is admitted.
[¶3725]
168. For constructive ownership of partnership interests for purposes of determining losses on sales and exchanges with a
controlled partnership, a partner is considered to own the interest of his partners who are related. [¶3733]
169. If a partner has partnership losses in 2015 that exceed her/his partnership basis, s/he may not deduct the full loss on
her/his 2015 tax return. [¶3734]
170. A partner’s holding period for property distributed to him in kind begins on the date of the distribution from the
partnership. [¶3746]
171. If the partner’s share of the partnership liabilities decreases, it is treated as a distribution of money to that partner.
[¶3760]
172. A partnership tax year ends with respect to a deceased partner on the date of her/his death. [¶3773]
173. On a transfer of partnership interest, the election to adjust the basis of the partnership assets is made by the
partnership filing a statement of election with the partnership return for the tax year during which the transfer of
interest occurs. [¶3780]
174. A partnership generally terminates for tax purposes when 50 percent or more of the total interest in the partnership’s
capital and profits changes hands by sale within 12 consecutive months. [¶3782]
175. If a trust distributes income to the beneficiary, the trust is still liable for the tax on that income. [¶3901]
176. An estate is entitled to a personal exemption of $600. [¶3928]
177. Family support allowances paid by an estate are not deductible by the estate. [¶3941]
178. When a trust is required to distribute all income to the beneficiary, the beneficiary is taxed even if the income was
not currently distributed. [¶3948]
20
2016–2017
179. The last tax year of a decedent ends on the last day of the year in which the decedent died and not on the actual date
of death. [¶3966]
180. The character of income in respect of a decedent (IRD) is the same as it would have been in the hands of the
decedent. [¶3971]
181. A civic league operated only for the promotion of social welfare, not operated for profit or benefit, is a tax-exempt
organization. [¶4106]
182. The IRS cannot retroactively revoke a determination letter that granted tax-exempt status to an organization. [¶4117]
183. Generally, all organizations exempt from tax must file an annual information return. . [¶4124]
184. A real estate investment trust (REIT) must be a calendar-year corporation, trust, or association. [¶4202]
185. The maximum pre-tax deferral in 2016 for an employee ineligible for the “catch-up” contribution is $17,500.
[¶4317]
186. A qualified employer plan must require that benefits resulting from employee contributions are fully vested within
five years. [¶4322]
187. Self-employed individuals may establish and participate in Keogh plans. [¶4327]
188. Generally, a loan from a qualified plan must be repaid within five years to avoid being treated as a plan distribution.
[¶4343]
189. For 2015 and 2016, the maximum amount a 55-year-old individual may contribute each year to an IRA is $6,500.
[¶4351]
190. Ralph, a 58-year-old taxpayer, may take money out of his IRA without penalty. [¶4357]
191. Traditional IRAs may be rolled over tax-free into Roth IRAs. [¶4367]
192. Roth IRAs are not subject to the post-age 70 ½ lifetime required distribution rules. [¶4367]
193. An advantage to a Roth IRA is that the 10-percent early withdrawal penalty does not apply. [¶4374]
194. Net operating losses (NOLs) attributable to farming may be carried back fifteen years. [¶4503]
195. U.S. citizens who live abroad are not subject to U.S. income tax on their income from sources outside of the U.S.
[¶4611]
196. Generally, aliens residing in Puerto Rico are taxed in the same manner as U.S. resident aliens. [¶4618]
197. Foreign corporations engaged in business in the United States are not required to file any tax returns or information
returns due to diplomatic immunity. [¶4658]
198. For U.S. tax purposes, transactions involving foreign currency must be expressed in U.S. dollars. [¶4673]
199. E-filing is not allowed for prior year amended returns. [¶4703]
200. The president and chief accounting officer of a corporation are the only officers allowed to sign the federal tax
return. [¶4725]
21
2016–2017
Course No. ASC354
24 Credit Hours
$150.00
CPE Quizzer for
RIA 2016 FEDERAL TAX HANDBOOK
Prerequisite: None
Directions:
x Identify federal tax law changes that affect 2015 and 2016 returns
x Determine changes affecting income taxes for partnerships and corporations
x Identify federal income tax requirements for estates and trusts
1. The marginal tax rate for 2015 is 39.6 percent for a single taxpayer whose taxable income is over $413,200 or for a
married couple filing jointly whose taxable income is over $464,850. [¶1102, 1103]
2. The 2016 income tax rate for trusts with income under $2,550 is 18%. [¶1106]
3. The OASDI tax rate imposed on self-employed individuals on the first $118,500 of self-employment income is 12.4
percent for 2015. [¶1109]
4. Each co-owner in a tenancy in common is taxed on half of the income from the co-owned property. [¶1202]
5. An employee who receives restricted stock must recognize the income immediately. [¶1217]
6. For employee stock purchases plans (ESPP), the employee pays no tax on the option or stock until disposal. [¶1220]
7. The cents-per-mile valuation method is not allowed for 2015 if the fair market value of the employer-provided auto
exceeds $16,000. [¶1236]
8. Employer-provided airline flights for an employee’s personal purposes are nontaxable fringe benefits. [¶1238]
9. A qualified employee discount is excluded from an employee’s gross income. [¶1244]
10. Insurance premiums paid for partners and more-than-2 percent S corporation shareholders are excludable from gross
income. [¶1255]
11. Employees are not taxed on employer-provided meals that are furnished for the employer’s convenience. [¶1267]
12. The maximum amount an employee can contribute to a health flexible spending accounts for 2016 is $2,550.
[¶1269]
13. Payments incurred by an employer under a written plan for dependent care assistance are included in the employee’s
gross income. [¶1270]
14. Unemployment benefits are fully taxable. [¶1278]
15. The highest tax rate on qualified dividends to noncorporate shareholders received in 2015 is 20 percent. [¶1286]
16. Generally, stock dividends are taxable to the shareholder. [¶1295]
17. Original issue discount (OID) is defined as the excess of a debt instrument’s stated redemption price at maturity over
its issue price. [¶1314]
18. The issue price of a publicly offered debt instrument issued for money is the initial offering price to the public at
which a substantial amount of the instruments are sold. [¶1317]
22
2016–2017
19. Life insurance proceeds payable to an individual by reason of an insured’s death must be included in the gross
income of the recipient. [¶1347]
20. For variable annuities, the excludable portion of each payment is computed by dividing the investment amount by
the total number of anticipated payments. [¶1359]
21. Property that is received as a gift, bequest, devise, or inheritance is not taxable to the recipient. [¶1370]
22. With the exception of qualified scholarships, all prizes and awards are includible in gross income. [¶1373]
23. If an insolvent taxpayer has debt discharged outside bankruptcy, the income is excluded from the taxpayer’s income
to the extent of the insolvency. [¶1389]
24. Start-up expenditures are amortized over a 180-month period if the taxpayer does not elect to expense them. [¶1501]
25. To meet the “necessary” requirement for a deductible business expense, an expense must be essential to the
taxpayer’s business. [¶1507]
26. A corporation may deduct payment of shareholders’ personal expenses. [¶1509]
27. The unreasonable portion of compensation paid to a shareholder may be treated as a dividend. [¶1517]
28. The test for reasonable compensation is normally applied to total compensation paid to a group of employees rather
than a particular individual. [¶1518]
29. A more-than-2 percent-shareholder of an S corporation can deduct 100 percent of medical insurance premiums as a
business expense. [¶1532]
30. A corporation accrued its 2015 employee bonuses on December 31, 2015, but paid them on March 1, 2016. The
amounts to be paid were determined with reasonable certainty, and the economic performance creating them had
occurred. These bonus payments may be deducted on the company’s 2015 accrual method calendar year tax return.
[¶1539]
31. The business standard mileage rate for 2015 is 57.5¢. [¶1558]
32. A taxpayer cannot deduct the cost of entertaining her/his own spouse, even if a clear business purpose can be
established. [¶1561]
33. Membership dues paid for professional and trade associations are not deductible. [¶1566]
34. In general, travel and entertainment expenses must be substantiated in order to be deducted. [¶1577]
35. The maximum deduction an employer may take for an employee achievement award is $600 per employee. [¶1589]
36. Penalties paid in connection with federal taxes are deductible business expenses. [¶1611]
37. Taxpayers are allowed to deduct mining exploration expenditures as percentage depletion for minerals, excluding oil
and gas, if elected and if allowed under IRC §617. [¶1624]
38. A deduction is allowed for only two-thirds of any treble damage or settlement payments paid to private parties
resulting from a criminal proceeding for violation of federal anti-trust laws in which the payor is convicted or pleads
guilty or no contest. [¶1628]
39. Accountants may deduct the cost of a CPA review course as well as the CPA exam. [¶1634]
40. For employees, home-office expenses are deducted on Form 1040 Schedule A if allowable. [¶1636]
41. To qualify for the moving expense deduction, the new job site must be more than 100 miles farther from the
taxpayer’s old residence than was the old job site. [¶1647]
42. Generally, an expense must be capitalized if it betters or improves a unit of property, restores it, or adapts it to a new
or different use. [¶1659]
43. Interest paid on delinquent sales tax related to the taxpayer’s business is deductible. [¶1708]
44. For joint owners of mortgaged property, if interest payments are made from a joint bank account, each owner is
presumed to have paid an equal amount absent evidence to the contrary. [¶1713]
45. Individual taxpayers may not deduct interest paid on personal credit card debt. [¶1715]
46. Individual taxpayers are allowed to deduct interest on debt incurred to buy tax-exempt securities. [¶1723]
47. A noncorporate taxpayer is permitted to deduct investment interest to the extent of net investment income. [¶1726]
23
2016–2017
48. Qualified residence interest includes interest paid during the tax year on home equity indebtedness. [¶1732]
49. A qualified residence for the qualified residence interest deduction may consist of the taxpayer’s primary residence
plus a second residence, such as a vacation home. [¶1735]
50. A cash basis taxpayer pays her/his 2015 property taxes that are due on January 31, 2016, on December 31, 2015. The
taxpayer may deduct this good faith advance payment of tax on her/his 2015 tax return. [¶1766]
51. In determination of whether an activity is “engaged in for profit,” a taxpayer who hasn’t engaged in an activity for
more than five years can elect to postpone the determination by filing Form 2553. [¶1778]
52. A home must be rented for 15 days or more in a year in order to deduct any rental expenses. [¶1780]
53. Gambling losses from horse racing may offset the taxpayer’s poker winnings for the same tax year. [¶1786]
54. An individual tax payer may elect to treat a loss on a frozen bank account as a theft or casualty loss. [¶1792]
55. Spouses filing a joint return generally are treated as one taxpayer for purposes of the passive activity rules. [¶1812]
56. A taxpayer’s work as an investor is considered participation if the person is directly involved in day-to-day
management or operations. [¶1830]
57. Bad debts are deductible only if they are connected with the taxpayer’s business. [¶1848]
58. A proratable depreciation deduction is allowed for MACRS property placed in service and disposed of in the same
year. [¶1905]
59. An improvement of any real property is to be depreciated in the same manner as the depreciation deduction for the
real property if the real property were placed in service at the same time as the improvement. [¶1921]
60. Franchises, trademarks, and trade names are amortizable Section 197 intangibles. [¶1971]
61. A taxpayer that sells property to a charity and receives less than the fair market value for the property sold in the
transaction may deduct the “bargain” element as a charitable contribution. [¶2112]
62. Charitable deductions are allowed for a taxpayer’s charitable travel expenses even if there are elements of recreation
and vacation. [¶2121]
63. LASIK eye surgery to correct defective vision is a deductible medical expense. [¶2144]
64. Costs incurred for transportation to a health facility for essential medical care are deductible as medical expenses.
[¶2148]
65. Alimony payments are deductible by the payor spouse and taxable by the payee spouse in the year received by the
payee spouse. [¶2153]
66. Qualifying individuals may deduct up to $5,500 of their own qualified student loan interest paid as an above-the-line
deduction. [¶2222]
67. Taxpayers are allowed a renewable electricity production credit for electricity produced by wind and solar energy.
[¶2324]
68. Foreign income taxes may be deducted the same year a credit is claimed for foreign income tax. [¶2362]
69. Any liabilities assumed in a like-kind transaction are treated as boot. [¶2422]
70. A disposition due to the threat or imminence of condemnation is not considered an involuntary conversion. [¶2435]
71. The exclusion of gain on a principal residence does not apply if the exclusion was applied to another home sale by
the taxpayer within the two-year period ending on the date of sale. [¶2442]
72. No deduction is allowed on a loss from a sale or exchange between a brother and sister. [¶2448]
73. The wash sale disallowance period is 90 days before the date of the sale and 90 days after the date of the sale.
[¶2462]
74. For a cash basis taxpayer, accounts receivable have a zero basis. [¶2471]
75. When a residence is converted to a rental, the basis is the lower of the adjusted basis or the fair market value on the
date of conversion. [¶2473]
76. A stockholder’s basis for his corporate stock is increased by his contribution to the capital of the corporation.
[¶2475]
24
2016–2017
77. The basis of property received in a like-kind exchange is the adjusted basis of the property traded assuming no gain
is recognized on the exchange. [¶2501]
78. Property is considered acquired from a decedent if it is received by bequest, devise, or inheritance. [¶2515]
79. Unrecaptured IRC §1250 gain is subject to a maximum tax rate of 35 percent. [¶2605]
80. Noncorporate taxpayers may deduct capital losses to the extent of capital gains plus the excess of the losses over the
gains up to $3,000. [¶2611]
81. Inventory is considered a capital asset. [¶2617]
82. Hedging transactions produce capital gains or losses. [¶2618]
83. The sale or exchange of tax-exempt obligations is exempt from tax. [¶2636]
84. A short sale occurs when a security is sold for delivery in the future. [¶2639]
85. For qualified small business stock (QSBS) acquired after September 27, 2010 and before 2015, a noncorporate
taxpayer may exclude 75% of the gain realized on the disposition of the stock. [¶2648]
86. An option to acquire stock is considered qualified small business stock (QSBS). [¶2649]
87. Assets used in a taxpayer’s trade or business that have been held for over a year at the time of their disposition are
IRC §1231 assets. [¶2686]
88. If a sale of depreciable property is made between related persons the gain is considered ordinary income. [¶2690]
89. Taxpayers do not have to compute taxable income on the basis of their tax year. [¶2801]
90. A deduction for a contested liability is allowed until resolved by agreement or final court decision. [¶2834]
91. A change from the LIFO inventory valuation method to the FIFO valuation inventory method is not considered an
accounting method change. [¶2838]
92. The IRS has authority to reallocate deductions among two organizations, owned by the same person in order to
reflect the true income of the organizations. [¶2857]
93. The taxpayer must have the title for an item to be included in inventory. [¶2863]
94. Consistency in the inventory valuation procedure consistency is of first importance. [¶2864]
95. The OASDI tax rate is 1.45%. [¶3025]
96. In 2016, the phase-out of personal exemptions for heads of households begins to apply when adjusted gross income
reaches $285,350. [¶3117]
97. Under the “kiddie tax” rules, children can be taxed at their parent’s highest tax rate on the child’s unearned income
over $3,100 for 2016. [¶3135]
98. There is no penalty for an individual for underpayment of estimated tax if the amount of tax due on the return after
withholding is less than $5,000. [¶3154]
99. Only small business corporations are eligible to be S corporations. [¶3351]
100. The accumulated adjustments account (AAA) contains the amount of corporate earnings that have been previously
taxed to the S corporation’s shareholders, but never distributed to them. [¶3374]
101. Reorganizations and other tax-free distributions do not reduce E&P if the distributee recognizes gain. [¶3523]
102. If shareholders control two corporations and they sell the stock of one corporation to the other for cash, the sale is
treated as a stock redemption. [¶3533]
103. If a partnership with two members is reduced to one member, the entity becomes disregarded as an entity separate
from its owner. [¶3701]
104. LLCs are a creation of federal law. [¶3703]
105. If a taxpayer receives a capital interest in a partnership in exchange for services performed for that partnership, the
fair market value of the capital interest would be treated as compensation paid to that taxpayer. [¶3712]
106. For constructive ownership of partnership interests for purposes of determining losses on sales and exchanges with a
controlled partnership, a partner is considered to own the interest of his partners who are related. [¶3733]
25
2016–2017
107. If a partner has partnership losses in 2015 that exceed her/his partnership basis, s/he may not deduct the full loss on
her/his 2015 tax return. [¶3734]
108. A partner’s holding period for property distributed to him in kind begins on the date of the distribution from the
partnership. [¶3746]
109.If the partner’s share of the partnership liabilities decreases it is treated as a distribution of money to that partner.
[¶3760]
110. A partnership generally terminates for tax purposes when 50 percent or more of the total interest in the partnership’s
capital and profits changes hands by sale within 12 consecutive months. [¶3782]
111. An estate is entitled to a personal exemption of $600. [¶3928]
112. The last tax year of a decedent ends on the last day of the year in which the decedent died and not on the actual date
of death. [¶3966]
113. Generally, all organizations exempt from tax must file an annual information return. . [¶4124]
114. The maximum pre-tax deferral in 2016 for an employee ineligible for the “catch-up” contribution is $17,500.
[¶4317]
115. For 2015 and 2016, the maximum amount a 55-year-old individual may contribute each year to an IRA is $6,500.
[¶4351]
116. Ralph, a 58-year-old taxpayer, may take money out of his IRA without penalty. [¶4357]
117. Traditional IRAs may be rolled over tax-free into Roth IRAs. [¶4367]
118. For U.S. tax purposes, transactions involving foreign currency must be expressed in U.S. dollars. [¶4673]
119. E-filing is not allowed for prior year amended returns. [¶4703]
120. The president or chief accounting officer of a corporation are the only officers allowed to sign the federal tax return.
[¶4725]
26
2016–2017
Course No. ASC221
20 Credit Hours
$125.00
CPE Quizzer for
J.K. LASSER’S® YOUR INCOME TAX 2016
Prerequisite: None
Directions:
x Identify changes due to 2015 tax legislation.
x Determine allowable deductions, gains and losses based on tax legislation for 2015
1. If a taxpayer is married on December 20, 2015, and the taxpayer stays married until the end of 2015, s/he is
considered married for the entire 2015 year. [¶1.1]
2. A taxpayer cannot avoid legal responsibility for the tax liability of her/his spouse by filing a separate return. [¶1.3]
3. If your divorce is final before by the end of 2015 you can still file a joint return for 2015. [¶1.4]
4. If a couple is married as of the end of 2015 and one spouse is a U.S. citizen or resident alien and the other spouse is a
nonresident alien, a special election to treat the nonresident spouse as a resident alien is required from each spouse if
they wish to file a joint tax return. [¶1.5]
5. A separate liability election is not available for taxpayers who get divorced or separated after filing a joint return.
[¶1.8]
6. One of the threshold conditions that must be met for equitable relief is that relief is not available under innocent
spouse or separate liability rules. [¶1.9]
7. If your spouse dies during the year and you remarry within the same tax year, you can still file a joint return with
your deceased spouse since you were married for a portion of the year. [¶1.10]
8. A taxpayer from a border country can file using head of household status for 2015 only if s/he was a U.S resident or
citizen for the whole year. [¶1.12]
9. The following returns must be filed on behalf of a deceased taxpayer: the prior year’s return (if not filed by the
decedent), the income tax return for the year of death, and a return for the decedent’s estate. [¶1.14]
10. The spouse of a deceased taxpayer may not assume responsibility for filing the return of a deceased taxpayer for the
year of death, if an executor or administrator has been appointed. [¶1.14]
11. Generally, a nonresident alien is taxed on all income from U.S. and foreign sources. [¶1.16]
12. If a taxpayer has a green card, s/he is considered to be a resident alien for tax purposes. [¶1.18]
13. Severance pay is taxable regardless of whether the employee signs a waiver releasing her/his former employer from
any future damage claims. [¶2.1]
14. Employees use the accrual-basis of accounting for income each year from their employer. [¶2.2]
15. If a taxpayer’s employer pays her/him with property instead of cash, the taxpayer does not have to claim the income
until the property is sold. [¶2.3]
J.K. Lasser’s® Your Income Tax 2016
27
2016–2017
16. All unemployment payments received are not taxable. [¶2.5]
17. Teachers may not deduct strike pay penalties. [¶2.6]
18. Employer contributions to a domestic rabbi trust are taxable in the year the contribution is made. [¶2.7]
19. Commissions that an executor receives for services performed for an estate are taxable to the executor as
compensation. [¶2.9]
20. Premium costs for group life insurance are tax deductible to the employee covered by the plan. [¶2.10]
21. If all of the IRS guidelines are met and advance approval of the grant program is received from the IRS, a private
foundation established by an employer can give scholarships to children of employees without the employees having
to claim any income on the benefits provided to their children. [¶2.11]
22. Sick pay received from an employer is not taxable. [¶2.12]
23. Workers’ compensation paid for job-related illness or injury is generally taxable. [¶2.13]
24. A taxable disability pension is treated as wages until the minimum retirement age under the plan is reached. [¶2.14]
25. Stock options are generally subject to AMT. [¶2.16]
26. The year you purchase restricted stock, you must report as compensation the difference between the amount that you
paid for the stock and its value at the time the risk of forfeiture is removed. [¶2.17]
27. Disability coverage is tax free to the employee if the employer pays the premiums and does not report the payment
as compensation income on the employee’s W-2. [¶3.1]
28. Reimbursements for cosmetic surgery qualify for tax-free treatment if the surgery is related to disfigurement,
congenital deformity, disease or accidental injury. [¶3.1]
29. All distributions from a health savings account (HSA) are tax free. [¶3.3]
30. Group-term life insurance for an employee’s children and spouse is considered a tax-free benefit as long as the
benefit amount does not exceed $2,000 per insured. [¶3.4]
31. For a married taxpayer filing a joint return, amounts received in excess of $5,000 in 2015 from her/his employer
under a written nondiscriminatory plan for dependent care assistance are considered taxable income. [¶3.5]
32. A cash allowance provided by the employer to an employee for meals and lodging is taxable. [¶3.13]
33. Salary-reduction contributions to an FSA are included in employee’s taxable wages on their Form W-2. [¶3.16]
34. Dividends paid on capital stock of an insurance company are taxable. [¶4.11]
35. If the taxpayer has over $1,500 of taxable interest and files Form 1040 or Form 1040A, the names of the payers of
the interest and the interest received from each are listed on Part I of Schedule B. [¶4.12]
36. If a bank imposes a penalty on a taxpayer for the early withdrawal of a savings certificate before the maturity date,
the full amount of the penalty may be deducted even if the taxpayer does not itemize deductions. [¶4.16]
37. Generally, no tax is paid on interest received from bonds or notes issued by cities, counties, states, the District of
Columbia, or a possession of the U.S. [¶4.24]
38. Treasury bonds and notes are considered capital assets; therefore, gain or loss is required to be reported. [¶4.27]
39. Imputed interest is not required where an individual makes a below-market-interest loan of up to $250,000 to a
family member who has investment income of $2,500 or less. [¶4.31]
40. For a single taxpayer, capital losses that exceed capital gains are fully deductible up to the amount of $3,000. [¶5.4]
41. Where married taxpayers both incur capital losses, the maximum amount of capital loss deduction that may be
claimed in a year for their combined losses is $6,000. [¶5.5]
42. For stock sold on a public exchange, the holding period for securities begins on the day after the security is
purchased and ends on the day the sales order is executed. [¶5.10]
28
2016–2017
43. The sale of inherited property always produces long-term capital gain or loss, regardless of the actual holding period.
[¶5.12]
44. The basis of property inherited from someone who died in 2015 is generally not "stepped up" to the fair market value
of the property on the date of the decedent's death. [¶5.17]
45. A taxpayer may realize a gain or loss when a buyer defaults on a loan and the personal property is repossessed, either
by voluntary surrender or a foreclosure. [¶5.29]
46. According to the regulations, goodwill of one business can never be of a like kind to the goodwill of another
business. [¶6.2]
47. Taxable gain is recognized up to the amount of the cash and the fair market value of any unlike property received, if
the taxpayer received cash or other property (unlike-kind) in addition to like-kind property. [¶6.3]
48. When distributing money from a qualified plan, there is no limit to the number of rollover accounts an individual
may have. [¶7.8]
49. If excess elective salary deferrals made by highly compensated employees to an employer’s 401(k) plan are
recharacterized as after-tax contributions, the excess contributions are taxable. [¶7.17]
50. Earnings contributed to an IRA are taxable upon contribution. [¶8.1]
51. If a taxpayer and her/his spouse are under age 50 and not covered by an employer retirement plan and each spouse
earned compensation in 2015of at least $5,500, each spouse can make a contribution of up to $5,500 to a traditional
IRA for 2015. [¶8.3]
52. After a five-year period, withdrawals from a Roth IRA may be made tax free, if the taxpayer is age 59-1/2 or older.
[¶8.6]
53. Funds withdrawn from a traditional IRA that are not deposited into a new IRA within 60 days are treated as a taxable
distribution and may be subject to penalties. [¶8.10]
54. A qualified written disclaimer must be made within six months after an IRA owner’s death in order for an older
primary beneficiary to pass all or part of an IRA to a younger contingent beneficiary. [¶8.14]
55. Self-employed individuals are not allowed to set up a simplified employee pension plan (SEP). [¶8.15]
56. A tenant’s payment of an early lease termination fee is considered rental income by the landlord. [¶9.1]
57. The number of days that a taxpayer uses a residential unit for personal use and how many days are used for fairmarket-rental-days determines how the taxpayer must report rental income and expenses. [¶9.7]
58. An individual who is not a real estate professional but who is an active participant in a management role in a real
estate venture may deduct up to $25,000 of real estate rental losses against her/his regular, nonpassive income.
[¶10.2]
59. A real estate professional must perform more than 50 percent of her/his services in one or more real property
businesses in which s/he materially participates and must perform more than 750 hours of services in real property
businesses in which s/he materially participates. [¶10.3]
60. The at-risk limits are in place to prevent an investor from claiming losses that are greater than the amount of her/his
cash invested and recourse debt. [¶10.17]
61. Losses that are disallowed by the at-risk rules can be carried over indefinitely until the taxpayer has at-risk basis to
sustain the deduction. [¶10.21]
62. Professional gamblers report gambling winning and losses on Form 1040, Schedule C. [¶11.3]
63. After a person receives inherited property, the income earned from that property is taxable to the person receiving
the property. [¶11.4]
64. The taxpayer claimed an itemized tax deduction on her/his 2014 federal return for the amount of state income taxes
on her/his 2014 Form W-2. In 2015, s/he received a refund of taxes from her/his state tax return filed for 2014. The
full amount of this refund may be taxable in 2015. [¶11.5]
29
2016–2017
65. A debt reduction agreement or other mortgage loan modification, such as a discount for early repayment, will not
result in cancellation of debt income to the borrower. [¶11.8]
66. If the partnership uses the accrual basis of accounting, then the partner’s basis is not increased by the accrued, but
unpaid expenses, such as interest costs and accounts payable.. [¶11.12]
67. An S corporation shareholder's basis is increased by the pass-through of income items, and basis is reduced by the
pass-through of loss items and the receipt of certain distributions. An S corporation shareholder may not deduct
losses that exceed the shareholder's basis. ¶11.14]
68. The surrender or sale of a life insurance policy will result in ordinary income or a long-term gain, but never both.
[¶11.20]
69. Any payments made to a taxpayer for serving on a jury must be reported as “other income” on Line 21 of Form
1040. [¶11.21]
70. Most educators can deduct up to $250 of out-of-pocket costs for books and classroom supplies. [¶12.2]
71. The student loan interest deduction is fully deductible. [¶12.2]
72. The standard deduction for 2015 is $6,300 if single or married filing separately. [¶13.1]
73. A charitable organization is having a silent auction and provides a catalogue of items and the estimated fair market
value of the items to be auctioned. The catalogue lists the value of a baseball card at $250. At the auction, the
taxpayer bid and paid $750 for the baseball card, so s/he may deduct $500 as a charitable contribution. [¶14.3]
74. A taxpayer who uses her/his car for charitable purposes in 2015 may deduct either actual expenses or 14 cents per
mile. [¶14.4]
75. You can deduct the value of used clothing and household items regardless of the condition, as long as they are
donated to a qualified nonprofit organization. [¶14.7]
76. A written acknowledgement is not required from the charity for cash or noncash contributions of $250 or more.
[¶14.14]
77. Transfer taxes paid when stock or investment real estate is sold are included in other selling expenses on Form 8949
and will decrease the taxpayer’s gain or increase taxpayer’s loss on the sale. [¶16.2]
78. Medicines and drugs, except insulin, must be available only through a prescription from a doctor in order to be
deductible. [¶17.2]
79. Over-the-counter medications, such as aspirins, that are prescribed by a doctor are fully deductible medical expenses.
[¶17.3]
80. Travel costs to the doctor’s office, hospital, or clinic where the taxpayer receives regular care are never deductible.
[¶17.9]
81. The cost of a nursing home for an elderly dependent is a medical expense subject to the adjusted gross income floor
if s/he is there for medical treatment. [¶17.11]
82. Theft losses can be deducted in the year that the property was stolen. [¶18.9]
83. Miscellaneous deductions subject to the 2-percent floor are not deductible for alternative minimum tax purposes.
[¶19.1]
84. Generally, an employee who pays professional dues and continuing education expenses that are not reimbursed by
her/his employer may deduct these expenses on Form 2106 and then transfer the allowable amount to Line 21 of
Schedule A, where it is subject to the 2-percent AGI floor along with other miscellaneous deductions. [¶19.3]
85. Statutory employees are allowed to deduct expenses on Schedule C. [¶19.4]
86. Job-related moving expenses are never deductible directly from gross income. [¶19.4]
87. A self-employed taxpayer whose home office is her/his principal place of business may deduct travel costs between
the home office and the offices of her/his clients. [¶20.2]
30
2016–2017
88. On a business trip to Florida, the taxpayer spent some time on the trip vacationing; however, the primary purpose of
the trip was to transact business. This taxpayer may deduct all of the costs of transportation to and from the area,
lodging, and 50 percent of meal expenses even if s/he spent some time vacationing. [¶20.11]
89. Travel costs of a friend, who accompanies the taxpayer on a business trip and is not the taxpayer’s employee or
business associate, are not deductible. [¶20.14]
90. Meals and entertainment expenses, subject to the 50-percent limit, are deductible if they are ordinary and necessary
to the taxpayer’s business and also are directly related to the active conduct of the business. [¶20.17]
91. A taxpayer's cohabitant's unmarried 16-year-old daughter is considered a qualifying relative for exemption purposes
if the cohabitant is not required to file a tax return because of low income, and the cohabitant does not file a return,
or files solely to get a refund of withheld income taxes. [¶21.4]
92. If the parents of a child with income subject to the kiddie tax are married but file separate tax returns, their incomes
should be recombined for reporting purposes on Form 8615. [¶24.3]
93. Generally, a taxpayer whose income is below the phaseout threshold may claim a $1,000 tax credit for each
qualifying child who was under the age of 17 as of December 31, 2015. [¶25.3]
94. In most cases, the IRS prefers that the taxpayer not calculate the estimated tax penalty. [¶27.1]
95. Gain on the sale of a personal residence where a taxpayer’s home office is within the same dwelling unit must be
allocated between the residential and business use portions of the taxpayer’s home. [¶29.7]
96. Generally, a loss on the sale of a personal residence cannot be deducted. [¶29.8]
97. In a short sale, stock is borrowed from a broker and sold. The short sale is closed when the taxpayer replaces the
borrowed stock with substantially identical stock. [¶30.5]
98 A taxpayer receives a grant for a four-year college program for tuition, course-related fees, books, supplies and
equipment, which are required for her/his degree candidate courses. This taxpayer must claim the amount received as
taxable income. [¶33.1]
99. The maximum amount that may be contributed to a Coverdell education savings account on behalf of a designated
beneficiary is $2,000 for 2015. [¶33.10]
100. Full retirement age for Social Security purposes is 66 for an individual born between 1943 and through and including
1954. [¶34.5]
31
2016–2017
Course No. ASC1930
15 Credit Hours
$93.75
CPE Quizzer for
IRS PUBLICATION 17: YOUR FEDERAL INCOME TAX
Prerequisite: None
Directions:
x Review the text located at www.irs.gov/pub/irs-pdf/p17.pdf.
Learning Objective:
x Identify federal tax law changes for 2015.
Information to Answer the Following Questions Can Be Found in Chapter 1
1. A penalty of $5,000 applies to frivolous tax returns. [Page 2]
2. All citizens and residents of the United States and residents of Puerto Rico are required to file a federal tax return if
they meet the filing requirements. [Page 5]
3. A child under the age of 18 at the end of 2015 or a full-time student under the age of 22 at the end of 2015 whose
only income is interest and dividends can elect to include their income on their parent’s return. [Page 6]
4. Beginning in 2015, qualified taxpayers can contribute up to $15,000 to an ABLE account. [Page 4]
5. Form 1040X is used to correct a return that has already been submitted. [Page 17]
6. There are four available filing status choices: single, married filing jointly, married filing separately, and head of
household. [Page 20]
7. A taxpayer can only file a joint return if both taxpayers had income and deductions for the tax year. [Page 21]
8. For 2015, the amount that an individual taxpayer may deduct for each personal exemption is $4,000. [Page 25]
9. The noncustodial parent is the parent with whom the child lived for the lesser number of nights during the year.
[Page 28]
10. The employer is responsible for withholding income tax from household workers’ pay. [Page 38]
11. If you do not provide your employer with a completed Form W-4, then the employer is required to withhold as if you
were single and claimed no withholding allowances. [Page 39]
12. An individual taxpayer does not have to pay an underpayment penalty if her/his total 2015 tax minus withholding
and refundable credits is less than $1,000. [Page 45]
13. A taxpayer who provides childcare services for a fee to others is required to report that income on Schedule C or
Schedule C-EZ of Form 1040 only if s/he is self-employed. [Page 46]
14. Fringe benefits should be included in your income as compensation, unless you pay fair market value for the benefit
if the benefit is received in connection with the performance of your service. [Page 47]
32
2016–2017
Information to Answer the Following Question Can Be Found in Chapter 6
15. If a restaurant adds a service charge to a customer’s bill and the restaurant pays that amount to the server, that
amount should be considered as a part of a server’s tips for income tax purposes. [Page 54]
16. If you received interest as a beneficiary of an estate or trust, the interest is generally taxable income for the taxpayer.
[Page 56]
17. Interest on a traditional IRA is tax deferred, but generally is not taxable on a Roth IRA. [Page 57]
18. Interest on coupon bonds is taxable in the year the coupon becomes due and payable. It does not matter when the
taxpayer mails the coupon for payment. [Page 63]
19. A taxpayer cannot use Form 1040EZ if her/his taxable interest income is more than $1,000. [Page 63]
20. A distribution that is not paid out of earnings and profits will reduce the holder’s basis in the stock. [Page 66]
21. Corporations are only allowed to distribute full shares of stock in a stock dividend to shareholders. [Page 67]
22. If the owner of rental property pays insurance premiums for three years in advance, the total expense may be
deducted in the year that the payment was made. [Page 69]
23. If a taxpayer or her/his spouse actively participated in a rental real estate activity, the taxpayer can deduct up to
$25,000 of loss from the activity from her/his nonpassive income. [Page 73]
24. When an eligible rollover distribution is paid directly to another qualified retirement plan, 20% is generally withheld
for income tax. [Page 81]
25. Any amount that a taxpayer was required to repay to an insurer or employer for disability payments can be taken as a
tax credit. [Page 87]
26. If a debt that a taxpayer owes is canceled or forgiven, s/he must include the canceled amount in her/his income, even
if it was intended as a gift. [Page 88]
27. S Corporations are required to file Form 1065. [Page 90]
28. Income and expenses from renting personal property should be reported on Schedule C or Schedule C-EZ. [Page 91]
29. The fair market value of property stolen by a taxpayer must be included in her/his gross income, unless s/he returns it
to its rightful owner during the same year. [Page 97]
30. If an individual taxpayer buys buildings and the land on which they stand for a lump sum, s/he allocates the cost
basis among the land and the buildings according to their respective fair market values at the time of purchase. [Page
98]
31. A U.S. citizen who sells property not located in the United States generally should not include the gain or loss on the
sale on her/his tax return. [Page 102]
32. Commissions paid to purchase bonds are added to the buyer’s basis in the bonds. [Page 102]
33. A single taxpayer who sold her/his main home in 2015 may exclude up to $250,000 of gain from income. [Page
109]
34. Long-term gains and losses are reported in Part 1 of Form 8949. [Page 117]
33
2016–2017
35. For purposes of the net investment income tax, net investment income includes any distributions from a qualified
retirement plan including IRAs. [Page 120]
36. Rollovers from a traditional IRA to a Roth IRA are limited to one per year. [Page 120]
37. Excess contributions made by a taxpayer to a traditional IRA are subject to 6-percent tax. [Page 128]
38. Early distributions from a traditional IRA are subject to a 15-percent penalty. [Page 129]
39. Roth IRAs can only be opened in the first quarter of the calendar year for taxpayers. [Page 130]
40. The taxpayer paying alimony must include the amount in income. The taxpayer receiving the alimony does not owe
taxes on the amount paid. [Page 133]
41. Payments made as required under a support agreement are generally not considered alimony if both spouses continue
to live together. [Page 134]
42. For 2015, the maximum reduction to income allowable for student loan interest paid is $2,500. [Page 136]
43. For 2015, the standard deduction for a single or married filing separately taxpayer is $9,250. [Page 141]
44. For 2015, the standard mileage rate allowed for the use of a car for medical reasons is 23 cents per mile.
[Page 143]
45. Medical expenses that are not reimbursed by a HRA are not included in medical expenses. [Page 144]
46. If a settlement from a personal injury lawsuit includes payment for medical expenses that the taxpayer previously
deducted, the taxpayer must recognize income to the extent the deduction reduced her/his tax liability in the previous
year. [Page 147]
47. Impairment-related expenses are ordinary and necessary business expenses that the taxpayer incurs to be able to
perform her/his job satisfactorily. [Page 147]
48. If a taxpayer pays their taxes by check, then the date of payment is the date the IRS receives the check.
[Page 148]
49. A taxpayer is allowed to deduct all state and local income taxes from their federal income tax payments. [Page 149]
50. Generally, points paid for a mortgage may be deducted in the year paid. [Page 156]
51. Personal interest (such as interest on car loans) is not deductible by the taxpayer. [Page 158]
52. Deductible investment interest, other than incurred to produce rents or royalties, should be deducted on Schedule A
of Form 1040 on line 10. [Page 159]
53. If a taxpayer makes a payment to a college and receives the right to buy tickets to an athletic event in the college
stadium, s/he may deduct only 80 percent of the payment as a charitable contribution. [155]
54. A taxpayer who hires a babysitter to care for his children while he volunteers for a qualified organization can deduct
payments for childcare expenses as a charitable contribution. [Page 161]
55. Deductible casualty losses include such events as floods, shipwrecks, and vandalism. [Page 168]
56. Loss of property due to termite damage is deductible as a casualty loss. [Page 168]
57. For 2015, the standard mileage rate for each mile of business use is 57.5 cents per mile. [Page 174]
34
2016–2017
58. A taxpayer may deduct the cost of dry cleaning and laundry if on a trip that qualifies for travel away from home for
business purposes. [Page 177]
59. An employee may deduct fees paid to park her/his car at her/his employer’s place of business. [Page 182]
60. Review courses to prepare for the Bar examination or the CPA exam are considered qualifying work-related
education. [Page 193]
61. A taxpayer may not deduct the cost of travel as a form of education unless it is directly related to her/his duties in
her/his work or business. [Page 194]
62. An individual who pays for a passport for a business trip can deduct the expense as an unreimbursed employee
expense. [Page 196]
63. Job search expenses of looking for a job in a new occupation are not deductible. [Page 197]
64. If a taxpayer is required to wear a uniform as a condition of employment, the cost to upkeep the work clothes is
deductible. [Page 195]
65. Tax preparation fees are not deductible. [Page 196]
66. If an individual taxpayer elects to include her/his child’s interest and dividend income on her/his tax return, the
interest and dividend income must be less than $7,500. [Page 206]
67. If a child’s interest, dividends, and other investment income total more than $1,500, all of that income will be taxed
at the parent’s tax rate instead of the child’s tax rate. [Page 206]
68. For purposes of the child and dependent care credit, a taxpayer cannot count work-related payments s/he makes to a
relative who lives in her/his home, even if s/he is not a dependent. [Page 214]
69. If an individual taxpayer is a U.S. citizen or resident alien and is under age 65 at the end of 2015, s/he can qualify for
the elderly or disabled credit only if s/he is retired on permanent and total disability, has taxable disability income for
2015, and had not reached mandatory retirement age by January 1, 2015. [Page 218]
70. If your tax on Form 1040, line 47 is zero, you could still be eligible for a child tax credit. [Page 221]
71. A taxpayer can claim both the American opportunity credit and the lifetime learning credit on the same return, just
not for the same student. [Page 222]
72. Education credits can be claimed regardless of filing status. [Page 222]
73. In order to qualify for the earned income credit (EIC) in 2015, married taxpayers who file jointly and have one
qualifying child must have less than $44,651of adjusted gross income. [Page 227]
74. To claim an earned income credit on your tax return, both you and your spouse (if filing jointly) must have a valid
SSN issued by the Social Security Administration. [Page 228]
75. The adoption credit is taken is the year the expenses are incurred regardless of when the adoption becomes final.
[Page 244]
35
2016–2017
Course No. ASC3312
4 Credit Hours
$25.00
CPE Quizzer for
IRS Publication 590-A: Contributions to
Individual Retirement Arrangements (IRAs)
Prerequisite: None
Directions:
x Review the text located at www.irs.gov/pub/irs-pdf/p590b.pdf.
Learning Objective:
x Determine who can participate in a traditional IRA, a ROTH IRA and a SIMPLE IRA, how contributions should
be made and what amount can be contributed to each
1. If a taxpayer and their spouse have taxable compensation and are under age 70½, both can participate in the same
IRA. [Page 5]
2. For IRA purposes, wages, commissions and alimony are considered compensation, but rental income, pension
income, and deferred compensation are not. [Page 7]
3. A SIMPLE IRA plan is a tax-favored retirement plan that certain small employers can set up to benefit their
employees. If a taxpayer participates in their employer’s SIMPLE IRA plan, they cannot contribute to a traditional or
ROTH IRA. [Page 7]
4. Some small employers and self-employed employees can choose to set up SIMPLE IRAs instead of traditional IRAs.
[Page 7]
5. Individuals under 50 years of age cannot contribute more than $10,000 to a traditional IRA in 2015. [Page 9]
6. Married taxpayers filing jointly who are age 50 or older can contribute a combined amount of as much as $13,000 to
traditional IRAs during the year. [Page 9]
7. An individual’s traditional IRA contribution for 2015 must be made by December 31, 2015. [Page 10]
8. Individuals who are covered by employer retirement plans may not be able to deduct the full amount of their annual
contribution to a traditional IRA. [Page 10]
9. If eligible individuals decline to participate in their employer’s defined benefit plan during the current year, they will
not be considered plan participants in relation to their IRA deduction, as long as they did not contribute any funds to
the defined benefit plan. [Page 12]
10. Individuals who inherit traditional IRAs from their spouses can choose whether to treat it as their own or treat
themselves as the beneficiary. [Page 20]
11. A transfer of funds in a traditional IRA from one trustee directly to another is considered a rollover and subject to the
applicable one-year waiting period. [Page 21]
36
2016–2017
12. If retirement plan funds are received on June 30, they must be rolled over into an IRA or other retirement account by
July 31 to receive tax-free treatment. [Page 23]
13. When rolling over funds from an employer’s retirement plan into an IRA, the rollover distribution can include
hardship distributions, dividends on employer securities, and the cost of life insurance coverage as long as they are
part of the balance in the employer’s qualified plan. [Page 24]
14. Individuals have 90 days to withdraw all of their assets from a traditional IRA and reinvest them in a Roth IRA, but
this conversion is not allowed unless the whole balance of the traditional IRA is transferred. Partial transfers are
ineligible for a Roth IRA conversion. [Page 28]
15. To be recharacterized, a contribution must be transferred from the IRA into which it was made to a second IRA using
a trustee-to-trustee transfer. [Page 29]
16. A 10% additional tax will typically apply if an individual withdraws or uses assets from a traditional IRA prior to
obtaining age 59½. [Page 31]
17. If a prohibited transaction occurs, a traditional IRA account will stop being a traditional IRA account as of the last
day of the tax year in which the transaction occurred. [Page 33]
18. Individuals who are married and filing jointly can contribute to Roth IRAs if they have taxable compensation and
modified AGI of less than $193,000. [Page 40]
19. If you are age 50 or older, your contribution limit generally is the lessor or $6,500 or your taxable compensation.
[Page 41]
20. For 2015, a taxpayer whose filing status is married filing jointly, may be able to claim the retirement savings
contributions credit if their modified AGI is not more than $61,000. [Page 47]
37
2016–2017
Course No. ASC3313
4 Credit Hours
$25.00
CPE Quizzer for
IRS Publication 590-B: Distributions from
Prerequisite: None
Directions:
x Review the text located at www.irs.gov/pub/irs-pdf/p590b.pdf.
Learning Objective:
x Determine when individuals must withdraw assets, the requirements of the 5-year rule, and what form should be
used to calculate nontaxable and taxable amounts.
1. An individual who inherits a traditional IRA from someone other than their spouse can make contributions to it as if
it were their own. [Page 5]
2. The required minimum distribution is the amount that must be distributed each year. [Page 6]
3. The 5-year rule requires the IRA beneficiary to withdraw 75% of the IRA balance by December 31 of the year
containing the fifth anniversary of the owner’s date. [Page 9]
4. In the years after an IRA owner’s death, the beneficiary can roll the minimum distributions from that IRA over into a
different retirement account in a tax-free transaction. [Page 10]
5. Yearly required distributions from a traditional IRA must be taken in twelve monthly installments. [Page 11]
6. Distributions from a traditional IRA will typically be taxable in the year they are received. [Page 13]
7. A qualified charitable distribution will count towards an individual’s required minimum distribution from a
traditional IRA. [Page 13]
8. Form 8606 must be used to calculate how much of your 2015 IRA distribution is tax free, if your traditional IRA
includes nondeductible contributions and you received a distribution from it in 2015. [Page 14]
9. Individuals cannot claim losses on traditional IRA investments on their income tax returns because contributions
were tax free. [Page 19]
10. Purchasing an annuity contract with IRA funds can be done tax free, but if the IRA contributions were fully
deductible, the annuity payments will be taxable. [Page 21]
11. Income tax cannot be withheld from traditional IRA distributions, so the distribution recipient is responsible for
making sure the appropriate amount of taxes, if any, get paid. [Page 21]
12. Fiduciaries and family members (including spouses) are considered disqualified persons in relation to prohibited
transactions for IRAs. [Page 22]
38
2016–2017
13. If an individual’s traditional IRA invests in collectibles such as works of art, antiques, and gems, he or she may have
to pay an additional tax of 10% in the year such investments were made. [Page 23]
14. Individuals under age 59½ who lose their jobs can take distributions from a traditional IRA to pay for medical
insurance for themselves, their spouses, and their dependents without paying any additional taxes on the funds as
long as all appropriate conditions are met. [Page 24]
15. Tax-free higher education expenses paid for from an early distribution from a traditional IRA can include a stipend
for miscellaneous living expenses in addition to tuition, books, room, and board. [Page 25]
16. If an individual pays a 10% tax on distributions from an IRA, this tax is paid in lieu of regular income taxes.
[Page 26]
17. Funds cannot be kept in a traditional IRA account indefinitely. [Page 27]
18. Taxpayers cannot deduct contributions to a Roth IRA. [Page 30]
19. Contributions and earnings from a Roth IRA are considered distributed in the following order: (1) regular
contributions, (2) conversion and rollover contributions (first-in, first-out), and (3) earnings on contributions.
[Page 33]
20. The same minimum distribution rules that apply to traditional IRAs also apply to Roth IRAs until after the owner’s
death. [Page 35]
39
2016–2017
Course No. ASC3234
8 Credit Hours
$50.00
CPE Quizzer for
IRS Publication 334: Tax Guide for Small Business
Prerequisite: None
Directions:
x Review the text located at www.irs.gov/pub/irs-pdf/p334.pdf
Learning Objective:
x Identify the federal tax laws that apply to small business owners who are sole proprietors and to statutory employees.
Information to Answer the Following Questions Can Be Found in the Introduction
1. If a taxpayer and her/his spouse jointly own and operate an unincorporated business and share in the profits and
losses, they may use either Schedule C or C-EZ instead of Form 1065. [Page 3]
2. For 2015, the maximum net self-employment earnings subject to Social Security tax is $118,500. [Page 4]
3. A taxpayer who was formerly a sole proprietor need not apply for a new EIN when s/he incorporates the business.
[Page 6]
4. Refund checks for income taxes are only available to the taxpayer through the mail. [Page 6]
5. The due date for filing Form 1040 for a small business is April 30, 2015. [Page 7]
6. For 2015, a self-employed taxpayer earns one credit per quarter, up to a maximum of four credits per year, for each
$1,200 of income subject to Social Security taxes. [Page 8]
7. A tax year can be based on either a calendar tax year or a fiscal tax year. [Page 12]
8. A 52–53-week tax year is a fiscal tax year that varies from 52 to 53 weeks but does not have to end on the last day of
a month. [Page 12]
9. An accounting method includes not only the overall method of accounting that a taxpayer uses, but also the
accounting treatment s/he uses for any material item. [Page 12]
10. A taxpayer who has to take an inventory to account for income may use the cash method of accounting for sales and
purchases. [Page 12]
11. Under the cash method of accounting, you generally report income in the year earned and deduct or capitalize
expenses in the year incurred. [Page 13]
IRS Publication 334
40
2016–2017
12. Under the accrual method, if a taxpayer receives an advance payment this year for services to be performed by the
end of the next tax year, s/he can elect to postpone including the advance payment into income until the next year.
[Page 13]
13. The business expenses and interest owed to a related person that uses the cash method of accounting are not
deductible until payment is made and the corresponding amount is includable in the related person’s gross income.
[Page 14]
14. You are a qualifying taxpayer who may use the cash method of accounting even if you produce, purchase, or sell
merchandise if your average annual gross receipts for each prior tax year ending on or after December 17, 1998, is
$3 million or less. [Page 15]
15. Like-kind exchanges are reported on Form 8824. [Page 17]
16. If your adjusted basis is more than the amount realized, then you have a gain. [Page 17]
17. To be a nontaxable like-kind exchange, the property traded and the property received in a transaction can be either of
the following: Business/investment property, or like property. [Page 17]
18. If a taxpayer holds property for one year or less, s/he has a short-term gain or loss upon the disposition of that
property. [Page 17]
19. The credit for employer-provided childcare facilities and services is claimed on Form 8882. [Page 18]
20. The distilled spirits credit is calculated on Form 8826. [Page 19]
21. A taxpayer who is a U.S. citizen and has business income from sources outside the U.S. must report that income on
her/his tax return, even if it is exempt under U.S. law. [Page 20]
22. Interest and dividends are never included in business income for tax purposes. [Page 21]
23. A taxpayer can exclude all income from the cancellation of debt to the extent s/he is insolvent at the time of the
discharge of indebtedness. [Page 22]
24. Qualified real property business debt is debt (other than qualified farm debt) that was acquired after January 1, 1993,
to acquire, construct, or substantially improve real property. [Page 22]
25. If merchandise is shipped out on consignment, a taxpayer should not include the items in their inventory. [Page 24]
26. Beginning inventory plus purchases, labor, materials, and supplies minus ending inventory equals cost of goods sold.
[Page 26]
27. A drawing account is a separate account that a taxpayer should keep to record the business income s/he withdraws to
pay for personal and family expenses. [Page 28]
28. Materials and supplies, such as hardware and chemicals, used in manufacturing goods can be deducted as a business
expense when they are used.. [Page 28]
29. A nonbusiness bad debt is deductible as a long-term capital loss. [Page 31]
IRS Publication 334
41
2016–2017
30. A person’s tax home for federal tax purposes is the city or general vicinity where her/his primary place of business
or work is located. [Page 31]
31. A taxpayer cannot use the standard mileage rate if s/he operates five or more cars at the same time. [Page 32]
32. Modified Accelerated Cost Recovery System (MACRS) is the most common depreciation method for most business
and investment property placed into service after 1986. [Page 33]
33. For 2014, a taxpayer’s IRC §179 election for the cost of any sport utility vehicle is limited to $25,000. [Page 33]
34. Listed property includes any property of a type generally used for entertainment, recreation, or amusement.
[Page 33]
35. As a sole proprietor, a taxpayer can deduct her/his own salary and any personal withdrawals s/he makes from her/his
business. [Page 33]
36. A taxpayer generally may not deduct the cost of fringe benefits s/he provides to her/his employees on Schedule C.
[Page 34]
37. Generally, a taxpayer cannot deduct prepaid insurance expenses for future years even if they are paid in advance.
[Page 35]
38. All personal, living, and family expenses can be deducted as business expenses in the year that they are paid,
regardless of which period they apply. [Page 39]
39. Children under the age of 18 who work for their parents are not subject to self-employment tax. [Page 41]
40. A fiscal-year filer must use the tax rate and maximum earnings limit in effect at the beginning of her/his tax year.
[Page 44]
IRS Publication 334
42
2016–2017
Course No. ASC3125
24 Credit Hours
$150.00
CPE Quizzer for
PPC’s GUIDE TO COMPILATION AND REVIEW ENGAGEMENTS
Recommended CPE Credit: 24 Hours (Auditing)
Prerequisite: None
Knowledge Level: Intermediate
Directions:
x Review the reference book (Thirty-seventh Edition, August 2015).
x Determine when a preparation engagement is appropriate under AR-C Section 70
x Identify the requirements of compilation and review engagements under SSARS No. 21
x Recognize the differences between SSARS No. 19 and SSARS No. 21
1. The sole mission of the Financial Accounting Standards Board is to develop and communicate comprehensive
performance and reporting standards and practice guidance to enable accountants of issuers to provide high quality,
objective compilation and review services. [¶100.1]
2. The scope of the Accounting and Review Services Committee (ARSC) covers audited and unaudited financial
statements. [¶100.2]
3. The term unaudited is used in practice when referring to a number of specific types of financial statements including
compiled financial statements of a nonpublic entity. [¶100.3]
4. Nominations of members to the ARSC are approved solely by the President of the AICPA. [¶100.5]
5. SSARS No. 21 was issued for the primary purse of clarification and recodification. [¶100.6]
6. SSARS No. 6, which was superseded by SSARS No. 21 effective for periods ending on or after December 14, 2015
(with early implementation permitted), gave guidance regarding reporting on personal financial statements included
in written personal financial plans. [¶100.6]
7. The Statements on Standards for Accounting and Review Services (SSARS) Nos. 1-20 are codified into AR Sections
while SSARS No. 21 is codified into AR-C Sections. [¶100.7]
8. SSARS No. 19, which was codified into AR 60, AR 80 and AR 90, deals with compilations and reviews of financial
9. SSARS Interpretations are more authoritative than the SSARS themselves. [¶100.8]
10. CPAs are required to consider applicable interpretative publications when performing their SSARS engagements.
[¶100.9]
11. SSARS No. 21 contains Interpretations which are authoritative in nature. [¶100.9]
12. Some of the guidance included in the Interpretations is included in SSARS No. 21. [¶100.9]
13. The AICPA Guide: Preparation, Compilation, and Review Engagements provides guidance for engagements
performed in accordance with SSARS No. 21. [¶100.10]
14. The AICPA Technical Questions and Answers are selected inquiries and replies by the staff of the Technical
Information Service of the AICPA. [¶100.12]
PPC’s Guide to Compilation and Review Engagements
43
2016–2017
15. Views expressed in the Technical Questions and Answers are official opinions of the AICPA and its committees,
including the ARSC. [¶100.12]
16. The AICPA Alert, Developments in Review, Compilation, and Financial Statement Preparation Engagements
2014/2015 is considered an authoritative practice aid published by the AICPA staff. [¶100.14]
17. SSARS No. 19 is codified into a single AR Section. [¶101.1]
18. Requirements with which accountants are required to comply in all cases in which the circumstances exist to which
the requirement applies are defined as unconditional requirements. [¶101.3]
19. Presumptively mandatory requirements are requirements with which accountants are required to comply in all cases
in which the circumstances exist to which the requirement applies. [¶101.4]
20. There are five levels in the hierarchy of compilation and review standards and guidance. [¶101.5]
21. AR 80 establishes the standards and provides guidance on reviews of financial statements. [¶101.6]
22. AR 90 establishes the standards and provides guidance on compilations of financial statements. [¶101.7]
23. AR-C 60 addresses financial statements, ethical responsibilities, professional judgment, conduct of the engagement in
accordance with the SSARS, engagement-level quality control as well as acceptance and continuance of client
relationships and engagements. [¶102.3]
24. AR-C 60 provides the overall framework for conducting an engagement in accordance with SSARS. [¶102.4]
25. AR-C 70 applies when an accountant is engaged to compile financial statements. [¶102.7]
26. AR-C 70 establishes the performance requirements for the preparation of financial statements. [¶102.7]
27. An accountant engaged to prepare financial statements for a client should establish an understanding with the client
regarding the services to be performed. [¶102.7]
28. AR-C 80 establishes the standards on compilations of financial statements. [¶102.8]
29. The accountant is required to comply with the provisions of AR-C 90 whenever her or she is engaged to audit
financial statements. [¶102.9]
30. The Accounting and Review Services Committee (ARSC) of the AICPA approved a project to clarify and converge
the auditing standards with the international auditing standards issued by the international Auditing and Assurance
Standards Board (IAASB). [¶103.1]
31. Generally accepted accounting principles (or a special purpose framework) are the same for any financial statements
regardless of whether they are prepared, compiled, reviewed, or audited. [¶104.1]
32. Acceptance and continuance of client relationships and engagements are addressed in section 201 of AR-C 60.
[¶200.1]
33. According to AR-C 60.07, the financial statements subject to the SSARS engagements are the accountant’s
responsibility and belong to the accountants’ firm. [¶200.2]
34. For continuing clients, practitioners should consider whether there are any significant changes in ownership or
management that would cause the firm to discontinue serving the client. [¶201.14]
35. Litigation status and management’s attitude toward, or pressure on, the accountants should be considered in the
decision as to whether to discontinue serving the client. [¶201.14]
36. Generally, any engagement for a nonpublic entity that involves unaudited financial statements is within the scope of
SSARS. [¶202.2]
37. Rather than trying to maintain their independence, CPA firms often give up the attest service engagement and
perform the nonattest services, instead. [¶202.5]
38. Financial presentations included in tax returns are considered financial statements according to the definition of
financial statements in SSARS No. 19 (AR 60.04). [¶202.9]
44
2016–2017
39. It is the external accountant’s responsibility to select the client’s financial reporting framework to be applied in the
preparation of the client’s financial statements. [¶204.7]
40. SSARS requires the accountant to establish an understanding with management regarding the services to be
performed for review engagements and to document that understanding through a written communication with
management. [¶204.9]
41. Recognized subsequent events are those that provide additional evidence about conditions that existed at the balance
sheet date and that affect the estimates inherent in preparing financial statements. [¶206.6]
42. A successor accountant is required in all cases to communicate with a predecessor in connection with a compilation
or review engagement. [¶210.1]
43. CPA firms that do only tax, compilation, and review work can safely assume that their malpractice risk is immatieral.
[¶211.2]
44. Loss prevention consists of risk avoidance and damage control. [¶211.8]
45. Risk avoidance includes protecting the assets of the firm and its owners in the event that the firm’s defenses against
liability prove ineffective. [¶211.9]
46. The client’s management is responsible for the prevention and detection of fraud and noncompliance with laws and
regulations as well as the maintenance of internal control. [¶211.15]
47. If the accountant suspects fraud and the suspected fraud involves the owner of the company, the accountant should
consider resigning from the engagement and consulting legal counsel. [¶211.18]
48. When performing bookkeeping services, it is recommended that the accountant take special care in having an
engagement letter that specifically details what procedures the accountant will perform. [¶211.21]
49. The Privity Doctrine, as described by the courts and followed by sixteen states, holds that persons who may sue an
accounting firm on a negligence standard include not only the CPA firm’s clients but also those persons the firm
knew would be relying upon the firm’s report and with whom the firm maintained a relationship similar to htat of an
accountant-client relationship. [¶211.25]
50. The AICPA Code of Professional Conduct applies to all accountants, bookkeepers, and tax professionals. [¶212.51]
51. Many CPA firms utilize accounting software to perform compilation and review engagements. [¶214.1]
52. Whether accountants are required to issue a compilation report depends on the intended use of the financial
53. When performing a compilation engagement, the CPA is required to verify and corroborate the accuracy and
completeness of the information supplied by the client. [¶300.4]
54. SSARS No. 19, Compilation and Review Engagements, prohibits CPAs from providing management-use-only
financial statements without issuing a compilation report. [¶301.1]
55. AR-C 70, Preparation of Financial Statements, gives guidance to accountants when they are engaged to prepare
financial statements but are not engaged to perform a compilation, review or audit on those financial statements.
[¶302.1]
56. AR-C 70 applies when the accountant prepares financial statements to be submitted solely to taxing authorities.
[¶302.2]
57. The objective of an AR-C 70 financial statement preparation engagement is to prepare financial statement sin
accordance with the applicable financial reporting framework. [¶302.3]
58. AR-C 70 applies to all engagements performed in accordance with SSARS. [¶302.2]
59. According to AR-C 70, a known departure or departures from the applicable financial reporting framework must be
disclosed either on the face of the financial statements or in a note to the financial statements. [¶302.4]
60. If only preparing financial statements, the accountant must include a legend on each page of the financial statements
that no assurance is being provided. [¶302.04]
45
2016–2017
61. AR-C 70 requires the accountant to obtain an understanding of the financial reporting framework and the significant
accounting policies that management has elected to use to prepare the financial statements. [¶302.6]
62. An accountant engaged to prepare a client’s financial statements in accordance with AR-C 70 may use financial
records, documents, explanations, and other information provided by the client, but still must verify the accuracy and
completeness of the information provided. [¶302.8]
63. Accountants compiling financial statements should read the compiled financial statements and consider whether they
appear to be appropriate in form and free from any and all misstatements. [¶303.1]
64. In performing a compilation engagement, the accountant should prepare documentation in sufficient detail to provide
a clear understanding of the work performed. [¶303.1]
65. The SSARS specify who must complete the compilation performance procedures. [¶303.2]
66. The accountant can obtain an understanding of the client’s business through a general understanding of the client’s
organization; its operating characteristics; and the nature of its assets, revenues, and expenses. [¶303.4]
67. An accountant does not need to be an expert in the client’s industry to accept a compilation engagement. [¶303.5]
68. Professional standards require obtaining written representations from the client’s management when assurance is
provided. [¶303.10]
69. In a compilation engagement, no assurance is expressed or implied. [¶303.1]
70. The use of analytical procedures in a review is the same as the use of analytical procedures in an audit. [¶402.2]
71. SSARS No. 19 states that the accounting should consider making inquiries regarding unusual or complex situations
that may have an effect on the financial statements. [¶403.1]
72. Analytical procedures include investigating differences by inquiring of management and performing other procedures
as necessary regarding fluctuations or relationships that differ from expectations or other relevant information by a
significant amount. [¶404.2]
73. Trend analysis as an analytical procedure is the study of change in accounts over time. [¶404.4]
74. Reasonableness tests are limited to the comparison of nonfinancial data. [¶404.4]
75. A ratio analysis involves the study of the relationship between two financial statement amounts. [¶404.4]
76. Regression analysis is a statistical method of trend analysis. [¶404.10]
77. Reasonableness tests may involve estimating account balances, such as estimating investment income based on the
amount invested and the average interest rate. [¶404.12]
78. Estimating payroll expense based on the number of employees and average wage rates is an example of a
reasonableness test. [¶404.12]
79. The current ratio indicates the efficiency with which common shareholders’ equity is employed by the firm.
[¶404.13]
80. Asset turnover is used to review the reasonableness of the allowance for doubtful accounts. [¶404.13]
81. SSARS No. 19 and SSARS No. 21 require that the accountant develop and document expectations during the
analytical procedures process and then compare those expectations to recorded amounts or ratios. [¶404.15]
82. Accountants can use relationships of financial statement elements within the period to form expectations for their
analytical procedures. [¶404.16]
83. Analytical procedures are without limitations to they can be used with confidence by the accountant to make
assertions. [¶404.25]
84. While performing review procedures, if the accountant becomes aware of information that is incorrect, management
should be asked to consider the effect of the error on the financial statements and to communicate the results of their
findings to the accountant. [¶405.1]
46
2016–2017
85. In a review engagement, one of the primary reasons for obtaining a representation letter is that it helps to avoid
misunderstandings and provides a list of important matters that may affect the financial statements. [¶412.5]
86. The statement of cash flows is note considered one of the basic financial statements included in the typical GAAP
financial statement presentation. [¶504.1]
87. Cash flows from management activities is one of the five basic elements of a statement of cash flows. [¶509.5]
88. GAAP requires that a summary of significant accounting policies be included if a statement of cash flows is issued.
[¶510.1]
89. A summary of significant accounting policies is required for unaudited interim financial statements even if there has
been no change since the last annual financial statement. [¶510.1]
90. A development stage company is required to include in its basic financial statements a balance sheet, an income
statement and a statement of stockholders’ equity, but is not required to include a statement of cash flows. [¶513.4]
91. FASB ASC 275 excludes disclosure of certain risks and uncertainties associated with proposed changes in
accounting principles. [¶514.4]
92. Under FASB ASC 450-20-20, the term reasonably possible is defined as the chance of the future event occurring is
slight. [¶514.10]
93. One characteristic of a derivative is that it requires a significant initial net investment. [¶515.2]
94. A forward contract to buy foreign currency is an example of a derivative. [¶515.6]
95. An interest rate swap is a derivative that may be used to convert a variable interest rate to a fixed rate or vice versa.
[¶515.7]
96. In the summary presentation and disclosure of receivables, deferred fees or costs should be included in determining
the carrying amount of the related receivables. [¶516.2]
97. A small or midsize nonpublic entity should consider whether it has a variable interest in a variable interest entity if
the reporting entity and its related parties provide more than half of the entity’s subordinated financial support.
[¶519.7]
98. If an accountant performs both a compilation as well as a review, the accountant may choose to issue the either a
compilation report or a review report. [¶600.2]
99. An accountant’s review report is required to include a statement that all information included in the financial
statements is the representation of the accountant. [¶602.1]
100. Common interest realty associations, like a condominium association, is required to include certain supplementary
information in their financial statements related to estimated funding for future repairs and replacements of common
property. [¶615.1]
101. A predecessor accountant is required to reissue his or her report when the statements reported on are included in
comparative financial statements. [¶617.22]
102. The gross profit method of estimating inventories is the most common method, even though it is not acceptable for
use in annual or interim statements. [¶704.2]
103. According to FASB ASC 250-10-20, a mistake in the application of an accounting principle is an example of an error
in the financial statements. [¶708.3]
104. Generally, the pure cash basis of accounting is limited to entities with very simple operations. [¶802.3]
105. Comprehensive income and its components are required to be reported when an entity presents a full set of financial
statements that report financial position, results of operations, and cash flows. . [¶809.1]
106. When reviewing or compiling personal financial statements for income tax planning or estate planning purposes,
CPAs will need to comply with provisions of the SSARS. [¶900.2]
107. FASB ASC 274-10-25-1 states that personal financial statements should present assets on the accrual basis of
accounting as opposed to the cash basis. [¶ 902.2]
47
2016–2017
108. The form and substance of a review or compilation report for a personal financial statement engagement is
substantially different from that used for commercial enterprises. [¶908.1]
109. When compiling or reviewing proprietorship financial statements, an accountant must issue the statements on the tax
basis of accounting. [¶1003.1]
110. The equity method of accounting may apply to proprietorships and be applicable to unconsolidated investments in
corporations or partnerships. [¶1006.3]
111. The financial statements of a partnership should include federal income tax expense as well as the related income tax
liability. [¶1102.1]
112. The balance sheet of an S corporation and a C corporation are the same. [¶1201.1]
113. The statement of cash flows for an S corporation is the same as for a C corporation. [¶1201.5]
114. An accountant using a SSARS No. 3 report is required to obtain an understanding of the client’s industry and
knowledge of the client’s business and accounting principles and practices. [¶1302.2]
115. Standard preprinted tax return forms are not considered prescribed forms. [¶1302.4]
116. An agreed-upon procedures engagement is generally an engagement that involves applying procedures to prospective
financial presentations that have been agreed upon by specified parties and issuing a report of the procedures
performed, the accountant’s findings and a restriction of use of the report to the parties that established the
procedures. [¶1402.14]
117. Historical financial information recast to show the effect of a transaction that had not been consummated during the
period covered by the information is known as a pro forma presentation. [¶1402.31]
118. Disclosure principles are the same for historical and prospective financial statements. [¶1402.32]
119. Most financial planning engagements are a consulting engagement designed to help individuals plan for their
financial future. [¶1500.1]
120. Fiduciary accounting principles as developed by the Committee on National Fiduciary Accounting standards states
that a fiduciary account shall include both the carrying values of assets at acquisition by the fiduciary and the current
values of the assets at the beginning and end of the accounting periods. [¶1603.15]
48
2016–2017
Course No. ASC310
24 Credit Hours
$150.00
CPE Quizzer for
CCH 2016 GAAP GUIDE® (VOLUMES I & II)
Recommended CPE Credit: 24 Hours (Accounting and Auditing)
Prerequisite: None
Knowledge Level: Overview
Directions:
x Review Volume I of the reference materials.
x A Certificate of Completion will be mailed back to you, in accordance with AICPA and your State Board's
Learning Objective:
x Identify recent changes to U.S. Gaap and recognize current U.S. GAAP requirements
1. The meaning of generally accepted accounting principles (GAAP) has changed over time. [Page 1001]
2. With the creation of the FASB Accounting Standards Codification® (ASC), the accounting profession has created a
GAAP hierarchy that gives relative priority to the different sources of GAAP that is recognized by the FASB to be
applied by nongovernmental entities. [Page 1001]
3. The FASB Accounting Standards Codification® (ASC) includes AICPA Practice Bulletins. [Page 1002]
4. Computing and presenting net income and comprehensive income is one of the most important aspects of financial
reporting. [Page 2001]
5. Relevance is the major factor in creating comparability. [Page 2002]
6. A description of the facts and circumstances leading to the disposal of assets/operations must be disclosed in
conjunction with discontinued operations. [Page 2005]
7. The separation of current assets and liabilities from noncurrent assets and liabilities is an important part of financial
reporting. [Page 3002]
8. Receivables are the most common type of secondary cash resources. [Page 3003]
9. Trade payables, wages, and taxes are included in revenue received in advance. [Page 3004]
10. The working capital ratio is computed by dividing by the assets that are closest to cash by total current liabilities.
[Page 3004]
11. Only recievables and securities convertible into cash are included in the quick ratio. [Page 3005]
12. There are three common procedures of accounting for uncollectible accounts. [Page 3006]
13. The direct write-off method recognizes a bad debt expense only when a specific account is determined to be
uncollectible. [Page 3006]
14. One of the conceptual flaws of the direct write-off method is accounts receivable are overstated. [Page 3006]
15. The direct write-off method is considered GAAP. [Page 3006]
CCH 2016 GAAP Guide® (Volumes I & II)
49
2016–2017
16. ASC 450 provides guidance regarding contingencies. [Page 3006]
17. Factoring with recourse allows the assignee to return the receivable to the company and get back the funds paid if the
receivable is uncollectible. [Page 3008]
18. The process of using existing accounts receivable as collateral for a loan is known as pledging. [Page 3009]
19. ASC 470 provides guidance for the current and noncurrent classification in the debtor’s balance sheet of obligations
that are payable on demand. [Page 3010]
20. One of the key functions of financial reporting is reporting the results of operations. [Page 5001]
21. GAAP only provides broad guidance concerning how comprehensive income should be presented. [Page 5001]
22. FASB Concepts Statement No. 7 first introduced the term comprehensive income. [Page 5001]
23. ASC 220 does not apply to not-for-profit organizations that must follow ASC 958. [Page 5002]
24. ASC 220 deals with the measurement and recognition of comprehensive income. [Page 5002]
25. The requirement to present comprehensive income applies to defined benefit pension plans. [Page 5003]
26. ASC 225 focuses on the income statement. [Page 6001]
27. “Dirty surplus” is a concept that supports the thought that all items affecting net increases in owners’ equity, except
dividend and capital transactions, should be included in net income. [Page 6001]
28. A material transaction that is both unusual in nature and occurs infrequently shall be reported as a separate
component of income from continuing operations. [Page 6002]
29. ASC 605 provides guidance on the recognition, measurement, and classification of insurance recoveries related to
property and equipment. [Page 6003]
30. Business interruption insurance works the same as insurance recoveries for environmental remediation costs. [Page
6003]
31. ASC 230 provides guidance for cash flow statements. [Page 7001]
32. A statement of cash flows is not a required component in a complete set of financial statements. [Page 7001]
33. The statement of cash flows classifies cash receipts and payments as operating, fixed financing, and variable
financing activities. [Pages 7001–7002]
34. All employee benefit plans must comply with requirements within ASC 230. [Page 7002]
35. Credit unions must report net cash flows from transactions instead of gross cash flows. [Page 7002]
36. Terms such as cash and funds are required in the statement of cash flows. [Page 7002]
37. As general rule, ASC 230 requires an entity to report the net amounts of its cash receipts and cash payments in the
cash flow statement. [Page 7003]
38. Foreign currency translations are reported in the statement of cash flows. [Page 7006]
39. Disclosure of accounting policies is required by FASB standards when the statements are intended to present
financial position, cash flows, and results of operations in conformity with GAAP. [Page 8001]
40. Accounting policies regarding the amortization of intangibles need to be disclosed, according to ASC 235. [Page
8002]
50
2016–2017
41. Accounting policies regarding recognition of profit on long-term construction contracts no longer needs to be
disclosed, according to ASC 235. [Page 8002]
42. ASC 250 provides guidance for accounting changes and error corrections. [Page 9001]
43. Changes in accounting principles are classified as accounting changes. [Page 9001]
44. A change in accounting principle includes a change in the method of applying the accounting principle. [Page 9002]
45. Corrections of errors are considered accounting changes. [Page 9002]
46. A change in the method of pricing inventory is considered a change in accounting principle. [Page 9003]
47. Over the years, three approaches have been proposed to compensate for changes in the monetary unit. [Page 10,002]
48. If the amounts of assets and liabilities are fixed or determinable without reference to future prices of specific goods
and services, they are identified as monetary items. [Page 10,002]
49. Examples of nonmonetary assets include inventory and property. [Page 10,003]
50. Earnings per share (EPS) figures are required to be presented in the income statements of publicly held entities.
[Page 11,002]
51. EPS figures are commonly presented in prospectuses. [Pages 11,002–11003]
52. Potential common stock may consist of options and warrants. [Page 11,003]
53. ASC 270 provides guidance on interim reporting. [Page 12,001]
54. Interim financial reports must include summarized information. [Page 12,001]
55. The dependent approach views an interim period as a component part of the annual period. [Page 12,001]
56. Interim reports contain arbitrary amounts of costs or expenses. [Page 12,003]
57. Accounting for limited liability entities is covered under ASC 272. [Page 13,001]
58. The characteristics of limited liability companies vary from state to state. [Page 13,001]
59. A limited liability company is an unincorporated association of two or more persons. [Page 13,001]
60. In personal financial statements, the primary focus is on an individual’s assets and liabilities. [Page 14,001]
61. Disclosure is required about significant risks and uncertainties that confront entities in the nature of operations.
[Page 15,001]
62. The presentation of information about the entire enterprise is known as segment reporting. [Page 16,002]
63. Segment reporting is thought to assist financial statement users in making informed decisions about the entity.
[Pages 16,002–16003]
64. The FASB specifically discusses the objective of providing information to assist in risk assessment. [Page 16,003]
51
2016–2017
65. In 2000, the AICPA’s Special Committee on Financial Reporting (aka the Jenkins Committee) issued its report on
segment reporting. [Page 16,003]
66. ASC 280 guidance applies to nonpublic business enterprises. [Page 16,003]
67. Not-for-profit entities need to follow ASC 280 requirements for segment reporting. [Page 16,003]
68. Operating segments are components of an entity. [Page 16,004]
69. According to ASC 280, a chief operating decision maker could be a single individual or a group of individuals.
[Page 16,004]
70. A segment manager can only be responsible for one segment, unlike the chief operating decision maker (who may be
responsible for more than one segment). [Page 16,004]
71. There are five primary characteristics of an operating segment. [Page 16,005]
72. In May 2013, the FASB issued AST 2014-09. [Page 18,003]
73. For the purposes of GAAP, accounts receivable must be reported at their gross value. [Page 18,004]
74. The total amount of the receivables less an estimated allowance for uncollectible accounts is the net realizable value.
[Page 18,004]
75. Trouble debt restructuring is prohibited under GAAP. [Page 18,005]
76. All debt restructuring is considered troubled debt restructurings. [Page 18,005]
77. Troubled debt restructuring includes the situation where the debtor issues new debt securities that have an effective
interest rate that is at or near the current market interest rate of the debt with similar maturity dates and interest rates
issued by nontroubled debtors. [Pages 18,005–18,006]
78. Leases fall within the scope of ASC 310. [Page 18,007]
79. Under ASC 310, a loan is considered impaired if the creditor expects to collect all amounts due. [Page 18,008]
80. If a loan is expected to be repaid solely by the underlying collateral, the loan is considered to be collateral dependent.
[Page 18,008]
81. A temporary increase in the contractual interest rate as a result of a restructuring precludes the restructuring from
being considered a concession. [Page 18,011]
82. A restructuring that results in an insignificant delay in payment is considered a concession. [Page 18,011]
83. According to ASC 310, legal fees resulting from a troubled debt restructuring are expensed when incurred by the
creditor. [Page 18,014]
84. ASC 320 deals with employee compensation. [Page 19,001]
85. Convertible debt is considered a debt security. [Page 19,003]
86. Forward contracts are considered a debt security. [Page 19,003]
87. Investments in consolidated subsidiaries fall within the scope of ASC 320. [Page 19,004]
88. Available-for-sale investments are positively intended to be retained until maturity. [Page 19,005]
89. There is a presumption of significant influence by the investor if the investee is technologically dependent on the
investor. [Page 20,003]
90. The percentage of ownership must be disclosed for investments accounted for by the equity method. [Page 20,010]
52
2016–2017
91. A cost-method investor in a company considered to be the acquiree should recognize the investment at historical cost.
[Page 21,002]
92. Some entities purchase corporate-owned life insurance policies to protect the entity against the loss of “key”
employees. [Page 21,004]
93. Multiple individual-life insurance policies are legal contracts with an insurance company that enable an employer to
cover multiple employees with individual-life insurance. [Page 21,004]
94. A mutual insurance company is owned by stockholders. [Page 21,006]
95. GAAP permits policyholders in a mutual insurance company to recognize their membership interest as an asset.
[Page 21,006]
96. Inventories include long-term assets that are subject to depreciation. [Page 22,003]
97. Selling expenses of inventory are part of inventory costs. [Page 22,003]
98. In a periodic inventory system, inventory records are maintained and updated continually as items are purchased or
sold. [Page 22,004]
99. The first-in, first-out (FIFO) method matches the most recent costs incurred with current revenue. [Page 22,006]
100. The weighted-average method of inventory valuation determines its weighted average by dividing the total costs of
the inventory available by the total number of units. [Page 22,007]
101. An inventory method that can only be used with a perpetual inventory is the moving-average method. [Page 22,009]
102. Selling expenses are included in inventory costs. [Page 22,017]
103. ASC 730 provides guidance for research and development activities. [Page 22,020]
104. The promotion of an industry, company, brand, product name, or specific product or service for the purpose of
improving an entity’s image is known as advertising. [Page 23,004]
105. There are eight general types of advertising costs. [Page 23,004]
106. Costs for direct-response advertising must be capitalized. [Page 23,005]
107. Payroll and payroll-related costs for direct-response advertising activities of employees who are directly associated
with idea development, writing advertising copy, and artwork should be capitalized. [Page 23,007]
108. A direct-response advertisement must provide an organization with probably future economic benefits in order for
the related advertising costs to be expensed. [Page 23,010]
109. Goodwill and trademarks are examples of intangible assets. [Page 24,002]
110. Assets with indefinite useful lives are amortized over a 10-year period. [Page 24,002]
111. Intangible assets are nonfinancial assets that lack physical substance. [Page 24,002]
112. Intangible assets acquired in a business combination are covered in ASC 350. [Page 24,004]
113. Intangible assets acquired individually are initially recorded at the original owner’s historical cost. [Page 24,008]
114. As a result of the guidance in ASC 350, goodwill must be tested for impairment at the reporting level at least
monthly. [Page 24,018]
53
2016–2017
115. Recognition of depreciation is not required in general-purpose financial statements that present financial position,
cash flows, and results of operations. [Page 25,003]
116. Fixed assets have relatively long lives and are held by an enterprise primarily for use and not for sale. [Page 25,004]
117. ASC 360 applies to sales and leasebacks. [Page 25,005]
118. Residual value is an estimate of the amount that will be realized at the end of the useful life of a depreciable asset
through sale or other disposal. [Page 25,006]
119. Guarantees in business include obligations of commercial banks under “standby letters of credit.” [Page 32,002]
120. A guarantor should recognize an asset in its balance sheet at the inception of a guarantee. [Page 32,006]
54
2016–2017
Course No. ASC2226
24 Credit Hours
$150.00
CPE Quizzer for
PPC’s GUIDE TO PREPARING FINANCIAL STATEMENTS
Recommended CPE Credit: 24 Hours (Accounting)
Prerequisite: None
Directions:
x Review the reference book (Thirty-third Edition, October 2015).
x Identify the basic components of the financial statements and the various special purpose frameworks
x Identify the categories in the cash flow statement
x Recognize the reporting protocol for nonprofit organizations, development stage companies, and real estate
transactions
1. According to FASB Statement of Financial Accounting Concepts No. 5, cash flows for the period should be
presented in a full set of financial statements. [¶101.2]
2. One of the five general categories within the standards of the accounting profession is quality control standards.
[¶102.1]
3. There are only three basic services that CPAs in public practice can offer clients with regard to financial statements.
[¶102.4]
4. Reporting standards of the accounting profession apply to all CPAs in public and private practice. [¶102.6]
5. The Code of Professional Conduct applies to non-AICPA members who are under a member’s supervision. [¶102.8]
6. The Code of Professional Conduct incorporates four conceptual frameworks. [¶102.10]
7. Statements using a special purpose framework must follow generally accepted accounting principles. [¶103.1]
8. Generally, GAAP (generally accepted accounting principles) reflects economic reality. [¶103.3]
9. The FASB Accounting Standards Codification® has been established as the source of authoritative accounting
principles recognized by the FASB to be used by nongovernmental entities when preparing financial statements in
accordance with generally accepted accounting principles in the United States. [¶103.4]
10. Nonauthoritative accounting guidance and literature includes the AICPA Issues Papers. [¶103.6]
11. FASB ASC 800 gives quantitative guidelines for determining materiality. [¶103.17]
12. The International Accounting Standards Board (IASB) defines small and medium-sized entities (SMEs) as entities
that do not have public accountability and publishes general purpose financial statements for external users.
[¶103.24]
13. An accountant employed by an entity is a member in public practice; therefore, the SSARS apply to that accountant
and her/his reports. [¶204.5]
14. Generally, for large corporations, the accountants’ or auditors’ report should be addressed to a specific individual,
preferably the CEO of the company. [¶204.9]
15. The statement of income is one of the basic financial statements required by generally accepted accounting
principles. [¶205.1]
16. It is common practice for the financial statements to be referenced to the notes, even though generally accepted
accounting principles do not require this. [¶205.9]
17. Column headings are not necessary in single-period financial statements. [¶205.17]
PPC’s Guide to Preparing Financial Statements
55
2016–2017
18. The notes to the financial statements contain the summary of significant accounting policies, which is required by
GAAP in audited annual financial statements. [¶206.13]
19. Normally, cash, marketable securities, and receivables are categorized as current liabilities. [¶300.3]
20. Money market accounts are short-term investments frequently sold by banks as alternatives to certificates of deposit.
[¶¶302.6, 302.7]
21. In practice, there are two types of escrow accounts. [¶302.12]
22. Debt securities include options and financial futures contracts. [¶302.15]
23. The FASB states that “other than temporary” means permanent, when dealing with impairment of investments.
[¶302.35]
24. Cash value policies can be used to fund buy-out and nonqualified deferred compensation arrangements. [¶303.20]
25. Items leased from others under capital leases are not considered examples of property and equipment. [¶304.1]
26. Costs incurred to treat or remove asbestos should not be capitalized. [¶304.4]
27. If an exchange of nonmonetary assets involves monetary consideration of 10 percent or more of the fair value of the
exchange, the transaction should be considered a monetary transaction. [¶304.47]
28. There are six classes of potentially responsible parties (PRPs) under Superfund laws. [¶310.2]
29. Incremental direct costs associated with environmental remediation liabilities include government oversight costs.
[¶310.8]
30. If an entity can estimate only a range of possible loss from an environmental remediation liability, it may discount the
liability to reflect the time value of money. [¶310.13]
31. Retained earnings is a component of stockholders’ equity. [¶311.1]
32. Treasury stock is a component of stockholders’ equity. [¶311.1]
33. The option-pricing model should always be used to measure the value of equity share options and similar
instruments. [¶311.9]
34. Compensation costs should be recognized over the requisite service period of the employee. [¶311.11]
35. Additional paid-in capital can be affected by reorganization costs. [¶311.21]
36. A subscription for the purchase of stock normally is debited to common stock issued and credited to subscriptions
receivable. [¶311.24]
37. Retained earnings are affected by net income or loss for the year. [¶311.32]
38. Stock splits are similar to stock dividends; however, a stock split is generally used to refer to a distribution of shares
in excess of 20 percent to 25 percent of currently outstanding shares. [¶311.37]
39. Authoritative accounting literature prescribes the use of Statement of Operations as the correct and proper title for the
income statement. [¶401.4]
40. In May 2013, the FASB and IASB issued a converged standard, AU 2013-34, Revenue from Contracts with
Customers. [¶402.13]
41. Generally accepted accounting principles require equity in operations of investees to be presented separately from
other elements of net income. [¶403.1]
42. Proceeds from life insurance on an officer should be treated as an extraordinary item. [¶403.5]
43. GAAP for exit or disposal cost obligations at FASB ASC 420-10 applies to costs to terminate a contract, other than a
capital lease. [¶403.20]
44. Regarding equity in operations of investees, one of the basic accounting principles to be followed in recording an
investor’s share of earnings or losses of investments in common stock is that intra-entity profits and losses should be
eliminated until realized. [¶403.32]
45. GAAP does not address how to account for transactions that occur in the intervening period when the year ends of an
investor and an investee differ. [¶403.40]
46. GAAP defines a noncontrolling interest as the portion of a subsidiary’s equity that is directly attributable to a parent.
[¶403.43]
47. Defined contribution pension plans and defined benefit pension plans are the two basic types of pension plans.
[¶404.2]
48. A profit-sharing plan is classified as a defined benefit pension plan for income tax reporting. [¶404.6]
56
2016–2017
49. The amount of depreciation expense for a period may be disclosed in the notes to the financial statements. [¶405.3]
50. The Accelerated Cost Recovery System of recording depreciation does not comply with GAAP. [¶405.4]
51. Costs that should be expensed as research and development (R&D) include salaries and related costs of personnel
engaged in research and development activities. [¶405.9]
52. Total research and development costs must be disclosed in the notes to the financial statements. [¶405.10]
53. Research and development activity assets acquired in a business combination should be measured at fair value.
[¶405.11]
54. Unamortized computer software costs included in each balance sheet presented need to be disclosed. [¶405.15]
55. The preliminary project stage of internal-use software development includes costs related to designing the chosen
alternative, coding, installing hardware, and testing. [¶405.18]
56. With internal-use computer software, capitalization should begin when the preliminary project stage begins.
[¶405.20]
57. The FASB issued ASU 2015-05 to clarify the appropriate accounting for cloud computing arrangements. [¶405.27]
58. In developing an internal-use website, the costs for designing and laying out of the Web page using graphics such as
borders, background, and text colors and fonts costs are generally capitalized. [¶405.35]
59. Changes in retained earnings must be disclosed whenever results of operations are presented. [¶500.2]
60. There are four common formats for the statement of changes in stockholders’ equity that are commonly used in
practice. [¶502.13]
61. The most frequent changes in partners’ capital accounts result from contributions to capital, earnings, and drawings.
[¶503.6]
62. S corporations may report the components of retained earnings on the face of the balance sheet, as well as having the
option of reporting retained earnings in a separate statement of retained earnings or in the notes to the financial
63. Net change in cash during the period is one of the basic elements of the statement of cash flows. [¶600.8]
64. GAAP does not specify a title for statements of cash flows. [¶601.2]
65. The direct method format for a cash flows statement begins with cash receipts and deducts cash payments for
operating costs and expenses. [¶602.4]
66. Proceeds from sales of long-lived assets would be reported in the investing activities section of a cash flows
statement. [¶603.6]
67. The amount paid to acquire a company’s own stock would be reported in the financing activities section of a cash
flows statement. [¶604.13]
68. FASB guidance requires the disclosure of the total operating and investing cash flows of a discontinued operation for
each period presented. [¶606.1]
69. Significant accounting policies followed by a company must be disclosed in its financial statements in a specific
format. [¶703.1]
70. FASB ASC 235-10-50-4 identifies amortization of intangibles as being an example of a required accounting policy
disclosure. [¶703.10]
71. The most common related-party disclosures for nonpublic companies include leases between stockholders and the
company. [¶705.3]
72. Material lawsuits against a company must be disclosed even if the possibility of loss is remote. [¶705.35]
73. A financial option contract imposes on the option writer a contractual obligation to exchange other financial
instruments with an option holder. [¶707.13]
74. If the chance of a future event occurring is more than remote but less than probable, it is considered reasonably
possible. [¶708.10]
75. Supplementary information is required for a fair presentation in conformity with GAAP. [¶800.1]
76. Supplementary information should be presented after the basic financial statements and before the notes. [¶800.5]
77. When details of consolidated financial statements are provided in supplemental schedules, the schedules are referred
to as a consolidating balance sheet or a consolidating statement of income. [¶803.2]
78. The basis of accounting that a company uses to prepare its financial statements is determined by the AICPA. [¶902.1]
57
2016–2017
79. School activity funds are examples of entities that sometimes use the pure cash basis of accounting. [¶902.5]
80. FASB ASC 230-10-15-3 requires a statement of cash flows to be presented if the financial statements are prepared on
a basis of accounting other than GAAP. [¶903.4]
81. Under the pure cash basis of accounting, entities that purchase investments do not capitalize them. [¶904.3]
82. Generally, borrowings consist of working capital loans and direct financing of assets. [¶904.6]
83. A taxpayer may change the fiscal year accounting period if s/he gets permission from the Commissioner of the
Internal Revenue Service. [¶1002.5]
84. In a liquidation situation, gains and losses will be recognized in the financial statements before they are realized.
[¶1003.9]
85. Secured claims are liabilities that are secured by collateral with a value that is less than the amount of the claim.
[¶1003.18]
86. For tax purposes, there are limitations on depreciation on luxury vehicles used in a business. [¶1005.5]
87. Guaranteed payments to partners of a partnership can be made as salary payments for services. [¶1007.8]
88. Limited liability companies (LLCs) are a creation of state law. [¶1008.1]
89. A reporting entity should consolidate the financial results of the other entity if it has a controlling financial interest in
that entity. [¶1100.1]
90. GAAP guidance establishes the presumption that a voting equity interest of at least 10 percent gives a reporting entity
the ability to exercise significant influence over another entity. [¶1101.2]
91. Financial results using the equity method, consolidation, and combination generally differ only in the line items
reported in the financial statements. [¶1101.26]
92. A business combination is defined as obtaining control of a business, according to FASB ASC 805-10-20.
[¶1104.16]
93. The IRS requires that LIFO be used for financial reporting when LIFO is used for income tax reporting. [¶1200.5]
94. Using LIFO for financial reporting purposes may be difficult because LIFO must be preferable to other inventory
methods for a change to LIFO to be in accordance with GAAP. [¶1200.6]
95. FASB ASC 958-10-15-3 includes universities and colleges as nonprofit organizations. [¶1300.3]
96. A statement of activities is not included as one of the basic financial statements for nonprofit organizations.
[¶1301.1]
97. In a nonprofit organization’s financial statements, expenses are always reported as decreases in unrestricted net
assets. [¶1301.14]
98. Promises to give (e.g., a pledge) may be unconditional or conditional. [¶1302.12]
99. The retailing industry includes both retail and wholesale companies. [¶1500.1]
100. The average cost is a variation of the cost method of determining inventory cost. [¶1501.7]
101. A disadvantage of selling receivables without recourse is the low discount rates. [¶1502.7]
102. The percentage of completion on a construction contract must be determined using the output method. [¶1602.4]
103. All uninstalled materials should be omitted from the percentage-of-completion calculation for costs incurred to date
when using the cost-to-cost method for accounting for construction contracts. [¶1602.6]
104. The length of a construction contract affects the method used for accounting for it. [¶1603.13]
105. Generally, time-and-material contracts provide for payment on the basis of direct labor hours at fixed hourly rates
and the cost of materials or other specified costs. [¶1604.10c]
106. ASU 2014-10 superseded FASB ASC 915. [¶1700.1]
107. ASU 2014-10 defends presentation and disclosure distinctions between development stage entities and other
reporting entities. [¶1700.1]
108. FASB ASC 810 now includes an exception for development stage entities related to the sufficiency of equity at-risk
in determining whether an entity is a variable interest entity. [¶1700.2]
109. Land acquisition costs include purchase price and legal fees, such as the cost of drafting the documents and
performing title searches. [¶1802.7]
110. Sales commissions and other costs incurred in marketing and selling property are considered selling costs according
to FASB ASC 970-340. [¶1802.25]
58
2016–2017
111. Media advertising and promotional costs associated with real estate sales should be capitalized. [¶1802.28]
112. Under the reduced profit method associated with real estate, the seller’s receivable is discounted to equal the present
value of the lowest level of annual payments due under the sales agreement. [¶1804.13]
113. The guidance in FASB ASC 820-10 should be followed whenever the fair value option is elected. [¶1900.6]
114. Pushdown accounting is a consideration when there is a purchase and sale between equity investors. [¶1901.6]
115. Fair value is determined using a fair value hierarchy of four levels of input. [¶1902.2]
116. The fair value of an asset is defined as the price that would be received to sell that asset in an orderly transaction
between market participants at the measurement date. [¶1902.5]
117. Derivatives that can be designed to establish a range of interest rates include a cap, a floor, and a collar. [¶2001.13]
118. The fair value of a stock option has two main components. [¶2001.44]
119. Derivatives are always considered financial instruments. [¶2002.7]
120. Any change in the fair value of a derivative used as a stand-alone investment is reported in other comprehensive
income. [¶2002.19]
59
2016–2017
Course No. ASC203
24 Credit Hours
$150.00
CPE Quizzer for
CCH 2016 U.S. GOVERNMENTAL GAAP GUIDE®
Recommended CPE Credit: 24 Hours (Accounting (Governmental))
Prerequisite: None
Directions:
x Identify recent changes to U.S. Governmental GAAP and
x Recognize the current U.S. Governmental GAAP requirements
1. Citizens of the governmental entity are a primary user group of governmental financial reports. [Page 1003]
2. Public colleges and universities fall within the scope of GASB-35. [Page 1005]
3. One of the easiest application issues in governmental accounting and financial reporting is the development of
procedures that facilitate the presentation of the two levels of financial statements (the fund financial statements and
the government-wide financial statements). [Page 1006]
4. There are four measurement approaches used in the basic governmental financial statements. [Page 1008]
5. GASB:CS-4 defines 12 elements of historically based financial statements of state and local governments.
[Page 1016]
6. Generally, liabilities that do not consume current financial resources of a governmental fund are reported at the fund
financial statement level. [Page 1019]
7. In the governmental fund financial statements, the issuance of debt is presented in the balance sheet at the fund
statement level. [Page 1019]
8. The amount of interest expenditure recorded during the year seldom equals the amount of the accrual-based interest
expense reflected in the government-wide financial statements. [Page 1021]
9. Debt is always sold with an interest rate equal to the market rate. [Page 1022]
10. When a governmental entity issues new debt and uses the proceeds from that debt to retire currently existing debt, an
advance refunding of debt has occurred. [Page 1024]
11. When a lessee makes improvements to a capital asset, the expenditure should be expensed. [Page 1034]
12. A nonexchange transaction is a transaction where a government “either gives value (benefit) to another party without
directly receiving equal value in exchange or receives value (benefit) from another party without directly giving
equal value in exchange.” [Page 2003]
13. Formal debt agreements such as bonds and notes are considered unmatured long-term indebtedness. [Page 2004]
14. An unassigned fund balance cannot be spent because it is legally or contractually required to be maintained intact.
[Page 2007]
15. Interfund balances not expected to be repaid within one year of the financial statement date are reported in the
governmental fund balance sheets as long-term liabilities. [Page 2029]
CCH 2016 U.S. Governmental GAAP Guide®
60
2016–2017
16. Government-wide financial statements are reported on the modified-cash basis of accounting. [Page 2039]
17. The purpose of a special revenue fund is to account for proceeds of specific revenue sources—other than for major
capital projects— that are legally restricted to be used for specific purposes. [Page 3001]
18. The special revenue fund and the general fund use the same accounting principles to measure revenues,
expenditures, assets, and liabilities. [Page 3003]
19. Balances in the fund financial statements are converted from a modified cash basis to a cash basis in order to create
the basic information for the government-wide financial statements. [Page 3004]
20. The Head Start fund accounts for property tax revenues collected for use by the Developmental Disabilities Resource
Center, Inc. [Page 3006]
21. The fund that administers human services programs under state and federal regulations is the social service fund.
[Page 3012]
22. The capital projects fund accounts for construction of civic centers, libraries, and general administrative services
buildings. [Page 4001]
23. Governments fund police cars, information technology, and other non-facility items through the use of the general
fund. [Page 4001]
24. The use of a capital projects fund can be mandated by law or stipulated by regulations or covenants related to the
financing source. [Page 4002]
25. Significant changes to fund balance classifications were made by GASB-54. [Page 4004]
26. GASB-37 revises GASB-34 by stating that the cost basis of capital assets includes interest costs incurred during the
construction of a capital asset related to governmental activities. [Page 4007]
27. For a governmental fund, a statement of revenues, expenditures, and changes in fund balances and a balance sheet
must be prepared at the fund financial statement level. [Page 4010]
28. GASB-54 requires the presentation of desegregated fund balances in the statement of revenues, expenditures, and
changes in fund balances. [Page 4012]
29. GASB-54 requires governmental entities to have a debt service fund. [Page 5001]
30. The resources that flow into a debt service fund may come from taxes specifically levied to service a particular debt
issue. [Page 5001]
31. Levies and assessments not specifically identified for the purpose of servicing a particular debt issuance are recorded
in a debt service fund. [Page 5001]
32. GASB-34 identifies transfers from a fund to the debt service fund as operating or residual equity transfers.
[Page 5002]
33. The activities of the debt service fund are presented in only the balance sheet. [Page 5002]
34. GASB-54 requires the presentation of desegregated fund balances in the statement of revenues, expenditures, and
changes in fund balances. [Page 5008]
35. The conversion of principal retirement amounts to reduction of debts payable worksheet is used to convert the
transactions that were recorded in the debt service funds from a modified accrual basis to an accrual basis.
[Page 5008]
36. The fund used to report resources that are legally restricted to the extent that only earnings may be used for purposes
that support the reporting government’s program should be a permanent fund. [Page 6001]
37. Permanent funds and private-purpose funds are identical. [Page 6001]
38. A private-purpose fund is used when resources are to be used for the benefit of individuals. [Page 6001]
39. Permanent funds are classified as fiduciary funds. [Page 6001]
61
2016–2017
40. Permanent funds act as public-public-purpose trust funds. [Page 6001]
41. Permanent funds are reported on a modified accrual basis of accounting. [Page 6001]
42. The resources that flow into a permanent fund must come from transfers within the governmental entity.
[Page 6002]
43. An example of a voluntary nonexchange transaction includes contributions from external parties. [Page 6002]
44. GASB-34 dictates how investment income that arises from resources invested by a permanent fund will be reported
in the financial statements. [Page 6002]
45. According to GASB-34, the restricted net position section of the statement of net position (government-wide
financial statement) must be subdivided into expendable and nonexpendable amounts, when the net position is
restricted on a permanent basis (in perpetuity). [Page 6005]
46. Most governments work from their enterprise fund financial statements. [Page 6007]
47. An enterprise fund is an example of a proprietary fund. [Page 7001]
48. Enterprise funds can account for hospitals and toll roads that charge a fee in order to recover operational costs.
[Page 7001]
49. An enterprise fund must be utilized to account for an activity if the activity is financed with debt that is secured
solely by a pledge of the net revenues from fees and charges of the activity. [Page 7001]
50. The criteria established by GASB-34 are the same as the standards that were previously used to determine when an
enterprise fund should be used by a governmental entity. [Page 7001]
51. In general, state lotteries are accounted for in enterprise funds. [Page 7003]
52. The balances and activities of enterprise funds are presented in four financial statements at the fund financial
statement level. [Page 7005]
53. GASB-34 does not require reconciliation between the governmental statement of net position and statement of
changes in net position and business-type activities. [Page 7006]
54. GASB-34 requires that business-type activities be separately reported at least by segment on the statement of
activities, so that activities that are different can have separate presentations. [Page 7007]
55. GASB-68 provides guidance for defined benefit pension benefits. [Page7016]
56. GASB-34 requires that operating and nonoperating expenses be detailed. It also dictates how these expenses are to
be classified. [Page 7018]
57. Shared revenues for operating purposes are considered nonoperating revenues. [Page 7021]
58. When transactions with other governmental entities represent the predominant portion of the activity, an internal
service fund is used. [Page 8001]
59. According to GASB-34, state or local governments are prohibited from establishing a separate internal service fund
to account for the payment of claims and judgments as part of a self-insurance strategy. [Page 8002]
60. For purposes of preparing the statement of revenues, expenses, and changes in net position, nonexchange revenues,
such as tax revenues, generally are to be considered nonoperating transactions. [Page 8008]
61. In order to reduce or increase the operating activities of the fund to break-even amounts, any profit or loss from an
Internal Service Fund must be allocated to governmental and/or business-type activities. [Page 8015]
62. Generally, interest expense on debt issued by an Internal Service Fund is considered a direct expense and should be
allocated as a direct expense to specific functional categories that appear on the statement of activities. [Page 8016]
63. GASB-67 notes that the term “public employee retirement system” refers to “a special-purpose government that
administers one or more pension plans; therefore, it is not able to administer other types of employee benefit plans—
such as postemployment healthcare plans and deferred compensation plans. [Page 9002]
62
2016–2017
64. GASB-67 requires the net pension liability to be measured as the total pension liability, plus the amount of the
pension plan’s fiduciary net position. [Page 9005]
65. There is no guarantee of balance or rate of return in a target benefit plan. [Page 9006]
66. Defined benefit OPEB plans with a total membership of 200 or more are required to obtain an actuarial valuation at
least every third year. [Page 9014]
67. There are three types of fiduciary funds. [Page 10,001]
68. The major fund reporting concept applies to private-purpose trust funds. [Page 10,002]
69. Financial statements of fiduciary funds are presented in the government-wide financial statements. [Page 10,003]
70. Money market funds are subject to Rule 2a-7 of the Investment Company Act of 1940. [Page 11,001]
71. The net asset value per share, using the total investments at fair value divided by the outstanding shares, is
considered the “shadow price.” [Page 11,002]
72. An internal investment pool is an arrangement that commingles the moneys of more than one fund or component
unit of a reporting entity. [Page 11,002]
73. A governmental entity is prohibited from pooling funds from governmental units that are not part of its financial
reporting entity. [Page 11,003]
74. GASB-72 was released in February 2015. [Page 11,005]
75. Generally, an agency fund is generated to act as a custodian for private entities or other governmental units.
[Page 12,001]
76. Under the flow of economic resources measurement focus and the accrual basis of accounting as it applies to agency
funds, resources are recognized when they are required to be provided to the governmental entity.
[Pages 12,001– 12,002]
77. The major fund reporting concept does not apply to agency funds. [Page 12,002]
78. An agency fund is required to prepare a statement of changes in net position. [Page 12,002]
79. Capital projects funds include those types of capital-related outflows financed by proprietary funds or assets that will
be held in trust for individuals, private organizations, or other governments. [Page 12,003]
80. Because resources of fiduciary funds cannot be used to finance a governmental entity’s activities, financial
statements of fiduciary funds are not presented in the government-wide financial statements. [Page 12,003]
81. Included in a governmental entity’s financial statements are fund-based financial statements. [Page 13,001]
82. Extraordinary items are included in total revenues and expenditures/expenses in identifying a major fund.
[Page 13,002]
83. The general fund is always deemed a major fund. [Page 13,002]
84. Internal service funds are always major funds. [Page 13,005]
85. Based on the standards established in GASB-54, the equity of a governmental fund should be identified as
nonspendable, restricted, committed, assigned, or unassigned amounts. [Page 13,009]
86. The governmental fund financial statements include the balance sheet and the statement of revenues, expenditures,
and changes in fund balances. [Page 13,009]
87. To avoid doubling-up expenses and revenues in the presentation of the governmental activities and business-type
activities columns in the statement of activities, activities related to internal service funds are eliminated at the
government-wide financial statement level. [Page 14,005]
63
2016–2017
88. Internal balances net to zero when totals are extended to the “reporting entity column” on the statement of net
position. [Page 14,007]
89. The governmental financial reporting consists of a primary government and its component units. Component units
can only be governmental organizations. [Page 15,001]
90. GASB-39 gives guidance on determining whether certain organizations are component units. [Page 15,002]
91. A blended component unit has different financial reporting requirements than a fund of the primary government.
[Page 15,003]
92. A state statutorily mandated position whose financial transactions are independent of the county is known as a public
Trustee. [Page 15,005]
93. It is necessary to have summary reconciliations between the fund financial statements and the government-wide
financial statements, according to GAAP. [Page 16,001]
94. The totals in the business-type activities columns of the government-wide financial statements will always be
different than the totals in the fund financial statements for enterprise funds. [Page 16,003]
95. The net investment in capital assets component of net position includes the capital assets, net of accumulated
depreciation. [Page 16,005]
96. Restricted net position arises if restrictions are imposed by law through constitutional provisions or enabling
legislation. [Page 16,005]
97. A common error made by financial statement preparers related to reporting restricted net position includes
inappropriately believing that all assets reported as restricted will also be reported as restricted net position.
[Page 16,008]
98. The notes to the financial statements are crucial to a user’s understanding of the reporting entity’s financial position
and inflows and outflows of resources. [Page 17,002]
99. Disclosure of the description of the activities accounted for in each of the following columns—major funds, internal
service funds, and fiduciary funds types—presented in the basic financial statement is considered essential to the fair
presentation of the basic financial statements. [Page 17,003]
100. Fund balance classification details should also be disclosed in the notes of governmental financial statements.
[Page 17,006]
101. There are nearly 60 different types of disclosures that may be applicable to the basic governmental financial
statements. [Page 17,008]
102. GASB-38 gives guidance regarding certain financial statement note disclosures. [Page 17,009]
103. GASB-38 requires that interfund activity for the year be summarized in a note to the financial statements.
[Page 17,012]
104. GAAP does not require Management’s Discussion and Analysis (MD&A) information to be presented in a
governmental entity’s financial statements. [Page 18,001]
105. If MD&A is provided, it is preceded by the governmental entity’s basic financial statements. [Page 18,004]
106. MD&A should portray a narrow analysis of a governmental entity’s short-term and long-term activities.
[Page 18,005]
107. A discussion of significant capital assets and long-term debt activity is included in the MD&A. [Page 20,036]
108. The final budget is the original budget adjusted by all reserves, transfers, allocations, supplemental appropriations,
and other legally authorized legislative and executive changes applicable to the fiscal year, whenever signed into law
or otherwise legally authorized. [Page 18,007]
109. The GASB requires governmental entities to present an additional column that reflects the differences between the
final budget and the actual amounts. [Page 18,008]
64
2016–2017
110. If the governmental entity presents the comparative budgetary information as a basic financial statement, the note
related to the excess of expenditures over appropriations must be reported as a note to required supplementary
information (RSI). [Page 18,008]
111. GASB-32 changed the focus of fund reporting to reporting by major fund. [Page 19,002]
112. Governmental funds include: general, special revenue, capital projects, debt service, and permanent funds.
[Page 19,002]
113. The supplementary information in the governmental entity’s Comprehensive Annual Financial Report (CAFR)
contains the presentation of all nonmajor governmental funds. [Page 19,003]
114. Separate financial statements for each individual nonmajor governmental must be presented in the general purpose
external financial statements. [Page 19,003]
115. GASB-54 gives direction regarding fund balance reporting and governmental fund type definitions. [Page 19,012]
116. The major-fund reporting concept applies to the presentation of internal service funds. [Page 19,015]
117. Transactions of a component unit are presented as if they were executed directly by the primary government, when
the blending method is used. [Page 19,024]
118. GASB-44 gives new reporting requirements for a government’s statistical section of its annual report when a
statistical section is presented. [Page 20,002]
119. Financial trends information is information intended to assist users in understanding and assessing how a
government’s financial position has changed over time. [Page 20,002]
120. Debt capacity information is intended to assist users in understanding the socioeconomic environment within which
a government operates and to provide information that facilitates comparisons among governments over time.
[Page 20,004]
65
2016–2017
Course No. ASC2281
24 Credit Hours
$150.00
CPE Quizzer for
PPC’s GUIDE TO AUDITS OF
NONPROFIT ORGANIZATIONS
Prerequisite: None
Directions:
x Review the reference book (Twenty-eighth Edition, February 2015).
x Identify the relevance and importance of substantive procedures and tests of controls
x Recognize the audit and reporting requirements for nonprofit organizations
x Identify when a Single Audit is required for nonprofit organizations
x Recognize the steps, considerations, and planning for audits of nonprofit organizations 1. It is relatively easy to determine whether an entity is a nonprofit organization, the primary determining factor is
whether or not the entity receives significant revenue. [¶100.3]
2. Colleges and community organizations are considered nonprofit entities for GAAP purposes. [¶100.4]
3. Examples of voluntary health and welfare organizations include Salvation Army and Red Cross. [¶100.10]
4. Nonprofit organizations do not exist to create a profit, instead they exist to engage in specific activities or provide
specific services. [¶102.2]
5. Employee training and skills can affect the effectiveness of internal control, particularly for smaller organizations.
[¶102.20]
6. Historically, fund accounting has failed to provide a mechanism for meeting differing needs of various users of
nonprofit financial statements. [¶105.5]
7. The Sarbanes-Oxley Act of 2002 (the Act) established the Public Company Accounting Oversight Board (the
PCAOB) under the supervision of the Securities and Exchange Commission (the SEC). [¶107.1]
8. Nonprofit organizations are exempt from the need for audited financial statements or special purpose presentations.
[¶108.1]
9. The Yellow Book identifies specific nonaudit services that always impair independence and that auditors are
prohibited from providing to audited entities. [¶108.15]
10. Generally accepted auditing standards require auditors to use information gathered about the entity and its
environment (including internal control) to identify and assess the risks of material misstatement at both the overall
financial statement and relevant assertion levels. [¶110.1]
11. At the end of an audit, an auditor should evaluate compliance with applicable ethics requirements. [¶200.2]
12. In most cases, if a client-imposed limitation will result in disclaiming an opinion on the financial statements as a
whole, the auditor should not accept such a limited engagement as an audit engagement. [¶201.2, Exhibit 2-1]
13. Government Auditing Standards require audit firms to include policies and procedures in their systems of quality
control that are designed to provide absolute assurance that the firm will undertake an audit engagement only if it can
PPC’s Guide to Audits of Nonprofit Organizations
66
2016–2017
comply with professional standards, legal requirements, and ethical principles and can act within its legal mandate or
authority. [¶202.2]
14. As a precondition for an audit, the auditor should determine whether the financial reporting framework to be applied
in the preparation of the financial statements complies with U.S. GAAP. [¶202.5]
15. Although an auditor may make a proposal to a client before communicating with the predecessor auditor, the
communication with the predecessor ought to happen before final acceptance of the engagement, according to AU-C
210.A27. [¶202.23]
16. Nonprofit organizations must have their financial statements audited annually. [¶202.29]
17. If an auditor assumes a management responsibility for an attest client, the management participation threat created
would be so significant that no safeguards could reduce the threat to an acceptable level. [¶202.44]
18. The documentation requirement at ET 1.295 applies to nonattest services performed before the client becomes an
attest client. [¶202.50]
19. The period of the professional engagement between a client and an auditor ends when the audit report is issued.
[¶202.63]
20. Independence in appearance is the absence of circumstances that would cause a reasonable and informed third party,
having knowledge of the relevant information, to reasonably conclude that the integrity, objectivity, or professional
skepticism of an audit organization or member of the audit team had been compromised. [¶202.65]
21. Nonprofit accounting and auditing involve specialized and unique aspects of GAAP and GAAS. [¶202.96]
22. The group auditor is required to request communication from the component auditor indicating compliance with
relevant ethical requirements, including independence and professional competence. [¶202.113]
23. AU-C 600 applies to engagements where another auditor performs procedures on financial statements that are not
group financial statements. [¶202.114]
24. Additional services may not be added to an engagement after the engagement has begun. [¶203.21]
25. A representation letter obtained from the client at the end of the engagement can be regarded as a substitute for an
undertaking-to-be-truthful clause in the engagement letter. [¶204.7]
26. AU-C 402 refers to the auditor who audits the financial statements of an entity that uses a service organization as the
service auditor. [¶206.1]
27. Whenever the client uses the services of a service organization that are part of its information system relevant to
financial reporting, the auditor should inquire of client management whether they are aware of any fraud,
noncompliance with laws and regulations, or uncorrected misstatements at the service organization that affect the
financial statements of the user entity, either reported by the service organization or otherwise known by the client.
[¶206.8]
28. Auditor’s specialist are individuals or organizations that have expertise in the field of accounting or auditing and who
are used by the entity to assist in preparing the financial statements. [¶207.1]
29. AU-C 620 prohibits using specialists who are employees of or related to the client. [¶207.19]
30. The group engagement team is made up of the partners and staff who establish the group audit strategy, communicate
with component auditors, perform work on the consolidation process, and evaluate the audit evidence for the purpose
of reporting on the group financial statements. [¶208.6]
31. Communication with the group auditor about matters of significance to the component may not be initiated by the
component auditor. [¶208.34]
32. The group engagement team should design and perform further audit procedures on the consolidation process to
respond to assessed risks of material misstatement of the group financial statements arising from the consolidation
process. [¶208.39]
33. When an auditor involves other auditors in an audit of financial statements that are not group financial statements, it
is still appropriate to make reference to the work performed by the other auditors. [¶208.55]
67
2016–2017
34. One of the objectives of the auditor when planning the audit and performing risk assessment procedures is to obtain
an understanding of relationships and transactions with related parties that is adequate to recognize fraud risk factors
relevant to the identification and assessment of risks of material misstatement due to fraud. [¶300.4]
35. According to AU-C 315.17, an auditor should obtain an understanding of the entity’s risk assessment process, if one
has been established, and its results. [¶300.5, Exhibit 3-1]
36. Audit planning includes developing an audit plan. The audit plan is less detailed than the audit strategy. [¶300.9]
37. If a nonprofit organization has a financial audit performed under Government Auditing Standards and a Single Audit,
the audit will be subject to several additional requirements, some of which affect planning and risk assessment
activities. [¶300.19]
38. According to AU-C 300 and 315, it is necessary to inquire of internal audit and others within the organization to
properly asses risk and plan for an audit, however analytical procedures are not required. [¶301.4]
39. The competence of accounting personnel and the quality of the accounting and financial reporting system are some of
the primary sources of information on the risk of misstatement arising from error. [¶301.14]
40. Making inquiries of employees outside the accounting department or those at varying levels of authority is not
appropriate as it compromises the confidentiality of the information. [¶301.29]
41. Some related-party relationships and transactions may give risk to higher risks of material misstatement than
transactions with unrelated parties. [¶301.31]
42. There are specific documentation requirements for inquiries made as risk assessment procedures. [¶301.37]
43. Some fraud-related matters that should be discussed within the engagement team “brainstorming” meeting include
risk of management override of controls, and external and internal factors that might create incentives/pressures,
provide opportunities, or enable rationalization of fraud. [¶301.77]
44. Within the context of AU-C 240 and AU-C 315, it is clear that the discussion among the engagement team is
expected to occur during the performance of risk assessment procedures as part of audit planning, but the exact
timing is not specified. [¶301.86]
45. In obtaining an understanding of the entity and its environment, reading third-party reviews of grant programs
including federal awards programs is not considered necessary. [¶302.6]
46. AU-C 315.12 indicates that the auditor’s understanding of the entity and its environment consists of an understanding
of the measurement and review of the entity’s financial performance. [¶302.9]
47. An organization that depends primarily on general public contributions generally has a lower risk of material
misstatement of revenue than an organization that receives all of its support from one or a few funding sources.
[¶302.29]
48. A downturn in the local economy can put nonprofit organizations under severe financial pressure making it difficult
to obtain new contributions and/or collect on promises to give received in prior years. [¶302.34]
49. For many small nonprofit organization clients, the auditor is instrumental in assisting with the selection of accounting
principles and the methods by which they are applied. [¶302.49]
50 The presence of risk factors related to financial stress or dissatisfaction among employees is particularly important
when considering the risk of misappropriation of assets. [¶302.55]
51. Since the issuance of the original COSO internal control framework in 1992, there have been very few changes in
business and operating environments. [¶303.8]
52. AU-C 315 addresses information technology as a separate component of internal control. [¶303.22]
53. The auditor’s understanding of internal control design and implementation is sufficient to reach a conclusion on the
operating effectiveness of controls. [¶303.35]
54. AU-C 315 dictates the specific manner in which auditors document their understanding of an entity’s internal control.
[¶303.57]
68
2016–2017
55. According to AU-C 315.21, the auditor is required to understand all controls and control activities that might exist in
an entity. [¶303.64]
56. Risks are affected by events and circumstances such as new personnel and rapid growth. [¶304.19]
57. Ongoing monitoring includes management and supervisory activities and other actions that personnel take in
performing their duties, such as performing comparisons, reconciliations, and other routine activities. [¶304.43]
58. In terms of assessing the quality of an entity’s quality of internal control, monitoring can be virtually any activity that
ensures that controls are operating as intended and continue to be properly designed. [¶304.45]
59. The financial reporting system includes the accounting system and encompasses the procedures and records
established to initiate, authorize, record, process, correct, transfer to the general ledger, and report the entity’s
transactions. [¶305.4]
60. Walkthroughs of transactions usually involve document inspection, inquiry, and observation. [¶305.22]
61. AU-C 320 provides a specific definition of materiality. [¶306.6]
62. Conceptually, materiality is established based on the auditor’s perception of users’ needs and expectations.
Therefore, the nature and size of the entity are not considered in selecting benchmarks to establish planning
materiality. [¶306.12]
63. The auditor’s objective is to perform the audit to obtain absolute assurance of detecting misstatements that the auditor
believes could be large enough, individually or in the aggregate, to be quantitatively material to the financial
64. There are three conditions that generally are present when fraud occurs: incentive/pressure, opportunity, and
attitude/rationalization. [¶307.2]
65. Assertions about account balances relate to the period end and consist of occurrence, completeness, accuracy, cutoff
and classification. [¶401.3]
66. The auditor assesses risks of material misstatement at the relevant assertion level and designs audit procedures to
mitigate that assessed risk. [¶401.9]
67. By understanding assertions that are relevant to an account balance, class of transactions, or disclosure and how
identified risks relate to them, the auditor can effectively design and link further audit procedures that are responsive
to the assessment of the risk of material misstatement. [¶401.11]
68. Synthisis is a process involving analysis of the information gathered to identify risk and because this process is
highly systematic and scientific, the risks identified by applying the process are the same whether they relate to error
or fraud. [¶402.17]
69. Magnitude refers to whether the risk could result in a material misstatement of the financial statements. [¶402.24]
70. The auditor’s consideration of audit risk at the individual account balance, transaction class, or disclosure level
directly assists the auditor in determining the nature, timing, and extent of further audit procedures for relevant
assertions related to balances, classes of transactions, or disclosures. [¶403.1]
71. Detection risk is a function of inherent risk and credit risk. [¶403.6]
72. Generally, the importance of the recorded amount in evaluating significance depends on whether the primary concern
is with overstatement or understatement. If the auditor’s primary concern for a particular account balance is a risk of
overstatement, then the recorded amount of the account balance is the lower limit of misstatement. [¶403.22]
73. The purpose of the risk assessment is to determine the nature, timing, and extent of further audit procedures to be
performed. [¶403.59]
74. The auditor’s primary concern when considering fraud risk factors is to identify who is committing the fraud.
[¶404.7]
75. Revenue can be misstated due to fraud by selecting and inconsistently recognizing in-kind contributions. [¶404.16]
76. When the auditor is documenting the risks of material misstatement due to fraud, AU-C 240 requires a one-to-one
correlation between risks and responses. [¶404.27]
69
2016–2017
77. Risk assessment procedures and tests of controls, by themselves, provide sufficient and appropriate audit evidence
for the formation of the auditor’s opnion. [¶502.2]
78. AU-C 240.32 requires certain substantive procedures in all audits to address the risk of management override of
controls. [¶502.4]
79. The lower the auditor’s assessment of risk, the more reliable and relevant audit evidence from substantive procedures
needs to be. [¶503.7]
80. Regarding substantive audit procedures, asking management about changes in sources of contributions is an example
of an inquiry procedure. [¶503.9]
81. Designing the nature of substantive procedures involves deciding between or combining tests of details and
substantive analytical procedures. [¶503.22]
82. Analytical procedures are always effective in testing assertions about rights or obligations or assertions related to
presentation and disclosure. [¶503.25]
83. A blank form of external confirmation requests recipients to reply directly to the auditor and make a positive
statement whether they agree or disagree with information included. [¶504.2]
84. Negative confirmations are used extensively for nonprofit organization audits. [¶504.3]
85. Inquiry procedures are a crucial part of the process of identifying useful analytical procedures. [¶506.3]
86. Nonprofit organizations have an abundance of readily available sets of standards to compare their activities with
those of other nonprofit organizations. [¶506.21]
87. Regarding reliable data, internal data are better than data obtained from an independent outside source. [¶506.30]
88. The precision of analytical procedures using trend analysis and ratio analysis is improved when the underlying
relationships are known to be reasonably predictable and the business environment is relatively stable. [¶506.36]
89. Many nonprofit organizations receiving government funds are required to have audits performed under Government
Auditing Standards (the Yellow Book). [¶600.6]
90. Generally, the auditor is required to perform tests of controls over compliance as part of a Single Audit. [¶603.3]
91. The auditor normally focuses on those controls that are key in preventing or detecting material misstatements in the
relevant assertions. Key controls often include actions of supervisors and senior management. [¶604.9]
92. Walkthroughs and inspection of documents and reports are examples of tests of controls. [¶605.5]
93. Auditors are prohibited from using the Single Audit required tests of controls over compliance to reduce the
substantive testing in the financial statement audit. [¶606.20]
94. If the auditor uses a computer specialist, the auditor should be knowledgeable enough to communicate the audit
objectives to the specialist and be able to evaluate whether the procedures performed by the specialist meet the
auditor’s objectives. [¶607.30]
95. Document inspection and reperformance of the control activity provide reliable and dependable results that allow the
auditor to fully rely on the results. [¶608.16]
96. Audit sampling enables conclusions to be drawn about an entire population based on tests of a sample taken from that
population. [¶700.8]
97. Generally, as the risk of material misstatement decreases, the extent of substantive procedures needs to increase.
[¶702.1]
98. When performing tests of details, at a minimum, the auditor examines all items that equal or exceed tolerable
misstatement. [¶702.10]
99. In the payroll area, an effective analytical procedure is to compare current expenditures to prior period actual and
current budget by department and relate to the number of employees by department. [¶702.15]
100. Government Auditing Standards establish specific standards related to access by others to audit documentation.
[¶804.10]
70
2016–2017
101. theThe auditing profession has resisted from moving to perform paperless audits because a paperless approach often
raises questions regarding workpaper documentation. [¶805.1]
102. Professional standards (GAAS) restrict the form of audit evidence accumulated to support a GAAS audit. [¶805.5]
103. Many auditing considerations and procedures for investments of a nonprofit organization are the same as for the audit
of a business. [¶902.62]
104. According to FASB ASC 958-605-20, a contribution is an unconditional transfer of assets or settlement of liabilities
in a voluntary nonreciprocal transfer. [¶903.2]
105. Generally, a contribution restriction is permanent if the organization is authorized to deplete what was donated, such
as contributions restricted to purchase assets or to fund program costs. [¶903.6]
106. The completeness assertion is of little concern to nonprofit organizations because nonprofit organizations may
receive unsolicited gifts and bequests. [¶903.30]
107. The auditor is required to ordinarily presume that improper revenue recognition is a risk that may result in material
misstatement of the financial statements due to fraud and to evaluate which types of revenue, revenue transactions, or
assertions give rise to such risks. [¶ 903.62]
108. With regard to agency transactions, an intermediary holds and manages assets for the benefit of a specified
beneficiary in accordance with a charitable trust agreement. [¶903.71]
109. Nonprofit organizations are recognized as Section 501(c)(3) tax-exempt entities effective from the date they were
organized. [¶1000.10]
110. Each year the IRS issues a revenue procedure on the user fee program regarding letter rulings, determination letters,
and other filings. [¶1000.16]
111. Unlike business enterprises, nonprofit organizations are not subject to IRS audits. [¶1006.1]
112. Commitments and contingencies are completed transactions that do not require disclosure. [¶1101.1]
113. AU-C 580.A27 indicates that the auditor does not need to physically possess management’s representation letter on
the date of the auditor’s report. [¶1104.25]
114. For a nonprofit organization, there is the presumption that transactions reflected in the financial statements have been
consummated on an arm’s-length basis between independent parties. [¶1106.1]
115. Audit procedures for related parties are applied at all stages of the audit. [¶1106.8]
116. A statement of cash flows has the following basic elements: cash flows from operating activities; cash flows from
investing activities; cash flows from financing activities; net change in cash during the period; and supplemental
disclosure of noncash investing and financing activities. [¶1202.4]
117. Presentations of assets and liabilities at their historical bases are relevant to liquidating entities. [¶1202.17]
118. Many nonprofit organization audits are Yellow Book audits due to requirements in OMB Circular A-133 and the
provisions of grant agreements. [¶1306.1]
119. A first-tier subrecipient is one that receives an award directly from the recipient. [¶1403.11]
120. SSARS No. 21 says the accountant should prepare documentation in sufficient detail to provide a clear understanding
of the work performed. SSARS No. 21 also specifies the form and content of the documentation. [¶1505.7]
71
2016–2017
Course No. ASC36
20 Credit Hours
$125.00
CPE Quizzer for
CCH 2016 REVENUE RECOGNITION GUIDE®
Prerequisite: None
Directions:
x Identify the revenue recognition principles under the FASB’s new guidance
x Determine how things like right of return, variable fee arrangements
1. Revenue is a key statistic used in the assessment of an entity’s financial health. p. 1001
2. Only the timing and source of reporting revenue are relevant to all parties interested in financial data. p. 1001
3. U.S. GAAP (generally accepted accounting principles) is a body of authoritative literature that can be contradictory
and uncoordinated, due to the fact that it is made up of guidance originally published in many individual
pronouncements by a number of different standard-setting bodies. p. 2002
4. The FASB’s Conceptual Framework was developed in late 1980s by the Financial Accounting Foundation. p. 2002
5. The FASB Accounting Standards Codification® is organized into 110 topics. p. 2003
6. The FASB Accounting Standards Codification® (ASC) is organized by topic and updates (ASUs) are numbered
sequentially by year of issuance. p. 2003
7. The topics within the ASC are divided into four main areas. p. 2003
8. The SEC has the responsibility and the authority to prescribe the standards to be used by public companies within
the U.S. p. 2005
9. Staff Accounting Bulletins (SABs) are released by the Financial Accounting Standards Board (FASB). p. 2005
10. International Financial Reporting Standards (IFRS) is the most commonly used set of accounting standards outside
the United States. p. 2017
11. The International Accounting Standards Board (IASB) was the predecessor of the International Accounting
Standards Committee (IASC). p. 2017
12. As defined by the IASB’s framework, income is the “increases in economic benefits during the accounting period in
the form of inflows or enhancements of assets and decreases of liabilities that result in increases in equity, other than
those relating to contributions from equity participants.” p. 2018
13. There is no distinction as an element between revenue and gains under the IASB’s framework. p. 2018
14. IAS 18 addresses three significant revenue types. p. 2018
15. IAS 17 deals with leases. p. 2019
16. SIC 29 deals with revenue from barter transactions related to advertising. p. 2019
CCH 2016 Revenue Recognition Guide®
72
2016–2017
17. Revenue is probably the single least important measure of a company’s health. p. 3002
18. FASB Concept Statements are sufficient guidance for preparers to determine the proper accounting treatment in a
particular transaction. p. 3003
19. The earnings process must be completed—at least in part—to meet the earned criterion within CON-5. p. 3005
20. Completion of the earnings process may be unrelated to the timing of the payments under contract. p. 3005
21. Receipt of nonmonetary assets that are not readily convertible into cash never meets the “realizability” criterion. pp.
3005-3006
22. One of the conditions that must be met in order for revenue to be both earned and realized is that persuasive
evidence of an arrangement must exist. p. 3006
23. To assess whether the seller has substantially completed what s/he has agreed to do, it is necessary to ascertain what
commitments the seller has undertaken. p. 3007
24. The seller may not have a right to payment under the law if no arrangement exists under which the buyer has agreed
to pay the seller for performing under the contract. p. 3008
25. The accounting literature specifies the types of evidence that qualify as persuasive evidence of an arrangement. p.
3008
26. The Completed Performance model is used when the seller fulfills its performance obligation, and the customer
receives value, over a period of time. pp. 3010 – 3011
27. When an arrangement involves a subscription usually the completed performance model is used. p. 3012
28. Generally, the Proportional Performance model is used in evaluating the delivery of a service. p. 3012
29. Generally, revenue recognition in an operating lease is based on the Proportional Performance model, where the
revenue is being recognized ratably over the lease term. p. 3013
30. Executory costs fall within the scope of ASC 840. p. 3014
31. U.S. GAAP does not provide specific revenue recognition guidance on construction contracts. p. 3014
32. Current GAAP permits license revenue to be recognized at the beginning of the lease term. p. 3017
33. Functional intellectual property has no significant standalone functionality. p. 3017
34. There is no clear definition of fixed or determinable fee within the accounting guidance. p. 3021
35. The ASC does not provide guidance for the recognition of revenue when a consumer has the right to cancel the
remainder of a service. p. 3023
36. Generally, the existence of a coupon indicates that the purchase price is not fixed or determinable. p. 3024
37. Redemption rates on rebates are much lower than 100%. p. 3024
38. A lack of relevant historical experience may impair an entity’s ability to reasonably estimate coupon or rebate
redemptions. p. 3024
39. Certain contracts have fees that vary based on the actions of third parties. p. 3028
40. It is easier to predict third-party actions than customer actions. p. 3028
41. Collection of the fee must be reasonably assured for revenue to be recognized. p. 3034
42. For appropriate revenue recognition, it may be necessary to evaluate multiple contracts as part of a single
arrangement. p. 3039
43. U.S. GAAP defines “deliverable.” p. 4007
44. An obligation to perform a service is almost invariably considered a deliverable. p. 4007
45. U.S. GAAP provides clear guidance on potential deliverables. p. 4012
73
2016–2017
46. A contingent deliverable may arise when a project is to be performed in phases, and each phase depends on the
completion of an earlier phase. p. 4013
47. There are clear and concise standards in U.S. GAAP regarding contingent deliverables. p. 4013
48. The SEC staff addressed the scope interaction of ASC 985-605 and ASC 605-25 in a 2003 speech. p. 4019
49. ASC 605-25 makes a distinction between general and specific refund rights. p. 4028
50. ASC 605-25 provides a hierarchy of information to be used to determine the separate selling prices for the purpose
of allocating revenue to multiple deliverables. p. 4033
51. VSOE refers to vendor-specific objective evidence. p. 4033
52. An arrangement can include a provision that allows the customer to terminate the arrangement by paying a fee to do
so. p. 4041
53. Warranties are within the scope of ASC 460. p. 4046
54. Guarantees involved in leases that are accounted for as contingent rent do not fall under ASC 460 guidance. p. 4047
55. The disclosure provisions of ASC 460 apply to product warranties. p. 4047
56. The settlement approach results in the reduction of a noncontingent liability over the period the guarantor stands
ready to honor the guarantee. p. 4049
57. One must turn to ASC 815 for measurement guidance regarding guarantees that meet the definition of a derivative.
p. 4050
58. A guarantee that meets the definition of a derivative must follow the disclosure requirements of ASC 460. p. 4050
59. The most basic sales transaction is the sale of a product for cash. p. 5002
60. Most retailers grant customers a right of return for a limited period of time. p. 5002
61. Both explicit and implicit warranties may exist on products purchased, which will raise questions about the amount
and timing of revenue recognition. p. 5002
62. U.S. GAAP comprehensively addresses general product sale issues. p. 5003
63. Revenue from product sales is generally earned when the products are physically delivered to the customer. p. 5007
64. The delivery condition in a product sale is generally evaluated under the Proportional Performance model. p. 5007
65. All of the things that would normally accrue to an owner of products is considered the “risks and rewards of
ownership.” p. 5008
66. Rewards of ownership include right to use and restrict the use of the product. p. 5008
67. The physical transfer of a product always indicates revenue has been earned. p. 5008
68. Free-on-Board (FOB) shipping point means that the shipping is paid for by the seller. p. 5010
69. Usually, the party that pays for shipping has title to the products during shipping. p. 5010
70. A consignment sale is considered a sale. p. 5014
71. One indication of an in-substance consignment is when the buyer pays more than other customers or makes
purchases above and beyond its normal needs. pp. 5015-5016
72. ASC 470-40 addresses product financing arrangements. p. 5019
73. When an arrangement is accounted for as product financing, payments received from the customer should be
recorded as a liability and generally classified as debt, while the inventory delivered should remain on the seller’s
books. p. 5020
74. The FASB and the IASB have addressed sales transactions known as bill and hold sales. p. 5022
75. Risks of ownership must pass to the buyer before revenue can be recognized in any product sale transaction. p. 5022
76. An example of a bill and hold transaction is a layaway sale. p. 5027
77. A warranty provision must be explicitly identified in the documentation. p. 5036
74
2016–2017
78. A price protection clause provides the seller with a credit if there is a price decrease during a specified period of
time. p. 5049
79. Electronics retailers often offer direct payment to the customer if a competitor offers the same or a similar product at
a lower price. p. 5049
80. When price protection clauses depend on the actions of a third party, it may be difficult to make a reasonable and
reliable estimate. p. 5049
81. To induce a customer to make a purchase, a company may offer what amounts to a blanket guarantee on the value of
the product for some time after delivery. p. 5052
82. The accounting treatment for a residual value guarantee depends on whether or not the beneficiary of the guarantee
intends to use the products or resell them. p. 5052
83. A fixed-price trade-in right allows the customer to exchange the purchased product for a specified credit toward
another of the manufacturer’s products after some period of time. p. 5054
84. ASC 952-605 discusses software revenue recognition. p. 7008
85. The music and software models for revenue recognition are comparable. p. 7008
86. In intellectual property transactions, it is sometimes difficult to determine when value transfers. p. 7009
87. The latest point at which delivery of intellectual property can occur is the first day of the license term. p. 7009
88. Intellectual property can be delivered on a physical medium. p. 7010
89. An intangible asset can be used by a number of users at a time. p. 7010
90. There is no guidance on how to determine the life of an intellectual property arrangement that has options or
potential extensions. p. 7010
91. The life of the intellectual property is the time period over which it provides benefits to its owner or users. p. 7010
92. An arrangement for intellectual property whose duration is longer than the life of the intellectual property has
attributes similar to an operating lease. p. 7011
93. When intellectual property is licensed to a customer for the duration of its life and on an exclusive basis, the
Completed Performance model is generally most appropriate. p. 7011
94. When-and-if available deliverables cannot be separated for accounting purposes from the initially licensed
intellectual property. p. 7017
95. Setup costs are incurred by a vendor to acquire a specific customer or revenue stream. p. 8004
96. The conceptual framework makes it clear that certain costs should be deferred even if they do not create or add value
to an asset. p. 8005
97. Service development costs are always capitalized. p. 8006
98. ASC 310-20 addresses the accounting for loan solicitation and direct origination costs. p. 8007
99. Deferred costs must be evaluated for realizability. p. 8016
100. Deferred costs should not be amortized as revenue related to the applicable contract is recognized. p. 8015
75
2016–2017
Course No. ASC2225
24 Credit Hours
$150.00
CPE Quizzer for
PPC’s GUIDE TO AUDITS OF NONPUBLIC COMPANIES
Prerequisite: None
Directions:
x Review the reference book. (Thirty-third edition, February 2015).
x Identify the objectives and scope of audits of nonpublic companies
x Recognize the difference between unconditional and presumptively mandatory requirements
x Identify the proper uses of substantive analytical procedures and tests of controls
1. The objective of a review engagement is to express an opinion about whether the financial statements are fairly
presented in conformity with the applicable financial reporting framework that is used by the entity. [¶100.1]
2. The Financial Accounting Standards Board (FASB) Accounting Standards Codification® has been established as the
source of generally accepted accounting principles for nongovernmental entities, by FASB ASC 105. [¶101.1]
3. The Financial Accounting Standards Board (FASB) requires CPAs to comply with the Statements of Auditing
Standards (SASs). [¶101.2]
4. Those requirements that an auditor must adhere to in all cases if the conditions apply are considered presumptively
mandatory requirements. [¶101.3]
5. Unconditional requirements use the words “must” or “is required,” and refer to those requirements that an auditor
must follow in all cases if the circumstances apply to the requirement. [¶101.3]
6. Auditors have to comply with presumptively mandatory requirements. [¶101.3]
7. Each auditing standard is divided into five topics: introduction, objectives, definitions, requirements, and conclusion.
[¶101.5]
8. Exhibits to standards are not auditing standards. [¶101.6]
9. AU-C section numbers are used within the AICPA Professional Standards. [¶101.7]
10. Each clarified standard is divided in five topics: introduction, objectives, definitions, requirements, and application
and other explanatory material. [¶101.7]
11. AU-C §§ 200-299 deal with audit conclusions and reporting. [¶101.7]
12. AU-C §§ 300-399 deal with general principles. [¶101.7]
13. AU-C §§ 400-499 deal with audit evidence. [¶101.7]
14. AU-C §§ 500-599 deal with reporting issues. [¶101.7]
PPC’s Guide to Audits of Nonpublic Companies
76
2016–2017
15. AU-C §§ 600-699 deal with using others’ work. [¶101.7]
16. AU-C §§ 700-799 deal with audit conclusions. [¶101.7]
17. AU-C §§ 800-899 deal with risk assessments. [¶101.7]
18. AU-C §§ 900-999 deal with special considerations in the United States. [¶101.7]
19. The Preface of the standards contains the principles underlying an audit conducted in accordance with GAAS.
[¶101.8]
20. The principles, provided in the AU-C Preface, are not requirements and authoritative. [¶101.8]
21. AU-C 200 contains the auditor’s overall responsibilities in accordance to GAAS. [¶101.9]
22. Generally, an auditor must be independent of her/his client when performing an audit engagement. [¶101.10]
23. According to the overall objectives and conduct of an audit in accordance with GAAS, the auditor must maintain
professional skepticism throughout the audit, recognizing the possibility that a material misstatement of the financial
statements may exist. [¶101.10, Exhibit 1-1]
24. According to the overall objectives and conduct of an audit in accordance with GAAS, the auditor must consider
applicable interpretive publications in planning and performing the audit. [¶101.10, Exhibit 1-1]
25. The audit engagement partner must take sole responsibility for the overall quality of each assigned audit
engagement. The performance of procedures may not be delegated to other members of the engagement team.
[¶101.16, Exhibit 1-2]
26. If there is an indication that members of the engagement team have not complied with relevant ethical requirements,
the engagement partner should remove herself/himself from the engagement. [¶101.16, Exhibit 1-2]
27. To form a conclusion on compliance with independence requirements that apply to the audit engagement, the
engagement partner should obtain relevant information from the firm and, when applicable, network firms to identify
and evaluate circumstances and relationships that create threats to independence. [¶101.16, Exhibit 1-2]
28. The engagement partner should determine that appropriate procedures regarding the acceptance and continuance of
client relationships and audit engagements have been followed and all conclusions reached are appropriate.
[¶101.16, Exhibit 1-2]
29. The engagement partner should be satisfied that the audit engagement team (including any external specialists) has
the appropriate competence and capabilities to perform the audit engagement as required by professional standards
and applicable legal and regulatory requirements. [¶101.16, Exhibit 1-2]
30. Due to independence issues, the engagement partner should not take responsibility for the direction, supervision, and
performance of the audit engagement. [¶101.16, Exhibit 1-2]
31. The engagement partner is charged with ensuring that professional standards, applicable legal and regulatory
requirements, and the firm’s policies and procedures are followed [¶101.16, Exhibit 1-2]
32. According to AU-C 220.20, the engagement partner should ensure that reviews are being performed in accordance
with the firm’s review policies and procedures. [¶101.16, Exhibit 1-2]
33. According to AU-C 220.21, the engagement partner should ascertain that an engagement quality control reviewer
has been appointed if an engagement quality control review (EQCR) is required. [¶101.16, Exhibit 1-2]
34. The engagement quality control reviewer should perform an objective evaluation of the significant judgments made
and the conclusions reached in formulating the auditor’s report. Discussing significant findings or issues with the
engagement partner is part of this evaluation. [¶101.16, Exhibit 1-2]
77
2016–2017
35. The engagement team should follow the firm’s policies and procedures for resolving differences of opinion when
differences of opinion occur within the engagement team, with those consulted, or between the engagement partner
and the engagement quality control reviewer. [¶101.16, Exhibit 1-2]
36. The engagement partner should consider the results of the firm’s monitoring process and whether deficiencies noted
in that information may affect the audit engagement. [¶101.16, Exhibit 1-2]
37. Conclusions on compliance with independence requirements should be documented, according to AU-C 200.26.
[¶101.16, Exhibit 1-2]
38. Very few audits are performed as part of a continuing engagement with a client. [¶200.1]
39. Auditors should evaluate compliance with applicable ethics requirements in the early stages of an audit. [¶200.2]
40. AU-C 300 establishes the auditor’s responsibilities in determining certain preconditions for an audit. [¶200.3]
41. The auditor should not determine whether the financial reporting framework to be applied in the preparation of the
financial statements is acceptable. [¶201.2, Exhibit 2-1]
42. It is no longer a precondition of an audit that management acknowledges and understands its responsibilities.
[¶202.5]
43. The auditor considers the risks related to the engagement when deciding whether to accept a new client. [¶202.7]
44. Before accepting a new client, an auditor wants to consider what services are to be provided. [¶202.13]
45. The AICPA, the Securities and Exchange Commission, and the Department of Labor follow the same independence
rules. [¶202.32]
46. Interpretation 101-3 requires the auditor to perform management functions for the attest client. [¶202.34]
47. According to Interpretation 101-3, the client no longer needs to agree to perform certain specific functions in
connection with nonattest services. [¶202.34]
48. Interpretation 101-3 clearly specifies how to document the understanding with the client regarding objectives,
services, client responsibilities, auditor responsibilities, and any limitations of the engagement. [¶¶202.40, 202.41]
49. An auditor’s independence would be impaired if s/he sets policies or strategic direction for the client. [¶202.42]
50. An auditor’s independence would be impaired if the auditor interpreted financial statements, forecasts, or other
analyses. [¶202.42, Exhibit 2-4]
51. AU-C 240 deals with assessing the risks of material misstatement due to fraud. [¶300.3]
52. AU-C 250 gives guidance on obtaining an understanding of internal control of a client that uses a service
organization. [¶300.3]
53. Planning an audit involves performing extensive risk assessment procedures based on knowledge from past
experience with the client. [¶300.6]
54. Obtaining an understanding of the entity’s internal control is an essential part of planning the audit. [¶300.8]
55. Risk assessment procedures include analytical procedures. [¶300.12]
56. To obtain information used to identify fraud, auditors should consider the existence of fraud risk factors and results
of analytical procedures. [¶301.6]
78
2016–2017
57. Responses from inquiries of employees outside the accounting department may corroborate responses received from
management or may reveal the possibility of management overriding established controls. [¶301.23]
58. According to AU-C 550, auditors are required to inquire of management about whether there were any transactions
with related parties during the period. [¶301.26]
59. There are explicit requirements regarding documentation requirements for inquiries made as risk assessment
60. An understanding of the entity’s objectives, strategies, and related business risks should be obtained by the auditor.
[¶302.26]
61. Fraud risk factors include conditions that indicate an incentive to perpetrate fraud, an opportunity to commit fraud, or
a rationalization to justify a fraudulent activity. [¶302.48]
62. Some entity-level controls might be directly linked to preventing or detecting material misstatements at the relevant
assertion level for an account balance, transaction class, or disclosure. [¶303.53]
63. Audit evidence for elements of the control environment is generally not found in documentary form. [¶304.8]
64. According to AU-C 315, assertions for classes of transactions include occurrence, accuracy, cutoff, completeness,
and classification. [¶401.2]
65. According to AU-C 315, assertions about presentation and disclosure relate to matters during the period or at the
period end. [¶401.5]
66. The auditor can effectively design and link further audit procedures that are responsive to the assessment of the risk
of material misstatement by understanding assertions that are relevant to an account balance, class of transactions, or
disclosure, and how identified risks relate to them. [¶401.11]
67. The mental process involving analysis of information gathered to identify risks is referred to as synthesis. [¶402.11]
68. The auditor considers how the potential risk could affect specific assertions related to account balances, transaction
classes, or disclosures as part of the synthesis process. [¶402.21]
69. Audit risk consists of control risk, inherent risk, and detection risk. [¶403.5]
70. Tests of details risk and substantive analytical procedures risk together form detection risk. [¶403.6]
71. Trend analysis and ratio analysis are examples of analytical procedures. [¶506.1]
72. Overall review analytical procedures are used in the final review stage of the audit. [¶506.4]
73. Substantive analytical procedures are a focused way of translating the understanding of the client’s business into
reasonable assurance that a particular account balance is not materially misstated. [¶506.8]
74. AU-C 315 describes how the results of tests of controls may impact the preliminary risk assessment and planned
audit procedures. [¶600.4(a)]
75. AU-C 330 provides guidance regarding selecting items for testing. [¶600.4(b)]
76. The evaluation of control design and implementation serves the same purpose as tests of controls. [¶602.2]
77. Tests of controls are required in every audit. [¶602.3]
78. The auditor does not have a basis for an expectation of operating effectiveness without properly designed and
implemented controls. [¶603.6]
79. The auditing standards provide guidance for determining when tests of controls would be efficient. [¶603.14]
79
2016–2017
80. There is no benefit to testing the operating effectiveness of a control that is inappropriately designed to prevent, or
detect and correct, a material misstatement in a relevant assertion. [¶604.5]
81. When designing and performing tests of controls, auditors should ensure that the item being tested is a processing
step. [¶604.7]
82. Walkthroughs can be used to gain an understanding of controls and serve as a test of controls. [¶605.17]
83. AU-C 530 addresses the auditor’s use of sampling when evaluating the results of the sample. [¶700.4]
84. An auditor may be less likely to use audit sampling for tests of controls in a small business engagement if s/he has
determined that the population consists of a small number of large dollar items. [¶700.7]
85. A monetary amount set by the auditor in respect of which the auditor seeks to obtain an appropriate level of
assurance that the monetary amount set by the auditor is not exceeded by the actual misstatement in the population is
known as a “tolerable misstatement.” [¶700.13]
86. Both tests of details and substantive analytical procedures fall under the umbrella of substantive procedures. [¶702.2]
87. In audit sampling, there is an inverse relationship between the allowable risk of incorrect acceptance and sample
sizes. [¶704.5]
88. According to AU-C 230, audit documentation should provide evidence obtained (along with its source) and the
conclusions reached. [¶802.2]
89. Audit workpapers can be used to document information that can be used in future audits. [¶802.5]
90. Complex or unusual transactions and the application of GAAP to those transactions would be considered a
significant audit finding or issue. [¶802.15]
91. The date that an auditor has obtained sufficient appropriate evidence to support her/his audit opinion on the financial
statements is the audit report date. [¶802.21]
92. An auditor can add, make changes, or delete any documentation within the audit file within 90 days of the report
release date. [¶802.24]
93. It has been established by law and custom that workpapers are the property of the client and not the auditor. [¶805.1]
94. AU-C 560 provides requirements on reporting and relevant procedures when other auditors perform part of the audit.
[¶900.2]
95. Group audits are audits of financial statements that include the financial information of more than one component.
[¶901.13]
96. Professional standards provide little guidance for determining whether a component is financially significant to the
group financial statements. [¶901.27]
97. Relevant assertions pertaining to cash include existence/occurrence, completeness, rights/obligations, cutoff, and
accuracy/classification. [¶1001.5]
98. There is a greater tendency to overaudit than underaudit with regard to auditing cash. [¶1003.3]
99. Shipments made on canceled or duplicate orders may indicate improper revenue recognition practices and warrant
special consideration by the auditor. [¶1101.33]
100. Failing to determine sound business reasons for deterioration of the aging of accounts receivable is an example of
underauditing in accounts receivable and sales. [¶1103.3]
101. Inventory is one of the easiest accounts to audit in any size company. [¶1200.1]
80
2016–2017
102. A trial balance that includes individual inventory accounts is commonly used to document the performance of
inventory audit procedures. [¶1202.1]
103. AU-C 500 requires audit procedures to include risk assessment procedures, tests of controls, and substantive
104. Risk assessment procedures contribute to the formation of an auditor’s opinion, but do not provide sufficient
appropriate audit evidence on their own. [¶1301.2]
105. Generally, auditors are required to perform substantive procedures for all relevant assertions related to property.
[¶1301.7]
106. A significant adverse physical change in an asset may be a sign that an asset is impaired. [¶1301.12]
107. Long-term investments should be classified as current assets in the financial statements. [¶1400.2(a)]
108. Business combinations should be accounted for under the acquisition method of accounting. [¶1400.2(i)]
109. Prepaid expenses are usually material to the financial statements and warrant much of the auditor’s time in testing
these accounts. [¶1401.6]
110. FASB ASC 815 requires all entities to measure derivatives at fair value. [¶1401.33]
111. Comparing balances in the equity accounts with those of the prior year is an example of substantive procedures for
equity. [¶1501.13]
112. Audit programs at the account balance and transaction class level include extensive tests related to presentation and
disclosure. [¶1501.14]
113. Sampling is always used in auditing accounts payable. [¶1501.15]
114. There are three primary types of external confirmations. [¶1501.17]
115. Accrued liabilities may include costs relating to employee benefit plans. [¶1501.24]
116. Unexpected loss of cash flow may be an indicator of possible fraudulent financial reporting. [¶1506.2 (Exhibit 151)]
117. If a tax return for the year has a tax position that does not meet the more-likely-than-not criterion, the difference
between the current tax provision and the tax reported in the return should be recognized as an asset. [¶1602.5]
118. Applying audit procedures to income statement accounts will never provide sufficient appropriate audit evidence for
relevant assertions related to the balance sheet. [¶1701.7]
119. AU-C 540 addresses the auditor’s responsibilities relating to related-party relationships and transactions. [¶1800.3]
120. AU-C 300 deals with the auditor’s responsibility to consider laws and regulations in an audit of financial statements.
[¶1800.4]
81
2016–2017
Course No. ASC2282
24 Credit Hours
$150.00
CPE Quizzer for
PPC’s GUIDE TO SINGLE AUDITS
Prerequisite: None
Directions:
x Review the reference book (Twenty-third Edition, August 2015).
x Identify the scope, audit requirements and reporting requirements of Single Audits
x Recognize the importance and application of the Federal Register Uniform Administrative Requirements, Cost
Principles, and Audit Requirements for Federal Awards and Yellow Book standards
1. Throughout the 1950s, the federal government supported a concept of grant-by-grant audits. [¶101.1]
2. By the mid-1970s, the government had issued over 1,000 separate program audit guides which frequently provided
confusing and sometimes conflicting approaches. [¶101.2]
3. The Yellow Book standards relate to standards for internal control in the Federal Government. [¶101.3]
4. The objective of the Single Audit Act of 1984 was to establish uniform audit requirements and promote efficient and
effective use of audit resources. [¶101.11]
5. In December 2013, OMB published in the Federal Register Uniform Administrative Requirements, Cost Principles,
and Audit Requirements for Federal Awards (Uniform Guidance). [¶101.22]
6. Deficiency in operations means that a control necessary to meet the control objective is missing or an existing
control is not properly designed so that, even if it operates as designed, the control objective would not be met.
[¶102.5]
7. Management is responsible for identifying government programs and understanding and complying with their
compliance requirements. [¶102.10]
8. There is no difference in GAAS between tests of controls in a financial statement audit and tests of controls in a
compliance audit. [¶102.20]
9. AU-C 935.37 states that the auditor should communicate an overview of the planned scope and timing of the
compliance audit to those charged with governance. [¶102.33]
10. The Comptroller General of the United States heads the Government Accountability Office (GAO) provides federal
agencies with guidance and standards for accounting, budgeting, financial management, grants, and contracts. [¶
103.2]
11. A non-federal entity that receives a subaward from a pass-through entity to carry out part of a federal program, but
does not include an individual that is a beneficiary of such a program is a subrecipient. [¶104.1]
12. Single Audits are generally organized into two parts: a financial audit of the entity’s financial statements and a
compliance audit of the federal award programs. [¶106.1]
13. As part of a Single Audit, the auditor is required to assume certain testing and reporting responsibilities beyond those
of the audit of the financial statements. [¶106.4]
PPC’s Guide to Single Audits
82
2016–2017
14. The Yellow Book’s ethical principles are not written as specific requirements. [¶108.7]
15. Both governmental and AICPA pronouncements are relevant to Single Audits. [¶109.1]
16. Because many of its programs have been completed or are winding down, the Recovery Act no longer affects Single
Audits. [¶110.3]
17. One of the more significant changes to reporting requirements include the requirement that both the auditee and the
auditor must ensure that their respective parts of the reporting package do not include protected personally
identifiable information. [¶111.11]
18. In December 15, 2014, the AICPA issued a revised Code of Professional Conduct. [¶200.3]
19. A governmental financial reporting entity is made up of two parts: the primary government and its component units.
[¶201.5]
20. Most component units will be blended rather than discretely presented. [¶201.5]
21. In most cases, an entity-wide single audit is usually less desirable than a series of department or agency audits.
[¶201.29]
22. The Uniform Guidance prescribes the basis of accounting that nonfederal entities must use to prepare their financial
23. A request for proposal (RFP) for audit services must clearly describe the objectives and scope of the audit and
request a copy of the audit firm’s peer review report. [¶202.15]
24. The auditee must make positive efforts—whenever possible—to utilize small businesses, minority-owned firms, and
women’s business enterprises, in procuring audit services. [¶202.16]
25. For purposes of assessing a client’s reputation, the auditor would normally obtain information from various sources,
including the entity’s public information office and other oversight units. [¶202.20]
26. AU-C 501.05 defines a successor auditor as an auditor from a different audit firm who reported on the most recent
audited financial statements or who was engaged to perform but did not complete an audit of the financial
27. The predecessor must always respond to the successor’s inquiries. [¶202.27]
28. To become familiar with the services that will be provided, a preliminary discussion with the prospective client is
usually necessary. [¶202.29]
29. The AICPA and the GAO share the same independence standards. [¶202.35]
30. The auditor will often communicate with management about issues related to the engagement during an audit
engagement. [¶202.45]
31. No safeguards could reduce the management participation threat to an acceptable level if an auditor assumes a
management responsibility for an attest client. [¶202.49]
32. A structural threat is the threat that an audit organization’s position within a government and the structure of that
government will impact the audit organization’s ability to conduct its work and report results objectively. [¶202.58]
33. The Yellow Book explains that the auditor is prohibited from providing any nonaudit services. [¶202.73]
34. The engagement letter is essentially a service contract. [¶203.6]
35. The single audit applies to nonfederal entities (primarily governmental units and nonprofit organizations) that
expend $500,000 or more in a year in federal awards. [¶204.1]
36. 2 CFR Section 200.502(h) indicates that Medicare payments that are paid to non-federal entities for patient care
services rendered to eligible individuals are considered to be federal awards expended. [¶204.4]
37. Nonprofit organizations that had biennial audits for all biennial periods ending between July 1, 1992, and January 1,
1995, are permitted to have biennial audits. [¶206.1]
83
2016–2017
38. Auditors considering accepting a Uniform Guidance compliance audit engagement might consider requesting priorperiod findings and questioned costs (including the corrective action plan and management decision related to the
findings and summary schedule of prior audit findings). [¶207.5]
39. The Uniform Guidance requires the audit to cover the entire operations of the auditee. [¶208.6]
40. There is a basic assumption that the recipient and its auditor are familiar with the objectives of a financial statement
audit. [¶300.1]
41. The audit of the financial statements in a Single Audit has different objectives from an audit made in accordance
with GAAS. [¶301.5]
42. Management’s corrective actions related to findings and recommendations from previous audits, attestation
engagements, and other studies should be evaluated and this evaluation should be used to assess risk and determine
the nature, timing, and extent of current audit work. [¶301.5]
43. The auditor is not allowed to contract with another firm to perform a portion of the single audit or a portion of the
financial statement audit. [¶301.9]
44. The Single Audit Act requires the preparation of financial statements in accordance with GAAP. [¶302.1]
45. The auditor’s report on the financial statements should refer to Government Auditing Standards and to the separately
issued report(s) on internal controls and compliance. [¶303.1]
46. GAO standards do not provide any guidance on financial statement presentation and disclosure. [¶303.2]
47. An example of a direct loan is a Federal Perkins Loan. [¶304.3]
48. Federal funds awarded to a recipient are in many cases subawarded to other governments or nonprofit organizations
and these are known as pass-through funds or awards. [¶304.5]
49. Most federal awards are granted in the form of cash awards. [¶304.7]
50 Pass-through entities must include the total amount provided to subrecipients from each federal program on their
schedule of expenditures of federal awards. [¶304.11]
51. A cluster of programs is treated as a single program for meeting audit requirements. [¶304.14]
52. When federal awards are closely related and share common compliance requirements, a state government may
combine funding from the different awards in providing assistance to subrecipients. [¶304.14]
53. The Uniform Guidance does not require the auditor to issue a report that includes an opinion on whether the schedule
of expenditures of federal awards (SEFA) is fairly stated in all material respects in relation to the financial
statements as a whole. [¶304.21]
54. The auditor may use evidence obtained during the financial statement audit regarding the accuracy, completeness,
and classification of recorded revenues and expenditures when testing the accuracy and completeness of the schedule
of expenditures of federal awards. [¶304.24]
55. Due to the relationship of the schedule of expenditures of federal awards to both the financial statements and
compliance with the Uniform Guidance, auditors must consider evaluating and reporting control deficiencies on the
SEFA using a four-step process. [¶304.26]
56. It is the auditor’s responsibility to prepare the SEFA in accordance with the applicable criteria (i.e., in accordance
with the Uniform Guidance). [¶304.29]
57. The reporting on the SEFA must be included in the Uniform Guidance report on compliance and on internal control
over compliance. [¶304.31]
58. The 2015 Compliance Supplement is effective for audits of fiscal years beginning after June 30, 2013. [¶400.6]
59. According to AU-C 300.02, planning an audit involves establishing the overall strategy for the engagement and
developing an audit plan. [¶400.7]
60. The audit strategy is more detailed than the audit plan and documents the nature, timing, and extent of procedures to
be performed to obtain sufficient appropriate audit evidence. [¶400.9]
84
2016–2017
61. In a financial statement audit, the auditor performs risk assessment procedures to obtain an understanding of the
entity and its environment, including its internal control, to assess the risks of material misstatement at the financial
statement and relevant assertion levels. [¶400.14]
62. The auditor’s objective in a Single Audit no longer includes performing an audit of the financial statements. [¶401.1]
63. The Yellow Book and the Uniform Guidance allow the auditor’s report(s) to be in the form of either combined or
separate reports. [¶401.4]
64. According to AU-C 725, the supplementary information is a required part of the basic financial statements and is
considered necessary for the financial statements to be fairly presented. [¶401.5]
65. Procedures performed in the current audit often provide a basis for the auditor to assess the summary schedule of
prior audit findings. [¶401.7]
66. A major program may have some expenditures that are subject to the pre-Uniform Guidance requirements and some
that are subject to the post-Uniform Guidance requirements. [¶401.8]
67. Nonfederal entities expending more than $50 million a year in federal awards must have a designated cognizant
agency for audit. [¶402.1]
68. The Uniform Guidance does not differentiate between a “cognizant agency for audit” and a “cognizant agency for
indirect costs.” [¶402.2]
69. The cognizant agency for audit is required to approve the recipient’s selection of an independent auditor. [¶402.4]
70. The cognizant or oversight agency for audit is required to approve the audit scope or plan in advance of the audit.
[¶402.13]
71. An AICPA member who accepts an engagement to audit government grants, governmental units, or other recipients
of government monies when such audits are to be performed in compliance with government audit standards, guides,
procedures, statutes, rules, and regulations, that are in addition to GAAS, is obligated to follow such requirements.
[¶403.2]
72. A cluster of programs is a grouping of closely related programs sharing common compliance requirements. [¶404.5]
73. 2 CFR Section 200.518(d)(2) permits the auditor to exclude relatively small federal programs from the risk analysis
process. [¶404.22]
74. Federal programs with aggregate federal awards expended of at least 25% of total federal awards expended must be
audited as major programs. [¶404.26]
75. The granting agency may require other programs to be audited as major programs in lieu of the agency conducting or
arranging for additional audits. [¶404.30]
76. In addition to the requirements of the Single Audit Act Amendments and the Uniform Guidance that are imposed on
entities that expend specified amounts of federal awards during a year, entities that receive and/or expend state or
local grants may be subject to additional requirements imposed by the state or local grantor agency. [¶405.1]
77. Audit requirements for some grants may not exist. [¶405.2]
78. State and local grantor agencies often substitute reporting forms different from those that would be required in an
audit in accordance with the Yellow Book or a single audit. [¶405.7]
79. AU-C 935.15 states that the auditor should perform risk assessment procedures to obtain an understanding of
applicable compliance requirements and related internal control over such compliance requirements for each
program and compliance requirement selected for testing. [¶406.4]
80. As part of assessing the risks of material noncompliance in a Uniform Guidance audit, the auditor assesses only the
risk that noncompliance may cause the financial statements to contain a material misstatement. [¶406.8]
81. Risk assessment procedures should include inquiring of management about whether reports or other written
communications from previous audits, attestation engagements, and internal or external monitoring have findings
and recommendations that directly relate to the objectives of the compliance audit. [¶406.9]
85
2016–2017
82. AU-C 300 and AU-C 315 specifically identify inquiries of management, internal audit (if applicable), and others
within the organization and those charged with governance as necessary risk assessment and other planning
83. Information about past misstatements and noncompliance do not help the auditor in assessing risks in the current
audit. [¶406.25]
84. Inquiry of management and others is used extensively throughout the audit planning process. Examples of inquiries
of others include internal audit and financial reporting personnel. [¶406.28]
85. AU-C 550.13 specifically requires auditors, as part of the engagement team discussion, to consider how related-party
relationships and transactions could affect the susceptibility of the financial statements to material misstatement.
[¶406.51]
86. Because governmental units and nonprofit organizations are not affected by economic changes, the auditor need not
consider either the general or local economic trends. [¶407.18]
87. Many governmental units and not-for-profit organizations have established a group of individuals formally
designated with oversight of financial reporting. [¶407.26]
88. The auditor is primarily concerned with fraud that causes a material misstatement of the financial statements.
[¶409.14]
89. If the auditor determines that there is evidence that fraud may exist (even if the matter is inconsequential), the
auditor is required to report it to the appropriate level of management. [¶409.25]
90. Basic audit procedures are cross-referenced to specific audit objectives. [¶410.15]
91. Tests of controls and compliance tests in a single audit may be performed using observation, inquiry, or audit
procedures applied to details. These audit procedures must use sampling. [¶500.1]
92. The Single Audit Act Amendments of 1996 and the Uniform Guidance require statistical sampling. [¶500.2]
93. The GAS/SA Audit Guide require the use of a separate sample for each major program. [¶500.8]
94. Audit sampling in single audits may be used for both tests of controls and substantive tests of compliance. [¶500.15]
95. One of the purposes of tests of controls in a Single Audit is to determine and to report on whether the entity has
internal controls to provide reasonable assurance that it is managing federal award programs in compliance with
applicable laws and regulations. [¶502.1]
96. The maximum rate of deviation from a prescribed control that the auditor is willing to accept without altering the
planned assessed level of control risk of noncompliance is the tolerable deviation rate. [¶502.22]
97. It may be possible to reduce the size of the sample or eliminate sampling altogether by first identifying and testing
individually important items. A large number of transactions that make up a significant percentage of the dollars
expended or that have a significant effect on compliance would typically be considered individually important items.
[¶503.7]
98. When testing compliance in a Single Audit, the auditor is only concerned with the dollar amount of noncompliance.
[¶504.43]
99. The auditor’s consideration of internal control over compliance for federal award programs in a Uniform Guidance
audit of compliance is similar to the consideration of internal control over financial reporting in a financial statement
audit. [¶601.2]
100. Monitoring is one of the five interrelated components of internal control defined and described in the COSO’s
Internal Control—Integrated Framework. [¶601.3]
101. The auditor uses risk assessment procedures to obtain audit evidence that the control has actually been implemented.
[¶601.9]
102. The extent of the understanding of internal control that is sufficient is a matter of professional judgment. [¶601.12]
103. The auditor’s understanding of internal control design and implementation always provides sufficient evidence to
reach a conclusion about the operating effectiveness of controls. [¶601.17]
86
2016–2017
104. The Yellow Book establishes a requirement that the audit team must determine that internal specialists are qualified
and competent in their areas of specialization. [¶601.28]
105. The auditor is no longer required to document the understanding obtained for each of the five components of internal
control. [¶601.29]
106. The information and communication component sets the tone of an entity and influences the control consciousness
of its people. [¶601.32]
107. Organizational structure and assignment of authority and responsibility are elements of the control environment. [¶
601.33]
108. Information system refers to the financial reporting system, excluding the accounting system. [¶601.41]
109. Risk assessment encompasses the policies and procedures that help ensure that management directives are carried
out. [¶601.45]
110. A pass-through entity has the same responsibilities for funds passed through to for-profit subrecipients as to
government or nonprofit subrecipients, except that the requirements of the Uniform Guidance do not apply to forprofit subrecipients. [¶801.18]
111. The pass-through entity’s auditor is responsible for auditing the subrecipients. [¶802.2]
112. Subrecipients are not subject to the requirements specified by the Uniform Guidance and each pass-through entity.
[¶802.7]
113. According to the Uniform Guidance, agreed-upon procedures engagements are one of the tools that pass-through
entities may use to monitor subrecipients. [¶803.1]
114. Disclaiming an opinion or withdrawing is required by AU-C 580.25 when the written representations required by
AU-C 580.10–.11 are not provided by management. [¶1003.2]
115. For a governmental entity, the representation letter generally should be signed by the chief executive officer and the
chief financial officer; e.g., the mayor, city manager, school superintendent and the finance officer, school district
business manager. [¶1003.24]
116. Management needs to understand that the auditor’s involvement in financial statement preparation may represent a
significant deficiency or material weakness in internal control that should be communicated to management and
those charged with governance. [¶1007.10]
117. The auditee must make the audit reporting package available for public inspection and has to authorize the FAC to
make the reporting package and data collection form publicly available on its website. [¶1008.10]
118. Findings that do not involve federal funds (such as violations of state or local laws) must be included in the federal
awards section of the schedule of findings and questioned costs. [¶1110.8]
119. There is no requirement for the auditor to expand the scope of the audit to determine with any greater precision the
amount of questioned costs to report in the schedule of findings and questioned costs. [¶1110.10]
120. Identification of the federal award rather than the nature of the goods and services involved is the determining factor
in distinguishing direct costs from indirect costs. [¶1303.1]
87
2016–2017
Course No. ASC2280
20 Credit Hours
$125.00
CPE Quizzer for
PPC’s GUIDE TO CASH, TAX, AND OTHER BASES OF ACCOUNTING
Prerequisite: None
Directions:
x Review the reference book (Nineteenth Edition, August 2015).
Learning Objective:
x Identify the differences between generally accepted accounting principles (GAAP) and special purpose framework
financial statements
1. Special purpose frameworks are used as an alternative to the accounting requirements prescribed by GAAP. [¶100.1]
2. There is a limited amount of authoritative guidance for using special purpose frameworks. [¶100.1]
3. The Statements on Auditing Standards and the Statements on Standards for Accounting and Review Services
discusses special purpose frameworks. [¶100.2]
4. The regulatory basis of accounting is used to file its tax return for the period covered by the financial statements.
[¶100.2]
5. The contractual basis of accounting is a basis of accounting used by an entity to comply with an agreement between
the entity and one or more third parties other than the practitioner. [¶100.2]
6. The FASB Accounting Standards Codification® (FASB ASC) is the single source of authoritative guidance for
special purpose frameworks. [¶100.5]
7. AU-C 800 provides guidance for auditing special purpose financial statements. [¶100.6]
8. AU-C 800 requires the auditor to determine whether the special purpose framework used to prepare the entity’s
financial statements is acceptable. [¶100.6]
9. A basis of accounting that the entity uses to comply with the requirements or financial reporting provisions of a
regulatory agency to whose jurisdiction the entity is subject is considered a special purpose financial reporting
framework. [¶100.7]
10. If the special purpose financial statements are prepared in accordance with the regulatory basis of accounting, the
auditor’s report should include an emphasis-of-matter or other-matter paragraph. [¶100.7]
11. One of the major provisions of AR-C §60 is to provide general principles for engagements performed in accordance
with the SSARS. [¶100.13]
12. The AR-C §70 provisions should be applied when the accountant is engaged to perform a review engagement.
[¶100.15]
13. The pure cash basis of accounting would be appropriate for an entity with simple operations. [¶101.11]
14. The pure cash basis of accounting may be used for entities such as fairs and school activity funds. [¶101.11]
15. An example of an entity that uses the tax basis of accounting would be a closely held company for which conversion
to GAAP would be costly. [¶101.13]
16. It is common for insurance companies to present their financial statements on a regulatory basis instead of using
GAAP. [¶101.14]
PPC’s Guide to Cash, Tax,
and Other Bases of Accounting
88
2016–2017
17. It is prohibited for entities to use special purpose frameworks for preparing interim financial statements and GAAP
for preparing annual statements. [¶101.17]
18. Cash basis of accounting recognizes a transaction when cash is received or paid. [¶102.1]
19. When presenting transactions in financial statements, GAAP presentation guidelines should not be followed when
transactions are recognized and measured following a special purpose framework. [¶102.3]
20. Disclosures for special purpose financial statements should be similar to those required by GAAP. [¶102.3]
21. Financial statements prepared using a special purpose reporting framework do not require notes or other disclosures.
[¶102.6]
22. Guidance on special purpose frameworks can be found in generally accepted accounting principles. [¶300.1]
23. According to AU-C §800, auditors are required to evaluate whether special purpose financial statements adequately
describe differences between the special purpose framework and GAAP. [¶300.2]
24. AU-C §800 requires the auditor to evaluate whether the special purpose financial statements include informative
disclosures similar to those required by GAAP when the special purpose financial statements include items that are
the same as or similar to those in financial statements prepared under GAAP. [¶300.3]
25. Special purpose financial statements are not permitted to present disclosures using qualitative information. [¶300.5]
26. AU-C §800.A21allows the use of qualitative information to communicate the substance of GAAP presentation
requirements. [¶301.2]
27. GAAP requires the effects of disposal of a component of an entity to be reported as a result of ordinary operations.
[¶301.3]
28. A voluntary health and welfare organization must present expenses in its tax basis statement of activities according
to their natural classifications. [¶301.4]
29. GAAP does not require classifying assets and liabilities as current and noncurrent. [¶301.5]
30. GAAP requires entities to disclose going concern considerations. [¶305.1]
31. Audit guidance requires the auditor to consider the adequacy of disclosure when there is substantial doubt about the
entity’s ability to continue as a going concern. [¶305.5]
32. FASB ASC 855 provides guidance on two types of subsequent events— recognized and nonrecognized subsequent
events. [¶305.16]
33. Under the pure cash basis of accounting, only transactions that increase or decrease cash/cash equivalents are
reflected in the financial statements. [¶400.6]
34. It is possible for some entities to file their tax returns using the cash method of accounting. [¶401.5]
35. FASB ASC 250-10 deals with accounting changes and error corrections. [¶401.7]
36. Estimates are often included in financial statements prepared under the cash basis of accounting. [¶401.12]
37. Generally, a company converting from C corporation to S corporation status is required to adopt a calendar year end.
[¶401.19]
38. A financial statement prepared under the pure cash basis of accounting will reflect transactions affecting cash and
cash equivalents and record them as current assets and liabilities. [¶402.1]
39. Under the pure cash basis of accounting, loan proceeds are recorded as a cash receipt. [¶402.1]
40. Certificates of deposit with maturities of three months are not recognized and measured by the pure cash basis of
accounting. [¶402.2]
41. Entities that purchase investments must capitalize them under the pure cash basis of accounting. [¶402.3]
42. Under the pure cash basis, entities capitalize purchases of property and equipment. [¶402.4]
43. A modification of the pure cash basis has substantial support if it is not illogical and it is equivalent to the accrual
basis of accounting for the particular item. [¶403.2]
44. Trade receivables are claims for goods and services sold in the ordinary course of business. [¶403.16]
45. Limited liability companies are generally categorized as C corporations for income tax reporting purposes. [¶500.6]
89
2016–2017
46. A C corporation’s income may be taxed twice: once on the corporation’s income tax return; and again, on a
stockholder’s personal income tax return, as a dividend. [¶500.7]
47. Generally, income from partnerships and C corporations is passed through to the shareholders or partners. [¶500.7]
48. Sole proprietorships are considered taxpaying entities. [¶500.7]
49. The Internal Revenue Code (IRC) mandates one method of accounting. [¶500.10]
50. Generally, for federal income tax reporting, the cash method is available for qualified personal service corporations.
[¶500.11]
52. Small businesses with average annual gross receipts of $1 million or less are allowed to use the cash method of
accounting. [¶500.11]
51. According to the IRS, taxpayers with average gross receipts of $5 million may use the cash method of accounting.
[¶500.11]
53. AMT stands for alternative minimum tax. [¶500.13]
54. An excess of AMT over regular tax is available as a credit against regular tax for a maximum of 7 years. [¶500.13]
55. Depreciation is computed differently under the AMT and regular tax systems. [¶500.13]
56. Generally, financial statement users are more familiar with the AMT system than the regular tax system. [¶500.13]
57. The auditing guidance defines the income tax basis as the basis underlying amounts reported in the income tax
return. [¶501.1]
58. The term “income tax return” is clearly defined by the Internal Revenue Service (IRS). [¶501.1]
59. Form 1065 is the U.S. Partnership Return of Income. [¶501.1]
60. Form 990 can be used as a substitute for financial statements, since it is the same as financial statements prepared on
the tax basis of accounting. [¶501.3]
61. Reporting permanent differences on the statement of revenues and expenses can result in reporting taxable income
on the tax return that differs from net income. [¶501.11]
62. Form 1065 and Form 1120S show an amount captioned “taxable income.” [¶501.11]
63. When circumstances arise in which it is useful to provide information to users about taxable income or the amounts
of nontaxable revenues and nondeductible expenses, the information must be provided in the statement of revenues
and expenses. [¶501.14]
64. Known errors may exist in the income tax return because the errors were not material to the income tax return and
were not corrected. [¶501.17]
65. The concept of results of operations for the income tax basis of accounting is not clearly defined in the authoritative
guidance for financial statements. [¶501.28]
66. Financial statements prepared on the accrual basis used for income tax reporting must include a statement of cash
flows. [¶501.30]
67. Receivables and payables have separate bases for tax reporting purposes. [¶501.33]
68. The IRC requires that taxpayers offset receivables and payables in tax-basis financial statements. [¶501.33]
69. GAAP does not allow an entity to offset accounts that have no substance apart from each other. [¶501.34]
70. The definition of a related party varies throughout the IRC sections. [¶501.35]
71. Under the accrual method, the right to receive income determines when entities record income. [¶502.1]
72. One of the acceptable cost methods for determining the cost of inventory is specific identification method. [¶502.7b]
73. Under the FIFO method, inventories consist of the most recently purchased items. [¶502.7b]
74. Investments in nonmarketable equity securities are always accounted for through consolidation. [¶502.8b]
75. Rent may be fully deductible in the year paid, even if the payment creates an asset extending beyond the end of the
year. [¶502.9]
76. Losses on trade-ins are expensed for income tax reporting purposes but are capitalized under GAAP. [¶502.13]
90
2016–2017
77. The total depreciation deduction for federal income tax reporting may be greater than the depreciation deduction for
state income tax reporting. [¶502.19]
78. Costs incurred in connection with investigating the creation or acquisition of an active trade or business are
considered business start-up costs. [¶502.28]
79. The fair value basis presents assets at amounts expected to be realized in liquidation. [¶600.3]
80. All credit unions must prepare their financial statements according to regulatory accounting practices (RAP).
[¶601.20]
81. According to AU-C §800, the other basis of special purpose frameworks is a basis of accounting that utilizes a
definite set of logical and reasonable criteria that is applied to all material items included in the financial statements.
[¶602.11]
82. FASB ASC 274 gives guidance on business combinations. [¶602.16]
83. AR-C 70 applies whenever an accountant is engaged to audit a client’s financial statements. [¶700.2]
84. SSARS No. 21 eliminates the option of compiling management-use-only financial statements. [¶701.1]
85. Donated services are not reflected in revenue in income tax basis financial statements. [¶801.65]
86. GAAP for fiduciary accounting is difficult to determine, because no authoritative body has issued guidance. [¶802.3]
87. AICPA quality control standards apply only to special purpose frameworks financial statements. [¶901.1]
88. The purpose of a quality control system is to promote quality in performing accounting and auditing engagements.
[¶901.2]
89. The types of industries served and number of partners would affect the nature of the policies and procedures the firm
will need to develop to comply with the requirements of SQCS No. 8. [¶901.3]
90. When a CPA’s independence is impaired, s/he may only provide a compilation and not a review or audit. [¶902.1]
91. The AICPA Code of Professional Conduct defines the primary rules governing independence. [¶902.3]
92. Familiarity and adverse interest threats are circumstances that could impair independence. [¶902.11]
93. The undue influence threat involves actions or interests between the accountant and the client that are in opposition,
such as a threat of litigation by either party. [¶902.11]
94. Interpretation No. 101-3 indicates that having custody of client assets would impair independence. [¶902.18]
95. SSARS No. 19 requires the accountant to establish and document an understanding with client management
regarding the services to be performed for all compilation and review engagements. [¶904.2]
96. An entity with seasonal revenues should not adjust its interim financials to annualize seasonal revenue. [¶1002.2]
97. If an accountant is engaged to prepare the interim financial statements, there are no reporting requirements.
[¶1004.2]
98. Generally, the periods indicated in the financial statements’ headings should match the periods covered in the report.
[¶1004.7]
99. The SSARS do not apply to information that is not a financial statement as defined in SSARS No. 1. [¶1004.8]
100. SSARS No. 21 is effective for engagements for financial statements periods ending on or after December 15, 2014.
[¶1005.1]
91
2016–2017
Course No. ASC3628
4 Credit Hours
$25.00
CPE Quizzer for
JOURNAL OF ACCOUNTANCY® ARTICLES: MAR 2015–FEB 2016
Recommended CPE Credit: 4 Hours (3 A&A, 1 Tax)
Prerequisite: None
Knowledge Level: Update
Directions:
x Review the articles listed below. They are all from Journal of Accountancy issues published in 2015–2016.
Learning Objective:
x Identify recent changes in the accounting literature and recent areas of change in the tax guidance
ACCOUNTING & AUDITING ARTICLES
New Challenges in a Delicate Process [March 2015]
1. FASB Accounting Standards Update (ASU) No. 2014-15, officially codifies management’s going-concern
responsibilities into GAAP.
Big Data Case Study: What Forensic Accountants Need to Know [March 2015]
2. New IT skills are needed by CPAs due to the rise of Big Data.
Driving Faster Decisions: How Continuous Monitoring and Auditing Are Enabling HP—and Many Other
Organizations—to Become More Agile [April 2015]
3. Governance and compliance teams can collaborate to design high-level analytics with drill-down capabilities to
identify and study trends, movements in the accounts, spikes of activity during the period, the nature of the entries,
and the individuals who are posting entries.
Will Simpler Also Be Better? [April 2015]
4. It has been noted by the standard setters and regulators that the complexity of accounting standards can be confusing
to investors and overwhelming to preparers.
Data Analytics Helps Auditors Gain Deep Insight [April 2015]
5. Audit procedures— such as bank confirmations, analytical procedures, and journal-entry testing—still need to be
performed on-site by local audit teams.
Don’t Lose Momentum on Revenue Recognition Standard [June 2015]
6. Seventy-seven percent of U.S. technology CFOs surveyed by BDO in December and January said they had not yet
familiarized themselves with the changes in the standard, even though it had been issued seven months earlier.
Not-for-Profit Financial Reporting Headed for a Change [July 2015]
7. The FASB has taken on a project to improve the usefulness and transparency of the current not-for-profit financial
reporting model.
Forensic Interviews: Plan to Succeed [August 2015]
8. The main goal of an interviewing strategy is to gather and synthesize enough supporting evidence to provide a sound
basis for questioning the suspected fraudster and to elicit an admission of guilt.
Journal of Accountancy® Articles: Mar 2015–Feb 2016
92
2016–2017
What’s Your Fraud IQ? [August 2015]
9. In fraud recovery schemes, the perpetrator double-dips by contacting a prior victim and impersonating a lossrecovery specialist who wishes to assist the target in the wake of the previous fraud.
How to Perform High-Quality EBP Audits [September 2015]
10. AICPA Employee Benefit Plan Audit Quality Center (EBPAQC) member firms are required to perform semi-annual
inspections of a representative sample of their EBP audits.
Succeeding with a Narrow Focus [September 2015]
11. CPAs who take work outside their area of expertise can make them vulnerable to mistakes or regulatory scrutiny.
Succession Planning and CPAs’ Golden Opportunity [October 2015]
12. A study by the Exit Planning Institute in late 2013 showed that 22% of business owners were unprepared to address
succession planning.
Highlights of Fraud Research [November 2015]
13. Research studies have found that familiarity increases accuracy, affecting auditors’ ability to exhibit professional
skepticism in a long-term auditor/client relationship.
IASB Issues Leases Standard; FASB to Follow [January 2016]
14. IASB Chairman Hans Hoogervorst believes the new standard on lease accounting will increase ambiguity on
companies’ lease assets and liabilities, including off-balance-sheet lease financing.
Bookkeeping or Preparation Service? [January 2016]
15. SSARSs do not apply to either bookkeeping services or preparation of financial statements.
TAX ARTICLES
Cash Balance Plans for Professional Practices [March 2015]
16. Flowthrough business income to owners of S corporations is subject to the additional 0.9% Medicare surtax.
Change Is Coming: Accounting Method Changes Under the Tangible Property Regulations [April 2015]
17. For successful implementation, the new tangible property regulations require substantial resources.
Ten Situations When a CPA Should Call “Timeout” [April 2015]
18. A tax accountant should respond to an IRS investigation on behalf of a client who is worried about criminal
prosecution.
Moved South but Still Taxed up North [August 2015]
19. Moving to a low-tax state to retire will always allow people to escape estate and inheritance taxes in the states they
left.
Tax Treatment of Drug Development Company Startup Costs [August 2015]
20. The life cycle of a new drug product being developed by a startup life science company has three distinct segments.
Journal of Accountancy® Articles: Mar 2015–Feb 2016
93
2016–2017
>3DJHOHIWLQWHQWLRQDOO\EODQN@
94
ASCE
Harris Bank
36786
Treasury
Center
Chicago, IL
60694-6700
ASCE BLOCK CODE #__________
= $
Fax (
)
Please include email and fax for order confirmation.
Email
State
Day Phone (
)
City
Address
Firm/Company Name
Name
Signature
Card No.
Discover
ZIP
Exp. Date
$15.00
METHOD OF PAYMENT:
Check payable to ASCE
Visa
MC
American Express
TOTAL DUE
(see quizzer for above information)
Grading Fee (ASC0006):
Course Number:_________________________________________________
Price:
$
A. Course Title:___________________________________________________
Grading of your ASCE quiz can be done online at asce.com
free of charge. There is a $10 grading fee if you wish to use this form to
have your course graded. Note: ASCE Block codes
cannot be used for the payment of the $15 grading fee;
please include a check or credit card for payment.
PLEASE PHOTOCOPY IF ADDITIONAL
COPIES ARE NEEDED
ASCE
COMPLETE AND MAIL TO:
A-1
T F
29 {
{
30 {
{
31 {
{
32 {
{
33 {
{
34 {
{
35 {
{
36 {
{
37 {
{
38 {
{
39 {
{
40 {
{
41 {
{
42 {
{
43 {
{
44 {
{
45 {
{
46 {
{
47 {
{
48 {
{
49 {
{
50 {
{
51 {
{
52 {
{
53 {
{
54 {
{
55 {
{
56 {
{
T F
1 {
{
2 {
{
3 {
{
4 {
{
5 {
{
6 {
{
7 {
{
8 {
{
9 {
{
10 {
{
11 {
{
12 {
{
13 {
{
14 {
{
15 {
{
16 {
{
17 {
{
18 {
{
19 {
{
20 {
{
21 {
{
22 {
{
23 {
{
24 {
{
25 {
{
26 {
{
27 {
{
28 {
{
D.
2
Q
T F
3
B.
1
0{
{
1{
{
2 {
2{
3 {
3{
4 {
4{
5 {
5{
6 {
6{
7 {
7{
8 {
8{
9 {
9{
0
STUDY
HOURS
T F
SOCIAL SECURITY NUMBER
T F
T F
225 {
{
226 {
{
227 {
{
228 {
{
229 {
{
230 {
{
231 {
{
232 {
{
233 {
{
234 {
{
235 {
{
236 {
{
237 {
{
238 {
{
239 {
{
240 {
{
241 {
{
242 {
{
243 {
{
244 {
{
245 {
{
246 {
{
247 {
{
248 {
{
249 {
{
250 {
{
251 {
{
252 {
{
T F
253{
{
254{
{
255{
{
256{
{
257{
{
258{
{
259{
{
260{
{
261{
{
262{
{
263{
{
264{
{
265{
{
266{
{
267{
{
268{
{
269{
{
270{
{
271{
{
272{
{
273{
{
274{
{
275{
{
276{
{
277{
{
278{
{
279{
{
280{
{
T F
0{
0{
0{
0{
0{
0{
0{
0{
{
1{
1{
1{
1{
1{
1{
1{
1{
{
2{
2{
2{
2{
2{
2{
2{
2{
2{
3{
3{
3{
3{
3{
3{
3{
3{
3{
4{
4{
4{
4{
4{
4{
4{
4{
4{
5{
5{
5{
5{
5{
5{
5{
5{
5{
6{
6{
6{
6{
6{
6{
6{
6{
6{
7{
7{
7{
7{
7{
7{
7{
7{
7{
8
{8
{ 8
{ 8
{ 8
{ 8
{ 8
{ 8
{ 8
{
9{
9{
9{
9{
9{
9{
9{
9{
9{
1
0
C.
113 {
{ 141 {
{ 169 {
{ 197 {
{
170
142
114 {
{ {
{ {
{ 198 {
{
115 {
{ 143 {
{ 171 {
{ 199 {
{
116 {
{ 144 {
{ 172 {
{ 200 {
{
117 {
{ 145 {
{ 173 {
{ 201 {
{
118 {
{ 146 {
{ 174 {
{ 202 {
{
119 {
{ 147 {
{ 175 {
{ 203 {
{
120 {
{ 148 {
{ 176 {
{ 204 {
{
177
149
121 {
{ {
{ {
{ 205 {
{
122 {
{ 150 {
{ 178 {
{ 206 {
{
123 {
{ 151 {
{ 179 {
{ 207 {
{
124 {
{ 152 {
{ 180 {
{ 208 {
{
125 {
{ 153 {
{ 181 {
{ 209 {
{
126 {
{ 154 {
{ 182 {
{ 210 {
{
127 {
{ 155 {
{ 183 {
{ 211 {
{
128 {
{ 156 {
{ 184 {
{ 212 {
{
129 {
{ 157 {
{ 185 {
{ 213 {
{
130 {
{ 158 {
{ 186 {
{ 214 {
{
131 {
{ 159 {
{ 187 {
{ 215 {
{
132 {
{ 160 {
{ 188 {
{ 216 {
{
133 {
{ 161 {
{ 189 {
{ 217 {
{
134 {
{ 162 {
{ 190 {
{ 218 {
{
135 {
{ 163 {
{ 191 {
{ 219 {
{
136 {
{ 164 {
{ 192 {
{ 220 {
{
137 {
{ 165 {
{ 193 {
{ 221 {
{
138 {
{ 166 {
{ 194 {
{ 222 {
{
139 {
{ 167 {
{ 195 {
{ 223 {
{
140 {
{ 168 {
{ 196 {
{ 224 {
{
T F
ANSWER SECTION
FILL IN CIRCLE
COMPLETELY
57 {
{ 85 {
{
58 {
{ 86 {
{
59 {
{ 87 {
{
60 {
{ 88 {
{
61 {
{ 89 {
{
62 {
{ 90 {
{
63 {
{ 91 {
{
64 {
{ 92 {
{
65 {
{ 93 {
{
66 {
{ 94 {
{
67 {
{ 95 {
{
68 {
{ 96 {
{
69 {
{ 97 {
{
70 {
{ 98 {
{
71 {
{ 99 {
{
72 {
{ 100 {
{
73 {
{ 101 {
{
74 {
{ 102 {
{
75 {
{ 103 {
{
76 {
{ 104 {
{
77 {
{ 105 {
{
78 {
{ 106 {
{
79 {
{ 107 {
{
80 {
{ 108 {
{
81 {
{ 109 {
{
82 {
{ 110 {
{
83 {
{
{ 111 {
84 {
{
{ 112 {
T F
Incorrect marks:
Correct mark:
Use a blue or black pen or a No. 2 Pencil. Do NOT use a red pen.
Please fill in the course title, course number and price, as provided on the
quizzer. Figure sales tax (if applicable) and total due. Indicate method of
payment along with your name, address and phone numbers in the space
provided.
B. Write in your number of study hours. Darken the corresponding circles
below each box. Recommended study hours are indicated on quizzer.
C. Write in your social security number. Darken the corresponding circles
below each box.
D. Indicate your correct answer choice. Darken the circles under ‘T’ for true
and ‘F’ for false.
X Do not make any stray marks on the form. Darken the circles
completely. Return the entire answer sheet to the address provided.
X
A.
HOW TO COMPLETE CPE ANSWER SHEET
ASCE
Harris Bank
36786
Treasury
Center
Chicago, IL
60694-6700
ASCE BLOCK CODE #__________
= $
Fax (
)
Day Phone (
)
Please include email and fax for order confirmation.
Email
State
City
Address
Firm/Company Name
Name
Signature
Card No.
Discover
ZIP
Exp. Date
$15.00
METHOD OF PAYMENT:
Check payable to ASCE
Visa
MC
American Express
TOTAL DUE
(see quizzer for above information)
Grading Fee (ASC0006):
Course Number:_________________________________________________
Price:
$
A. Course Title:___________________________________________________
Grading of your ASCE quiz can be done online at asce.com
free of charge. There is a $10 grading fee if you wish to use this form to
have your course graded. Note: ASCE Block codes
cannot be used for the payment of the $15 grading fee;
please include a check or credit card for payment.
PLEASE PHOTOCOPY IF ADDITIONAL
COPIES ARE NEEDED
ASCE
COMPLETE AND MAIL TO:
A-1
T F
29 {
{
30 {
{
31 {
{
32 {
{
33 {
{
34 {
{
35 {
{
36 {
{
37 {
{
38 {
{
39 {
{
40 {
{
41 {
{
42 {
{
43 {
{
44 {
{
45 {
{
46 {
{
47 {
{
48 {
{
49 {
{
50 {
{
51 {
{
52 {
{
53 {
{
54 {
{
55 {
{
56 {
{
T F
1 {
{
2 {
{
3 {
{
4 {
{
5 {
{
6 {
{
7 {
{
8 {
{
9 {
{
10 {
{
11 {
{
12 {
{
13 {
{
14 {
{
15 {
{
16 {
{
17 {
{
18 {
{
19 {
{
20 {
{
21 {
{
22 {
{
23 {
{
24 {
{
25 {
{
26 {
{
27 {
{
28 {
{
D.
2
Q
T F
3
B.
1
0{
{
1{
{
2 {
2{
3 {
3{
4 {
4{
5 {
5{
6 {
6{
7 {
7{
8 {
8{
9 {
9{
0
STUDY
HOURS
T F
SOCIAL SECURITY NUMBER
T F
T F
225 {
{
226 {
{
227 {
{
228 {
{
229 {
{
230 {
{
231 {
{
232 {
{
233 {
{
234 {
{
235 {
{
236 {
{
237 {
{
238 {
{
239 {
{
240 {
{
241 {
{
242 {
{
243 {
{
244 {
{
245 {
{
246 {
{
247 {
{
248 {
{
249 {
{
250 {
{
251 {
{
252 {
{
T F
253{
{
254{
{
255{
{
256{
{
257{
{
258{
{
259{
{
260{
{
261{
{
262{
{
263{
{
264{
{
265{
{
266{
{
267{
{
268{
{
269{
{
270{
{
271{
{
272{
{
273{
{
274{
{
275{
{
276{
{
277{
{
278{
{
279{
{
280{
{
T F
0{
0{
0{
0{
0{
0{
0{
0{
{
1
1
1
1
1
1
1
1{
{
{
{
{
{
{
{
{
2{
2{
2{
2{
2{
2{
2{
2{
2{
3{
3{
3{
3{
3{
3{
3{
3{
3{
4{
4{
4{
4{
4{
4{
4{
4{
4{
5{
5{
5{
5{
5{
5{
5{
5{
5{
6{
6{
6{
6{
6{
6{
6{
6{
6{
7{
7{
7{
7{
7{
7{
7{
7{
7{
8
8
8
8
8
8
8
8
{
{
{
{
{
{
{ { 8
{
9{
9{
9{
9{
9{
9{
9{
9{
9{
1
0
C.
113 {
{ 141 {
{ 169 {
{ 197 {
{
170
142
114 {
{ {
{ {
{ 198 {
{
115 {
{ 143 {
{ 171 {
{ 199 {
{
116 {
{ 144 {
{ 172 {
{ 200 {
{
117 {
{ 145 {
{ 173 {
{ 201 {
{
118 {
{ 146 {
{ 174 {
{ 202 {
{
119 {
{ 147 {
{ 175 {
{ 203 {
{
120 {
{ 148 {
{ 176 {
{ 204 {
{
177
149
121 {
{ {
{ {
{ 205 {
{
122 {
{ 150 {
{ 178 {
{ 206 {
{
123 {
{ 151 {
{ 179 {
{ 207 {
{
124 {
{ 152 {
{ 180 {
{ 208 {
{
125 {
{ 153 {
{ 181 {
{ 209 {
{
126 {
{ 154 {
{ 182 {
{ 210 {
{
127 {
{ 155 {
{ 183 {
{ 211 {
{
128 {
{ 156 {
{ 184 {
{ 212 {
{
129 {
{ 157 {
{ 185 {
{ 213 {
{
130 {
{ 158 {
{ 186 {
{ 214 {
{
131 {
{ 159 {
{ 187 {
{ 215 {
{
132 {
{ 160 {
{ 188 {
{ 216 {
{
133 {
{ 161 {
{ 189 {
{ 217 {
{
134 {
{ 162 {
{ 190 {
{ 218 {
{
135 {
{ 163 {
{ 191 {
{ 219 {
{
136 {
{ 164 {
{ 192 {
{ 220 {
{
137 {
{ 165 {
{ 193 {
{ 221 {
{
138 {
{ 166 {
{ 194 {
{ 222 {
{
139 {
{ 167 {
{ 195 {
{ 223 {
{
140 {
{ 168 {
{ 196 {
{ 224 {
{
T F
ANSWER SECTION
FILL IN CIRCLE
COMPLETELY
57 {
{ 85 {
{
58 {
{ 86 {
{
59 {
{ 87 {
{
60 {
{ 88 {
{
61 {
{ 89 {
{
62 {
{ 90 {
{
63 {
{ 91 {
{
64 {
{ 92 {
{
65 {
{ 93 {
{
66 {
{ 94 {
{
67 {
{ 95 {
{
68 {
{ 96 {
{
69 {
{ 97 {
{
70 {
{ 98 {
{
71 {
{ 99 {
{
72 {
{ 100 {
{
73 {
{ 101 {
{
74 {
{ 102 {
{
75 {
{ 103 {
{
76 {
{ 104 {
{
77 {
{ 105 {
{
78 {
{ 106 {
{
79 {
{ 107 {
{
80 {
{ 108 {
{
81 {
{ 109 {
{
82 {
{ 110 {
{
83 {
{
{ 111 {
84 {
{
{ 112 {
T F
Incorrect marks:
Correct mark:
Use a blue or black pen or a No. 2 Pencil. Do NOT use a red pen.
Please fill in the course title, course number and price, as provided on the
quizzer. Figure sales tax (if applicable) and total due. Indicate method of
payment along with your name, address and phone numbers in the space
provided.
B. Write in your number of study hours. Darken the corresponding circles
below each box. Recommended study hours are indicated on quizzer.
C. Write in your social security number. Darken the corresponding circles
below each box.
D. Indicate your correct answer choice. Darken the circles under ‘T’ for true
and ‘F’ for false.
X Do not make any stray marks on the form. Darken the circles
completely. Return the entire answer sheet to the address provided.
X
A.
HOW TO COMPLETE CPE ANSWER SHEET
ASCE
ASCE
 ASCE PRE-PAID CREDIT BLOCKS ARE
 FAST, AFFORDABLE CPE.
ONLY ASCE MAKES IT THIS EASY.
Earn CPE credit in an instant for
as low as $5.75 per hour!
IDEAL FOR INDIVIDUALS AND FIRMS!
Save with ASCE pre-paid credits and earn CPE even faster!
With ASCE’s convenient quizzers, you can start earning CPE credits immediately. Simply choose your format
(catalog or online), select a quiz, complete a series of true/false questions and submit your answers. ASCE
quizzers are based on popular books, software and publications you already own or can access free on the
internet — and they even include references to help you locate relevant information.
ASCE pre-paid credit blocks provide the perfect way for individuals, firms and groups to maximize
their savings by reserving all their annual CPE credits now and then taking their courses at any
time during the year! Credits are good for one year and can be shared firm-wide and used
toward any of our ASCE quizzers*.
55 Lock in your CPE costs NOW for the entire year — there’s nothing more to pay
55 Share credits with as many colleagues and staff members as you want
55 Use pre-paid credits only when you pass the ASCE quizzers
a.
From Start to Finish in 4 Easy Steps!
1. Select
Enjoy Flexibility and Convenience
4. Submit
55 Use credits at your convenience — anytime for one year
Choose from any of the quizzers in this catalog
or visit asce.com
for additional quizzers available online.
To receive credits for your ASCE quizzer(s), submit your answers
and payment via one of the following methods:
55 Choose which ASCE quizzers to take whenever you’re ready to complete them — no need to decide now
2. Read
Complete all questions and required fields — including
your ASCE block credit number (available from your sales
representative) or credit card number — then click to submit
your answers and receive your CPE credits.
Handy references direct you to relevant
information you can read and review
before answering each question.
Visit asce.com for
links to online resources.
3. Answer
Fill out the answer sheet(s) on page
A-1 of this catalog to record your
responses to the true/false questions.
Or log on to asce.com for
online quizzers with instant grading.
55 Get immediate online grading — ideal when you need to earn last-minute CPE credit
Online:
ASCE pre-paid credit block discounts
for individuals and firms:
Credit Hours
Mail: Send your answer sheet(s) and payment to:
ASCE
Harris Bank
36786 Treasury Center
Chicago, IL 60694-6700
AS LOW
List Price
$ Per Credit Cost
40
$250
$6.25
80
$492
$6.15
120
$714
$5.95
160
$936
$5.85
200
$1,150
$5.75
*
PER CR
Please see your order confirmation email for pre-paid credit terms and conditions.
Please call your sales representative to purchase pre-paid credit blocks.
AS
$5.75
EDIT!
545 Westcott Road
Eagan, MN 55123-1396
ASCE
CPE: EASY. AFFORDABLE. SO START NOW.
PRESORTED
STANDARD
U.S. POSTAGE
PAID
WEST
One of the Largest
CPE Providers with
Thousands of
Satisfied Customers
© 2016 Thomson Reuters/Tax & Accounting.
All Rights Reserved.
Company, products and service names may be trademarks
of their respective owners.
AFFORDABLE CPE: ONLY ASCE MAKES IT THIS EASY!
ASCE 2016 – 2017
See inside back cover.
Complete CPE Coverage
for You and Your Firm!
ASCE
NEW!
for
2016
Now Part of
Thomson Reuters
Affordable.
Easy. Fast.
Don’t put your license in jeopardy.
Get your CPE from ASCE!
Share With Your Firm and Save!
CPE
One of the Largest CPE Providers With Thousands of Satisfied Customers
VIP and CPE
SO START NOW!
Earn CPE Starting at
$5.75 Per Credit Hour
Block Specials Inside!
See page ii or call
800.231.1860

 True/False Quizzers

 391 Credits Inside + Hundreds

 Instant Online Grading
• Earn CPE With Materials You Already Own
• Hundreds of Credits Available Online
•Credits as Low as $5.75 Per Hour
More Online
• 100% Satisfaction Guaranteed
 Use Your Own Materials or

Free Resources Online
The Credits You Need.
The Price You Want.
asce.com
CATASCP 16 / 41928151
| asce.com
 Share Credits and Save Even More

| asce.com

here - ASCE

Transcription

Similar documents

I`m helping to end MS by participating in the 2016 Jayman BUILT MS

The Board of Directors of Qatar Fuel (WOQOD) is pleased to invite

5 `S` Training Program at ABV-IIITM, Gwalior on 21.07.2016

Trans-tasman regulatory findings

Porky Expo Flyer

The NeuLion Report

Sept 30-Oct 2, 2016 Nov 4-6, 2016 @Camp Tadmor

4 star ALOE HOTEL, PAPHOS

the Guidelines for the registration on

AGM 27th April 2016 - Sønderborg International School