Question 1

Sam rents his second home. During the current year, he reported a $40,000 net loss from the rental. Assume Sam actively participates in the rental activity and no phase-out limitations apply. What is the greatest amount of the rental loss that Sam can deduct against ordinary income in the current year?

Options :

A : $25,000

B : $0

C : $40,000

D : $5,000

Answer: A

Question 2

The following bank reconciliation statement has been prepared by a trainee accountant: $ Overdraft per bank statement 3,860 Less: Unpresented cheques 9,160 ––––––– 5,300 Add: Outstanding lodgements 16,690 ––––––– Cash at bank 21,990 ––––––– What should be the correct balance per the cash book?

Options :

A : $21,990 balance at bank as stated

B : $3,670 balance at bank

C : $11,390 balance at bank

D : $3,670 overdrawn

Answer: B

Question 3

Identify the correct statement regarding analytical procedures used in a review conducted at the conclusion of an audit.

Options :

A : The ultimate purpose of analytical procedures used in a review conducted at the conclusion of the audit is to uncover fraud schemes that may have been missed previously during the audit.

B : Typically, a junior member of the engagement team will perform the analytical procedures applied at the conclusion of the audit because less precision is required.

C : If review analytical procedures suggest the presence of misstated account balances, the auditor may have to perform additional substantive tests of details to satisfactorily complete the audit.

D : Analytical procedures used in the review near the conclusion of the audit are not required.

Answer: C

Question 4

Which of the following requires filing a gift tax return if the transfer exceeds the available annual gift tax exclusion?

Options :

A : Medical expenses paid directly to a physician on behalf of an individual unrelated to the donor.

B : Tuition paid directly to an accredited university on behalf of an individual unrelated to the donor.

C : Payments for college books, supplies, and dormitory fees on behalf of an individual unrelated to the donor.

D : Campaign expenses paid to a political organization.

Answer: C

Question 5

Sales on credit is recorded in which of the following journal ?

Options :

A : Purchase journal

B : Sales journal

C : Purchase return journal

D : Sales return journal

Answer: B