The Circle Trust reports some exempt interest income for the year. How does this investment income affect Circle’s deduction of its fiduciary fees? Charitable contributions?
What will be an ideal response?
A proportionate amount of the deduction for the fees and charitable contributions is disallowed in computing entity taxable income. The disallowed portion of the deduction is the amount paid or accrued multiplied by the following fraction.?
| exempt items of entity accounting income |
| total accounting income |
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Sharon made a $60,000 interest-free loan to her son, Todd, who used the money to start a new business. Todd’s only sources of income were $25,000 from the business and $490 of interest on his checking account. The relevant Federal interest rate was 5%. Based on this information:
A. Todd’s business net profit will be reduced by $3,000 (0.05 × $60,000) of interest expense. B. Sharon must recognize $3,000 (0.05 × $60,000) of imputed interest income on the below-market loan. C. Todd’s gross income must be increased by the $3,000 (0.05 × $60,000) imputed interest income on the below-market loan. D. Sharon does not recognize any imputed interest income and Todd does not recognize any imputed interest expense. E. None of these is correct.
In situations where the change in accounting principle has both direct and indirect effects on prior years' income, GAAP states that a company recognize
A) only the direct effect retrospectively. B) the direct effect and discuss the indirect effect in the notes to the financial statements. C) only the indirect effect. D) the direct effect prospectively.
Which of the following statements is consistent with principle-based ethics?
A. Although certain acts are wrong, they should be performed for the overall happiness they may produce. B. An act that produces the greatest beneficial consequences is the ethically right thing to do. C. Obligations, responsibilities, and commitments do not determine the correct approach to ethics. D. Individuals have rights that should not be sacrificed in order to generate a net increase in the collective good.
"Available appropriation" is calculated as the difference between appropriations and the sum of expenditures and encumbrances.
Answer the following statement true (T) or false (F)