1. Which of the given conditions would cause break-even point to decrease?
a. Unit variable cost decreases
b. Total fixed costs increase
c. Unit variable cost increases
d. Unit selling price decreases
2.Which of the given would be included in cost of a product manufactured according to variable costing?
a. Property taxes on factory buildings
b. Direct materials
c. Interest expense
d. Sales commissions
3. Pink Corporation is accrual basis taxpayer which uses recurring item exception to economic performance test for all applicable years. For 2009, corporation's income subject to state income tax was $500,000 and state corporate tax rate was 6%. During 2009, corporation paid $18,000 on its estimated state income tax liability for that year. Remaining $12,000 of 2009 state income tax was paid in March 2010. In June 2009, corporation paid $4,000 on its year 2007 state income tax liability, as a result of the audit of 2007 return that was conducted in 2009. As a result of the above:
a. Pink must deduct $18,000 as state income taxes for 2009.
b. Pink must deduct $22,000 as state income taxes for 2009.
c. Pink must deduct $30,000 as state income taxes for 2009.
d. Pink must deduct $34,000 as state income taxes for 2009.
e. None of the above.
4. Taxpayer has consistently, but incorrectly, used the allowance for bad debts. At beginning of the year, balance in the allowance account is $90,000.
a. If IRS examines taxpayer's return and needs taxpayer to change accounting methods, taxpayer will be needed to identify the extra $90,000 of income (one-half in current year and one-half in following year) as adjustment due to change in accounting methods.
b. If taxpayer voluntarily changes methods, the $90,000 adjustment can be spread over current and three following years.
c. If taxpayer voluntarily changes methods, $90,000 reserve can be used to absorb bad debts until the account balance is zero.
d. If IRS examines taxpayer's return, no adjustment to reserve account will be needed if balance is consistent with prior bad debt experience.
e. None of the above.