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AICPA CPA Regulation Sample Questions:

1. Under the uniform capitalization rules applicable to property acquired for resale, which of the following
costs should be capitalized with respect to inventory if no exceptions are met?

A) Option D
B) Option C
C) Option A
D) Option B

2. Elm Corp. is an accrual-basis calendar-year C corporation with 100,000 shares of voting common stock
issued and outstanding as of December 28, 1996. On Friday, December 29, 1996, Hall surrendered 2,000
shares of Elm stock to Elm in exchange for $33,000 cash. Hall had no direct or indirect interest in Elm
after the stock surrender. Additional information follows:

What amount of income did Hall recognize from the stock surrender?

A) $17,000 capital gain.
B) $33,000 dividend.
C) $25,000 dividend.
D) $18,000 capital gain.

3. Clark bought Series EE U.S. Savings Bonds after 1989. Redemption proceeds will be used for payment of
college tuition for Clark's dependent child. One of the conditions that must be met for tax exemption of
accumulated interest on these bonds is that the:

A) Bonds must be bought by the owner of the bonds before the owner reaches the age of 24.
B) Bonds must be bought by a parent (or both parents) and put in the name of the dependent child.
C) Purchaser of the bonds must be the sole owner of the bonds (or joint owner with his or her spouse).
D) Bonds must be transferred to the college for redemption by the college rather than by the owner of the
bonds.

4. Starr, a self-employed individual, purchased a piece of equipment for use in Starr's business. The costs
associated with the acquisition of the equipment were:

What is the depreciable basis of the equipment?

A) $59,125
B) $55,000
C) $59,425
D) $58,400

5. Which one of the following will result in an accruable expense for an accrual-basis taxpayer?

A) A signed contract for repair work to be done and the work is to be completed at a later date.
B) A repair completed prior to year end but not invoiced.
C) An invoice dated prior to year end but the repair completed after year end.
D) A repair completed prior to year end and paid upon completion.

Solutions: