Many financial statement frauds have been perpetrated because:
a. management needed to report high income to support stock prices.
b. management wanted to decrease the total tax payable by the company.
c. management wanted to show artificial losses to employees.
d. management wanted to pay lower dividends to the shareholders.
a
FEEDBACK: a. Correct.
b. Incorrect.
c. Incorrect.
d. Incorrect.
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Which of the following are the premium payments for a Universal life policy NOT used for?
A) Death benefits B) Cash value C) Loading costs D) Separate account investments
Nan, a cash basis taxpayer, borrowed money from a bank and signed a 10-year interest-bearing note on business property on January 1 of the current year. The cash flow from Nan's business enabled Nan to prepay the first three years of interest attributable to the note on December 31 of the current year. How should Nan treat the prepayment of interest for tax purposes?
a) Capitalize the interest as part of the basis of the business property. b) Deduct the current year's interest and amortize the balance over the next two years. c) Capitalize the interest and amortize the balance over the 10-year loan period. d) Deduct the entire amount as a current expense.