FAC Finance and Accounting Taxation & Regulatory Compliance 5

Question 1

Under ASC 606, revenue is recognized when (or as) a company satisfies a performance obligation by transferring a promised good or service to a customer. What is the correct five-step model sequence?

Accepted Answer

Identify contract → Identify obligations → Determine price → Allocate price → Recognize revenue

Answer

ASC 606 requires: (1) identify the contract, (2) identify performance obligations, (3) determine transaction price, (4) allocate price to obligations, and (5) recognize revenue as obligations are satisfied.

Question 2

The IRS requires employers to deposit payroll taxes electronically through the Electronic Federal Tax Payment System (EFTPS). For large employers with annual payroll tax liability exceeding $50,000, deposits must generally be made:

Accepted Answer

Semi-weekly

Answer

Employers classified as semi-weekly depositors (those with more than $50,000 in payroll tax liability in the lookback period) must deposit payroll taxes on Wednesday or Friday following paydays.

Question 3

Under IRC Section 409A, nonqualified deferred compensation plans must meet specific requirements to avoid immediate income inclusion and penalties. The excise tax imposed on amounts that fail to comply is:

Accepted Answer

20%

Answer

IRC Section 409A imposes a 20% excise tax (plus interest) on deferred compensation that fails to meet its requirements for timing of elections, distributions, and funding.

Question 4

Which of the following best describes the purpose of Internal Revenue Code Section 482?

Accepted Answer

Allowing IRS to reallocate income among related entities to prevent tax avoidance

Answer

IRC Section 482 grants the IRS authority to allocate income, deductions, and credits among related entities when necessary to clearly reflect income and prevent tax avoidance.

Question 5

The Uniform Capitalization (UNICAP) rules under IRC Section 263A require certain taxpayers to capitalize which costs into inventory?

Accepted Answer

Both direct costs and allocable indirect costs

Answer

Section 263A's UNICAP rules require producers and certain resellers to capitalize both direct costs and allocable indirect costs (including storage, handling, and overhead) into inventory.

(FAC) Finance and Accounting Certification Practice Test

(FAC) Finance and Accounting Certification Practice Test

FAC Finance and Accounting Taxation & Regulatory Compliance 5