Concept explainers
Concept Introduction:
A business expense has to go through several tests to get eligible for deduction from business income for tax purposes. These tests are an ordinary and necessary test, business purpose test, and reasonableness test.
To choose: The option that is not a test for deductibility of a business expense.

Answer to Problem 1MCQ
b.
Explanation of Solution
Explanation for Correct answer:
The expectation of profit test is not one of the tests for the deductibility of a business expense. Hence, option b is correct.
Explanations for incorrect answers:
a. The ordinary and necessary test is one of the three tests for the determination of the deductibility of a business expense. Hence this option is incorrect.
c. The reasonableness test is one of the three tests for the determination of the deductibility of a business expense. Hence this option is incorrect.
d. The business purpose test is one of the three tests for the determination of the deductibility of a business expense. Hence this option is incorrect.
Want to see more full solutions like this?
Chapter 3 Solutions
Income Tax Fundamentals 2020
- Correct solution......?????arrow_forwardBase on the scenerio below Mr. Snow was extremely upset with the budget deficit. He immediately called you, the treasurer, to complain about the budget variance for the meal cost. He told you that the added dessert caused the meal cost to be $4,810 ($25,110-$20,300) over budget. He added, “I could expect a couple hundred dollars one way or the other, but several thousand is totally unacceptable. At the next budget meeting of the budget committee, I want you to explain what happened.” I need help Summarizing the results of the sales volume and variable cost volume variances computations based on the comparison between the master budget and the flexible budge. Along with Summarizing the results of the flexible budget variances computations based on the comparison between the flexible budget and the actual results.Justifing the favorable or unfavorable budget variances. Since this is a not-for-profit organization, addressing why anyone should be concerned with meeting the budget. Making…arrow_forwardSales commissions are $6,000 when 1,500 units are sold and $12,000 when 3,000 units are sold. Using the high-low method, what is the variable portion of sales salaries and commissions? Answerarrow_forward
- General accounting questionarrow_forwardLarson Manufacturing Company observed that, during its busiest month of 2023, maintenance costs totaled $22,400, resulting from the production of 50,000 units. During its slowest month, $16,900 in maintenance costs were incurred, resulting from the production of 35,000 units. Use the high-low method to estimate the maintenance cost that the company will incur if it produces 42,000 units. (Calculation in 2 decimal)arrow_forwardSales commissions are $6,000 when 1,500 units are sold and $12,000 when 3,000 units are sold. Using the high-low method, what is the variable portion of sales salaries and commissions?arrow_forward
- Can you solve this general accounting question with the appropriate accounting analysis techniques?arrow_forwardSolve this Accounting Problemarrow_forwardAt the beginning of the year, Mitchell Corporation had total assets of $920,000 and total liabilities of $570,000. If total assets increased $250,000 during the year and total liabilities increased $90,000, what is the amount of stockholders' equity at the end of the year?arrow_forward
- Business/Professional Ethics Directors/Executives...AccountingISBN:9781337485913Author:BROOKSPublisher:Cengage