In December 2019, Emily, a cash basis taxpayer, received a $2,500 cash scholarship for the spring...

In December 2019, Emily, a cash basis taxpayer, received a $2,500 cash scholarship for the spring semester of 2020. However, she did not use the funds to pay the tuition until January 2020. Emily can exclude the $2,500 from her gross income in 2019.

a. True

b. False

Solutions

Expert Solution

False , Emily should not exclude $ 2500 from her gross income in 2019 because she is a cash basis taxpayer so she follows cash basis accounting in which policy is that when cash is received at that time it is recorded in accounts , in same year Or in same accounting year. Emily should record transaction in 2019 received a $ 2500 cash scholarship for the spring semester of 2020 in 2019 .

On other hand there is accrual basis accounting in which we record transactions on accrual basis that is we earn that income but we do not receive that income in cash so that transaction is recorded in the accounts in same period. So Emily do not follow accrual basis accounting.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Freda is a cash basis taxpayer. In 2019, she negotiated her salary for 2021. Her employer...

Freda is a cash basis taxpayer. In 2019, she negotiated her salary for 2021. Her employer offered to pay her $21,000 per month in 2021 for a total of $252,000. Freda countered that she would accept $10,000 each month for the 12 months in 2021 and the remaining $132,000 in January 2022. The employer accepted Freda’s terms for 2021 and 2022. Did Freda actually or constructively receive $252,000 in 2021? What could explain Freda’s willingness to spread her salary over...

True or False. Taxpayer (“T”), a cash basis individual taxpayer, bought a bond for $8,760 on...

True or False. Taxpayer (“T”), a cash basis individual taxpayer, bought a bond for $8,760 on January 1, 2019, with a maturity value of $10,000 on January 1 2022 (meaning there are no scheduled payments other than the $10,000 received at maturity). Assume the yield to maturity is 4.5% on an annual basis. If the bond is a series EE government bond T will not be required to include any gross income in 2019, but if the bond is issued...

True or False. Taxpayer (“T”), a cash basis individual taxpayer, bought a bond for $8,760 on...

June is a cash basis taxpayer, and is a fashion and makeup consultant in a high...

June is a cash basis taxpayer, and is a fashion and makeup consultant in a high fashion company, Curlylocks, Inc. She earned a salary of $60,000. She also was provided a disability income protection policy for which Curlylocks paid a $1,500 premium for June's insurance. The company also provided health insurance for her which cost the company $15,000, and long term care insurance for her which Curlylocks paid a $1,000 premium. Her salary would have been $65,000, but she was...

June is a cash basis taxpayer and a fashion and makeup consultant in a high fashion...

June is a cash basis taxpayer and a fashion and makeup consultant in a high fashion company, Goldielocks, Inc. She earned a salary of $60,000. She also was provided a disability income protection policy for which Goldielocks Inc. paid a %1,500 premium for June's insurance. The company also provided health insurance for her which cost the company $15,000 and long term care insurance for her which cost the company $1,000 premium. Her salary would have been $65,000 but she was...

LO4 Under the cash basis of accounting, revenue is recorded when it is received in cash,...

LO4 Under the cash basis of accounting, revenue is recorded when it is received in cash, and expenses are recorded when they are paid in cash. Under the accrual basis of accounting, revenue is recorded when earned, even if cash is received at an earlier or a later date, and expenses are recorded when incurred, even if cash is to be paid at an earlier or a later date. Considering the following events, match which month the revenue or expenses...

In the current year Jose, a cash basis taxpayer, was offered $5 million for signing a...

In the current year Jose, a cash basis taxpayer, was offered $5 million for signing a professional baseball contract. He countered asking that he receive $1,100,000 a year for 5 years beginning in the current year. The team accepted the counteroffer. In accordance with the contract Jose received $1,100,000 in the current year. For tax purposes, how much income is he treated as constructively receiving in the current year?

Garrison Printing Company, a sole proprietorship owned by Jim Garrison (a calendar-year taxpayer, cash-basis taxpayer) has...

Garrison Printing Company, a sole proprietorship owned by Jim Garrison (a calendar-year taxpayer, cash-basis taxpayer) has 2019 before tax income of $600,000 generated from completing orders that involve printing on t-shirts and hats. Garrison also sold the following assets during 2019: Unprinted t-shirts and hats (i.e. inventory) with a cost basis of $85,000 were sold for $120,000. Stocks (held longer than 12 months) with a cost basis of $25,000 were sold for $10,000. A printing machine (held longer than 12...

Describe when a cash basis taxpayer must recongize gross income for tax purposes.

Charlie’s Green Lawn Care is a cash basis taxpayer. Charlie Adame, the sole proprietor, is considering...

Charlie’s Green Lawn Care is a cash basis taxpayer. Charlie Adame, the sole proprietor, is considering delaying some of his December 2017 customer billings for lawn care into the next year. In addition, he is thinking about paying some of the bills in late December 2017, which he would ordinarily pay in January 2018. This way, Charlie claims, he will have “less income and more expenses, thereby paying less tax!” Is Charlie’s way of thinking acceptable?

Subjects