In: Accounting
Charlie was hired by Ajax this year as a corporate executive and
a member of the board of directors. During the current year,
Charlie received the following payments or benefits paid on his
behalf.
Salary payments | $ | 118,000 |
Contributions to qualified pension plan | 11,600 | |
Qualified health insurance premiums | 11,950 | |
Year-end bonus | 21,000 | |
Annual director’s fee | 19,900 | |
Group-term life insurance premiums (face = $40,000) | 880 | |
Whole life insurance premiums (face = $100,000) | 1,970 | |
Disability insurance premiums (no special elections) | 4,090 | |
a. Charlie uses the cash method and calendar year
for tax purposes. Calculate Charlie’s gross income for the current
year.
Solution:-
a. Charlie uses the cash method and calendar year for tax purposes. Calculate Charlie’s gross income for the current year:-
Account details | Amount |
Salary payments | $118,000 |
Contributions to qualified pension plan | $11,600 |
Qualified health insurance premiums | $11,950 |
Year-end bonus | $21,000 |
Annual director’s fee | $19,900 |
Group-term life insurance premiums (face = $40,000) | $880 |
Whole life insurance premiums (face = $100,000) | $1,970 |
Disability insurance premiums (no special elections) | $4,090 |
Gross income |
= $118,000 + $11,600 + $21,000 + $19,900 + $880 + $1,970 + $4,090 = $177,440 |