1. Manny, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In...

1. Manny, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December he performed $21,000 of legal services for a client. Manny typically requires his clients to pay his bills immediately upon receipt. Assume Manny’s marginal tax rate is 32 percent this year and next year, and that he can earn an after-tax rate of return of 6 percent on his investments. What is the net benefit of collecting the bill in December?

2.Jonah has the choice of paying Rita $10,000 today or $40,000 in ten years. Assume Jonah can earn a 11 percent after-tax rate of return. What is the present value of the $40,000 payment due in 10 years?

Solutions

Expert Solution

Let me know in case you face any issue:

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late...

Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $21,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal tax rate is 32 percent this year and will be 37 percent next year, and that he can earn an after-tax rate of return of 4 percent on his investments. a. What is the after-tax income if Hank sends...

Sal, a calendar-year taxpayer, uses the cash-basis method of accounting for his sole proprietorship. In late...

Sal, a calendar-year taxpayer, uses the cash-basis method of accounting for his sole proprietorship. In late December he performed $50,000 of consulting services for a client. Sal typically requires his clients to pay his bills immediately upon receipt. Assume that Sal's marginal tax rate is 32 percent this year and 37 percent next year and that he can earn an after-tax rate of return of 7 percent on his investments. Should Sal send his client the bill in December or...

Reese, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late...

Reese, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December, she received a $15,000 bill from her accountant for consulting services related to her small business. Reese can pay the $15,000 bill anytime before January 30 of next year without penalty. Assume Reese’s marginal tax rate is 32 percent this year and will be 37 percent next year, and that she can earn an after-tax rate of return of 9 percent on her...

Isabel, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late...

Isabel, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December she received a $75,000 bill from her accountant for consulting services related to her small business. Isabel can pay the $75,000 bill anytime before January 30 of next year without penalty. Assume her marginal tax rate is 37 percent this year and next year, and that she can earn an after-tax rate of return of 10 percent on her investments. a. What is...

Reese, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late...

Reese, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December, she received a $35,000 bill from her accountant for consulting services related to her small business. Reese can pay the $35,000 bill anytime before January 30 of next year without penalty. Assume Reese’s marginal tax rate is 30 percent this year and will be 40 percent next year, and that she can earn an after-tax rate of return of 10 percent on her...

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...

José, a cash method taxpayer, is a partner in J&T Accounting Services, a calendar year partnership....

José, a cash method taxpayer, is a partner in J&T Accounting Services, a calendar year partnership. Under the partnership agreement, José is to receive 20% of the partnership’s profits or losses. Each partner is allowed to withdraw $10,000 each month for his or her living expenses. José withdrew $120,000 during the year as his monthly draw in 2019. However, in December, the partnership was short on cash and José was required to invest an additional $10,000 in the partnership. In...

Step's Music Lessons Inc. is a calendar-year taxpayer using the accrual method of accounting.

Step's Music Lessons Inc. is a calendar-year taxpayer using the accrual method of accounting. On September 1 of this year, the corporation received $1,800 for a one-year contract beginning on that date to provide 8 lessons. The company provided 5 lessons this year under the contract. How much should the corporation include in income this year with respect to this contract?A) $900 B) $1,125 C) $1,275 D) $1,800

Trevor is a single individual who is a cash-method, calendar-year taxpayer. For each of the next...

Trevor is a single individual who is a cash-method, calendar-year taxpayer. For each of the next two years (year 1 and year 2), Trevor expects to report AGI of $80,000, contribute $8,000 to charity, and pay $2,800 in state income taxes. A. Assume that Trevor combines his anticipated charitable contributions for the next two years and makes the combined contribution in December of year 1. Estimate Trevor’s taxable income for each of the next two years using the 2018 amounts...

Trevor is a single individual who is a cash-method, calendar-year taxpayer. For each of the next...

Trevor is a single individual who is a cash-method, calendar-year taxpayer. For each of the next two years (year 1 and year 2), Trevor expects to report AGI of $104,000, contribute $8,450 to charity, and pay $3,400 in state income taxes. Required: Estimate Trevor’s taxable income for year 1 and year 2 using the 2019 amounts for the standard deduction for both years. Now assume that Trevor combines his anticipated charitable contributions for the next two years and makes the...

Subjects