Question
In: Accounting
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
ekkarill92 answered 2 years agoRelated Solutions
Manny, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late...
Manny, a calendar-year taxpayer, uses the cash method of
accounting for his sole proprietorship. In late December he
performed $24,000 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 37 percent this year and next
year, and that he can earn an after-tax rate of return of 7 percent
on his investments.
a. What is the after-tax income if Manny sends his client the
bill...
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...
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