Daniel B Butler and Freida C. Butler, husband and wife, file a joint return. The butlers live at 625 Oak Street in Corbin, KY 40701. Dan’s Social Security number is 111‐11‐1112, and Freida’s is 123‐45‐6789. Dan was born on January 15, 1965, and Freida was born on August 20, 1966. During 2016, Dan and Freida furnished over half of the total support of each of the following individuals, all of whom still live at home.

a) Gina, their daughter, age 22, a full‐time student, has no income of her own. Gina’s Social Security number is 123‐45‐6788.

b) Sam, their son, age 20, who had gross income of $6,300 in 2016. He graduated from high school in May 2016, Started College in August 2016, then dropped out of college in September 2016. Sam’s Social Security number is 123‐45‐6787.

c) Ben, their oldest son, age 26, is a full‐time graduate student with a gross income of $5,200. Ben’s Social Security number is 123‐45‐6786.

Dan was employed as a manager by WJJJ, Inc. (employer identification number 11‐ 1111111, 604 Franklin Street, Corbin, KY 40702), and Freida was employed as a salesperson for Corbin Realty, Inc. (employer identification number 98‐7654321, 899 Central Street, Corbin, KY 40701). Selected information from the W‐2 Forms provided by the employers is presented below. Dan and Freida use the cash method.

Line Description Dan Freida 1. Wages, tips, other compensation Dan$74,000 Freida $86,000

2. Federal income tax withheld Dan11,000 Freida 12,400 17

3. State income tax withheld Dan 2,960 Freida 3,440

Freida sold a house on December 30, 2016, and will be paid a commission of $3,100 (not included in the $86,000 reported on the W‐2) on the January 10, 2017 closing date.

Before marrying Freida, Dan was married and divorced to Sarah. Under the divorce agreement, Dan is to pay Sarah $500 per month. Dan paid Sarah $5,500 in 2016, his December alimony payment was not made until January of 2017. Sarah’s Social Security number is 123‐45‐6785 The Butlers also had (1) $1,600 in interest income from their savings account, (2) they sold ABC stock on 8/15/2016 for $10,000 (originally purchased for $4,000 on 1/15/2013), and (3) they sold XYZ stock on 10/15/2016 for $3,000 (originally purchased for $4,000 on 12/15/2015). Prepare the 2016 Federal income tax return for the Butlers’. You may work in groups no larger than 3 (i.e. 1, 2, or 3). Submit one tax return per group. Please submit (1) a cover page with a list of students who participated in the group project, (2) Form 1040, (3) calculation of Capital gain (including LT or ST), and (4) calculation of tax.

Doug​ Klock, 56 just retired after 31 years of teaching. He is a husband and father of three​ children, two of whom are still dependent. He received a $140,000​lump-sum retirement bonus and will receive 2,700 per month from his retirement annuity. He has saved $151,000 in a​ 403(b) retirement plan and another​$93,000 in other accounts. His​ 403(b) plan is invested in mutual​ funds, but most of his other investments are in bank accounts earning 2 or 3 percent annually. Doug has asked your advice in deciding where to invest his​ lump-sum bonus and other accounts now that he has retired. He also wants to know how much he can withdraw per​ month, considering he has two children in college and a nonworking spouse. His current monthly expenses total $6,000. He does not intend to begin receiving Social Security until age 67​,and his monthly benefit will amount to ​$1,500.He has grown accustomed to some risk but wants most of his money in​ FDIC-insured accounts.

a. Assuming Doug has another account set aside for​ emergencies, how much can he withdraw on a monthly basis to supplement his retirement annuity if his investments return is 4 percent annually and he expects to live 25 more​ years?

Suppose a public referendum is being held on whether or not to levy a tax on cigarettes. Currently, the supply of cigarettes is given by Qs = -100 + 20P. You estimate the demand for cigarettes to be Qd = 200 - 5P.

You are asked to evaluate the likely effects of a tax on cigarettes equal to $1 per pack of cigarettes. Specifically, you are to file a report which predicts by how much this will reduce the amount of cigarettes sold. You are also asked to estimate the proportion of the tax that will be paid by the cigarette companies (sellers), and the proportion of the tax that will be paid by the smokers (consumers) of cigarettes.

To do this, you will first need to calculate the current price and quantity of cigarettes sold.

Next you know from your economics class that you will need to know the price elasticity of demand and the price elasticity of supply of cigarettes. (Note: for parts b-e, please leave your answers in the form of a fraction.)

c) (6 points) What is the price elasticity of supply of cigarettes at the equilibrium price?

Using your answers to b) and c), you are now able to determine what proportion of the tax will be paid by buyers, and what proportion of the tax will be paid by sellers.

d) (6 points) What proportion of the tax will be paid by sellers?

e) (6 points) What price will buyers pay after the tax is imposed?

f) (6 points) What quantity of cigarettes will be sold after the tax??

Finally, a new proposal suggests that the tax should be levied on the cigarette companies instead of the smokers.

g) (6 points) From what you have learned in this class, how should you respond to this proposal?

"Jon consumes chicken (C) and rice (R) for his meals. The price of a unit of chicken is $6, and the price of a unit of rice is $2.

Jon's utility function is: U = (3C)*(2R)

Jon has $132 to spend on chicken and rice."

a) For U = 100, which of the following (C,R) points are on the indifference curve?

"Jon consumes chicken (C) and rice (R) for his meals. The price of a unit of chicken is $6, and the price of a unit of rice is $2.

Jon's utility function is: U = (3C)*(2R)

Jon has $132 to spend on chicken and rice."

a) For U = 100, which of the following (C,R) points are on the indifference curve?

"Jon consumes chicken (C) and rice (R) for his meals. The price of a unit of chicken is $6, and the price of a unit of rice is $2.

Jon's utility function is: U = (3C)*(2R)

Jon has $132 to spend on chicken and rice."

a) For U = 100, which of the following (C,R) points are on the indifference curve?

1. (30,20)

2.(10,35)

3.(4,5)

4.(0,5)

b) Is the indifference curve linear or non-linear?

c) Determine Jon's optimal bundle of chicken and rice to consume, given his budget and utility function.

d) Now rice goes on sale for $1 per unit of rice. Now determine Jon's optimal bundle of chicken and rice to consume.

e)  If there is a supply disruption and there is no chicken to purchase, what happens to Jon's utility? (Budget is still $132.)

1. Calculating inflation using a simple price index

Consider a fictional price index, the College Student Price Index (CSPI), based on a typical college student’s annual purchases. Suppose the following table shows information on the market basket for the CSPI and the prices of each of the goods in 2017, 2018, and 2019.

The cost of each item in the basket and the total cost of the basket are shown for 2017.

Perform these same calculations for 2018 and 2019, and enter the results in the following table.

Suppose the base year for this price index is 2017.

In the last row of the table, calculate and enter the value of the CSPI for the remaining years.

Between 2017 and 2018, the CSPI increased by

. Between 2018 and 2019, the CSPI increased by

.

Which of the following, if true, would illustrate why price indexes such as the CSPI might overstate inflation in the cost of going to college? Check all that apply.

A new type of personal transporter, which made it easier to get around places like university campuses, became available for purchase.

The quality of textbooks increased dramatically from 2017 to 2019, with textbook companies bundling new online study aids with their books, but this quality change is hard to measure.

As the price of energy drinks increased relative to the price of coffee between 2017 and 2019, students decreased their consumption of energy drinks and increased their consumption of coffee.

Professors required each student to buy 15 notebooks, regardless of the price.

Dée Trader opens a brokerage account and purchases 100 shares of Internet Dreams at $56 per share. She borrows $3,500 from her broker to help pay for the purchase. The interest rate on the loan is 9%.

a. What is the margin in Dée’s account when she first purchases the stock?

Margin            $

b-1. If the share price falls to $46 per share by the end of the year, what is the remaining margin in her account? (Round your answer to 2 decimal places.)

Remaining margin             %

b-2. If the maintenance margin requirement is 30%, will she receive a margin call?

No
Yes

c. What is the rate of return on her investment? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)

Rate of return             %

On 1 January 2008, a company bought plant at a price of $500 000. The

plant was to be depreciated using the straight line method over its

useful life of 5 years (after which it was estimated that it would have no

residual value).

For tax purposes, wear and tear is allowed on the following basis:

50% in the first year

30% in the second year

20% in the third year

On 31 December 2011 the plant was sold for $100 000. The profit before

tax for 2010 was $120 000 and for 2011 $150 000. The tax rate was

30% from 2008 to 2011.

Required

a) Calculate temporary differences and deferred tax asset/ liability for the

years 2008 to 2011, clearly indicating the debits/credits to the deferred

tax account.

b) Calculate the taxable income and current income for 2010 and 2011