. During the current year, Lavender Corporation, a C corporation in the business of manufacturing tangible research equipment, made charitable contributions to qualified organizations as follows:

Lavender Corporation’s taxable income (before any charitable contribution deduction) is $1.5 million.

An advantage of Roth IRAs

a)They reduce taxable income in the year of contribution.

b)They can be passed from generation to generation without any estate or income tax implication.

c)One’s taxable income in retirement is reduced by the withdrawals from the account.

d)There is no tax on Roth withdrawals in retirement when tax rates are often higher.

Which of the following can you deduct from taxable income if you do not itemize:

a)Medical Expenses

b)Charitable contributions.

c)Mortgage interest.

d)Property taxes

e)IRA contributions

The Blue division of the Leaf Company reported the following data for the current year:

Senior Management is unhappy with the investment centre’s return on investment. It asks the manager of the Blue division to submit plans to improve the ROI in the next year. The manager believes it is reasonable to consider each of the following independent courses of action

1. Increase sales by $270,000 with no change in the contribution margin percentage

2. Reduce variable costs by $120,000 3. Reduce average operating assets by 4.5%

3. Reduce average operating assets by 4.5%

Required :

a. Calculate the return on investment for the current year.

b. Using the ROI formula, calculate the ROI under each of the proposed courses of action (Round to one decimal)

a) Adam wants to purchase a car and finance his purchase with a 3 year loan at 5% interest. If he wants his payments to be $475 per month, how much can he finance with this loan?

b) Bernard purchased a car and financed his purchase with a loan at 5% interest. His payments are $475 per month. If he has 3 years left on his loan, what is his remaining balance?

c) Carlton purchased a car and took out a loan for $33,607.12, at 5% interest for 6 years. If he has 3 years left on his loan, what is his remaining balance?

D) Emile bought a car for $27,000 three years ago. The loan had a 5 year term at 6% interest rate, and Emile has been making monthly payments for three years. How much does he still owe on the car?

(Hint: first you will need to figure out the monthly payment on the 5 year loan.)

For the second quarter of the following year Cloaks Company has projected sales and production in units as follows:

Cash-related production costs are budgeted at $8 per unit produced. Of these production costs, 40% are paid in the month in which they are incurred and the balance in the next month. $170,000 per month will account for Selling and administrative expenses. On January 31 the accounts payable balance totals $210,000, which will be paid in February.

All units are sold on account for $12 each. Cash collections from sales are budgeted at 60% in the month of sale, 20% in the month following the month of sale, and the remaining 20% in the second month following the month of sale. On January 1 accounts receivable totaled $630,000 ($100,000 from November’s sales and the remaining from December).

Required:

1. Prepare a schedule for each month showing budgeted cash disbursements for Cloaks Company.   

2. Prepare a schedule for each month showing budgeted cash receipts for Cloaks Company.

The Allwardt Trust is a simple trust that correctly uses the calendar year for tax purposes. Its income beneficiaries (Lucy and Ethel) are entitled to the trust's annual accounting income in shares of one-half each.

For the current tax year, Allwardt reports the following.

a. How much income is each beneficiary entitled to receive?

b. What is the trust's DNI?

c. What is the trust's taxable income?

d. How much gross income is reported by each of the beneficiaries?

Note: This problem is for the 2019 tax year.

Alice J. and Bruce M. Byrd are married taxpayers who file a joint return. Their Social Security numbers are 123-45-6784 and 111-11-1113, respectively. Alice's birthday is September 21, 1972, and Bruce's is June 27, 1971. They live at 473 Revere Avenue, Lowell, MA 01850. Alice is the office manager for Lowell Dental Clinic, 433 Broad Street, Lowell, MA 01850 (Employer Identification Number 98-7654321). Bruce is the manager of a Super Burgers fast-food outlet owned and operated by Plymouth Corporation, 1247 Central Avenue, Hauppauge, NY 11788 (Employer Identification Number 11-1111111).

The following information is shown on their Wage and Tax Statements (Form W–2) for 2019.

The Byrds provide over half of the support of their two children, Cynthia (born January 25, 1995, Social Security number 123-45-6788) and John (born February 7, 1999, Social Security number 123-45-6780). Both children are full-time students and live with the Byrds except when they are away at college. Cynthia earned $6,200 from a summer internship in 2019, and John earned $3,800 from a part-time job.

During 2019, the Byrds provided 60% of the total support of Bruce's widower father, Sam Byrd (born March 6, 1943, Social Security number 123-45-6787). Sam lived alone and covered the rest of his support with his Social Security benefits. Sam died in November, and Bruce, the beneficiary of a policy on Sam's life, received life insurance proceeds of $1,600,000 on December 28.

The Byrds had the following expenses relating to their personal residence during 2019:

The Byrds had the following medical expenses for 2019:

The medical expenses for Sam represent most of the 60% that Bruce contributed toward his father's support.

Other relevant information follows:

• When they filed their 2018 state return in 2019, the Byrds paid additional state income tax of $900.
• During 2019, Alice and Bruce attended a dinner dance sponsored by the Lowell Police Disability Association (a qualified charitable organization). The Byrds paid $300 for the tickets. The cost of comparable entertainment would normally be $50.
• The Byrds contributed $5,000 to Lowell Presbyterian Church and gave used clothing (cost of $1,200 and fair market value of $350) to the Salvation Army. All donations are supported by receipts, and the clothing is in very good condition.
• Via a crowdfunding site (gofundme.com), Alice and Bruce made a gift to a needy family who lost their home in a fire ($400). In addition, they made several cash gifts to homeless individuals downtown (estimated to be $65).
• In 2019, the Byrds received interest income of $2,750, which was reported on a Form 1099–INT from Second National Bank, 125 Oak Street, Lowell, MA 01850 (Employer Identification Number 98-7654322).
• The home mortgage interest was reported on Form 1098 by Lowell Commercial Bank, P.O. Box 1000, Lowell, MA 01850 (Employer Identification Number 98-7654323). The mortgage (outstanding balance of $425,000 as of January 1, 2019) was taken out by the Byrds on May 1, 2015.
• Alice's employer requires that all employees wear uniforms to work. During 2019, Alice spent $850 on new uniforms and $566 on laundry charges.
• Bruce paid $400 for an annual subscription to the Journal of Franchise Management and $741 for annual membership dues to his professional association.
• Neither Alice's nor Bruce's employer reimburses for employee expenses.
• The Byrds do not keep the receipts for the sales taxes they paid and had no major purchases subject to sales tax.
• This year the Byrds gave each of their children $2,000, which was then deposited into their Roth IRAs.
• Alice and Bruce paid no estimated Federal income tax, and they did not engage in any virtual currency transactions during the year. Neither Alice nor Bruce wants to designate $3 to the Presidential Election Campaign Fund.

Required:

Compute net tax payable or refund due for Alice and Bruce Byrd for 2019. If they have overpaid, they want the amount to be refunded to them.

• Make realistic assumptions about any missing data.
• If an amount box does not require an entry or the answer is zero, enter "0".
• Enter all amounts as positive numbers.
• It may be necessary to complete the tax schedules before completing Form 1040.
• When computing the tax liability, do not round your immediate calculations. If required, round your final answers to the nearest dollar.

Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company’s present selling price is $91 per unit, and variable expenses are $61 per unit. Fixed expenses are $834,600 per year. The present annual sales volume (at the $91 selling price) is 25,800 units.

Required:

1. What is the present yearly net operating income or loss?

2. What is the present break-even point in unit sales and in dollar sales?

3. Assuming that the marketing studies are correct, what is the maximum annual profit that the company can earn? At how many units and at what selling price per unit would the company generate this profit?

4. What would be the break-even point in unit sales and in dollar sales using the selling price you determined in (3) above (e.g., the selling price at the level of maximum profits)?

Consider a 1-year forward contract on a stock with a price of $51. The current price of the stock is $50. A cash dividend payment of $2 per share is anticipated in 9 months. The interest rate is 3% per annum with continuously compounding. Assume that there are no transaction costs. (a) Determine the fair price and the initial value of the forward contract today. (b) Is there any arbitrage opportunity? Verify your trading positions taken at each point in time. (c) After 10 months, the stock price falls 2% and the interest rate remains unchanged. Calculate the value of the forward contract. What is the mark-to-market?