Chapter 9 Tax - Thomas

Assume Sarah is a cash-method, calendar-year taxpayer, and she is considering making the following cash payments related to her business. Calculate the after-tax cost of each payment assuming she has a 37 percent marginal tax rate. (Do not round intermediate calculation.) rev: 12_13_2018_QC_CS-151658, 02_18_2019_QC_CS-159403 d. $1,200 contribution to the mayor's re-election campaign.

After-tax cost: $1,200

Assume Sarah is a cash-method, calendar-year taxpayer, and she is considering making the following cash payments related to her business. Calculate the after-tax cost of each payment assuming she has a 37 percent marginal tax rate. (Do not round intermediate calculation.) rev: 12_13_2018_QC_CS-151658, 02_18_2019_QC_CS-159403 a. $2,700 payment for next year's property taxes on her place of business.

After-tax cost: $1,701

Assume Sarah is a cash-method, calendar-year taxpayer, and she is considering making the following cash payments related to her business. Calculate the after-tax cost of each payment assuming she has a 37 percent marginal tax rate. (Do not round intermediate calculation.) rev: 12_13_2018_QC_CS-151658, 02_18_2019_QC_CS-159403 b. $2,200 to reimburse the cost of meals incurred by employees while traveling for the business.

After-tax cost: $1,793

Assume Sarah is a cash-method, calendar-year taxpayer, and she is considering making the following cash payments related to her business. Calculate the after-tax cost of each payment assuming she has a 37 percent marginal tax rate. (Do not round intermediate calculation.) rev: 12_13_2018_QC_CS-151658, 02_18_2019_QC_CS-159403 c. $2,600 for football tickets to entertain out-of-town clients during contract negotiations.

After-tax cost: $2,600

Rebecca is a calendar-year taxpayer who operates a business. She made the following business-related expenditures in December of year 0. Indicate the amount of these payments that she may deduct in year 0 under both the cash method of accounting and the accrual method of accounting. (Leave no answers blank. Enter zero if applicable.) b. $3,700 for new office furniture. The furniture was delivered on March, 15, year 1.

Cash Method: $0 Accrual Method: $0

Rebecca is a calendar-year taxpayer who operates a business. She made the following business-related expenditures in December of year 0. Indicate the amount of these payments that she may deduct in year 0 under both the cash method of accounting and the accrual method of accounting. (Leave no answers blank. Enter zero if applicable.) d. $2,900 for interest on a short-term bank loan relating to the period from November 1, year 0, through February 28, year 1.

Cash Method: $1,450 Accrual Method: $1,450

In October of year 0, Janine received a $11,550 payment from a client for 33 months of security services she will provide starting on October 1 of year 0. This amounts to $350 per month. Janine is a calendar-year taxpayer. a. When must Janine recognize the income from the $11,550 advance payment for services if she uses the cash method of accounting? a. Year 1 and year 2 b. Year 2 c. Year 0 d. Year 1 e. Year 0 and year 1

C

Rebecca is a calendar-year taxpayer who operates a business. She made the following business-related expenditures in December of year 0. Indicate the amount of these payments that she may deduct in year 0 under both the cash method of accounting and the accrual method of accounting. (Leave no answers blank. Enter zero if applicable.) a. $4,500 for an accountant to evaluate the accounting system of Rebecca's business. The accountant spent three weeks in January of year 1 working on the evaluation.

Cash Method: $4,500 Accrual Method: $4,500

Rebecca is a calendar-year taxpayer who operates a business. She made the following business-related expenditures in December of year 0. Indicate the amount of these payments that she may deduct in year 0 under both the cash method of accounting and the accrual method of accounting. (Leave no answers blank. Enter zero if applicable.) c. $4,600 for property taxes payable on her factory.

Cash Method: $4,600 Accrual Method: $4,600

Kimberly is a self-employed taxpayer. She recently spent $900 for airfare to travel to Italy. What amount of the airfare is deductible in each of the following alternative scenarios? (Leave no answers blank. Enter zero if applicable.) c. On the trip, she spent six days on business activities and four day(s) on personal activities.

Deductable amount: $540

Kimberly is a self-employed taxpayer. She recently spent $900 for airfare to travel to Italy. What amount of the airfare is deductible in each of the following alternative scenarios? (Leave no answers blank. Enter zero if applicable.) d. Her trip was entirely for business purposes.

Deductable amount: $900

Erin is considering switching her business from the cash method to the accrual method at the beginning of next year (year 1). Determine the amount and timing of her §481 adjustment assuming the IRS grants Erin's request in the following alternative scenarios. a. At the end of year 0/beginning of year 1, Erin's business has $20,700 of accounts receivable and $24,000 of accounts payable that have not been recorded for tax purposes.

Decrease in Income by $3,300 Number of year(s) : 1

Kimberly is a self-employed taxpayer. She recently spent $900 for airfare to travel to Italy. What amount of the airfare is deductible in each of the following alternative scenarios? (Leave no answers blank. Enter zero if applicable.) a. Her trip was entirely for personal purposes.

Deductable amount: $0

Kimberly is a self-employed taxpayer. She recently spent $900 for airfare to travel to Italy. What amount of the airfare is deductible in each of the following alternative scenarios? (Leave no answers blank. Enter zero if applicable.) b. On the trip, she spent eight days on personal activities and two day(s) on business activities.

Deductable amount: $0

In January of year 0, Justin paid $5,600 for an insurance policy that covers his business property for accidents and casualties. Justin is a calendar-year taxpayer who uses the cash method of accounting. What amount of the insurance premium may Justin deduct in year 0 in each of the following alternative scenarios? (Leave no answers blank. Enter zero if applicable.) b. The policy begins on February 1 of year 1 and extends through January 31 of year 2.

Deductible amount: $0

In January of year 0, Justin paid $5,600 for an insurance policy that covers his business property for accidents and casualties. Justin is a calendar-year taxpayer who uses the cash method of accounting. What amount of the insurance premium may Justin deduct in year 0 in each of the following alternative scenarios? (Leave no answers blank. Enter zero if applicable.) c. Justin pays $6,800 for a 24-month policy that covers the business from April 1, year 0, through March 31, year 2. (Do not round intermediate calculations.)

Deductible amount: $2,550

On November 1 of year 0, Jaxon borrowed $31,000 from Bucksnort Savings and Loan for use in his business. In December, Jaxon paid interest of $2,790 relating to the 12-month period from November of year 0 through October of year 1. (Do not round intermediate calculations.) a. How much interest, if any, can Jaxon deduct in year 0 if his business uses the cash method of accounting for tax purposes?

Deductible amount: $465

On November 1 of year 0, Jaxon borrowed $31,000 from Bucksnort Savings and Loan for use in his business. In December, Jaxon paid interest of $2,790 relating to the 12-month period from November of year 0 through October of year 1. (Do not round intermediate calculations.) b. How much interest, if any, can Jaxon deduct in year 0 if his business uses the accrual method of accounting for tax purposes?

Deductible amount: $465

In January of year 0, Justin paid $5,600 for an insurance policy that covers his business property for accidents and casualties. Justin is a calendar-year taxpayer who uses the cash method of accounting. What amount of the insurance premium may Justin deduct in year 0 in each of the following alternative scenarios? (Leave no answers blank. Enter zero if applicable.) a. The policy covers the business property from April 1 of year 0 through March 31 of year 1.

Deductible amount: $5,600

In January of year 0, Justin paid $5,600 for an insurance policy that covers his business property for accidents and casualties. Justin is a calendar-year taxpayer who uses the cash method of accounting. What amount of the insurance premium may Justin deduct in year 0 in each of the following alternative scenarios? (Leave no answers blank. Enter zero if applicable.) d. Instead of paying an insurance premium, Justin pays $5,600 to rent his business property from April 1 of year 0 through March 31 of year 1.

Deductible amount: $5,600

In October of year 0, Janine received a $11,550 payment from a client for 33 months of security services she will provide starting on October 1 of year 0. This amounts to $350 per month. Janine is a calendar-year taxpayer. d. Suppose that instead of services, Janine received the payment for inventory to be delivered next year. When would Janine recognize the income from the advance payment for sale of goods if she uses the accrual method of accounting and she uses the full-inclusion method for advance payments? a. Year 2 b. Year 0 and year 1 c. Year 1 and year 2 d. Year 1 e. Year 0

E

In October of year 0, Janine received a $11,550 payment from a client for 33 months of security services she will provide starting on October 1 of year 0. This amounts to $350 per month. Janine is a calendar-year taxpayer. b. When must Janine recognize the income from the $11,550 advance payment for services if she uses the accrual method of accounting? a. Year 1 b. Year 1 and Year 2 c. Year 0 d. Year 2 e. Year 0 and Year 1

E

In October of year 0, Janine received a $11,550 payment from a client for 33 months of security services she will provide starting on October 1 of year 0. This amounts to $350 per month. Janine is a calendar-year taxpayer. c. Suppose that instead of services, Janine received the payment for a security system (inventory) that she will deliver and install in year 2. When would Janine recognize the income from the advance payment for inventory sale if she uses the accrual method of accounting and she uses the deferral method for reporting income from advance payments? For financial accounting purposes, she reports the income when the inventory is delivered. a. Year 1 b. Year 0 c. Year 0 and year 1 d. Year 1 and year 2 e. Year 2

E

Erin is considering switching her business from the cash method to the accrual method at the beginning of next year (year 1). Determine the amount and timing of her §481 adjustment assuming the IRS grants Erin's request in the following alternative scenarios. b. At the end of year 0/beginning of year 1, Erin's business reports $30,600 of accounts receivable and $10,200 of accounts payable that have not been recorded for tax purposes.

Increase in income by $20,400 Number of year(s) : 4

Jeremy is a calendar-year taxpayer who sometimes leases his business equipment to local organizations. He recorded the following receipts this year. Indicate the extent to which these payments are taxable income to Jeremy this year if Jeremy is (1) a cash-method taxpayer and (2) an accrual-method taxpayer. (Leave no answers blank. Enter zero if applicable.) b. $2,180 from the Ladies' Club for leasing the trailer from December of this year through March of next year ($545 per month).

Income from cash: $2,180 Income from accrual: $2,180

Jeremy is a calendar-year taxpayer who sometimes leases his business equipment to local organizations. He recorded the following receipts this year. Indicate the extent to which these payments are taxable income to Jeremy this year if Jeremy is (1) a cash-method taxpayer and (2) an accrual-method taxpayer. (Leave no answers blank. Enter zero if applicable.) c. $435 lease payment received from the Men's Club this year for renting Jeremy's trailer last year. Jeremy billed the club last year but recently he determined that the Men's Club would never pay him, so he was surprised when he received the check.

Income from cash: $435 Income from accrual: $0

Jeremy is a calendar-year taxpayer who sometimes leases his business equipment to local organizations. He recorded the following receipts this year. Indicate the extent to which these payments are taxable income to Jeremy this year if Jeremy is (1) a cash-method taxpayer and (2) an accrual-method taxpayer. (Leave no answers blank. Enter zero if applicable.) a. $2,600 deposit from the Ladies' Club, which wants to lease a trailer. The club will receive the entire deposit back when the trailer is returned undamaged.

Income under cash: $0 Income under accrual: $0