P21-1 Determining Type of Lease and Subsequent Accounting
On January 1, 2010, the Alice Company leases equipment for five years, agreeing to pay $70,000 annually at the beginning of each year under the non-cancelable lease. Superior Equipment Company, the lessor, agrees to pay $70,000 annually at the beginning of each year under the non-cancelable lease. Superior Equipment Company, the lessor, agrees to pay all executor costs, estimated to be $3,450 per year. The cost and also fair value of the equipment is 305,000. Its estimated life is 10 years. The estimated residual value at the end of five years is $64,000 and is not guaranteed by Alice; at the end of 10 years, it is $5,000. There is no bargain purchase option in the lease or any agreement to transfer ownership at the end of the lease to the lessee. The implicit interest rate is 12%. During 2010, Superior Equipment pays property taxes of $650, maintenance costs of $1,600, and insurance of $1,200. There are no important uncertainties surrounding the amount of un-reimbursable costs yet to be incurred by the lessor. Straight-line depreciation is considered the appropriate method both companies.
REQUIRED:
1.Identify the type of lease involved for Alice Company and Superior Equipment Company and give reasons for your classifications.
2.Prepare appropriate journal entries for 2010 for the lessee and lessor.
3.If the residual value at the end of five years is guaranteed by Alice, identify the type of lease. Prepare journal entries for 2010 and 2011 for the lessee and lessor. Also prepare the journal entries for the lessee and the lessor when the lessee pays the guaranteed residual value.
Click here for the solution: On January 1, 2010, the Alice Company leases equipment for five years, agreeing to pay $70,000 annually at the beginning of each year under the non-cancelable lease
Showing posts with label pay. Show all posts
Showing posts with label pay. Show all posts
Tuesday, April 12, 2016
Wednesday, September 23, 2015
Ben Chase needs to pay off some of his debts over the next few months
1) Ben Chase needs to pay off some of his debts over the next few
months. Which item on his balance sheet would help him decide what
amounts are due in the near future?
2) A family with $45,000 in assets and $22,000 of liabilities would have a net worth of
3) A budget deficit would result when a person's or family's
4) The tax base for an individual tax return is
5) All of the following are for AGI deductions EXCEPT
6) Which of the following series of inequalities is generally most accurate?
7) Which of the following has the lowest authoritative weight?
8) Josephine is considering taking a 6-month rotation in Paris for her job. Which type of authority may be especially helpful in determining the tax consequences of Josephine's job in Paris?
9) Which of the following has the highest authoritative weight?
10) Congress allows self-employed taxpayers to deduct the cost of health insurance above the line (for AGI) because
11) Hector is a married self-employed taxpayer, and this year he paid $3,000 for his health insurance premiums. Under which of the following alternative conditions can Hector deduct the cost of the premiums for AGI?
12) Graham has accepted an offer to do graduate work in the chemistry department at State University. The chemistry department offered Graham a scholarship that will pay $5,000 toward his tuition, $500 toward his university fees, and $3,500 toward the cost of room and meals. Under the terms of the scholarship, Graham must work in the chemistry labs during the summer. What amount must Graham include in his gross income?
13) After a meeting with a prospective client, Holly paid for dinner. After dinner, Holly took the prospective client to the theatre. Holly paid $290 for the meal and $250 for the tickets, amounts that were reasonable under the circumstances. What amount of these expenditures can Holly deduct as a business expense?
14) Rhianna and Jay are married filing jointly in 2009. They have six children for whom they may claim the child tax credit. Their AGI was $123,440. What amount of child tax credit may they claim on their 2009 tax return?
15) Which of the following taxes will not qualify as an itemized deduction?
16) Bateman Corporation sold an office building that it used in its business for $800,000. Bateman bought the building ten years ago for $600,000 and has claimed $200,000 of depreciation expense. What is the amount and character of Bateman's gain or loss?
17) The sale of machinery for more than the original cost basis (before depreciation), used in a trade or business, and held for more than one year results in the following types of gain or loss:
18) Winchester LLC sold the following business assets during the current year: (1) automobile, $30,000 cost basis, $12,000 depreciation, proceeds $20,000; (2) machinery, $25,000 cost basis, $20,000 depreciation, proceeds $10,000; (3) furniture, $15,000 cost basis, $10,000 depreciation, proceeds $4,000; (4) computer equipment, $25,000 cost basis, $6,000 depreciation, proceeds $10,000; (5) Winchester had unrecaptured Section 1231 losses of $3,000 in the prior 5 years. What is the amount and character of Winchester's gains and losses before the 1231 netting process?
19) On the sale of a passive activity, any suspended losses can be used to offset income from
20) Which of the following would be considered passive income?
21) Which of the following would be considered active income?
22) Sue invested $5,000 in the ABC Limited Partnership and received a 10 percent interest in the partnership. The partnership had $20,000 of qualified nonrecourse debt and $20,000 of debt she is not responsible to repay because she is a limited partner. Sue is allocated a 10 percent share of both types of debt. During the year, ABC LP generated a ($90,000) loss. How much of Sue's loss is disallowed due to her tax basis or at-risk amount?
23) Harvey rents his second home. During 2009, Harvey reported a net loss of $35,000 from the rental. If Harvey is an active participant in the rental and his AGI is $80,000, how much of the loss can he deduct against ordinary income in 2009?
24) What happens when a taxpayer experiences a net loss from a rental home?
25) What is the minimum ownership percentage an owner must have in the entity to avoid gain recognition when property is contributed?
26) What is the tax impact to a taxable corporation or an S corporation when it makes a property distribution to a shareholder?
27) What item(s) affect the tax basis of a shareholder in a taxable corporation?
28) Antoine transfers property with a tax basis of $500 and a fair market value of $600 to a corporation in exchange for stock with a fair market value of $550 in a transaction that qualifies for deferral under Section 351. The corporation assumed a liability of $50 on the property transferred. What is Antoine's tax basis in the stock received in the exchange?
29) Which of the following requirements do not have to be met in a Section 351 transaction?
30) Inez transfers property with a tax basis of $200 and a fair market value of $300 to a corporation in exchange for stock with a fair market value of $250 in a transaction that qualifies for deferral under Section 351. The corporation assumed a liability of $50 on the property transferred. What is the corporation's tax basis in the property received in the exchange?
31) Au Sable Corporation reported taxable income of $800,000 in 2010 and paid federal income taxes of $272,000. Not included in the computation was a disallowed penalty of $25,000, life insurance proceeds of $100,000, and an income tax refund from 2009 of $50,000. Au Sable is an accrual basis taxpayer. The corporation's current earnings and profits for 2010 would be
32) BTW Corporation has taxable income in the current year that can be offset with an NOL from a previous year. What is the nature of the book-tax difference created by the net operating loss deduction in the current year?
33) A calendar-year corporation has negative current E&P of $(500) and accumulated positive E&P of $1,000. The corporation makes a $600 distribution to its sole shareholder. Which of the following statements is true?
34) El Toro Corporation declared a common stock dividend to all shareholders of record on June 30, 2010. Shareholders will receive 1 share of El Toro stock for each 2 shares of stock they already own. Raoul owns 300 shares of El Toro stock with a tax basis of $60 per share. The fair market value of the El Toro stock was $100 per share on June 30, 2010. What are the tax consequences of the stock dividend to Raoul?
35) Which of the following stock dividends would be tax-free to the shareholder?
36) Which of the following individuals is not considered "family" for purposes of applying the stock attribution rules to a stock redemption?
37) Which of the following statements is true when property is contributed in exchange for a partnership interest?
38) Which of the following are prohibited from being an S corporation shareholder?
39) Under which of the following circumstances will a partner recognize a loss from an operating distribution?
40) Suppose at the beginning of 2010, Jamaal's basis in his S corporation stock was $27,000 and that Jamaal has loaned the S corporation $10,000. During 2010, the S corporation reported an $80,000 ordinary business loss and no separately stated items. How much of the ordinary loss is deductible by Jamaal if he owns 50% of the S corporation?
41) Clampett, Inc. has been an S corporation since its inception. On July 15, 2011, Clampett, Inc. distributed $50,000 to J.D. His basis in his Clampett, Inc. stock on January 1, 2011, was $45,000. For 2011, J.D. was allocated $10,000 of ordinary income from Clampett, Inc. and no separately stated items. What is J.D.'s basis in his Clampett, Inc. stock after all transactions in 2011?
42) Clampett, Inc. has been an S corporation since its inception. On July 15, 2011, Clampett, Inc. distributed $50,000 to J.D. His basis in his Clampett, Inc. stock on January 1, 2011, was $45,000. For 2011, J.D. was allocated $10,000 of ordinary income from Clampett, Inc. and no separately stated items. What is the amount of income J.D. recognizes related to Clampett, Inc. in 2011?
43) Erica and Brett decide to form their new motorcycle business as an LLC. Each will receive an equal profits (loss) interest by contributing cash, property, or both. In addition to the members' contributions, their LLC will obtain a $50,000 nonrecourse loan from First Bank at the time it is formed. Brett contributes cash of $5,000 and a building he bought as a storefront for the motorcycles. The building has an FMV of $45,000, an adjusted basis of $30,000, and is secured by a $35,000 nonrecourse mortgage that the business LLC will assume. What is Brett's outside tax basis in his LLC interest?
44) Under general circumstances, debt is allocated from the partnership to each partner in the following manner:
45) Which of the following statements is true when property is contributed in exchange for a partnership interest?
46) Frank and Bob are equal members in Soxy Socks, LLC. When forming the LLC, Frank contributed $50,000 in cash and $50,000 worth of equipment. Frank's adjusted basis in the equipment was $35,000. Bob contributed $50,000 in cash and $50,000 worth of land. Bob's adjusted basis in the land was $30,000. On 3/15/04, Soxy Socks sells the land Bob contributed for $60,000. How much gain (loss) related to this transaction will Bob report on his X4 return?
47) What form does a partnership use when filing an annual informational return?
48) Vanessa contributed $20,000 of cash and land with a fair market value of $100,000 and an adjusted basis of $40,000 to Cook, Inc. (an S corporation) when it was formed. The land was encumbered by a $30,000 mortgage executed two years before. What is Vanessa's tax basis in Cook, Inc. after formation?
49) The estate and gift taxes share several common features. Which of the following characteristics are common to both the estate and gift taxes?
50) The estate and gift taxes share several common features. Which of the following characteristics are common to both the estate and gift taxes?
51) The estate and gift taxes share several common features. Which of the following characteristics are common to both the estate and gift taxes?
52) This year Samantha gave each of her three nephews birthday gifts of $10,000 in cash. At Christmas, Samantha gave each of her three nephews Christmas gifts of an additional $5,000 in cash. What is the amount of the taxable gifts, if any, made by Samantha this year?
53) Jonathan transferred $90,000 of cash to a trust this year for the benefit of Hannah, age 10. The trustee has the discretion to distribute income or corpus (principal) for Hannah's benefit and is required to distribute all assets to Hannah (or her estate) not later than Hannah's 21st birthday. What is the amount of the taxable gift?
54) This year Natalie transferred $500,000 of bonds to a revocable trust with directions to the trustee to pay income to her aunt for five years, after which the corpus is to be distributed to Natalie's niece. At year-end, the trustee paid $14,000 of income to the aunt. Which of the following is a true statement?
Click here for the solution: Ben Chase needs to pay off some of his debts over the next few months
2) A family with $45,000 in assets and $22,000 of liabilities would have a net worth of
3) A budget deficit would result when a person's or family's
4) The tax base for an individual tax return is
5) All of the following are for AGI deductions EXCEPT
6) Which of the following series of inequalities is generally most accurate?
7) Which of the following has the lowest authoritative weight?
8) Josephine is considering taking a 6-month rotation in Paris for her job. Which type of authority may be especially helpful in determining the tax consequences of Josephine's job in Paris?
9) Which of the following has the highest authoritative weight?
10) Congress allows self-employed taxpayers to deduct the cost of health insurance above the line (for AGI) because
11) Hector is a married self-employed taxpayer, and this year he paid $3,000 for his health insurance premiums. Under which of the following alternative conditions can Hector deduct the cost of the premiums for AGI?
12) Graham has accepted an offer to do graduate work in the chemistry department at State University. The chemistry department offered Graham a scholarship that will pay $5,000 toward his tuition, $500 toward his university fees, and $3,500 toward the cost of room and meals. Under the terms of the scholarship, Graham must work in the chemistry labs during the summer. What amount must Graham include in his gross income?
13) After a meeting with a prospective client, Holly paid for dinner. After dinner, Holly took the prospective client to the theatre. Holly paid $290 for the meal and $250 for the tickets, amounts that were reasonable under the circumstances. What amount of these expenditures can Holly deduct as a business expense?
14) Rhianna and Jay are married filing jointly in 2009. They have six children for whom they may claim the child tax credit. Their AGI was $123,440. What amount of child tax credit may they claim on their 2009 tax return?
15) Which of the following taxes will not qualify as an itemized deduction?
16) Bateman Corporation sold an office building that it used in its business for $800,000. Bateman bought the building ten years ago for $600,000 and has claimed $200,000 of depreciation expense. What is the amount and character of Bateman's gain or loss?
17) The sale of machinery for more than the original cost basis (before depreciation), used in a trade or business, and held for more than one year results in the following types of gain or loss:
18) Winchester LLC sold the following business assets during the current year: (1) automobile, $30,000 cost basis, $12,000 depreciation, proceeds $20,000; (2) machinery, $25,000 cost basis, $20,000 depreciation, proceeds $10,000; (3) furniture, $15,000 cost basis, $10,000 depreciation, proceeds $4,000; (4) computer equipment, $25,000 cost basis, $6,000 depreciation, proceeds $10,000; (5) Winchester had unrecaptured Section 1231 losses of $3,000 in the prior 5 years. What is the amount and character of Winchester's gains and losses before the 1231 netting process?
19) On the sale of a passive activity, any suspended losses can be used to offset income from
20) Which of the following would be considered passive income?
21) Which of the following would be considered active income?
22) Sue invested $5,000 in the ABC Limited Partnership and received a 10 percent interest in the partnership. The partnership had $20,000 of qualified nonrecourse debt and $20,000 of debt she is not responsible to repay because she is a limited partner. Sue is allocated a 10 percent share of both types of debt. During the year, ABC LP generated a ($90,000) loss. How much of Sue's loss is disallowed due to her tax basis or at-risk amount?
23) Harvey rents his second home. During 2009, Harvey reported a net loss of $35,000 from the rental. If Harvey is an active participant in the rental and his AGI is $80,000, how much of the loss can he deduct against ordinary income in 2009?
24) What happens when a taxpayer experiences a net loss from a rental home?
25) What is the minimum ownership percentage an owner must have in the entity to avoid gain recognition when property is contributed?
26) What is the tax impact to a taxable corporation or an S corporation when it makes a property distribution to a shareholder?
27) What item(s) affect the tax basis of a shareholder in a taxable corporation?
28) Antoine transfers property with a tax basis of $500 and a fair market value of $600 to a corporation in exchange for stock with a fair market value of $550 in a transaction that qualifies for deferral under Section 351. The corporation assumed a liability of $50 on the property transferred. What is Antoine's tax basis in the stock received in the exchange?
29) Which of the following requirements do not have to be met in a Section 351 transaction?
30) Inez transfers property with a tax basis of $200 and a fair market value of $300 to a corporation in exchange for stock with a fair market value of $250 in a transaction that qualifies for deferral under Section 351. The corporation assumed a liability of $50 on the property transferred. What is the corporation's tax basis in the property received in the exchange?
31) Au Sable Corporation reported taxable income of $800,000 in 2010 and paid federal income taxes of $272,000. Not included in the computation was a disallowed penalty of $25,000, life insurance proceeds of $100,000, and an income tax refund from 2009 of $50,000. Au Sable is an accrual basis taxpayer. The corporation's current earnings and profits for 2010 would be
32) BTW Corporation has taxable income in the current year that can be offset with an NOL from a previous year. What is the nature of the book-tax difference created by the net operating loss deduction in the current year?
33) A calendar-year corporation has negative current E&P of $(500) and accumulated positive E&P of $1,000. The corporation makes a $600 distribution to its sole shareholder. Which of the following statements is true?
34) El Toro Corporation declared a common stock dividend to all shareholders of record on June 30, 2010. Shareholders will receive 1 share of El Toro stock for each 2 shares of stock they already own. Raoul owns 300 shares of El Toro stock with a tax basis of $60 per share. The fair market value of the El Toro stock was $100 per share on June 30, 2010. What are the tax consequences of the stock dividend to Raoul?
35) Which of the following stock dividends would be tax-free to the shareholder?
36) Which of the following individuals is not considered "family" for purposes of applying the stock attribution rules to a stock redemption?
37) Which of the following statements is true when property is contributed in exchange for a partnership interest?
38) Which of the following are prohibited from being an S corporation shareholder?
39) Under which of the following circumstances will a partner recognize a loss from an operating distribution?
40) Suppose at the beginning of 2010, Jamaal's basis in his S corporation stock was $27,000 and that Jamaal has loaned the S corporation $10,000. During 2010, the S corporation reported an $80,000 ordinary business loss and no separately stated items. How much of the ordinary loss is deductible by Jamaal if he owns 50% of the S corporation?
41) Clampett, Inc. has been an S corporation since its inception. On July 15, 2011, Clampett, Inc. distributed $50,000 to J.D. His basis in his Clampett, Inc. stock on January 1, 2011, was $45,000. For 2011, J.D. was allocated $10,000 of ordinary income from Clampett, Inc. and no separately stated items. What is J.D.'s basis in his Clampett, Inc. stock after all transactions in 2011?
42) Clampett, Inc. has been an S corporation since its inception. On July 15, 2011, Clampett, Inc. distributed $50,000 to J.D. His basis in his Clampett, Inc. stock on January 1, 2011, was $45,000. For 2011, J.D. was allocated $10,000 of ordinary income from Clampett, Inc. and no separately stated items. What is the amount of income J.D. recognizes related to Clampett, Inc. in 2011?
43) Erica and Brett decide to form their new motorcycle business as an LLC. Each will receive an equal profits (loss) interest by contributing cash, property, or both. In addition to the members' contributions, their LLC will obtain a $50,000 nonrecourse loan from First Bank at the time it is formed. Brett contributes cash of $5,000 and a building he bought as a storefront for the motorcycles. The building has an FMV of $45,000, an adjusted basis of $30,000, and is secured by a $35,000 nonrecourse mortgage that the business LLC will assume. What is Brett's outside tax basis in his LLC interest?
44) Under general circumstances, debt is allocated from the partnership to each partner in the following manner:
45) Which of the following statements is true when property is contributed in exchange for a partnership interest?
46) Frank and Bob are equal members in Soxy Socks, LLC. When forming the LLC, Frank contributed $50,000 in cash and $50,000 worth of equipment. Frank's adjusted basis in the equipment was $35,000. Bob contributed $50,000 in cash and $50,000 worth of land. Bob's adjusted basis in the land was $30,000. On 3/15/04, Soxy Socks sells the land Bob contributed for $60,000. How much gain (loss) related to this transaction will Bob report on his X4 return?
47) What form does a partnership use when filing an annual informational return?
48) Vanessa contributed $20,000 of cash and land with a fair market value of $100,000 and an adjusted basis of $40,000 to Cook, Inc. (an S corporation) when it was formed. The land was encumbered by a $30,000 mortgage executed two years before. What is Vanessa's tax basis in Cook, Inc. after formation?
49) The estate and gift taxes share several common features. Which of the following characteristics are common to both the estate and gift taxes?
50) The estate and gift taxes share several common features. Which of the following characteristics are common to both the estate and gift taxes?
51) The estate and gift taxes share several common features. Which of the following characteristics are common to both the estate and gift taxes?
52) This year Samantha gave each of her three nephews birthday gifts of $10,000 in cash. At Christmas, Samantha gave each of her three nephews Christmas gifts of an additional $5,000 in cash. What is the amount of the taxable gifts, if any, made by Samantha this year?
53) Jonathan transferred $90,000 of cash to a trust this year for the benefit of Hannah, age 10. The trustee has the discretion to distribute income or corpus (principal) for Hannah's benefit and is required to distribute all assets to Hannah (or her estate) not later than Hannah's 21st birthday. What is the amount of the taxable gift?
54) This year Natalie transferred $500,000 of bonds to a revocable trust with directions to the trustee to pay income to her aunt for five years, after which the corpus is to be distributed to Natalie's niece. At year-end, the trustee paid $14,000 of income to the aunt. Which of the following is a true statement?
Click here for the solution: Ben Chase needs to pay off some of his debts over the next few months
Monday, August 31, 2015
Large Land Photo Shop has asked you to determine whether the company's ability to pay current liabilities and total liabilities improved or deteriorated during 2012
E15-18 Large Land Photo Shop has asked you to determine whether the company's ability to pay current liabilities and total liabilities improved or deteriorated during 2012. To answer this question, you gather the following data:
2012 2011
Cash $ 58,000 $ 57,000
Short-term investments 31,000 —
Net receivables 110,000 132,000
Inventory 247,000 297,000
Total assets 585,000 535,000
Total current liabilities 255,000 222,000
Long-term note payable 46,000 48,000
Income from operations 180,000 153,000
Interest expense 52,000 39,000
Requirement
• 1.Compute the following ratios for 2012 and 2011:
o a.Current ratio
o b.Acid-test ratio
o c.Debt ratio
o d.Debt to equity ratio
Click here for the solution: Large Land Photo Shop has asked you to determine whether the company's ability to pay current liabilities and total liabilities improved or deteriorated during 2012
2012 2011
Cash $ 58,000 $ 57,000
Short-term investments 31,000 —
Net receivables 110,000 132,000
Inventory 247,000 297,000
Total assets 585,000 535,000
Total current liabilities 255,000 222,000
Long-term note payable 46,000 48,000
Income from operations 180,000 153,000
Interest expense 52,000 39,000
Requirement
• 1.Compute the following ratios for 2012 and 2011:
o a.Current ratio
o b.Acid-test ratio
o c.Debt ratio
o d.Debt to equity ratio
Click here for the solution: Large Land Photo Shop has asked you to determine whether the company's ability to pay current liabilities and total liabilities improved or deteriorated during 2012
Sunday, July 19, 2015
Cleaner’s, Inc., is switching to paying employees every 2 weeks rather than weekly and will therefore “skip” 1 week’s pay
E16–2 Cleaner’s, Inc., is switching to paying employees every 2 weeks rather than weekly and will therefore “skip” 1 week’s pay. The firm has 25 employees who work a 60-hour week and earn an average wage of $12.50 per hour. Using a 10% rate of interest, how much will this change save the firm annually?
Click here for the solution: Cleaner’s, Inc., is switching to paying employees every 2 weeks rather than weekly and will therefore “skip” 1 week’s pay
Click here for the solution: Cleaner’s, Inc., is switching to paying employees every 2 weeks rather than weekly and will therefore “skip” 1 week’s pay
Sunday, July 12, 2015
IP Inc is expected to pay $1.70 dividends next year
IP Inc is expected to pay $1.70 dividends next year. The dividend growth rate is expected to be 7% forever. If the required rate of return for IP is 10% calculate the price of the stock using the constant growth model. If the stock is currently selling for $63, indicate whether the stock is underpriced or overpriced.
Click here for the solution: IP Inc is expected to pay $1.70 dividends next year
Click here for the solution: IP Inc is expected to pay $1.70 dividends next year
Saturday, July 11, 2015
Watson Technical Institute (WTI), a school owned by Tom Watson, provides training to individuals who pay tuition directly to the school
Watson Technical Institute (WTI), a school owned by Tom Watson, provides training to individuals who pay tuition directly to the school. WTI also offers training to groups in off-site locations. Its unadjusted trial balance as of December 31, 2005, follows. WTI initially records prepaid expenses and unearned revenues in balance sheet accounts. Descriptions of items a through h that require adjusting entries on December 31, 2005, follow.
Additional Information Items
a. An analysis of the school’s insurance policies shows that $3,000 of coverage has expired.
b. An inventory count shows that teaching supplies costing $2,600 are available at year-end 2005.
c. Annual depreciation on the equipment is $12,000.
d. Annual depreciation on the professional library is $6,000.
e. On November 1, the school agreed to do a special six-month course (starting immediately) for a client. The contract calls for a monthly fee of $2,200, and the client paid the first five months’ fees in advance. When the cash was received, the Unearned Training Fees account was credited. The fee for the sixth month will be recorded when it is collected in 2006.
f. On October 15, the school agreed to teach a four-month class (beginning immediately) for an individual for $3,000 tuition per month payable at the end of the class. The services are being provided as agreed, and no payment has yet been received. g. The school’s two employees are paid weekly. As of the end of the year, two days’ wages have accrued at the rate of $100 per day for each employee.
h. The balance in the Prepaid Rent account represents rent for December.
Required
1. Prepare T-accounts (representing the ledger) with balances from the unadjusted trial balance.
2. Prepare the necessary adjusting journal entries for items a through h and post them to the T-accounts. Assume that adjusting entries are made only at year-end.
3. Update balances in the T-accounts for the adjusting entries and prepare an adjusted trial balance.
4. Prepare Watson Technical Institute’s income statement and statement of owner’s equity for the year 2005 and prepare its balance sheet as of December 31, 2005.
Check (2e) Cr.Training Fees Earned, $4,400; (2f ) Cr.Tuition Fees Earned, $7,500; (3) Adj.Trial balance totals, $301,500; (4) Net income, $38,500; Ending T.Watson, Capital $62,100
Click here for the solution: Watson Technical Institute (WTI), a school owned by Tom Watson, provides training to individuals who pay tuition directly to the school
Additional Information Items
a. An analysis of the school’s insurance policies shows that $3,000 of coverage has expired.
b. An inventory count shows that teaching supplies costing $2,600 are available at year-end 2005.
c. Annual depreciation on the equipment is $12,000.
d. Annual depreciation on the professional library is $6,000.
e. On November 1, the school agreed to do a special six-month course (starting immediately) for a client. The contract calls for a monthly fee of $2,200, and the client paid the first five months’ fees in advance. When the cash was received, the Unearned Training Fees account was credited. The fee for the sixth month will be recorded when it is collected in 2006.
f. On October 15, the school agreed to teach a four-month class (beginning immediately) for an individual for $3,000 tuition per month payable at the end of the class. The services are being provided as agreed, and no payment has yet been received. g. The school’s two employees are paid weekly. As of the end of the year, two days’ wages have accrued at the rate of $100 per day for each employee.
h. The balance in the Prepaid Rent account represents rent for December.
Required
1. Prepare T-accounts (representing the ledger) with balances from the unadjusted trial balance.
2. Prepare the necessary adjusting journal entries for items a through h and post them to the T-accounts. Assume that adjusting entries are made only at year-end.
3. Update balances in the T-accounts for the adjusting entries and prepare an adjusted trial balance.
4. Prepare Watson Technical Institute’s income statement and statement of owner’s equity for the year 2005 and prepare its balance sheet as of December 31, 2005.
Check (2e) Cr.Training Fees Earned, $4,400; (2f ) Cr.Tuition Fees Earned, $7,500; (3) Adj.Trial balance totals, $301,500; (4) Net income, $38,500; Ending T.Watson, Capital $62,100
Click here for the solution: Watson Technical Institute (WTI), a school owned by Tom Watson, provides training to individuals who pay tuition directly to the school
A progressive tax system is one in which higher-income people pay ____ than lower-income people
1) A progressive tax system is one in which higher-income people pay ____ than lower-income people.
2) ____ would be considered taxable income.
3) You have up to three years after mailing your tax return to file an amended tax return (1040X).
a. True
b. False
4) Connie is a 20 year old college student who earned $8,000 and spent it all on her support during the year. Her parents may claim her as a tax dependent as long as
5) You would typically not include ____ in your gross income.
6) A tax audit is a(n)
7) The main objective of tax planning is to maximize the amount of money you keep by minimizing the amount of taxes you pay.
a. True
b. False
8) Molly and Justin are considering contributing $5,000 to their favorite, tax deductible charity. This contribution will bring their total itemized deductions to $20,000. Assuming they are in the 28% marginal tax bracket, how much will they save in taxes by contributing this $5,000 to charity?
9) A couple will usually incur a lower tax liability if they choose "married, filing jointly" rather than "married, filing a separately."
a. True
b. False
10) Mr. and Mrs. McMurray have three children ages 3, 6, and 12 for which they paid $6,000 in child care expenses this year. Assume the McMurray's tax liability is initially calculated to be $10,000. Then apply a 20% tax credit for child care expenses within limits normally allowed. How much will their final tax liability be?
11) Tax avoidance is legal, tax evasion is illegal.
a. True
b. False
12) Which of the following cannot be adjustment(s) to gross income on the 1040 form?
13) Tax-deferred income is better than tax-free income.
a. True
b. False
14) Russ and Lois got married December 30. Since they were single for most of the year, however, they can legally file as married taxpayers in the year of the wedding.
a. True
b. False
15) Alimony received is included in gross income for the receiver and a tax deduction for the payer.
a. True
b. False
16) For tax purposes, head-of-household refers to
17) Buddy Slaton has only one itemized deduction item, the $3,000 he gave to his church. His standard deduction this year is $5,450, and he is in the 15% marginal tax bracket. How much will his contribution to the church save Buddy in taxes this year?
18) Pete and Pam are married with four dependent children. Pete and Pam can legally file using which of the following filing statuses?
19) If you do not wish to itemize deductions, you can use the
20) ____ income is gross income less tax deductions and payments for insurance and retirement savings.
21) The standard deduction is a blanket deduction that depends on the taxpayers
22) A declaration of estimated taxes is made by filing
23) Itemized non-business expenses do not include
24) You are preparing your own tax return. The least costly source for answering your questions would be
25) You have no employer provided pension plan; your IRA contributions are treated as
26) The total amount that you owe for income tax in one year is your tax
27) Which of the following can be adjustment(s) to gross income on the 1040 form?
28) Ben and Jack both earned $60,000 this year. Ben (age 30) is married with two children, and Jack (age 68) is single with no dependents. Which of the following is true regarding the amount of Social Security taxes they will pay?
29) The tax rate on capital gains for most people is
30) Murray (age 68, single) just sold his home of 35 years so that he could relocate nearer his grandchildren. He realized a $400,000 capital gain on the home. How much of this gain will Murray have to pay taxes on?
Click here for the solution: TV commercials, newspaper and magazine ads, the tools that carry and deliver the “image” of a marketed product or service, are known as its
2) ____ would be considered taxable income.
3) You have up to three years after mailing your tax return to file an amended tax return (1040X).
a. True
b. False
4) Connie is a 20 year old college student who earned $8,000 and spent it all on her support during the year. Her parents may claim her as a tax dependent as long as
5) You would typically not include ____ in your gross income.
6) A tax audit is a(n)
7) The main objective of tax planning is to maximize the amount of money you keep by minimizing the amount of taxes you pay.
a. True
b. False
8) Molly and Justin are considering contributing $5,000 to their favorite, tax deductible charity. This contribution will bring their total itemized deductions to $20,000. Assuming they are in the 28% marginal tax bracket, how much will they save in taxes by contributing this $5,000 to charity?
9) A couple will usually incur a lower tax liability if they choose "married, filing jointly" rather than "married, filing a separately."
a. True
b. False
10) Mr. and Mrs. McMurray have three children ages 3, 6, and 12 for which they paid $6,000 in child care expenses this year. Assume the McMurray's tax liability is initially calculated to be $10,000. Then apply a 20% tax credit for child care expenses within limits normally allowed. How much will their final tax liability be?
11) Tax avoidance is legal, tax evasion is illegal.
a. True
b. False
12) Which of the following cannot be adjustment(s) to gross income on the 1040 form?
13) Tax-deferred income is better than tax-free income.
a. True
b. False
14) Russ and Lois got married December 30. Since they were single for most of the year, however, they can legally file as married taxpayers in the year of the wedding.
a. True
b. False
15) Alimony received is included in gross income for the receiver and a tax deduction for the payer.
a. True
b. False
16) For tax purposes, head-of-household refers to
17) Buddy Slaton has only one itemized deduction item, the $3,000 he gave to his church. His standard deduction this year is $5,450, and he is in the 15% marginal tax bracket. How much will his contribution to the church save Buddy in taxes this year?
18) Pete and Pam are married with four dependent children. Pete and Pam can legally file using which of the following filing statuses?
19) If you do not wish to itemize deductions, you can use the
20) ____ income is gross income less tax deductions and payments for insurance and retirement savings.
21) The standard deduction is a blanket deduction that depends on the taxpayers
22) A declaration of estimated taxes is made by filing
23) Itemized non-business expenses do not include
24) You are preparing your own tax return. The least costly source for answering your questions would be
25) You have no employer provided pension plan; your IRA contributions are treated as
26) The total amount that you owe for income tax in one year is your tax
27) Which of the following can be adjustment(s) to gross income on the 1040 form?
28) Ben and Jack both earned $60,000 this year. Ben (age 30) is married with two children, and Jack (age 68) is single with no dependents. Which of the following is true regarding the amount of Social Security taxes they will pay?
29) The tax rate on capital gains for most people is
30) Murray (age 68, single) just sold his home of 35 years so that he could relocate nearer his grandchildren. He realized a $400,000 capital gain on the home. How much of this gain will Murray have to pay taxes on?
Click here for the solution: TV commercials, newspaper and magazine ads, the tools that carry and deliver the “image” of a marketed product or service, are known as its
Thursday, July 2, 2015
(Calculating Net Float) Each business day, on average, a company writes checks totaling $12,000 to pay its suppliers
(Calculating Net Float) Each business day, on average, a company writes checks totaling $12,000
to pay its suppliers. The usual clearing time for the checks is four
days. Meanwhile, the company is receiving payments from its customer
each day, in the form of checks, totaling $23,000. The cash from the
payments is available to the firm after two days.
a) Calculate the company’s disbursement float, collection float, and net float.
b) How would you answer to part (a) change if the collected funds were available in one day instead of two?
Click here for the solution: (Calculating Net Float) Each business day, on average, a company writes checks totaling $12,000 to pay its suppliers
Subscribe to:
Posts (Atom)