[joshualuis2003]

Joe operates a business that locates and purchases specialized assets for clients, among other activities. Joe uses the accrual method of accounting but he doesn’t keep any significant inventories of the specialized assets that he sells. Joe reported the following financial information for his business activities during year 0. Determine the effect of each of the following transactions on the taxable business income.

a. Joe has signed a contract to sell gadgets to the city. The contract provides that sales of gadgets are dependent upon a test sample of gadgets operating successfully. In December, Joe delivers $12,000 worth of gadgets to the city that will be tested in March. Joe purchased the gadgets especially for this contract and paid $8,500.

b. Joe paid $180 for entertaining a visiting out-of-town client. The client didn’t discuss business with Joe during this visit, but Joe wants to maintain good relations to encourage additional business next year.

c. On November 1, Joe paid $600 for premiums providing for $40,000 of “key man” insurance on the life of Joe’s accountant over the next 12 months.

d. At the end of the year (year 1), Joe’s business reports $9,000 of accounts receivable.
Based upon past experience, Joe believes that at least $2,000 of his new receivables will be uncollectible.

e. In December of year 0, Joe rented equipment for a large job. The rental agency required a minimum rental of three months ($1,000 per month), but
Joe completed the job before year-end.

f. Joe hired a new sales representative as an employee and sent her to Dallas for a week to contact prospective out-of-state clients. Joe ended up reimbursing his employee $300 for airfare, $350 for lodging, $250 for meals, and $150 for entertainment. Joe requires the employee to account for all expenditures in order to be reimbursed.

g. Joe uses his BMW (a personal auto) to travel to and from his residence to his factory. However, he switches to a business vehicle if he needs to travel after he reaches the factory. Last month, the business vehicle broke down and he was forced to use the BMW both to travel to and from the factory and to visit work sites. He drove 120 miles visiting work sites and 46 miles driving to and from the factory from his home.

h. Joe paid a visit to his parents in Dallas over the Christmas holidays. While he was in the city, Joe spent $50 to attend a half-day business symposium. Joe paid $200 for airfare, $50 for meals during the symposium, and $20 on cab fare to the symposium.

[joshualuis2003]

Assuming Alexa receives $20,000 in gross rental receipts, answer the following questions:

a. What effect does the rental activity have on her AGI for the year?

b. Assuming that Alexa’s AGI from other sources is $90,000, what effect does the rental activity have on Alexa’s AGI? Alexa makes all decisions with respect to the property.

c. Assuming that Alexa’s AGI from other sources is $120,000, what effect does the rental activity have on Alexa’s AGI? Alexa makes all decisions with respect to the property.

d. Assume that Alexa’s AGI from other sources is $200,000. This consists of $150,000 salary, $10,000 of dividends, and $25,000 of long-term capital gain and net rental income from another rental property in the amount of $15,000. What effect does the Cocoa Beach Condo rental activity have on Alexa’s AGI?

[joshualuis2003]

Ken is 63 years old and unmarried. He retired at age 55 when he sold his business, Understock.com. Though Ken is retired, he is still very active. Ken reported the following financial information this year. Assume Ken’s modified adjusted gross income for purposes of the bond interest exclusion and for determining the taxability of his Social Security benefits is $70,000 and that Ken files as a single taxpayer. Determine Ken’s 2009 gross income.

a. Ken won $1,200 in an illegal game of poker (the game was played in Utah, where gambling is illegal).

b. Ken sold 1,000 shares of stock for $32 a share. He inherited the stock two years ago. His tax basis (or investment) in the stock was $31 per share.

c. Ken received $25,000 from an annuity he purchased eight years ago. He purchased the annuity, to be paid annually for 20 years, for $210,000.

d. Ken received $13,000 in Social Security benefits for the year.

e. Ken resided in Ireland from July 1, 2008, through June 30, 2009, visiting relatives.
While he was there he earned $35,000 working in his cousin’s pub. He was paid $17,000 for his services in 2008 and $18,000 for his services in 2009.
Assume Ken elects to use the foreign-earned income exclusion to the extent he is eligible.

f. Ken decided to go back to school to learn about European history. He received a $500 cash scholarship to attend. He used $300 to pay for his books and he applied the rest toward his new car payment.

g. Ken’s son, Mike, instructed his employer to make half of his final paycheck of the year payable to Ken. Ken received the check on December 30 in the amount of $1,100.

h. Ken received a $610 refund of the $3,600 in state income taxes his employer withheld from his pay last year. Ken claimed $5,500 in itemized deductions last year (the standard deduction for a single filer was $5,450).

I. Ken received $30,000 of interest from corporate bonds and money market accounts.

[hheath541]

We won't do your homework for you? What do YOU think the answer is?

[Curlyben]

Thank you for taking the time to copy your homework to AMHD.
Please refer to this announcement: https://www.askmehelpdesk.com/financ...-b-u-font.html

[joshualuis2003]

we won't do your homework for you? what do YOU think the answer is?

I'm so sorry but this isn't homework. I bought a financial accounting book and I'm trying to learn and these are example problems. But thank you anyway!

[hheath541]

OK, then the best way to learn is to try to work out the problems yourself. If you show the work you've already done on the problems, then people will be more than willing to help you get to the right answer.

[NeedKarma]

I'm so sorry but this isn't homework. I bought a financial accounting book and I'm trying to learn and these are example problems. But thank you anyway!

Usually the chapter preceding the questions has the theory that explains what you need to know.

[joshualuis2003]

we won't do your homework for you? what do YOU think the answer is?

If I could at least get help with the first 2 questions.

[joshualuis2003]

Never mind I have been able to pay an online tutor. That's better because she is walking me through the problems. Costly 25.00 an hour but well worth it.

[joshualuis2003]

Assuming Alexa receives $20,000 in gross rental receipts, answer the following questions:

a. What effect does the rental activity have on her AGI for the year?

b. Assuming that Alexa’s AGI from other sources is $90,000, what effect does the rental activity have on Alexa’s AGI? Alexa makes all decisions with respect to the property.

c. Assuming that Alexa’s AGI from other sources is $120,000, what effect does the rental activity have on Alexa’s AGI? Alexa makes all decisions with respect to the property.

d. Assume that Alexa’s AGI from other sources is $200,000. This consists of $150,000 salary, $10,000 of dividends, and $25,000 of long-term capital gain and net rental income from another rental property in the amount of $15,000. What effect does the Cocoa Beach Condo rental activity have on Alexa’s AGI?

Here is what I come up with.

Alexa owns a condominium near Cocoa Beach in Florida. This year, she incurs the following expenses in connection with her condo:
Insurance $2,000
Mortgage interest 6,500 (from agi)
Property taxes 2,000
Repairs & maintenance 1,400
Utilities 2,500
Depreciation 14,500

During the year, Alexa rented out the condo for 100 days. She did not use the condo at all for personal purposes during the year. Alexa’s AGI from all sources other than the rental property is $200,000. Unless otherwise specified, Alexa has no sources of passive income.

[morgaine300]

It's really useful if you do not post several different questions in the same thread. It's confusing, plus time consuming to scroll through a bunch of non-related stuff to find you only want help with the very last thing. Please always post different problems in different threads.

It also might be more useful to you to post this over on the tax forum instead. (Or perhaps rather link over here so we don't end up with a bunch of duplicate posts.) Contrary to popular belief, accountants are not always tax experts - I'm certainly not. I'm sure they pop over here, but would possibly see if there more quickly.

[riobard85]

So, this isn't homework? Sure looks like my homework for the Masters of Accountancy class I'm taking. Funny how you just happen to be doing the 'sample problems' that are also the assigned problems for my class.:cool: