Question: Conrad, who has $180,000 of taxable

> Maxwell Corporation has income per books before tax of $400,000. Included in the income per books is $8,000 interest income from tax-exempt municipal bonds. In computing income per books, Maxwell deducted $22,000 for meals and entertainment expenses, $3,

> Over what ranges of taxable income in 2017 will the total income tax liability for two persons with equal incomes who file as single individuals equal their income tax liability if they file jointly as a married couple?

> Neil owns a ski lodge in Aspen. His use of this lodge varies from year to year. The annual expenses for the lodge are as follows: Mortgage interest………………………………………$24,000 Property taxes………………………………………………12,000 Snow removal……………………………………………….1,000 Yard mai

> Teresa is an accomplished actress. During the summer, she rented a vacant store to stage productions of four plays, using the local townspeople as actors and stagehands. She sold $24,000 of tickets to the various plays. Her expenses included $10,000 for

> Maureen operates a cosmetics sales business from her home. She uses 400 of 1,600 square feet of the home as an office for the entire year. Her income before her home office deduction is $3,400 and unapportioned expenses for the home are as follows: Mortg

> Jim, the owner of a tabloid magazine, is sued by an actor for libel and pays $15,000 in legal fees. Jim is found guilty. Jim also received many parking tickets while attending various business meetings in areas where legal parking spaces are extremely di

> Maria earns $50,000 from consulting contracts during the year. She collects only $48,000 from her clients and expects the $2,000 will remain uncollectible. a. If Maria’s business uses accrual basis, what is her gross income for the year and how much can

> Tim accepts a temporary assignment that is 500 miles away from his office. The assignment is expected to last 7 months. Tim spends $7,000 for lodging and transportation and $3,000 for meals during these 7 months. At the end of the 7 months, Tim is notifi

> Mark flew from Baltimore to Phoenix on business. He spent four days on business and visited friends for two days before returning home. He stayed at a hotel for the four business days but he stayed at his friend’s home the last two days. He paid the foll

> In January, Marco incurs $2,800 in expenses traveling to San Diego to investigate the feasibility of acquiring a new business. He acquires the business and on March 1 forms a new corporation, Marco Enterprises, Inc. and pays $6,000 for organization costs

> Foster Corporation, a cash-basis taxpayer, borrowed $100,000 on January 1, year 1, but received only $98,000. The loan matures in 10 years with the $100,000 principal due on that date. Interest of $10,000 is payable on January 1 of each year beginning Ja

> When Kelley couldn’t make several monthly payments on a business loan, her brother Mike made three of the monthly payments of $700 each, a total of $2,100 ($1,950 for interest expense and $150 for principal) for Kelley’s loan. Kelley made the other nine

> Distinguish tax planning from tax compliance.

> Marco and Lisa are married and file a joint tax return. Lisa has salary income of $260,000 and Marco has salary income of $400,000. They also have the following items of investment income: $60,000 net long-term capital gain on sale of stock, $8,000 divid

> Linda received $90,000 in salary income for 2017. She has no dependents. Determine her income tax liability under each of the following independent situations: a. She files as a single individual. b. She is married and files a joint return with her spo

> Mark and Patricia report adjusted gross income of $380,500 and itemized deductions of $64,000 for the interest on their home acquisition mortgage (principal amount of $890,000), taxes, and charitable contributions. They file a joint income tax return and

> Jessica and Jason are married, file a joint return, and have 4 dependent children. Calculate their 2017 personal and dependency deductions for each of the following independent situations: a. Their AGI is $275,000. b. Their AGI is $375,000. c. Their A

> What is the total deduction for personal and dependency exemptions for the following taxpayers in 2017 if their AGI is $350,500? a. Married filing jointly with three dependents b. Single with no dependents

> Mario and Kaitlin are married and file a joint tax return. They have adjusted gross income of $385,000 that includes $4,700 of investment income ($3,000 short-term capital gains and $1,700 of corporate bond interest). They paid the following expenses for

> Arnold is a single individual and has adjusted gross income of $65,000 in the current year. Arnold donates the following items to his favorite qualified charities: a. $5,000 cash to the athletic department booster club at State University. This contribu

> Jennifer and Jason Greco are married and file a joint tax return. Their two dependent children (Jim, age 14 and Jessica, age 16); both live at home. The Grecos have the following income and expenses: Income: Jennifer’s salary…………………………………………………..$120,0

> Kelly Martin is divorced; her child, Barbara, lives with her and is her dependent. Kelly has the following items of income and expense: Income: Salary………………………………………………………………………………………..$ 60,000 Cash dividends……………………………………………………………………………….3,000 Interest

> Which of the following individuals must file a tax return in 2017? a. Carolyn is single and age 66. She receives $2,000 of interest income, $3,000 of dividend income, and $6,000 in Social Security benefits. b. Tim is single, age 18, and a full-time stu

> Differentiate a wealth tax from a wealth transfer tax and give examples of each.

> Edward is single with income that places him in the 25 percent marginal tax bracket. He incurs interest expense of $10,000 attributable to his investment in stocks and bonds. His gross investment income is $6,200 ($1,000 of which is from long-term capita

> Jennifer, a single individual, has a $20,000 loss from an S corporation, $11,000 salary from a part-time job, and $2,000 of interest income. Her itemized deductions include $4,000 interest on the $100,000 principal on her home acquisition mortgage, $2,80

> Michelle, a single individual, reports 2017 adjusted gross income of $280,000 and has the following itemized deductions before applicable limitations: Medical expenses……………………………………………………………………………………………….$14,000 Interest on home acquisition mortgage wit

> Ashley is single and owns a sole proprietorship. Her annual premium is $2,600 for her high-deductible medical policy with a $2,300 deductible. How much can Ashley set aside in an HSA? How much can she deduct for AGI?

> During 2017, Raymond, a single individual, earned a salary of $196,000. He also had the following items of investment income: $40,000 net short-term capital gain on sale of stock, $7,000 dividend income, $5,000 interest income from corporate bonds, and $

> Wendy is a single individual who works for MTP, Inc. During the entire calendar year, she works in France and pays French taxes of $8,000 on her $95,000 salary. Her taxable income without considering her salary from MTP is $10,000. Should Wendy claim the

> Melissa has $90,000 in salary from her full-time position and $40,000 in net income in 2017 from consulting as an independent contractor. What is her self-employment tax? What portion of this can she deduct?

> Four years ago, Handcock Corporation granted 300 SARs to Maria as a bonus. Handcock’s stock was worth $20 a share on the date of grant. Maria exercises her SARs this year when the stock is worth $60 a share. a. How much income should Maria have recogniz

> Three years ago, Netcom granted an ISO to Karen to buy 2,000 shares of Netcom stock at $6 per share exercisable for five years. At the date of the grant, Netcom stock was selling for $5 per share. This year, Karen exercises the ISO when the price is $30

> Linda’s husband dies, naming her the sole beneficiary of a $500,000 life insurance policy. The insurance company informs her that she has two options: (1) she can receive the entire $500,000 in one lump-sum payment or (2) she can receive annual installme

> Differentiate a consumption-based tax from an income tax and illustrate with an example.

> Justin’s 24-year-old son, Carlos, is a full-time student. In April 2017, Justin gave Carlos 450 shares of Striker Oil stock. Justin purchased the stock 8 months earlier at $18 per share. On the gift date, the stock was worth $31 per share. After the gift

> Clara and Charles decide to form a business. They each plan to contribute $15,000 in exchange for a 50 percent interest. The business will borrow $20,000 to cover the balance of its working capital needs. In their business plan, Clara and Charles show th

> Assume the same facts as problem 53, except that John and June expect the business will have a $44,000 loss in the first year (instead of a $64,000 profit) and will not make any cash distributions. Determine the income tax savings in the current year for

> Assume the same facts as problem 53, except that the business expects to make a cash distribution of $28,000 each to June and John the first year. Determine how much tax the business will pay and how much additional tax they will personally pay if they f

> June and John decide to form a business. They each plan to contribute $20,000 in exchange for a 50 percent interest in the business. They will then take out a bank loan for $30,000 to cover the balance of their working capital needs. They expect that the

> Krystyna, a single individual, invested $20,000 in corporate bonds with a stated interest rate of 5 percent and another $20,000 in tax-exempt municipal bonds issued for governmental activities with a stated interest rate of 4.75 percent. Calculate her af

> Sandle Corporation, an accrual-basis, calendar-year taxpayer, sold $15,000 of its products on account to Jim in November, year 1. In year 2, Jim declares bankruptcy and Sandle writes off the account as a bad debt. In year 3, Jim unexpectedly inherits a l

> Lilikoi Corporation began business in 2015. Lilikoi earned taxable income of $40,000 in 2015 and $120,000 in 2016. For 2017, Lilikoi Corporation has a net operating loss of $50,000 and decides to carry the loss back, filing a refund claim. Compute the am

> Stu and Harriett divorce on January 2 of the current year after eight years of marriage. Under the divorce decree, Harriett receives a vacation home that was held jointly with Stu while they were married. The vacation home was acquired seven years ago fo

> Cynthia and Howard, married taxpayers filing a joint return, have $100,000 in taxable income in 2017. They have 4 children (ages 4 through 12) who have no income that is taxable. If they can legally shift $2,000 in taxable income to each child, how much

> Explain the integration of the gift and estate taxes.

> Kimo Corporation, a cash-basis, calendar-year taxpayer, is in the 25 percent marginal tax bracket this year. Kimo owes a $15,000 expense that it may pay before the end of this year or in January of next year. a. If it expects its marginal tax rate to be

> Monico Corporation, a cash-basis, calendar-year taxpayer, is in the 25 percent marginal tax bracket this year. If it bills its customers at the beginning of December, it will receive $5,000 of income prior to year-end. If it bills its customers at the en

> The 4,000 shares of Medco stock that Diana purchased 11½ months ago for $12 per share are now trading at $19 per share. Diana’s regular marginal tax rate is 28 percent and her tax rate for long-term capital gains is 15 percent. a. What is Diana’s after-

> Thomas received $30,000 in a legal settlement in 2017. The tax treatment of the item is not certain. Thomas’s research results were ambiguous and he is not sure if the income is taxable. Because some doubt remained and because he did not think he would b

> Alison accidentally omitted $40,000 of gross income from the restaurant she owned on her 2016 tax return. The return showed gross income of $150,000 when filed on October 15, 2017. When can the IRS no longer pursue Alison with the threat of collection of

> Kevin deliberately omitted $40,000 of gross income from his restaurant on his 2017 tax return. The return indicated gross income of $200,000 when filed on April 14, 2018. When can the IRS no longer pursue Kevin with the threat of collection of the relate

> Five years ago, Cargo Corporation granted Mark a nonqualified stock option to buy 3,000 shares of Cargo common stock at $10 per share exercisable for five years. At the date of the grant, Cargo stock was selling for $9 per share. This year, Mark exercise

> Robert decided not to file his return on April 15 because he knew that he could not pay the balance due. He files his return on August 3, paying the full $4,000 balance. What are Robert’s expected late-payment/late-filing penalties?

> Vera, a single individual, receives $18,000 of dividend income and $38,000 of interest income from tax-exempt bonds. Vera also receives Social Security benefits of $16,000. What is Vera’s gross income?

> What types of investments are favored by tax law and why?

> George has $91,700 in salary from his full-time position and $43,000 in net income in 2017 from his sole proprietorship. What is his self-employment tax? What portion of this can he deduct?

> Barney retired from the Marlin Corporation where he worked for 25 years. Barney elects to receive his retirement benefits as an annuity over his remaining life, resulting in annual payments of $15,000. His plan balance consists of $70,000 employer contri

> Charles pays $120,000 for a single-life annuity that will pay him $11,000 a year for life. Treasury Department tables estimate his expected remaining life at 15 years. a. How much of each $11,000 payment must Charles report as gross income? b. If Charl

> Jill worked for a business in Denver. She took a new job with a different company in Colorado Springs, 90 miles away. Her commuting distance from her old home to her old employer in Denver was 15 miles. If she does not move to Colorado Springs, her commu

> Larry, age 32, works for Horizon Corporation. His annual salary is $60,000 and he is not a key employee. Horizon provides the following benefits to all employees: • Group term life insurance (each employee is provided with $80,000 worth of coverage that

> Sheldon Corporation loans $80,000 interest free for one year to Lynn, an employee. Assume that the applicable federal interest rate is 4 percent. Lynn uses the loan to pay for personal debts. What are the loan’s tax consequences for Sheldon and Lynn? How

> Joshua loans his son, Seth, $100,000 interest free for five years. Seth uses the money for a down payment on his home. Assume that the applicable federal interest rate is 4 percent. a. What are the tax consequences of this loan to Joshua and to Seth? b

> Jessica has $10,000 invested in corporate bonds with a stated interest rate of 7 percent and $10,000 in tax-exempt municipal bonds issued for governmental activities with a stated interest rate of 5.5 percent. Calculate her after-tax cash flow from each

> Luis received 400 shares of his employer’s stock as a bonus. He must return the stock to the company if he leaves before the 5-year vesting period ends. The fair market value of the stock at the time it was issued was $20,000. After five years, the stock

> Mac’s 24-year-old daughter, Alana, is a full-time student. In 2017, Mac gives Alana 600 shares of Highgrowth stock. Mac purchased the stock 10 months ago at $20 per share. On the gift date, the stock is worth $35 per share. After the gift, Highgrowth dec

> Can tax return preparers be assessed penalties?

> In year 1, Highrise Company contracts to manufacture a piece of customized equipment for a customer. The contract will take two years to complete. The contract price is $250,000 and the company estimates total costs of $220,000. Actual costs incurred are

> Betsy receives a salary of $50,000 from her employer (a retail clothing store) and several fringe benefits. Her employer pays premiums of $300 for her $40,000 group term life insurance coverage and pays $3,200 for medical insurance premiums. Her employer

> Realty Corporation, an accrual-basis, calendar-year corporation, agrees to rent office space to Tenant Company for $3,000 per month beginning on January 1, year 2. On December 15, year 1, Tenant gives Realty Corporation a $3,000 deposit in addition to re

> At the end of October, year 1, Dunbar Corporation hired Specialty Training, an accrual-basis, calendar-year taxpayer, to provide a six-week training program for its employees. Dunbar paid Specialty its full training fee of $30,000 on the first day of tra

> Beta Corporation received permission to change its tax year from a calendar year to a year ending August 31. Its income for the eight months ending August 31 is $96,000. What is Beta Corporation’s tax liability for its short tax year?

> On October 1, Bender Company (a calendar-year, cash-basis taxpayer) signs a lease with Realco Corporation to rent office space for 36 months. Bender obtains favorable monthly payments of $600 by agreeing to prepay the rent for the entire 36-month period.

> Tom is 68 years old. His employer pays the premiums for group term life insurance coverage of $110,000. The cost for Tom’s coverage is $3,000. a. If the plan providing this coverage is nondiscriminatory and Tom is not a key employee, how much gross inco

> Amy, a cash-basis taxpayer, received a salary of $100,000 during years 1, 2, and 3. Amy also was awarded a $30,000 bonus that was accrued by her employer, Vargus Corporation (an accrualbasis, calendar-year C corporation), in December of year 1 but which

> Charlie, who is in the 39.6 percent marginal tax bracket, is the president and sole owner of Charlie Corporation (a C corporation in the 34 percent tax bracket). His current salary is $700,000 per year. What are the income and FICA tax consequences if th

> Rebecca is single and an employee of Grand Corporation. In 2017 Rebecca’s salary was $190,000 and she earned a bonus of $45,000. How much in Social Security and Medicare taxes must be paid by Grand Corporation and how much of these taxes can it deduct? H

> What is a long-term contract? Briefly describe the two possible accounting treatments for long-term contracts.

> What is the purpose of the DIF formula? What happens if someone has a high DIF score?

> Moore Wholesalers is preparing its merchandise purchases budget. Budgeted sales are $400,000 for April and $480,000 for May. Cost of goods sold is expected to be 65% of sales. The company’s desired ending inventory is 20% of the following month’s cost of

> Bruno Industries expects credit sales for January, February, and March to be $200,000, $260,000, and $300,000, respectively. It is expected that 75% of the sales will be collected in the month of sale, and 25% will be collected in the following month. Co

> Pierre’s Hair Salon is considering opening a new location in French Lick, California. The cost of building a new salon is $300,000. A new salon will normally generate annual revenues of $70,000, with annual expenses (including depreciation) of $41,500. A

> Noble Company classifies its selling and administrative expense budget into variable and fixed components. Variable expenses are expected to be $22,000 in the first quarter, and $4,000 increments are expected in the remaining quarters of 2014. Fixed expe

> For Roche Inc., variable manufacturing overhead costs are expected to be $20,000 in the first quarter of 2014, with $5,000 increments in each of the remaining three quarters. Fixed overhead costs are estimated to be $40,000 in each quarter. Prepare the m

> The standard cost of product 777 includes 2 units of direct materials at $6.00 per unit. During August, the company bought 29,000 units of materials at $6.30 and used those materials to produce 16,000 units. Compute the total, price, and quantity varianc

> The Wellstone Division operates as a profit center. It reports the following for the year. Prepare a responsibility report for the Wellstone Division at December 31, 2014. Budget $2,000,000 Actual Sales $1,860,000 Variable costs 800,000 760,000 Con

> Palermo Company estimates that unit sales will be 10,000 in quarter 1; 12,000 in quarter 2; 15,000 in quarter 3; and 18,000 in quarter 4. Using a sales price of $70 per unit, prepare the sales budget by quarters for the year ending December 31, 2014.

> Voorhees, Inc. reports the following financial information. Average operating assets …………………………………. $3,000,000 Controllable margin ……………………………………………$ 660,000 Minimum rate of return ………………………………………………..10% Compute the return on investment and the residu

> Vilas Company is considering a capital investment of $190,000 in additional productive facilities. The new machinery is expected to have a useful life of 5 years with no salvage value. Depreciation is by the straight-line method. During the life of the i

> Jacque Company accumulated the following standard cost data concerning product I-Tal. Direct materials per unit: 2 pounds at $5 per pound Direct labor per unit: 0.2 hours at $15 per hour Manufacturing overhead: Predetermined rate is 125% of direct labor

> Dalby Company has accumulated the following budget data for the year 2014. 1. Sales: 30,000 units, unit selling price $85. 2. Cost of one unit of finished goods: direct materials 2 pounds at $5 per pound, direct labor 3 hours at $15 per hour, and manufac

> Fuqua Company’s sales budget projects unit sales of part 198Z of 10,000 units in January, 12,000 units in February, and 13,000 units in March. Each unit of part 198Z requires 4 pounds of materials, which cost $2 per pound. Fuqua Company desires its endin

> In May 2014, the budget committee of Grand Stores assembles the following data in preparation of budgeted merchandise purchases for the month of June. 1. Expected sales: June $500,000, July $600,000. 2. Cost of goods sold is expected to be 75% of sales.

> Lager Dental Clinic is a medium-sized dental service specializing in family dental care. The clinic is currently preparing the master budget for the first 2 quarters of 2014. All that remains in this process is the cash budget. The following information

> The costs listed below relate to a variety of different decision situations. Cost Decision 1. Unavoidable fixed overhead Eliminate an unprofitable segment 2. Direct labor Make or buy 3. Original cost

> Twyla Company operates a small factory in which it manufactures two products: C and D. Production and sales results for last year were as follows. For purposes of simplicity, the firm averages total fixed costs over the total number of units of C and D

> Cawley Company makes three models of tasers. Information on the three products is given below. Fixed expenses consist of $300,000 of common costs allocated to the three products based on relative sales, and additional fixed expenses of $30,000 (Tingler

> Aaron Corporation is projecting a cash balance of $30,000 in its December 31, 2013, balance sheet. Aaron’s schedule of expected collections from customers for the first quarter of 2014 shows total collections of $180,000. The schedule of expected payment

> Johnson Enterprises uses a computer to handle its sales invoices. Lately, business has been so good that it takes an extra 3 hours per night, plus every third Saturday, to keep up with the volume of sales invoices. Management is considering updating its

> On January 2, 2013, Benson Hospital purchased a $100,000 special radiology scanner from Picard Inc. The scanner had a useful life of 4 years and was estimated to have no disposal value at the end of its useful life. The straight-line method of depreciati