.LO.2 On July 1, 2016, Rex purchases a new automobile for $40,000. He uses the car 80% for business and drives the car as follows: 8,000 miles in 2016, 19,000 miles in 2017, 20,000 miles in 2018, and 15,000 miles in 2019. Determine Rex's basis in the business portion of the auto as of January 1, 2020, under the following assumptions: a. Rex uses the automatic mileage method. b. Rex uses the actual cost method. [Assume that no § 179 expensing is claimed and that 200% declining-balance cost recovery with the half-year convention is used-see Chapter 8. The recovery limitation for an auto placed in service in 2016 is as follows: $3,160 (first year), $5,100 (second year), $3,050 (third year), and $1,875 (fourth year).]

.LO.2 On July 1, 2016, Rex purchases a new automobile for $40,000. He uses the car 80% for business and drives the car as follows: 8,000 miles in 2016, 19,000 miles in 2017, 20,000 miles in 2018, and 15,000 miles in 2019. Determine Rex's basis in the business portion of the auto as of January 1, 2020, under the following assumptions: a. Rex uses the automatic mileage method. b. Rex uses the actual cost method. [Assume that no § 179 expensing is claimed and that 200% declining-balance cost recovery with the half-year convention is used-see Chapter 8. The recovery limitation for an auto placed in service in 2016 is as follows: $3,160 (first year), $5,100 (second year), $3,050 (third year), and $1,875 (fourth year).]

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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While buying a new car, Melissa made a down payment of $1,200.00 and agreed to make month-end payments of $300.00 for the next 4 years and 5 months. If she was charged an interest rate of 3.00% compounded quarterly for the entire term, answer the following, a. What was the cost of the car when Melissa purchased it? b. What was the total amount of interest paid over the term?
3
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While buying a new car, Ryan made a down payment of $1,200 and agreed to make month-end payments of $320 for the next 3 years and 6 months. She was charged an interest rate of 4% compounded semi-annually for the entire term. a. What was the purchase price of the car? b. What was the total amount of interest paid over the term? Since the birth of her daughter, 18 years ago, Jeremy has deposited $150.00 at the beginning of every month into an RESP. The interest rate on the plan was 3.00% compounded monthly for the first 9 years and 3.60% compounded monthly for the next 9 years. a. Calculate the value of the fund today (the end of a 18-year term). b. How much of this is interest?
LO.2 Selma operates a contractor's supply store. She maintains her books using the cash method. At the end of 2023, her accountant computes her accrual basis income that is used on her tax return. For 2023, Selma had cash receipts of $1,400,000, which included $200,000 collected on accounts receivable from 2022 sales. It also included the proceeds of a $100,000 bank loan. At the end of 2023, she had $250,000 in accounts receivable from customers, all from 2023 sales. a. Compute Selma's accrual basis gross revenues for 2023. b. Selma paid cash for all of the purchases. The total amount paid for merchandise in 2023 was $1,300,000. At the end of 2022, she had merchandise on hand with a cost of $150,000. At the end of 2023, the cost of merchandise on hand was $300,000. Compute Selma's gross income from merchandise sales for 2023.
2. Ms. Fatima sold to Ms. Ruqaiya OMR 60,000 worth of goods on the 15th of April 2022 by accepting a 150 days, 6% interest bearing note. Both Ms. Fatima & Ms. Ruqaiya need your help in understanding how and in what way the notes receivable and the payables should be treated. Provide them with the required help by showing how the transactions would be treated in the books of both parties in the following situations: a) When the notes are accepted. b) On the maturity date, the note is honored. c) Suppose Ms. Fathima prepared final accounts on the 25th of July 2022 d) Following the above situation, the bill is met on maturity. e) The note was dishonored on the maturity date by Ms. Ruqaiya.
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2.
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