Firm B, a calendar year, cash basis taxpayer, leases lawn and garden equipment. During December, it received the following cash payments. To what extent does each payment represent current taxable income to Firm 8? Required: a. $522 repayment of a loan from an employee. Firm B loaned $500 to the employee six months ago, and the employee repaid the loan with interest. b. $600 deposit from a customer who rented mechanical equipment. Firm B must return the entire deposit when the customer returns the undamaged equipment. c. $10,000 short-term loan from a local bank. Firm B gave the bank a written note to repay the loan in one year at 5 percent interest. d. $888 prepaid rent from the customer described in part (b). The rent is $12 per day for the 74-day period from December 17 through February 28.

Firm B, a calendar year, cash basis taxpayer, leases lawn and garden equipment. During December, it received the following cash payments. To what extent does each payment represent current taxable income to Firm 8? Required: a. $522 repayment of a loan from an employee. Firm B loaned $500 to the employee six months ago, and the employee repaid the loan with interest. b. $600 deposit from a customer who rented mechanical equipment. Firm B must return the entire deposit when the customer returns the undamaged equipment. c. $10,000 short-term loan from a local bank. Firm B gave the bank a written note to repay the loan in one year at 5 percent interest. d. $888 prepaid rent from the customer described in part (b). The rent is $12 per day for the 74-day period from December 17 through February 28.

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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A-1
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