Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $25,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal tax rate is 32 percent this year and will be 35 percent next year, and that he can earn an after-tax rate of return of 12 percent on his investments. Use Exhibit 3.1.Required: (PLEASE ONLY SOLVE QUESTION NUMBER 4)What is the after-tax income if Hank sends his client the bill in December?What is the after-tax income if Hank sends his client the bill in January?Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.Should Hank send his client the bill in December or January?What is the after-tax income if Hank expects his marginal tax rate to be 24 percent next year and sends his client the bill in January?Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.Should Hank send his client the bill in December or January if he expects his marginal tax rate to be 32 percent this year and 24 percent next year? Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed$25,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginaltax rate is 32 percent this year and will be 35 percent next year, and that he can earn an after-tax rate of return of 12 percent on hisinvestments. Use Exhibit 3.1.Required:a. What is the after-tax income if Hank sends his client the bill in December?b. What is the after-tax income if Hank sends his client the bill in January?Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.c. Should Hank send his client the bill in December or January?d. What is the after-tax income if Hank expects his marginal tax rate to be 24 percent next year and sends his client the bill in January?Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.e. Should Hank send his client the bill in December or January if he expects his marginal tax rate to be 32 percent this year and 24percent next year?Complete this question by entering your answers in the tabs below.Answer is complete but not entirely correct.Required ARequired B Required CWhat is the after-tax income if Hank expects his marginal tax rate to be 24 percent next year and sends his client the bill inJanuary?Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.$ 19,662After-tax incomeRequired D< Required CRequired ERequired E > EXHIBIT 3-1 Present Value of a Single Payment at Various Annual Rates ofReturnYear 1Year 2Year 3Year 4Year 5Year 6Year 7Year 8Year 9Year 10Year 11Year 12Year 13Year 14Year 154%5%6%7% 8% 9% 10% 11% 12%0.9620.9520.9430.935 0.926 0.917 0.909 0.901 0.8930.857 0.842 0.826 0.812 0.7970.9250.9070.890 0.8730.8890.864 0.840 0.816 0.794 0.772 0.751 0.731 0.7120.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.6360.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.5670.7900.746 0.705 0.6660.5070.630 0.596 0.564 0.5350.583 0.547 0.513 0.482 0.4520.7600.711 0.665 0.6230.7310.540 0.502 0.467 0.434 0.4040.500 0.460 0.424 0.391 0.3610.677 0.627 0.5820.703 0.645 0.592 0.5440.676 0.614 0.558 0.5080.5850.6500.5270.4750.6250.557 0.4970.4440.3970.463 0.422 0.386 0.352 0.3220.429 0.388 0.350 0.317 0.2870.356 0.319 0.286 0.2570.601 0.530 0.469 0.415 0.368 0.326 0.290 0.258 0.2290.5770.340 0.299 0.263 0.232 0.2050.555 0.481 0.417 0.362 0.315 0.275 0.239 0.209 0.1830.505 0.4420.388

Given information:Legal services performed in December: $25,000Hank's marginal tax rate this year:…

Answered: Hank, a calendar-year taxpayer, uses…

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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Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $25,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal tax rate is 32 percent this year and will be 35 percent next year, and that he can earn an after-tax rate of return of 12 percent on his investments. Use Exhibit 3.1.

Required: (PLEASE ONLY SOLVE QUESTION NUMBER 4)
1. What is the after-tax income if Hank sends his client the bill in December?
2. What is the after-tax income if Hank sends his client the bill in January?
  Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.
3. Should Hank send his client the bill in December or January?
4. What is the after-tax income if Hank expects his marginal tax rate to be 24 percent next year and sends his client the bill in January?
  Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.
5. Should Hank send his client the bill in December or January if he expects his marginal tax rate to be 32 percent this year and 24 percent next year?

Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed
$25,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal
tax rate is 32 percent this year and will be 35 percent next year, and that he can earn an after-tax rate of return of 12 percent on his
investments. Use Exhibit 3.1.
Required:
a. What is the after-tax income if Hank sends his client the bill in December?
b. What is the after-tax income if Hank sends his client the bill in January?
Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.
c. Should Hank send his client the bill in December or January?
d. What is the after-tax income if Hank expects his marginal tax rate to be 24 percent next year and sends his client the bill in January?
Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.
e. Should Hank send his client the bill in December or January if he expects his marginal tax rate to be 32 percent this year and 24
percent next year?
Complete this question by entering your answers in the tabs below.
Answer is complete but not entirely correct.
Required A
Required B Required C
What is the after-tax income if Hank expects his marginal tax rate to be 24 percent next year and sends his client the bill in
January?
Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.
$ 19,662
After-tax income
Required D
< Required C
Required E
Required E >

EXHIBIT 3-1 Present Value of a Single Payment at Various Annual Rates of
Return
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Year 11
Year 12
Year 13
Year 14
Year 15
4%
5%
6%
7% 8% 9% 10% 11% 12%
0.962
0.952
0.943
0.935 0.926 0.917 0.909 0.901 0.893
0.857 0.842 0.826 0.812 0.797
0.925
0.907
0.890 0.873
0.889
0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712
0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636
0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567
0.790
0.746 0.705 0.666
0.507
0.630 0.596 0.564 0.535
0.583 0.547 0.513 0.482 0.452
0.760
0.711 0.665 0.623
0.731
0.540 0.502 0.467 0.434 0.404
0.500 0.460 0.424 0.391 0.361
0.677 0.627 0.582
0.703 0.645 0.592 0.544
0.676 0.614 0.558 0.508
0.585
0.650
0.527
0.475
0.625
0.557 0.497
0.444
0.397
0.463 0.422 0.386 0.352 0.322
0.429 0.388 0.350 0.317 0.287
0.356 0.319 0.286 0.257
0.601 0.530 0.469 0.415 0.368 0.326 0.290 0.258 0.229
0.577
0.340 0.299 0.263 0.232 0.205
0.555 0.481 0.417 0.362 0.315 0.275 0.239 0.209 0.183
0.505 0.442
0.388

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