Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $27,000 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. What is the after-tax income if Hank sends his client the bill in 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?
Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $27,000 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. What is the after-tax income if Hank sends his client the bill in 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?
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 $27,000 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
What is the after-tax income if Hank sends his client the bill in 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?
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