Harry has just started a business with$500,000 of assets, funded by$300,000 of personal funds and$200,000 debt. Unfortunately, on theopening day, before Harry could takeout an insurance policy and before hecould make any sales, a customer,Julie, injures herself on businesspremises and successfully sues formedical bills of $800,000. All businessassets can be sold at cost to cover partof the medical expenses. AssumeHarry has $400,000 of personalassets, including his $300,000investment in the business. Which ofthe following statements is NOTcorrect?а.If the business is set up as a soletrader, Julie will receive $500,000.b.If Harry is a sole trader, his return onequity will be -133%.C.If the business is set up as a company,the customer, Julie, will receive$400,000 towards her medical bill.d.If Harry set this business up as aprivate company as the soleshareholder, his return on equity willbe -100%.е.If Harry has set the business up as apartnership with Sandra, both partnerswill be personally liable for the costs ofwinding up the business and the lawsuit.

Setting up the business as a private company, in this case, the return on equity is 100% as all the…

Answered: Harry has just started a business with…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

To improve her body shape Ms. Ganda decided to undergo procedure and sought the services of the Body Beautiful, a clinic operated outside the hospital and owned by Below Medical Center Group Company. Body Beautiful charged Ms. Ganda the amount of P224,000 (inclusive of 12% but exclusive of excise tax) for the service rendered. Ms. Ganda bought residential house for P4,000,000. He paid P1,000,000 down and mortgage back the property as security for the P3,000,000. REQUIRED:1) How much is the DST from the mortgage? 2) How much is the Excise tax?
Zachary Lee has a personal automobile policy (PAP) with coverage of $25,000/$50,000 for bodily injury liability, $25,000 for property damageliability, $5,000 for medical payments, and a $500 deductible for collision insurance. How much will his insurance cover in each of the following situations? Will he have any out-of-pocket costs?a. Zachary loses control and skids on ice, running into a parked car and causing $3,785 damage to the unoccupied vehicle and $2,350 damage to his own car.b. Zachary runs a stop sign and causes a serious auto accident, badly injuring two people. The injured parties win lawsuits against him for $30,000 each.c. Zachary’s 18-year-old son borrows his car. He backs into a telephone pole and causes $450 damage to the car.
Carmen had worked for Sparrow Corporation for thirty years when she died of a heart attack at age 60. She was practically penniless at the time of her death, owed a $12,000 hospital bill, and had a disabled spouse. The company was very concerned about its public image, and rather than run the risk of embarrassment from one of its long-term employees dying and leaving her spouse with insufficient means, the Board of Directors agreed to pay Carmen’s hospital bill and to give her spouse $6,000 per year for the rest of his life. Discuss both sides of the question whether Carmen (or her estate) and her spouse realize any taxable income from the above.
Jessica is a professional consultant. She agrees to consulting services for Joe for $2,000. After she finishes, Joe does not have cash to pay Jessica, but he has an antique, collectible baseball card with a fair market value of $2,000 that he gives her to satisfy the payment. The baseball card cost Joe $500. How much should Jessica include in her gross income?
Your cousin lost her job because of the pandemic and used her credit card up to her $20,000 limit in order to pay bills. But she hasn’t found another job, so had to call the credit card company and explain that she had zero money with which to pay her bill, had zero assets that could be sold for cash, and had a pile of other debts besides. The credit card company did its due diligence, concluded that yes your cousin was a lost cause, then wrote off the entire $20,000 as uncollectible. Code § 61(a) includes “discharge of indebtedness” as an example of “gross in-come.” So your cousin will be taxable on that $20,000, right? Wrong? Why?
please help, I’m confused :(
Dan sells his expensive sports car to his brother for $100. The next week, Dan files for bankruptcy under Chapter 7. Regarding the sale of the car, the trustee may 1) not cancel it, but can sue Dan's brother for return of the $100. 2) cancel it as a voidable preference. 3) not cancel it because it is a sale, not a gift. 4) cancel it as a fraudulent transfer.
GoodMates Pty Ltd loaned one of its staff, Munir, the amount of $5,000 (interest free) for one month. Due to personal life issues and financial hardship that Munir was suffering, it turned out that demanding the loan will endanger his health and will cause him not to be able to provide basic needs for his family. At the discretion of the board of directors, this loan was waived on compassionate reasons and Munir was informed. Is the company required to pay any fringe benefit tax? Kindly use the template below and discuss in detail. Facts: Rules and or cases: Application: Conclusion:
Energo Electronics, an incorporated business, has a highly paid electrical and computer specialist, Seng, on the payroll whose services are essential to the success of the business. The company is concerned that should Seng die or become disabled the business would suffer serious financial setbacks. In order to partially protect its interests, the company plans to purchase $500,000 worth of term insurance on Seng's life. Earning over $300,000 a year Seng's primary concern is to shelter as much of his income as possible from taxes. He has little personal need for life insurance. Suggest a solution using universal life insurance that would meet both Seng's and the company's needs. A) The company could buy a $500,000 UL policy on Seng's life with the level plus account value death benefit. The company would own the basic death benefit and Seng would own the cash value and the portion of the death benefit equal to the account value. The company would pay a premium equal to the policy NCPI…
Susan owned a restaurant in Key West, Florida that was destroyed by a hurricane. The restaurant had an adjusted basis of $589,000 when the hurricane hit. Susan had insurance coverage on the restaurant and received a check for $745,500. She purchased a new restaurant four months after receiving the insurance check for $633,500. Assume Susan wants to minimize gain if possible. What is Susan's realized gain/loss? (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Susan's (b) What is Susan's recognized gain/loss? (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Susan's ✓ is $ recognized gain -----------
Black operates a business. Black is single. The following information is available concerning his business related expenses during 2021: 1. A customer who owed $6,200 on open account filed for bankruptcy during 2021. It was estimated during 2021 that only $1,700 would eventually be collected from the customer during 2022. The account receivable had a basis of $6,200. 2. He incurred costs of $2,500 to appear before the city council to lobby for proposed legislation that had a direct effect upon his business. 3. He paid political contributions of $250 to a candidate for the city council. 4. He traveled to Paris on business for 6 days. The cost of airfare was $1,500. The cost of a hotel room was $250 per day. The cost of meals was $60 per day. Business was conducted on 5 days. He stayed the extra 1 day for a vacation. 5. He incurred entertainment expenses qualified business meals in the amount of $4,500 and entertainment expenses for attending the theater in the amount of $3,500. 6. He…
Haresh

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS