In 2022, Mr. Woods had taxable income in the amount of $518,000 before considering the following events and transactions that transpired in 2022: a. On January 1, 2022, WAR purchased a plot of land for $109,500 with the intention of creating a driving range where patrons could test their new golf equipment. WAR never got around to building the driving range; instead, WAR sold the land on October 1, 2022, for $43,800. b. On August 17, 2022, WAR sold its golf testing machine, "Iron Byron," and replaced it with a new machine, "Iron Tige" "Iron Byron" was purchased and installed for a total cost of $25,800 on February 5, 2018. At the time of sale, "Iron Byron" had an adjusted tax basis of $7,800. WAR sold "Iron Byron" for $34,500. c. In the months October through December 2022, WAR sold various assets to come up with the funds necessary to invest in WAR's latest and greatest invention-the three-dimple golf ball. Data on these assets are provided below:
In 2022, Mr. Woods had taxable income in the amount of $518,000 before considering the following events and transactions that transpired in 2022: a. On January 1, 2022, WAR purchased a plot of land for $109,500 with the intention of creating a driving range where patrons could test their new golf equipment. WAR never got around to building the driving range; instead, WAR sold the land on October 1, 2022, for $43,800. b. On August 17, 2022, WAR sold its golf testing machine, "Iron Byron," and replaced it with a new machine, "Iron Tige" "Iron Byron" was purchased and installed for a total cost of $25,800 on February 5, 2018. At the time of sale, "Iron Byron" had an adjusted tax basis of $7,800. WAR sold "Iron Byron" for $34,500. c. In the months October through December 2022, WAR sold various assets to come up with the funds necessary to invest in WAR's latest and greatest invention-the three-dimple golf ball. Data on these assets are provided below:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![31 U2_ASi
ces
FI
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!
@
2
142
Required information
[The following information applies to the questions displayed below.]
x
WAR (We Are Rich) has been in business since 1989. WAR is an accrual-method sole proprietorship that deals in the
manufacturing and wholesaling of various types of golf equipment. Hack & Hack CPAS has filed accurate tax returns for
WAR's owner since WAR opened its doors. The managing partner of Hack & Hack (Jack) has gotten along very well with
the owner of WAR-Mr. Someday Woods (single). However, in early 2022, Jack Hack and Someday Woods played a round
of golf, and Jack, for the first time ever, beat Mr. Woods. Mr. Woods was so upset that he fired Hack & Hack and has hired
you to compute his 2022 taxable income. Mr. Woods was able to provide you with the following information from prior tax
returns. The taxable income numbers reflect the results from all of Mr. Woods's activities except for the items separately
stated. You will need to consider how to handle the separately stated items for tax purposes. Also, note that the 2017-
2021 numbers do not reflect capital loss carryovers.
Ordinary taxable income.
Other items not included in
ordinary taxable income:
Net gain (loss) on disposition of
$1231.assets
$ 3,570
Net long-term capital gain (loss)
on disposition of capital assets $ (16,425)
F2
J
#
3
F3
$ (8,900)
In 2022, Mr. Woods had taxable income in the amount of $518,000 before considering the following events and
transactions that transpired in 2022:
■
2017
$ 4,380
(1)
$
a. On January 1, 2022, WAR purchased a plot of land for $109,500 with the intention of creating a driving range where
patrons could test their new golf equipment. WAR never got around to building the driving range; instead, WAR sold the
land on October 1, 2022, for $43,800.
Q Search
4
b. On August 17, 2022, WAR sold its golf testing machine, "Iron Byron," and replaced it with a new machine, "Iron Tige"
"Iron Byron" was purchased and installed for a total cost of $25,800 on February 5, 2018. At the time of sale, "Iron
Byron" had an adjusted tax basis of $7,800. WAR sold "Iron Byron" for $34,500.
2018
$ 2,190
c. In the months October through December 2022, WAR sold various assets to come up with the funds necessary to
invest in WAR's latest and greatest invention-the three-dimple golf ball. Data on these assets are provided below:
F4
10,950
%
5
w Question
FS
$ 1,190 $ (19,800)
Saved
< Prev
Q 4.0
PRE
☀
2019
$ 98,465
F6
A
M Question X M Question X M Question X
6
2020
$ 178,075
$ (7,140)
2021
$ 261,875
11 12 of 15
F7
&
7
PrtScn
Next >
F8
8
Home
F9
9
End
F10
PgUp
0](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8f49901f-6146-4171-b57a-a00c57625a24%2Fae45e313-473e-4fac-b0e3-b728deabb38e%2Fw2004vk_processed.jpeg&w=3840&q=75)
Transcribed Image Text:31 U2_ASi
ces
FI
ezto.mheducation.com/ext/map/index.html?_con=con&external browser=0&launchUrl=https%253A%252F%252Flms.mheducation.com%252Fmghmiddlewa
!
@
2
142
Required information
[The following information applies to the questions displayed below.]
x
WAR (We Are Rich) has been in business since 1989. WAR is an accrual-method sole proprietorship that deals in the
manufacturing and wholesaling of various types of golf equipment. Hack & Hack CPAS has filed accurate tax returns for
WAR's owner since WAR opened its doors. The managing partner of Hack & Hack (Jack) has gotten along very well with
the owner of WAR-Mr. Someday Woods (single). However, in early 2022, Jack Hack and Someday Woods played a round
of golf, and Jack, for the first time ever, beat Mr. Woods. Mr. Woods was so upset that he fired Hack & Hack and has hired
you to compute his 2022 taxable income. Mr. Woods was able to provide you with the following information from prior tax
returns. The taxable income numbers reflect the results from all of Mr. Woods's activities except for the items separately
stated. You will need to consider how to handle the separately stated items for tax purposes. Also, note that the 2017-
2021 numbers do not reflect capital loss carryovers.
Ordinary taxable income.
Other items not included in
ordinary taxable income:
Net gain (loss) on disposition of
$1231.assets
$ 3,570
Net long-term capital gain (loss)
on disposition of capital assets $ (16,425)
F2
J
#
3
F3
$ (8,900)
In 2022, Mr. Woods had taxable income in the amount of $518,000 before considering the following events and
transactions that transpired in 2022:
■
2017
$ 4,380
(1)
$
a. On January 1, 2022, WAR purchased a plot of land for $109,500 with the intention of creating a driving range where
patrons could test their new golf equipment. WAR never got around to building the driving range; instead, WAR sold the
land on October 1, 2022, for $43,800.
Q Search
4
b. On August 17, 2022, WAR sold its golf testing machine, "Iron Byron," and replaced it with a new machine, "Iron Tige"
"Iron Byron" was purchased and installed for a total cost of $25,800 on February 5, 2018. At the time of sale, "Iron
Byron" had an adjusted tax basis of $7,800. WAR sold "Iron Byron" for $34,500.
2018
$ 2,190
c. In the months October through December 2022, WAR sold various assets to come up with the funds necessary to
invest in WAR's latest and greatest invention-the three-dimple golf ball. Data on these assets are provided below:
F4
10,950
%
5
w Question
FS
$ 1,190 $ (19,800)
Saved
< Prev
Q 4.0
PRE
☀
2019
$ 98,465
F6
A
M Question X M Question X M Question X
6
2020
$ 178,075
$ (7,140)
2021
$ 261,875
11 12 of 15
F7
&
7
PrtScn
Next >
F8
8
Home
F9
9
End
F10
PgUp
0
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