llison has completed a degree in Computer Science at Santa Clara Univ. and has just begun a full-time job at Alphabet Inc. (Google). Below are a few facts concerning her financial status and outlook (as of her first day on the job; July 1, 2020).  She owns a used car which she purchased for $20,000. Her remaining loan balance of $12,000 is to be paid out monthly over the next two years. She secured the loan from her dad and it carries no interest, so she only has to pay down the principle.  She has student loan debt of $48K. Now that she has graduated she plans to pay this off in 6 years with annual payments of $8,000 beginning December 1, 2020.  She has credit card debt with a current balance of $3,500.  Last week she moved into a new Mountain View apartment. 1. Monthly rent of $4,200 (the rent payment includes all utilities) 2. She paid an additional $4,200 when she moved in as a security deposit. This money is held by the apartment management against potential damage. If she keeps the apartment clean and free of damage, she will be refunded this amount when she moves out.  Her checking account balance is $6,300 (Net, after making her first month’s rent payment along with the security deposit).  Her job offer from Google consisted of; 3. $25K cash (net of taxes) hiring bonus. She received this on her first day of employment and deposited it promptly into a new savings account. 4. Her base salary is $200K/year to be paid on the last day of each month. Note that Google is an “at-will” employer. If you are not familiar with this term see; https://www.indeed.com/hire/c/info/at-will-employment-what-is-this-exactly She was given a grant of 500 shares of GOOG stock, issued as RSUs which will vest in 1 year if she remains as an employee. Note: See Investopia: What to know about Restricted Stock Units.  Going forward, she estimates the following net income and expenses 5. Her monthly take-home pay, after withholding for social security, income taxes, and insurance is: $10,000/month 6. In addition to her monthly rent of $4,200, she estimates the following ongoing expenses: ▪ Eating out: $500/mo ▪ Groceries/gas: $400/mo ▪ Clothing: $250/mo ▪ Insurance / health: $300/mo ▪ Misc: $600/mo ▪ Travel: $500/mo  Assignment: I. Build a personal balance sheet for Allison, effective the end of her first day on the job at Google (i.e. end of day, July 1, 2020). - Use the account list below (Chart of Accounts). Choose the appropriate account to record the amount and add it to the blank Balance Sheet II. Build a personal balance sheet for Allison, effective at the end of her 1 year anniversary at Google. (i.e. end of day, July 1, 2021) Use the following assumptions: ▪ GOOG share price of $144/share remains flat over time. ▪ Ignore interest rates on all loans and savings accounts ▪ Ignore depreciation in value of her car ▪ She uses the credit card account as a revolving debt, making monthly payments to equal new purchases while keeping the overall balance the same. III. For both balance sheets use the account list below (The Chart of Accounts). Choose the appropriate account to record the Asset, Liability, or Equity values from the description above.  The Chart of Accounts o Assets ▪ Current Assets  Cash and Checking Account  Savings Account  Deposits and Prepaid Items  Stock  Other ▪ Fixed (Long-term) Assets  Automobile  Other ▪ Other Assets  Other o Liabilities ▪ Current Liabilities  Credit card debt  Current portion of long-term debt  Other ▪ Long-term Liabilities  Long-term debt  Other o Equity ▪ Contributed Capital ▪ Accumulated Earnings

llison has completed a degree in Computer Science at Santa Clara Univ. and has just begun a full-time job at Alphabet Inc. (Google). Below are a few facts concerning her financial status and outlook (as of her first day on the job; July 1, 2020).  She owns a used car which she purchased for $20,000. Her remaining loan balance of $12,000 is to be paid out monthly over the next two years. She secured the loan from her dad and it carries no interest, so she only has to pay down the principle.  She has student loan debt of $48K. Now that she has graduated she plans to pay this off in 6 years with annual payments of $8,000 beginning December 1, 2020.  She has credit card debt with a current balance of $3,500.  Last week she moved into a new Mountain View apartment. 1. Monthly rent of $4,200 (the rent payment includes all utilities) 2. She paid an additional $4,200 when she moved in as a security deposit. This money is held by the apartment management against potential damage. If she keeps the apartment clean and free of damage, she will be refunded this amount when she moves out.  Her checking account balance is $6,300 (Net, after making her first month’s rent payment along with the security deposit).  Her job offer from Google consisted of; 3. $25K cash (net of taxes) hiring bonus. She received this on her first day of employment and deposited it promptly into a new savings account. 4. Her base salary is $200K/year to be paid on the last day of each month. Note that Google is an “at-will” employer. If you are not familiar with this term see; https://www.indeed.com/hire/c/info/at-will-employment-what-is-this-exactly She was given a grant of 500 shares of GOOG stock, issued as RSUs which will vest in 1 year if she remains as an employee. Note: See Investopia: What to know about Restricted Stock Units.  Going forward, she estimates the following net income and expenses 5. Her monthly take-home pay, after withholding for social security, income taxes, and insurance is: $10,000/month 6. In addition to her monthly rent of $4,200, she estimates the following ongoing expenses: ▪ Eating out: $500/mo ▪ Groceries/gas: $400/mo ▪ Clothing: $250/mo ▪ Insurance / health: $300/mo ▪ Misc: $600/mo ▪ Travel: $500/mo  Assignment: I. Build a personal balance sheet for Allison, effective the end of her first day on the job at Google (i.e. end of day, July 1, 2020). - Use the account list below (Chart of Accounts). Choose the appropriate account to record the amount and add it to the blank Balance Sheet II. Build a personal balance sheet for Allison, effective at the end of her 1 year anniversary at Google. (i.e. end of day, July 1, 2021) Use the following assumptions: ▪ GOOG share price of $144/share remains flat over time. ▪ Ignore interest rates on all loans and savings accounts ▪ Ignore depreciation in value of her car ▪ She uses the credit card account as a revolving debt, making monthly payments to equal new purchases while keeping the overall balance the same. III. For both balance sheets use the account list below (The Chart of Accounts). Choose the appropriate account to record the Asset, Liability, or Equity values from the description above.  The Chart of Accounts o Assets ▪ Current Assets  Cash and Checking Account  Savings Account  Deposits and Prepaid Items  Stock  Other ▪ Fixed (Long-term) Assets  Automobile  Other ▪ Other Assets  Other o Liabilities ▪ Current Liabilities  Credit card debt  Current portion of long-term debt  Other ▪ Long-term Liabilities  Long-term debt  Other o Equity ▪ Contributed Capital ▪ Accumulated Earnings

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter3: Income Sources

Section: Chapter Questions

Problem 41P

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