Nancy operates a business that uses the accrual method of accounting. In December, Nancy asked her brother, Hank, to provide her business with consulting advice. Hank billed Nancy for $8,300 of consulting services in year O (a reasonable amount), but Nancy was only able to pay $5,100 of the bill by the end of this year. However, Nancy paid the remainder of the bill in the following year. a. How much of the $8,300 consulting services will Hank include in his income this year if he uses the cash method of accounting? What amount can Nancy deduct this year for the consulting services? Amount included by Hank Amount deducted by Nancy

Nancy operates a business that uses the accrual method of accounting. In December, Nancy asked her brother, Hank, to provide her business with consulting advice. Hank billed Nancy for $8,300 of consulting services in year O (a reasonable amount), but Nancy was only able to pay $5,100 of the bill by the end of this year. However, Nancy paid the remainder of the bill in the following year. a. How much of the $8,300 consulting services will Hank include in his income this year if he uses the cash method of accounting? What amount can Nancy deduct this year for the consulting services? Amount included by Hank Amount deducted by Nancy

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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Sandy and John Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2022, Sandy worked as a computer technician at a local university earning a salary of $152,100, and John worked part time as a receptionist for a law firm earning a salary of $29,100. Sandy also does some Web design work on the side and reported revenues of $4,100 and associated expenses of $800. The Fergusons received $820 in qualified dividends and a $205 refund of their state income taxes. The Fergusons always itemize their deductions, and their itemized deductions were well over the standard deduction amount last year. Use Exhibit 8-10, Tax Rate Schedule, Dividends and Capital Gains Tax Rates, 2022 AMT exemption for reference. The Fergusons reported making the following payments during the year: State income taxes of $4,425. Federal tax withholding of $21,000. Alimony payments to Sandy's former spouse of $10,050 (divorced 12/31/2014). Child support payments for Sandy's child with…
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