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Nello Company owed $23,400 overdue rent to its landlord, Bonview Inc. Because Nello is a desirable tenant, Bonview agreed to settle the overdue account for a $15,000 cash payment from Nello. Both Nello and Bonview are accrual basis taxpayers. Required: a. What is the tax consequence to Nello of the settlement of its $23,400 account payable to Bonview? Compute Nello's net cash outflow from the settlement assuming its tax rate is 35 percent. b. What is the tax consequence to Bonview of the settlement of its $23,400 account receivable from Nello? Compute Bonview's net cash inflow from the settlement assuming its tax rate is 21 percent. Complete this question by entering your answers in the tabs below. Required A Required B

Nello Company owed $23,400 overdue rent to its landlord, Bonview Inc. Because Nello is a desirable tenant, Bonview agreed to settle the overdue account for a $15,000 cash payment from Nello. Both Nello and Bonview are accrual basis taxpayers. Required: a. What is the tax consequence to Nello of the settlement of its $23,400 account payable to Bonview? Compute Nello's net cash outflow from the settlement assuming its tax rate is 35 percent. b. What is the tax consequence to Bonview of the settlement of its $23,400 account receivable from Nello? Compute Bonview's net cash inflow from the settlement assuming its tax rate is 21 percent. Complete this question by entering your answers in the tabs below. Required A Required B

FINANCIAL ACCOUNTING
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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**Transcription for Educational Website** --- Nello Company owed $23,400 overdue rent to its landlord, Bonview Inc. Because Nello is a desirable tenant, Bonview agreed to settle the overdue account for a $15,000 cash payment from Nello. Both Nello and Bonview are accrual basis taxpayers. **Required:** a. What is the tax consequence to Nello of the settlement of its $23,400 account payable to Bonview? Compute Nello’s net cash outflow from the settlement assuming its tax rate is 35 percent. b. What is the tax consequence to Bonview of the settlement of its $23,400 account receivable from Nello? Compute Bonview’s net cash inflow from the settlement assuming its tax rate is 21 percent. *Complete this question by entering your answers in the tabs below.* - **Required A** - **Required B** **Required A** *What is the tax consequence to Nello of the settlement of its $23,400 account payable to Bonview? Compute Nello’s net cash outflow from the settlement assuming its tax rate is 35 percent.* | Amount | | |------------------------|---------------------------| | Income recognized | | | Tax cost | | | Net cash outflow | | *Note: To view "Required B," switch the tab to reveal more data.* ---
Transcribed Image Text:**Transcription for Educational Website** --- Nello Company owed $23,400 overdue rent to its landlord, Bonview Inc. Because Nello is a desirable tenant, Bonview agreed to settle the overdue account for a $15,000 cash payment from Nello. Both Nello and Bonview are accrual basis taxpayers. **Required:** a. What is the tax consequence to Nello of the settlement of its $23,400 account payable to Bonview? Compute Nello’s net cash outflow from the settlement assuming its tax rate is 35 percent. b. What is the tax consequence to Bonview of the settlement of its $23,400 account receivable from Nello? Compute Bonview’s net cash inflow from the settlement assuming its tax rate is 21 percent. *Complete this question by entering your answers in the tabs below.* - **Required A** - **Required B** **Required A** *What is the tax consequence to Nello of the settlement of its $23,400 account payable to Bonview? Compute Nello’s net cash outflow from the settlement assuming its tax rate is 35 percent.* | Amount | | |------------------------|---------------------------| | Income recognized | | | Tax cost | | | Net cash outflow | | *Note: To view "Required B," switch the tab to reveal more data.* ---
**Nello Company and Bonview Inc. Settlement Analysis** Nello Company owed $23,400 in overdue rent to its landlord, Bonview Inc. Because Nello is a desirable tenant, Bonview agreed to settle the overdue account for a $15,000 cash payment from Nello. Both Nello and Bonview are accrual basis taxpayers. **Required:** - **a.** What is the tax consequence to Nello of the settlement of its $23,400 account payable to Bonview? Compute Nello’s net cash outflow from the settlement assuming its tax rate is 35 percent. - **b.** What is the tax consequence to Bonview of the settlement of its $23,400 account receivable from Nello? Compute Bonview’s net cash inflow from the settlement assuming its tax rate is 21 percent. **Complete this question by entering your answers in the tabs below.** - **Required A** - **Required B** --- **Required B:** What is the tax consequence to Bonview of the settlement of its $23,400 account receivable from Nello? Compute Bonview’s net cash inflow from the settlement assuming its tax rate is 21 percent. | **Amount** | | |-----------------------|----------------------| | Deductible expense | | | Tax savings | | | Net cash inflow | |
Transcribed Image Text:**Nello Company and Bonview Inc. Settlement Analysis** Nello Company owed $23,400 in overdue rent to its landlord, Bonview Inc. Because Nello is a desirable tenant, Bonview agreed to settle the overdue account for a $15,000 cash payment from Nello. Both Nello and Bonview are accrual basis taxpayers. **Required:** - **a.** What is the tax consequence to Nello of the settlement of its $23,400 account payable to Bonview? Compute Nello’s net cash outflow from the settlement assuming its tax rate is 35 percent. - **b.** What is the tax consequence to Bonview of the settlement of its $23,400 account receivable from Nello? Compute Bonview’s net cash inflow from the settlement assuming its tax rate is 21 percent. **Complete this question by entering your answers in the tabs below.** - **Required A** - **Required B** --- **Required B:** What is the tax consequence to Bonview of the settlement of its $23,400 account receivable from Nello? Compute Bonview’s net cash inflow from the settlement assuming its tax rate is 21 percent. | **Amount** | | |-----------------------|----------------------| | Deductible expense | | | Tax savings | | | Net cash inflow | |
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