HelpNorman Dowd owns his own taxi, for which he bought a $11,400 permit to operate two years ago. Mr. Dowd earns $34,200 a yearoperating as an independent but has the opportunity to sell the taxi and permit for $41,000 and take a position as dispatcher for CarterTaxi Co. The dispatcher position pays $32,000 a year for a 40-hour week. Driving his own taxi, Mr. Dowd works approximately 55hours per week. If he sells his business, he will invest the $41,000 and can earn a 9 percent return.Requireda. Determine the opportunity cost of owning and operating the independent business.b. Calculate the earnings of Norman Dowd operating as an independent and the earnings of Norman Dowd working as a dispatcher.Based solely on financial considerations, should Mr. Dowd sell the taxi and accept the position as dispatcher?a. Opportunity costb. Operating as an independentWorking as a dispatcherShould Mr. Dowd sell the taxi and accept the position as dispatcher?< Prev.4 of 7Next >

Opportunity cost includes: Explicit cost Implicit cost

Answered: Norman Dowd owns his own taxi, for…

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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Donald Jefferson and his wife, Maryanne, live in a modest house located in a Los Angeles suburb. Donald has a job at Pittsford Cast Iron that pays him $50,000 annually. In addition, he and Maryanne receive $2,500 interest from bonds that they purchased 10 years ago. To supplement his annual income, Donald bought rental property a few years ago. Every month he collects $3,500 in rent from all of the property he owns. Maryanne manages the rental property, and she is paid $15,000 annually for her work. During 2015, Donald had to have the plumbing fixed in the houses that he rents as well as the house in which he and Maryanne live. The plumbing bill was $1,250 for the rented houses and $550 for the Jeffersons’ personal residence. In 2015, Donald paid $18,000 for mortgage interest and property taxes—$12,650 was for the rental houses, and the remaining $5,350 was for the house occupied by him and his wife. The couple has three children who have graduated from medical school and now are…
Gerry likes driving small cars and buys nearly identical ones whenever the old one needs replacing. Typically, he trades in his old car for a new one costing about $15,000. A new car warranty covers all repair costs above standard maintenance (standard maintenance costs are constant over the life of the car) for the first two years. After that, his records show an average repair expense (over standard maintenance) of $2500 in the third year (at the end of the year), increasing by 50 percent per year thereafter. If a 30 percent declining-balance depreciation rate is used to estimate salvage values and interest is 9 percent, how often should Gerry get a new car? Click the icon to view the table of compound interest factors for discrete compounding periods when i = 9%. Gerry should get a new car every years, which has the (Round to the nearest whole number as needed.) EAC of $
Seiko's current salary is $106,000. Her marginal tax rate is 32 percent, and she fancies European sports cars. She purchases a new auto each year. Seiko is currently a manager for Idaho Office Supply. Her friend, knowing of her interest in sports cars, tells her about a manager position at the local BMW and Porsche dealer. The new position pays $91,100 per year, but it allows employees to purchase one new car per year at a discount of $24,900. This discount qualifies as a nontaxable fringe benefit. In an effort to keep Seiko as an employee, Idaho Office Supply offers her a $15,900 raise. Answer the following questions about this analysis. b-1. Financially, which offer is better for Seiko on an after-tax basis? b-2. By how much is the offer better for Seiko on an after tax basis? (Assume that Seiko is going to purchase the new car whether she switches jobs or not.)
Reba Dixon is a fifth-grade school teacher who earned a salary of $38,000 in 2021. She is 45 years old and has been divorced for four years. She receives $1,200 of alimony payments each month from her former husband (divorced in 2016). Reba also rents out a small apartment building. This year Reba received $50,000 of rental payments from tenants and she incurred $19,500 of expenses associated with the rental.Reba and her daughter Heather (20 years old at the end of the year) moved to Georgia in January of this year. Reba provides more than one-half of Heather’s support. They had been living in Colorado for the past 15 years, but ever since her divorce, Reba has been wanting to move back to Georgia to be closer to her family. Luckily, last December, a teaching position opened up and Reba and Heather decided to make the move. Reba paid a moving company $2,270 to move their personal belongings, and she and Heather spent two days driving the 1,620 miles to Georgia.Reba rented a home in…
Leon Martin is single and has never been married. Leon earned wages of $23,000 during the first half of the year. Leon lost his job in July and received a total of $9,000 in unemployment compensation. Leon is a barber and took a class at the community barber college to improve his barbering skills. He paid the cost of tuition and a course-related book. His qualified education expenses were $2,500. Leon also paid student loan interest for the courses he previously took to earn his Bachelor’s degree. For 2022, he paid student loan interest of $550. Leon does not have any dependents. Leon is a U.S. citizen with a valid Social Security number. 11. What is the taxable amount of Leon's unemployment compensation? A. $0 B. $4,500 C. $9,000 D. $10,200
Kate is an executive for the Cozy Furniture Manufacturing Company. She purchased furniture from the company for $9,500, the price Cozy ordinarily would charge a wholesaler for the same items. The retail price of the furniture was $12,500, and Cozy’s cost was $9,000. The company also paid for Kate’s parking space in a garage near the office. The parking fee was $600 for the year. All employees are allowed to buy furniture at a discounted price comparable to that charged to Kate. However, the company does not pay other employees’ parking fees. Kate’s gross income from the above is: answer choices: $3,500. $4,100. $-0-. $900 $600.
To support herself while attending school, Daun Deloch sold stereo systems to other students. During the first year of operations, Daun purchased the stereo systems for $260,000 and sold them for $370,000 cash. She provided her customers with a one-year warranty against defects in parts and labor. Based on industry standards, she estimated that warranty claims would amount to 2 percent of sales. During the year, she paid $4,020 cash to replace a defective tuner. Requireda. Prepare an income statement and statement of cash flows for Daun’s first year of operation. b. Based on the information given, what is Daun’s total warranties liability at the end of the accounting period?
Quinn is an employee of Caribbean Imports. His company car is a 2021 Toyota Prius LXE with a fair-market value of $30,000 and a lease value of $8,250, according to Publication 15-b. During the year, Quinn drove 36,953 miles, of which 6,822 were for personal use. The car was available for use on 250 of the days during the year. All gasoline was provided by the employer and is charged back to Quinn at $0.055 per mile. What is the amount of the company-car fringe benefit that will appear on Quinn's W-2, using the lease-value rule? (Do not round intermediate calculations, only round final answer to two decimal points.) Multiple Choice $375.21 $1,043.19 $1,418.40
Sophie Lopez is a 72-year-old widow who has recently been diagnosed with Alzheimer’s disease. She has limited financial assets of her own and has been living with her daughter Felicity for two years. Her income is $850a month in Social Security survivor’s benefits. Felicity wants to make surethat her mother will be taken care of if Felicity should die prematurely. Felicity, 40, is single and earns $55,000 a year as a human resources manager for a small manufacturing firm. She owns a condo with a current market value of $100,000 and has a $70,000 mortgage. Other debtsinclude a $5,000 auto loan and $500 in various credit card balances. Her 401(k) plan has a current balance of $24,500, and she keeps $7,500 in a money market account for emergencies. After talking with her mother’s doctor, Felicity believes that her mother will be able to continue living independently for another two to three years. She estimates that her mother would need about $2,000 a month to cover her living…
Charlene, a chemist, worked in a chemistry lab and earned $60,000 per year. Charlene quit in order to start her own business. To buy the necessary equipment, she withdrew $50,000 from her savings, (which paid two percent interest per year) and borrowed $60,000 from her Aunt Bea, whom she pays five percent interest per year. Last year she paid $48,000 for ingredients and paid all of the interest on the loan from her aunt. She had revenue of $124,000. For last year, Alvin, the accountant, says Charlene’s profit is ________ and Emily the economist, says Charlene’s profit is ________. $76,000; $12,000 $73,000; $14,000 $73,000; $12,000. $73,000; $13,000. $72,000; $13,000.
Sandra earns $21,000 in employment income in 2020 and her spouse Susan earns$18,000. They have two children: Mike, who is 5 years old, and Eric, who is 9 yearsold. They spent $2,500 on after school care from 3:30 - 5:30 each day, since theywork until 5:30, and they also sent Eric to a 2-week biking training camp for $1,000where he stayed overnight in cabins.Calculate the maximum child care expense deduction the family can take.

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