Required information Comprehensive Problem 5-88 (LO 5-1, LO 5-2, LO 5-3) (Algo) Skip to question [The following information applies to the questions displayed below.] Diana and Ryan Workman were married on January 1 of last year. Diana has an eight-year-old son, Jorge, from her previous marriage. Ryan works as a computer programmer at Datafile Incorporated (DI) earning a salary of $96,500. Diana is self-employed and runs a day care center. The Workmans reported the following financial information pertaining to their activities during the current year. Ryan earned a $96,500 salary for the year. Ryan borrowed $12,100 from DI to purchase a car. DI charged him 2 percent interest ($242) on the loan, which Ryan paid on December 31. DI would have charged Ryan $730 if interest had been calculated at the applicable federal interest rate. Assume that tax avoidance was not a motive for the loan. Diana received $2,050 in alimony and $4,600 in child support payments from her former husband. They divorced in 2016. Diana won a $910 cash prize at her church-sponsored Bingo game. The Workmans received $550 of interest from corporate bonds and $300 of interest from a municipal bond. Diana owned these bonds before she married Ryan. The couple bought 52 shares of ABC Incorporated stock for $41 per share on July 2. The stock was worth $49 a share on December 31. The stock paid a dividend of $1 per share on December 1. Diana’s father passed away on April 14. She inherited cash of $51,000 from her father and his baseball card collection, valued at $2,100. As the beneficiary of her father’s life insurance policy, Diana also received $151,000. The couple spent a weekend in Atlantic City in November and came home with gross gambling winnings of $1,300. Ryan received $600 cash for reaching 10 years of continuous service at DI. Ryan was hit and injured by a drunk driver while crossing a street at a crosswalk. He was unable to work for a month. He received $6,200 from his disability insurance. DI paid the premiums for Ryan, but it reported the amount of the premiums as compensation to Ryan on his year-end W-2. The drunk driver who hit Ryan in part (j) was required to pay his $2,100 medical costs, $1,600 for the emotional trauma he suffered from the accident, and $5,200 for punitive damages. For meeting his performance goals this year, Ryan was informed on December 27 that he would receive a $5,100 year-end bonus. DI (located in Houston, Texas) mailed Ryan’s bonus check from its payroll processing center (Tampa, Florida) on December 28. Ryan didn’t receive the check at his home until January 2. Diana is a 10 percent owner of MNO Incorporated, a Subchapter S corporation. The company reported ordinary business income for the year of $94,000. Diana acquired the MNO stock two years ago. Diana’s day care business collected $40,000 in revenues. In addition, customers owed her $3,500 at year-end. During the year, Diana spent $6,000 for supplies, $2,000 for utilities, $16,000 for rent, and $550 for miscellaneous expenses. One customer gave her use of his vacation home for a week (worth $3,000) in exchange for Diana allowing his child to attend the day care center free of charge. Diana accounts for her business activities using the cash method of accounting. Ryan’s employer pays the couple’s annual health insurance premiums of $6,000 for a qualified plan.

Required information Comprehensive Problem 5-88 (LO 5-1, LO 5-2, LO 5-3) (Algo) Skip to question [The following information applies to the questions displayed below.] Diana and Ryan Workman were married on January 1 of last year. Diana has an eight-year-old son, Jorge, from her previous marriage. Ryan works as a computer programmer at Datafile Incorporated (DI) earning a salary of $96,500. Diana is self-employed and runs a day care center. The Workmans reported the following financial information pertaining to their activities during the current year. Ryan earned a $96,500 salary for the year. Ryan borrowed $12,100 from DI to purchase a car. DI charged him 2 percent interest ($242) on the loan, which Ryan paid on December 31. DI would have charged Ryan $730 if interest had been calculated at the applicable federal interest rate. Assume that tax avoidance was not a motive for the loan. Diana received $2,050 in alimony and $4,600 in child support payments from her former husband. They divorced in 2016. Diana won a $910 cash prize at her church-sponsored Bingo game. The Workmans received $550 of interest from corporate bonds and $300 of interest from a municipal bond. Diana owned these bonds before she married Ryan. The couple bought 52 shares of ABC Incorporated stock for $41 per share on July 2. The stock was worth $49 a share on December 31. The stock paid a dividend of $1 per share on December 1. Diana’s father passed away on April 14. She inherited cash of $51,000 from her father and his baseball card collection, valued at $2,100. As the beneficiary of her father’s life insurance policy, Diana also received $151,000. The couple spent a weekend in Atlantic City in November and came home with gross gambling winnings of $1,300. Ryan received $600 cash for reaching 10 years of continuous service at DI. Ryan was hit and injured by a drunk driver while crossing a street at a crosswalk. He was unable to work for a month. He received $6,200 from his disability insurance. DI paid the premiums for Ryan, but it reported the amount of the premiums as compensation to Ryan on his year-end W-2. The drunk driver who hit Ryan in part (j) was required to pay his $2,100 medical costs, $1,600 for the emotional trauma he suffered from the accident, and $5,200 for punitive damages. For meeting his performance goals this year, Ryan was informed on December 27 that he would receive a $5,100 year-end bonus. DI (located in Houston, Texas) mailed Ryan’s bonus check from its payroll processing center (Tampa, Florida) on December 28. Ryan didn’t receive the check at his home until January 2. Diana is a 10 percent owner of MNO Incorporated, a Subchapter S corporation. The company reported ordinary business income for the year of $94,000. Diana acquired the MNO stock two years ago. Diana’s day care business collected $40,000 in revenues. In addition, customers owed her $3,500 at year-end. During the year, Diana spent $6,000 for supplies, $2,000 for utilities, $16,000 for rent, and $550 for miscellaneous expenses. One customer gave her use of his vacation home for a week (worth $3,000) in exchange for Diana allowing his child to attend the day care center free of charge. Diana accounts for her business activities using the cash method of accounting. Ryan’s employer pays the couple’s annual health insurance premiums of $6,000 for a qualified plan.

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

10th Edition

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter3: Financial Statements, Cash Flow, And Taxes

Section: Chapter Questions

Problem 8P: PERSONAL TAXES Susan and Stan Britton are a married couple who file a joint income tax return, where...

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Required information

Comprehensive Problem 5-88 (LO 5-1, LO 5-2, LO 5-3) (Algo)

Skip to question

[The following information applies to the questions displayed below.]

Diana and Ryan Workman were married on January 1 of last year. Diana has an eight-year-old son, Jorge, from her previous marriage. Ryan works as a computer programmer at Datafile Incorporated (DI) earning a salary of $96,500. Diana is self-employed and runs a day care center. The Workmans reported the following financial information pertaining to their activities during the current year.

Ryan earned a $96,500 salary for the year.
Ryan borrowed $12,100 from DI to purchase a car. DI charged him 2 percent interest ($242) on the loan, which Ryan paid on December 31. DI would have charged Ryan $730 if interest had been calculated at the applicable federal interest rate. Assume that tax avoidance was not a motive for the loan.
Diana received $2,050 in alimony and $4,600 in child support payments from her former husband. They divorced in 2016.
Diana won a $910 cash prize at her church-sponsored Bingo game.
The Workmans received $550 of interest from corporate bonds and $300 of interest from a municipal bond. Diana owned these bonds before she married Ryan.
The couple bought 52 shares of ABC Incorporated stock for $41 per share on July 2. The stock was worth $49 a share on December 31. The stock paid a dividend of $1 per share on December 1.
Diana’s father passed away on April 14. She inherited cash of $51,000 from her father and his baseball card collection, valued at $2,100. As the beneficiary of her father’s life insurance policy, Diana also received $151,000.
The couple spent a weekend in Atlantic City in November and came home with gross gambling winnings of $1,300.
Ryan received $600 cash for reaching 10 years of continuous service at DI.
Ryan was hit and injured by a drunk driver while crossing a street at a crosswalk. He was unable to work for a month. He received $6,200 from his disability insurance. DI paid the premiums for Ryan, but it reported the amount of the premiums as compensation to Ryan on his year-end W-2.
The drunk driver who hit Ryan in part (j) was required to pay his $2,100 medical costs, $1,600 for the emotional trauma he suffered from the accident, and $5,200 for punitive damages.
For meeting his performance goals this year, Ryan was informed on December 27 that he would receive a $5,100 year-end bonus. DI (located in Houston, Texas) mailed Ryan’s bonus check from its payroll processing center (Tampa, Florida) on December 28. Ryan didn’t receive the check at his home until January 2.
Diana is a 10 percent owner of MNO Incorporated, a Subchapter S corporation. The company reported ordinary business income for the year of $94,000. Diana acquired the MNO stock two years ago.
Diana’s day care business collected $40,000 in revenues. In addition, customers owed her $3,500 at year-end. During the year, Diana spent $6,000 for supplies, $2,000 for utilities, $16,000 for rent, and $550 for miscellaneous expenses. One customer gave her use of his vacation home for a week (worth $3,000) in exchange for Diana allowing his child to attend the day care center free of charge. Diana accounts for her business activities using the cash method of accounting.
Ryan’s employer pays the couple’s annual health insurance premiums of $6,000 for a qualified plan.

Comprehensive Problem 5-88 Part 1 and 3 (Algo)
1. Assuming the Workmans file a joint tax return, determine their gross income minus expenses on the daycare business (this is called
total income on the Form 1040).
Answer is complete but not entirely correct.
$ 153,230
Gross income
3. Assuming the Workmans live in California, a community property state, and that Diana and Ryan file separately, what is Ryan's gross
income minus expenses on the daycare business?
X Answer is complete but not entirely correct.
$130,730
Gross income

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