Wally is employed as an executive with Pay More Incorporated. To entice Wally to work for Pay More, the corporation loaned him$25,000 at the beginning of the year at a simple interest rate of 1 percent. Wally would have paid interest of $3,000 this year if theinterest rate on the loan had been set at the prevailing federal interest rate.Required:a. Wally used the funds as a down payment on a speedboat and repaid the $25,000 loan (including $250 of interest) at year-end.a-1. Does this loan result in any income to either party?a-2. Indicate the amount of income to either party that results from the loan.b. Assume instead that Pay More forgave the loan and interest on December 31. What amount of gross income does Wally recognizethis year?Complete this question by entering your answers in the tabs below.Required A1 Required A2 Required BབིཀWally used the funds as a down payment on a speedboat and repaid the $25,000 loan (including $250 of interest) at year-end.Does this loan result in any income to either party?YesShow less A

a. Wally used the funds as a down payment on a speedboat and repaid the $25,000 loan (including $250…

Answered: Wally is employed as an executive with…

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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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?
! Required information [The following information applies to the questions displayed below.] Clyde is a cash-method taxpayer who reports on a calendar-year basis. This year Paylate Corporation has decided to pay Clyde a year-end bonus of $1,000. Determine the amount Clyde should include in his gross income this year under the following circumstances. (Leave no answer blank. Enter zero if applicable.) d. Clyde picked up the check in December, but the check could not be cashed immediately because it was postdated January 10. Amount to be included in gross income
Carrie, age 55, is an employee of Rocket, Inc. (Rocket). Rocket sponsors a SEP IRA and would like to contribute the maximum amount to Carrie’s account for the plan year. If Carrie earns $14,000 per year from Rocket, what is the maximum contribution Rocket can make on her behalf to the SEP IRA? a. $3,500. b. $14,000. c. $19,500. d. $57,000.
Rob asks his good friend Ted to borrow $5,000 and says he will pay it back to him in 6 months with 8% interest, meaning Rob will owe Ted $5,200 if he pays it back at that time. Ted asks Rob to "make" a promissory note payable to Ted stating these terms. Rob does prepare the "note" and signs and gives it to Ted and at the same time Ted gives Rob the $5,000. Ted in need of money unexpectedly, because he loses his job, contacts his buddy Gullible, and asks him if he will buy the note at a discount of $4,800. Gullible accepts and stands to make a nice profit when the note owed by Rob comes due. When Gullible gives Ted the $4,800, Ted writes on the note "Without Recourse" and signs his name and tenders the note to Gullible. Gullible does see Ted write this on the note, but is not sophisticated with regard to legal lingo, and thinks nothing of it. He therefater gets nervous and thinks maybe he should sell the note himself right away. He calls his aunt Saviour who says she will buy the…
Five years ago, alex loaned his son Liam $20,000 to start a business. A note was executed with an interest rate of 8%, which is the Federal rate. The note required monthly payments of the interest with the $20,000 due at the end of 10 years. Liam always made the interest payments until last year. During the current year, Liam notified his father that he was bankrupt and would not be able to repay the $20,000 or the accrued interest of $1,800. Tom is an accrual basis taxpayer whose only income is salary and interest income. The proper treatment for the nonpayment of the note is: a.$3,000 deduction. b.$20,000 deduction. c.No deduction. d.$21,800 deduction.
Austin is taking out an amortized loan for $94,000 to open a small business and is deciding between the offers from two lenders. He wants to know which one would be the better deal over the life of the small business loan, and by how much. Answer each part. Do not round intermediate computations, and round your answers to the nearest cent. If necessary, refer to the list of financial formulas. (a) A bank has offered him a 10-year small business loan at an annual interest rate of 11.3%. Find the monthly payment. (b) An online lending company has offered him a 8-year small business loan at an annual interest rate of 14.2%. Find the monthly payment. re) Suppose Austin pavs the monthly pavment each month for the full t 2021 Continue %23 & 2 3 7.
In year 1, Abby purchased a new home for $200,000 by making a down payment of $150,000 and financing the remaining $50,000 with a loan, secured by the residence, at 6 percent. As of January 1, year 4 the outstanding balance on the loan was $40,000. On January 1, year 4, when her home was worth $300,000, Abby refinanced the home by taking out a $120,000 mortgage at 5 percent. With the loan proceeds, she paid off the $40,000 balance of the existing mortgage and used the remaining $80,000 for purposes unrelated to the home. During year 4, she made interest-only payments on the new loan of $6,000. What amount of the $6,000 interest expense on the new loan can Abby deduct in year 4 on the new mortgage as home-related interest expense?
The Roths bought a house for $438,500. They paid the sellers a 20% down payment and obtained a simple interest amortized loan for the balance from their bank for the remainder, at 0.4875 for thirty years. The bank in turn paid the sellers the loan amount, less a 6% sales commission paid to the sellers' and buyers' real estate agents. The bank charged them 2 points plus fees totaling $8,549.15; of these fees, $6,317.55 were included in the finance charge. (a) Find the loan amount (b) Find the "legal loan amount" –the amount borrowed, according to the Truth in Lending Act. (Round your answer to the nearest cent.) (c) Find the Roth's monthly payment. (Round your answer to the nearest cent.) (d) Find the APR (round to the nearest hundredth of 1%). (e) Find the total interest paid. (Round your answer to the nearest cent.) (f) Find the total finance charge. (Round your answer to the nearest cent.) (g) Find the amount that the sellers are paid for their house.
To support herself while attending school, Daun Deloch sold stereo systems to other students. During the first year of operations, Deloch purchased the stereo systems for $157,000 and sold them for $294,000 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 3 percent of sales. During the year, she paid $1,970 cash to replace a defective tuner. Required a-1. Prepare an income statement for Deloch's first year of operation. a-2. Prepare a statement of cash flows for Deloch's first year of operation. X Answer is not complete. Complete this question by entering your answers in the tabs below. Required A1 Required A2 Prepare a statement of cash flows for Deloch's first year of operation. (Cash outflows should be indicated with a minus sign.) DELOCH STEREOS Statement of Cash Flows
Lupe made a down payment of $2,500 toward the purchase of a new car. To pay the balance of the purchase price, she has secured a loan from her bank at the rate of 12%/year compounded monthly. Under the terms of her finance agreement, she is required to make payments of $240/month for 30 mo. What is the cash price of the car? $4,433.24 $8,693.85 $6,193.85 $10,848.37 Question 16 Robin, who is self-employed, contributes $4,500/year into a Keogh account. How much will he have in the account after 20 years if the account earns interest at the rate of 9.5%/year compounded yearly? $27,637.25 O $7,790.74 $243,550.05 O $290,918.47

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