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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Similar questions

Ed borrowed $10,000 to purchase City of Valdosta bonds. This year, he received $600 in City of Valdosta Bond interest on the bonds purchased. He also paid $500 in interest on the $10,000 loan. How much of the interest on the loan is deductible?
Need all three parts....A1, A2 and B..... Attempt if you will solve all three parts....thanks
Deja owns a photo printing business and wants to purchase a new state-of-the-art photo printer that she found online for $9,275, plus sales tax of 5.5%. The supply company is offering cash terms of 2/15, n/30, with a 1.5% service charge on late payments, or 90 days same as cash financing if Deja is approved for a company line of credit. If she is unable to pay within 90 days under the second option, she would have to pay 22.9% annual simple interest for the first 90 days, plus 2% simple interest per month on the unpaid balance after 90 days. Deja has an excellent credit rating but is unsure of what to do. a) If Deja took the cash option and was able to pay off the printer within the 15-day discount period, how much would she save? How much would she owe? b) If Deja takes the 90 days same as cash option and purchases the printer on December 30 to get a current-year tax deduction, using exact time, what is her deadline for paying no interest in a non-leap year? In a leap year?
(a) Heather borrowed $5000 from her grandmother as a down payment on her first car. She promised to repay the debt in 2 years at 7% per annum, simple interest. How much should Heather repay her grandmother? (b) How much must Jason deposit in a special account paying interest at the rate of 9.5% to receive $75.21 in interest after 6 months? (c) An investment of $4500 gained $337.50 in intesest in 9 months. What rate of yearly intesest did the investment pay?
nterest-only loan (regular interest payments each year and principal at maturity). Chuck Ponzi has talked an elderly woman into loaning him $45,000 for a new business venture. She has, however, successfully passed a finance class and requires Chuck to sign a binding contract on repayment of the $45,000 with an annual interest rate of 11% over the next 10 years. Determine the cash flow to the woman under an interest-only loan, in which Ponzi will pay the annual interest expense each year and pay the principal back at the end of the contract. What is the amount of payment that the woman will receive at the end of years 1 through 9? $nothing (Round to the nearest dollar.)
While William was a student at Edinburgh University, he borrowed $15,000 in student loan at an annual interest rate of 9%. If he repays $2,000 per year, calculate the period required (to the nearest year) to pay off his debt. Expressing the formula and workings (not using excel).
To help pay for art school, Kareem borrowed money from his credit union. He took out a personal, amortized loan for $55,000 at an interest rate of 5.3% with monthly payments for a term of 20 years a) Find Kareem's monhly payment b) If Kareem pays the monthly payment for each month for the full term, find his total amount to repay the amount. c) If Kareem pays the monthly payement for each month for the full term, find the total amount of interest he will pay. .
Linda borrowed money from a bank to buy a fishing boat. She took out a personal, amortized loan for $13,500, at an interest rate of 4.35%, with monthly payments for a term of 4 years. For each part, do not round any intermediate computations and round your final answers to the nearest cent. If necessary, refer to the list of financial formulas. (a) Find Linda's monthly payment. S (b) If Linda pays the monthly payment each month for the full term, find her total amount to repay the loan. s (c) If Linda pays the monthly payment each month for the full term, find the total amount of interest she will pay. $0 X ?
Discount loan (interest and principal at maturity). Chuck Ponzi has talked an elderly woman into loaning him $10,000 for a new business venture. She has, however, successfully passed a finance class and requires Chuck to sign a binding contract on repayment of the $10,000 with an annual interest rate of 8% over the next 10 years. Determine the cash flow to the woman under a discount loan, in which Ponzi will have a lump-sum payment at the end of the contract. What is the amount of payment that the woman will receive at the end of years 1 through 9? $nothing (Round to the nearest cent.) What is the amount of payment that the woman will receive at the end of the loan in year 10? $nothing (Round to the nearest cent.)
a mother earned $15000.00 from royalties on her cookbook. She set aside 20% of this for a down payment for a new home. The balance will be used for her son's future education. She invested a portion of the money in a bank certificate of a deposit (cd account) that earns 4% and the remainder in a savings bond that earns 7%. IF the total interest earned after one year is $720.00, how much money was invested at each rate?
Mason paid $4,100 of interest on a loan that paid tuition for him to attend a private university this year. How much of this payment can Mason deduct as student loan interest if he files single and reports modified AGI of $81,400? $1,900. $3,116. $984. $600.
Assume that the prescribed rate for each quarter last year was 4%. Gerry received a loan from his employer of $60,000 at 2%, which he put towards a rental property he purchased for $120,000. He paid the balance in cash. What was his taxable benefit last year as a result of the loan that he obtained from his employer? a) $0 b) $600 c) $1,200 d) $2,400 Alan Peterson made a $2,000 RRSP contribution this year, and his marginal tax rate is 29%. Next year, Alan expects to get a significant raise, such that his marginal tax rate will increase to 43%. The Income Tax Act allows him to deduct his RRSP contribution this year, or to carry the deduction forward to future years. When should he claim the deduction to optimize the tax benefits? a) He should claim the deduction this year. b) He should claim the deduction next year. c) It does not matter when he claims the deduction because it will result in the same tax reduction in either year. d) He should split the deduction between his tax returns…

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