Many companies hire independent contractors in place of hiring regular employees to cut down costs. The main advantages for the companies are they do not have to pay social security tax or unemployment insurance payment. Even do not need to withhold federal, state taxes and employee’s share of FICA tax. Even though IRS has test to differentiate the worker from the independent contractor, but many business ignore it. The independent contractor need to fill 1099 form and are subject to self-employment taxes in which they have to bear both employer, and employee’s share of FICA taxes. To Identify: The way an independent contractor is hurt when business abuses this issue.

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Answer 1

Question

Chapter 11, Problem 11.1EI

1.

Ethical Issue

To determine

Case Summary: Many companies hire independent contractors in place of hiring regular employees to cut down costs. The main advantages for the companies are they do not have to pay social security tax or unemployment insurance payment. Even do not need to withhold federal, state taxes and employee’s share of FICA tax. Even though IRS has test to differentiate the worker from the independent contractor, but many business ignore it. The independent contractor need to fill 1099 form and are subject to self-employment taxes in which they have to bear both employer, and employee’s share of FICA taxes.

To Identify: The way an independent contractor is hurt when business abuses this issue.

2.

To determine

To Identify: The ethical issue if a business takes an aggressive position in taking the law in slanted way and the party who is being hurt as such.

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For questions 6 and 7, refer to the following information from the balance sheets and income statement of Pink Corp. From the balance sheets 12/31/2024 12/31/2023 Accounts receivable Prepaid insurance Machines Acc. depreciation $90,000 8,000 $80,000 From the income statement 12/31/2024 Sales $750,000 12,000 Cost of sales 65,000 95,000 Operating Expenses -600,000 -75,000 -30,000 -20,000 Gain on sale of machine 4,000 Additional information: Operating expenses includes depreciation expense Machines costing $30,000 were sold for $22,000 at a gain. 6) How much would net income be adjusted under the indirect method? A B $(12,000) $12,000 с D $0 $20,000 7) What were the cash payments for operating expenses under the direct method? A $74,000 C $61,000 B $49,000 D $53,000

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Answer 2

Question

Chapter 11, Problem 11.1EI

1.

Ethical Issue

To determine

Case Summary: Many companies hire independent contractors in place of hiring regular employees to cut down costs. The main advantages for the companies are they do not have to pay social security tax or unemployment insurance payment. Even do not need to withhold federal, state taxes and employee’s share of FICA tax. Even though IRS has test to differentiate the worker from the independent contractor, but many business ignore it. The independent contractor need to fill 1099 form and are subject to self-employment taxes in which they have to bear both employer, and employee’s share of FICA taxes.

To Identify: The way an independent contractor is hurt when business abuses this issue.

2.

To determine

To Identify: The ethical issue if a business takes an aggressive position in taking the law in slanted way and the party who is being hurt as such.

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Answer 3

Question

Chapter 11, Problem 11.1EI

1.

Ethical Issue

To determine

Case Summary: Many companies hire independent contractors in place of hiring regular employees to cut down costs. The main advantages for the companies are they do not have to pay social security tax or unemployment insurance payment. Even do not need to withhold federal, state taxes and employee’s share of FICA tax. Even though IRS has test to differentiate the worker from the independent contractor, but many business ignore it. The independent contractor need to fill 1099 form and are subject to self-employment taxes in which they have to bear both employer, and employee’s share of FICA taxes.

To Identify: The way an independent contractor is hurt when business abuses this issue.

2.

To determine

To Identify: The ethical issue if a business takes an aggressive position in taking the law in slanted way and the party who is being hurt as such.

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Answer 4

Question

Chapter 11, Problem 11.1EI

1.

Ethical Issue

To determine

Case Summary: Many companies hire independent contractors in place of hiring regular employees to cut down costs. The main advantages for the companies are they do not have to pay social security tax or unemployment insurance payment. Even do not need to withhold federal, state taxes and employee’s share of FICA tax. Even though IRS has test to differentiate the worker from the independent contractor, but many business ignore it. The independent contractor need to fill 1099 form and are subject to self-employment taxes in which they have to bear both employer, and employee’s share of FICA taxes.

To Identify: The way an independent contractor is hurt when business abuses this issue.

2.

To determine

To Identify: The ethical issue if a business takes an aggressive position in taking the law in slanted way and the party who is being hurt as such.

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Answer 5

Chapter 11, Problem 11.1EI

1.

Ethical Issue

To determine

Case Summary: Many companies hire independent contractors in place of hiring regular employees to cut down costs. The main advantages for the companies are they do not have to pay social security tax or unemployment insurance payment. Even do not need to withhold federal, state taxes and employee’s share of FICA tax. Even though IRS has test to differentiate the worker from the independent contractor, but many business ignore it. The independent contractor need to fill 1099 form and are subject to self-employment taxes in which they have to bear both employer, and employee’s share of FICA taxes.

To Identify: The way an independent contractor is hurt when business abuses this issue.

2.

To determine

To Identify: The ethical issue if a business takes an aggressive position in taking the law in slanted way and the party who is being hurt as such.

Answer 6

Chapter 11, Problem 11.1EI

1.

Ethical Issue

To determine

Case Summary: Many companies hire independent contractors in place of hiring regular employees to cut down costs. The main advantages for the companies are they do not have to pay social security tax or unemployment insurance payment. Even do not need to withhold federal, state taxes and employee’s share of FICA tax. Even though IRS has test to differentiate the worker from the independent contractor, but many business ignore it. The independent contractor need to fill 1099 form and are subject to self-employment taxes in which they have to bear both employer, and employee’s share of FICA taxes.

To Identify: The way an independent contractor is hurt when business abuses this issue.

Answer 7

Chapter 11, Problem 11.1EI

1.

Ethical Issue

To determine

Case Summary: Many companies hire independent contractors in place of hiring regular employees to cut down costs. The main advantages for the companies are they do not have to pay social security tax or unemployment insurance payment. Even do not need to withhold federal, state taxes and employee’s share of FICA tax. Even though IRS has test to differentiate the worker from the independent contractor, but many business ignore it. The independent contractor need to fill 1099 form and are subject to self-employment taxes in which they have to bear both employer, and employee’s share of FICA taxes.

To Identify: The way an independent contractor is hurt when business abuses this issue.

Answer 8

2.

To determine

To Identify: The ethical issue if a business takes an aggressive position in taking the law in slanted way and the party who is being hurt as such.

Answer 9

2.

To determine

To Identify: The ethical issue if a business takes an aggressive position in taking the law in slanted way and the party who is being hurt as such.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 11 - Prob. 6QC Ch. 11 - Prob. 1QC Ch. 11 - A company sells 180,000 (selling price) of goods...Ch. 11 - Prob. 3QC Ch. 11 - Prob. 4QC Ch. 11 - Prob. 5QC Ch. 11 - Prob. 7QC Ch. 11 - Vega Company expects to pay a 4% bonus on net...Ch. 11 - Prob. 9QC Ch. 11 - Prob. 10QC

Solution Summary: The author explains the ethical issue of hiring independent contractors in place of regular employees to cut down costs.

To Identify: The ethical issue if a business takes an aggressive position in taking the law in slanted way and the party who is being hurt as such.

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Chapter 11 Solutions