PRIN.OF AUDITING+OTHER...(LL) >CUSTOM<
PRIN.OF AUDITING+OTHER...(LL) >CUSTOM<
21st Edition
ISBN: 9781260824308
Author: WHITTINGTON
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 12, Problem 5RQ
To determine

Explain the purpose of using the cost accounting system in the auditing of the financial statements of a manufacturing company.

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Manny, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December he performed $20,000 of legal services for a client. Manny typically requires his clients to pay his bills immediately upon receipt. Assume Manny’s marginal tax rate is 37 percent this year and next year, and that he can earn an after-tax rate of return of 8 percent on his investments.   a. What is the after-tax income if Manny sends his client the bill in December?          b. What is the after-tax income if Manny sends his client the bill in January? Use Exhibit 3.1. (Round your answer to the nearest whole dollar amount.)            c. Based on requirements a and b, should Manny send his client the bill in December or January?       multiple choice December January
Isabel, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December she received a $20,000 bill from her accountant for consulting services related to her small business. Isabel can pay the $20,000 bill anytime before January 30 of next year without penalty. Assume her marginal tax rate is 37 percent this year and next year, and that she can earn an after-tax rate of return of 8 percent on her investments.   a. What is the after-tax cost if Isabel pays the $20,000 bill in December?          b. What is the after-tax cost if Isabel pays the $20,000 bill in January? Use Exhibit 3.1. (Round your answer to the nearest whole dollar amount.)         c. Based on requirements a and b, should Isabel pay the $20,000 bill in December or January?       multiple choice December January
When a company pays a bill, the account Cash will be __________.

Chapter 12 Solutions

PRIN.OF AUDITING+OTHER...(LL) >CUSTOM<

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