Discuss the advantage of leasing key assets of the business to the corporation by the shareholders.

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Diana and Ryan Workman were married on January 1 of last year. Ryan has an eight-year-old son, Jorge, from his previous marriage. Diana works as a computer programmer at Datafile Incorporated (DI) earning a base salary of $98,000. Ryan is self-employed and runs a day care center. The Workmans reported the following financial information pertaining to their activities during the current year. a. Diana earned a $98,000 base salary for the year (not including any taxable benefits). b. Diana borrowed $12,400 from DI to purchase a car. DI charged her 2 percent interest ($248) on the loan, which Diana paid on December 31. DI would have charged Diana $760 if interest had been calculated at the applicable federal interest rate. Assume that tax avoidance was not a motive for the loan. c. Ryan received $2,200 in alimony and $4,900 in child support payments from his former spouse. They divorced in 2016. d. Ryan won a $940 cash prize at his church-sponsored Bingo game. e. The Workmans received…

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Chapter 20, Problem 16DQ

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Discuss the advantage of leasing key assets of the business to the corporation by the shareholders.

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Diana and Ryan Workman were married on January 1 of last year. Ryan has an eight-year-old son, Jorge, from his previous marriage. Diana works as a computer programmer at Datafile Incorporated (DI) earning a base salary of $98,000. Ryan is self-employed and runs a day care center. The Workmans reported the following financial information pertaining to their activities during the current year. a. Diana earned a $98,000 base salary for the year (not including any taxable benefits). b. Diana borrowed $12,400 from DI to purchase a car. DI charged her 2 percent interest ($248) on the loan, which Diana paid on December 31. DI would have charged Diana $760 if interest had been calculated at the applicable federal interest rate. Assume that tax avoidance was not a motive for the loan. c. Ryan received $2,200 in alimony and $4,900 in child support payments from his former spouse. They divorced in 2016. d. Ryan won a $940 cash prize at his church-sponsored Bingo game. e. The Workmans received…

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ABC Company produces a single product. Operating data for the company and its absorption costing income statement for the last year are presented below: Particulars Units in beginning inventory Units produced Amount 0 9,000 Units sold 7,000 Sales 1,00,000 Less: Cost of goods sold: Beginning inventory Add: Cost of goods manufactured 54,000 Goods available for sale 54,000 Less: Ending inventory 12,000 Cost of goods sold 42,000 Gross margin 58,000 Less: Selling and administrative expenses 28,000 Net operating income 30,000 Variable manufacturing costs are $4 per unit. Fixed manufacturing overhead totals $18,000 for the year. The fixed manufacturing overhead was applied at a rate of $2 per unit. Variable selling and administrative expenses were $1 per unit sold Required: Prepare a new income statement for the year using variable costing.