Governmental and Nonprofit Accounting (11th Edition)
11th Edition
ISBN: 9780133799569
Author: Robert J. Freeman, Craig D. Shoulders, Dwayne N. McSwain, Robert B. Scott
Publisher: PEARSON
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Chapter 7, Problem 2.2E
To determine
Indicate the correct statement:
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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 __________.
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 12 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
Chapter 7 Solutions
Governmental and Nonprofit Accounting (11th Edition)
Ch. 7 - When is a Capital Projects Fund used by a...Ch. 7 - Prob. 2QCh. 7 - What is the life cycle of a Capital Projects Fund?Ch. 7 - Why is each significant capital project usually...Ch. 7 - In what situations could several capital projects...Ch. 7 - Prob. 6QCh. 7 - Prob. 7QCh. 7 - Prob. 8QCh. 7 - Prob. 9QCh. 7 - Prob. 10Q
Ch. 7 - Prob. 11QCh. 7 - Prob. 12QCh. 7 - Which of the following general government capital...Ch. 7 - Budgets for Capital Projects Funds are a. often...Ch. 7 - Which of the following are sometimes reported as...Ch. 7 - Wakefield Heights sold 6,000,000 of general...Ch. 7 - Which of the following statements regarding the...Ch. 7 - Common expenditures in a Capital Projects Fund...Ch. 7 - Prob. 1.7ECh. 7 - In practice, which of the following is false...Ch. 7 - The funding sources for a Capital Projects Fund...Ch. 7 - Prob. 2.2ECh. 7 - When grant resources are received before...Ch. 7 - Bonds are sold to finance the construction of a...Ch. 7 - After restricted and committed levels of fund...Ch. 7 - Which of the following would not be reported on...Ch. 7 - The City of Hope received an unrestricted grant in...Ch. 7 - Expenditures are made in a Capital Projects Fund...Ch. 7 - A GAAP-based Statement of Revenues, Expenditures,...Ch. 7 - Prob. 2.10ECh. 7 - (General Ledger Entries) The following...Ch. 7 - (Long-Term Debt Issuances) Swenson Township issued...Ch. 7 - (Short Discussion and Analysis) Briefly discuss...Ch. 7 - (Statement of Revenues, Expenditures, and Changes...Ch. 7 - (Multiple Choice Problems and Computations)...Ch. 7 - Prob. 2PCh. 7 - (Statement of Revenues, Expenditures, and Changes...Ch. 7 - Prob. 6PCh. 7 - (CPF Journal EntriesBlue Earth County, Montana)...
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- Reese, 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. Reese can pay the $20,000 bill anytime before January 30 of next year without penalty. Assume Reese's marginal tax rate is 32 percent this year and 35 percent next year, and that she can earn an after-tax rate of return of 12 percent on her investments. a. What is the after-tax cost if she pays the $20,000 bill in December? b. What is the after-tax cost if she pays the $20,000 bill in January? Use Exhibit 3.1. c. Should Reese pay the $20,000 bill in December or January? multiple choice 1 December January d. What is the after-tax cost if she expects her marginal tax rate to be 24 percent next year and pays the $20,000 bill in January? Use Exhibit 3.1. (Round your answer to the nearest whole dollar amount.) e. Should Reese…arrow_forwardEntries to revenues accounts such as Service Revenues are usually __________..arrow_forwardCrane Company accumulates the following data concerning a mixed cost, using units produced as the activity level. Units Produced Total Cost March 9,970 $20,005 April 8,930 18,154 May 10,500 20,538 June 8,710 17,674 July 9,370 18,604 (a1) Compute the unit variable costs using the high-low method. (Round your answers to two decimal places (e.g., 2.25).) Variable cost +A $ per unitarrow_forward
- Solve this accounting qnarrow_forwardHank, 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. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal tax rate is 32 percent this year and will be 37 percent next year, and that he can earn an after-tax rate of return of 12 percent on his investments. a. What is the after-tax income if Hank sends his client the bill in December? b. What is the after-tax income if Hank 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 Hank send his client the bill in December or January? multiple choice December Januaryarrow_forwardAssets minus liabilities equals __________.arrow_forward
- What are the main sections on a balance sheet? Assets, liabilities, income Assets, liabilities, equity Assets, liabilities, expenses Assets, gains, revenuearrow_forward2. The main Purpose of Financial Accounting is? To Provide financial information to shareholders To maintain balance sheet To minimize taxes. To keep track of liabilities.arrow_forwardA company that uses the cash basis of accounting will: Record revenue when it is collected. Record revenue when it is earned. Record revenue at the same time as accounts receivable. Record bad debt expense on the income statement.arrow_forward
- Given answer general accounting questionarrow_forwardDo fast answer of this question general accountingarrow_forwardThe Tamarisk Marine Supply Company's bank statement for the month of November showed a balance per bank of $8,500. The company's Cash account in the general ledger had a balance of $5,536 at November 30. Other information is as follows: (1) Cash receipts for November 30 recorded on the company's books were $6,480 but this amount does not appear on the bank statement. (2) (3) (4) (5) (6) (7) The bank statement shows a debit memorandum for $50 for check printing charges. Check No. 119 payable to Riverbed Company was recorded in the cash payments journal and cleared the bank for $368. A review of the accounts payable subsidiary ledger shows a $18 credit balance in the account of Riverbed Company and that the payment to them should have been for $386. The total amount of checks still outstanding at November 30 amounted to $6,260. Check No. 138 was correctly written and paid by the bank for $506. The cash payment journal reflects an entry for Check No. 138 as a debit to Accounts Payable and…arrow_forward
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