David has a contract to buy 900 metres of cloth each month for $7 per month. From each 3 meters of cloth he can make a dress which he can sell for $30. He also incurs labour costs of $4 per dress. Alternatively he can sell the cloth immediately for $6.25 per meter. If he decides to cancel the cloth purchase contract without notice he must pay cancellation penalty of $700, for each of the next two months. In December 2009 the market price of dresses fell to $22. He is considering ceasing production since he believes that the market will not improve. There is 2 months' notice stated in the contract in case of breach of a contract. Is there a present obligation? b) What will appear in respect of the contract in David's financial statements for the year ending 31 December, 2009?

David has a contract to buy 900 metres of cloth each month for $7 per month. From each 3 meters of cloth he can make a dress which he can sell for $30. He also incurs labour costs of $4 per dress. Alternatively he can sell the cloth immediately for $6.25 per meter. If he decides to cancel the cloth purchase contract without notice he must pay cancellation penalty of $700, for each of the next two months. In December 2009 the market price of dresses fell to $22. He is considering ceasing production since he believes that the market will not improve. There is 2 months' notice stated in the contract in case of breach of a contract. Is there a present obligation? b) What will appear in respect of the contract in David's financial statements for the year ending 31 December, 2009?

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter9: Deductions: Employee And Self- Employed-related Expenses

Section: Chapter Questions

Problem 49P

See similar textbooks

Similar questions

Markson and Sons leases a copy machine with terms that include a fixed fee each month plus acharge for each copy made. Markson made 9,000 copies and paid a total of $480 in January. In April, they paid $320 for 5,000 copies. What is the variable cost per copy if Markson uses the high-low method to analyze costs?
Able Transport operates a tour bus that they lease with terms that involve a fixed fee each month plus a charge for each mile driven. Able Transport drove the bus 7,000 miles and paid a total of $1,360 in June. In October. Able Transport paid $1,280 for the 5,000 miles driven. If Able Transport uses the high-low method to analyze costs, how much would Able Transport pay in December, if they drove 6,000 miles?
Sergio has a chance to work at one of two firms. Scantor will give him a salary of 700 a month, a commission of 3% on total monthly sales, and a 3% more on monthly sales over 70,000. Fletcher offers him a commisiion of 2.5% on the first 45,000 of monthly sales, 4%, on the next 20,000 of monthly sales and 7% on all montlhy sales over 65,000. If Sergio could average 90,000 in sales a month at either job, at which job could he earn more per month, and how much more?
Carol has two job offers.One pays $655 per week, and the other pays $2,800 per month. Which is the better offer?
A contractor has 50 men of the same capacity. They can complete the work in 30 days, the working day being 8 hours, but the contract expires in 20 days. He decides to put 10 additional men. If all the men get P300 per day for a full or part time day, & if the liquidated damages are P2k for every full or part day he requires over his contract time. How much will it cost with the additional 10 men.
An employee is earning P 18,511 a month and he can only afford to purchase a car which will require a down payment of P 85,000 and a monthly amortization of 30% of his monthly salary. What would be the maximum cash value of a car he can purchase if the seller will agree to a down payment of P 82,000 and the balance payable in four years at 18% per year payable in monthly basis. The first payment will be due at the beginning of the first month.
Fiona has a four-year contract to sell coffee in a local office building. After two years in business, she wants to move on. Kurt wants to buy out the last two years of Fiona’s contract. He estimates he can make $7,500 in the first year and $7,800 in the second year. If the discount rate is 8%, what is the maximum amount Kurt should be willing to pay?
Xavi sells seashore paintings. His annual Fixed Costs are $1,000 and the Variable Costs are $8 per painting. Xavi is considering advertising his artwork in a local gallery, the cost of which is $80 per month. What would be the new annual breakeven revenue (in dollars) if he continues to sell his pieces for $15?
John got a new job through Island Recruiting Company.The job pays $55K per year, and the agency fee is equal to 30% of 1 month’s pay.How much must the employer pay the agency?
GerrinAL sells five machines to VernAL for $500,000 per machine, the list price for the machines is $600,000. In a separate contract they sell maintenance services on the five machines for the first year. They charge $12,000 per machine for the maintenance, the list price for maintenance on the machine. As an incentive to sign the maintenance contract, GerrinAL gives VernAL a 25% discount on the purchase of machines in the next 75 days. No discounts are granted to other customers and they project there is 41% probability they will use the discount to purchase one machine with a stand-alone selling price of $600,000. What is the approximate contract consideration allocated to the discount? Select one: a. $150,000 b. $120,000 c. zero d. $50,000 e. $61,500
David is paid a monthly salary of 12,000 and earn a commission of 4% in sale. If he sold the total amount of 80,000 during the month how much is the gross pay
Your bakery can produce 3,000 unit of bagel per week for 48 weeks of operation per year. You aim to stay in this business for five years. You can either make the dough for the bagels in house or buy them from a different source. If you make the dough in house, you face with annual labour costs: $30,000, annual safety regulation costs: $5,000 and annual material costs: $20,000. But, if you choose to buy the dough from a different source, you must have a special dough-mixer machine to make adjustment for your production. Therefore, you need to pay $5,000 for the dough mixer machine, which has $1,000 salvage value at the end of 5 years. Furthermore, you face with annual maintaining costs including labour costs: $20,000 and additional overhead costs: $10,000 Using this information, find the unit cost of buy the bagel option with MARR 20%. Question 4 options: a) Between $0.70 and $0.80 b) None of the answers are correct…