The sole proprietor of the FM2 Financial Services, Bondo, receives all accounting profits earned by her firm and a K28,000-a-year salary she pays herself. It is noteworthy that she also has a standing salary offer of K35,000 a year if she agrees to work for Bank of Zambia. If she had invested her capital outside her own company, she estimates that would have made a return of K22,000 a year. Further, information has reached you that last year, Bondo's accounting profit was K50,000. Calculate her economic profit?
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- Mrs X runs a small business. At the beginning of the calendar year, her owner’s equity consisted solely of a capital contribution of R280 000; her liabilities stood at R410 000; and she had R690,000 worth of assets. During the calendar year, she made a profit of R60 000. She also increased her capital contribution to R330 000, and paid down her debts by R40,000. At the end of the calendar year, what amount would her assets be sitting at? a.R690 000 b.R710 000 c.R700 000 d.R760 000 e.R800 000Mr Ramu is a chief operating office of the company and being paid a salary of RM15,625 per month. His percentage portion for Employees Provident Fund contribution is 17%. He intent to buy a car worth RM290,000 and would be making a bank loan of RM100,000 to finance building an extension for his house kitchen. He also plans to bring his wife (housewife) and four children (two studying in a local university and the rest in secondary school) for an overseas holiday trip with an estimate cost RM15,000. He also plans to have a servant and a driver where he would be paying them with an annual salary of RM15,000 and RM24,000 respectively. His company is willing to prepared to restructure his remuneration package to accommodate the above needs. REQUIRED: (a) Explain how Mr Ramu’s remuneration package can be restructure on a more tax efficient basis based on the above information only. ( b) Based on (a), which are item (s) in the proposed remuneration package is/are taxable or exempted. (c)…Mr. Leody, a resident citizen, is working for a large real estate development company in the country and in 2020, he was promoted to Vice-President of the company. With more responsibilities comes higher pay. In 2021, he decided to buy a new car worth P2 Million and he traded-in his old car with a market value of P800,000.00 and paid the difference of P1.2 Million to the car company. The old car, which was bought three (3) years ago by the father of Mr. Leody at a price of P700,000.00 was donated by him and registered in the name of his son. The corresponding donor’s tax thereon was duly paid by the father. How much is the tax basis of the old car?
- Mr. Leody, a resident citizen, is working for a large real estate development company in the country and in 2020, he was promoted to Vice-President of the company. With more responsibilities comes higher pay. In 2021, he decided to buy a new car worth P2 Million and he traded-in his old car with a market value of P800,000.00 and paid the difference of P1.2 Million to the car company. The old car, which was bought three (3) years ago by the father of Mr. Leody at a price of P700,000.00 was donated by him and registered in the name of his son. The corresponding donor’s tax thereon was duly paid by the father. How much if any is the tax liability of Mr. Leody on the trade in of his old car?Mr. Young operates a photography studio as a sole proprietorship. His average annual income from the business is $100,000. Because Mr. Young does not need the entire cash flow for personal consumption, he is considering incorporating the business. He will work as a corporate employee for a $40,000 annual salary, and the corporation will accumulate its after-tax income to fund future business expansion. For purposes of this case, assume that Mr. Young’s marginal income tax rate is 32 percent and ignore any employment tax consequences. Required: Assuming Mr. Young's sole proprietorship does not qualify for the QBI deduction, by how much would Mr. Young's annual tax burden increase or decrease by incorporating? Assuming Mr. Young's sole proprietorship qualifies for the 20% QBI deduction, by how much would Mr. Young's annual tax burden increase or decrease by incorporating? Mr. Young's tax burden decrease or increase by ( ) NOTE: 25,400 is NOT the right answer.D, E, and F are partners in DEF Enterprises. They want to obtain a loan from X, but X does not know any of them, so they asked Y, who is known to X, to represent himself as a partner in DEF Enterprises. X, believing that Y is a partner in DEF enterprises, thus grants the loan of Php180,000.00 to DEF Enterprises. Later, however, DEF Enterprises is unable to pay the loan as its assets amount only to Php120,000.00. How does the payment of the loan be settled: a. D, E, and F shall share in the payment of Php180,000.00 from their separate assets at Php60,000.00 each. b. The assets of DEF Enterprises shall first be exhausted. Thereafter, D, E, and F may be held liable by X from their separate assets at Php20,000.00 each. c. D, E, F, and Y shall share in the payment of Php180,000.00 from their separate assets at Php45,000.00 each. d. The assets of DEF Enterprises shall first be exhausted. Thereafter, D, E, F, and Y may be held liable by Z from their separate assets at Php15,000.00…
- A man formerly employed as chief mechanic of an automobile repair shop has saved P1,000,000.00 which are now invested in certain securities giving him an annual dividend of 15%. He now plans to invest this amount in his own repair shop. In his resents job, he is earning P25,000.00 a month, but he has to resign to run his own business. He will need the services of the following: 2 mechanics each earning P400.00 a day, and 8 helpers each earning P200.00 a day. These men will work on the average300 days per year. His other expenses are the following: Rental 30, 000.00 a monthMiscellaneous 25,000 a monthSales tax 3% of gross incomeInsurance 2% The length of his lease is 5 years. If the average charge for each car repaired by his shop is P1,000.00.Determine the number of cars he must service in one year so that he will obtain a profit of at least 20% on his investment?The store owner hires 2 sellers with a total payment fund of 150 thousand rubles per year. Pays a monthly rent of 60 thousand rubles. He invested his own capital of 300 thousand rubles in the business, donating 30 thousand rubles per annum, which he would have had with another placement of capital. He estimates his entrepreneurial talent at 100 thousand rubles a year. A large trading company offers him a place with a salary of 200 thousand rubles a year. Calculate the amount of accounting and economic costs and draw conclusions.1.Mariang is a Pilipinas Got Talent champion. She won P2million as cash prize, a house and lot at ABC Homes in Baguio City with the total fair value of P5 million, and a recording contract with Sony Music Inc. for P10 million in two years. How much his income tax, if any? 2. Maki is a stockholder in both Agrix Corporation (domestic corporation) and Atlanta corporation (non-resident foreign corporation). During the year, Jhaeron earned P100,000 dividends from Agrix and P300,000 dividends from Atlanta. Maki is a Filipino citizen residing in the Philippines. How much of the dividend income of Maki is subject to income tax in the Philippines?
- Jane Shay operates a management consulting business. The business has been successful and now produces a taxable income of $100,000 per year after all “ordinary and necessary” expenses and depreciation have been deducted. At present the business is operated as a proprietorship; that is, Jane pays personal federal income tax on the entire $100,000. For tax purposes, it is as if she had a job that pays her a $100,000 salary per year. As an alternative, Jane is considering incorporating the business. If she does, she will pay herself a salary of $40,000 a year from the corporation. The corporation will then pay taxes on the remaining $60,000 and retain the balance of the money as a corporate asset. Thus Jane’s two alternatives are to operate the business as a proprietorship or as a corporation. Jane is single and has $3500 of itemized personal deductions. Which alternative will result in a smaller total payment of taxes to the government?Candice, who is a sole trader, drives a small van from which she sells ice cream and drinks. Candice paid $20,000 cash for the van, which is her only asset, and she pays cash for everything else including the purchase of ice cream and drinks. Candice has a relatively small number of customers. She makes average sales of $60,000 per year and earns an average profit of $25,000 per year. Required: Determine if the business outlined above is a Reporting Entity, stating the criteria (factors) used and your reasons. Also provide a conclusion and include the reporting requirements for a Reporting Entity or a Non-Reporting Entity, whichever is applicable in this caseJennifer uses the cash method. Which of the following transactions result in gross income in the current year? Car, worth $7,000, received as a consulting fee $500 of interest credited to her checking account, but not withdrawn Wages payable from a corporation with ample funds, in which she is a 12 percent shareholder, unpaid at year-end Stock, worth $20,000, for services rendered, fully vested if Jennifer still works for the corporation in three years $700 of dental services (bill cancelled upon Jennifer’s estate planning advice to the dentist’s mother-in-law) Sale of a used car for a note due in one year, face value $3,000, fair market value $2,500. No elections were made