Income Tax Fundamentals 2020
38th Edition
ISBN: 9780357391129
Author: WHITTENBURG
Publisher: Cengage
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Textbook Question
Chapter 6, Problem 5MCQ
Which of the following entities is required to report on the accrual basis?
- An accounting firm operating as a Personal Service Corporation.
- A manufacturing business with $30 million of gross receipts operating as a regular C corporation.
- A corporation engaged in tropical fruit farming in Southern California.
- A
partnership with gross receipts of $13 million and all of the partners are individuals with a December year-end.
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Students have asked these similar questions
Which of the following taxpayers can use the cash method of accounting?
a. Partnerships which have a C corporation as a partner
b. Tax shelters
c. C corporations with annual average gross receipts of $27 million for the three prior tax years
d. C corporations with annual average gross receipts of $24 million for the three prior tax years
Referring to relevant statutory provisions and common law, discuss whether, for the current income year, the following amounts would be as an allowable deduction against assessable income.
Provision for the estimated amount of trade debtors’ accounts, which might not be collected.
An amount of $9,000 paid to a solicitor for preparing a partnership deed.
Newspapers purchased by an accountant who advises clients on financial and investment matters.
Travel cost of a business executive to attend a trade fair in London paid by the employer.
Paul and Carl are partners in a business. The partnership agreement included the following:
Interest on drawings is to be charged at 15%
Interest on capital is to be charged 10%
Paul is to be paid a salary of $6,500
Profit or loss is to be shared in the same ratio as their capital
The following trial balance was extracted after the calculation of the net income for the year ended December 31,2021
Debit
Credit
$
$
Net profit for the year
42,000
cash
8,700
bank
58,000
creditors
14,000
debtors
34,000
fixtures
100,000
Provision for depreciation on fixtures
10,000
building
250,000
Provision for depreciation on building
50,000
Loan
220,000
Capital
Paul
200,000
Carl
50,000
Drawings
Paul
15,000
Carl
10,000
Current Account
Paul
8,400
Carl
2,800
Motor vehicle
160,000…
Chapter 6 Solutions
Income Tax Fundamentals 2020
Ch. 6 - E Corporation is a subchapter S corporation owned...Ch. 6 - Income and loss from which of the following...Ch. 6 - Which of the following entities is likely to have...Ch. 6 - Which of the following is an acceptable method of...Ch. 6 - Which of the following entities is required to...Ch. 6 - Prob. 6MCQCh. 6 - B Corporation, a calendar year-end, accrual basis...Ch. 6 - Prob. 8MCQCh. 6 - Prob. 9MCQCh. 6 - Prob. 10MCQ
Ch. 6 - Prob. 11MCQCh. 6 - Prob. 12MCQCh. 6 - For 2019, Roberta is a self-employed truck driver...Ch. 6 - Prob. 14MCQCh. 6 - Prob. 15MCQCh. 6 - Which of the following employees would not be...Ch. 6 - Prob. 17MCQCh. 6 - Prob. 18MCQCh. 6 - Prob. 19MCQCh. 6 - Christine and Doug are married. In 2019, Christine...Ch. 6 - Prob. 1PCh. 6 - Prob. 2PCh. 6 - Geraldine is an accrual basis taxpayer who has the...Ch. 6 - Prob. 4PCh. 6 - Prob. 5PCh. 6 - Prob. 7PCh. 6 - Prob. 8PCh. 6 - Refer to the previous problem 8. If Stan's parents...Ch. 6 - Prob. 10PCh. 6 - Prob. 11PCh. 6 - Otto and Monica are married taxpayers who file a...Ch. 6 - Prob. 13PCh. 6 - Prob. 14PCh. 6 - Prob. 15PCh. 6 - Prob. 16PCh. 6 - Sally hires a maid to work in her home for $280...Ch. 6 - Prob. 18PCh. 6 - Rachel is single and has wages of $150,000 and...Ch. 6 - Married taxpayers Otto and Ruth are both...
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- You are an accountant working for a company that has recently decided to incorporate. The company has incurred $4,300 for attorneys fees, promotion costs, and filing fees with the state of incorporation as a part of organizing the corporate entity. What is the journal entry to record these costs on March 13, assuming they are paid in cash?arrow_forwardYou are an accountant working for a manufacturing company that makes personal care products and has recently decided to incorporate. The company incurred a total of $7,900 for attorneys fees, promotion costs, and filing fees with the state of incorporation as a part of organizing the corporate entity. What is the journal entry to record these costs on February 28, assuming they are paid in cash?arrow_forwardReferring to relevant statutory provisions and common law, discuss whether, for the current income year, the following amounts would be as an allowable deduction against assessable income. a) Provision for the estimated amount of trade debtors’ accounts, which might not be collected. b) An amount of $9,000 paid to a solicitor for preparing a partnership deed. c) Newspapers purchased by an accountant who advises clients on financial and investment matters. d) Travel cost of a business executive to attend a trade fair in London paid by the employer. e) Speeding fines of $ 500 paid by an owner to a driver.arrow_forward
- ABC and XYZ have been operating an accounting firm as partners for a number of years and at the beginning of 2021, their capital balances were 85,000 and 70,000, respectively. During 2021, ABC invested an additional 10,000 on April 1 and withdrew 5,000 on August 30. XYZ withdrew 12,000 on May 1 and invested 12,000 on November 1. In addition, ABC and XYZ withdrew their salary allowances of 18,000 and 24,000, respectively. At year-end 2021 total capital of the ABC and XYZ partnership was 182,000. ABC and XYZ share income after salary allowances in a 60:40 ratio. What is the ending capital of XYZ:arrow_forwardMabel, Loretta, and Margaret are equal partners in a local restaurant. The restaurant reports the following items for the current year: Revenue $ 520,000 Business expenses 270,000 Investment expenses 138,000 Short-term capital gains 128,000 Short-term capital losses (177,100) Each partner receives a Schedule K-1 with one-third of the preceding items reported to her. Required: How must each individual report these results on her Form 1040? Schedule A: Schedule B: Schedule C:arrow_forwardIncome summary shows a credit balance of 1,800,000 at the end of the first year of operations.1. By what amount will the capital balance of MAR182 be credited on January 1, 2018?2. By what amount will the capital balance of MAR186 be credited on January 1, 2018?3. How much is the total assets of the partnership at the date of formation?4. What is the net effect of the adjustments made on January 1 to MAR186 capital balance?5. What is the weighted average capital of MAR182 in 2018?6. How much is the bonus given to MAR186?7. How much is the share of MAR182 in the partnership net income?8. How much is the share of MAR186 in the partnership net income?9. What is the ending adjusted capital balance of MAR182?10. What is the ending adjusted capital balance of MAR186?arrow_forward
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