You have set up your tax preparation firm as an incorporated business. You took $70,500 from the firm as your salary. The firm’s taxable income for the year (net of your salary) was $29,000. Assume you pay personal taxes as an unmarried taxpayer. Use the tax rates presented in Table 3-5 and Table 3-7.

You have set up your tax preparation firm as an incorporated business. You took $70,500 from the firm as your salary. The firm’s taxable income for the year (net of your salary) was $29,000. Assume you pay personal taxes as an unmarried taxpayer. Use the tax rates presented in Table 3-5 and Table 3-7.

a.	How much taxes must be paid to the federal government, including both your personal taxes and the firm’s taxes?

Total taxes

b.	By how much will you reduce the total tax bill by reducing your salary to $50,500, thereby leaving the firm with taxable income of $49,000?

Total taxes reduced

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The year-end 2010 balance sheet of Brandex Inc. listed common stock and other paid-in capital at $1,400,000 and retained earnings at $3,700,000. The next year, retained earnings were listed at $4,000,000. The firm’s net income in 2011 was $930,000. There were no stock repurchases during the year. What were the dividends paid by the firm in 2011?

The year-end 2010 balance sheet of Brandex Inc. listed common stock and other paid-in capital at $1,400,000 and retained earnings at $3,700,000. The next year, retained earnings were listed at $4,000,000. The firm’s net income in 2011 was $930,000. There were no stock repurchases during the year. What were the dividends paid by the firm in 2011?

  Dividends paid

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Using Table 3.7, calculate the marginal and average tax rates for a single taxpayer with the following incomes: (Do not round intermediate calculations. Round "Average tax rate" to 2 decimal places.)

Using Table 3.7, calculate the marginal and average tax rates for a single taxpayer with the following incomes: (Do not round intermediate calculations. Round "Average tax rate" to 2 decimal places.)

	Income	Marginal Tax Rate	Average Tax Rate
a.	$28,500	%	%
b.	$58,500	%	%
c.	$334,000	%	%
d.	$4,700,000	%

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Construct a balance sheet for Sophie’s Sofas given the following data. (Be sure to list the assets and liabilities in order of their liquidity.)

Construct a balance sheet for Sophie’s Sofas given the following data. (Be sure to list the assets and liabilities in order of their liquidity.)

Cash balances	=	$	9,500
Inventory of sofas	=	$	195,000
Store and property	=	$	95,000
Accounts receivable	=	$	21,500
Accounts payable	=	$	16,500
Long-term debt	=	$	165,000

BALANCE SHEET OF SOPHIE’S SOFAS

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Neosho River Resort, Inc. opened for business on June 1 with eight air-conditioned units.

Neosho River Resort, Inc. opened for business on June 1 with eight air-conditioned units. Its trial balance before adjustment on August 31 is as follows. NEOSHO RIVER RESORT, INC. Trial Balance August 31, 2008 Account Number Debit Credit 101 Cash $ 19,600 126 Supplies 3,300 130 Prepaid Insurance 6,000 140 Land 25,000 143 Cottages 125,000 149 Furniture 26,000 201 Accounts Payable $ 6,500 208 Unearned Rent 7,400 275 Mortgage Payable 80,000 311 Common Stock 100,000 332 Dividends 5,000 429 Rent Revenue 80,000 622 Repair Expense 3,600 726 Salaries Expense 51,000 732 Utilities Expense 9,400 $273,900 $273,900 In addition to those accounts listed on the trial balance, the chart of accounts for Neosho River Resort also contains the following accounts and account numbers: No. 112 Accounts Receivable, No. 144 Accumulated Depreciation—Cottages, No. 150 Accumulated Depreciation—Furniture, No. 212 Salaries Payable,No. 230 Interest Payable,No. 320 Retained Earnings,No. 620 Depreciation Expense—Cottages, No. 621 Depreciation Expense—Furniture, No. 631 Supplies Expense, No. 718 Interest Expense, and No. 722 Insurance Expense. Other data: 1. Insurance expires at the rate of $400 per month. 2. A count on August 31 shows $600 of supplies on hand. 3. Annual depreciation is $6,000 on cottages and $2,400 on furniture. 4. Unearned rent of $4,100 was earned prior to August 31. 5. Salaries of $400 were unpaid at August 31. 6. Rentals of $1,000 were due from tenants at August 31. (Use Accounts Receivable.) 7. The mortgage interest rate is 9% per year. (The mortgage was taken out on August 1.) Instructions (a) Journalize the adjusting entries on August 31 for the 3-month period June 1–August 31. (b) Prepare a ledger using the three-column form of account. Enter the trial balance amounts and post the adjusting entries. (Use J1 as the posting reference.) (c) Prepare an adjusted trial balance on August 31. (d) Prepare an income statement and a retained earnings statement for the 3 months ending August 31 and a balance sheet as of August 31

  

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Compute the present value of a $150 cash flow for the following combinations of discount rates and times: (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Compute the present value of a $150 cash flow for the following combinations of discount rates and times: (Do not round intermediate calculations. Round your answers to 2 decimal places.)

	Present Value
a. r = 12%, t = 8 years	$
b. r = 12%, t = 16 years
c. r = 6%, t = 8 years
d. r = 6%, t = 16 years

Explanation:

a. $150/(1.12)8 = $60.58

b. $150/(1.12)16 = $24.47

c. $150/(1.06)8 = $94.11

d. $150/(1.06)16 = $59.05

Compute the future value of a $150 cash flow for the same combinations of rates and times: (Do not round intermediate calculations. Round your answers to 2 decimal places.)

	Future Value
a. r = 12%, t = 8 years	$
b. r = 12%, t = 16 years
c. r = 6%, t = 8 years
d. r = 6%, t = 16 years

Explanation:

a. $150 × (1.12)8 = $371.39

b. $150 × (1.12)16 = $919.56

c. $150 × (1.06)8 = $239.08

d. $150 × (1.06)16 = $381.05

In 1880 five aboriginal trackers were each promised the equivalent of 100 Australian dollars for helping to capture the notorious outlaw Ned Kelley. In 1994 the granddaughters of two of the trackers claimed that this reward had not been paid. The Victorian prime minister stated that if this was true, the government would be happy to pay the $100. However, the granddaughters also claimed that they were entitled to compound interest.

a.	How much was each entitled to if the interest rate was 3%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Future value

$

b.	How much was each entitled to if the interest rate was 6%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Future value

$

Explanation:

a.

$100 × (1.03)114 = $2,906.99

b.

$100 × (1.06)114 = $76,712.94

a-1.	Calculate the present value of an annual payment of $900 you would received for 12 years if the interest rate is 3%. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Present value

$

a-2.	Calculate the present value of an annual payment of $700 you would received for 17 years if the interest rate is 3%. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Present value

$

a-3.	Which option would you prefer?
	$700 a year for 17 years

b-1.	Calculate the present value of an annual payment of $900 you would received for 12 years if the interest rate is 12%. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Present value

$

b-2.	Calculate the present value of an annual payment of $700 you would received for 17 years if the interest rate is 12%. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Present value

$

b-3.	Which option would you prefer?
	$900 a year for 12 years

rev: 01_28_2012


Explanation:

You should compare the present values of the two annuities.