Posted: October 20th, 2022

ACCT 401 – Spring B 2015 ch 8,9,10 and 11 homework 3

Problem 8-47 (LO 8-1, LO 8-2)Indicate the amount (if any) that Josh can deduct as ordinary and necessary business deductions in each of the following situations.a.Josh borrowed $83,000 from the First State Bank using his business assets as collateral. He used the money to buy City of Blanksville bonds. Over the course of a year, Josh paid interest of $12,000 on the borrowed funds, but he received $11,600 of interest on the bonds.b.Josh purchased a piece of land for $85,500 in order to get a location to expand his business. He also paid $7,000 to construct a new driveway for access to the property.c.This year Josh paid $18,200 to employ the mayor’s son in the business. Josh would typically pay an employee with these responsibilities about $15,400 but the mayor assured Josh that after his son was hired, some city business would be coming his way.d.Josh paid his brother, a mechanic, $5,300 to install a robotic machine for Josh’s business. The amount he paid to his brother is comparable to what he would have paid to an unrelated party to do the same work. Once the installation was completed by his brother, Josh began calibrating the machine for operation. However, by the end of the year, he had not started using the machine in his business.Problem 8-51 (LO 8-2)Ryan is self-employed. This year Ryan used his personal auto for several long business trips. Ryan paid $1,740 for gasoline on these trips. His depreciation on the car if he was using it fully for business purposes would be $4,800. During the year, he drove his car a total of 15,000 miles (a combination of business and personal travel). (Do not round intermediate calculations. Round your final answer to the nearest dollar amount.)a.Ryan can provide written documentation of the business purpose for trips totaling 6,000 miles. What business expense amount can Ryan deduct (if any) for these trips?b.Ryan estimates that he drove approximately 1,740 miles on business trips, but he can only provide written documentation of the business purpose for trips totaling 1,150 miles. What business expense amount can Ryan deduct (if any) for these trips?Problem 8-57 (LO 8-3)This year Amy purchased $2,100 of equipment for use in her business. However, the machine was damaged in a traffic accident while Amy was transporting the equipment to her business. Note that because Amy did not place the equipment into service during the year, she does not claim any depreciation expense for the equipment.a.After the accident, Amy had the choice of repairing the equipment for $2,540 or selling the equipment to a junk shop for $730. Amy sold the equipment. What amount can Amy deduct for the loss of the equipment?b.After the accident, Amy repaired the equipment for $860. What amount can Amy deduct for the loss of the equipment?c.After the accident, Amy could not replace the equipment so she had the equipment repaired for $4,800. What amount can Amy deduct for the loss of the equipment?Problem 9-38 (LO 9-1)Jose purchased a delivery van for his business through an online auction. His winning bid for the van was $34,750. In addition, Jose incurred the following expenses before using the van: shipping costs of $1,470; paint to match the other fleet vehicles at a cost of $1,590; registration costs of $4,836, which included $4,600 of sales tax and a registration fee of $236; wash and detailing for $141; and an engine tune-up for $318.What is Jose’s cost basis for the delivery van?Problem 9-44 (LO 9-1)Wanting to finalize a sale before year-end, on December 29, WR Outfitters sold to Bob a warehouse and the land for $189,000. The appraised fair market value of the warehouse was $126,000, and the appraised value of the land was $149,250. (Do not round intermediate calculations. Round your answers to the nearest dollar amount.)a.What is Bob’s basis in the warehouse and in the land?b.What would be Bob’s basis in the warehouse and in the land if the appraised value of the warehouse is $106,000, and the appraised value of the land is $169,250?c.Which appraisal would Bob likely prefer?Problem 9-62 (LO 9-3)Phil owns a ranch business and uses four-wheelers to do much of his work. Occasionally, though, he and his boys will go for a ride together as a family activity. During year 1, Phil put 999 miles on the four-wheeler that he bought on January 15 for $8,400. Of the miles driven, only 219 miles was for personal use. Assume four-wheelers qualify to be depreciated according to the five-year MACRS schedule and the four-wheeler was the only asset Phil purchased this year. (Use MACRS .mhhe.com/connect/0077631714/MACRS_Table_1.jpg”>Table 1, .mhhe.com/connect/0077631714/MACRS_Table_2.jpg”>Table 2, .mhhe.com/connect/0077631714/MACRS_Table_3.jpg”>Table 3, .mhhe.com/connect/0077631714/MACRS_Table_4.jpg”>Table 4 and .mhhe.com/connect/0077631714/MACRS_Table_5.jpg”>Table 5.) (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.)a.Calculate the allowable depreciation for year 1 (ignore the §179 expense and bonus depreciation).b.Calculate the allowable depreciation for year 2 if total miles were 1,495 and personal use miles were 665 (ignore the §179 expense and bonus depreciation).rev: 03_25_2014_QC_47356Problem 9-68 (LO 9-4)Nicole organized a new corporation. The corporation began business on April 1 of year 1. She made the following expenditures associated with getting the corporation started:ExpenseDateAmountAttorney fees for articles of incorporationFebruary 10$44,000March 1 – March 30 wagesMarch 307,600March 1 – March 30 rentMarch 303,200Stock issuance costsApril 117,000April 1 – May 30 wagesMay 3019,000a.What is the total amount of the start-up costs and organizational expenditures for Nicole’s corporation?b.What amount of the start-up costs and organizational expenditures may the corporation immediately expense in year 1?c.What amount can the corporation deduct as amortization expense for the organizational expenditures and for the start-up costs for year 1 (not including the amount it immediately expensed)? (Round intermediate calculations to 2 decimal places and final answer to the nearest whole dollar amount.)d.What would be the allowable organizational expenditures, including immediate expensing and amortization, if Nicole started a sole proprietorship instead?Problem 10-32 (LO 10-1)Rafael sold an asset to Jamal. What is Rafael’s amount realized on the sale in each of the following alternative scenarios?a.Rafael received $96,500 of cash and a vehicle worth $17,600. Rafael also pays $9,400 in selling expenses.b.Rafael received $116,000 of cash and was relieved of a $50,250 mortgage on the asset he sold to Jamal. Rafael also paid a commission of $8,950 on the transaction.c.Rafael received $25,750 of cash, a parcel of land worth $75,500, and marketable securities of $16,700. Rafael also paid a commission of $11,150 on the transaction.Problem 10-37 (LO 10-3, LO 10-4)In year 0, Longworth Partnership purchased a machine for $56,000 to use in its business. In year 3, Longworth sold the machine for $36,700. Between the date of the purchase and the date of the sale, Longworth depreciated the machine by $29,800. (Loss amounts should be indicated by a minus sign.)a.What is the amount and character of the gain Longworth will recognize on the sale?b.What is the amount and character of the gain Longworth will recognize on the sale if the sale proceeds were increased to $61,250?c.What is the amount and character of the gain Longworth will recognize on the sale if the sale proceeds were decreased to $18,300?Problem 10-52 (LO 10-6)Kase, an individual, purchased some property in Potomac, Maryland, for $213,000 approximately 10 years ago. Kase is approached by a real estate agent representing a client who would like to exchange a parcel of land in North Carolina for Kase’s Maryland property. Kase agrees to the exchange.What is Kase’s realized gain or loss, recognized gain or loss, and basis in the North Carolina property in each of the following alternative scenarios? (Loss amounts should be indicated by a minus sign.)a.The transaction qualifies as a like-kind exchange and the fair market value of each property is $687,500.b.The transaction qualifies as a like-kind exchange and the fair market value of each property is $150,000.Problem 10-61 (LO 10-6)Ken sold a rental property for $640,000. He received $152,000 in the current year and $122,000 each year for the next four years. $535,000 of the sales price was allocated to the building and the remaining $105,000 was allocated to the land. Ken purchased the property several years ago for $438,000. When he initially purchased the property, he allocated $340,000 of the purchase price to the building and $98,000 to the land. Ken has claimed $22,000 of depreciation deductions over the years against the building. (Round your answers to the nearest whole dollar amount.)Ken had no other sales of §1231 or capital assets in the current year.a.Determine the amount of Ken’s total recognized gain or loss, and the character of the gain or loss.b.Calculate Ken’s total tax due because of the sale (assuming his marginal ordinary tax rate is 35 percent).problem 11-48 (LO 11-1)Matt recently deposited $40,750 in a savings account paying a guaranteed interest rate of 4.5 percent for the next 10 years.(Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)a.If Matt expects his marginal tax rate to be 15 percent for the next 10 years, how much interest will he earn after-tax for the first year of his investment?b.How much interest will he earn after-tax for the second year of his investment if he withdraws enough cash every year to pay the tax on the interest he earns?c.How much will he have in the account after four years?d.How much will he have in the account after seven years?Problem 11-52 (LO 11-1)At the beginning of her current tax year, Angela purchased a zero-coupon corporate bond at original issue for $46,000 with a yield to maturity of 5 percent.Given that she will not actually receive any interest payments until the bond matures in 10 years, how much interest income will she report this year assuming semiannual compounding of interest? (Do not round intermediate calculations. Round your answer to 2 decimal places.)Problem 11-53 (LO 11-1)At the beginning of his current tax year, Eric bought a corporate bond with a maturity value of $20,000 from the secondary market for $15,200. The bond has a stated annual interest rate of 8 percent payable on June 30 and December 31, and it matures in five years on December 31.Absent any special tax elections, how much interest income will Eric report from the bond this year and in the year the bond matures?Problem 11-71 (LO 11-2)Irene is saving for a new car she hopes to purchase either two or five years from now. Irene invests $21,500 in a growth stock that does not pay dividends and expects a 6 percent annual before-tax return (the investment is tax deferred). When she cashes in the investment after either two or five years, she expects the applicable marginal tax rate on long-term capital gains to be 25 percent. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)a.What will be the value of this investment two and five years from now?b.When Irene sells the investment, how much cash will she have after taxes to purchase the new car (two and five years from now)?

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