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Chapter 4 Solutions
Individual Income Taxes
- Paul’s Pool Service provides pool cleaning, chemical application, and pool repairs for residential customers. Clients are billed weekly for services provided and usually pay 50 percent of their fees in the month the service is provided. In the month following service, Paul collects 40 percent of service fees. The final 10 percent is collected in the second month following service. Paul purchases his supplies on credit and pays 50 percent in the month of purchase and the remaining 50 percent in the month following purchase. Of the supplies Paul purchases, 85 percent is used in the month of purchase, and the remainder is used in the month following purchase. The following information is available for the months of June, July, and August, which are Paul’s busiest months: June 1 cash balance $16,000. June 1 supplies on hand $4,400. June 1 accounts receivable $9,100. June 1 accounts payable $4,300. Estimated sales for June, July, and August are $27,300, $41,000, and $43,900, respectively.…arrow_forwardPaul's Pool Service provides pool cleaning, chemical application, and pool repairs for residential customers. Clients are billed weekly for services provided and usually pay 40 percent of their fees in the month the service is provided. In the month following service, Paul collects 50 percent of service fees. The final 10 percent is collected in the second month following service. Paul purchases his supplies on credit and pays 50 percent in the month of purchase and the remaining 50 percent in the month following purchase. Of the supplies Paul purchases, 80 percent is used in the month of purchase, and the remainder is used in the month following purchase. The following information is available for the months of June, July, and August, which are Paul's busiest months: June 1 cash balance $16,300. June 1 supplies on hand $4,500. ⚫ June 1 accounts receivable $17,650. ⚫ June 1 accounts payable $2,800. " • • Estimated sales for June, July, and August are $27,900, $41,900, and $44,900,…arrow_forwardThe May clinic runs a small office in Columbia. May pays the building owner a rent of 12000 a month which includes all utilities. It all signed a three-year lease. May hires a general practice position at $300 an hour, a nurse at $90 an hour, and a secretary at $60 an hour. May assumes that each patient uses $60 in supplies. In September, the clinic was open for 400 hours, during which all Personnel were available at all times to stuff the clinic. During that time 6000 patients were seen what we're maze fixed, variable, and total cost for the month? Show your workarrow_forward
- Forrester and Cohen is a small accounting firm, managed by Joseph Cohen since the retirement in December of his partner Brad Forrester. Cohen and his 3 CPAs together bill 620 hours per month. When Cohen or another accountant bills more than 155 hours per month, he or she gets an additional "overtime" pay of $65.80 for each of the extra hours: this is above and beyond the $5,100 salary each draws during the month. (Cohen draws the same base pay as his employees.) Cohen strongly discourages any CPA from working (billing) more than 245 hours in any given month. The demand for billable hours for the firm over the next 6 months is estimated below: Month Estimate of Billable Hours Jan. 600 Feb. 510 Mar. 1,010 Apr. 1,220 May 660 June 580 Cohen has an agreement with Forrester, his former partner, to help out during the busy tax season, up to 245 hours in any given month if needed, for an hourly fee of $135. Cohen will not even…arrow_forwardAce Architects employs two architects, each having a different area of specialization. Caitlin specializes in industrial commercial construction and Zachary specializes in residential construction. Ace expects to incur total overhead costs of $737,100 during the year and applies overhead based on annual salary costs. Caitlin is a senior partner, her annual salary is $168,750, and she is expected to bill 3,000 hours during the year. Zachary is a senior associate, his annual salary is $94,500, and he is expected to bill 2,800 hours during the year. a. Calculate the predetermined overhead rate. Predetermined Overhead Rate b. Assuming that the hourly billing rate should be set to cover the total cost of services plus a 20% markup, compute the hourly billing rates for Caitlin and Zachary. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Caltin Zachary % Billing rate per hour per hourarrow_forwardPinnacle Consulting employs two CPAs, each having a different area of specialization. Judy specializes in tax consulting and Steve specializes in management consulting. Pinnacle expects to incur total overhead costs of $419,400 during the year and applies overhead based on annual salary costs. Judy is a senior partner, her annual salary is $225,000, and she is expected to bill 2,200 hours during the year. Steve is a senior associate, his annual salary is $124,500, and he is expected to bill 1,500 hours during the year. Required: Calculate the predetermined overhead rate. Assuming that the hourly billing rate should be set to cover the total cost of services plus a 25% markup, compute the hourly billing rates for Judy and Steve.arrow_forward
- help mearrow_forwardElliott, Inc., has four salaried clerks to process purchase orders. Each clerk is paid a salary of $25,750 and is capable of processing as many as 6,500 purchase orders per year. Each clerk uses a PC and laser printer in processing orders. Time available on each PC system is sufficient to process 6,500 orders per year. The cost of each PC system is $1,100 per year. In addition to the salaries, Elliott spends $27,560 for forms, postage, and other supplies (assuming 26,000 purchase orders are processed). During the year, 25,350 orders were processed. REQUIRED: 1. Classify the resources associated with purchasing as (1) flexible or (2) committed. 2. Compute the total activity availability, and break this into activity usage and unused activity. 3. Calculate the total cost of resources supplied (activity cost), and break this into the cost of activity used and the cost of unused activity. (a) Suppose that a large special order will cause an additional 500 purchase orders. What purchasing…arrow_forwardSanjeev enters into a contract that pays him $1,000 each month for six months of continuous consulting services. In addition, there is a 40% chance the contract will pay an additional $3,000, depending on the outcome of the consulting contract. Sanjeev used the most likely amount to determine transaction price. After Sanjeev has recognized revenue for two months of the contract, he changes his assessment of the chance the contract will pay him $3,000 up to 70%. How much revenue would Sanjeev recognize in the third month of the contract? $2,500 O $1.500 $1,850 O $1,600arrow_forward
- Elliott, Inc., has four salaried clerks to process purchase orders. Each clerk is paid a salary of $25,750 and is capable of processing as many as 6,500 purchase orders per year. Each clerk uses a PC and laser printer in processing orders. Time available on each PC system is sufficient to process 6,500 orders per year. The cost of each PC system is $1,100 per year. In addition to the salaries, Elliott spends $27,560 for forms, postage, and other supplies (assuming 26,000 purchase orders are processed). During the year, 25,350 orders were processed. Required: 1. Which of the resources associated with purchasing can be classified as flexible resources? Forms, Postage and Supplies Which of the resources associated with purchasing can be classified as committed resources? PC system and clerks 2. Compute the total activity availability, and break this into activity usage and unused activity. Activity availability: fill in the blank 3 purchase orders Activity usage: fill in the blank…arrow_forward2. Helen Hunt and Cory Coates, two salespersons in adjoining territories, regularly compete for bonuses. During the last month, their dollar volume of sales, on which the bonuses are based, was nearly equal. On the last day of the month, both made a large sale. Both orders were shipped on the last day of the month and both were received by the customer on the fifth of the following month. Helen's sale was FOB shipping point, and Cory's was FOB destination. The company "counts" sales for purposes of calculating bonuses on the date that ownership passes to the purchaser. Helen's sale was therefore counted in her monthly total of sales, Cory's was not. Cory is quite upset. She has asked you to just include it, or to take Helen's off as well. She also has told you that you are being unethical for allowing Helen to get a bonus just for choosing a particular shipping method. Write a response to Cory. Explain your position.arrow_forwardAlan’s Affordable Running Products aka AARP has three employees: Brandon, the Manager, who earns a salary of $52,000 per year or $1,000 per week, Clarissa, the Sales Coordinator, who is paid $20 per hour, and David, the Shipper, who is paid $.20 per package shipped. Alan pays his employees every week and, this past week, Brandon worked all five scheduled days, Clarissa worked fifty (50) hours, and David shipped 4,500 packages. Record/journalize the employees’ payroll entry (pay attention to what’s asked for) by function (Management Salary Expense, Sales Wage Expense, & Shipping Wage Expense) now for the paychecks that will be issued this coming Friday, which will be the first time the employees are paid this calendar year. All the employees want 20% of their earnings withheld for Federal Income Tax purposes. The tax rates are: FICA Social Security 6.2% State Unemployment 5.4% Medicare…arrow_forward
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning