CONCEPTS IN FED.TAX.,2020-W/ACCESS
20th Edition
ISBN: 9780357110362
Author: Murphy
Publisher: CENGAGE L
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 5, Problem 79IIP
To determine
Ascertain the tax consequences for the situation, whether Person R is engaged in the trade or business or whether Person R is engaged in a hobby activity.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Tyrell has a tax service and accounting business in Redwood City. He decides to
move to Center City, which is 150 miles away and sells his accounting practice to
Able and Baker, a CPA firm. In the sales contract, he agrees that he will refrain
from practicing accounting anywhere within a 20-mile radius of Redwood City for
a period of two years. However, on weekends he returns to his house in Redwood
City, and when clients call him, he meets with them in his home. The sales
agreement:
Ois being violated by Tyrell.
O is invalid, because it is an illegal restraint of trade.
O is illegal, because it is a violation of public policy.
O will be divided into an enforceable, valid portion and an unenforceable, invalid
portion, which is the time provision, because the two-year period is too long.
To support herself while attending school, Daun Deloch sold stereo systems to other students. During the first year of operations,
Daun purchased the stereo systems for $240,000 and sold them for $350,000 cash. She provided her customers with a one-year
warranty against defects in parts and labor. Based on industry standards, she estimated that warranty claims would amount to 3
percent of sales. During the year, she paid $3,820 cash to replace a defective tuner.
Required
Prepare an income statement and statement of cash flows for Daun's first year of operation. (Statement of Cash Flows only, items to
be deducted must be indicated with a negative amount.)
DAUN'S STEREOS
Income Statement
Shanice owns a food delivery business. She picks up meals from restaurants and
delivers them to his clients' homes. One year Shanice's revenue is $25,000 and her
costs (such as gas and maintenance on her car) is $10,000. If Shanice did not run this
business, she could get a job at a grocery store and make $15,000 that year. Which
of the following statements is true?
Shanice's accounting profit is $15,000. Shanice's economic profit is $0.
Shanice's accounting profit is $10,000. Shanice's economic profit is $20,000.
Shanice's accounting profit is $0. Shanice's economic profit is $15,000.
OShanice's accounting profit is $20,000. Shanice's economic profit is $10,000.
Chapter 5 Solutions
CONCEPTS IN FED.TAX.,2020-W/ACCESS
Ch. 5 - Prob. 1DQCh. 5 - Why does the computation of adjusted gross income...Ch. 5 - Prob. 3DQCh. 5 - Prob. 4DQCh. 5 - Prob. 5DQCh. 5 - Prob. 6DQCh. 5 - Prob. 7DQCh. 5 - Prob. 8DQCh. 5 - Prob. 9DQCh. 5 - What is the difference between a trade or business...
Ch. 5 - Prob. 11DQCh. 5 - Prob. 12DQCh. 5 - Prob. 13DQCh. 5 - Prob. 14DQCh. 5 - Prob. 15DQCh. 5 - Prob. 16DQCh. 5 - Prob. 17DQCh. 5 - Prob. 18DQCh. 5 - Prob. 19DQCh. 5 - Prob. 20DQCh. 5 - Prob. 21DQCh. 5 - Prob. 22DQCh. 5 - Prob. 23DQCh. 5 - Prob. 24DQCh. 5 - Prob. 25DQCh. 5 - Prob. 26PCh. 5 - Prob. 27PCh. 5 - Prob. 28PCh. 5 - Prob. 29PCh. 5 - Prob. 30PCh. 5 - Prob. 31PCh. 5 - Prob. 32PCh. 5 - Prob. 33PCh. 5 - Prob. 34PCh. 5 - Prob. 35PCh. 5 - Prob. 36PCh. 5 - Prob. 37PCh. 5 - Prob. 38PCh. 5 - Prob. 39PCh. 5 - Prob. 40PCh. 5 - Prob. 41PCh. 5 - Prob. 42PCh. 5 - Prob. 43PCh. 5 - Prob. 44PCh. 5 - Prob. 45PCh. 5 - Prob. 46PCh. 5 - Prob. 47PCh. 5 - Prob. 48PCh. 5 - Prob. 49PCh. 5 - Prob. 50PCh. 5 - Prob. 51PCh. 5 - Prob. 52PCh. 5 - Prob. 53PCh. 5 - Prob. 54PCh. 5 - Prob. 55PCh. 5 - Hassad owns a rental house on Lake Tahoe. He uses...Ch. 5 - Ray, 83, is a used car dealer. He lives in a rural...Ch. 5 - Prob. 58PCh. 5 - Prob. 59PCh. 5 - Prob. 60PCh. 5 - Prob. 61PCh. 5 - Prob. 62PCh. 5 - Prob. 63PCh. 5 - Prob. 64PCh. 5 - Prob. 65PCh. 5 - Joy incurs the following expenses in her business....Ch. 5 - Prob. 67PCh. 5 - Prob. 68PCh. 5 - Prob. 69PCh. 5 - Prob. 70PCh. 5 - Prob. 71PCh. 5 - Prob. 72IIPCh. 5 - Prob. 73IIPCh. 5 - Prob. 74IIPCh. 5 - Prob. 75IIPCh. 5 - Prob. 76IIPCh. 5 - Prob. 77IIPCh. 5 - Prob. 78IIPCh. 5 - Prob. 79IIPCh. 5 - Prob. 80IIPCh. 5 - Prob. 81IIPCh. 5 - Prob. 91CPCh. 5 - Prob. 92DCCh. 5 - Prob. 93DCCh. 5 - Prob. 94DCCh. 5 - Prob. 95TPCCh. 5 - Allison and Paul are married and have no children....
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Molly is a full-time engineer for Y-Corporation. On the weekends, Molly enters fishing competitions in order to earn cash prizes. Molly really enjoys the relaxation of fishing and being near the water. Molly made $5,200 in income and incurred the following expenses during the year for her fishing activities: Contest Entrance Fees: $5,000 Property taxes on boat: $200 Fishing supplies: $1,000 Depreciation on equipment: $500 Which of the following statements is FALSE about Molly’s fishing activities? Group of answer choices Molly’s income from her fishing activities is taxable, even though the fishing activities constitute a hobby. Hobby losses are not allowed as a deduction. Since hobby expenses are categorized as miscellaneous itemized deductions, they are currently disallowed as deductions. Molly’s hobby expenses are fully deductible.arrow_forwardTo support herself while attending school, Daun Deloch sold stereo systems to other students. During the first year of operations, Deloch purchased the stereo systems for $145,000 and sold them for $272,000 cash. She provided her customers with a one-year warranty against defects in parts and labor. Based on industry standards, she estimated that warranty claims would amount to 6 percent of sales. During the year, she paid $2,350 cash to replace a defective tuner. Required a-1. Prepare an income statement for Deloch's first year of operation. a-2. Prepare a statement of cash flows for Deloch's first year of operation.arrow_forwardGomez runs a small pottery firm. He hires one helper at $15,500 per year, pays annual rent of $5,500 for his shop, and spends $21,000 per year on materials. He has $40,000 of his own funds invested in equipment (pottery wheels, kilns, and so forth) that could earn him $6,500 per year if alternatively invested. He has been offered $20,500 per year to work as a potter for a competitor. He estimates his entrepreneurial talents are worth $7,000 per year. Total annual revenue from pottery sales is $87,000. Instructions: Enter your answers as whole numbers. a. Calculate the accounting profit for Gomez's pottery firm. b. Now calculate Gomez's economic profit. Prev 1 of 11 Next >arrow_forward
- Check my work mode : This shows what is correct or incorrect for the work you have completed so far. It does not indicate Seiko's current salary is $98,500. Her marginal tax rate is 32 percent and she fancies European sports cars. She purchases a new auto each year. Seiko is currently a manager for Idaho Office Supply. Her friend, knowing of her interest in sports cars, tells her about a manager position at the local BMW and Porsche dealer. The new position pays only $87,100 per year, but it allows employees to purchase one new car per year at a discount of $17700. This discount qualifies as a nontaxable fringe benefit. In an effort to keep Seiko as an employee, Idaho Office Supply offers her a $12.400 raise. Answer the following questions about this analysis. b-1. Financially, which offer is better for Seiko on an after-tax basis? Car dealer's offer O Current employer's offer OBoth offers b-2. By how much is the offer better for Seiko on an after tax basis (Assume that Seiko is going…arrow_forwardTo support herself while attending school, Daun Deloch sold stereo systems to other students. During the first year of operations, Deloch purchased the stereo systems for $165,000 and sold them for $310,000 cash. She provided her customers with a one-year warranty against defects in parts and labor. Based on industry standards, she estimated that warranty claims would amount to 4 percent of sales. During the year, she paid $2,350 cash to replace a defective tuner. eBook Required Ask a-1. Prepare an income statement for Deloch's first year of operation. a-2. Prepare a statement of cash flows for Deloch's first year of operation. Print Complete this question by entering your answers in the tabs below. Required A1 Required A2 Prepare an income statement for Deloch's first year of operation. DELOCH STEREOS Income Statement Required A1 Required A2 >arrow_forwardTo support herself while attending school, Daun Deloch sold stereo systems to other students. During the first year of operations, Deloch purchased the stereo systems for $166,000 and sold them for $312,000 cash. She provided her customers with a one-year warranty against defects in parts and labor. Based on industry standards, she estimated that warranty claims would amount to 4 percent of sales. During the year, she paid $2,560 cash to replace a defective tuner. Required a-1. Prepare an income statement for Deloch's first year of operation. a-2. Prepare a statement of cash flows for Deloch's first year of operation. Complete this question by entering your answers in the tabs below. Required A1 Required A2 Prepare an income statement for Deloch's first year of operation. DELOCH STEREOS Income Statementarrow_forward
- Gomez runs a small pottery firm. He hires one helper at $12,000 per year, pays annual rent of $5,000 for his shop, and spends $20,000 per year on materials. He has $40,000 of his own funds invested in equipment (pottery wheels, kilns, and so forth) that could earn him$4,000 per year if alternatively invested. He has been offered $15,000 per year to work as a potter for a competitor. He estimates his entrepreneurial talents are worth $3,000 per year. Total annual revenue from pottery sales is $72,000. Calculate the accounting profit and the economic profit for Gomez’s pottery firm. d. How much is the total implicit cost? (Use a whole number, no currency, no comma, no space) e. How much is the economic profit? (Use a whole number, no currency, no comma, no space)arrow_forwardTo support herself while attending school, Daun Deloch sold stereo systems to other students. During the first year of operations, Daun purchased the stereo systems for $260,000 and sold them for $370,000 cash. She provided her customers with a one-year warranty against defects in parts and labor. Based on industry standards, she estimated that warranty claims would amount to 2 percent of sales. During the year, she paid $4,020 cash to replace a defective tuner. Requireda. Prepare an income statement and statement of cash flows for Daun’s first year of operation. b. Based on the information given, what is Daun’s total warranties liability at the end of the accounting period?arrow_forwardTo support herself while attending school, Daun Deloch sold stereo systems to other students. During the first year of operations, Deloch purchased the stereo systems for $159,000 and sold them for $298,000 cash. She provided her customers with a one-year warranty against defects in parts and labor. Based on industry standards, she estimated that warranty claims would amount to 4 percent of sales. During the year, she paid $1,790 cash to replace a defective tuner. Required a-1. Prepare an income statement for Deloch's first year of operation. a-2. Prepare a statement of cash flows for Deloch's first year of operation. Complete this question by entering your answers in the tabs below. Required A1 Required A2 Prepare an income statement for Deloch's first year of operation. DELOCH STEREOS Income Statement $ 0 0 Required A2 >arrow_forward
- To support herself while attending school, Daun Deloch sold stereo systems to other students. During the first year of operations, Deloch purchased the stereo systems for $157,000 and sold them for $294,000 cash. She provided her customers with a one-year warranty against defects in parts and labor. Based on industry standards, she estimated that warranty claims would amount to 3 percent of sales. During the year, she paid $1,970 cash to replace a defective tuner. Required a-1. Prepare an income statement for Deloch's first year of operation. a-2. Prepare a statement of cash flows for Deloch's first year of operation. X Answer is not complete. Complete this question by entering your answers in the tabs below. Required A1 Required A2 Prepare a statement of cash flows for Deloch's first year of operation. (Cash outflows should be indicated with a minus sign.) DELOCH STEREOS Statement of Cash Flowsarrow_forwardKensley enjoys playing blackjack at the casino every Thursday night after work. This year, she has won $3,850, which she included in gross income. She lost $9,540. Her adjusted gross income is $150,000. How much of the losses can Kensley deduct? (Do not use commas or dollar signs. Round to the nearest dollar.)arrow_forwardFreddie owns an electronics outlet in Houston. This year, he paid $600 to register for a four-day course in management in Oklahoma City. Freddie paid $800 in airfare and $1,000 for five nights' lodging. After the course, Freddie spent the last day sightseeing. During the trip, Freddie also paid $140 a day for meals, and $80 a day for a rental car. What amount of these travel expenditures may Freddie deduct as business expenses?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
How to Calculate your Income Tax? Step-by-Step Guide for Income Tax Calculation; Author: ETMONEY;https://www.youtube.com/watch?v=QdJKpSXCYmQ;License: Standard YouTube License, CC-BY
How to Calculate Federal Income Tax; Author: Edspira;https://www.youtube.com/watch?v=2LrvRqOEYk8;License: Standard Youtube License