Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $25,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal tax rate is 32 percent this year and will be 35 percent next year, and that he can earn an after-tax rate of return of 12 percent on his investments. Use Exhibit 3.1. Required: (PLEASE ONLY SOLVE QUESTION NUMBER 4) What is the after-tax income if Hank sends his client the bill in December? What is the after-tax income if Hank sends his client the bill in January? Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. Should Hank send his client the bill in December or January? What is the after-tax income if Hank expects his marginal tax rate to be 24 percent next year and sends his client the bill in January? Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. Should Hank send his client the bill in December or January if he expects his marginal tax rate to be 32 percent this year and 24 percent next year?
Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $25,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal tax rate is 32 percent this year and will be 35 percent next year, and that he can earn an after-tax rate of return of 12 percent on his investments. Use Exhibit 3.1. Required: (PLEASE ONLY SOLVE QUESTION NUMBER 4) What is the after-tax income if Hank sends his client the bill in December? What is the after-tax income if Hank sends his client the bill in January? Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. Should Hank send his client the bill in December or January? What is the after-tax income if Hank expects his marginal tax rate to be 24 percent next year and sends his client the bill in January? Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. Should Hank send his client the bill in December or January if he expects his marginal tax rate to be 32 percent this year and 24 percent next year?
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter4: Gross Income
Section: Chapter Questions
Problem 21P
Related questions
Question
-
Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $25,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal tax rate is 32 percent this year and will be 35 percent next year, and that he can earn an after-tax rate of return of 12 percent on his investments. Use Exhibit 3.1.
Required: (PLEASE ONLY SOLVE QUESTION NUMBER 4)
- What is the after-tax income if Hank sends his client the bill in December?
- What is the after-tax income if Hank sends his client the bill in January?
Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.
- Should Hank send his client the bill in December or January?
- What is the after-tax income if Hank expects his marginal tax rate to be 24 percent next year and sends his client the bill in January?
Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.
- Should Hank send his client the bill in December or January if he expects his marginal tax rate to be 32 percent this year and 24 percent next year?
Transcribed Image Text:Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed
$25,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal
tax rate is 32 percent this year and will be 35 percent next year, and that he can earn an after-tax rate of return of 12 percent on his
investments. Use Exhibit 3.1.
Required:
a. What is the after-tax income if Hank sends his client the bill in December?
b. What is the after-tax income if Hank sends his client the bill in January?
Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.
c. Should Hank send his client the bill in December or January?
d. What is the after-tax income if Hank expects his marginal tax rate to be 24 percent next year and sends his client the bill in January?
Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.
e. Should Hank send his client the bill in December or January if he expects his marginal tax rate to be 32 percent this year and 24
percent next year?
Complete this question by entering your answers in the tabs below.
Answer is complete but not entirely correct.
Required A
Required B Required C
What is the after-tax income if Hank expects his marginal tax rate to be 24 percent next year and sends his client the bill in
January?
Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.
$ 19,662
After-tax income
Required D
< Required C
Required E
Required E >
Transcribed Image Text:EXHIBIT 3-1 Present Value of a Single Payment at Various Annual Rates of
Return
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Year 11
Year 12
Year 13
Year 14
Year 15
4%
5%
6%
7% 8% 9% 10% 11% 12%
0.962
0.952
0.943
0.935 0.926 0.917 0.909 0.901 0.893
0.857 0.842 0.826 0.812 0.797
0.925
0.907
0.890 0.873
0.889
0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712
0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636
0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567
0.790
0.746 0.705 0.666
0.507
0.630 0.596 0.564 0.535
0.583 0.547 0.513 0.482 0.452
0.760
0.711 0.665 0.623
0.731
0.540 0.502 0.467 0.434 0.404
0.500 0.460 0.424 0.391 0.361
0.677 0.627 0.582
0.703 0.645 0.592 0.544
0.676 0.614 0.558 0.508
0.585
0.650
0.527
0.475
0.625
0.557 0.497
0.444
0.397
0.463 0.422 0.386 0.352 0.322
0.429 0.388 0.350 0.317 0.287
0.356 0.319 0.286 0.257
0.601 0.530 0.469 0.415 0.368 0.326 0.290 0.258 0.229
0.577
0.340 0.299 0.263 0.232 0.205
0.555 0.481 0.417 0.362 0.315 0.275 0.239 0.209 0.183
0.505 0.442
0.388
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
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.Recommended textbooks for you
Individual Income Taxes
Accounting
ISBN:
9780357109731
Author:
Hoffman
Publisher:
CENGAGE LEARNING - CONSIGNMENT