X had started business with $2,00,000 in the beginning of the year. During the year, he borrowed $1,00,000 from Y. He further introduced $2,00,000 in the business. He also gave $50,000 as loan to his son. Goods given away as charity by him were $20,000. Profits earned by him were $2,50,000. He also withdraws $30,000 from the business. His capital at the end of the year would be
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- Carlos opens a dry cleaning store during the year. He invests 30,000 of his own money and borrows 60,000 from a local bank. He uses 40,000 of the loan to buy a building and the remaining 20,000 for equipment. During the first year, the store has a loss of 24,000. How much of the loss can Carlos deduct if the loan from the bank is nonrecourse? How much does Carlos have at risk at the end of the first year?Roberto invested 18,000 in a chicken production operation. Using nonrecourse notes, the business purchases 120,000 worth of grain to feed the chickens. If Robertos share of the expense is 26,000, how much can he deduct?During the last five months of the year, Dwana opens a new Internet telecommunications business called Dwan-Com. Dwan-Com bills 50,000 of revenues, but receives only 40,000 cash. Dwan-Com incurs 3,000 of supply expenses, and 41,000 of labor costs. Dwan-Com pays for 2,200 of the supplies and 38,000 of the labor costs in the current year. a. What is Dwan-Coms taxable income if it elects the cash method of accounting? b. What is Dwan-Coms taxable income if it elects the accrual method of accounting? c. What method of accounting do you recommend that Dwan-Com elect?
- X had started business with $2,00,000 in the beginning of the year. During the year, he borrowed $1,00,000 from Y. He further introduced $2,00,000 in the business. He also gave $50,000 as loan to his son. Goods given away as charity by him were $20,000. Profits earned by him were $2,50,000. He also withdraw $30,000 from the business. His capital at the end of the year would be__________.Blake is a limited partner in Kling-On Partners. This year Kling-On reported that Blake's share of dividend income was $3,700 and his share of municipal interest was $2,750. Early this year Blake found a bundle of $100 bills in the alley outside his apartment. When no one claimed the money, the cash (a total of $2,400) was returned to Blake. Finally, Blake earned salary of $42,000 but almost $6,500 was withheld for income taxes and FICA tax. Compute Blake's realized income and gross income.Don and Joe went into business together as equal co-owners. Joe had a lot of money but no business sense and Don had the “know how”. Don and Joe each invested $10,000 and Joe loaned the business $90,000. Chase loaned the business another $100,000 after Joe and Don agreed to guarantee the loan. In the first year, as is typical, the business struggled and incurred ordinary operating income of $50,000, excluding the payment promised to Don of $65,000 annually for his labor. The business earned interest income of $2,000, a short term capital loss of $4,000, and made qualified charitable contributions of $1,000. In the second year of business ordinary operating income was $32,000. including the promised amount for Don’s labor. The business earned $1,200 in interest income and incurred a $1,500 capital gain and paid $2,500 in qualified charitable contributions. Joe was repaid $10,000 for his loan and Chase received $3,000 in principal payments. An equal distribution of $4,000 was made to…
- a. Josh borrowed $87,000 from 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 $13,300 on the borrowed funds, but he received $12,000 of interest on the bonds. Deductible amountTom and Davidson go into business together as a partnership selling computer software through the Internet. On January 1 they each put $6,000 as capital and this goes into their local bank account for the company. They bought computer equipment for $10,000 in which they paid by check and set up for business in Davidson's dad's basement. The cost of computer equipment will be amortized over the next three years with a disposable value of $1000. Davidson's dad has agreed to let them operate out of his basement if they pay him a rent of 10% of their annual profit or $1,200 per year whichever is greater. At the end of the first month of business, they have made no sales and incurred no expenses other than the amortization rate of the computer equipment and the rent which is owed to Davidson's dad. At the end of January, what is the accounting equation (assets, liabilities and equity)ASLEY is in the business of purchasing accounts receivable from businesses at a discount and then collecting them. Last year, she purchased a $30,000 account receivable for $25,000. This year, the account was settled for $25,000. How much loss can Peggy deduct and in which year? a.$5,000 for the prior year. b.$5,000 for the prior year and $5,000 for the current year. c.$5,000 for the current year. d.$-0- for the current year.
- Last year, lana purchased a $100,000 account receivable for $90,000. During the current year, Lucy collected $97,000 on the account. What are the tax consequences to Lucy associated with the collection of the account receivable? No subsequent collections are expected. a.$7,000 gain b.$3,000 loss c.$13,000 loss d.$2,000 gain1. Salvatore, an investor-broker, earns $195,000 from his practice in the current year. He receives $35,000 in dividends and interest during the year. In addition, he incurs a loss of $18,000 from an investment in a passive activity acquired three years ago. After considering the passive investment, Salvatore's net income for the current year is $ 2. LeAnne, a physician, earns $315,000 from her medical practice in the current year. She receives $40,000 in dividends and interest during the year. In addition, she incurs a loss of $42,000 from an investment in a passive activity acquired three years ago and has income of $9,000 from an investment in a passive activity acquired one year ago. After considering the passive investments, LeAnne's net income for the current year is $ 3. Gabriel, an accountant, earns $360,000 from his practice. He also receives $9,100 in dividends and interest from various portfolio investments. During the year, he pays $85,000 to acquire a 15% interest…Ben teaches golf lessons at a country club under a business called Ben’s Pure Swings (BPS). He operates this business as a sole proprietorship on the accrual basis of accounting. This year BPS billed clients for $86,700 and collected $61,000 in cash for golf lessons completed during the year. In addition, BPS collected an additional $14,500 in cash for lessons that will commence after year end. Ben hopes to collect about half of the outstanding billings next year but the rest will likely be written off. Besides providing private golf lessons, BPS also contracted with the country club to staff the driving range. This year BPS billed the country club $27,200 for the service. The club paid $18,000 of the amount but disputed the remainder. By year end the dispute had not been resolved, and while Ben believes he is entitled to the money, he has still not collected the remaining $9,200. What is the amount of revenue recognized by BPS?