1. ) Earned and Unearned Income (LO. 2) Partha owns a qualifiedannuity that cost...

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Accounting

1. ) Earned and Unearned Income (LO. 2) Partha owns a qualifiedannuity that cost $52,000. Under the contract, when he reaches age65, he will receive $500 per month until he dies. Partha turns 65on June 1, 2018, and receives his first payment on June 3, 2018.Refer to the Annuity payment table to answer the followingquestion. Partha will report gross income of $__ from theannuity payments in 2018.
FACTS (^^^)
Age on Annuity Starting Date: 61-65= 260 payments 66-70= 210payments
2.) Effect of Accounting Method (LO. 6)
Arlene is a lawyer. She begins the current year with $12,000 inaccounts receivable from customers. During the year, she billscustomers $210,000 in fees and receives $180,000 in payments onaccount. She writes off $8,000 of the receivables as uncollectible,leaving her a year-end receivable balance of $34,000.
a. Arlene will recognize $ of cashreceipts as her gross income if she uses the cash basis ofaccounting.
^^^Feedback: Cash basis taxpayers look for constructive receiptwhile accrual basis taxpayers look for when earned.
b. Arlene's gross income would be $ ifshe uses the accrual basis of accounting.
3.) Effect of Accounting Method (LO. 6)
During the last five months of the year, Dwana opens a newinternet telecommunications business called Dwan-Com. Dwan-Combills $50,000 of revenues, but receives only $40,000 cash. Dwan-Comincurs $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 laborcosts in the current year.
a. Under the cash method, Dwan-Com has a netloss of $_.
b. Dwan-Com's taxable income under the accrualmethod is $_______.

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3.7 Ratings (324 Votes)

Part 1 Partha will report gross income of 2100 from the annuity payments in 2018 Explanation Partha is age 65 and so number of payments 260 months monthly exclusion 200 52000 260 months Taxable amount 500200 300 Gross income 2100 300 x 7 payments Part 2 A Arlene will recognize See Answer

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In: Accounting1. ) Earned and Unearned Income (LO. 2) Partha owns a qualifiedannuity that cost $52,000....1. ) Earned and Unearned Income (LO. 2) Partha owns a qualifiedannuity that cost $52,000. Under the contract, when he reaches age65, he will receive $500 per month until he dies. Partha turns 65on June 1, 2018, and receives his first payment on June 3, 2018.Refer to the Annuity payment table to answer the followingquestion. Partha will report gross income of $______ from theannuity payments in 2018.****FACTS**** (^^^)Age on Annuity Starting Date: 61-65= 260 payments 66-70= 210payments2.) Effect of Accounting Method (LO. 6)Arlene is a lawyer. She begins the current year with $12,000 inaccounts receivable from customers. During the year, she billscustomers $210,000 in fees and receives $180,000 in payments onaccount. She writes off $8,000 of the receivables as uncollectible,leaving her a year-end receivable balance of $34,000.a. Arlene will recognize $________ of cashreceipts as her gross income if she uses the cash basis ofaccounting.^^^Feedback: Cash basis taxpayers look for constructive receiptwhile accrual basis taxpayers look for when earned.b. Arlene's gross income would be $________ ifshe uses the accrual basis of accounting.3.) Effect of Accounting Method (LO. 6)During the last five months of the year, Dwana opens a newinternet telecommunications business called Dwan-Com. Dwan-Combills $50,000 of revenues, but receives only $40,000 cash. Dwan-Comincurs $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 laborcosts in the current year.a. Under the cash method, Dwan-Com has a netloss of $_______.b. Dwan-Com's taxable income under the accrualmethod is $_________.