Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. company y began business in february 2021. by the

Company Y began business in February 2021. By the end of the calendar year, it...

80.2K

Verified Solution

Question

Accounting

imageimage

Company Y began business in February 2021. By the end of the calendar year, it had billed its clients for $3.5 million of services and had incurred $800,000 of operating expenses. As of December 31, it had collected $2.9 million of its billings and had paid $670,000 of its expenses. It expects to collect the remaining outstanding bills and pay the remaining expenses by March 2022. Company Y adopted a calendar year for federal tax purposes. It may use either the cash method or the accrual method of accounting on its first tax return, and it has asked you to quantify the value of using the cash method for the first year. In doing so, assume Company Y uses a 5 percent discount rate to compute NPV. Use Appendix A. (Round discount factor(s) to 3 decimal places, intermediate computations and final answers to the nearest whole dollar amount. Enter your answers in dollars not in millions of dollars.) Amount $ 0 Accrual method Income from billings Expenses incurred Net income in 2021 Cash method: Cash received Expenses paid Net income in 2021 Income deferred until 2022 under cash method Tax on income deferred for one year NPV of deferred tax Decrease in tax cost from cash method $ 0

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students