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Manny, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In...

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Accounting

Manny, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December he performed $37,000 of legal services for a client. Manny typically requires his clients to pay his bills immediately upon receipt. Assume Mannys marginal tax rate is 37 percent this year and next year, and that he can earn an after-tax rate of return of 11 percent on his investments.

Required:

  1. What is the after-tax income if Manny sends his client the bill in December?
  2. What is the after-tax income if Manny sends his client the bill in January? Use Exhibit 3.1.

Note: Round your answer to the nearest whole dollar amount.

  1. Based on requirements a and b, should Manny send his client the bill in December or January?
4%5%6%7%8%9%10%11%12%Year 10.9620.9520.9430.9350.9260.9170.9090.9010.893Year 20.9250.9070.8900.8730.8570.8420.8260.8120.797Year 30.8890.8640.8400.8160.7940.7720.7510.7310.712Year 40.8550.8230.7920.7630.7350.7080.6830.6590.636Year 50.8220.7840.7470.7130.6810.6500.6210.5930.567Year 60.7900.7460.7050.6660.6300.5960.5640.5350.507Year 70.7600.7110.6650.6230.5830.5470.5130.4820.452Year 80.7310.6770.6270.5820.5400.5020.4670.4340.404Year 90.7030.6450.5920.5440.5000.4600.4240.3910.361Year 100.6760.6140.5580.5080.4630.4220.3860.3520.322Year 110.6500.5850.5270.4750.4290.3880.3500.3170.287Year 120.6250.5570.4970.4440.3970.3560.3190.2860.257Year 130.6010.5300.4690.4150.3680.3260.2900.2580.229Year 140.5770.5050.4420.3880.3400.2990.2630.2320.205Year 150.5550.4810.4170.3620.3150.2750.2390.2090.183
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