Question

QUESTION 35 Ward has a 50% interest in the PW partnership in the current year, the partnership had sales of $500,000, cost of goods sold of $340,000 and $90,000 in operating expenses Ward withdrew $30.000 from the partnership during the year but his partner did not withdraw anything War r ied to recognize any income from the parte Wand must report 30.000 gous income from the parent for the year Word must report 36.000 grom income from the partie Wwd core 550.000 income from the perhero 50 (5500,000 $340,000 $90,000 $30,000 The power stable on 570.000 for the your und Ward must include $30,000 in gross income $30,000 QUESTION 34 In November last year, Eva a cash basis CPA, contracted to perform an audit during the month of December last year. At the time the contract was being negotiated, the client offered to pay for the services in December However, Eva wanted to deter the income until this year. Therefore, the final agreement called for a $1,500 payment in January of this year Eve also prepared a corporate tax return in November last year. When she completed the tax return on December 1, last year, the client offered to pay the $150 charge, but Eva refused to accept payment until this year What amount must Eva report on her return for last year? $150 $1500 50 $1,650 None of the above QUESTION An acc ess andiord collected Jayron for this year in December last year The last you and the taxpayer can can the Jouy depreciation for this your on last year's tax retum Because there will be oned before the end of this year, there is no bad this you There is able this year so that the income and expense from the rents will be matched There is and last year None of the above

Answer 1

Solution for Question 35

Here the correct choice is " The partnership is taxable on $ 70,000 for the year and Ward must include $30,000 in gross income"

let us see why this is the case. We know that gross income = Revenue - COGS - Operating expense

in this case it is = 500,000 - 340,000 - 90,000

Gross Income = 70,000

The money withdrawn by Ward was in the form of drawings since it was withdrawn from the working capital / floating funds of the partnership during the financial year before any tax payments we calculated and paid and also due to the fact that his 50% profit sharing partner did not take any part of this drawings, the drawings also cannot be considered as dividend distributed in advance.

Such withdrawals are considered a part of gross income unless the net income and tax is calculated and dividend declared from Profit after tax. hence in this situation the taxable income is 70,000.

Answered for the first question as per Q & A guidelines since no specific instruction was given.

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