ZuoTi.Pro
Question

Daniel who is in the 25% tax bracket sells taxable bonds (at no gain or loss)...

Daniel who is in the 25% tax bracket sells taxable bonds (at no gain or loss) which yielded $900 of interest annually and purchases tax-exempt bonds yielding $400 of annual interest. What is the net cash effect of these transactions to Daniel for the year? a. Increases by $ 900. b. Increases by $ 225. c. Decreases by $ 625. d. Decreases by $ 275. e. None
business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Answer:

First lets look at Daniel's net cash when he held taxable bond:

Annual Interest = $900

Less:Tax @25% = ($225)

Net Cash earned = $675

Now lets look at Daniel's net cash when he holds tax exempt bonds:

Annual Interest = $400

Less:Tax exempt = Nil

Net Cash earned = $400

Net cash earned decreases from $675 to $400, that is by $275.

So the net cash effect is :-

d. Decreases by $275.

0 0
Add a comment
Know the answer?
Add Answer to:
Daniel who is in the 25% tax bracket sells taxable bonds (at no gain or loss)...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Walt, who is in the 35% tax bracket, sells taxable bonds (at no gain or loss)...

    Walt, who is in the 35% tax bracket, sells taxable bonds (at no gain or loss) which yielded $900 of interest annually and purchases tax-exempt bonds yielding $600 of annual interest. What is the net cash effect of these transactions to Walt for the year? a. Decreases by $300. b. Increases by $915. c. Decreases by $900. d. Increases by $15. e. None of the above.

  • Jennifer is in the 25% federal income tax bracket and the 3% state income tax bracket....

    Jennifer is in the 25% federal income tax bracket and the 3% state income tax bracket. If Jennifer purchases a municipal bond yielding 4.25%, what is her after-tax equivalent yield if the bond income is exempt from both federal and state taxes? 5.84% 5% 7.55% 8. A bond has a YTM of 6.5%, a modified duration of 16.9 years, a duration of 18 years and a 30 year maturity. By what percentage will the bond's price change if market interest...

  • Purchase and Sale of Bonds Starship Enterprises enters into the following transactions during 2017 and 2018:...

    Purchase and Sale of Bonds Starship Enterprises enters into the following transactions during 2017 and 2018: Required: 1. Identify and analyze all transactions on Starship’s records to account for its investment in the Northern Lights bonds. 2017 Jan. 1: Purchased $100,000 face value of Northern Lights Inc. bonds at face value. The newly issued bonds have an interest rate of 8% paid semiannually on June 30 and December 31. The bonds mature in five years. Activity Investing Accounts Investments in...

  • Please answer the Multiple choice questions below to the best of your knowledge. This is another chance for those stude...

    Please answer the Multiple choice questions below to the best of your knowledge. This is another chance for those students did not participate in previous questions.  Some Terms you might need to know Other Adjustments Account (OAA) Accumulated Adjustments Account (AAA) Previously Taxed Income (PTI) Accumulated Earnings and Profits (AE&P)                                                                                                                                                                                                                                                                                                                                      1. If the beginning balance in OAA is zero, and the following transactions occur, what is the ending OAA balance?              Section 1245 gain $21,000              Payroll tax penalty 4,200              Tax-exempt interest...

  • ACC206: Financial Reporting 3.0 1. When bonds are sold at a discount and the effective interest...

    ACC206: Financial Reporting 3.0 1. When bonds are sold at a discount and the effective interest method is used, at each subsequent interest payment date, which of the following is true? a. The cash paid for interest is less than the effective interest expense. b. The cash paid for interest is equal to the effective interest expense. c. The cash paid for interest is more than if the bonds had been sold at a premium. d. The cash paid for...

  • On January 1, Year 1, G and L form a limited partnership to acquire and operate...

    On January 1, Year 1, G and L form a limited partnership to acquire and operate a rental apartment building. L, the limited partner, contributes $90 and G, the general partner, $10. The partnership obtains a nonrecourse loan from an unrelated financial institution for $900 and purchases a building (on leased land) for $1,000. The loan is secured by the building. The loan requires interest to be paid currently, but does not call for any principal payment for 5 years....

  • LION CORPORATION INCOME STATEMENT-12-31-20xX 1. SALES 2. COST OF GOODS SOLD 3. GROSS PROFIT 4. SELLING,GENERAL&ADMINISTRATIVE...

    LION CORPORATION INCOME STATEMENT-12-31-20xX 1. SALES 2. COST OF GOODS SOLD 3. GROSS PROFIT 4. SELLING,GENERAL&ADMINISTRATIVE 5. RESEARCH & DEVELOPMENT X 6. DEPREIATION &AMORTIZATION X S 736,447 (462,000) S 274,447 S (198,000) S (20,000) (18,000) 7. OPERATING INCOME (OPERATING PROFIT) 38,447 S (4,000) 9.EARNINGS BEFORE INTEREST & TAXES (EBIT) S 34,447 (3,000) 8. OTHER INCOME (EXPENSE) 12 13 14 - 10. INTEREST INCOME (EXPENSE) 1. EARNINGS BEFORE TAXES (EBT) [PRETAX INCON S 31,447 12. TAXES 13. EARNINGS AFTER TAXES (EAT)...

  • 23. What is the total net amount of capital gain reported on Form 1040? OA. $308...

    23. What is the total net amount of capital gain reported on Form 1040? OA. $308 OB. $2,411 C. $2,719 OD. $2,900 Advanced Scenario 7: Mark and Barbara Matthews Directions Using the tax software, complete the tax return, including Form 1040 and all appropri- ate forms, schedules, or worksheets. Answer the questions following the scenario. Note: When entering Social Security numbers (SSNs) or Employer Identification Numbers (EINS), replace the Xs as directed, or with any four digits of your choice....

  • Payable: Use the t-accts below to record the following entries. If you get stuck, carefully revie...

    Payable: Use the t-accts below to record the following entries. If you get stuck, carefully review the online and text examples. On September 1t, Geo Inc. borrows $2,400 from State Bank and signs a 10 month short-term note payable. The interest rate on the note is 7%. Even though the note is only for 10 months, the interest rate is an annual rate (see interest calculations below). a) Record the entry to borrow the money from the bank. b) Next,...

  • ASSIGNMENT 7: FINANCIAL ACCOUNTING Note: 1. Value Added Tax (VAT) must be ignored 2. Use the form...

    All questions need to be answered please. From questions 1 to question 5. ASSIGNMENT 7: FINANCIAL ACCOUNTING Note: 1. Value Added Tax (VAT) must be ignored 2. Use the formats contained in your study guide to answer questions 2 to 5 (20) QUESTION 1 REQUIRED For each of the following questions, write down only the letter of the correct answer e.g. 1.6 C. Do not shovw any calculations. 1.1 he following information relates to an item of inventory sold by...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT