1. Taxpayer Info: Star Corp. is a calendar-year, accrual-method C corporation that sells inventory.
During 2018, Star Corp had gross sales of $300,000,000 and returns of $10,000,000. At the beginning of the year, Star Corp. had $20,000,000 worth of inventory. During the year, Star Corp. purchased $105,000,000 worth of inventory. Star Corp. had end of year inventory worth $25,000,000. What is Star Corp.'s cost of goods sold?
2. Same facts as previous question. What is the amount of Star Corp.'s gross profit?
3. On December 31, 2018, Deb's employer gave her a Tag Heuer Limited Edition Tom Brady watch because Deb met her sales quota for the year.
Deb’s employer originally purchased the watch in 2017 for $3,750.
At the time Deb received the watch from her employer (Dec. 31, 2018), the price had decreased to $3,000 because Tag Heuer was having a difficult time selling through their inventory of Tag Heuer Limited Edition Tom Brady watches.
In January 2019, Tom Brady again helped lead the Patriots to the Super Bowl, and demand for the Tag Heuer Limited Edition Tom Brady watch soared. The watch was sold out at all retail locations. The only place to buy the watch was on eBay, where Tag Heuer Limited Edition Tom Brady watches were selling for $5,000.
What is the amount of Deb's gross income, if any, from the receipt of the watch?
4. Arman is an arborist. Arman agreed to remove a tree for his neighbor. In exchange, his neighbor, a mechanic, fixed the air conditioner in Arman’s car. Arman would have paid $1,000 to have the air conditioner fixed if he took it to the dealership, and his neighbor would have paid an arborist $1,000 to remove the tree. What amount, if any, must Arman include in gross income as a result of the transaction?
1. Cost of Goods Sold = Cost of Goods purchased + Beginning Finished Goods Inventory – Ending Finished Goods Inventory
=105,000,000+20,000,000-25,000,000
=100,000,000$
2. Gross profit = Net sale - cost of goods sold
= [300,000,000-10,000,000]- 100,000,000
=290,000,000-100,000,000
=190,000,000$
1. Taxpayer Info: Star Corp. is a calendar-year, accrual-method C corporation that sells inventory. During 2018, Star Co...
On December 31, 2018, Deb's employer gave her a Tag Heuer Limited Edition Tom Brady watch because Deb met her sales quota for the year. Deb’s employer originally purchased the watch in 2017 for $3,750.At the time Deb received the watch from her employer (Dec. 31, 2018), the price had decreased to $3,000 because Tag Heuer was having a difficult time selling through their inventory of Tag Heuer Limited Edition Tom Brady watches. In January 2019, Tom Brady again helped...
n December 20, 2019, Deb's employer gave her a Tag Heuer Limited Edition Tom Brady watch because Deb met her sales quota for the year. Deb’s employer originally purchased the watch at the beginning of 2019 for $3,000. At the time Deb received the watch from her employer (Dec. 20, 2019), the price of similar watches had increased to $3,750 because everyone thought that Tom Brady was going to lead the Patriots to another Super Bowl victory. By Dec. 31,...
On December 20, 2019, Deb's employer gave her a Tag Heuer Limited Edition Tom Brady watch because Deb met her sales quota for the year. Deb’s employer originally purchased the watch at the beginning of 2019 for $3,000. At the time Deb received the watch from her employer (Dec. 20, 2019), the price of similar watches had increased to $3,750 because everyone thought that Tom Brady was going to lead the Patriots to another Super Bowl victory. By Dec. 31,...