Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he per...
Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $35,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal tax rate is 32 percent this year and will be 37 percent next year, and that he can earn an after-tax rate of return of 9 percent on his investments.
a. What is the after-tax income if Hank sends his client the bill in December?
b. What is the after-tax income if Hank sends his client the bill in January? Use Exhibit 3.1. (Round your answer to the nearest whole dollar amount.)
| 4% | 5% | 6% | 7% | 8% | 9% | 10% | 11% | 12% | |
|---|---|---|---|---|---|---|---|---|---|
| Year 1 | .962 | .952 | .943 | .935 | .926 | .917 | .909 | .901 | .893 |
| Year 2 | .925 | .907 | .890 | .873 | .857 | .842 | .826 | .812 | .797 |
| Year 3 | .889 | .864 | .840 | .816 | .794 | .772 | .751 | .731 | .712 |
| Year 4 | .855 | .823 | .792 | .763 | .735 | .708 | .683 | .659 | .636 |
| Year 5 | .822 | .784 | .747 | .713 | .681 | .650 | .621 | .593 | .567 |
| Year 6 | .790 | .746 | .705 | .666 | .630 | .596 | .564 | .535 | .507 |
| Year 7 | .760 | .711 | .665 | .623 | .583 | .547 | .513 | .482 | .452 |
| Year 8 | .731 | .677 | .627 | .582 | .540 | .502 | .467 | .434 | .404 |
| Year 9 | .703 | .645 | .592 | .544 | .500 | .460 | .424 | .391 | .361 |
| Year 10 | .676 | .614 | .558 | .508 | .463 | .422 | .386 | .352 | .322 |
| Year 11 | .650 | .585 | .527 | .475 | .429 | .388 | .350 | .317 | .287 |
| Year 12 | .625 | .557 | .497 | .444 | .397 | .356 | .319 | .286 | .257 |
| Year 13 | .601 | .530 | .469 | .415 | .368 | .326 | .290 | .258 | .229 |
| Year 14 | .577 | .505 | .442 | .388 | .340 | .299 | .263 | .232 | .205 |
| Year 15 | .555 | .481 | .417 | .362 | .315 | .275 | .239 |
c. Based on requirement a and b, should Hank send his client the bill in December or January?
Homework Answers
a. What is the after-tax income if Hank sends his client the bill in December?
After tax income = Pre tax income 35000 - Tax ( 35000 * 32 % ) = 35000 - 11200 = $ 23800
b. What is the after-tax income if Hank sends his client the bill in January?
Tax ( 35000 * 37 % ) = 12950
Present value of tax = 12950 * PVIF ( 9 % , 1 year ) = 12950 * 0.917 = 11875
After tax income = Pre tax income 35000 - Tax ( 11875 ) = $ 23125
c. Based on requirement a and b, should Hank send his client the bill in December or January?
In december as proceeds are more in december.
Add Answer to:
Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he per...
Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late...
Hank, a calendar-year taxpayer, uses the cash method of
accounting for his sole proprietorship. In late December, he
performed $25,000 of legal services for a client. Hank typically
requires his clients to pay his bills immediately upon receipt.
Assume his marginal tax rate is 30 percent this year and will be 33
percent next year, and that he can earn an after-tax rate of return
of 12 percent on his investments. Use Exhibit 3.1.
a. What is the after-tax income...
Reese, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late...
Reese, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December, she received a $20,000 bill from her accountant for consulting services related to her small business. Reese can pay the $20,000 bill anytime before January 30 of next year without penalty. Assume Reese's marginal tax rate is 32 percent this year and will be 37 percent next year, and that she can earn an after-tax rate of return of 12 percent on her...
Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late...
Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $26,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal tax rate is 32 percent this year and will be 37 percent next year, and that he can earn an after-tax rate of return of 9 percent on his investments. a. What is the after-tax income if Hank sends...
manny, a calendar Maríny, a calendar year taxpayer, uses the cash method of accounting for his...
manny, a calendar
Maríny, a calendar year taxpayer, uses the cash method of accounting for his sole proprietorship in late December he performed $31,000 of legal services for a client. Manny typically requires his clients to pay his bills immediately upon receipt. Assume Manny's marginal tax rate is 40 percent this year and next year and that he can eam an affer-tax rate of return of 5 percent on his investments a. What is the after-tax income if Manny sends...
Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late...
Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $22,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal tax rate is 32 percent this year and will be 35 percent next year, and that he can earn an after-tax rate of return of 12 percent on his Investments. Use Exhibit 3.1. a. What is the after-tax income...
Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late...
Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $30,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal tax rate is 32 percent this year and will be 37 percent next year, and that he can earn an after-tax rate of return of 4 percent on his investments. a. What is the after-tax income if Hank sends...
Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late...
Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $44,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal tax rate is 32 percent this year and will be 37 percent next year, and that he can earn an after-tax rate of return of 9 percent on his investments. a. What is the after-tax income if Hank sends...
Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late...
Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $28,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal tax rate is 32 percent this year and will be 37 percent next year, and that he can earn an after-tax rate of return of 11 percent on his investments. a. What is the after-tax income if Hank sends...
Manny, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late...
Manny, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December he performed $39,000 of legal services for a client. Manny typically requires his clients to pay his bills immediately upon receipt. Assume Manny's marginal tax rate is 37 percent this year and next year, and that he can earn an after-tax rate of return of 4 percent on his investments. a. What is the after-tax income if Manny sends his client the bill...
Hank, a calendar-year taxpayer, uses the cash method of
accounting for his sole proprietorship. In late December, he
performed $25,000 of legal services for a client. Hank typically
requires his clients to pay his bills immediately upon receipt.
Assume his marginal tax rate is 30 percent this year and will be 33
percent next year, and that he can earn an after-tax rate of return
of 12 percent on his investments. Use Exhibit 3.1.
a. What is the after-tax income...
Reese, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December, she received a $20,000 bill from her accountant for consulting services related to her small business. Reese can pay the $20,000 bill anytime before January 30 of next year without penalty. Assume Reese's marginal tax rate is 32 percent this year and will be 37 percent next year, and that she can earn an after-tax rate of return of 12 percent on her...
Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $26,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal tax rate is 32 percent this year and will be 37 percent next year, and that he can earn an after-tax rate of return of 9 percent on his investments. a. What is the after-tax income if Hank sends...
manny, a calendar
Maríny, a calendar year taxpayer, uses the cash method of accounting for his sole proprietorship in late December he performed $31,000 of legal services for a client. Manny typically requires his clients to pay his bills immediately upon receipt. Assume Manny's marginal tax rate is 40 percent this year and next year and that he can eam an affer-tax rate of return of 5 percent on his investments a. What is the after-tax income if Manny sends...
Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $22,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal tax rate is 32 percent this year and will be 35 percent next year, and that he can earn an after-tax rate of return of 12 percent on his Investments. Use Exhibit 3.1. a. What is the after-tax income...
Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $30,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal tax rate is 32 percent this year and will be 37 percent next year, and that he can earn an after-tax rate of return of 4 percent on his investments. a. What is the after-tax income if Hank sends...
Manny, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December he performed $39,000 of legal services for a client. Manny typically requires his clients to pay his bills immediately upon receipt. Assume Manny's marginal tax rate is 37 percent this year and next year, and that he can earn an after-tax rate of return of 4 percent on his investments. a. What is the after-tax income if Manny sends his client the bill...
Most questions answered within 3 hours.
-
Combustion of hydrocarbons such as ethane ( C 2 H 6 ) produces
carbon dioxide, a...
asked 8 minutes ago -
For the reaction: 2A + 3B ---> 3D, if the rate of formation
of D is...
asked 9 minutes ago -
At 25 °C, a solution has a hydronium ion concentration of
2.70×10-8 M.
What is the...
asked 24 minutes ago -
If gatsby wants to ensure that it can start each month with
sufficient denim on hand...
asked 21 minutes ago -
CISC 1115 Assignment 6 Write a complete program, including
javadoc comments, to process voter statistics Input...
asked 1 hour ago -
Use De Broglie's wave equation to calculate the wavelength of an
electron moving at the speed...
asked 45 minutes ago -
SargentMud Corporation makes custom mud sculptures and is very
labor intensive so they apply overhead cost...
asked 34 minutes ago -
If the Henry’s law constant for oxygen in water is 1.3 x 10-3
M/atm at 25...
asked 1 hour ago -
A laser with a wavelength of 470. nm illuminates two narrow
slits. The interference pattern from...
asked 1 hour ago -
1) In your own words, explain what elasticity of supply is
signifying. (Put in your own...
asked 52 minutes ago -
Who is ultimately responsible for formulating a firm's strategy
-- its managers, employees, or both? Explain.
asked 43 minutes ago -
The risk of material misstatement due to fraud relating to
revenue recognition should be a. given...
asked 57 minutes ago