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problem- Falcon, Inc., paid salaries of $500,000 to its employees during its first year of operations.




Question;38. Falcon, Inc., paid salaries of $500,000 to its employees during its first year of operations.At the end of the year, Falcon had unpaid salaries of $45,000.a. Calculate the salary deduction if Falcon is a cash basis taxpayer.b. Calculate the salary deduction if Falcon is an accrual basis taxpayer.39. LO.2 Maud, a calendar year taxpayer, is the owner of a sole proprietorship that uses the cash method. On February 1, 2013, she leases an office building to use in her business for $120,000 for an 18-month period. To obtain this favorable lease rate, she pays the $120,000 at the inception of the lease. How much rent expense may Maud deduct on her 2013 tax return?40. LO.2 Duck, an accrual basis corporation, sponsored a rock concert on December 29,2013. Gross receipts were $300,000. The following expenses were incurred and paid as indicated:Expense Payment DateRental of coliseum $ 25,000 December 21, 2013Cost of goods sold:Food 30,000 December 30, 2013Souvenirs 60,000 December 30, 2013Performers 100,000 January 5, 2014Cleaning of coliseum 10,000 February 1, 2014Because the coliseum was not scheduled to be used again until January 15, the company with which Duck had contracted did not perform the cleanup until January 8?10,2014.Calculate Duck?s net income from the concert for tax purposes for 2013.41. LO.3 Doug incurred and paid the following expenses during the year:? $50 for a ticket for running a red light while he was commuting to work.? $100 for a ticket for parking in a handicapped parking space.? $200 to an attorney to represent him in traffic court as to the two tickets.? $500 to an attorney to draft an agreement with a tenant for a one-year lease on an apartment that Doug owns.? $1,000 to an attorney to negotiate a reduction in his child support payments.? $2,500 to an attorney to negotiate a reduction in his qualified alimony payments to a former spouse.Calculate the amount of Doug?s deductible expenses.42. LO.3 Trevor, a friend of yours from high school, works as a server at the ST Caf?. He asks you to help him prepare his Federal income tax return. When you inquire about why his bank deposits substantially exceed his tip income, he confides to you that he is a bookie on the side. Trevor then provides you with the following documented income and expenses for the year:Tip income $16,000Gambling income 52,000Gambling expensesPayouts to winners 29,000Employee compensation 8,000Bribe to police officer who is aware ofTrevor?s bookie activity 7,500a. How will these items affect Trevor?s AGI?b. His taxable income?c. If Trevor?s business was an illegal drug operation and the cost of the illegal drugs sold was $6,200, how would your answers to parts (a) and (b) differ?43. LO.3 Polly made political contributions to the following:National Republican Party $1,000National Democratic Party 1,000Candidate for mayor 700Candidate for state senate 200Candidate for school board 250How much, if any, can Polly deduct?


Paper#41306 | Written in 18-Jul-2015

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