ACCOUNTING QUESTION

ACCOUNTING QUESTION - 1. Mac is the owner of Maid in...

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1. Mac is the owner of Maid in Arizona Cleaning Service (MACS). In 2007, the company had gross income of $300,000 and operating expenses of $195,000. In July, MACS sold a capital asset that had been held by the business for two years for a $15,000 loss. During 2007, Mac withdrew $93,000 from the business for his personal living expenses. Assuming MACS is a sole proprietorship, how do these transactions affect Mac’s taxable income for 2007? a. Increase taxable income by $105,000. b. Increase taxable income by $102,000. c. Increase taxable income by $93,000. d. Increase taxable income by $90,000. e. None of the above. 2. Bjorn owns a 40% interest in an S corporation that earned $150,000 in 2007. He also owns 30% of the stock in a C corporation that earned $150,000 during the year. The S corporation distributed $35,000 to Bjorn and the C corporation paid dividends of $35,000 to Bjorn. How much income must Bjorn report from these businesses? a. $0 income from the S corporation and $0 income from the C corporation. b. $35,000 income from the S corporation and $35,000 income from the C corporation. c. $60,000 income from the S corporation and $35,000 of dividend income from the C corporation. d. $60,000 income from the S corporation and $0 income from the C corporation. e. None of the above. 3. Juan is the sole shareholder of an S corporation, and Diego owns a sole proprietorship. Both businesses, which were started in 2007, make a profit of $300,000 in 2007. Each owner withdraws $225,000 from his business during the year. Which of the following statements is correct? a. Diego must report net profit from his business of $300,000 for 2007. b. Juan must report dividend income of $300,000 for 2007. c. Diego’s proprietorship is required to pay tax on the $300,000 profit for 2007. d. Juan’s S corporation must pay tax on $300,000 for 2007. e. None of the above. 4. Norma formed Hyacinth Enterprises, a proprietorship, in 2007. In its first year, Hyacinth had operating income of $150,000 and operating expenses of $100,000. In addition, Hyacinth had a long-term capital loss of $4,000. Norma, the proprietor of Hyacinth Enterprises, withdrew $25,000 from Hyacinth during the year. Assuming Norma has no other capital gains or losses, how does this information affect her taxable income for 2007? a. Increases Norma’s taxable income by $25,000. b. Increases Norma’s taxable income by $21,000 ($25,000 income – $4,000 long-term capital loss). c. Increases Norma’s taxable income by $47,000 ($50,000 income – $3,000 long-term capital loss). d. Increases Norma’s taxable income by $50,000. e. None of the above.
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5. Geneva, a sole proprietor, sold one of her non-depreciable business assets for a $20,000 long-term capital gain. Geneva’s marginal tax rate is 35%. Gulf, a C corporation, sold one of its assets for a $20,000 long-term capital gain. Gulf’s marginal tax rate is 35%. What tax rates are applicable to these capital gains? a.
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This note was uploaded on 11/12/2009 for the course ACCT ACCT taught by Professor Acct during the Summer '09 term at Adelphi.

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ACCOUNTING QUESTION - 1. Mac is the owner of Maid in...

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