ch 1 solutions - Solutions for Questions and Problems...

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Solutions for Questions and Problems – Chapter 1 25 SOLUTIONS FOR QUESTIONS AND PROBLEMS
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26 Chapter 1 – The Individual Income Tax Return
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Solutions for Questions and Problems – Chapter 1 27 CHAPTER 1 THE INDIVIDUAL INCOME TAX RETURN Group 1 - Multiple Choice Questions 1. D (Section 1.1) 8. C (Section 1.6) 2. A (Section 1.3) 9. C (Section 1.6) 3. C (Section 1.3) 10. D (Section 1.8) 4. C (Section 1.4) 11. E (Section 1.9) 5. C (Section 1.5) 12. A (Section 1.9) 6. E (Section 1.6) 13. E (Section 1.9) 7. B (Section 1.7) 14. C (Section 1.9) Group 2 - Problems 1. a. Economic. This provision is designed to encourage development of new technology. b. Social. This provision is designed to promote child welfare. c. Economic. This provision is designed to encourage small businesses to invest in capital assets. c. Social. This provision is designed to reduce the financial hardship of illnesses. 2. a. $36,500 = $41,000 + 500 – 5,000. b. $10,300 , the greater of itemized deductions or the standard deduction of $10,300. c. $19,600 = $36,500 – 10,300 – (2 x $3,300). (Section 1.3) 3. a. $23,000. b. $5,150 , the greater of total itemized deductions or the standard deduction amount. c. $14,550 = $23,000 – 5,150 – 3,300. (Section 1.3) 4. a. No. Income is less than the sum of the $3,300 exemption plus the $5,150 standard deduction. b. Yes. Interest income is more than $300 and interest plus earned income exceeds $850. c. No. They are under $17,900, the total of personal exemptions and the standard deduction. d. No. Taxable income less than $16,900, the total of personal exemptions and the standard deduction. e. Yes. His earnings exceeded the $400 limit for self-employed persons. (Section 1.4) 5. Yes. Since Geri owes social security taxes on the unreported tips, she must file an income tax return. (Section 1.4) 6. a. $48,079 = $46,479 + 3,500 – 1,900. b. $10,300 . c. $31,179 = $48,079 – 10,300 – (2 x 3,300). d. $3,921 (Tax Table) (Sections 1.3 and 1.5) 7. a. D b. D c. A d. A e. B or C (Section 1.5) 27
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28 Chapter 1 – The Individual Income Tax Return 8. Allen $2,776. Boyd $3,301. Caldwell $4,611. Dell $3,584. Evans $7,814. (Section 1.5) 9. a. 2. One personal and one dependency. b. 2. Two personal. c. 2. One personal and one dependency. d. 2. One personal and one dependency. (Section 1.6). e. 2. Two personal. 10. Adjusted gross income $17,400 Less: Itemized deductions –2,250 One exemption –3,300 Taxable income $11,850 Ulysses’ tax liability from the Tax Table is $1,404 . (Sections 1.3 and 1.5) 11. Adjusted gross income ($5,500 + 1,400) $6,900 Less: Standard deduction –5,150 Taxable income $1,750 Alicia’s tax from the Tax Table is $176. (Sections 1.3 and 1.5) 12. a. $158,000 = $140,000 + 10,000 + 5,000 + 3,000. b. $154,800 = $158,000 – 3,200. c. $11,914 = $12,000 – 86. The reduction in itemized deductions due to adjusted gross income in excess of $150,500 is equal to the lesser of: $86 = ($154,800 – 150,500) x 2 percent, or $6,000 = $7,500 (itemized deductions other than investment interest expense x 80 percent). d. 5. Two personal and three dependency exemptions. e. $126,386 = $154,800 – 11,914 – 16,500. f. $24,792 = $24,040 + 28%(126,386 – 123,700). (Sections 1.3, 1.5, 1.6 and 1.8) 13. a. $230,000 = $190,000 + 40,000. b. $6,424 = $6,600 – 176. The reduction in personal exemptions due to adjusted gross income in excess of the threshold amounts is determined as follows: [($230,000 – 225,750)/$2,500] (rounded up to 2) x 2 percent x 2/3 x 6,600 $176 = $6,600 ($3,300 x 2 exemptions) – 176 = $6,424.
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This note was uploaded on 12/11/2009 for the course ACCT 12345 taught by Professor Smith during the Spring '09 term at Abilene Christian University.

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ch 1 solutions - Solutions for Questions and Problems...

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