Fall 05 solution

# Fall 05 solution - ACCTG 321 Fall 2005 Exam II Solution I A...

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ACCTG 321 Fall, 2005 Exam II Solution I. A. Salaries and Wages \$ 70,000 Dividends 15,000 S Corporation Income 40,000 Short-term capital gain 12,000 Long-term capital loss (18,000) Net capital loss (limited to \$ 3,000) (3,000) Alimony 20,000 Employee business expenses (reimbursed and in W-2) (10,000) Traffic fine reimbursement (not in W-2) 1,000 Adjusted Gross Income \$ 133,000 B. Adjusted Gross Income (as determine in part 1 preceding) \$ 133,000 Itemized Deductions Personal property taxes \$ 2,000 Charitable contributions 8,000 State income taxes 9,000 Real property taxes 15,000 (34,000) Exemptions Personal \$ 6,400 Dependency 16,000 (22,400) Taxable Income \$ 76,600

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C. 1) Municipal Bond Interest Income Excluded from taxation by statute 2) Gift sent to Aunt Susie Gary and Val may each exclude \$ 11,000. Since the gift is only \$ 18,000, all of it is excluded from any potential gift tax. 3) Child Support received Excluded from taxation by statute 4) State sales tax The greater of state sales tax or state income tax is deductible. In this particular case, the state income tax exceeds the state sales tax and therefore is the amount to be deducted by the taxpayer. 5) Standard deduction The taxpayer deducts the greater of the standard deduction or itemized deductions. In this particular case, the itemized deductions exceed the standard deduction and are therefore deductible.
II. A. Revenue Recognized 2002: (400)(\$180 - \$100) = \$32,000 2003: ZERO 2004: ZERO B. Gross Profit rate = \$80/\$180 = 44.44% Gross Profit Recognized 2002: (\$30,000)(44.44%) = \$13,333 2003: (\$40,000)(44.44%) = \$17,778 2004: (\$2,000)(44.44%) = \$ 889 C. Cash Collected Cost Gross Profit Recognized 2002: \$30,000 (\$100)(250) = \$25,000 \$ 5,000 2003: \$40,000 (\$100)(150) = \$15,000 \$25,000 2004: \$ 2,000 \$0 \$ 2,000

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III. A.
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Fall 05 solution - ACCTG 321 Fall 2005 Exam II Solution I A...

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