h Gregory McDonald sold a piece of land he purchased for 5000 many years ago He

H gregory mcdonald sold a piece of land he purchased

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Prepayment for services to be rendered this year, check cashed by payee in December. h. Gregory McDonald sold a piece of land he purchased for $5,000 many years ago. He recently mortgaged 82. the property for $30,000, but after six months he sold the land for $50,000 to his cousin, Gus. If Gus purchased the land for cash and Gregory paid off the mortgage, what is the contract price, the a. gross profit, and the gross profit percentage? If Gus took the land subject to the mortgage and paid $5,000 a year, plus 10 percent interest for four b. years, starting with the year of sale, what is the contract price and the gain in the year of the sale? For each of the following changes in accounting method or period explain (1) if permission is needed and 83. (2) the tax effect of the change. Changing from a calendar to a fiscal year Changing from FIFO to LIFO b. Changing from the cash to accrual method c. Changing from the expensing to capitalizing carrying charges d. Changing from ACRS to the “units of production” method e. Changing from accruing accounts receivable at the time the order is received to the time that title f. changes Sandra Surrey sold her racehorse for $40,000 to Mickey Jockey and received $10,000 down and a note 84. for $30,000 (value $25,000) due in three years together with accrued interest of 12 percent compounded semiannually. If the note is paid on time and the horse is Section 1231 property in which Sandra had a basis of $15,000, what are the tax consequences to Sandra if: Sandra elects out of installment reporting? a. Sandra reports her gain on the installment method? b. Xeno Corporation was formed in 2007 and adopted a calendar year. In 2010, it switched to a fiscal year 85. beginning April 1. The only available information is for January 1 through March 31. Taxable income for the three months was $23,000. Determine Xeno’s tax liability for the short period. When is the short period’s tax return due? Is there any relief available to Xeno Corporation? a.
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621 Testbank © 2010 CCH. All Rights Reserved. Chapter 13 In 2010, Bust Company requested and received permission from the IRS to switch its accounting method 86. from the cash method to the accrual method. Taxable income in 2010 (computed under the accrual basis) was $110,000. At the end of 2010, Bust had accounts receivable of $32,000, accounts payable of $27,000 and merchandise inventory of $10,000. Determine Bust Company’s taxable income after all (if any) adjustments. Is any relief available to Bust Company? Genesis Corporation began business in 2010. Its primary activity is the sale of appliances. It is uncertain as 87. to which inventory method to use—FIFO, LIFO, or weighted average. Given the information below, which method would you suggest? State your reasons for suggesting this method. Purchases: February 200 units $300 =$60,000June 300 units $350 =105,000Augus 150 units $360 =54,000December180 units $380 = 68,400830$287,400Genesis sold 600 units in 2010 and anticipates increased sales (in units and price) and increased unit costs. Wonderworks Corporation sells and repairs equipment. Wonderworks is an accrual basis, calendar year 88. taxpayer. In computing its taxable income for 2010, it is uncertain about the treatment of the following three items and seeks your advice: It repaired a machine for Dandy Co. and submitted a bill for $7,000. Dandy Co. paid $3,000 at delivery
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