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Len [333]
3 years ago
9

Wade paid $7,000 for an automobile that needed substantial repairs. he worked nights and weekends to restore the car and spent $

2,400 on parts for it. he knows that he can sell the car for $13,000, but he is very wealthy and does not need the money. on the other hand, his daughter, who has very little income, needs money to make the down payment on a house.
a. would it matter, after taxes, whether wade sells the car and gives the money to his daughter or whether he gives the car to his daughter and she sells it for $13,000
Business
1 answer:
Brrunno [24]3 years ago
8 0
Yes, it would matter. If Wade was primarily concerned with the tax effect, he should give the car to his daughter and let her sell it. Conveniently, the limit on how much one can give without paying federal taxes on that gift (other than to charity), is $13,000. This means wade will pay no tax when he gifts the car to his daughter. If he sells it himself, he will need to pay tax on the gain he realizes on the sale of the car, since he will have made a profit on the sale.

His daughter, when she sells the car, will also have to recognize the gain on the sale of the vehicle. However, she is apparently in a much lower income bracket than Wade, and thus may pay even less tax on her 13,000 gain than Wade would have paid on his $3600 profit.
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Nash Co. sells $435,000 of 12% bonds on June 1, 2020. The bonds pay interest on December 1 and June 1. The due date of the bonds
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Answer:

\left[\begin{array}{ccccccc}\\ &&$Carrying Value&$Cash&$Int. exp&$Amortization&$E.Carrying\\& 1&493574.88&26100&19743&6357&487217.88\\& 2&487217.88&26100&19488.72&6611.28&480606.6\\& 3&480606.6&26100&19224.26&6875.74&473730.86\\& 4&473730.86&26100&18949.23&7150.77&466580.09\\& 5&466580.09&26100&18663.2&7436.8&459143.29\\& 6&459143.29&26100&18365.73&7734.27&451409.02\\& 7&451409.02&26100&18056.36&8043.64&443365.38\\& 8&443365.38&26100&17734.62&8365.38&435000\\\end{array}\right]

<u>Journal entries:</u>

cash       493,574.88 debit

 bonds payable   435,000.00 credit

 premium on bp     58,574.88 credit

--to record issuance--

Interest expense 19743

Amortization 6357

cash 26100

--to record Dec 31st, 2020--

Interest expense 19488.72

Amortization 6611.28

cash 26100

--to record June 30th, 2021--

bonds payable    130,500.00 debit

premium on bp       13,681.98 debit

interest expense    17,400.00 debit

      gain on redemption           25,081.98 credit

       cash                                 136,500.00 credit

--to record redemption--

premium on BP      4,813.04 debit

interest expense  13,456.96 debit

        cash                         18,270 credit

-- to record December 31st, 2021--

Explanation:

First, we solve for the proceeds from the bonds payable:

C \times \frac{1-(1+r)^{-time} }{rate} = PV\\

C 26,100 (435,000 x 12% / 2)

time 8 ( 4 years x 2)

yield to maturity  0.04 ( 8% / 2)

26100 \times \frac{1-(1+0.04)^{-8} }{0.04} = PV\\

PV $175,724.6412

\frac{Maturity}{(1 + rate)^{time} } = PV  

Maturity   435,000.00

time   8.00

rate  0.04

\frac{435000}{(1 + 0.04)^{8} } = PV  

PV   317,850.24

PV c $175,724.6412

PV m  $317,850.2392

Total $493,574.8804

We now build the amortization schedule.

We take this value, we multiply by the interest rate and then, solve for amortization and ending carrying value.

<u>To record the redemption:</u>

accrued interest:

435,000 x 0.12 x 4/12 (months from June to oct) = 17,400

premium:

480,606.6 - 435,000 = 45,606.6

proportional of premium:

45,606 / 435,000 x 130,500 = 13.681,98

we now solve for the gain/loss on redemption:

130,500 + 13,681.98 + 17,400 = 161.581,9 value redeem

                                      for cash 136,500

gain on redemption 25.081,98

bonds payable    130,500.00 debit

premium on bp       13,681.98 debit

interest expense    17,400.00 debit

      gain on redemption           25,081.98 credit

       cash                                 136,500.00 credit

Now, we solve for Dec 31st, 2021 entry.

bonds payable: 435,000 - 130,500 = 304,500

premium: 45,606 - 13,681.98 = 31.924,02

interest expense:

(304,500 + 31,924.02) x 0.04 = 13,456.96

cash outlay:

304,500 x 0.06 = 18,270

amortization 18,270 - 13,456.96 = 4,813.04

6 0
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sattari [20]

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This can be calculated as follows:

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Learn more about cash flows here: brainly.com/question/18301011.

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