1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
-BARSIC- [3]
3 years ago
11

Nicole is a calendar-year taxpayer who accounts for her business using the cash method. On average, Nicole sends out bills for a

bout 512,000 of her services at the first of each month. The bills are due by the end of the month, and typically 70 percent of the bills are paid on time and 98 percent are paid within 60 days.
a) Suppose that Nicole is expecting a 2 percent reduction in her marginal tax rate next year. Ignoring the time value of money, estimate the tax savings for Nicole if she postpones mailing of bills for December until January 1 of next year.
b) Describe how the time value of money affects your calculations.
c) Would this tax savings strategy create any additional business risks? Explain.
Business
1 answer:
BigorU [14]3 years ago
4 0

Answer:

a) I guess that Nicole bills $12,000 per month, not $512,000.

Assuming that the last time Nicole billed her customers was November, she was able to collect $11,760 before the year ended. I will also assume that the remaining $240 are uncollectible.

If Nicole postpones billing her customers during December, her taxable income as a cash basis taxpayer will decrease by $12,000 x 70% = $8,400

she will be able to save $8,400 x 2% = $168 in current taxes, but she will have to pay them next year anyways.

b) The time value of money should affect Nicole's calculations because she is saving the interests that could be earned by $168 in 1 year. We are not given any specific interest rate but we could use 6% as an example. Nicole will gain $168 x 6% = $10.08

But she will also lose potential interests earned on the $8,400 that she billed later. Using the same interest rate, 6%, she will lose $8,400 x 6% x 1/12 (only 1 month) = $42.

That means that the net result from this = $10.08 - $42 = -$31.92.

As you can see, Nicole is losing money. The higher the interest rate, the more money she will lose.

c) The risk of increasing uncollectible accounts will always exist. Nicole already has around 2% of uncollectible accounts, and combining two bills at one time might lead to a higher percentage of uncollectible accounts. Of course, this depends on her clients, but the risk will increase a little bit or a lot, but it will increase.  

You might be interested in
A disadvantage of adding a salad bar to a school lunch menu would be ?
bearhunter [10]
The cost of adding more options. Supply and demand: would the students want to have salad for lunch, or would it go to waste?
5 0
3 years ago
Read 2 more answers
All of the following are documents used for inventory control except:______.
damaskus [11]

Answer:

c. a petty cash voucher.

Explanation:

For controlling the inventory following documents are to be used i.e.

1.  Purchase order

2.  Vendor invoice

3. Receiving report

These three documents we called as an voucher package

But it does not involved the petty cash voucher

Therefore the correct option is c.

And, the same is to be considered

8 0
2 years ago
Use the following data to compute total manufacturing costs for the month:
Akimi4 [234]

Answer:

$132,300

Explanation:

The total manufacturing costs for the month can be calculated as follows

Direct labor + indirect materials + factory manager salary + indirect labour + direct materials + depreciation on factory equipment

= 40,600 + 16,200 + 8,200 + 10,000 + 7,300 + 41,500 + 8,500

= $132,300

Hence the total manufacturing costs if $132,300

7 0
2 years ago
Which is most likely to happen to consumers with good credit? Check all that apply.
nekit [7.7K]

Answer:

They can use credit in emergencies. A form must be filled out when someone is hired for a job to determine how much income tax will be withheld.

Explanation:

4 0
3 years ago
Managing Financial Information<br> Project: Analyzing Consumer Protections Active
3241004551 [841]

Answer:

you want me to do a whole project?!

Explanation:

5 0
3 years ago
Read 2 more answers
Other questions:
  • A company's ________ is similar to a company's personality.
    15·1 answer
  • A monopolist makes self‑cleaning jackets. At a price of $100 each, it can sell 20 jackets. At a price of $98 each, it can sell 2
    9·2 answers
  • Rather than competing head to head with established competitors, many companies seek out unoccupied positions in uncontested mar
    8·1 answer
  • What a primary cause of inflation​
    5·1 answer
  • Metlock Company is a multiproduct firm. Presented below is information concerning one of its products, the Hawkeye. 1/1 - Beginn
    10·1 answer
  • (Table: Cherry Farm) Use Table: Cherry Farm. If Hank and Helen have one of 100 farms in the perfectly competitive cherry industr
    15·1 answer
  • The move of retail banking to use ATMs after Citibank unveiled its first ATMs illustrates the use of information systems to achi
    6·1 answer
  • Dave and Kelly are discussing how quickly products now become obsolete in their industry. David believes this will make it more
    15·1 answer
  • 18.On January 1, 2016, the Accounts Receivable and the Allowance for Uncollectible Accounts for Darius Company carried balances
    6·1 answer
  • select the correct answer. weight management is one benefit of participating in sports. which sentence is true regarding weight
    10·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!