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Firdavs [7]
3 years ago
7

Rip garage, inc. (459 ellis avenue, harrisburg, pa 17111), is an accrual basis taxpayer that repairs automobiles. in late decemb

er 2017, the company repaired samuel mosley's car and charged him $1,000. samuel did not think the problem had been fixed, so he refused to pay; thus, trip refused to release the automobile. in early january 2018, trip made a few adjustments under the hood; trip then convinced samuel that the automobile was working properly. at that time, samuel agreed to pay only $900 because he did not have the use of the car for a week. trip said "fine," accepted the $900, and released the automobile to samuel. an irs agent thinks trip, as an accrual basis taxpayer, should report $1,000 of income in 2017, when the work was done, and then deduct a $100 business loss in 2018. prepare a memo to susan apple, the treasurer of trip, with your recommended treatment for the disputed income.
Business
1 answer:
mixas84 [53]3 years ago
3 0

Answer:

<u>MEMO</u>

To: Treasurer of Trip Garage, Inc.

From: Me

Subject: Dispute over accrued revenue

Mrs. S. Apple,

Good evening. Regarding your dispute over accrued revenue generated form the repair of Mr. Mosley's car, I must inform you the following:

Trip Garage, Inc., is an accrual basis taxpayer, therefore, revenues must be recorded once the repair service was completed, not when the invoice was collected.

In future occasions when similar problems show up, you should record an allowance for doubtful accounts. This way, if you believe that an account receivable is unlikely to be collected, it will be not considered for the year's financial records. This adjusting journal entry must be recorded before the end of the year, if not, all related revenues must be included in the years income statement.

Regards,

Me

Explanation:

Accrual taxpayers are required to record revenues once the revenue generating activity has been completed, i.e. Trip should have recorded $1,000 in revenue during 2017:

Dr Accounts receivable 1,000

    Cr Service revenue 1,000

If Trip didn't consider that it would be able to collect the $1,000 receivable, then it should have recorded it as bad debt expense:

Dr Bad debt expense 1,000

    Cr Allowance for doubtful accounts 1,000

If thy did not record the bad expense, then the IRS agent is right, and the $1,000 must be included in the 2017 income statement.  

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On January​ 1, 2019, Commercial Equipment Sales issued $ 29 comma 000 in bonds for $ 21 comma 700. These are sixminusyear bonds
maxonik [38]

Answer:

$2,058.33

Explanation:

bond's face value = $29,000

bond's market value = $21,700

interest rate = 10%

n = 6 x 2 coupons = 12

discount on bonds payable = $29,000 - $21,700 = $7,300

discount amortized per coupon payment = $7,300 / 12 = $608.33

total interest expense = ($29,000 x 10% x 1/2) + $608.33 = $1,450 + $608.33 = $2,058.33

the journal entry to record the coupon payment in June 30,2019:

Dr Interest expense 2,058.33

    Cr Cash 1,450

    Cr Discount on bonds payable 608.33

8 0
3 years ago
Rubbermaid Plastics plans to purchase a rectilinear robot for pulling parts from an injection molding machine. Because of the ro
liubo4ka [24]

Answer:

The present worth of the cost savings if the company uses an interest rate of 15% per year on such investments is $442108.5079.

Explanation:

Present Worth = $100,000/(1 + 15%) + $100,000/(1 + 15%)^2 + $100,000/(1 + 15%)^3 + $200,000/(1 + 15%)^4 + $200,000/(1 + 15%)^5

                         = $442108.5079

Therefore, the present worth of the cost savings if the company uses an interest rate of 15% per year on such investments is $442108.5079.

3 0
3 years ago
Which one of the following statements is TRUE? a. Company sponsorship of a local charity is an example of a nonpecuniary benefit
mojhsa [17]

Answer: c. An inside director is a board member who also holds a managerial position in the company

Explanation:

Inside Directors are indeed Board members who are employees/ hold managerial positions in the company.

They are in a unique position to help the board in Corporate Governance because as they are on the ground, they have specialized knowledge of the company and as such can provide complete information to the Board.

They typically include a Company's top executives such as the CEO, CFO and the COO.

5 0
3 years ago
9. Mackenzie PLC is considering expanding a production line. The new equipment for the line will cost $255,000. In addition, the
NNADVOKAT [17]

Answer:

Net Present Value = $59,632.78

Explanation:

<em>The net present value NPV) of a project is the present value of cash inflow less the present value of cash outflow of the project. </em>

<em>NPV = PV of cash inflow - PV of cash outflow </em>

Present value of cash inflow:

65,000 × (1.09375)^(-1) + 98000 ×(1.09375)^(-2)+ 126,000 ×(1.09375)^(-3)+  132,000 × (1.09375)^(-4)= 326882.7792

PV of annual maintenance cost :

=1,500 × (1- 1.09375^(-4))/0.09375

=4819.84773

NPV = 26882.7792  - 4819.84773 - (255,000+12250)

= 59,632.78

8 0
3 years ago
Describe the benefits of branding? ​
Kobotan [32]

Answer:

u get free stuff out of it

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