When external benefits are present in a market INEFFICIENCY MAY ARISE, BECAUSE POTENTIAL PRODUCERS ARE UNABLE TO CAPTURE FULLY THE BENEFITS THAT THEIR ACTION CREATE FOR OTHERS. This may cause the producers to produce just a little of this product.
Emily should ask herself the following questions:
“If I buy the designer jacket, is it going to increase value in the future so I can sell it?”
“Can I afford the designer jacket?”
“Is the cheaper jacket good quality?”
Answer:
1. Justin’s employer was downsizing and offered employees an amount equal to one year’s salary if the employee would voluntarily retire.
- the compensation is included in Justin's gross income.
2. Trina contracted a disease and was unable to work for six months. Because of her dire circumstances, her employer paid her one-half of her regular salary while she was away from work.
- the compensation is included in Trina's gross income.
3. Coral Corporation collected $1,000,000 on a key person life insurance policy when its chief executive died. The corporation had paid the premiums on the policy of $77,000, which were not deductible by the corporation.
- the benefits are included in the company's taxable income, but the premiums paid are deductible
4. Juan collected $40,000 on a life insurance policy when his wife, Leona, died in 2020. The insurance policy was provided by Leona’s employer, and the premiums were excluded from Leona’s gross income as group term life insurance. In 2020, Juan also collected the $3,500 accrued salary owed to Leona at the time of her death.
- the life insurance policy proceeds are not taxable, but the accrued salaries are taxed
Answer:
The answer is given below;
Explanation:
Retained Earnings (125,000*2%) Dr.$2,500
Dividend payable Cr.$2,500
Retained Earnings (62,000*.25) Dr.$15,500
Dividend Payable Cr.$15,500
