Question

acc 430 Firm B, a calendar year, cash basis taxpayer, leases lawn and garden equipment. During December, it received the following cash payments. To what extent does each payment represent current taxable income to Firm B

Answer 1

Answer: See explanation

Explanation:

a. Even though firm B received a cash of $522, only $22 which is the interest will be taxable as the $500 which is the principal isn't taxable.

b. Even though Firm B got $600 cash, there'll be no taxable income as the receipt brought about a liability. Hence, taxable income is 0.

c. Even though Firm B got $10000 cash, there'll be no taxable income as the receipt brought about a liability and the net worth wasn't increased. Hence, taxable income is 0.

d. The taxable income here will be $888.