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96 Cards in this Set
- Front
- Back
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Restin Co. uses the gross method to record sales made on credit. On June 1, 2014, it made sales of $64,900 with terms 3/15, n/45. On June 12, 2014, Restin received full payment for the June 1 sale. |
dr - accts rcvb 64900 cr - sales rev 64900
dr - cash 62953 [64900-(64900 * .03)] dr - sales dis 1947(64900* .03) cr - accts rcvb 64900 |
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Restin Co. uses the net method to account for cash discounts. On June 1, 2014, it made sales of $69,300 with terms 2/15, n/45. On June 12, 2014, Restin received full payment for the June 1 sale. |
dr - accts rcvb 67914 [69300-(69300* .02) cr - sales rev 67914
dr - cash 67914 cr - accts rcvb 67914 |
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Presented below are a number of independent situations. |
925340 - checking acct only |
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Presented below are a number of independent situations.
2. Checking account balance $510,800; an overdraft in special checking account at same bank as normal checking account of $18,500; cash held in a bond sinking fund $220,760; petty cash fund $398; coins and currency on hand $1,530. |
494228 - checking acct - minus overdraft - plus petty cash - plus coins and currency
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Presented below are a number of independent situations.
3. Checking account balance $634,380; postdated check from a customer $14,950; cash restricted due to maintaining compensating balance requirement of $111,860; certified check from customer $9,050; postage stamps on hand $668. |
643430 -checking acct - plus certified chk
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Presented below are a number of independent situations.
4. Checking account balance at bank $46,440; money market balance at mutual fund (has checking privileges) $50,990; NSF check received from customer $882. |
97430 - chking acct - plus money market(has ckg privileges) |
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Presented below are a number of independent situations.
5. Checking account balance $712,320; cash restricted for future plant expansion $504,590; short-term Treasury bills $183,400; cash advance received from customer $944 (not included in checking account balance); cash advance of $7,640 to company executive, payable on demand; refundable deposit of $26,300 paid to federal government to guarantee performance on construction contract. |
713264 - ckg acct - plus cash adv from customer |
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Duncan Company reports the following financial information before adjustments. Dr. Accounts Receivable $162,100 Cr. Allowance for Doubtful Accounts $2,800
Cr. Sales Revenue (all on credit) 804,400 Dr. Sales Returns and Allowances 53,000
(a) 1% of net sales and (b) 5% of accounts receivable. |
a) dr - bad debt exp 7514 (sales-rtrns *.01) cr - allow for doubtful 7514
b) dr - bad debt exp 5305 (ar*.05 - allow for doubtful) cr - allow for doubtful 5305 |
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On December 31, 2012, Ed Abbey Co. performed environmental consulting services for Hayduke Co. Hayduke was short of cash, and Abbey Co. agreed to accept a $309,100 zero-interest-bearing note due December 31, 2014, as payment in full. Hayduke is somewhat of a credit risk and typically borrows funds at a rate of 10%. Abbey is much more creditworthy and has various lines of credit at 6%.
Prepare the journal entry to record the transaction of December 31, 2012, for the Ed Abbey Co. |
dr - notes rcvb $309100
cr- service rev $255456 (309100 * pv 2 periods 0.82645) cr - disc on notes rcvb $53644 (309100-255456) |
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On December 31, 2012, Ed Abbey Co. performed environmental consulting services for Hayduke Co. Hayduke was short of cash, and Abbey Co. agreed to accept a $309,100 zero-interest-bearing note due December 31, 2014, as payment in full. Hayduke is somewhat of a credit risk and typically borrows funds at a rate of 10%. Abbey is much more creditworthy and has various lines of credit at 6%.
Assuming Ed Abbey Co.’s fiscal year-end is December 31, prepare the journal entry for December 31, 2013.
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dr - disc on notes rcvb $25545.60 ( 10% of srvc rev)
cr- interest rev $25545.60
if not paid that first year the discount goes down by the full interest rate
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On December 31, 2012, Ed Abbey Co. performed environmental consulting services for Hayduke Co. Hayduke was short of cash, and Abbey Co. agreed to accept a $309,100 zero-interest-bearing note due December 31, 2014, as payment in full. Hayduke is somewhat of a credit risk and typically borrows funds at a rate of 10%. Abbey is much more creditworthy and has various lines of credit at 6%.
Assuming Ed Abbey Co.’s fiscal year-end is December 31, prepare the journal entry for December 31, 2014. |
to record interest revenue: dr - disc on notes rcvb $28100.281 ( 309100 * pv 1 period 0.90909 = 280999.719, then 309100-280999.719)
cr- interest rev $28100.281
to record collection of note: dr - cash $309100
cr- notes rev $309100 |
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Angela Lansbury Company deposits all receipts and makes all payments by check. The following information is available from the cash records.
June 30 Bank Reconciliation Balance per bank $13,601 Add: Deposits in transit $2,992 Deduct: Outstanding checks $(3,886) Balance per books $12,707
Month of July Results Per Bank Per Books Balance July 31 $16,808 $17,973 July deposits $8,744 $11,289 July checks $7,772 $6,023 July note collected $2,915 (not included in July deposits) July bank service $29 charge July NSF check from $651 a customer, returned by the bank (recorded by bank as a charge)
Prepare a bank reconciliation going from balance per bank and balance per book to correct cash balance. |
Balance per bank statement $16808
Add:Deposits in transit $5537 (per books +per bank - june in transist)
Less:Outstanding checks $-2137 (per books +per bank - june outstanding
Correct cash balance, July 31 $-2137
Balance per books, July 31 $17973
ADD: Collection of note $2915 LESS: - Bank service charge $29 -NSF checkOutstanding $651
Correct cash balance, July 31 $20208 LessAdd: Collection of noteDeposits in transitNSF checkBank service chargeCorrect cash balance, July 31Outstanding checksBalance per bank statement, July 31Balance per books, July 31
LessAdd: NSF check Bank service charge Balance per bank statement, July 31 Balance per books, July 31 Deposits in transit Outstanding checks Collection of note Correct cash balance, July 31 $ Correct cash balance, July 31 Balance per books, July 31 Collection of note Bank service charge Outstanding checks Deposits in transit NSF check Balance per bank statement, July 31
Balance per bank statement, July 31NSF checkCollection of noteCorrect cash balance, July 31Balance per books, July 31Bank service chargeDeposits in transitOutstanding checks $ |
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Angela Lansbury Company deposits all receipts and makes all payments by check. The following information is available from the cash records.
June 30 Bank Reconciliation Balance per bank $13,601 Add: Deposits in transit $2,992 Deduct: Outstanding checks $(3,886) Balance per books $12,707
Month of July Results Per Bank Per Books Balance July 31 $16,808 $17,973 July deposits $8,744 $11,289 July checks $7,772 $6,023 July note collected $2,915 (not included in July deposits) July bank service $29 charge July NSF check from $651 a customer, returned by the bank (recorded by bank as a charge)
Prepare the general journal entry to correct the Cash account. |
DR - CASH 2235 DR - OFFICE EXP 29 DR - AR 651
CR - NOTES RCVB 2915
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Restin Co. uses the gross method to record sales made on credit. On June 1, 2014, it made sales of $64,900 with terms 3/15, n/45. On June 12, 2014, Restin received full payment for the June 1 sale. |
dr - accts rcvb 64900 cr - sales rev 64900
dr - cash 62953 [64900-(64900 * .03)] dr - sales dis 1947(64900* .03) cr - accts rcvb 64900 |
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Restin Co. uses the gross method to record sales made on credit. On June 1, 2014, it made sales of $64,900 with terms 3/15, n/45. On June 12, 2014, Restin received full payment for the June 1 sale. |
dr - accts rcvb 64900 cr - sales rev 64900
dr - cash 62953 [64900-(64900 * .03)] dr - sales dis 1947(64900* .03) cr - accts rcvb 64900 |
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Restin Co. uses the gross method to record sales made on credit. On June 1, 2014, it made sales of $64,900 with terms 3/15, n/45. On June 12, 2014, Restin received full payment for the June 1 sale. |
dr - accts rcvb 64900 cr - sales rev 64900
dr - cash 62953 [64900-(64900 * .03)] dr - sales dis 1947(64900* .03) cr - accts rcvb 64900 |
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Restin Co. uses the gross method to record sales made on credit. On June 1, 2014, it made sales of $64,900 with terms 3/15, n/45. On June 12, 2014, Restin received full payment for the June 1 sale. |
dr - accts rcvb 64900 cr - sales rev 64900
dr - cash 62953 [64900-(64900 * .03)] dr - sales dis 1947(64900* .03) cr - accts rcvb 64900 |
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Restin Co. uses the gross method to record sales made on credit. On June 1, 2014, it made sales of $64,900 with terms 3/15, n/45. On June 12, 2014, Restin received full payment for the June 1 sale. |
dr - accts rcvb 64900 cr - sales rev 64900
dr - cash 62953 [64900-(64900 * .03)] dr - sales dis 1947(64900* .03) cr - accts rcvb 64900 |
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Restin Co. uses the gross method to record sales made on credit. On June 1, 2014, it made sales of $64,900 with terms 3/15, n/45. On June 12, 2014, Restin received full payment for the June 1 sale. |
dr - accts rcvb 64900 cr - sales rev 64900
dr - cash 62953 [64900-(64900 * .03)] dr - sales dis 1947(64900* .03) cr - accts rcvb 64900 |
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Restin Co. uses the gross method to record sales made on credit. On June 1, 2014, it made sales of $64,900 with terms 3/15, n/45. On June 12, 2014, Restin received full payment for the June 1 sale. |
dr - accts rcvb 64900 cr - sales rev 64900
dr - cash 62953 [64900-(64900 * .03)] dr - sales dis 1947(64900* .03) cr - accts rcvb 64900 |
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Alicia has been working for JMM Corp. for 32 years. Alicia participates in JMM’s defined benefit plan. Under the plan, for every year of service for JMM she is to receive 2 percent of the average salary of her three highest years of compensation from JMM. She retired on January 1, 2014. Before retirement, her annual salary was $570,000, $600,000, and $630,000 for 2011, 2012, and 2013.
What is the maximum benefit Alicia can receive in 2014?
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570,000+600,000+630,000 = 1,800,000
1,800,000/3= 600,000
600,000 x 2% = 12,000
32 yrs x 12,000 = $ 384,000 ( this is over the 2014 max of 210,000)
$210, 000 is the max that can be contributed |
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Matthew (48 at year-end) develops cutting-edge technology for SV Inc., located in Silicon Valley. In 2014, Matthew participates in SV’s money purchase pension plan (a defined contribution plan) and in his company’s 401(k) plan. Under the money purchase pension plan, SV contributes 15 percent of an employee’s salary to a retirement account for the employee up to the amount limited by the tax code. Because it provides the money purchase pension plan, SV does not contribute to the employee’s 401(k) plan. Matthew would like to maximize his contribution to his 401(k) account after SV’s contribution to the money purchase plan.
Assuming Matthew’s annual salary is $400,000.
a-1.What amount will SV contribute to Matthew’s money purchase plan? |
400,000 x 15% = 60,000 (this is over the 2014 combined ee & er max)
$52,000 is the amt the company can contribute.
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Matthew (48 at year-end) develops cutting-edge technology for SV Inc., located in Silicon Valley. In 2014, Matthew participates in SV’s money purchase pension plan (a defined contribution plan) and in his company’s 401(k) plan. Under the money purchase pension plan, SV contributes 15 percent of an employee’s salary to a retirement account for the employee up to the amount limited by the tax code. Because it provides the money purchase pension plan, SV does not contribute to the employee’s 401(k) plan. Matthew would like to maximize his contribution to his 401(k) account after SV’s contribution to the money purchase plan.
Assuming Matthew’s annual salary is $400,000.
a-2.What can Matthew contribute to his 401(k) account in 2014? |
0, zero
- this is b/c the company contributed the company contributed the combined ee & er max of 52,000 |
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Matthew (48 at year-end) develops cutting-edge technology for SV Inc., located in Silicon Valley. In 2014, Matthew participates in SV’s money purchase pension plan (a defined contribution plan) and in his company’s 401(k) plan. Under the money purchase pension plan, SV contributes 15 percent of an employee’s salary to a retirement account for the employee up to the amount limited by the tax code. Because it provides the money purchase pension plan, SV does not contribute to the employee’s 401(k) plan. Matthew would like to maximize his contribution to his 401(k) account after SV’s contribution to the money purchase plan.
Assuming Matthew’s annual salary is $240,000. . b-1.What amount will SV contribute to Matthew’s money purchase plan? |
240,000 x 15% = 36,000 is what the company can contribute
this is ok b/c it is under the combined ee & er max of 52,000 |
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Matthew (48 at year-end) develops cutting-edge technology for SV Inc., located in Silicon Valley. In 2014, Matthew participates in SV’s money purchase pension plan (a defined contribution plan) and in his company’s 401(k) plan. Under the money purchase pension plan, SV contributes 15 percent of an employee’s salary to a retirement account for the employee up to the amount limited by the tax code. Because it provides the money purchase pension plan, SV does not contribute to the employee’s 401(k) plan. Matthew would like to maximize his contribution to his 401(k) account after SV’s contribution to the money purchase plan.
Assuming Matthew’s annual salary is $240,000.
b-2.What can Matthew contribute to his 401(k) account in 2014? |
240,000 x 15% = 36,000 is what the company contributed
52,000(max) - 36,000 = 16,000 is what ee can contribute (b/c this is also under the ee max of 17,500) |
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Matthew (48 at year-end) develops cutting-edge technology for SV Inc., located in Silicon Valley. In 2014, Matthew participates in SV’s money purchase pension plan (a defined contribution plan) and in his company’s 401(k) plan. Under the money purchase pension plan, SV contributes 15 percent of an employee’s salary to a retirement account for the employee up to the amount limited by the tax code. Because it provides the money purchase pension plan, SV does not contribute to the employee’s 401(k) plan. Matthew would like to maximize his contribution to his 401(k) account after SV’s contribution to the money purchase plan.
Assuming Matthew’s annual salary is $60,000.
c-1.What amount will SV contribute to Matthew’s money purchase plan? |
60,000 x 15% = 9000 (what the company can contrib. b/c it is under the 52,000 combined max)
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Matthew (48 at year-end) develops cutting-edge technology for SV Inc., located in Silicon Valley. In 2014, Matthew participates in SV’s money purchase pension plan (a defined contribution plan) and in his company’s 401(k) plan. Under the money purchase pension plan, SV contributes 15 percent of an employee’s salary to a retirement account for the employee up to the amount limited by the tax code. Because it provides the money purchase pension plan, SV does not contribute to the employee’s 401(k) plan. Matthew would like to maximize his contribution to his 401(k) account after SV’s contribution to the money purchase plan.
Assuming Matthew’s annual salary is $60,000.
c-2.What amount can Matthew contribute to his 401(k) account in 2014? |
60,000 x 15% = 9000 (what the company contrib.)
52,000 ( max) - 9000 = 43,000 ( this is over the ee max of 17,500)
$17,500 is what the ee can contrib. |
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Matthew (48 at year-end) develops cutting-edge technology for SV Inc., located in Silicon Valley. In 2014, Matthew participates in SV’s money purchase pension plan (a defined contribution plan) and in his company’s 401(k) plan. Under the money purchase pension plan, SV contributes 15 percent of an employee’s salary to a retirement account for the employee up to the amount limited by the tax code. Because it provides the money purchase pension plan, SV does not contribute to the employee’s 401(k) plan. Matthew would like to maximize his contribution to his 401(k) account after SV’s contribution to the money purchase plan.
Assuming Matthew’s annual salary is $60,000.
d.Assume the same facts as part c, except that Matthew is 54 years old at the end of 2014. What amount can Matthew contribute to his 401(k) account in 2014?
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60,000 x 15% = 9000 (what the company contrib.)
57,500 ( combined max for over 50 yrs old) - 9000 = 48,500 ( this is over the ee max of 23,000)
$23,000 is what the ee over 50 can contrib. |
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Jacquiline is unmarried and age 32. Even though she participates in an employer-sponsored retirement plan, Jacquiline contributed $3,000 to a traditional IRA during the year. Jacquiline files as a head of household, her AGI before the contribution is $43,000, and her marginal tax rate is 15 percent.
What is the after-tax cost of her $3,000 traditional IRA contribution? |
3000 x 15% = $450 ( tax liab)
3000-450= 2550
2550 - $200(savers credit) = 2350 (after tax cost) |
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minimum distribution for retiring a year before turning 70 1/2...
traditional 401k |
the previous year acct bal times lifetime table percentage for 71 yeras old |
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minimum distribution for retiring a year before turning 70 1/2...
roth 401k |
same as traditional 401k |
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minimum distribution for retiring a year before turning 70 1/2...
traditional ira |
same as traditional 401k |
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minimum distribution for retiring a year before turning 70 1/2...
roth ira |
0, zero - no minimum distributions |
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tax and penalty amt for early withdrawl of roth 401k total $32,000 and earnings $18,000 with 25% marginal tax rate? |
-tax and penalty on earnings only
18,000 x 25% = 4500 ( tax)
18,000 X 10% (penalty rate) = 1800 (penalty)
4500+1800 = 6300 total tax and penalty on 18,000
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FOR AGI deductions |
-business activities -self-employed business exps & tax deduction -rental & royalty exps -ordinary & necessary for the business -business assets at a losses -flow through entities exps & losses -moving exps -interest income as a penalty for early w/d -alimony -retirement svgs contributions -interest exp on qual edu loans & exps -
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FROM AGI deductions |
-itemized deductions -personal in nature -unreimbursed ee business exps -other investment exps -medical exps -home ownership -charitable giving -casulty losses -taxes: state, local, foreign, real estate, and personal property -ineterst exp: mortgage & home equity indebtness -tax prep fees -hobby losses
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what are trade/business expenses? |
-for AGI
expenses directly related to business activity and that are ordinary and necessary -advertising -car exps -ofc exp -travel |
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Self-employed business expense deductions |
-for AGI - health ins for the taxpayer, spouse & dependents as long as they cannot participate in an employer sponsored plan - employer portion of ss & medicare taxes |
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Rules for deductibility of moving expenses, allowed expenses |
-for AGI -have to meet 2 tests
1) a distance test: 50 miles form the old residence
2) time test: employed fulltime 39 of the first 52 wks or self employ for 78 of the first 104 wks after move
-can deduct 23.5 cents/mile -lodging during move -cost of moving personsal belongings -not meals or house hunting costs
-if reimbursed by er, do not include in income and do not deduct exps - if recieve a flat moving allow, nust include in income, & can deduct exps |
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Student loan interest deductions |
-for AGI -INTEREST PAID UP TO $2500 -phased out depending on filing status and modified AGI -married individuals who file seperately are not allowed this deduction
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Possible deductions including itemized deductions |
-itemized deds -standard deduction -personal & dependency |
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Deductible medical expenses |
-payments not reimbursed by health ins or paid thru flex acct -exps for spouse & dependents -medications -glasses -wheelchairs -pmts to med care providers -transportation -long term care facilities helath ins prems and ins for long term care - |
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Calculate deduction for charitable contributions |
cash = 50% capital gain prop = 30% ordinary income prop = 50%
1) AGI }162,000
2) 50% contributions total } 1,930 (cash + ordinary inc)
3) 50% AGI contib limit } 81,000 (#1 x 50%)
4) allowable 50% deductions }1,930 ( lesser of #2 or 3)
5) 30% contribs total } 10,600
6) 30% AGI contrib limit } 48,600 (#1 x 30%)
7) remaining 50% AGI limitation } 79,070 (#3 - #4)
8) allowable 30% deductions } 10,600 (least of #5, 6, or 7)
= deductible charitable contribs } 12,530 (#4 + #8)
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rules of casualty / theft losses |
- loss from a sudden, unexpected, or unusdual event -fire, storm, shipwreck, or theft -tax benefit if loss is large - the amt of tax is the lesser of 1) the decline in value or 2) tax basis in the the asset - the loss is reduced by any reimbursemnts -basis is reduced by deductible loss |
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calculate theft losses |
FMV before casulty } 325
FMV after casulty } - 0
= 1) decline in FMV (cost to repair) } 325
2) tax basis in prop before casulty } 350
loss before reim (lesser of 1 or 2) } 325 ins reim } -0 = unreimbursed casulty losses } 325
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calculate casualty losses |
1) decline in FMV (cost to repair) } 2000
2) tax basis in prop before casulty } 22000
loss before reim (lesser of 1 or 2) } 2000 ins reim } -1400 = unreimbursed casulty losses } 600 |
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Reimbursed employee expenses |
-exps that have required documentation |
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unreimbursed employee expenses |
- misc itemized deductions - business trip exps |
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Itemized deductions subject to 2% floor |
- subscriptions -educational costs -business trips -tax prep fees -total misc itemized deds |
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Standard deduction |
- flat amt that can be deducted instead of itemizing deductions -varies by filing status, age, and eyesight - 12,400 m. jointly - 9,100 HOH - 6,200 single - 6,200 m. seperatly |
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additional standard deduction possibilities |
- for 65 on the last day of the year or blindness -married is 1220 -HOH 1550 -single 1550 -not married 1550
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Personal and dependency exemptions |
3950 |
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Possible types of filing status |
-m. jointly -HOH -single -m. seperately |
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Identify capital assets |
all assets other than 1) ar from sale of goods or services 2) invty & other assets held for sale in in the ord course of business 3) assets used in a trade or business, including supplies |
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Kiddie tax |
1) child under 18 2) childs earned income does not exceed half of their support 3) the child is over 18 ,but under 24 and is a fulltime student and their income does not exceed half of their support (excluding scholarships) 4) tax is paid on the childs net unearned income in excess of $2000 and taxed at parents marginal rate 5) tax base the the net unearned income |
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Taxable income for dependents of others |
???? |
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AMT base |
reg taxable inc + personal exemptions and standard ded - phase out of itemized deds + or - other adjs - AMT exempt amt = AMT base |
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AMT income adjustments |
plus: -tax exempt interest frm private actvity bonds -real prop & personal prop taxes -state inc or sales taxes -home equity interest exp -misc itemized in excess of 2% floor
plus or minus: -depreciation
minus: -state inc tax refunds included in reg taxable inc -gain or loss on sale of depreciable assets |
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Why more taxpayers are subject to AMT? |
b/c it is taxed on a tax base that is meant to more closely reflect economic income than the reg inc tzx base |
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Know difference between independent contractor vs. employee |
independent contractors:
-set their own wrkg hrs -work pt -work for more than one co -realize profit or loss -perform work somewhere other than an employers premises -work w/o freq oversight |
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Tax credits vs. tax deductions |
tax credit: -reduce tax liability dollar for dollar -generate tax savings independent of marginal rate
tax deductions: - reduce taxable income dollar for dollar -tax savings depend on the marginal rate |
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Child tax credit criteria |
- 1000 for ea qualifying child - subj to phase out based on AGI -phase out depends on filing status |
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Child tax calculation |
1) determine AGI excess by subtracting the threshold amt from the AGI
2) divide the excess AGI from step 1 by 1000 and round up to the next whole number
3) multiply the amt from step 2 by $50. this is the amt of the total credit that is phased-out or disallowed
4) subtract the amt from step 3 from the total credit before phase out to determine the allowable child tax credit |
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Child and dependent care credit criteria |
- amt is based on the amt of exps for 1 or more qualifying persons - dependent under 13 -dependent or spouse who is physically or menatally incapable of caring for themself and lives w/ the taxpayer for more than half the yr
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Child and dependent care calculation |
- the amt allowed is the least of these 3 amts: 1) total amt of dep care exps 2) 3000 for one person or 6000 for 2 or more 3) taxpayers earned inc .
- multiply qualifying exps by appropiate credit percentage |
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American opportunity credit criteria |
-avail the first four yrs of postsecondary edu -must be enrolled in a qual institution at least half time -eligible exps: tuition, fees, and materials
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American opportunity calculation |
- 100% of the first $2000 - plus 25% of the next $2000 - max is $2500 |
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Earned income credit criteria |
-refundable -qual individuals: >at least 1 qualifying child >anyone who does not have a child, lives in us for more than half, a& 25 yrs old but younger than 65, & not a dependent |
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Earned income credit calculation |
multiply the credit% x earned inc up to max |
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Refundable credits |
-child tax (partial) -american opp (partial) -earned inc -excess FICA w/h -taxes w/h on wages & est tax pmts
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nonrefundable credits |
-child & dep care -lifetime -business credits |
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When are tax withholdings considered paid? |
when the employer witholds the tax from an ee salary |
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Underpayment penalty |
penalty for when taxpayers fall behind on their tax prepayments -can be avoided if withholdings equal or exceed the 2 safe harbors |
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Form 2210 |
for taxpayers who do not meet either of the 2 safe harbors - this form can be used to compute the penalty -if not used, then the IRS will compute |
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Minimum requirements to be met to file a tax return |
-if gross inc exceeds certain threshholds -filing status -age |
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Extensions of filing tax return |
6 mo extension |
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Deductibility of business expenses according to §162 |
-broad & ambigious -all ordinary & necessary exps pd or incurred in the yr |
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Deductibility of meals and entertainment expenses |
50% of business meals -amt be reasonable -taxpayer ooee must be present -meal directly assoc w/ active business |
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Travel with both business and personal components |
-depends upon whether business is the primary purpose for the trip -if business is primary: >the transportation costs are fully deductible >meals are 50% >lodging and incenidentals limited to business portion of travel |
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Domestic manufacturing deduction criteria |
-a subsidy for the cost of producing goods or services -limited to overall income >agi for individuals >50% of wages for businesses |
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Domestic manufacturing deduction calculation |
-9% times lesser of 1)the business taxable inc before deduction (modified agi) or 2)qual prod activty inc (net inc from selling or leasing prop)
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Casualty losses incurred on business property |
-amt of loss depends on if: >asset was completely destroyed or stolen (calculate the amt as if asset was sold minus ins proceeds) >only partially destroyed (ins proceeds minus the lesser of 1)asset tax basis or 2)decline in value
-itemized deduction |
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Recognition of income: cash vs. accrual |
cash: recognize revenue when property or srvcs are rcvd
accrual: transactions are counted when order is made, regardless of when money is rcvd |
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Recognition of income under the accrual method – all events test |
-requires that businesses recognize income when 1) all events have occured 2) the amt of the inc can be dteremined w/ resonable accuracy 3) must meet 1 and 2 on the earliest of these 3 dates: -when they complete the task -when the pmt is due from the customer -when the business rcvs pmt |
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Related parties for purpose of limitation on accruals |
-family members -shareholders & C corps when the holder owns more than 50% -owners of partenerships and S corps |
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Description defined benefit plan |
-trad pension plans -provide stand retirement benefits based on a fixed formula empoyer, not ee, bears the invest risk -early & minimum distrib rules, but not restrictive |
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Description defined contribution plan |
-more common -alt approach for employers employers have seperate accts for each ee -ee can freq contrib -ee can choose how amts are invested -ee bears the risk -employers match ee contrib |
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differences between defined benefit plan and defined contribution plan |
-both are employer provided qualified plans -def benefit spells out the specific benefit -def contribution specify maximum annaul contribs that employers and ees amy contrib -def contrib are more common |
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Contributions to traditional 401(k) plan vs. Roth 401(k) plan |
401K: LIMITED TO 17,500 or 23,000 if 50 yrs old, ee & er contrib, deductible
roth: same limits as 401k, ee only contrib, not deductible, after tax dollars, no tax savings |
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Distributions from 401(k) |
-taxed as ordinary income
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minimum distribution penalty from 401(k) |
-50% penalty if minium is ataken -must rcv by apr 1st of the lesser of - either the yr after yr they turn 70 1/2 or - the yr after retires |
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minimum early distribution penalty from 401(k) |
-rcv distrib before 59 1/2 or 55 & have separated from job -subject to 10% nondeductible penalty on the distrib amt |
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Employer funding of nonqualified deferred compensation plan |
-offered to certain employees -ees defer current inc -pmt not guarantted |
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Differences and limits of contribution between a traditional IRA vs. Roth IRA |
trad ira: >lesser or $5500 or earned inc >over 50, lesser of 6500 or earned inc >deductible >qualified distrib are taxable
roth ira: >not deductible >same contrib limits as trad ira >qualified distribs are not taxable |
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Examples of self-employed retirement accounts |
-iras -401ks
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Qualifications and calculations for and amounts allowed for saver’s credit |
-contrib to qualified plan -contribs up to $2000 -filing status -agi -max is 1000 -unavail for married joint agi over 60k, hoh agi over 45k, & others over agi 30k |
