Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Comprehensive Problem 9-81 (LO 9-1, LO 9-2, LO 9-3, LO 9-4) (Algo) Rex loves to work with his hands and is very good at making

image text in transcribed
image text in transcribed
image text in transcribed
Comprehensive Problem 9-81 (LO 9-1, LO 9-2, LO 9-3, LO 9-4) (Algo) Rex loves to work with his hands and is very good at making small figurines Three years ago, Rex opened Bronze Age Miniatures (BAM) for business as a sole proprietorship. BAM produces miniature characters ranging from sci-fi characters (his favorite) to historical characters like George Washington (the most popular). Business has been going very well for him, and he has provided the following information relating to his business. Calculate the business taxable income for BAM assuming that BAM elects to account for its inventory of miniatures a Rex received approval from the IRS to switch from the cash method of accounting to the accrual method of accounting effective January 1 of this year. At the end of last year. BAM reported accounts receivable that had not been included in Income under the accrual method of $19,200 and accounts payable that had not been deducted under the accrual method of $6,550 b. In March BAM sold 8,800 miniature historical figures to History R Us Incorporated (HRU), a retailer of historical artifacts and figurines, for $132,000. CHRU was so impressed with the figurines that it purchased in March that it wanted to contract with BAM to continue to produce the figurines for it for the next three years. HRU paid BAM $237168 ($12 per figurine) on October 30 of this year to produce 549 figurines per month for 36 months beginning on November 1 of this year BAM delivered 549 figurines on November 30 and again on December 30. Rex elects to use the deferral method to account for the transaction, d. Though the sci-fi figurines were not quite as popular. BAM sold 494 figurines at a sch-i convention in April. Rex accepted cash only and received $13,338 for these sales e In January, BAM determined that it would not be able to collect on $4200 of its beginning of the year receivables, so it wrote off $4,200 of specific receivables. BAM sold 124.000 other figurines on credit for $148,800 BAM estimates that it will be unable to collect 5 percent of the sales revenue from these sales, but it has not been able to specifically identify any accounts to write off Assume that BAM correctly determined that its cost of goods sold using an appropriate inventory method is $66,960 this year 9. The sci-fi convention in April was held in Chicago, Illinois, Rex attended the convention because he felt it was a good opportunity to gain new customers and to get new ideas for figurines. He paid $880 round-trip airfare. $110 for entrance to the convention $297 for lodging, $108 for cab fare, and $162 for meals at restaurants during the trip. He was busy with business activities the entire trip h. On August 1. BAM purchased a 12-month insurance policy that covers its business property for accidents and casualties through July 31 of next year. The policy cost BAM $9,000 5 ped t Assume thot BAM correctly determined that its cost of goods sold using an appropriate inventory method is $66,960 this year 9. The sci-fi convention in April was held in Chicago, Illinois. Rex attended the convention because he felt it was a good opportunity to gain new customers and to get new ideas for figurines. He paid $880 round-trip ourfore. $110 for entrance to the convention $297 for lodging, $108 for cab fore, and $162 for meals at restaurants during the trip. He was busy with business activities the entire trip h On August 1, BAM purchased a 12-month insurance policy that covers its business property for accidents and casualties through July 31 of next year. The policy cost BAM $9.000 BAM reported depreciation expense of $6,500 for this year Rex had previously operated his business out of his garage, but in January he decided to rent a larger space. He entered into a lease agreement on February 1 and paid $25,320 ($2.110 per month) to possess the space for the next 12 months (February of this year through January of next year) k Before he opened his doors for business, Rex spent $32 250 investigating and otherwise getting ready to do business. He expensed $5,000 immediately and is amortizing the remainder using the straight-line method over 180 months In December, BAM agreed to a 12 month, $14.950 contract with Advertise With Us (AWU) to produce a radio ad campaign BAM paid $5700 up front (in December of this year), and AWU agreed that BAM would owe the remaining $9.250 only if BAM's sales Increased by 15 percent over the 9-month period after the contract was signed m In November of this year BAM paid $4,800 in business property taxes (based on asset values) covering the period December of this year through November 30 of next yearIn November of last year, BAM paid $3,800 for business property taxes (based on asset values) covering the period December 1 of last year through November 30 of this year. 1 What is BAM's business income? (Enter the write-off of the recei be indicated by a minus sign. Do not round intermediate calcula amount.) Amount a. b. C. d. e- e-1 e-2 f. g D C h j k 1 m. Business income

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Ecology, Sustainable Development And Accounting

Authors: Seleshi Sisaye

1st Edition

0415816351, 9780415816359

More Books

Students also viewed these Accounting questions

Question

Be able to schedule and conduct a performance appraisal interview

Answered: 1 week ago

Question

Know the two most common approaches to appraisal timing

Answered: 1 week ago