Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $45,000 of legal services for a

Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $45,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal tax rate is 32 percent this year and will be 37 percent next year, and that he can earn an after-tax rate of return of 10 percent on his investments.

  1. What is the after-tax income if Hank sends his client the bill in December?
  2. What is the after-tax income if Hank sends his client the bill in January? Use Exhibit 3.1.

Note: Round your answer to the nearest whole dollar amount.

  1. Based on requirements a and b, should Hank send his client the bill in December or January?

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

Management And Cost Accounting

Authors: Charles T. Horngren, George Foster, Srikant M. Datar

3rd Edition

ISBN: 0273687514, 978-0273687511

More Books

Students also viewed these Accounting questions

Question

Describe why intercultural communication is a necessity

Answered: 1 week ago