HW#2 on Module 3

Topics: Taxes and Financial Services

Solve the following problems and answer related questions. Show steps clearly.

1. Assume the following income tax table.

Income Range Marginal Tax rate

$20,000 and below 10%

20,001 50,000 15%

50,001 120,000 20%

120,001 200,000 25%

200,001 500,000 30%

More than 500,000 35%

The OBrien Family has the following income items:

Salaries $180,000

Dividend income $20,000

Interest income on savings account $5,500

Interest income on municipal bonds $3,000

Short term capital gains $45,000

The standard deduction for the year is $24,000 and itemized deductions for the family is $22,500.

1. Determine taxable income for the OBrien Family
2. Calculate the tax
3. What is their average tax rate?
4. What is their marginal tax rate?

2. Xia and John have joint accounts at Downtown Bank that is insured by the FDIC. They have $220,000 in their checking account, $350,000 in regular savings account, and $150,000 in an investment account. Unfortunately, Downtown Bank went bankrupt. How much would Xia and John recover from their accounts? Show work.

3. Hussein received his bank statement for the month of September. The bank statement shows balance of $5,285 in his account. His checkbook record shows a balance of $4,655 for the same date. When he examined the bank statement, he found that the bank added interest earned of $20, and deposits made by friends to his account of $250. In addition, a check Hussein wrote for gym membership in the amount of $160 did not clear the bank. Also Husseins ATM withdrawal of $200 on the last day of September is not reflected in the bank statement.

Prepare bank reconciliation statement for Hussein and show the correct cash balance.