Manny, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December he performed $42,000 of legal services for a client. Manny typically requires his clients to pay his bills immediately upon receipt. Assume Mannys marginal tax rate is 37 percent this year and next year, and that he can earn an after-tax rate of return of 7 percent on his investments.

b. What is the after-tax income if Manny sends his client the bill in January? Use Exhibit 3.1. (Round your answer to the nearest whole dollar amount.)

4% .826 EXHIBIT 3-1 Present Value of a Single Payment at Various Annual Rates of Return 5% 6% 7% 8% 9% 10% 11% 12% Year 1 962 952 943 935 926 917 909 901 .893 Year 2 925 907 .890 .873 .857 .842 .812 .797 Year 3 .889 .864 .840 .816 .794 772 .751 .731 .712 Year 4 .855 .823 .792 .763 .735 .708 .683 .659 .636 Year 5 .822 .784 .747 713 .681 .650 .621 .593 .567 Year 6 .790 .746 .705 .666 .630 596 564 .535 507 Year 7 .760 .711 .665 .623 583 547 513 .482 452 Year 8 .731 .677 .627 582 540 502 467 .434 404 Year 9 .703 .645 .592 544 500 460 424 391 361 Year 10 .676 .614 558 508 463 422 386 352 322 Year 11 .650 585 527 .475 .429 388 350 317 .287 Year 12 .625 .557 .497 444 397 356 319 .286 .257 Year 13 .601 .530 469 415 368 326 .290 .258 .229 Year 14 577 505 442 388 340 .299 .263 .232 .205 Year 15 .555 .481 .417 362 315 .275 .239 .209 .183