Problem 4-27 (LO. 6)

Tammy, a resident of Virginia, is considering whether to purchase a North Carolina bond, face amount $100,000, that yields 4.6% before tax. She is in the 35% Federal marginal tax bracket and the 5% state marginal tax bracket.

Tammy is aware that State of Virginia bonds of comparable risk are yielding 4.5%. Virginia bonds are exempt from Virginia tax, but the North Carolina bond interest is taxable in Virginia. Tammy can deduct all state taxes paid on her Federal income tax return.

If required, round your computations and answers to the nearest dollar. Assume that Tammy itemizes her deductions for federal taxes.

Determine the after tax income from each bond.

Virginia Bond:	$________
North Carolina Bond:	$________

*****for North Caroline Bond; the answer is NOT!! $2840 0R $2760. i TRIED THEM AND THEY ARE WRONG.

Problem 4-15 (Algorithmic) (LO. 2)

Al is a physician who conducts his practice as a sole proprietor. During 2019, he received cash of $505,200 for medical services. Of the amount collected, $51,600 was for services provided in 2018. At the end of 2019, Al held accounts receivable of $91,400, all for services rendered in 2019. In addition, at the end of the year, Al received $9,000 as an advance payment from a health maintenance organization (HMO) for services to be rendered in 2020.

a. Compute Al's gross income for 2019 using the cash basis of accounting. $___________

b. Compute Al's gross income for 2019 using the accrual basis of accounting. $____________

Problem 4-33 (LO. 10)

Apply the imputed interest rules in the following situations. If an amount is zero, enter "0".

a. Mike loaned his sister Shonda $90,000 to buy a new home. Mike did not charge interest on the loan. The Federal rate was 4%. Shonda earned $900 of investment income for the year.

The imputed amount is $ _______________

b. Nico's employer maintains an emergency loan fund for its employees. During the year, Nico's wife was very ill, and they incurred unusually large medical expenses. He borrowed $8,500 from his employer's emergency loan fund for six months. The Federal rate was 4%. Nico and his wife earned no investment income for the year.

The imputed amount is $ ________________

c. Jody borrowed $25,000 from her controlled corporation for six months. She used the funds to pay her daughter's college tuition. The corporation charged Jody 3% interest. The Federal rate was 4%. Jody earned $3,500 of investment income for the year.

The imputed amount is $ ________________

d. Kait loaned her son, Jake, $60,000 for six months. Jake used the $60,000 to pay off college loans. The Federal rate was 4%, and Kait did not charge Jake any interest. Jake earned dividend and interest income of $2,100 for the tax year.

The imputed amount is $ _______________