Question
Use RIA Checkpoint to answer the following questions. 5 . Frank and Farrah, who are twins, ask you to research an issue for them. Both
Use RIA Checkpoint to answer the following questions.
5. Frank and Farrah, who are twins, ask you to research an issue for them. Both are starting new jobs as staff accountants. Farrah decides to start saving $400 per month and intends to keep saving $400 per month for 20 years. Frank, on the other hand, desperately wants a new sports car and thus decides he is going to wait five years before starting his $400 per month savings plan. Frank figures $400 per month for five years is only a difference of $24,000 so it will not make much of a difference if he waits five years before starting to save. What difference will delaying his savings really make? Assuming a 6 percent rate of return, using the Savings tools in Checkpoint, what is the difference in the future value of Farrahs and Franks savings plans? (Assume the starting amount = zero).
a. $187,065.
b. $89,574.
c. $107,253.
d. $66,935.
e. None of the above.
6. Edward received two gifts in 2023. A car valued at $30,000 from his parents and a $20,000 cash gift from his grandparents. According to IRC 102(a) Edward will be required to include ____________ in gross income as a result of the gifts.
a. $20,000.
b. $15,000.
c. Zero.
d. $35,000.
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