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Whirlwind Cycles is owned 1 0 0 % by Daniel, a single taxpayer. Both Whirlwind Cycles and Daniel use the cash method of accounting for
Whirlwind Cycles is owned by Daniel, a single taxpayer. Both Whirlwind Cycles and Daniel use the cash method of accounting for tax purposes. Whirl Cycles is organized as a C Corporation and the corporation pays all of its aftertax cash flows to Daniel as a dividend.
The business incurred the following items of income and expense in Year :
Cash Sales
Interest received from City of Flint Bonds this is a municipal bond
Cost of Goods Sold assume cash paid in Year
Cash payments for Year utilities
Cash payments for Year rent
Tax depreciation
Cash contribution to the Democratic party not deductible for tax purposes
On Year Whirlwind Cycles purchased a month zero coupon bond with a yield and a $ maturity value for $compounded annually
Daniels taxable income is $ before any profits from the business are considered. Daniel files as a single tax payer.
a How much interest income does Whirlwind cycles need to recognize from the zero coupon bond in Year pts
b What is the taxable income of Whirlwind Cycles in Year pts
c What is the aftertax cash flow of Whirlwind Cycles in Year pts
Hint: the total tax due in Year of Whirlwind Cycles is
d Calculate Daniels Year aftertax cash flows from the Whirlwind Cycles. pts
Hint: This is a dividend payment. So consider what tax rate Daniel needs to pay on the cash payment.
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