Question: Is it possible for a person to

> Margaret started her own business in the current year and will report a profit for her first year. Her results of operations are as follows: Gross income ……………………………………………......... $50,000 Travel …………………………………………….........………………… 1,000 Contribution

> Go to the IRS website (www.irs.gov) and redo Problem 1 (Chapter 3, Group 2) using the most recent interactive Schedule C (Form 1040) on the IRS website that will allow the required information to be input. Print out the completed Schedule C.

> Please answer the following questions regarding the taxability of Social Security: a. A 68-year-old taxpayer has $20,000 in Social Security income and $100,000 in tax-free municipal bond income. Does the municipal bond income affect the amount of Social

> Scott Butterfield is self-employed as a CPA. He uses the cash method of accounting, and his Social Security number is 644-47-7833. His principal business code is 541211. Scott’s CPA practice is located at 678 Third Street, Riverside, CA 92860. During 201

> As part of the property settlement related to their divorce, Cindy must give Allen the house that they have been living in, while she gets 100 percent of their savings accounts. The house was purchased for $90,000 15 years ago in Southern California and

> During the 2016 tax year, Brian, a single taxpayer, received $7,200 in Social Security benefits. His adjusted gross income for the year was $14,500 (not including the Social Security benefits) and he received $30,000 in tax-exempt interest income and has

> Lew is a practicing CPA who decides to raise bonsai as a business. Lew engages in the activity and has the following revenue and expenses: Sales …………………………………………………... $ 5,000 Depreciation on greenhouse …………………. 10,000 Fertilizer, soil, pots ………………………………

> Ellen’s tax client is employed at a large company that offers medical flexible spending accounts to its employees. Tom must decide at the beginning of the year whether he wants to put as much as $2,550 of his salary into the medical spending account. He

> Maggie lost her job in the current year. She paid the expenses of owning her home, interest on the mortgage, and property taxes out of savings. Her tax return shows negative taxable income of $20,000. How should this loss be treated?

> Linda and Richard are married and file a joint return for 2016. During the year, Linda, who works as an accountant for a national airline, used $2,100 worth of free passes for travel on the airline; Richard used the same amount. Linda and Richard also

> Carl has had a couple of good years in his new business. However, in the current year he has a net operating loss of $80,000. He does not feel that the future of his business is very bright. As his tax accountant, how would you recommend Carl treat his n

> Lydia, a married individual, was unemployed for a few months during 2016. During the year, she received $3,250 in unemployment compensation payments. How much of her unemployment compensation payments must be included in gross income?

> Ann is a self-employed restaurant critic who does her work exclusively from a home office. Ann’s income is $25,000 before the home office deduction this year. Her office takes up 200 square feet of her 1,000-square-foot apartment. The total expenses for

> Karen is a wealthy retired investment advisor who is in the 35 percent tax bracket. She has a choice between investing in a high-quality municipal bond paying 5 percent or a high-quality corporate bond paying 7 percent. Which investment do you think she

> Randi qualifies for a home deduction. The amount of space devoted to business use is 400 square feet of the total 2,000 square feet of her home. Randi’s mortgage interest and property taxes in total are $1,600. Other deductions properly

> Arlen is required by his divorce agreement to pay alimony of $2,000 a month and child support of $2,000 a month to his ex-wife Jane. What is the tax treatment of these two payments for Arlen? What is the tax treatment of these two payments for Jane? Arle

> Vandell is a taxpayer in the 28 percent tax bracket. He invests in Otay Mesa Water District Bonds that pay 4.5 percent interest. What taxable interest rate will provide the same after-tax return to Vandell?

> Pete qualifies for a home office deduction. The amount of space devoted to business use is 300 square feet of the total 1,200 square feet in his apartment. Pete’s total rent for the year is $9,600, and he pays utilities (other than telephone) of $2,500 f

> a. Milton is a nurse whose employer provided meals for him on the employer’s premises, since he is given only 30 minutes for lunch. Is the value of these meals taxable income to Milton? Explain b. Mary is a San Diego ambulance driver. The city provides

> Ellen is a single taxpayer. Ellen’s employer pays $150 per month ($1,800 this year) for her health insurance. During the year, Ellen had medical expenses of $3,500 and the insurance company paid $2,000 of the expenses. How much of the above amounts, if a

> Skyler is covered by his company’s health insurance plan. The health insurance costs his company $3,500 a year. During the year, Skyler is diagnosed with a serious illness and health insurance pays $100,000 for surgery and treatment. How much of the insu

> Robbie receives a scholarship of $20,000 to an elite private college. $12,000 of the scholarship is earmarked for tuition, and $8,000 covers his room and board. How much of the scholarship, if any, is taxable to Robbie?

> Charlene receives a gift from her boyfriend of $10,000. He knows she is having financial problems and wants to help her. How much of the gift is taxable to Charlene?

> Gwen is a tax accountant who works very hard for a large corporate client. The client is pleased and gives her a gift of $10,000 at year-end. How much of the gift is taxable to Gwen?

> In June of 2016, Kevin inherits stock worth $125,000. During the year, he collects $6,500 in dividends from the stock. How much of these amounts, if any, should Kevin include in his gross income for 2016? Why?

> Helen receives a $200,000 lump sum life insurance payment when her friend Alice dies. How much of the payment is taxable to Helen?

> Answer the following questions, assuming that the related divorce agreements were executed during 2016. a. Under a divorce agreement, Joan is required to pay her ex-husband, Bill, $700 a month until their daughter is 18 years of age. At that time, the re

> Plot the following data and specify the type of relationship between the two variables. (Place “Price” on the vertical axis and “Quantity Supplied” on the horizontal axis.) Price of Apples ($) Quantity Supplied of Apples  0.25 350  0.50 400  0.

> When is a pie chart better than a bar chart for illustrating data?

> What is the slope of a 45-degree line?

> What is the special characteristic of a 45-degree line?

> In Exhibit 4(b), determine the slope between points A and D.

> Scarcity is the condition in which peoples’ wants (for goods and services) are unlimited or infinite. Do you agree or disagree? Explain your answer.

> There are 30 students in an Economics class. Is the opportunity cost of attending the class the same for each of the 30 students? Why or why not.

> All theories are abstractions from reality. What does this mean?

> Can a person exercise “too much”? Explain your answer.

> Explain what it means to make a decision at the margin.

> In Exhibit 4(a), determine the slope between points C and D.

> Suppose the marginal costs of reading are constant and the marginal benefits of reading decline (over time). Initially, the marginal benefits of reading are greater than the marginal costs. Draw the marginal benefit curve and marginal cost curve of readi

> Jim could undertake activity X, but chooses not to. Draw the marginal benefit and cost curves for activity X from Jim’s perspective.

> Using the diagram you drew in question 1, lower the marginal costs of reading and identify the new efficient amount of reading. Also, identify the additional net benefits derived as a result of the lower marginal cost of reading. Marginal costs, mar

> Can either scarcity or one of the effects of scarcity be found in a car dealership? Explain your answer.

> What is the difference between the resource labor and the resource entrepreneurship?

> What do economists mean when they say that “institutions matter”?

> Give an example of something that is a good for one person and a bad for another person.

> Give two examples for each of the following: (a) an intangible good, (b) a tangible good, (c) a bad.

> The United States is considered a rich country because Americans can choose from an abundance of goods and services. How can there be scarcity in a land of abundance?

> Discuss the opportunity costs of attending college for four years. Is college more or less costly than you thought it was? Explain.

> Plot the following data and specify the type of relationship between the two variables. (Place “Price” on the vertical axis and “Quantity Demanded” on the horizontal axis.) Price of Apples ($) Quantity Demanded of Apples  0.25 1,000  0.50 800  

> Explain the link between scarcity and each of the following: (a) choice, (b) opportunity cost, (c) the need for a rationing device, (d) competition.

> A theory is an abstraction from reality. What does this mean?

> Janice decides to go out on a date with Kyle instead of Robert. Do you think Janice is using some kind of “rationing device” to decide who she dates? If so, what might that rationing device be?

> The person who smokes cigarettes cannot possibly be thinking in terms of costs and benefits because it has been proven that cigarette smoking increases one’s chances of getting lung cancer. Do you agree or disagree with the part of the statement that rea

> If you found $10 bills on the sidewalk regularly, we might conclude that individuals don’t try to maximize net benefits. Do you agree or disagree with this statement? Explain your answer.

> Jackie’s alarm clock buzzes. She reaches over to the small table next to her bed and turns it off. As she pulls the covers back up, Jackie thinks about her 8:30 American history class. Should she go to the class today or sleep a little longer? She worked

> Would there be a need for a rationing device if scarcity did not exist? Explain your answer.

> What is the difference between positive economics and normative economics? Between microeconomics and macroeconomics?

> When two individuals enter into an exchange, you can be sure that one person benefits and that the other person loses. Do you agree or disagree with this statement? Explain your answer.

> Represent the following data in bar graph form (a) Sales of hot dogs and sales of hot dog buns (b) The price of winter coats and sales of winter coats (c) The price of personal computers and the production of personal computers (d) Sales of toothbrush

> Why do people enter into exchanges?

> A change in X will lead to a change in Y; the predicted change is desirable, so we should change X. Do you agree or disagree? Explain.

> What does an economist mean if she says that there are no $10 bills on the sidewalk?

> Ivan stops studying before the point at which his marginal benefits of studying equal his marginal costs. Is Ivan forfeiting any net benefits? Explain your answer.

> How would an economist define the efficient amount of time spent playing tennis?

> Economists say that individuals make decisions at the margin. What does this mean?

> A layperson says that a proposed government project simply costs too much and therefore shouldn’t be undertaken. How might an economist’s evaluation be different?

> A friend pays for your lunch. Is this an example of a “free lunch”? Why or why not?

> Smith says that we should eliminate all pollution in the world. Jones disagrees. Who is more likely to be an economist, Smith or Jones? Explain your answer.

> Explain the relationship between changes in opportunity costs and changes in behavior.

> For each of the following, what type of relationship would you expect between the variables? (a) Sales of hot dogs and sales of hot dog buns (b) The price of winter coats and sales of winter coats (c) The price of personal computers and the production

> The Georgia Gun Club adjusts its accounts monthly and closes its accounts annually. Club members pay their annual dues in advance by January 4. The entire amount is initially credited to Unearned Membership Dues. At the end of each month, an appropriate

> Florida Palms Country Club adjusts its accounts monthly. Club members pay their annual dues in advance by January 4. The entire amount is initially credited to Unearned Membership Dues. At the end of each month, an appropriate portion of this amount is c

> On November 1, Girtz Corporation purchased a six-month insurance policy from The Tomptee Agency for $4,500. a. Prepare the necessary adjusting entry for Girtz Corporation on November 30, assuming it recorded the November 1 expenditure as Unexpired Insur

> Listed as follows are nine technical accounting terms used in this chapter. Unrecorded revenue Adjusting entries Accrued expenses Book value Matching principle Accumulated depreciation Unearned revenue Materiality Prepaid expenses Each of the following s

> How is deferred revenue reported in the balance sheet?

> Four types of adjusting entries were identified in this chapter Type I Converting Assets to Expenses Type II Converting Liabilities to Revenue Type III Accruing Unpaid Expenses Type IV Accruing Uncollected Revenue Complete the following table by indic

> The Freemont Flyers, a professional soccer team, prepares financial statements on a monthly basis. The soccer season begins in May, but in April the team engaged in the following transactions. 1. Paid $1,500,000 to the municipal stadium as advance rent

> Ted’s Tax Service had earned—but not yet recorded—the following client service revenue at the end of the current accounting period. Prepare the necessary adjusting entry to record Tedâ€&#

> On March 1, Phonic Corporation had office supplies on hand of $1,000. During the month, Phonic purchased additional supplies costing $500. Approximately $200 of unused office supplies remain on hand at the end of the month. Prepare the necessary adjustin

> On February 1, Watson Storage agreed to rent Hillbourne Manufacturing warehouse space for $300 per month. Hillbourne Manufacturing paid the first three months’ rent in advance. a. Prepare the necessary adjusting entry for Hillbourne Manufacturing on Feb

> Hunter’s unadjusted trial balance dated December 31, year 1, reports Income Taxes Expense of $70,000, and Income Taxes Payable of $20,000. The company’s accountant estimates that income taxes expense for the entire year ended December 31, year 1, is $85,

> Jump Corporation borrowed $60,000 on December 1, year 1, by issuing a 2-month, 4 percent note payable to Service One Credit Union. The entire amount of the loan, plus interest, is due February 1, year 2. a. Prepare the necessary adjusting entry for inte

> Milford Corporation pays its employees on the 15th of each month. Accrued, but unpaid, salaries on December 31, year 1, totaled $210,000. Salaries earned by Milford’s employees from January 1 through January 15, year 2, totaled $216,000. a. Prepare the

> Jasper’s unadjusted trial balance reports Unearned Client Revenue of $4,000 and Client Revenue Earned of $30,000. An examination of client records reveals that $2,500 of previously unearned revenue has now been earned. a. Prepare the necessary adjusting

> Jesse Company adjusts its accounts monthly and closes its accounts on December 31. On October 31, year 1, Jesse Company signed a note payable and borrowed $150,000 from a bank for a period of six months at an annual interest rate of 6 percent. a. How mu

> List various accounts in the balance sheet that represent deferred expenses

> Sweeney & Allen, a large marketing firm, adjusts its accounts at the end of each month. The following information is available for the year ending December 31. 1. A bank loan had been obtained on December 1. Accrued interest on the loan at December 31 a

> When Delta Airlines sells tickets for future flights, it debits Cash and credits an account entitled Air Traffic Liability (as opposed to crediting Passenger Revenue Earned). This account, reported recently at approximately $4.5 billion, is among the lar

> The geological consulting firm of Gilbert, Marsh, & Kester prepares adjusting entries on a monthly basis. Among the items requiring adjustment on December 31, year 2, are the following. 1. The company has outstanding a $50,000, 9 percent, 2-year note pa

> Carnival Corporation & PLC is one of the world’s largest cruise line companies. Its printing costs for brochures are initially recorded as Prepaid Advertising and are later charged to Advertising Expense when they are mailed. Passenger deposits for upcom

> Security Service Company adjusts its accounts at the end of the month. On November 30, adjusting entries are prepared to record the following. a. Depreciation expense for November. b. Interest expense that has accrued during November. c. Revenue earne

> The financial statements of Home Depot, Inc., appear in Appendix A at the end of this textbook. Examine the company’s consolidated balance sheet and identify specific accounts that may have required adjusting entries at the end of the year.

> For each of the following situations described, indicate the underlying accounting principle that is being violated. Choose from the following principles. Matching Materiality Cost Realization

> The unadjusted and adjusted trial balances for Tinker Corporation on December 31, current year are shown as follows Journalize the nine adjusting entries that the company made on December 31, current year. TINKER CORPORATION TRIAL BALANCES DECEMBER

> Listed are seven corporations that receive cash from customers prior to earning revenue. Delta Air Lines, Inc. (airline) The New York Times Company (newspaper) Royal Caribbean (Cruise Company) DeVry Education Group (for-profit technical college)

> The following information was reported in a recent balance sheet issued by Microsoft Corporation. 1. The book value of property and equipment is listed at $14.7 billion (net of depreciation). Related notes to the financial statements reveal that accumul

> Would a $1,000 expenditure be considered material to all businesses? Explain.

> Among the ledger accounts used by Rapid Speedway are the following: Prepaid Rent, Rent Expense, Unearned Admissions Revenue, Admissions Revenue, Prepaid Printing, Printing Expense, Concessions Receivable, and Concessions Revenue. For each of the followin

> Why does the recording of adjusting entries require a better understanding of the concepts of accrual accounting than does the recording of routine revenue and expense transactions occurring throughout the period?

> Do adjusting entries affect income statement accounts, balance sheet accounts, or both? Explain.