Question 1

Which of the following businesses can use the cash method? I. The Donner Group, a partnership with 3 equal partners, of which one is The Garden Corporation. Average revenues for the Donner Group, a consulting firm, over the last three years are $4,000,000. II. The Mongoose Corporation, a computer software consultant that has average annual fees from services over the last three years are $2,100,000.

Accepted Answer

The Donner Group, being a partnership with one partner being a corporation, cannot use the cash method as partnerships with corporations as partners must use the accrual method if their average revenues exceed $5,000,000. The Mongoose Corporation, on the other hand, can use the cash method as their average annual fees from services are less than $25,000,000.

Question 2

Martina, an unmarried individual with no dependents, owns and operates an office supply store as a sole proprietorship. The net income from the business is consistently $100,150 annually. Based solely on income taxes, consider whether the corporate form of business will produce tax savings. Assume Martina uses the standard deduction amount.

Accepted Answer

The answer of Martina, an unmarried individual with no dependents,...

Question 3

Discuss what limited liability means. What type of entity or entities) offers this characteristic to its owners? What types) of entity or entities) do not provide this characteristic?

Accepted Answer

The answer of Discuss what limited liability means. What type...

Question 4

Franco and Melanie start a new business called F&M Delivery. Franco contributes $50,000 in cash and Melanie contributes a fleet of vans worth $80,000. The business assumes Melanie's $30,000 debt on the van. The business borrows $500,000 to purchase necessary buildings and for working capital. They anticipate that the business will suffer losses for at least three years before it becomes profitable. Which entity forms would be appropriate for Franco and Melanie's new business?

Accepted Answer

The answer of Franco and Melanie start a new business...

Question 5

Does the selection of a corporate entity ever make sense based on a desire for lower marginal tax rates? Discuss.

Accepted Answer

The answer of Does the selection of a corporate entity...

Question 6

Which of the following businesses must use the accrual method of accounting? I. Pryor and Ransom, a local law firm with annual gross receipts of $650,000. II. Mayson Manufacturing, which has annual gross receipts of $20,000,000.

Accepted Answer

Businesses with annual gross receipts of over $25 million are required to use the accrual method of accounting. Therefore, statement II is correct and statement I is incorrect.

Question 7

Which of the following businesses must use the accrual method of accounting? I. Champion Mortgage Corporation, which has annual gross receipts of $10,000,000. II. The Happy Bookworm, a local bookstore with annual gross receipts of $950,000.

Accepted Answer

The answer of Which of the following businesses must use...

Question 8

Which of the following businesses can use the cash method? I. The Hateris Group, a partnership with 3 equal partners, of which one is The Hillard Corporation. Average revenues for the Hateris Group, a financial planning firm, over the last three years are $4,000,000. II. The Glidder Corporation, a clothing retailer that has average annual sales over the last three years are $2,100,000.

Accepted Answer

The answer of Which of the following businesses can use...

Question 9

Discuss the characteristics of a personal service corporation PSC).

Accepted Answer

The answer of Discuss the characteristics of a personal service...

Question 10

Monica acquires a 25% interest in Terrapin Partnership during 2012 by contributing land with a fair market value of $35,000, an adjusted basis of $18,000, and subject to a mortgage of $12,000. The partnership assumes the mortgage. What is Monica's adjusted basis in her partnership interest? Discuss how you arrived at that adjusted basis amount, and the underlying reasoning behind the rules you applied.

Accepted Answer

The answer of Monica acquires a 25% interest in Terrapin...

Quiz 13: Choice of Business Entity-General Tax and Nontax Factorsformation

Discuss what limited liability means. What type of entity or entities) offers this characteristic to its owners? What types) of entity or entities) do not provide this characteristic?

Does the selection of a corporate entity ever make sense based on a desire for lower marginal tax rates? Discuss.

Which of the following businesses must use the accrual method of accounting? I. Pryor and Ransom, a local law firm with annual gross receipts of $650,000. II. Mayson Manufacturing, which has annual gross receipts of $20,000,000.

Which of the following businesses must use the accrual method of accounting? I. Champion Mortgage Corporation, which has annual gross receipts of $10,000,000. II. The Happy Bookworm, a local bookstore with annual gross receipts of $950,000.

Discuss the characteristics of a personal service corporation PSC).