ACCT 422 SEU Tax and Zakat Accounting Worksheet

Description

Assignment 3

Q.1- Mr. A and Mrs. B are married and have two dependent children. X & Y, They also fully support Mrs. B’s mother who lives with them and has no income. Their 2012 tax and other related information is as follows:(2.5 marks)

Particulars	Amount in $
Value of premiums for $ 100000 of group term life insurance provided by employer	2,000
Gift from A’S parents	60,000
Dividend income—from ABC stock,	8,000
Loan from A’S parents	20,000
Total salaries	640,000
Bank account interest income	14,000
Gain from the sale of qualified small business stock acquired in 2010	60,000
Total itemized deductions	64,000
Municipal bond interest income	6,000
Value of employer provided medical insurance	22,000

Required: Compute Mr. A and Mrs.B Taxable income. (Show all calculations in proper /good form.)

Solution:

Q.2- Mr. Abdullah’s medical and personal expenses include the following: (2.5 mark)

Particulars	Amount in $
Prescription drugs	2,400
Eyeglasses	1,400
Doctors’ fees	8,000
Hospital fees	13,400
Food for personal use (expenses)	4,000
Travel allowances	10,000
General purpose vitamins	400
Medical premiums	43,400
Visitors fees	2,000
Recreation fees	5,000
Club fess	2,000

Abdullah’s AGI for the year is $ 132,000. He is single and age 56.Insurance company reimburses none of the medical costs and other related items.

After considering the AGI floor, what will be Abdullah’s medical expense deduction?

Answer:

Q.3 In the year 2013, PQR Corporation had the following items of income, expense, gains, and losses: (2 mark)

Particulars	Amount in $
Sales	2,000,000
Account payable	600,000
Interest on savings account	56,000
Plant & Machinery	600,000
Equipment	300,000
Operating expenses	400,000
Furniture and Fixture	400,000
Gain on sale of AT&T stock	24,000
Loss on sale of IBM stock	60,000
Building	400,000
Motor vehicle	200,000
Cost of sales	1,080,000

What is taxable income of PQR Corporation’s for the year?

Answer: –

Q-4-To make income taxable, income must be realized and recognized. Explain in your own words the difference between income realization and income recognition, and then provide a short numerical example to indicate the difference (Don’t copy the same numerical example from other students. Numerical example must be differ). (2 mark)

Answer

Q5. If a NOL (net operating loss) is incurred, when would a taxpayer elect to forgo the carryback period and only carry the loss deduction forward? (1 marks)

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