ACCT-224 Lecture Notes - Lecture 6: Savings Account, Canada Pension Plan, Income Splitting
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Tax Return Problem Beth R. Jordan lives at 2322 Skyview Road, Mesa, AZ 85201. She is a tax accountant with Mesa Manufacturing Company, 1203 Western Avenue, Mesa, AZ 85201 (employer identification number 11-1111111). She also writes computer software programs for tax practitioners and has a part-time tax practice. Beth is single and has no dependents. Beth was born on July 4, 1972, and her Social Security number is 123-45-6789. She wants to contribute $3 to the Presidential Election Campaign Fund.
The following information is shown on Beth's 2015 Wage and Tax Statement (Form W–2).
Line | Description | Amount |
---|---|---|
1 | Wages, tips, other compensation | $65,000.00 |
2 | Federal income tax withheld | 10,500.00 |
3 | Social Security wages | 65,000.00 |
4 | Social Security tax withheld | 4,030.00 |
5 | Medicare wages and tips | 65,000.00 |
6 | Medicare tax withheld | 942.50 |
15 | State | Arizona |
16 | State wages, tips, etc. | 65,000.00 |
17 | State income tax withheld | 1,650.00 |
Other 2015 transactions include the following.
Beth received interest of $1,300 from Arizona Federal Savings and Loan and $400 from Arizona State Bank. Each financial institution reported the interest income on a Form 1099–INT. She received qualified dividends of $800 from Blue Corporation, $750 from Green Corporation, and $650 from Orange Corporation. Each corporation reported Beth's dividend payments on a Form 1099–DIV.
Beth received a $1,100 income tax refund from the state of Arizona on April 29, 2015. On her 2014 Federal income tax return, she reported total itemized deductions of $8,200, which included $2,200 of state income tax withheld by her employer.
Fees earned from her part-time tax practice totaled $3,800. She paid $600 to have the tax returns processed by a computerized tax return service.
On February 8, Beth bought 500 shares of Gray Corporation common stock for $17.60 a share. On September 12, Beth sold the stock for $14 a share.
Beth bought a used sport utility vehicle for $6,000 on June 5. She purchased the vehicle from her brother-in-law, who was unemployed and was in need of cash. On November 2, she sold the vehicle to a friend for $6,500.
On January 2, Beth acquired 100 shares of Blue Corporation common stock for $30 a share. She sold the stock on December 19 for $55 a share.
Beth records revenues of $16,000 from the sale of a software program she developed. Beth incurred the following expenditures in connection with her software development business.
Cost of personal computer (100% business use) | $7,000 |
Cost of printer (100% business use) | 2,000 |
Furniture | 3,000 |
Supplies | 650 |
Fee paid to computer consultant | 3,500 |
Beth elected to deduct the maximum portion of the cost of the computer, printer, and furniture allowed under the provisions of § 179. These items were placed in service on January 15 and used 100 percent in her business.
Although her employer suggested that Beth attend a convention on current developments in corporate taxation, Beth was not reimbursed for the travel expenses of $1,420 she incurred in attending the conference. The $1,420 included $200 for meals.
Beth paid $300 for prescription medicines and $2,875 in physician and hospital bills. Medical insurance premiums were paid by her employer. Beth paid real property taxes of $1,766 on her home. Interest on her home mortgage was $3,845, and interest paid to credit card companies totaled $320.
Beth electronically contributed $30 each week to her church and $10 each week to the United Way. Professional dues and subscriptions totaled $350.
Beth paid $1,000 in estimated Federal income taxes throughout the year. She was covered for the entire year by Mesa Manufacturing's health insurance policy.
Part 1—Tax Computation
Compute the 2015 net tax payable or refund due for Beth R. Jordan. If you use tax forms for your solution, you will need Forms Schedules A, B, C, D, and SE. Suggested software: H&R BLOCK Tax Software.
Read the Interview for the Miss Peach Project below and write asystems requirement checklist with these five general catagories:Outputs, Inputs, Processes, Performance and controls.
In a prior interview, Miss Peach provided the informationsummarized below. She has also provided associated documentationshe thought might be helpful.
Payroll
Currently Miss Peach pays her students $3 each Monday usingpaper money for doing their assigned chores during the week. Shethen charges them $1 for rent on their desks. She also pays bonusesfor bringing in homework (about $8 a week) and for good behavior($1 a day).
This works pretty well as far as it goes, but Miss Peach wouldlike to model real life even more. With the new system, thestudents' pay would be posted to their bank accounts. In order forthe tax tables to work, Miss Peach will have to increase the weeklysalaries to about $150. Each week the students would receive anearnings statement that would list their gross pay (broken down bysalary, bonuses, and hourly pay), their current deductions (Federalincome tax, Social Security tax, Medicare tax, and Michigan stateincome tax), and their net pay deposited into their bank account.The rent for their desks would be inflated to $25 and would be anautomatic deduction from the students' weekly pay. There would alsobe a column indicating the year-to-date values.
Although Miss Peach currently does not pay an hourly wage, shewould like the option to do so at a later time.
Miss Peach has included a copy of her weekly earnings statementto be used as a model.
Earnings Statement | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kelly Elementary School 5150 Riverside Drive Marshall, MI 49068 | Period Ending:9/24/2004 Pay Date: 9/24/2004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Taxable Marital Status: Single Exemptions/Allowances: Federal: 1 State: 1 | Pamela Peach 135 Grove Street Marshall, MI 49068 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Store Currently Miss Peach opens the class store Monday, right afterpayday. She runs the store herself, but would like the new systemto support students running the store. She keeps the inventorystocked fairly well considering her limited time and resources. Shemostly uses standard school supplies (see list below), although shesometimes supplements the inventory with stickers and craftsupplies from her own pocket or items donated by parents. Currentlyno records are kept. Although very popular with the students, Miss Peach finds thecurrent system way too chaotic. Her main goal is to use thecomputer to make it possible for the students to run the storethemselves. Shifting the responsibility for running the store toher students would make it into a learning experience for them. Italso would make it possible to open the store anytime a student isfinished with his or her regular activities. General supplies include pencils, pens, crayons, markers, chalk,white paper, lined paper, notebooks, colored paper, tissue paper,construction paper, rulers, scissors, glue sticks, tape, brassfasteners, envelopes, paint, pipe cleaners, glue, and popsiclesticks. Donated supplies include books, arts and craft materials (leftover cloth and yarn, toilet paper rolls, bottle caps), and sciencematerials (plastic yogurt containers, seeds, potting soil). Miss Peach has included a copy of the paper receipt currentlybeing used in the school store to be used as a model. |
4th Grade StoreKelly Elementary School 5150Riverside Drive Marshall, MI 49068
Customer: ID Date:
Receipt
Qty | ID | Description | Each | Total |
Subtotal | ||||
Tax (6%) | ||||
Debit Total |
Signature:
Bank
Currently Miss Peach acts as the bank. All transactions are inpaper money and the only records are related to the normal gradingactivities of homework and behavior. She would like the new systemto allow students to have access to their bank accounts through anATM machine.
Through the ATM the students should be able to change theirpasswords, check their current balances, transfer funds between thechecking and savings accounts, and see or print listings of alltransactions for a period of time. Money in the savings accountshould accrue interest.
Miss Peach has included a copy of her bank checking and savingsaccount transaction histories to be used as a model.
Teachers Credit Union |
Checking Account History