Log in
Accounting
1
answer
0
watching
51
views

There are various types of dividends; however, the two mostcommon dividends have to do with either a cash dividend or a stockdividend. With a cash dividend the shareholder receives cash, basedon the number of shares that is owned. In a stock dividend theshareholder receives stock certificates, based on the number ofshares owned. From the perspective of the stockholder, whichdividend would do you think they would prefer and from theperspective of the company, which dividend do you think they wouldprefer. Please fully explain your answer, giving reasons as towhy.

Watch
1
answer
0
watching
51
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Hubert Koch
Hubert KochLv2
28 Sep 2019

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related questions

Adam, Linda, and Mike are considering starting a bakery togetherin Burlington, VT called Vermont Bakes. They have come to youlooking for advice on the advantages and disadvantages of eachbusiness entity. Adam and Linda will each own 40% of the businessand Mike will own 20%. Adam would like to contribute cash of$40,000, Linda will contribute land with an FMV of $60,000 and anadjusted basis of $25,000. Mike will contribute services of$20,000. In addition, Linda receives $20,000 of cash. Adam, Linda& Mike have indicated that they would like to takedistributions of profits from Vermont Bakes each year in additionto compensation. They plan to pay themselves compensation of$45,000 each and they project that Vermont Bakes will have $10,000in profits each year that they would like to distribute based ontheir ownership percentages. The distributions are as follows:Adjusted Basis FMV Adam - Equipment $2,000 $4,000 Linda - Cash$4,000 $4,000 Mike - Cash $2,000 $2,000 In a concise, well-writtenessay (do not use bullet points - write out your answers inparagraph form): • Explain the advantages and disadvantages of eachentity type (C Corporation, S Corporation, Partnership/LLC),including both tax and non-tax considerations we discussed inclass. Include in your discussion an explanation of entities aretaxed at the entity level and which offer flow through taxation.Explain how are income and losses aggregated when they flow throughto the shareholder/member/partner including the effect this has onthe owner's basis in the entity (if any). • Explain the taxtreatment of property contributions from theshareholder/member/partner to each type entity upon formation.including a discussion of the basis the entity would take in thecontributed property and the basis the shareholder/member/ownerwould have in the entity as a result of the contribution. oCalculate Adam, Linda & Mike's basis in their ownershipinterest if they were part of a prearranged plan to incorporateVermont Bakes as a C corporation. Calculate the basis the Ccorporation would take in the property contributed by Adam, Linda& Mike. Calculate the realized and recognized gain to Adam,Linda & Mike on their contribution to the C corporation (ifany). o Calculate Adam, Linda & Mike's basis in their ownershipinterest if they decided to form Vermont Bakes as a partnership.Calculate the basis the partnership would take in the propertycontributed by Adam, Linda & Mike. Calculate the realized andrecognized gain to Adam, Linda & Mike on their contribution tothe partnership (if any). • Explain the tax treatment of cash andproperty distributions/dividends to a shareholder/member/partner ofeach type of entity. Include in your discussion an explanation ofthe concepts of E&P and AAA and the purpose of thosecalculations. o Calculate Adam's basis in the distributed propertyassuming Vermont Bakes is a C Corporation and indicate whether theproperty distribution would result in gain or loss recognition.Assume Adam's basis just prior to the distribution was $1,000.Would your answer change if this was a liquidating distribution? oCalculate Adam's basis in the distributed property assuming VermontBakes is a partnership and indicate whether the propertydistribution would result in gain or loss recognition. AssumeAdam's basis just prior to the distribution was $1,000. Would youranswer change if this was a liquidating distribution? • ProvideVermont Bakes with a recommendation on which entity you think wouldbest suit their needs including the justification for yourrecommendation.

Assignment Help >> Managerial Accounting

INDIVIDUAL TAX RETURN PROBLEM 5

Required:

Use the following information to complete Paul and Judy Vance's2014 federal income tax return. If information is missing, usereasonable assumptions to fill in the gaps.

You may need the following forms and schedules to complete theproject: Form 1040, Schedule A, Schedule B, Schedule C, Schedule D,Schedule E, Schedule SE, Form 2106-EZ, Form 4562 (for the dentalpractice), Form 4562 (for the rental property), Form 4797, Form8863, and Form 8949. The forms, schedules, and instructions can befound at the IRS website (www.irs.gov). The instructions can behelpful in completing the forms.

Facts:

Paul J. and Judy L. Vance are married and file a joint return.Paul is self-employed as a dentist, and Judy is a collegeprofessor. Paul and Judy have three children. The oldest is Vincewho lives at home. Vince is a law student at the University ofCincinnati and worked part-time during the year, earning $1,500,which he spent for his own support. Paul and Judy provided $6,000toward Vince's support (including $4,000 for Vince's fall tuition).They also provided over half the support of their daughter, Joan,who is a full-time student at Edgecliff College in Cincinnati. Joanworked part-time as an independent contractor during the year,earning $3,200. Joan lived at home until she was married inDecember 2014. She filed a joint return with her husband, Patrick,who earned $20,000 during the year. Jennifer is the youngest andlived in the Vances' home for the entire year. The Vances provideyou with the following additional information:

Paul and Judy would like to take advantage on their return ofany educational expenses paid for their children.

The Vances do not want to contribute to the presidentialelection campaign.

The Vances live at 621 Franklin Avenue, Cincinnati, OH45211.

Paul's birthday is 3/5/1957 and his Social Security number is333-45-6666.

Judy's birthday is 4/24/1960 and her Social Security number is566-77-8888.

Vince's birthday is 11/6/1991 and his Social Security number is576-18-7928.

Joan's birthday is 2/1/1995 and her Social Security number is575-92-4321.

Jennifer's birthday is 12/12/2002 and her Social Security numberis 613-97-8465.

The Vances do not have any foreign bank accounts or trusts.

Judy is a lecturer at Xavier University in Cincinnati, where sheearned $30,000. The university withheld federal income tax of$3,375, state income tax of $900, Cincinnati city income tax of$375, $1,860 of Social Security tax and $435 of Medicare tax. Shealso worked part of the year for Delta Airlines. Delta paid her$10,000 in salary, and withheld federal income tax of $1,125, stateincome tax of $300, Cincinnati city income tax of $125, SocialSecurity tax of $620, and Medicare tax of $145.

The Vances received $800 of interest from State Savings Bank ona joint account. They received interest of $1,000 on City ofCincinnati bonds they bought in January with the proceeds of a loanfrom Third National Bank of Cincinnati. They paid interest of$1,100 on the loan. Paul received a dividend of $540 on GeneralBicycle Corporation stock he owns. Judy received a dividend of $390on Acme Clothing Corporation stock she owns. Paul and Judy receiveda dividend of $865 on jointly owned stock in Maple Company. All ofthe dividends received in 2014 are qualified dividends.

Paul practices under the name "Paul J. Vance, DDS." His businessis located at 645 West Avenue, Cincinnati, OH 45211, and hisemployer identification number is 01-2222222. Paul's gross receiptsduring the year were $111,000. Paul uses the cash method ofaccounting for his business. Paul's business expenses are asfollows:

Advertising

1,200 $

Professional dues

490

Professional journals

360

Contributions to employee benefit plans

2,000

Malpractice insurance

3,200

Fine for overbilling State of Ohio for work performed on welfarepatient

5,000

Insurance on office contents

720

Interest on money borrowed to refurbish office

600

Accounting services

2,100

Miscellaneous office expense

388

Office rent

12,000

Dental supplies

7,672

Utilities and telephone

3,360

Wages

30,000

Payroll taxes

2,400

In June, Paul decided to refurbish his office. This project wascompleted and the assets placed in service on July 1. Paul'sexpenditures included $8,000 for new office furniture, $6,000 fornew dental equipment (seven-year recovery period), and $2,000 for anew computer. Paul elected to compute his cost recovery allowanceusing MACRS. He did not elect to use §179 immediate expensing, andhe chose to not claim any bonus depreciation.

Judy's mother, Sarah, died on July 2, 2009, leaving Judy herentire estate. Included in the estate was Sarah's residence (325Oak Street, Cincinnati, OH 45211). Sarah's basis in the residencewas $30,000. The fair market value of the residence on July 2,2009, was $155,000. The property was distributed to Judy on January1, 2010. The Vances have held the property as rental property andhave managed it themselves. From 2010 until June 30, 2014, theyrented the house to the same tenant. The tenant was transferred toa branch office in California and moved out at the end of June.Since they did not want to bother finding a new tenant, Paul andJudy sold the house on June 30, 2014. They received $140,000 forthe house and land ($15,000 for the land and $125,000 for thehouse), less a 6 percent commission charged by the broker. They haddepreciated the house using the MACRS rules and conventionsapplicable to residential real estate. To compute depreciation onthe house, the Vances had allocated $15,000 of the property's basisto the land on which the house is located. TheVances collected rentof $1,000 a month during the six months the house was occupiedduring the year. They incurred the following related expensesduring this period:

Property insurance

$500

Property taxes

800

Maintenance

465

Depreciation (to be computed)

?

The Vances sold 200 shares of Capp Corporation stock onSeptember 3, 2014, for $42 a share (minus a $50 commission). TheVances received the stock from Paul's father on June 25, 1980, as awedding present. Paul's father originally purchased the stock for$10 per share in 1967. The stock was valued at $14.50 per share onthe date of the gift. No gift tax was paid on the gift.

Judy is required by Xavier University to visit several highschools in the Cincinnati area to evaluate Xavier Universitystudents who are doing their practice teaching. However, she is notreimbursed for the expenses she incurs in doing this. During thespring semester (January through April 2014), she drove herpersonal automobile 6,800 miles in fulfilling this obligation. Judydrove an additional 6,700 personal miles during 2014. She has beenusing the car since June 30, 2013. Judy uses the standard mileagemethod to calculate her car expenses.

Paul and Judy have given you a file containing the followingreceipts for expenditures during the year:

Prescription medicine and drugs (net of insurancereimbursement)

376 $

Doctor and hospital bills (net of insurance reimbursement)

2,468

Penalty for underpayment of last year's state income tax

15

Real estate taxes on personal residence

4,762

Interest on home mortgage (paid to Home State Savings &Loan)

8,250

Interest on credit cards (consumer purchases)

595

Cash contribution to St. Matthew's church

3,080

Payroll deductions for Judy's contributions to the UnitedWay

150

Professional dues (Judy)

325

Professional subscriptions (Judy)

245

Fee for preparation of 2013 tax return paid April 12, 2014

500

The Vances filed their 2013 federal, state, and local returns onApril 12, 2014. They paid the following additional 2013 taxes withtheir returns: federal income taxes of $630, state income taxes of$250, and city income taxes of $75.

The Vances made timely estimated federal income tax payments of$1,500 each quarter during 2014. They also made estimated stateincome tax payments of $300 each quarter and estimated city incometax payments of $160 each quarter. The Vances made allfourth-quarter payments on December 31, 2014. They would like toreceive a refund for any overpayments.

Paul and Judy have qualifying insurance for purposes of theAffordable Care Act (ACA).

Get Answer

CC13 Natalie’s friend, Curtis Lesperance, decides to meet withNatalie after hearing that her discussions about a possiblebusiness partnership with her friend Katy Peterson have failed.(Natalie had decided that forming a partnership with Katy, a highschool friend, would hurt their friendship. Natalie had alsoconcluded that she and Katy were not compatible to operate abusiness venture together.) Because Natalie has been so successfulwith Cookie Creations and Curtis has been just as successful withhis coffee shop, they both conclude that they could benefit fromeach other’s business expertise. Curtis and Natalie next evaluatethe different types of business organization. Because of theadvantage of limited personal liability, they decide to form acorporation. Curtis has operated his coffee shop for 2 years. Hebuys coffee, muffins, and cookies from a local supplier. Natalie’sbusiness consists of giving cookie-making classes and selling fineEuropean mixers. The plan is for Natalie to use the premises Curtiscurrently rents to give her cooking-making classes anddemonstrations of the mixers that she sells. Natalie will alsohire, train, and supervise staff to bake the cookies and muffinssold in the coffee shop. By offering her classes on the premises,Natalie will save on travel time going from one place to another.Another advantage is that the coffee shop will have one centrallocation for selling the mixers. The current market values of theassets of both businesses are as follows. Curtis’s Coffee CookieCreations Cash $7,130 $12,000 Accounts receivable 100 800 Inventory450 1,200 Equipment 2,500 1,000* *Cookie Creations decided not tobuy the delivery van considered in Chapter 10. Combining forceswill also allow Natalie and Curtis to pool their resources and buya few more assets to run their new business venture. Combiningforces will also allow Natalie and Curtis to pool their resourcesand buy a few more assets to run their new business venture. Curtisand Natalie then meet with a lawyer and form a corporation onNovember 1, 2017, called Cookie & Coffee Creations Inc. Thearticles of incorporation state that there will be two classes ofshares that the corporation is authorized to issue: common sharesand preferred shares. They authorize 100,000 no-par shares ofcommon stock, and 10,000 no-par shares of preferred stock with a$0.50 noncumulative dividend. The assets held by each of their soleproprietorships will be transferred into the corporation at currentmarket value. Curtis will receive 10,180 common shares, and Nataliewill receive 15,000 common shares in the corporation. Therefore,the shares have a fair value of $1 per share. Natalie and Curtisare very excited about this new business venture. They come to youwith the following questions: 1. “Curtis’s dad and Natalie’sgrandmother are interested in investing $5,000 each in the businessventure. We are thinking of issuing them preferred shares. Whatwould be the advantage of issuing them preferred shares instead ofcommon shares?” 2. “Our lawyer has sent us a bill for $750.When wediscussed the bill with her, she indicated that she would bewilling to receive common shares in our new corporation instead ofcash for her services. We would be happy to issue her shares, butwe’re a bit worried about accounting for this transaction. Can wedo this? If so, how do we determine how many shares to give her?”Instructions (a) Answer their questions. (b) Prepare the journalentries required on November 1, 2017, the date when Natalie andCurtis transfer the assets of their respective businesses intoCookie & Coffee Creations Inc. (c) Assume that Cookie &Coffee Creations Inc. issues 1,000 $0.50 noncumulative preferredshares to Curtis’s dad and the same number to Natalie’sgrandmother, in both cases for $5,000. Also assume that Cookie& Coffee Creations Inc. issues 750 common shares to its lawyer.Prepare the journal entries for each of these transactions. Theyall occurred on November 1. (d) Prepare the opening balance sheetfor Cookie & Coffee Creations Inc. as of November 1, 2017,including

Weekly leaderboard

Home
Homework Help 3,900,000
Accounting 580,000
Start filling in the gaps now
Log in