(TCO 9) D Trucking uses the accrual method of accounting.

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(TCO 9) D Trucking uses the accrual method of accounting. Below is a reconciliation of D Trucking’s allowance for

bad debts for the current year.

Beginning allowance for bad debts $61,150
Actual write-offs of accounts receivable during the year (70,000)
Addition to allowance 90,500
Ending allowance for bad debts  $69,650

Considering the difference between the GAAP and the tax rules for accounting for bad debts, calculate D Trucking’s temporary excess of taxable income over book income. (Points : 30)

 
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TCO 8) During the audit of Mr. and Mrs. Greenwood’s income tax return

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TCO 8) During the audit of Mr. and Mrs. Greenwood’s income tax return, the revenue agent concluded that the

couple had claimed a $26,300 deduction that was not allowed by law. The improper deduction reduced the couple’s tax by $19,205. The Greenwood’s total tax deficiency was $13,890.

Compute the penalty that the IRS agent can impose if the agent concludes that the improper deduction was attributable to negligence.

Compute the penalty that the IRS agent can impose if the agent concludes that the improper deduction was attributable to fraud. (Points : 30)

 
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Mr. and Mrs. Adam moved from Chicago, IL to Detroit, MI so that Mrs. Adams could accept employment

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Mr. and Mrs. Adam moved from Chicago, IL to Detroit, MI so that Mrs. Adams could accept employment with Ultra

Corporation. As part of her employment contract, Mrs. Adams received a $10,000 moving allowance. What is the effect of this $10,000 cash receipt on the couple’s AGI assuming the following?

Their deductible moving expenses totaled     $8,000.

Their deductible moving expenses totaled     $11,000. (Points : 30)

 
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How would you describe the relationship between tax base and tax rate

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How would you describe the relationship between tax base and tax rate in determining the revenue collected by the

government? Give an example of how a particular tax would fit into the various components of the equation.

 
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