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According to a written agreement, her former husband is entitled to
receive the dependency exemption.
·
d.Debbie is a widow, age 68, who receives a pension of $8,000,
nontaxable social security benefits of $8,000, and interest of $4,000.
She has no dependents.
·
e.Edith is married, but her husband left her two years ago and
she has not seen him since. Edith supported herself and her daughter,
age 6. She paid all household expenses. Her income of $26,000
consisted of a salary of $25,200 and interest of $800.
3-36
Cash and Accrual Methods. Carmen opens a retail store. Her sales
during the first year are $600,000, of which $30,000 has not been
collected at year-end. Her purchases are $400,000. She still owes
$20,000 to her suppliers, and at year-end she has $50,000 of inventory
on hand. She incurred operating expenses of $160,000. At year-end
she has not paid $15,000 of the expenses.
·
a.Compute her net income from the business assuming she
elects the accrual method.
·
b.Compute her net income from the business assuming she
elects the cash method.
·
c.Would paying the $15,000 she owes for operating expenses
before year-end change her net income under accrual method of
reporting? Under the cash method?