ACCT 612 help A Guide to career/Snaptutorial ACCT 612 help A Guide to career/Snaptutorial | Page 2

must show your work for each problem. Correct solutions without
corresponding work will not be accepted. The Excel document should
be labeled as follows: lastname_problems2.xls.
As this is not a formal writing assignment, APA format is not
required. Furthermore, there is no need to submit a title page or
research page. Just include your full name at the top of first sheet.
Problems:
Julia currently is considering the purchase of some land to be held as
an investment. She and the seller have agreed on a contract under
which Julia would pay $1,000 per month for 60 months, or $60,000
total. The seller, not in the real estate business, acquired the land
several years ago by paying $10,000 in cash. Two alternative
interpretations of this transaction are (1) a price of $51,726 with 6
percent interest and (2) a price of $39,380 with 18 percent interest.
Which interpretation would you expect each party to prefer? Why?
Assume that a taxpayer can choose when he is to receive $10,000 of
fully taxable income. If the taxpayer receives the income at the end of
Year 1, he will receive exactly $10,000. If he delays receipt of the
income until the end of Year 2, the amount will grow to $11,000. If
the taxpayer takes the money at the end of Year 1, he can invest the
proceeds and earn a pre- tax return of 10 percent over the next year.
If the taxpayer faces a marginal tax rate of 31 percent in both Year 1
and Year 2, when should he elect to receive the income?
At what pre- tax rate of return, will the taxpayer be indifferent to
taking the money in Year 1 and Year 2?
If the taxpayer’s marginal tax rate increases to 35 percent in Year 2,
when should he elect to receive the income?
What would the tax rate need to be in Year 2 to make the taxpayer
indifferent?
A taxpayer can invest $10,000 in a taxable 10- year bond that yields
an annual pre- tax return of 6 percent or buy land (a capital asset) for