Question: 1. Determine the amount of income that must be recognized in each of the following cases:
a. Ramona is a production supervisor for White Company. During the current year, her division had no accicentes, and White rewarded the achievement with a $200 cash award to each employee in the division.
b. Lenny retires from the Brice company this year. At this retirement reception, the company gives him a set of golf clubs values at $600 in appreciation of his years of loyal service.
c. Fatima is named Humanitarian of the Year by Local City for her volunteer services. She receives a plaque and all expense paid trip to Whashington Dc where she will meet the president. The value of the trip is $400
d. Sook is a college professor specializing in computer chip development. During the current year, he publishes a paper that explains the design of a revolutionary new chip. Softmicro, Inc awards him $10000 for the best breakthough idea of the year. Sook uses the money to purchase a computer workstation to use in his research.
2. Has the taxpayer in each of the following situations received taxable income? If so, when should the income be recognized? Explain.
a. Charlotte is a lawyr who specializes in drafting wills. She wants to give her husband a new gazeb for Christmas. In November, she makes a deal with Joe a local handyman, to build a gazebo. In return, Charlotte is to draft a will for Joe's father. The gazebo normally would cost $3000, which is approximately what Charlotte would charge for drafting the will. Joe builds the gazebo in time for Christmas. Charlotte drafts the will and delivers it to Joe the following January.
b. Ed buys 500 shares of Northstar stock in January 2015 for $4000. On December 3,2015, the shares are worth $4600. In March 2016, Ed sells the shares for $4500.
c. Dayo is the director of marketing for Obo Inc. In December, the board of directors of OBO votes to give Dayo $10000 bonus for her excellent work throughout the year. The check is ordered and written on December15 but is misplaced in the mail room and is not delivered to Dayo until January 5.
d. John is unemployed. During the current year, he receives $4000 in unemployment benefits. Because the unemployment is not enough to live on, John sells drugs to support himslef. His total revenue for the year is $120000.The cost of the drugs is $60000..
3.Hermano and Rosetta are a retired couple who receive $10000 in Social Security benefits during the current year. They also receive $3000 in interest on their saving account and taxable pension payment of $28000. What is their gross income if:
a. They receive no other income?
b. They receive $13000 in interest from tax exempt bonds they own?