a. What is the after-tax cost if Isabel pays the $50,000 bill in December? b. What is the after-tax cost if Isabel pays the $50,000 bill in January? Use Exhibit 3.1. Note: Round your answer to the nearest whole dollar amount. c. Based on requirements a and b, should Isabel pay the $50,000 bill in December or January?
a. What is the after-tax cost if Isabel pays the $50,000 bill in December? b. What is the after-tax cost if Isabel pays the $50,000 bill in January? Use Exhibit 3.1. Note: Round your answer to the nearest whole dollar amount. c. Based on requirements a and b, should Isabel pay the $50,000 bill in December or January?
Chapter3: Income Sources
Section: Chapter Questions
Problem 58P
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Transcribed Image Text:Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Year 11
Year 12
Year 13
Year 14
Year 15
Return
4%
5%
6%
7%
8% 9% 10%
11% 12%
0.962 0.952 0.943
0.935
0.926 0.917
0.909
0.901
0.893
0.925 0.907
0.890 0.873
0.857 0.842 0.826 0.812
0.797
0.889 0.864
0.840 0.816 0.794
0.772 0.751 0.731
0.712
0.855
0.823 0.792 0.763 0.735
0.708
0.683 0.659
0.636
0.822 0.784 0.747 0.713 0.681 0.650
0.621 0.593
0.567
0.790
0.746 0.705 0.666
0.630 0.596
0.564
0.535
0.507
0.760
0.711 0.665 0.623 0.583
0.547
0.513
0.482
0.452
0.731
0.677 0.627
0.582
0.540 0.502 0.467
0.434 0.404
0.703
0.645
0.592
0.544
0.500 0.460
0.424 0.391
0.361
0.676
0.614
0.558
0.508
0.463
0.422
0.386 0.352
0.322
0.650
0.585
0.527
0.475
0.429
0.388
0.350 0.317
0.287
0.625
0.557
0.497
0.444
0.397
0.356 0.319 0.286
0.257
0.601 0.530
0.469
0.415 0.368
0.326
0.290 0.258
0.229
0.577
0.505
0.442
0.388 0.340
0.299
0.263 0.232
0.205
0.555 0.481 0.417
0.362 0.315
0.275
0.239 0.209
0.183
Transcribed Image Text:Problem 3-39 (LO 3-2, LO 3-3) (Algo)
Isabel, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December she received a
$50,000 bill from her accountant for consulting services related to her small business. Isabel can pay the $50,000 bill anytime before
January 30 of next year without penalty. Assume her marginal tax rate is 37 percent this year and next year, and that she can earn an
after-tax rate of return of 10 percent on her investments
Required:
a. What is the after-tax cost if Isabel pays the $50,000 bill in December?
b. What is the after-tax cost if Isabel pays the $50,000 bill in January? Use Exhibit 31.
Note: Round your answer to the nearest whole dollar amount.
c. Based on requirements a and b, should Isabel pay the $50,000 bill in December or January?
Complete this question by entering your answers in the tabs below.
Required A Required B
Required C
What is the after-tax cost if Isabel pays the $50,000 bill in December?
After-tax cost
< Required A
Required B >
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ISBN:
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Author:
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Publisher:
CENGAGE LEARNING - CONSIGNMENT