Sal, a Calendar Year Taxpayer, Uses the Cash-Basis Method of Accounting

question 16

Essay

Sal, a calendar year taxpayer, uses the cash-basis method of accounting for his sole proprietorship.In late December he performed $40,000 of consulting services for a client. Sal typically requires his clients to pay his bills immediately upon receipt. Assume that Sal's marginal tax rate is 30% this year and 35% next year and that he can earn an after-tax rate of return of 12% on his investments. Should Sal send his client the bill in December or January? Use Exhibit 3.1.

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Definitions:

ERG Theory

A theory in psychology proposed by Clayton Alderfer that categorizes human needs into three categories: Existence, Relatedness, and Growth, and suggests that these needs can be pursued simultaneously.

Activated Need

A psychological or physiological requirement that motivates behavior towards its fulfillment.

Hygiene Factors

In the job context are sources of job dissatisfaction.

Organizational Policies

The formal guidelines and rules established by an organization to govern actions and decisions in the workplace.