Trang Is in the 15% Marginal Tax Bracket in the Current

question 55

Multiple Choice

Trang is in the 15% marginal tax bracket in the current year.She owes a $10,000 bill for business expenses.Since she reports taxable income on a cash basis,she can deduct the $10,000 in either this year or next year,depending on when she makes the payment.She can pay the bill at any time before January 31 of next year,without incurring the normal 12% interest charge.She expects to be in the 25% marginal bracket next year.Without considering the time value of money,what are her tax savings if she pays the bill after January 1?

• A)Current year $1,000.
• B)Current year $1,500.
• C)Next year $1,000.
• D)Next year $2,500.
• E)Next year $1,500.

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Definitions:

Promissory Note

A Promissory Note is a financial document in which one party promises to pay a specified sum of money to another party at a predetermined date or on demand.

360-Day Year

A simplified method for calculating interest based on a year of 360 days instead of the actual 365 or 366 days.

Promissory Note

A financial document in which one party promises to pay another party a specified sum of money at a specified date or on demand.

Maturity Date

The exact date on which a financial instrument, such as a note payable or bond, must be repaid in full.