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

question 87

Essay

Sal, a calendar-year taxpayer, uses the cash-basis method of accounting for his sole proprietorship. In late December, he performed $46,000 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 32 percent this year and 37 percent next year and that he can earn an after-tax rate of return of 12 percent on his investments. Should Sal send his client the bill in December or January? Use Exhibit 3.1. (Round discount factor(s)to three decimal places.)

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Definitions:

Position Pay

The compensation or salary associated with a specific job role within an organization.

Team Appraisal

A method of performance evaluation where a team's overall effectiveness, contributions, and outcomes are assessed rather than evaluating individual members separately.

Implicit Assumption

An unspoken premise or belief that underlies an argument or decision, often taken for granted without explicit statement.

Equivalent Level

A position, status, or degree that is equal in value, rank, or importance to another.