For Each of the Following Situations Explain Why the Expenditure

question 65

Essay

For each of the following situations explain why the expenditure is or is not deductible and any limitations that may be placed on the amount of the deduction.
a.Ellis is a part-time bookkeeper for Gilmore Company. The owner of Gilmore told Ellis that if he earns an accounting degree and passes the CPA exam, he would hire him as Gilmore's accountant. Ellis spends $5,600 taking classes towards an accounting degree at City College.
b.Harry owns Circus City Condiments, a wholesaler of circus food. In 2012, he loaned his friend Joanna $8,000 at 6% annual interest with the balance due in 5 years. Joanna used the loan to open a beauty salon. In December 2017, Joanna tells Harry that she has filed for bankruptcy and that he will be lucky to get $2,000 of his money back. The bankruptcy proceedings had not been completed at the end of 2017.
c.Audrey is a self-employed computer consultant. Harvey calls Audrey and asks her for information on installing a new Lan-based workstation system in his business. Audrey meets Harvey at Franco's Chop House. They have dinner while Audrey explains how such a system will work and what it will cost. Audrey pays for the dinner, which costs $100. Harvey calls Audrey the next day and tells her that he has decided that the system costs too much and that he will not need her services.

Evaluate the effect of changing interest rates on financial outcomes.

Understand the concept of the time value of money.

Calculate the required savings for future goals.

Understand the impact of frequency of compounding on investment growth.

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Definitions:

Limited Liability Company

A business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.

Capital Balances

Capital balances refer to the amount of money equity holders have invested in a company, often reflected in the equity section of the balance sheet.