Ward and June Are in the 28% Tax Bracket

question 142

Multiple Choice

Ward and June are in the 28% tax bracket.Included in their assets is a Dell Corporation bond with a face value of $10,000.The bond pays $1,000 a year in interest.Ward and June make a gift to their son,Wally (age 19) of the $1,000 in interest income.Wally is in the 10% tax bracket.What is Ward and June's tax liability related to the bond and the bond interest for the current year?

• A)$-0-
• B)$100
• C)$280
• D)$1,000
• E)$2,800

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Definitions:

Sales Tax Payable

A liability account in the general ledger that accumulates the amount of sales tax collected from customers on behalf of local or state tax authorities, to be remitted in the future.

Estimated Returns Inventory

A reserve account used by companies to account for anticipated returns of sold goods, affecting the overall sales and inventory levels.

FOB Destination

A shipping term indicating that the seller is responsible for the goods and the shipping cost until the goods reach the buyer's specified location.

Cost of Inventory

The total cost incurred to acquire stock items that are intended for resale, including purchase price, freight, and handling fees.