College of Administration and Finance Sciences Assignment (3) Instructions – PLEASE READ

College of Administration and Finance Sciences

Assignment (3)

Instructions – PLEASE READ THEM CAREFULLY

The Assignment must be submitted on Blackboard (WORD format only) via allocated folder.

Assignments submitted through email will not be accepted.

Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page.

Students must mention question number clearly in their answer.

Late submission will NOT be accepted.

Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.

All answers must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism.

Submissions without this cover page will NOT be accepted.

Assignment 3

Q-1- To make income taxable, income must be realized and recognized. Explain in your own words the difference between income realization and income recognition, and then provide a short numerical example to indicate the difference (Do not copy the same numerical example from other students). (1.5 mark)

Answer

Q.2- Mr. X and Mrs. Y are married and have two dependent children. P & Q They also fully support Mrs. Y’s mother who lives with them and has no income. Their 2014 tax and other related information is as follows: (2 marks)

Particulars

Amount in $

Total salaries

320,000

Bank account interest income

7,000

Municipal bond interest income

3,000

Value of employer provided medical insurance

11,000

Value of premiums for $ 100000 of group term life insurance provided by employer

1,000

Gift from X’S parents

30,000

Gain from the sale of qualified small business stock acquired in 2008

30,000

Total itemized deductions

32,000

Dividend income—from ABC stock,

4,000

Loan from X’S parents

10,000

Required: Compute Mr. X and Mrs. Taxable income. (Show all calculations in proper /good form.)

Q.3- Ahmed’s medical expenses include the following: (1.5 mark)

Particulars

Amount in $

Food for personal use (expenses)

2,000

Travel allowances

5,000

Visitors fees

1,000

Prescription drugs

1,200

Eyeglasses

700

General purpose vitamins

200

Medical premiums

21,700

Doctors’ fees

4,000

Hospital fees

6,700

Ahmed’s AGI for the year is $66,000. He is single and age 59. Insurance company reimburses none of the medical costs and other related items. After considering the AGI floor,

Required – What will be Ahmed’s medical expense deduction?