ACC 455 Apply: Week 2 Application Assignment

Review the Week 2 Knowledge Check in preparation for this assignment.

Complete the Week 2 Application Assignment in McGraw-Hill Connect.

Dean has earned $72,250 annually for the past five years working as an architect for WCC Inc. Under WCC’s defined benefit plan (which uses a 7-year graded vesting schedule) employees earn a benefit equal to 3.5% of the average of their three highest annual salaries for every full year of service with WCC. Dean has worked for five full years for WCC and his vesting percentage is 60%. What is Dean’s vested benefit (or annual retirement benefit he has earned so far)?

Multiple Choice

$12,644.

$43,350.

$7,586.

$0.

Jessica retired at age 65. On the date of her retirement, the balance in her traditional IRA was $219,000. Over the years, Jessica had made $21,900 of nondeductible contributions and $69,500 of deductible contributions to the account. If Jessica receives a $69,000 distribution from the IRA on the date of retirement, what amount of the distribution is taxable?

Multiple Choice

$0.

$6,900.

$51,750.

$62,100.

$69,000.

Daniela retired at the age of 65. The current balance in her Roth IRA is $200,000. Daniela established the Roth IRA 10 years ago. Through a rollover and annual contributions Daniela has contributed $88,500 to her account. If Daniela receives a $58,500 distribution from the Roth IRA, what amount of the distribution is taxable?

Multiple Choice

$0.

$25,886.25.

$32,613.75.

$58,500.00.

Lisa, age 46, needed some cash so she withdrew $56,500 from her Roth IRA. At the time of the distribution, the balance in the Roth IRA was $200,000. Lisa established the Roth IRA 10 years ago. Over the years, she has contributed $21,300 to her account. What amount of the distribution is taxable and subject to early distribution penalty?

Multiple Choice

$0.

$5,650.

$35,200.

$56,500.

Kathy is 60 years of age and self-employed. During 2018 she reported $112,000 of revenues and $42,400 of expenses relating to her self-employment activities. If Kathy has no other retirement accounts in her name, what is the maximum amount she can contribute to a simplified employee pension (SEP) IRA for 2018? (Round your final answer to the nearest whole number)

Multiple Choice

$12,937.

$17,164.

$71,200.

$56,200.

Kathy is 48 years of age and self-employed. During 2018 she reported $136,000 of revenues and $54,400 of expenses relating to her self-employment activities. If Kathy has no other retirement accounts in her name, what is the maximum amount she can contribute to a simplified employee pension (SEP) IRA for 2018? (Round your final answer to the nearest whole number)

Multiple Choice

$15,167.

$17,170.

$71,800.

$55,000.

Kathy is 60 years of age and self-employed. During 2018 she reported $516,000 of revenues and $104,000 of expenses relating to her self-employment activities. If Kathy has no other retirement accounts in her name, what is the maximum amount she can contribute to a simplified employee pension (SEP) IRA for 2018? (Round your final answer to the nearest whole number)

Multiple Choice

$55,000.

$61,000.

$79,704.

$380,482.

Kathy is 60 years of age and self-employed. During 2018, she reported $524,000 of revenues and $104,800 of expenses relating to her self-employment activities. If Kathy has no other retirement accounts in her name, what is the maximum amount she can contribute to an individual 401(k) for 2018? (Round your final answer to the nearest whole number)

Multiple Choice

$55,000.

$61,000.

$81,125.

$99,625.

Kathy is 48 years of age and self-employed. During 2018 she reported $508,000 of revenues and $101,600 of expenses relating to her self-employment activities. If Kathy has no other retirement accounts in her name, what is the maximum amount she can contribute to an individual 401(k)?

Multiple Choice

$55,000.

$61,000.

$97,099.

$103,095.

On November 1, year 1, Jamie (who is single) purchased and moved into her principal residence. In the early part of year 2, Jamie was laid off from her job. On February 1, year 2, Jamie sold the home at a $44,000 gain. She sold the home because she found a new job in a different state. How much of the gain, if any, may Jamie exclude from her gross income in year 2?

Multiple Choice

$0.

$4,400.

$31,250.

$44,000.

Michael (single) purchased his home on July 1, 2008. He lived in the home as his principal residence until July 1, 2016 when he moved out of the home and rented it out until July 1, 2017 when he moved back into the home. On July 1, 2018 he sold the home and realized a $327,500 gain. What amount of the gain is Michael allowed to exclude from his 2018 gross income?

Multiple Choice

$0.

$225,000.

$250,000.

$327,500.

Ethan (single) purchased his home on July 1, 2008. He lived in the home as his principal residence until July 1, 2015 when he moved out of the home and rented it out until July 1, 2017 when he moved back into the home. On July 1, 2018 he sold the home and realized a $170,500 gain. What amount of the gain is Ethan allowed to exclude from his 2018 gross income?

Multiple Choice

$0.

$136,400.

$160,500.

$170,500.

Patricia purchased a home on January 1, 2017 for $1,410,000 by making a down payment of $100,000 and financing the remaining $1,310,000 with a 30-year loan, secured by the residence, at 6 percent. During year 2017 and 2018, Patricia made interest-only payments on the loan of $78,600. What amount of the $78,600 interest expense Patricia paid during 2018 may she deduct as an itemized deduction? (Assume not married filing separately.)

Multiple Choice

$0.

$18,600.

$60,000.

$78,600.

Jessica purchased a home on January 1, 2018 for $510,000 by making a down payment of $200,000 and financing the remaining $310,000 with a 30-year loan, secured by the residence, at 6 percent. During 2018 and 2019, Jessica made interest-only payments on this loan of $18,600 (each year). On July 1, 2018, when her home was worth $510,000 Jessica borrowed an additional $127,500 secured by the home at an interest rate of 8 percent. During 2018, she made interest-only payments on the second loan in the amount of $5,100. During 2019, she made interest only on the second loan in the amount of $10,200. What is the maximum amount of the $28,800 interest expense Jessica paid during 2019 may she deduct as an itemized deduction if she used the proceeds of the second loan to finish the basement in her home and landscape her yard? (Assume not married filing separately.)

Multiple Choice

$0.

$10,200.

$27,106.

$6,600.

$28,800.

Amanda purchased a home for $460,000 in 2016. She paid $92,000 cash and borrowed the remaining $368,000. This is Amanda’s only residence. Assume that in year 2021 when the home had appreciated to $690,000 and the remaining mortgage was $276,000, interest rates declined and Amanda refinanced her home. She borrowed $460,000 at the time of the refinancing, paid off the first mortgage, and used the remainder for purposes unrelated to the home. What is her total amount of her amount of acquisition indebtedness for purposes of determining the deduction for home mortgage interest? (Assume not married filing separately.)

Multiple Choice

$276,000.

$345,000.

$460,000.

$506,000.

On March 31, year 1, Mary borrowed $230,000 to buy her principal residence. Mary paid 1 points to reduce her interest rate from 7 percent to 6 percent. The loan is for a 30-year period. What is Mary’s year 1 deduction for her points paid?

Multiple Choice

$19.

$57.5.

$1,725.

$2,300.

On April 1, year 1, Mary borrowed $120,000 to refinance the original mortgage on her principal residence. Mary paid 3 points to reduce her interest rate from 6 percent to 5 percent. The loan is for a 30-year period. How much can Mary deduct in year 1 for her points paid?

Multiple Choice

$120.00.

$90.00.

$2,700.00.

$3,600.00.

On July 1 of year 1, Elaine purchased a new home for $630,000. At the time of the purchase, it was estimated that the property tax bill on the home for the year would be $12,600 ($630,000 × 2%). On the settlement statement, Elaine was charged $6,300 for the year in property taxes and the seller was charged $6,300. On December 31, year 1 Elaine discovered that the real property taxes on the home for the year were actually $13,600. Elaine wrote a $13,600 check to the local government to pay the taxes for that calendar year (Elaine was liable for the taxes because she owned the property when they became due). What amount of real property taxes is Elaine allowed to deduct for year 1? (Assume not married filing separately.)

Multiple Choice

$0.

$6,300.

$6,800.

$7,300.

$13,600.

Harvey rents his second home. During the year, Harvey reported a net loss of $57,000 from the rental. If Harvey is an active participant in the rental and his AGI is $99,900, how much of the loss can he deduct against ordinary income for the year?

Multiple Choice

$57,000.

$25,000.

$16,000.

$0.

Ilene rents her second home. During the year, Ilene reported a net loss of $22,200 from the rental. If Ilene is an active participant in the rental and her AGI is $148,000, how much of the loss can she deduct against ordinary income in the year?

Multiple Choice

$22,200.

$21,200.

$1,000.

$0.