Joe Laramie owns and operates Joe's Burgers, a small fast food store, located at the edge of CityCollege Newton, Ohio. After several very profitable years, Joe's Burgers began to have problems. Most of the pro related to Joe's expansion of the eating area in the restaurant without corresponding increases in the food area. Joe does not have the cash or financial backing to expand further. He has therefore decided to sell William Sheets is interested in purchasing the husinorr Hounu

Joe Laramie owns and operates Joe's Burgers, a small fast food store, located at the edge of CityCollege Newton, Ohio. After several very profitable years, Joe's Burgers began to have problems. Most of the pro related to Joe's expansion of the eating area in the restaurant without corresponding increases in the food area. Joe does not have the cash or financial backing to expand further. He has therefore decided to sell William Sheets is interested in purchasing the husinorr Hounu

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter5: Introduction To Business Expenses

Section: Chapter Questions

Problem 41P

See similar textbooks

Similar questions

Accounting Plaza Bistro is a restaurant and bar business in the northern suburbs. The Bistro has acquired a large base of loyal customers and established a name for itself during its 15 years of operation. Unfortunately, due to the effect of the pandemic, the owner can no longer sustain the business and it has to be put on sale.Adrian has been in the restaurant business for many years and is interested to buy Plaza Bistro. His negotiation for buying were going well until it came to evaluating the value for Inventory Ordering System (IOS). Adrian reasons that the IOS is not worth much as it is an old version, but the owner insists that the system has been routinely maintained and all problems have been fixed during its many years of trial run, making it very efficient and an essential part of the business. 1) Advise Adrian of two approaches (measurements) that can be used to evaluate the Inventory Ordering System (IOS). 2) Suggest what information (in three examples) Adrian should…
Mary Helu and Jason Haynes recently graduated from the same university. After graduation they decided not to seek jobs at established organizations but, rather, to start their own small business hoping they could have more flexibility in their personal lives for a few years. Mary's family has operated Mexican restaurants and taco-trucks for the past two generations, and Mary noticed there were no taco-truck services in the town where their university was located. To reduce the amount they would need for an initial investment, they decided to start a business operating a taco-cart rather than a taco-truck, from which they would cook and serve traditional Mexican-styled street food. They bought a used taco-cart for $18,000. This cost, along with the cost for supplies to get started, a business license, and street vendor license brought their initial expenditures to $22,000. They took $5,000 from personal savings they had accumulated by working part time during college, and they borrowed…
Taylor’s is a popular restaurant that offers customers a large dining room and comfortable bar area. Taylor Henry, the owner and manager of the restaurant, has seen the number of patrons increase steadily over the last two years and is considering whether and when she will have to expand its available capacity. The restaurant occupies a large home, and all the space in the building is now used for dining, the bar, and kitchen, but space is available on the property to expand the restaurant. The restaurant is open from 6 p.m. to 10 p.m. each night (except Monday) and, on average, has 26 customers enter the bar and 47 enter the dining room at the beginning of each of those hours. Taylor has noticed the trends over the last 2 years and expects that within about 4 years, the number of bar customers will increase by 50% and the dining customers will increase by 20%. Taylor is worried that the restaurant will be not be able to handle the increase and has asked you to study its capacity. In…
Willie Waylon is a famous country and western singer. As an investment, Willie started a chain of barbecue restaurants called Willies Wonderful Ribs. Willie's friends and associates invested $500,000 in this venture. The restaurant chain failed and the investors lost all their money. Because of his visibility and status in the entertainment community, Willie felt that he personally had to make good on the losses suffered by the investors, to protect his singing and business reputation. Consequently, he personally paid $500,000 to reimburse the investors for their losses. What are Willie's tax consequences (if any) from the reimbursement?
Earlier this week you closed a deal to sell 20 houses you constructed in a new neighborhood. Like any other product that a business sells, these houses were considered inventory until you sold them. The houses were sold to another developer who is buying the surrounding land and would like to enlarge the neighborhood; as a result, he would like to control marketing and sales for the entire development. The developer bought the houses at a slightly discounted price to facilitate their resale at a profit. You benefited from the sale because you avoided the necessity of selling the houses one at a time and the risk of carrying unsold inventory. How should this $4 million be categorized on your income statement? Oa. Should appear as net income on the income statement. O b. Should not appear on the income statement because you received cash. Oc. Should appear as operating income on the income statement. Od. Should appear as revenue on the income statement.
Maria Gutierrez and Devin Cuncan recently graduated from the same university. After graduation they decided not to seek jobs at established organizations but, rather, to start their own small business hoping they could have more flexibility in their personal lives for a few years. Maria's family has operated Mexican restaurants and taco trucks for the past two generations, and Maria noticed there were no taco truck services in the town where their university was located. To reduce the amount they would need for an initial investment, they decided to start a business operating a taco cart rather than a taco truck, from which they would cook and serve traditional Mexican-style street food. They bought a used taco cart for $17,000. This cost, along with the cost for supplies to get started, a business license, and street vendor license brought their initial expenditures to $23,000. They withdrew $4,000 from personal savings they had accumulated by working part time during college, and…
Khalil founded the "Taco Factory" 20 years ago as a family-oriented restaurant. Over the years as they grew the business, he incorporated and sold stock to outside investors. Recently the stockholders voted to seek liquor licenses and to sell beer and hard liquor in the restaurants. Khalil opposed this, citing the history of the restaurant's "family" environment, but was voted down. Khalil has experienced which drawback of the corporate form of ownership? The potential for diminished managerial incentives. The inability to accumulate capital. The potential loss of control. Legal requirements and red tape.
Henrietta, the owner of a very successful hotel chain in the Southeast, is exploring the possibility of expanding the chain into a city in the Northeast. She incurs $60,000 of expenses associated with this investigation. Based on the regulatory environment for hotels in the city, she decides not to expand. During the year, she also investigates opening a restaurant that will be part of a national restaurant chain. Her expenses for this are $54,400. She proceeds with opening the restaurant, and it begins operations on May 1. Determine the amount that Henrietta can deduct in the current year for investigating these two businesses. In your computations, round the per-month amount to the nearest dollar and use rounded amount in subsequent computations. a. The deductible amount of investigation expenses related to expansion of her hotel chain into another city? b. The deductible amount of investigation expenses related to opening a restaurant?
Smart owns multiple Burger restaurants. After months of struggling, one of the restaurants just must be closed, Smart knows that this loss will already cause a decrease in his reported net earnings, he decides to go ahead and charge a majority of the company's expenses to this business unit shut down. This is an example of ………. in earning Management
Henrietta, the owner of a very successful hotel chain in the Southeast, is exploring the possibility of expanding the chain into a city in the Northeast. She incurs $60,000 of expenses associated with this investigation. Based on the regulatory environment for hotels in the city, she decides not to expand. During the year, she also investigates opening a restaurant that will be part of a national restaurant chain. Her expenses for this are $52,600. She proceeds with opening the restaurant, and it begins operations on May 1. Determine the amount that Henrietta can deduct in the current year for investigating these two businesses. In your computations, round the per-month amount to the nearest dollar and use rounded amount in subsequent computations. a. The deductible amount of investigation expenses related to expansion of her hotel chain into another city: s 60,000 v b. The deductible amount of investigation expenses related to opening a restaurant: $ 4,631 X
Ben and Eric are opening a comic bookstore to be registered as E&B Comic Bookstore Co. There is no other competing comic bookstore in the area. Their fundamental decision is how to organize the business and they anticipate a substantial profit in the first year, with the ability to sell franchises in the future. Although they have enough to start the business now as a partnership, cash flow will be an issue as they grow. They feel the corporate form of operation will be best for the long term. They seek your advice. Requirements: Distinguish between par value and issue price.
Rivera Corporation runs two convenience stores, one in Connecticut and one in Rhode Island. Operating income for each store in 2014 is as follows: (Click to view the operating income for the stores.) The equipment has a zero disposal value. In a senior management meeting, Maria Lopez, the management accountant at Rivera Corporation, makes the following comment, "Rivera can increase its profitability by closing down the Rhode Island store." Is Maria Lopez Correct? Read the requirements. Requirement 1. By closing down the Rhode Island store, Rivera can reduce overall corporate overhead costs by $40,000. Calculate Rivera's operating income if it closes the Rhode Island store. Is Maria Lopez's statement about the effect of closing the Rhode Island store correct? Explain. 4 Begin by calculating Rivera's operating income if it closes the Rhode Island store. (Enter losses in revenues as a negative amount. Enter a "0" if the cost is not relevant. If the net effect is an operating loss enter…