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Tutor profile: Jamie N.

Inactive
Jamie N.
Accountant in public accounting, Enrolled in CPA program.
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Questions

Subject: Personal Finance

TutorMe
Question:

A student is looking to receive a $50,000 loan to fund the cost of their college tuition. They have the option to choose a line of credit with an interest rate of 3% annually, with no set repayment terms OR they can receive funding from a related party who will not charge interest until year 5, at a rate of 5%. If the student plans on paying the loan as a lump sum payment, 13 years after borrowing the amount, what option results in the client having a lower interest expense?

Inactive
Jamie N.
Answer:

This will require a spreadsheet: LOC Related Party Option 1 Option 2 Loan 50,000.00 50,000.00 Annual Interest rate 3% 5% Accumulated interest year 1-5 7,500.00 0 Accumulated interest year 5-13 12,000.00 20,000.00 Total interest 19,500.00 20,000.00 Conclusion: the line of credit would be the cheaper option

Subject: Business

TutorMe
Question:

A retail store's net income been declining for a few years and the owner is not sure why this is. What are some examples of reasons why sales would be declining? Consider quantitative and qualitative aspects.

Inactive
Jamie N.
Answer:

1) Lack of proper record revenue and expense tracking. Accounting department may not be effective. 2) Cost of product may have increased and the store did not increase its sales price proportionately, thus decreasing its gross margin and net income. 3) Employees may not be properly trained or are not completing their job properly, causing product to be sold at incorrect prices or causing a customer to be unhappy and thus the losing loyal customers.

Subject: Accounting

TutorMe
Question:

ABC Partners is performing an audit for a client. The client purchased a new vehicle during the current year for $40,000. The vehicle is used solely for the business and is expected to last for 8 years, at which time the Company expects to sell the vehicle for $2,000. What journal entries should the client have recorded to purchase this vehicle? What are the tax effects of this purchase?

Inactive
Jamie N.
Answer:

The client should capitalize the $40,000 vehicle for accounting purposes and depreciate the vehicle over its useful life of 8 years. The depreciation expense for the current year would be $4,750 ((cost - salvage value)/useful life). Dr. Vehicle $40,000 CR Cash $40,000 Dr. Depreciation expense $4,750 Cr. Accumulated Depreciation $4,750 For tax purposes, the asset qualifies as a luxury vehicles as it costs greater than $30,000 and therefore should be added to CCA class 10.1, which has a CCA rate of 30%. The CCA class qualifies for the half-year rule and therefore the CCA deduction for year 1 will be $5,085. ($30,000*1.13*50%*30%).

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