20 Required information The folowing information applies to the questions displa
ID: 2340939 • Letter: 2
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20 Required information The folowing information applies to the questions displayed below] Wally is employed as an executive with Pay More Incorporated. To entice Wally to work for Pay More, the corporation $12,900 this year if the interest rate on Part 1 of 2 of the year at a simple interest rate of 2.5 percent. Wally would have paid interest of the loan had been set at the prevailing federal interest rate and repaid the $43,000 loan including $1,075 of interest at year-end n Waly used the funds as a down pyment on s speedboat and repaid the $43000 loan (ncluding 51075 of nterest) at year-end Does this loan result in any income to either party, and if so, how much? Pay More C Prev20 21 or 32 Next MacBookA s-11 3 5Explanation / Answer
A)The Gross Income for wally is $12,900- $ 1,075=$ 11,825.
The Gross Income for Pay more= $ 12,900
B)If pay more Forgive the loan the wally will consider the below income
2a)Jimmy will include Nil Amount as Income. Though its true that there is loan waiver of $ 27,900 which can included in Gross income but he is still insolvent as his assets ($ 220,000) is lower than the liabilities ($282,100)
2b)Jimmy will include $ 9,700 as Income. The waiver was for $ 27,900 but jimmy will be able to pay only upto $ 9,700 ($291,800-$ 282,100) Because anything excess on this will make him insolvent.
3c)Jimmy will include $ 8,500 as income. The waiver was for $ 27,900 but jimmy will be able to pay only upto $ 8,500 ($290,600-$ 282,100) Because anything excess on this will make him insolvent.
compensation income for discounted interest rate $ 11,825.00 Principal waived $ 43,000.00 Interest waived $ 1,075.00 $ 55,900.00Related Questions
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