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Theresa Cortez is the primary breadwinner for a family of four. Her husband has been unable to work since the onset of severe vertigo 2½ years ago. Their two children are both in high school and, presumably, college bound. After attending your seminar about life insurance planning, she has come to you to determine whether she has enough life insurance. Besides the small disability check that her husband receives, she is the only source of income-albeit a good income of $84,000 per year. At your request, she has brought her most recent annual income and expense statement that shows the family's annual expenses of $55,000, annual taxes of $17,000, and savings of $12,000.
Calculate Theresa's current insurance need using the Human Life Value approach for each of the following four scenarios, assuming her remaining working life is 26 years and the projected discount rate is 8.0% before taxes, compounded daily.a. Using her gross income.b. Using her gross income and a growth rate of 3.5%.c. Using her net income.d. Using her net income and a growth rate of 3.5%.
Which of these four methods would result in the most reasonable estimation of insurance need?
The following control procedures are used at Sandwich Company for over-the-counter cash receipts. For each procedure, explain the weakness in internal control, and identify the control principle that is violated.
What additional questions should you ask Mr. Gemstone in an attempt to substantiate the deductibility of the above items?
Brown Corporation, an accrual basis corporation, has taxable income of $150,000 in the current year. Included in its determination of taxable income are the following transactions.
Prepare the journal entries for these transactions.Purchased a tract of land in exchange for $10,000 cash down payment and a noninterest-bearing note requiring five $10,000 annual payments, with the first annual payment in one year. The fair value ..
Over the past year, you earned 11.9% overall on your investments. During that period, the inflation rate was 2.3% and the risk-free of risk-free rate of return was 3.2%. What real rate of return did you earn?
The company also makes its disbursements from remote disbursement centers so checks written by City Farm take longer to clear the bank. Collection time has been reduced by two days and disbursement time increased by one day because of these polici..
The following transactions, adjusting entries, and closing entries were completed by Trail Creek Furniture Co. during a three year period. All are related to the use of delivery equipment. The double-declining-balance method of depreciation is use..
Assume that investors have recently become more risk averse, so the market risk premium has increased. Also, assume that the risk-free rate and expected inflation have not changed. Which of the following is most likely to occur?
Evaluate those actions from your own ethical standpoint. Use these questions to inspire your analysis
In a recent month a CPA provided ten hours of volunteer time to the Society for the Visually Impaired. He devoted seven hours to maintaining the organization's financial records and three to recording tapes of newspapers and magazine articles.
What can they do to mitigate financial risk? Should we have global accounting standards? Why or why not? Examine at least four accounting regulatory bodies, and discuss how an organization complies with the standards of the regulatory bodies you s..
The parent company acquires all of a subsidary's common stock but only 70 percent of its preferred shares. This preferred stock pays a 7 percent annual cumulative dividend. No dividends are in arrears at the current time. How is the noncontrolling..
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