Comprehensive Problem 5-77 (LO 5-1, LO 5-2, LO 5-3) (Algo)

Skip to question

[The following information applies to the questions displayed below.]

Diana and Ryan Workman were married on January 1 of last year. Ryan has an eight-year-old son, Jorge, from his previous marriage. Diana works as a computer programmer at Datafile Incorporated (DI) earning a salary of $103,500. Ryan is self-employed and runs a day care center. The Workmans reported the following financial information pertaining to their activities during the current year.

1. Diana earned a $103,500 salary for the year.
2. Diana borrowed $13,500 from DI to purchase a car. DI charged her 2 percent interest ($270) on the loan, which Diana paid on December 31. DI would have charged Diana $870 if interest had been calculated at the applicable federal interest rate. Assume that tax avoidance was not a motive for the loan.
3. Ryan received $2,750 in alimony and $6,000 in child support payments from his former spouse. They divorced in 2016.
4. Ryan won a $1,050 cash prize at his church-sponsored Bingo game.
5. The Workmans received $1,250 of interest from corporate bonds and $1,000 of interest from a municipal bond. Ryan owned these bonds before he married Daina.
6. The couple bought 80 shares of ABC Incorporated stock for $55 per share on July 2. The stock was worth $77 a share on December 31. The stock paid a dividend of $1 per share on December 1.
7. Ryan's father passed away on April 14. He inherited cash of $65,000 from his father and his baseball card collection, valued at $3,500. As the beneficiary of his father's life insurance policy, Ryan also received $165,000.
8. The couple spent a weekend in Atlantic City in November and came home with gross gambling winnings of $2,700.
9. Diana received $3,400 cash for reaching 10 years of continuous service at DI.
10. Diana was hit and injured by a drunk driver while crossing a street at a crosswalk. she was unable to work for a month. She received $9,000 from her disability insurance. DI paid the premiums for Diana, but it reported the amount of the premiums as compensation to Diana on her year-end W-2.
11. The drunk driver who hit Diana in part (j) was required to pay her $3,500 medical costs, $3,000 for the emotional trauma she suffered from the accident, and $8,000 for punitive damages.
12. For meeting her performance goals this year, Diana was informed on December 27 that she would receive a $6,500 year-end bonus. DI (located in Houston, Texas) mailed Diana's bonus check from its payroll processing center (Tampa, Florida) on December 28. Diana didn't receive the check at home until January 2.
13. Ryan is a 10 percent owner of MNO Incorporated, a Subchapter S corporation. The company reported ordinary business income for the year of $122,000. Ryan acquired the MNO stock two years ago.
14. Ryan's day care business collected $110,000 in revenues. In addition, customers owed him $10,500 at year-end. During the year, Ryan spent $13,000 for supplies, $9,000 for utilities, $30,000 for rent, and $1,250 for miscellaneous expenses. One customer gave him use of their vacation home for a week (worth $10,000) in exchange for Ryan allowing their child to attend the day care center free of charge. Ryan accounts for his business activities using the cash method of accounting.
15. Diana's employer pays the couple's annual health insurance premiums of $13,000 for a qualified plan.

Comprehensive Problem 5-77 Part 2 (Algo)

2. Complete page 1 of Form 1040 through line 9 and Schedule 1 for the Workmans (for filing MFJ).

Note: Input all the values as positive numbers. Enter any non-financial information, (e.g. Names, Addresses, social security numbers) EXACTLY as they appear in any given information or Problem Statement. Do not skip rows, while entering in Deductions section of Form 1040 PG1. Assume the dividends are qualified dividends. Neither Ryan nor Diana wish to contribute to the Presidential Election Campaign fund or had any virtual currency transactions or interests.

Ryan's and Diana's address is 19010 N.W. 135th Street, Miami, FL 33054

Social security numbers:

Ryan: 111-22-3333

Diana: 222-33-4444

Jorge: 333-44-5555

1040PG1schedule1 Form 1040 Schedule 1. \begin{tabular}{lcc} \hline For Paperwork Reduction Act Notice, see your tax return instructions. & Cat. No. 71479F & Schedule 1 (Form 1040) 2021 \\ \hline \end{tabular} THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR Form 1040 Page 1. 1040PG1schedule1 Form 1040 Schedule 1. \begin{tabular}{lcc} \hline For Paperwork Reduction Act Notice, see your tax return instructions. & Cat. No. 71479F & Schedule 1 (Form 1040) 2021 \\ \hline \end{tabular} THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR Form 1040 Page 1