Question one.

FOR TAX YEAR 2015 (must use 2015 forms)

Jack Hastings (HE), age 65 and Kara Hastings (SHE), age 40, are married with three children: Mark Broke, age 17 and Nicole Broke, age 16, (her two children from a former marriage) and Laura, their 10 year old daughter. ALL children are full-time students. They also provide 100% support for Jack's 85 year old mother, Mary Hastings (a citizen of France), who has lived full-time (as a resident) in a retirement home in Quebec, Canada for several years. Mary has no other sources of income. HE is the Vice President of the Premier Bank of San Marcos, Texas and receives an annual base salary of $185,000. Kara is Assistant Marketing Director for a national health food company in Austin and is paid an annual base salary of $65,000. The family resides at 111 College Ave., San Marcos, Hays County, TX, 78666. (all ages as of end of tax year; make up SS numbers as needed).

In addition to the above items, during the tax year the couple received the following:

$2,500 in qualified dividends on Apple, Inc. stock. Kara (SHE) received from her grandparents as a graduation present (college - May 2000). The value of the gift was $15,000 at that time and it has a current market value at the end of the year of $18,500.

Total of $500 in bond interest of which $250 was from a City of Boston, MA bond; the remainder was from an AT&T bond; they purchased both bonds several years ago. A total of $2,500 in interest from a savings account they hold jointly at Express Bank located in Windsor, Canada. The savings account has a balance of $150,000 in it at year end and represents Jack's inherited funds (received in 2009) from his deceased father.

SHE received a bonus check for $50 from her employer in formal recognition of her 5 years of service to company (assume this amount is included in her W-2, BUT IS IN ADDITION TO HER BASE SALARY).

The bank provides HIM with a $250,000 group term life insurance policy. The bank provides all employees with this policy insurance policy equal to three times their annual salary or $250,000, whichever is less (assume that the taxable portion of this item was - incorrectly - not included in W-2 - and therefore will need to be added to "Line 7") *Refer Pub 525 and/or IRS website for information on how to calculate any taxable portion.

SHE volunteers at a local IRS qualified non-profit organization. This organization presented her with a $125 check this year in recognition for her "best fund raising idea" - which netted the organization over $10,000 in additional funds. In addition, SHE has receipts accounting for $600 out of pocket expenses she incurred during the year - all associated with events she attended on behalf (as a representative) of the organization. She wonders if these expenses are deductible as charitable contributions - if so deduct them.

HE won $1,000 from a Texas Lotto game. He paid $250 total for several tickets and retained the receipts.

When HE chooses to work on Saturdays (not a typical work day for him), he elects to eat his meals at work (so that he can continue working rather than take a break) and has his meals picked up by other employees who are working that day - while on their lunch breaks. The annual value of these meals is $3,000 (he has receipts). He would like to have this expense deducted as unreimbursed employee business expenses if allowable.

The couple sold shares in two stocks during the past year: 150 shares of Amazon sold on July 1 for $155 per share; and 200 shares of Shell Oil sold on October 1 for $110 per share. Prior to the sale they owned 150 shares of Amazon which they purchased on February 1, 2015 for a total of $4,500, and 300 shares of Shell Oil which they purchased on May 31, 2009 for a total of $1,000. (Assume IRS is notified of basis by broker and Box D is checked on Form 8949).

Other itemized deductions that the couple tells you about (that they paid) for the tax year were unreimbursed medical expenses of $12,800 (which includes $6, 000 in premiums HE paid for his family's group medical insurance and the remainder was what HE paid for his mother's health insurance policy - his company only paid a portion related to him, not for the entire family); home mortgage interest of $8,500; real estate/property taxes on their home of $6,200; and multiple cash contributions to the American Cancer Society totaling $750 and $800 cash to the Salvation Army (they have all IRS required letters and receipts for the donations). Refer to Pub 17 and/or the IRS website to calculate the appropriate sales tax deduction.

They paid their CPA during 2015 for income tax services - $200 amending for their 2013 tax return, $400 for amending their 2014 tax return, and $300 for tax planning advice related to the 2015 tax year.

SHE received twelve monthly child support payments (for a total of $16,000) from her ex-husband Ralph Broke.

HER employer withheld $7,500 in Federal income taxes on HER salary. HIS employer withheld $38,000 in Federal income tax on HIS salary. Assume the two employers both withheld the proper amount of FICA taxes. The couple made no estimated tax payments and no overpayments from 2014 were applied to 2015.

Needed:Your textbook, IRS Forms, and references such as Pub 17

prepare couple's joint tax return for 2015. Assume that they want to claim the maximum amount of deductions possible and pay the minimum amount of taxes. Make-up needed social security numbers and other data not provided and complete necessary lines as though filing return. Ignore ALL TAX CREDITS. Do Not Consider Form 8938; Do consider Form 8949; It is not necessary to create/attach W-2s or 1099s.

IGNORE AMT, NET INVESTMENT TAX, and 2210 Underpayment Penalty - as we have not discussed these

Turn in a manually prepared (NOT TYPED) tax return with all required schedules - but DO NOT turn in supporting working papers and/or schedules which you may use to complete return.....just the items that need to be submitted for filing. The MANUAL tax return should be completed on 2015 forms (from IRS website.)

Part ii.

answer the following questions according to the instructions.

Question 41 2 pts Which one of the following is not a recognized method of recognizing assets as expenses in a particular accounting period? O A building is depreciated and its cost is assigned to the current and future accounting periods in which the building is expected to be used Prepaid insurance is assigned to expense as the insurance expires Customers' account balances in accounts receivable are assigned to expense in the period in which each customer pays Merchandise inventory is assigned to cost of goods sold in the period the goods are sold D Question 42 2 pts Hilton Company pays its agents on commission. The company believes it has appropriately applied the matching principle in 2010. Which situation violates the matching principle? Sales commissions are charged to expense in 2010 on all sales revenue recognized in 2010 even though some of the commissions have not been paid. Electricity and water expenses are recognized as expenses in 2010 even though the last bill received in 2010 will not be paid until 2011. None of the above O Insurance expense Is recognized for the total cost of a 1-year policy purchased in May, 2010D Question 39 2 pts Food To Go is a local catering service. Conceptually, when should Food To Go recognize revenue from its catering service? O At the date the customer places the order At the date the meals are served At the date the invoice is mailed to the customer O At the date the customer's payment is received D Question 40 2 pts Aster Company sells merchandise to customers. Aster should normally recognize Revenue and the related expenses in the same accounting period as earned whether payment is received or not Revenue and expenses after all payments are collected Expenses in the period the merchandise is sold and defer revenue until the customer pays for the merchandise O Revenue when the cash is collected and the expenses when Aster pays its creditor for the merchandise1. The primary objective of the finance manager is to maximize the market value of equity of the company. a. true b. false 2. The principal-agent problem is most severe for the sole proprietorship because there are fewer owners who can monitor the relationship. a. true In. false 3' Which of the following is NOT an ADVANTAGE of a partnership? 3. The potential for more talent and skills in the business b. A potential increase in available capital over a sole proprietorship c. The commingling with the general partner's personal assets d. All of these are advantages of a partnership. 4. EBIT (earnings before interest and taxes) is obtained by adding together revenue and operating expenses. a. true b. false