Liabilities and the effective income tax rates

Reference no: EM131002104

For Mary Lou and Ernie, the assets and liabilities and the effective income tax rates at December 31, 2008, follow:

Accounts	TaxBases	EstimatedCurrent Value	Excess of Estimated Current Values over Tax Bases	EffectiveIncomeTaxRates	Amount ofEstimatedIncome Taxes
Cash	$ 20,000	$ 20,000	$ -	-
Marketable securities	80,000	100,000	20,000	28%
Options	0	30,000	30,000	28%
Residence	100,000	150,000	50,000	28%
Royalties	0	20,000	20,000	28%
Furnishings	40,000	20,000	(20,000)	-
Auto	20,000	15,000	(5,000)	-
Mortgage	(70,000)	(70,000)	-	-
Auto loan	(10,000)	(10,000)	-	-

Required:

a. Compute the estimated tax liability on the differences between the estimated current value of the assets and liabilities and their tax bases.

b. Present a statement of financial condition for Mary Lou and Ernie at December 31, 2008.

c. Comment on the statement of financial condition.

Reference no: EM131002104

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