Determine whether the taxpayer in the following situation has realized income. Explain why there has or has not been a realization, and determine the amount of income to be reported.
Janet owns a pest-control service. She charges customers $50 per month for basic pest control. Alternatively, customers can pay a lump sum of $500 for one year of basic monthly pest control. During the current year, Janet receives $13,000 in monthly payments and $26,000 in 1-year prepayments.
Titan Football Manufacturing had the following operating results for 2014: sales = $19,830; cost of goods sold = $13,930; depreciation expense = $2,320; interest expense = $320; dividends paid = $600. At the beginning of the year, net fixed assets were $16,300, current assets were $2,990, and current liabilities were $2,020. At the end of the year, net fixed assets were $19,340, current assets were $3,380, and current liabilities were $2,110. The tax rate for 2014 was 40 percent.
What is the cash flow to stockholders?
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