Question

Min lee received the following items of income during the year: • $35,000 of wages. • $150 of dividends from a savings account at her credit union. • $200 of interest from a U.S. Savings Bond. • $250 of interest from a Treasury bill. What amount will be reported on Min's Form 1040, line 2b? a) $350 b) $400 c) $450 d) $601

Answer 1

Items a, b, c, d, and e are categorized as neither, M1, M1, M1, and M2 respectively in terms of the money supply, while the net worth of the bank in the provided scenario is $220, calculated by deducting liabilities from assets.

Step-by-step explanation:

The subject of the question is money supply and banking. Here is the categorization of the items based on whether they are in M1, M2, or neither:

• a. Your $5,000 line of credit on your Bank of America card: Neither - A line of credit is potential borrowing and is not considered money.
• b. $50 dollars' worth of traveler's checks you have not used yet: M1 - Traveler's checks are included in the M1 classification of money supply.
• c. $1 in quarters in your pocket: M1 - Coins are part of the currency component of M1.
• d. $1200 in your checking account: M1 - Funds in checking accounts are counted in M1 because they can be used for transactions.
• e. $2000 you have in a money market account: M2 - Money in a money market account is included in M2 as it is not used for direct transactions like M1, but can be easily transferred into cash or checking deposits.

Regarding the T-account balance sheet for the bank:

• Assets: Reserves ($50) + Government Bonds ($70) + Loans ($500) = $620
• Liabilities: Deposits ($400)
• Net Worth: Assets - Liabilities = $620 - $400 = $220. The bank's net worth is $220.

Answer 2

The amount Min Lee will report on Form 1040, line 2b is the total taxable interest income of $450, which includes $200 from a U.S. Savings Bond and $250 from a Treasury bill.

Step-by-step explanation:

To calculate the amount that will be reported on Min's Form 1040, line 2b, we need to identify the types of income that should be reported. Line 2b of Form 1040 is for taxable interest income. Therefore, we need to determine which types of income listed are taxable interest income.

The question pertains to the amount that Min Lee will report on Form 1040, line 2b, which concerns taxable interest income. Min Lee received a total of $150 in dividends and $450 in interest ($200 from a U.S. Savings Bond and $250 from a Treasury bill). However, on Form 1040, line 2b, only taxable interest needs to be reported, not dividends. Thus, the correct answer to what amount will be reported on Min Lee's Form 1040, line 2b, is $450 (option c), which is the sum of the interest received from both U.S. Savings Bond and Treasury bill.