Final answer:
a. The after-tax cost if Isabel pays the $21,000 bill in December is $20,442.
b. The after-tax cost if Isabel pays the $21,000 bill in January is $19,425.
c. Isabel should pay the $21,000 bill in January to minimize the after-tax cost.
Step-by-step explanation:
a. To calculate the after-tax cost if Isabel pays the $21,000 bill in December, we need to find the present value of the payment using the after-tax rate of return. The relevant rate in Exhibit 3-1 for one year at 4% is 0.962. Therefore, the after-tax cost is $21,000 * 0.962 = $20,442.
b. If Isabel pays the $21,000 bill in January, we need to find the present value at the after-tax rate for two years. The relevant rate in Exhibit 3-1 for two years at 4% is 0.925. Therefore, the after-tax cost is $21,000 * 0.925 = $19,425.
c. To determine whether Isabel should pay the $21,000 bill in December or January, we compare the after-tax costs. The after-tax cost is lower in January ($19,425) compared to December ($20,442). Therefore, Isabel should pay the $21,000 bill in January to minimize the after-tax cost.
The complete question is:can u explain it too if u can thanks lol
Isabel, a calendar-year taxpayer, uses the cash method of açcounting for her sole proprietorship. in late December she received a \( \$ 21,000 \) bili from her accountant for consulting services related to her business.