Question & Answer

Relevant information; recommendation Frank owns a caravan and loves to visit national parks with his family. However, the family only takes two one-week trips in the caravan each year. Frank’s wife would rather stay in motels than the caravan. She presented him with the following itemisation of the cost per trip, hoping that he will sell the caravan and use motels instead. Required (a)          What are the relevant costs for deciding whether the family should go on one more camping trip this year? (b)          What are the relevant costs for deciding whether Frank should sell the caravan? Assume the family will take the same vacations but stay in motels if the caravan is sold. (c)           What factors other than costs might influence the decision to sell the caravan? List as many as you can. (d)          Consider your own preferences for this problem. Do you expect Frank’s preferences to be the same as yours? How can you control for your biases and consider this problem from Frank’s point of view? (e)           Frank asks you to help him decide what to do. Do you think he should sell the caravan? Why?             (LO1, 2 and 3)

Ramirez Company has a held-for-collection investment in the 6%, 20-year bonds of Soto Company. The investment was originally purchased for $1,200,000 in 2013. Early in 2014, Ramirez recorded an impairment of $300,000 on the Soto investment, due to Soto’s financial distress. In 2015, Soto returned toprofitability and the Soto investment was no longer impaired. What entry does Ramirez make in 2015 under (a) GAAP and (b) IFRS?

Is it true that a corporation recognizes all gains and losses on liquidating distributions of property to noncorporate shareholders?  Explain.

In what ways may free trade have harmful cultural effects on developing countries?

At December 31, 2014, Cascade Company had a net deferred tax liability of $450,000. An explanation of the items that compose this balance is as follows. Temporary Differences in Deferred Taxes Resulting Balances 1. Excess of tax depreciation over book depreciation. $200,000 2. Accrual, for book purposes, of estimated loss contingency from pending lawsuit that is expected to be settled in 2015. The loss will be deducted on the tax return when paid. $ (50,000) 3. Accrual method used for book purposes and installment method used for tax purposes for an isolated installment sale of an investment. $300,000 In analyzing the temporary differences, you find that $30,000 of the depreciation temporary difference will reverse in 2015, and $120,000 of the temporary difference due to the installment sale will reverse in 2015. The tax rate for all years is 40%. Instructions Indicate the manner in which deferred taxes should be presented on Cascade Company’s December 31, 2014, statement of financial position.

In very general terms, how is the alternative minimum tax system different from the regular income tax system?  How is it similar?

In what accounts should the following items be classified? (a) Coins and currency. (b) U.S. Treasury (government) bonds. (c) Certificate of deposit. (d) Cash in a bank that is in receivership. (e) NSF check (returned with bank statement). (f) Deposit in foreign bank (exchangeability limited). (g) Postdated checks. (h) Cash to be used for retirement of long-term bonds. (i) Deposits in transit. (j) 100 shares of Dell stock (intention is to sell in one year or less). (k) Savings and checking accounts. (l) Petty cash. (m) Stamps. (n) Travel advances.

Describe the difference in mechanical properties as a function of temperature between a highly crystalline thermoplastic and an amorphous thermoplastic.

Discuss the basic differences between annotated and topical tax services.  How are these services used in tax research?

If a good were free, why would total consumer surplus equal total utility? What would be the level of marginal utility?

What is an “ordinary and necessary” business expenditure?

How is a business activity distinguished from an investment activity? Why is this distinction important for the purpose of calculating federal income taxes?

How would you attempt to value time that you yourself save (a) getting to work; (b) going on holiday; (c) going out in the evening?

Using the information from BE4-9, prepare a retained earnings statement for the year ended December 31, 2014. Assume an error was discovered: land costing $80,000 (net of tax) was charged to maintenance and repairs expense in 2011.

Describe in general the process by which new tax legislation is enacted.

Explain collateralized debt obligations (CDOs). (LO4)

What is a §481 adjustment, and what is the purpose of this adjustment?

In each of the following independent cases, determine the taxpayer’s filing status and the number of dependents the taxpayer is allowed to claim.

Kathleen Cole Inc. acquired the following assets in January of 2012. Equipment, estimated service life, 5 years; salvage value, $15,000 $525,000 Building, estimated service life, 30 years; no salvage value $693,000 The equipment has been depreciated using the sum-of-the-years’-digits method for the first 3 years for financial reporting purposes. In 2015, the company decided to change the method of computing depreciation to the straight-line method for the equipment, but no change was made in the estimated service life or salvage value. It was also decided to change the total estimated service life of the building from 30 years to 40 years, with no change in the estimated salvage value. The building is depreciated on the straight-line method. Instructions (a) Prepare the general journal entry to record depreciation expense for the equipment in 2015. (b) Prepare the journal entry to record depreciation expense for the building in 2015. (Round all computations to two decimal places.)

Briefly describe the fair value hierarchy

Assume that the demand for a product is given by the following function                QD = 1000 – 50P + 2P2 + 10PS + PS2 where QD is the quantity demanded, P is the price of the good and PS  is the price of a substitute good. What is the partial derivative of this demand function with respect to (a) the price of the good; (b) the price of the substitute good? Interpret the meaning of each partial derivative.

Based on the video about vernier calipers, are the markings on the vernier plate (moveable scale) the same spacing, slightly closer, or slightly further apart compared to the stationary bar?

What is meant by the terms elements and items as they relate to the income statement? Why might items have to be disclosed in the income statement?

Ben Sisko Supply Company, a newly formed corporation, incurred the following expenditures related to Land, to Buildings, and to Machinery and Equipment. Abstract company’s fee for title search $ 520 Architect’s fees 3,170 Cash paid for land and dilapidated building thereon 87,000 Removal of old building $20,000 Less: Salvage 5,500 14,500 Interest on short-term loans during construction 7,400 Excavation before construction for basement 19,000 Machinery purchased (subject to 2% cash discount, which was not taken) 55,000 Freight on machinery purchased 1,340 Storage charges on machinery, necessitated by noncompletion of building when machinery was delivered 2,180 New building constructed (building construction took 6 months from date of purchase of land and old building) 485,000 Assessment by city for drainage project 1,600 Hauling charges for delivery of machinery from storage to new building 620 Installation of machinery 2,000 Trees, shrubs, and other landscaping after completion of building (permanent in nature) 5,400 Instructions Determine the amounts that should be debited to Land, to Buildings, and to Machinery and Equipment. Assume the benefits of capitalizing interest during construction exceed the cost of implementation. Indicatehow any costs not debited to these accounts should be recorded.

A Wall Street Journal article noted that Apple reported higher income than its competitors by using a more aggressive policy for recognizing revenue on future upgrades to its products. Some contend that Apple’s quality of earnings is low. What does the term “quality of earnings” mean?