Question & Answer

List the key statutory requirements that must be met before a corporate formation is tax-deferred under §351.

(a) Name the four principal noble metals. (b) Why are they called noble metals?

On January 1, 2014, Beyonce Co. purchased 25,000 shares (a 10% interest) in Elton John Corp. for $1,400,000. At the time, the book value and the fair value of John’s net assets were $13,000,000. On July 1, 2015, Beyonce paid $3,040,000 for 50,000 additional shares of John common stock, which represented a 20% investment in John. The fair value of John’s identifiable assets net of liabilities was equal to their carrying amount of $14,200,000. As a result of this transaction, Beyonce owns 30% of John and can exercise significant influence over John’s operating and financial policies. John reported the following net income and declared and paid the following dividends. Net Income Dividend per Share Year ended 12/31/14 $700,000 None Six months ended 6/30/15 500,000 None Six months ended 12/31/15 815,000 $1.55 Instructions (Any excess fair value is attributed to goodwill.) Determine the ending balance that Beyonce Co. should report as its investment in John Corp. at the end of 2015.

Describe cost depletion and percentage depletion. Why is the percentage depletion method permitted?

What is meant by the ‘steady-state economic growth path’? What determines its slope?

Cost categories; cost function The Leyland Hospital Cafe has been reporting losses in past months. In July, for example, the loss was $5000. The Cafe purchases prepared food directly from Hospital Food Services. This charge varies proportionately with the number and kind of meals served. Personnel who are paid by the Cafe serve the food, tend the cash register, waiting and clean tables, and wash dishes. The staffing levels in the cafe rarely change; the existing staff can usually handle daily fluctuations in volume. Administrative costs are primarily the salaries of the Cafe manager and her office staff. The hospital charges the Cafe a surcharge of 10 per cent of its revenue. Utility costs are the costs of cooling, heating, and lighting the Cafe during its normal operating hours.   The hospital’s management is considering shutting the Cafe down because it has been operating at a loss.   Required (a)          List the fixed expenses of the Cafe. (b)          List the variable expenses of the Cafe and the most likely cost driver for each expense. (c)           Write out the cost function for running the Cafe. (d)          Estimate the profit or loss for August if the revenues of the Cafe increase to $80 000. (e)           Explain why the original data show a loss but part (d) shows a profit. Be specific.

Name some of the steps that can be taken to reduce or eliminate vibrations in machining

Based on the video about vernier calipers, explain how to read the scale on a vernier caliper.

Explain what exchange-traded notes are and how they are used. Why are they risky? (LO4)

Using the facts from the previous problem, how would your answer change if, instead, Duff adopted the cash method of accounting to allow them to better control the timing of their cash receipts and disbursements?

The following statement is an excerpt from the FASB pronouncement related to interim reporting. Interim financial information is essential to provide investors and others with timely information as to the progress of the enterprise. The usefulness of such information rests on the relationship that it has to the annual results of operations. Accordingly, the Board has concluded that each interim period should be viewed primarily as an integral part of an annual period.  n general, the results for each interim period should be based on the accounting principles and practices used by an enterprise in the preparation of its latest annual financial statements unless a change in an accounting practice or policy has been adopted in the current year. The Board has concluded, however, that certain accounting principles and practices followed for annual reporting purposes may require modification at interim reporting dates so that the reported results for the interim period may better relate to the results of operations for the annual period. Instructions Listed on the next page are six independent cases on how accounting facts might be reported on an individual company’s interim financial reports. For each of these cases, state whether the method proposed to be used for interim reporting would be acceptable under generally accepted accounting principles applicable to interim financial data. Support each answer with a brief explanation. (a) J. D. Long Company takes a physical inventory at year-end for annual financial statement purposes. Inventory and cost of sales reported in the interim quarterly statements are based on estimated gross profit rates, because a physical inventory would result in a cessation of operations. Long Company does have reliable perpetual inventory records. (b) Rockford Company is planning to report one-fourth of its pension expense each quarter. (c) Republic Company wrote inventory down to reflect lower-of-cost-or-market in the first quarter. At year-end, the market exceeds the original acquisition cost of this inventory. Consequently, management plans to write the inventory back up to its original cost as a year-end adjustment. (d) Gansner Company realized a large gain on the sale of investments at the beginning of the second quarter. The company wants to report one-third of the gain in each of the remaining quarters. (e) Fredonia Company has estimated its annual audit fee. It plans to pro rate this expense equally over all four quarters. (f) LaBrava Company was reasonably certain it would have an employee strike in the third quarter. As a result, it shipped heavily during the second quarter but plans to defer the recognition of the sales in excess of the normal sales volume. The deferred sales will be recognized as sales in the third quarter when the strike is in progress. LaBrava Company management thinks this is more representative of normal second- and third-quarter operations.

Under what circumstances would a rise in income tax act as (a) a disincentive and (b) an incentive to effort?

Distinguish between publicly provided goods, public goods and merit goods.

Discuss the evolution of fintech. (LO1)

Explain the two limitations placed on the §179 deduction. How are they similar? How are they different?

Chaz Corporation has taxable income in 2024 of $1,312,000 for purposes of computing the §179 expense and acquired the following assets during the year:

Discuss the appropriate treatment in the income statement for the following items: (a) Loss on discontinued operations. (b) Non-controlling interest allocation.

Explain the difference between roughing and finishing operations in machining.

1.    As an administrator for a medium sized hospital, you and the board of directors have decided to change the business from a short-term, acute-care facility to a drug dependency hospital. How would you go about executing this strategy?

Presented in Illustration 21-31 are the financial statement disclosures from the January 31, 2012, annual report of Wal-Mart Stores, Inc. Instructions Answer the following questions related to these disclosures. (a) What is the total obligation under capital leases at January 31, 2012, for Wal-Mart? (b) What is the total rental expense reported for leasing activity for the year ended January 31, 2012, for Wal-Mart? (c) Estimate the off-balance-sheet liability due to Wal-Mart’s operating leases at January 31, 2012.

Discuss how the property limitation restricts large businesses from taking the §179 expense.

The cone-shaped part in Problem 33.5 is to be built using laminated-object manufacturing. Layer thickness = 0.20 mm. The laser beam can cut the sheet stock at a velocity of 500 mm/s. Compute an estimate for the time required to build the part, if 10 s are lost each layer to lower the height of the platform that holds the part and advance the sheet stock in preparation for the next layer. Ignore cutting of the cross-hatched areas outside of the part since the cone should readily drop out of the stack owing to its geometry.

Define the terms ‘sustainability’, ‘sustainability management’ and ‘sustainability management accounting’.

Is it possible for a rental property to generate a positive annual cash flow and at the same time produce a loss for tax purposes? Explain.

What types of business entities does the U.S. tax system recognize?