Question & Answer

Jorge is puzzled that the IRS and his CPA could legitimately reach different conclusions on a tax issue.  Why does this happen?

What are the arguments for reward systems at the executive level to      contain a longer-term component?             (LO3)

Describe the two criteria for determining the valuation of financial assets.

On July 1, 2015, Fontaine Company purchased for cash 40% of the outstanding capital stock of Knoblett Company. Both Fontaine Company and Knoblett Company have a December 31 year-end. Knoblett Company, whose common stock is actively traded in the over-the-counter market, reported its total net income for the year to Fontaine Company and also paid cash dividends on November 15, 2015, to Fontaine Company and its other stockholders. Instructions How should Fontaine Company report the above facts in its December 31, 2015, balance sheet and its income statement for the year then ended? Discuss the rationale for your answer.

Cost function judgement and methodology Suppose you have the responsibility of creating a cost function for the costs of an Internet service provider’s help line.   Required (a)          What is the cost object? Identify where you might obtain information about past costs for the cost object. (b)          Identify at least two potential cost drivers. Explain where you might obtain information about past volumes for each cost driver. (c)           What other information would you like to obtain before estimating the cost function? How might you obtain that information? (d)          Identify the techniques introduced in this chapter that you would be most likely to use in creating the cost function. Explain why.

In 2024, Juanita is married and files a joint tax return with her husband.  What is her tentative minimum tax in each of the following alternative circumstances?

On January 1, Santiago Company, a lessee, entered into three noncancelable leases for brand-new equipment, Lease L, Lease M, and Lease N. None of the three leases transfers ownership of the equipment to Santiago at the end of the lease term. For each of the three leases, the present value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executory costs such as insurance, maintenance, and taxes to be paid by the lessor, is 75% of the fair value of the equipment. The following information is peculiar to each lease. 1. Lease L does not contain a bargain-purchase option. The lease term is equal to 80% of the estimated economic life of the equipment. 2. Lease M contains a bargain-purchase option. The lease term is equal to 50% of the estimated economic life of the equipment. 3. Lease N does not contain a bargain-purchase option. The lease term is equal to 50% of the estimated economic life of the equipment. Instructions (a) How should Santiago Company classify each of the three leases above, and why? Discuss the rationale for your answer. (b) What amount, if any, should Santiago record as a liability at the inception of the lease for each of the three leases above? (c) Assuming that the minimum lease payments are made on a straight-line basis, how should Santiago record each minimum lease payment for each of the three leases above?

Under what circumstances can a taxpayer deduct medical expenses paid for a member of their family? Does it matter if the family member reports significant amounts of gross income and cannot be claimed as a dependent?

Revenue is usually recognized at the point of sale. Under special circumstances, however, bases other than the point of sale are used for the timing of revenue recognition. Instructions (a) Why is the point of sale usually used as the basis for the timing of revenue recognition? (b) Disregarding the special circumstances when bases other than the point of sale are used, discuss the merits of each of the following objections to the sale basis of revenue recognition: (1) It is too conservative because revenue is earned throughout the entire process of production. (2) It is not conservative enough because accounts receivable do not represent disposable funds, sales returns and allowances may be made, and collection and bad debt expenses may be incurred in a later period. (c) Revenue may also be recognized (1) during production and (2) when cash is received. For each of these two bases of timing revenue recognition, give an example of the circumstances in which it is properly used and discuss the accounting merits of its use in lieu of the sale basis.

Ottawa Corporation owns machinery that cost $20,000 when purchased on July 1, 2011. Depreciation has been recorded at a rate of $2,400 per year, resulting in a balance in accumulated depreciation of $8,400 at December 31, 2014. The machinery is sold on September 1, 2015, for $10,500. Prepare journal entries to (a) update depreciation for 2015 and (b) record the sale.

Henrich is a single taxpayer. In 2024, his taxable income is $530,000.  What are his income tax and net investment income tax liability in each of the following alternative scenarios?

Will the amortization of Discount on Bonds Payable increase or decrease Bond Interest Expense? Explain.

1.            If you were a student interested in pursuing a career in project management how important do you think being a CAPM would be?

The pretax financial income of Truttman Company differs from its taxable income throughout each of 4 years as follows. Pretax Taxable Year Financial Income Income Tax Rate 2014 $290,000 $180,000 35% 2015 320,000 225,000 40% 2016 350,000 260,000 40% 2017 420,000 560,000 40% Pretax financial income for each year includes a nondeductible expense of $30,000 (never deductible for tax purposes). The remainder of the difference between pretax financial income and taxable income in each period is due to one depreciation temporary difference. No deferred income taxes existed at the beginning of 2014. Instructions (a) Prepare journal entries to record income taxes in all 4 years. Assume that the change in the tax rate to 40% was not enacted until the beginning of 2015. (b) Prepare the income statement for 2015, beginning with Income before income taxes.

Oregon Inc. $10 par common stock is selling for $110 per share. Four million shares are currently issued and outstanding. The board of directors wishes to stimulate interest in Oregon common stock before a forthcoming stock issue but does not wish to distribute capital at this time. The board also believes that too many adjustments to the stockholders’ equity section, especially retained earnings, might discourage potential investors. The board has considered three options for stimulating interest in the stock: 1. A 20% stock dividend. 2. A 100% stock dividend. 3. A 2-for-1 stock split. Instructions Acting as financial advisor to the board, you have been asked to report briefly on each option and, considering the board’s wishes, make a recommendation. Discuss the effects of each of the foregoing options.

Explain the difference between pretax financial income and taxable income.

1.      : Have the successes of sales associates such as Katherine or Damien created a situation in which customers’ loyalty to particular salespeople is stronger than their loyalty to the store? For example, if a successful associate leaves Morgan’s, might the customer leave also?

What are the criteria that should be satisfied to make an automated manufacturing system flexible?

A direct extrusion operation is performed on a cylindrical billet with an initial diameter of 2.0 in and an initial length of 4.0 in. The die angle = 60° and orifice diameter is 0.50 in. In the Johnson extrusion strain equation, a = 0.8 and b = 1.5. The operation is carried out hot and the hot metal yields at 13,000 lb/in2 and does not strain harden when hot. (a) What is the extrusion ratio? (b) Determine the ram position at the point when the metal has been compressed into the cone of the die and starts to extrude through the die opening. (c) What is the ram pressure corresponding to this position? (d) Also determine the length of the final part if the ram stops its forward movement at the start of the die cone.

How does electroless plating differ from electrochemical plating?

1.       : If you were asked to design a training program to help managers become better communicators of vision, mission, and values, what would you include in the program?

Electron-beam welding has a significant disadvantage in high-production applications. What is that disadvantage?

Unlike the other major financial statements, the statement of cash flows is not prepared from the adjusted trial balance. From what sources does the information to prepare this statement come, and what information does each source provide?

What are the two basic methods by which the circuit pattern is transferred to the copper surface of the boards?

1.       : If you were the leader of a newly formed team, what might you do to make sure the team developed norms of high performance?