Question & Answer

Are the tax consequences to the corporation the same whether a shareholder contributes property to a corporation in a §351 transaction or as a capital contribution? Explain.

Roley Corporation uses a periodic inventory system and the gross method of accounting for purchase discounts. On July 1, Roley purchased $60,000 of inventory, terms 2/10, n/30, FOB shipping point. Roley paid freight costs of $1,200. On July 3, Roley returned damaged goods and received credit of $6,000. On July 10, Roley paid for the goods. Prepare all necessary journal entries for Roley.

Why is understanding the time value of money important for tax planning?

1.    : If you were to interview someone for a position as an international business executive, what are three questions you think it would be important to ask? Explain your reasoning.

Given the analysis of bilateral monopoly, if the passing of minimum-wage legislation forces employers to pay higher wage rates to low-paid employees, will this necessarily cause a reduction in employment?

On January 1, 2014, Bensen Company leased equipment to Flynn Corporation. The following information pertains to this lease. 1. The term of the noncancelable lease is 6 years, with no renewal option. The equipment reverts to the lessor at the termination of the lease. 2. Equal rental payments are due on January 1 of each year, beginning in 2014. 3. The fair value of the equipment on January 1, 2014, is $150,000, and its cost is $120,000. 4. The equipment has an economic life of 8 years, with an unguaranteed residual value of $10,000. Flynn depreciates all of its equipment on a straight-line basis. 5. Bensen set the annual rental to ensure an 11% rate of return. Flynn’s incremental borrowing rate is 12%, and the implicit rate of the lessor is unknown. 6. Collectibility of lease payments is reasonably predictable, and no important uncertainties surround the amount of costs yet to be incurred by the lessor. Instructions (Both the lessor and the lessee’s accounting period ends on December 31.) (a) Discuss the nature of this lease to Bensen and Flynn. (b) Calculate the amount of the annual rental payment. (c) Prepare all the necessary journal entries for Flynn for 2014. (d) Prepare all the necessary journal entries for Bensen for

The starting point for computing alternative minimum taxable income is regular taxable income.  What are some of the plus adjustments, plus or minus adjustments, and minus adjustments to regular taxable income to compute alternative minimum taxable income?

In 2013, Chirac Enterprises issued, at par, 60 $1,000, 8% bonds, each convertible into 100 shares of common stock. Chirac had revenues of $17,500 and expenses other than interest and taxes of $8,400 for 2014. (Assume that the tax rate is 40%.) Throughout 2014, 2,000 shares of common stock were outstanding; none of the bonds was converted or redeemed. Instructions (a) Compute diluted earnings per share for 2014. (b) Assume the same facts as those assumed for part (a), except that the 60 bonds were issued on September 1, 2014 (rather than in 2013), and none have been converted or redeemed. (c) Assume the same facts as assumed for part (a), except that 20 of the 60 bonds were actually converted on July 1, 2014.

Ortiz purchased a piece of equipment that cost $202,000 on January 1, 2014. The equipment has the following components. Component Cost Residual Value Estimated Useful Life A $70,000 $7,000 10 years B 50,000 5,000 5 years C 82,000 4,000 12 years Compute the depreciation expense for this equipment at December 31, 2014.

In what way does specialisation reduce the problem of scarcity?

What is a DIP?

Sherwin-Williams, based in Cleveland, Ohio, manufactures a wide variety of paint and other coatings, which are marketed through its specialty stores and in other retail outlets. The company also manufactures paint for automobiles. The Automotive Division has had financial difficulty. During a recent year, five branch locations of the Automotive Division were closed, and new management was put in place for the branches remaining. The following titles were shown on Sherwin-Williams’s balance sheet for that year. Accounts payable Machinery and equipment Accounts receivable, less allowance Other accruals Accrued taxes Other capital Buildings Other current assets Cash and cash equivalents Other long-term liabilities Common stock Postretirement obligations other than pensions Employee compensation payable Retained earnings Finished goods inventories Short-term investments Intangibles and other assets Taxes payable Land Work in process and raw materials inventories Long-term debt Instructions (a) Organize the accounts in the general order in which they would have been presented in a classified balance sheet. (b) When several of the branch locations of the Automotive Division were closed, what balance sheet accounts were most likely affected? Did the balance in those accounts decrease or increase?

What is the likely limitation of “general-purpose financialstatements”?

If people are generally risk averse, why do so many people around the world take part in national lotteries?

1. What is the significance of the slope of the line ac in the top part of Figure 6.1? 2. Given that there is a fixed supply of land in the world, what implications can you draw from Figure 6.1 about the effects of an increase in world population for food output per head?

{Planning}Through November, Tex has received gross income of $120,000.For December, Tex is considering whether to accept one more work engagement for the year.Engagement 1 will generate $7,000 of revenue at a cost of $4,000, which is deductible for AGI.In contrast, engagement 2 will generate $7,000 of revenue at a costof $3,000,which is deductible as an itemized deduction.Tex files as a single taxpayer.

What is meant by the term design for life cycle?

What are the two basic types of forging equipment?

How do shaping and planing differ?

Polymer fibers and filaments are used in several applications; what is the most important application commercially?

Name the three most common machining processes.

Discuss the accounting treatment or disclosure that should be accorded a declared but unpaid cash dividend, an accumulated but undeclared dividend on cumulative preferred stock, and a stock dividend distributable.

Distinguish between common and preferred stock.

Jack operates a large home repair business as a sole proprietorship. Besides providing services, Jack also sells home repair supplies to homeowners. However, these sales constitute a relatively small portion of Jack’s income. Describe the conditions under which Jack would need to account for sales and purchases of plumbing supplies using the accrual method. (Hint: Read §471(c) and Reg. §1.471-1.)

The payroll of YellowCard Company for September 2013 is as follows. Total payroll was $480,000, of which $110,000 is exempt from Social Security tax because it represented amounts paid in excess of $113,700 to certain employees. The amount paid to employees in excess of $7,000 was $400,000. Income taxes in the amount of $80,000 were withheld, as was $9,000 in union dues. The state unemployment tax is 3.5%, but YellowCard Company is allowed a credit of 2.3% by the state for its unemployment experience. Also, assume that the current FICA tax is 7.65% on an employee’s wages to $113,700 and 1.45% in excess of $113,700. No employee for YellowCard makes more than $125,000. The federal unemployment tax rate is 0.8% after state credit. Instructions Prepare the necessary journal entries if the wages and salaries paid and the employer payroll taxes are recorded separately.