Question & Answer

Columbia Sportswear Company acquired a trademark that is helpful in distinguishing one of its new products. The trademark is renewable every 10 years at minimal cost. All evidence indicates that this trademarked product will generate cash flows for an indefinite period of time. How should this trademark be amortized?

Using Figure 1.5 as an example, develop an internal value chain for an airline such as Virgin Australia.

Two or more items are omitted in each of the following tabulations of income statement data. Fill in the amounts that are missing. 2013 2014 2015 Sales revenue $290,000 $ ? $410,000 Sales returns and allowances 11,000 13,000 ? Net sales ? 347,000 ? Beginning inventory 20,000 32,000 ? Ending inventory ? ? ? Purchases ? 260,000 298,000 Purchase returns and allowances 5,000 8,000 10,000 Freight-in 8,000 9,000 12,000 Cost of goods sold 233,000 ? 293,000 Gross profi t on sales 46,000 91,000 97,000

Compare task forces, teams, project managers, and relational coordination in terms of how they can provide coordination across departments and hierarchical levels.

Balanced scorecard; incentives Many organisations use a balanced scorecard set of measures to determine the short-term incentive for senior managers and executives.   Required Outline any potential difficulties associated with using a set of balanced scorecard measures to determine the short-term incentive. (LO2 and 3)

Using the same information as in E14-22 and , answer the following questions related to American Bank (creditor). Instructions (a) Compute the loss American Bank will suffer under this new term modification. Prepare the journal entry to record the loss on American’s books. (b) Prepare the interest receipt schedule for American Bank after the debt restructuring. (c) Prepare the interest receipt entry for American Bank on December 31, 2015, 2016, and 2017. (d) What entry should American Bank make on January 1, 2018?

Using the facts in the previous problem, what are some ways that Bendetta could shift some of the rental income to Jenine?  What are the disadvantages associated with these income-shifting strategies?

Helen holds 1,000 shares of Fizbo Inc. stock that she purchased 11 months ago. The stock has done very well and has appreciated $20/share since Helen bought the stock. When sold, the stock will be taxed at capital gains rates (long-term rate is 15% and short-term rate is the taxpayer’s marginal tax rate). If Helen’s marginal tax rate is 35%, how much would she save by holding the stock an additional month before selling? What might prevent Helen from waiting to sell?

What happens to a ceramic material when it is sintered?

Benita is concerned that she will not be able to complete her tax return by April 15.  Can she request an extension to file her return?  By what date must she do so? Assuming she requests an extension, what is the latest date that she could file her return this year without penalty?

Mary Tokar is comparing a GAAP-based company to a company that uses IFRS. Both companies report equity investments. The IFRS company reports unrealized losses on these investments under the heading “Reserves” in its equity section. However, Mary can find no similar heading in the GAAP-based company financial statements. Can Mary conclude that the GAAP-based company has no unrealized gains or losses on its non-trading equity investments? Explain

Jayanna, an advertising consultant, is contemplating instructing some of her clients to pay her in cash so that she does not have to report the income on her tax return.  Use an available tax service to identify the three basic elements of tax evasion and penalties associated with tax evasion.  Write a memo to Jayanna explaining tax evasion and the risks associated with her actions.

Explain how an underfunded public pension fund can affect the debt rating of a city or state. (LO4)

Give some examples of these random shocks.

How are realized income, gross income, and taxable income similar, and how are they different?

Robert has found a “favorable” authority directly on point for his tax question.  If the authority is a court case, which court would he prefer to have issued the opinion?  Which court would he least prefer to have issued the opinion?

Eisler Corporation issued 2,000 $1,000 bonds at 101. Each bond was issued with one detachable stock warrant. After issuance, the bonds were selling in the market at 98, and the warrants had a market price of $40. Use the proportional method to record the issuance of the bonds and warrants

Developing a reward system Synergy Ltd’s incentive plan is based on a shared bonus pool. Return on investment (ROI) is used as the main performance metric and is calculated as: Operating profit before tax ÷ Assets at gross book value   Receipt of the incentive is dependent on the achievement of annual ROI targets. These targets were set in consultation with division managers. Moreover, the senior management team is rewarded on the basis of organisational ROI. The amount of bonus received by managers is determined as follows. The bonus pool is determined as:   $100 000 + 10% of increases in annual combined ROI   The bonus pool is shared 15 per cent to senior management (shared equally among 10 managers on the basis of organisational ROI), 50 per cent to divisional managers (shared among three managers according to divisional ROI) and 35 per cent to managers within the divisions (shared among 12 mangers according to divisional ROI). The bonus payment is in the form of cash. While some members of the management team have expressed concerns about the use of ROI as the key performance metric, the CEO is intent on keeping things simple and believes that ROI is a good summary measure on which to base senior management and divisional manager rewards. One of the senior managers, Sonia Lee, has become persistent in her objections to the current bonus scheme. She feels the scheme needs to reflect shareholder interests with suitable measures at each level of the company that reflect managers’ span of control and the right mix of incentives.   Required You have been asked to advise the board of Synergy Ltd on a possible new incentive plan that addresses the concerns of Sonia Lee. Prepare a report outlining the detail of your incentive plan. Make sure you explain how your plan addresses Sonia’s concerns.             (LO2 and 4)

Are taxpayers required to include all realized income in gross income? Explain.

Why should a taxpayer be interested in the character of income received?

How can the financial problems of one large bank affect the market’s risk evaluation of other large banks? (LO5)

Equivalent units under weighted average and FIFO Francisco’s mass-produces folding chairs in Port Sorrell. All direct materials are added at the beginning of production, and conversion costs are incurred evenly throughout production. The following production information is for the month of May:       Required (a)        Calculate the equivalent units used to calculate cost per unit under the weighted average method. (b)        Calculate the equivalent units used to calculate cost per unit under the FIFO method.

Determine the direction of bond prices over the last year and explain the reason for it. (LO1, LO2)

What is the difference between gross income and adjusted gross income, and what is the difference between adjusted gross income and taxable income?

How do taxpayers determine whether they should deduct their itemized deductions or utilize the standard deduction?