Question & Answer

Jerry is a 30 percent partner in the JJM Partnership when he sells his entire interest to Lucia for $56,000 cash. At the time of the sale, Jerry’s basis in JJM is $32,000. JJM does not have any debt or hot assets. What is Jerry’s gain or loss on the sale of his interest?

You manage a hotel resort located on the South Beach on the Island of Kauai in Hawaii. You are shifting the focus of your resort from a traditional fun-in-the-sun destination to eco-tourism. (Eco-tourism focuses on environmental awareness and education.) How would you classify the following projects in terms of compliance, strategic, and operational?   a.   Convert the pool heating system from electrical to solar power. b.   Build a 4-mile nature hiking trail. c.   Renovate the horse barn. d.   Launch a new promotional campaign with Hawaii Airlines. e.   Convert 12 adjacent acres into a wildlife preserve. f.    Update all the bathrooms in condos that are 10 years or older. g.   Change hotel brochures to reflect eco-tourism image. h.   Test and revise disaster response plan.                                                         How easy was it to classify these projects? What made some projects more difficult than others?

Kleckner Company started operations in 2010. Although it has grown steadily, the company reported accumulated operating losses of $450,000 in its first four years in business. In the most recent year (2014), Kleckner appears to have turned the corner and reported modest taxable income of $30,000. In addition to a deferred tax asset related to its net operating loss, Kleckner has recorded a deferred tax asset related to product warranties and a deferred tax liability related to accelerated depreciation. Given its past operating results, Kleckner has established a full valuation allowance for its deferred tax assets. However, given its improved performance, Kleckner management wonders whether the company can now reduce or eliminate the valuation allowance. They would like you to conduct some research on the accounting for its valuation allowance. Instructions If your school has a subscription to the FASB Codification, go to http://aaahq.org/ascLogin.cfm to log in and prepare responses to the following. Provide Codification references for your responses. (a) Briefly explain to Kleckner management the importance of future taxable income as it relates to the valuation allowance for deferred tax assets. (b) What are the sources of income that may be relied upon to remove the need for a valuation allowance? (c) What are tax-planning strategies? From the information provided, does it appear that Kleckner could employ a tax-planning strategy to support reducing its valuation allowance?

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

A cylindrical workpart with D = 2.5 in and h = 2.5 in is upset forged in an open die to a height = 1.5 in. Coefficient of friction at the die-work interface = 0.10. The work material has a flow curve defined by: K = 40,000 lb/in2 and n = 0.15. Yield strength = 15,750 lb/in2. Determine the instantaneous force in the operation (a) just as the yield point is reached (yield at strain = 0.002), (b) at height h = 2.3 in, (c) h = 2.1 in, (d) h = 1.9 in, (e) h = 1.7 in, and (f) h = 1.5 in. Use of a spreadsheet calculator is recommended.

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

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

{Research} Ralph owns a building that he is trying to lease.  Ralph is a calendar-year, cash method taxpayer and is trying to evaluate the tax consequences of three different lease arrangements.  Under lease 1, the building rents for $500 per month, payable on the first of the next month, and the tenant must make a $500 security deposit that is refunded at the end of the lease.  Under lease 2, the building rents for $5,500 per year, payable at the time the lease is signed, but no security deposit is required.  Under lease 3, the building rents for $500 per month, payable at the beginning of each month, and the tenant must pay a security deposit of $1,000 that is to be applied toward the rent for the last two months of the lease.  a.       What amounts are included in Ralph’s gross income this year if a tenant signs lease 1 on December 1 and makes timely payments under that lease?  b.       What amounts are included in Ralph’s gross income this year if the tenant signs lease 2 on December 31 and makes timely payments under that lease?   c.       What amounts are included in Ralph’s gross income this year if the tenant signs lease 3 on November 30 and makes timely payments under that lease?

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

1.       : Can intuition and evidence-based decision making coexist as valid approaches within an organization? How might managers combine their intuition with a rational, data-driven, evidence-based approach?

Explain why diversification across different types of mutual funds is highly recommended. (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?

Why are some deductions called “abovetheline” deductions and others called “belowtheline” deductions?What is the “line”?

Will students in receipt of a loan, grant or an allowance who receive the money once per term have a high or a low transactions demand for money relative to their income?

A 7-station transfer line has been observed over a 40-hour period. The process times at each station are as follows: station 1, 0.80 min; station 2, 1.10 min; station 3, 1.15 min; station 4, 0.95 min; station 5, 1.06 min; station 6, 0.92 min; and station 7, 0.80 min. The transfer time between stations = 6 sec. The number of downtime occurrences = 110, and hours of downtime = 14.5 hours. Determine (a) the number of parts produced during the week, (b) the average actual production rate in parts/hour, and (c) the line efficiency. (d) If the balancing efficiency were computed for this line, what would its value be?

1. The following table shows data for a monopsonist employer. Fill in the missing figures. How many workers should the firm employ if it wishes to maximise profits? 2. Will a monopsony typically also be a monopoly? Try to think of some examples of monopsonists that are not monopolists, and monopolists that are not monopsonists.

Using the facts in problem 52, what is the minimum tax that Pedro should pay to make the tax structure vertically equitable based on the tax rate paid?  This would result in what type of tax rate structure?

Compare and contrast the relationship test requirements for a qualifying child with the relationship requirements for a qualifying relative.

In general terms, what are the differences in the rules for determining who is a qualifying child and who qualifies as a dependent as a qualifying relative?Is it possible for someone to be a qualifying child and a qualifying relative of the same taxpayer?Why or why not?

Karen is the sole shareholder of a calendar-year-end C corporation she formed last year. If she elects S corporation status this year on February 20, when will the election become effective and why?  What if she had made the election on March 20?

The following information is available for the pension plan of Radcliffe Company for the year 2014. Actual and expected return on plan assets $ 15,000 Benefi ts paid to retirees 40,000 Contributions (funding) 90,000 Interest/discount rate 10% Prior service cost amortization 8,000 Projected benefi t obligation, January 1, 2014 500,000 Service cost 60,000 Instructions (a) Compute pension expense for the year 2014. (b) Prepare the journal entry to record pension expense and the employer’s contribution to the pension plan in 2014.

Would a corporation with a small amount of current-year taxable income (before the net operating loss deduction) and a large net operating loss carryover have a tax liability for the current year?  Explain.

Is a qualifying relative always a qualifying person for purposes of determining head of household filing status?

The following comments were made at an Annual Conference of the Financial Executives Institute (FEI). There is an irreversible movement toward the harmonization of financial reporting throughout the world. The international capital markets require an end to: 1. The confusion caused by international companies announcing different results depending on the set of accounting standards applied. 2. Companies in some countries obtaining unfair commercial advantages from the use of particular national accounting standards. 3. The complications in negotiating commercial arrangements for international joint ventures caused by different accounting requirements. 4. The inefficiency of international companies having to understand and use a myriad of different accounting standards depending on the countries in which they operate and the countries in which they raise capital and debt. Executive talent is wasted on keeping up to date with numerous sets of accounting standards and the never-ending changes to them. 5. The inefficiency of investment managers, bankers, and financial analysts as they seek to compare financial reporting drawn up in accordance with different sets of accounting standards. Instructions (a) What is the International Accounting Standards Board? (b) What stakeholders might benefit from the use of International Accounting Standards? (c) What do you believe are some of the major obstacles to convergence?