Question & Answer

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

Foreman Company issued $800,000 of 10%, 20-year bonds on January 1, 2014, at 119.792 to yield 8%. Interest is payable semiannually on July 1 and January 1. Prepare the journal entries to record (a) the issuance of the bonds, (b) the payment of interest and the related amortization on July 1, 2014, and (c) the accrual of interest and the related amortization on December 31, 2014. (Round to the nearest dollar.)

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

Explain how CVP analysis can be used to make decisions about increases in advertising costs.

Journal entries Langley uses a job costing system. At the beginning of the month of June, two orders were in process as follows:       There was no inventory in finished goods on 1 June. During June, orders numbered 106 to 120 were put into process.   Direct materials requirements amounted to $13 000, direct labour costs for the month were $20 000, and actual manufacturing overhead recorded during the month amounted to $28 000.   The only order in process at the end of June was order 120, and the costs incurred for this order were $1150 of direct materials and $1000 of direct labour. In addition, order 118, which was 100 per cent complete, was still on hand as of 30 June. Total costs for this order were $3300. The entity's overhead allocation rate in June was the same as that used in May and is based on labour cost.   Required (a)    Prepare journal entries (with supporting calculations) to record the cost of goods manufactured, the cost of sales, and the closing of the overapplied or underapplied overhead to cost of sales. (b)   Describe the two different approaches to closing overapplied or underapplied overhead at the end of the period. How do you choose an appropriate method?

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?

1.              : How would you characterize Baker’s leadership style? What approach do you think is correct for this situation? Why?

What is the aspect ratio of a cubic particle shape?

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

Juan Diego began the year with a tax basis in his partnership interest of $50,000. During the year, he was allocated $20,000 of partnership ordinary business income, $70,000 of §1231 losses, $30,000 of short-term capital losses and received a cash distribution of $50,000. a. What items related to these allocations does Juan Diego actually report on his tax return for the year? [Hint: See Reg. §1.704-1(d)(2) and Rev. Rul. 66-94.] b. If any deductions or losses are limited, what are the carryover amounts, and what is their character? [Hint: See Reg. §1.704-1(d).]

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

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?

Presented below are two independent situations related to future taxable and deductible amounts resulting from temporary differences existing at December 31, 2014. 1. Mooney Co. has developed the following schedule of future taxable and deductible amounts. 2015 2016 2017 2018 2019 Taxable amounts $300 $300 $300 $ 300 $300 Deductible amount — — — (1,600) — 2. Roesch Co. has the following schedule of future taxable and deductible amounts. 2015 2016 2017 2018 Taxable amounts $300 $300 $ 300 $300 Deductible amount — — (2,300) — Both Mooney Co. and Roesch Co. have taxable income of $4,000 in 2014 and expect to have taxable income in all future years. The tax rates enacted as of the beginning of 2014 are 30% for 2014–2017 and 35% for years thereafter. All of the underlying temporary differences relate to noncurrent assets and liabilities. Instructions For each of these two situations, compute the net amount of deferred income taxes to be reported at the end of 2014, and indicate how it should be classified on the balance sheet.

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

How are the tax issues associated with home offices and vacation homes used as rentals similar? How are the tax issues or requirements dissimilar?

Jorge and Anita, married taxpayers, earn $150,000 in taxable income and $40,000 in interest from an investment in City of Heflin bonds.  Using the U.S. tax rate schedule for married filing jointly (see Example 1-3), how much federal tax will they owe?  What is their average tax rate?  What is their effective tax rate?  What is their current marginal tax rate?

} Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $20,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal tax rate is 32 percent this year and will be 37 percent next year, and that he can earn an after-tax rate of return of 12 percent on his investments. Should Hank send his client the bill in December or January?

Do you agree that, if some people gain and if no one loses, then this will be an ‘improvement’ in the well-being of society? Does it depend on who gains? Would it be possible for there to be an improvement in the well-being of society without there being a Pareto improvement?

Identify an industry that would have a high level of operating leverage. Briefly comment on your selection.

2. What are the advantages and disadvantages of presenting data graphically with the axes starting from zero?

Gary and Lakesha were married on December 31 last year. They are now preparing their taxes for the April 15 deadline and are unsure of their filing status. a.    What filing status options do Gary and Lakesha have for last year?

Assuming that liquidity and interest rate expectations are both important for explaining the shape of a yield curve, what does a flat yield curve indicate about the market’s perception of future interest rates? (LO3)

Explain how the Fed’s monetary policy may indirectly affect the prices of equity securities. (LO2)