Question & Answer

Explain how the income generated by a mutual fund is taxed when the fund distributes at least 90 percent of its taxable income to shareholders. (LO1)

RNA Inc. manufactures a variety of consumer products. The company’s founders have run the company for 30 years and are now interested in retiring. Consequently, they are seeking a purchaser who will continue its operations, and a group of investors, Morgan Inc., is looking into the acquisition of RNA. To evaluate its financial stability and operating efficiency, RNA was requested to provide the latest financial statements and selected financial ratios. Summary information provided by RNA is as follows.     Instructions (a) Calculate a new set of ratios for the fiscal year 2015 for RNA based on the financial statements presented. (b) Explain the analytical use of each of the six ratios presented, describing what the investors can learn about RNA’s financial stability and operating efficiency. (c) Identify two limitations of ratio analysis.

1.      : How might the state control the accuracy of principals who are conducting teacher evaluations? Explain.

Who issues commercial paper? Which types of financial institutions issue commercial paper? Why do some firms create a department that can directly place commercial paper? Which criteria affect the decision to create such a department? (LO1)

Jose purchased a delivery van for his business through an online auction. His winning bid for the van was $24,500. In addition, Jose incurred the following expenses before using the van: shipping costs of $650; paint to match the other fleet vehicles at a cost of $1,000; registration costs of $3,200, which included $3,000 of sales tax and an annual registration fee of $200; wash and detailing for $50; and an engine tune-up for $250. What is Jose’s cost basis for the delivery van?

Support or refute the following statement: Investors can avoid all types of risk by purchasing a mutual fund that contains only Treasury bonds. (LO2)

Melissa recently paid $400 for round-trip airfare to San Francisco to attend a business conference for three days. Melissa also paid the following expenses: $250 fee to register for the conference, $300 per night for three nights’ lodging, $200 for meals, and $150 for cab fare.

Which way is the L2 curve likely to shift in the following cases? (a) The balance of trade moves into deficit. (b) People anticipate that foreign interest rates are likely to rise relative to domestic ones. (c) The domestic rate of inflation falls below that of other major trading countries. (d) People believe that the pound is about to depreciate.

Why do you consider that taxation authorities require an international             transfer price to be set based on an arm’s length transaction?

How does a weak dollar affect U.S. inflation? Explain. (LO2)

Compare the federal income tax to sales taxes using the “certainty” criterion.

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.

1.       : Describe specific ways that you might incorporate Twitter into an organization’s communication with customers. How about with employees?

JB Corporation is a C corporation owned 80 percent by Jacob and 20 percent by Bauer.  Jacob would like JB to make an S election, but Bauer is opposed to the idea.  Can JB elect to be taxed as an S corporation without Bauer’s consent?  Explain.

In 2024, Carson is claimed as a dependent on his parents’ tax return. His parents report taxable income of $200,000 (married filing jointly). Carson’s parents provided most of his support. What is Carson’s tax liability for the year in each of the following alternative circumstances?

When a taxpayer sells an asset, what is the difference between realized and recognized gain or loss on the sale?

Rex and Felix are the sole shareholders of the Dogs and Cats Corporation (DCC). After several years of operations using the accrual method, they decided to liquidate the corporation and operate the business as a partnership. Rex has a tax basis in his shares of $60,000 and Felix has a tax basis in his shares of $20,000. Rex and Felix hired a lawyer to draw up the legal papers to dissolve the corporation, but they need some tax advice from you, their trusted accountant. DCC’s tax accounting balance sheet at the date of liquidation is as follows:  AssetsTax BasisFMV Cash$30,000$30,000 Accounts receivable 10,000 10,000 Inventory 10,000 20,000 Equipment 30,000 20,000 Building 15,000 30,000 Land   5,000   40,000     Total assets $100,000 $150,000   Liabilities Accounts payable $5,000 Mortgage payable - Building 10,000 Mortgage payable - Land 10,000 Total liabilities $25,000   Stockholders’ Equity Common stock - Rex (80%)$100,000 Common stock - Felix (20%) 25,000   Total shareholders’ equity$125,000   Required: a) Compute the gain or loss recognized by Rex, Felix, and DCC on a complete liquidation of the corporation assuming each shareholder receives a pro rata distribution of the corporation’s assets and assumes a pro rata amount of the liabilities.

Analysis of WIP T-account Jasper Company uses a job costing system. Overhead is allocated based on 120 per cent of direct labour cost. Last month’s transactions in the work in process account are shown here:       Only one job, number 850, was still in process at the end of the month. Job 850 was charged with $9000 in overhead for the month.   Required (a)          What is the ending balance in the WIP account? (b)          How much direct labour cost was used for job 850? (c)           What is the amount of direct materials used for job 850?

Ekiya, who is single, has been offered a position as a city landscape consultant. The position pays $125,000 in wages. Assume Ekiya has no dependents. Ekiya deducts the standard deduction instead of itemized deductions, she is not eligible for the qualified business income deduction.   a. What is the amount of Ekiya’s after-tax compensation (ignore payroll taxes)?

What impact would an increase in potential output have on the DAS curve? How would the long-term rate of economic growth be reflected by the DAS curve?

Is a corporation’s choice of its tax year independent from its year-end for financial accounting purposes?

Evergreen Corporation (calendar-year-end) acquired the following assets during the current year:

Bobbie works as an employee for Altron Corp. for the first half of the year and for Betel Inc. for rest of the year. She is relatively well paid. What FICA tax issues is she likely to encounter?  What FICA tax issues do Altron Corp. and Betel Inc. need to consider?

Given your knowledge of how interest rates are influenced by various factors reflecting the demand for funds and the supply of funds available in the credit markets, write a short essay to explain how and why interest rates will change over the next three months.

Describe the appeal and the difficulties of investing in a franchise as a route to small business ownership.