Question & Answer

Explain the two limitations placed on the §179 deduction. How are they similar? How are they different?

The Simon Corporation issued 10-year, $5,000,000 par, 7% callable convertible subordinated debentures on January 2, 2014. The bonds have a par value of $1,000, with interest payable annually. The current conversion ratio is 14:1, and in 2 years it will increase to 18:1. At the date of issue, the bonds were sold at 98. Bond discount is amortized on a straightline basis. Simon’s effective tax was 35%. Net income in 2014 was $9,500,000, and the company had 2,000,000 shares outstanding during the entire year. Instructions (a) Prepare a schedule to compute both basic and diluted earnings per share. (b) Discuss how the schedule would differ if the security was convertible preferred stock.

Tweedie Company issues 10,000 shares of restricted stock to its CFO, Mary Tokar, on January 1, 2014. The stock has a fair value of $500,000 on this date. The service period related to this restricted stock is 5 years. Vesting occurs if Tokar stays with the company until December 31, 2018. The par value of the stock is $10. At December 31, 2014, the fair value of the stock is $450,000. Instructions (a) Prepare the journal entries to record the restricted stock on January 1, 2014 (the date of grant), and December 31, 2015. (b) On July 25, 2018, Tokar leaves the company. Prepare the journal entry (if any) to account for this forfeiture.

1.      : Do you think a more participative and open culture can be imposed on managers with value statements and training sessions? Why or why not?

} 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?

Brooke, a single taxpayer, works for Company A for all of 2024, earning a salary of $50,000.     a. What is her FICA tax obligation for the year?

Bella Partnership is an equal partnership in which each of the partners has a basis in their partnership interest of $10,000. Bella reports the following balance sheet: Assets: Tax Basis FMV Inventory $ 20,000 $ 30,000 Land 10,000 15,000    Totals $ 30,000 $ 45,000 Liabilities and capital: Capital- Toby 10,000 - Kaelin 10,000 - Andrew 10,000   Totals $ 30,000 a. Identify the hot assets if Toby decides to sell his partnership interest. Are these assets “hot” for purposes of distributions? b. If Bella distributes the land to Toby in complete liquidation of his partnership interest, what tax issues should be considered?

Perez Company reported an increase in inventories in the past year. Discuss the effect of this change on the current ratio (current assets 4 current liabilities). What does this tell a statement user about Perez Company’s liquidity?

Explain the relationships among culture, corporate values, and business performance, and describe the tools a cultural leader can use to create a high-performance culture.

Using the IRS Web site (https://www.irs.gov/pub/irs-pdf/p5869.pdf), how large is the current estimated “tax gap” (i.e., the amount of tax underpaid by taxpayers annually) for years 2020-2021? What group of taxpayers represents the largest “contributors” to the tax gap?

Gopher Corporation reported taxable income of $500,000 this year.  Gopher paid a dividend of $100,000 to its sole shareholder, Sven Anderson. The dividend meets the requirements to be a qualified dividend, and Sven is subject to a tax rate of 15 percent on the dividend. What income tax is imposed on the corporate income earned by Gopher and the income tax on the dividend distributed to Sven?

What is the difference between a roving and a yarn?

Design the nominal sizes of a GO/NO-GO snap gage to inspect the diameter of a shaft that is 30.00 ± 0.18 mm. A wear allowance of 3% of the entire tolerance band is applied to the GO side. Determine (a) the nominal size of the GO gage including the wear allowance and (b) the nominal size of the NO-GO gage

Deluxe Ezra Company purchases equipment on January 1, Year 1, at a cost of $469,000. The asset is expected to have a service life of 12 years and a salvage value of $40,000. Instructions (a) Compute the amount of depreciation for each of Years 1 through 3 using the straight-line depreciation method. (b) Compute the amount of depreciation for each of Years 1 through 3 using the sum-of-the-years’- digits method. (c) Compute the amount of depreciation for each of Years 1 through 3 using the double-declining-balance method. (In performing your calculations, round constant percentage to the nearest one-hundredthof a point and round answers to the nearest dollar.)

Explain the difference between the proportional method and the incremental method of allocating the proceeds of lump-sum sales of capital stock.

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

Describe how purchased goodwill leads to temporary book-tax differences.

Mechanical surface treatments are often performed for reasons other than or in addition to cleaning. What are the reasons?

Farve Inc. recently elected S corporation status.  At the time of the election, the company had $10,000 of accumulated earnings and profits and a net unrealized gain of $1,000,000 associated with land it had invested in (although some parcels had an unrealized loss).  In the next couple of years, most of the income the company expects to generate will be in the form of interest and dividends (approximately $200,000 per year).  However, in the future, the company will want to liquidate some of its current holdings in land and possibly reinvest in other parcels.  What strategies can you recommend for Farve Inc. to help reduce its potential tax liability as an S corporation?

How much flexibility do partnerships have in allocating partnership items to partners?

Explain how each of the following would use banker’s acceptances: (a) exporting firms, (b) importing firms, (c) commercial banks, and (d) investors. (LO1)

David and Lilly Fernandez have determined their tax liability on their joint tax return to be $1,700. They have made prepayments of $1,500 and also have a child tax credit of $1,000.What is the amount of their tax refund or taxes due?

Under what circumstances does property received by a corporation in a §351 transaction not receive a carryover basis?  What is the reason for this rule?

Assume Rita’s consulting business generated $15,000 in gross income.

How is the present value of a non-interest-bearing note computed?