Question & Answer

On June 3, Arnold Company sold to Chester Company merchandise having a sale price of $3,000 with terms of 2/10, n/60, f.o.b. shipping point. An invoice totaling $90, terms n/30, was received by Chester on June 8 from John Booth Transport Service for the freight cost. On June 12, the company received a check for the balance due from Chester Company. Instructions (a) Prepare journal entries on the Arnold Company books to record all the events noted above under each of the following bases. (1) Sales and receivables are entered at gross selling price. (2) Sales and receivables are entered at net of cash discounts. (b) Prepare the journal entry under basis 2, assuming that Chester Company did not remit payment until July 29.

Jackson Company adopts acceptable accounting for its defined benefit pension plan on January 1, 2013, with the following beginning balances: plan assets $200,000; projected benefit obligation $250,000. Other data relating to 3 years’ operation of the plan are as follows. 2013 2014 2015 Annual service cost $16,000 $ 19,000 $ 26,000 Settlement rate and expected rate of return 10% 10% 10% Actual return on plan assets 18,000 22,000 24,000 Annual funding (contributions) 16,000 40,000 48,000 Benefi ts paid 14,000 16,400 21,000 Prior service cost (plan amended, 1/1/14) 160,000 Amortization of prior service cost 54,400 41,600 Change in actuarial assumptions establishes a December 31, 2015, projected benefi t obligation of: 520,000 Instructions (a) Prepare a pension worksheet presenting all 3 years’ pension balances and activities. (b) Prepare the journal entries (from the worksheet) to reflect all pension plan transactions and events at December 31 of each year. (c) Indicate the pension-related amounts reported in the financial statements for 2015.

Name some of the important applications of FRPs.

Give an example of a transaction that results in: (a) A decrease in an asset and a decrease in a liability. (b) A decrease in one asset and an increase in another asset. (c) A decrease in one liability and an increase in another liability.

Hans runs a sole proprietorship. Hans has reported the following net §1231 gains and losses since he began business. Net §1231 gains shown are before the look-back rule.   Year Net §1231 Gains/(Losses) Year 1 ($65,000) Year 2 15,000 Year 3 0 Year 4 0 Year 5 10,000 Year 6 0 Year 7 (current year) 50,000   a. What amount, if any, of the year 7 (current year) $50,000 net §1231 gain is treated as ordinary income? b. Assume that the $50,000 net §1231 gain occurs in year 6 instead of year 7. What amount of the gain would be treated as ordinary income in year 6?

Virginia Corporation is a calendar-year corporation.  At the beginning of 2024, its election to be taxed as an S corporation became effective.  Virginia Corp.’s balance sheet at the end of 2023 reflected the following assets (it did not have any earnings and profits from its prior years as a C corporation). Asset Adjusted basis FMV Cash $20,000 $20,000 Accounts receivable 40,000 40,000 Inventory 90,000 200,000 Land 150,000 175,000   Totals $300,000 $435,000   In 2024, Virginia Corp. reported business income of $50,000 (this would have been its taxable income if it were still a C corporation). What is Virginia’s built-in gains tax in each of the following alternative scenarios?

Janet is a cash-basis calendar-year taxpayer.  She received a check for services provided in the mail during the last week of December.  However, rather than cash the check, Janet decided to wait until the following January because she believes that her delay will cause the income to be realized and recognized next year.  What would you tell her?  Would it matter if she didn’t open the envelope?  Would it matter if she refused to check her mail during the last week of December?  Explain.

At December 31, 2014, Higley Corporation has one temporary difference which will reverse and cause taxable amounts in 2015. In 2014, a new tax act set taxes equal to 45% for 2014, 40% for 2015, and 34% for 2016 and years thereafter. Instructions Explain what circumstances would call for Higley to compute its deferred tax liability at the end of 2014 by multiplying the cumulative temporary difference by: (a) 45%. (b) 40%. (c) 34%.

Several years ago, your client, Brooks Robinson, started an office-cleaning service. His business was very successful, owing much to his legacy as the greatest defensive third baseman in major league history and his nickname, “The Human Vacuum Cleaner.”  Brooks operated his business as a sole proprietorship and used the cash-basis method of accounting. Brooks was advised by his attorney that it is too risky to operate his business as a sole proprietorship and that he should incorporate to limit his liability. Brooks has come to you for advice on the tax implications of incorporation. His balance sheet is presented below. Under the terms of the incorporation, Brooks would transfer the assets to the corporation in return for 100 percent of the company’s common stock. The corporation would also assume the company’s liabilities (payables and mortgage).

Distinguish between a determinable current liability and a contingent liability. Give two examples of each type.

Molten metal can be poured into the pouring cup of a sand mold at a steady rate of 1000 cm3 /s. The molten metal overflows the pouring cup and flows into the downsprue. The cross section of the sprue is round, with a diameter at the top = 3.4 cm. If the sprue is 25 cm long, determine the proper diameter at its base so as to maintain the same volume flow rate.

Explain Congress’s rationale for depreciation recapture.

Super Corp. was organized under the laws of the state of Montana.  It issued common voting stock and common nonvoting stock to its two shareholders.  Is Super Corp. eligible to elect S corporation status?  Why or why not?

Indicate how the following items are recorded in the accounting records in the current year of Coronet Co. (a) Impairment of goodwill. (b) A change in depreciating plant assets from accelerated to the straight-line method. (c) Large write-off of inventories because of obsolescence. (d) Change from the cash basis to accrual basis of accounting. (e) Change from LIFO to FIFO method for inventory valuation purposes.

] Montana Max sells a 2,500-acre ranch for $1,000,000 in cash, a note receivable of $1,000,000, and debt relief of $2,400,000. He also pays selling commissions of $60,000. In addition, Max agrees to build a new barn on the property (cost $250,000) and spend $100,000 upgrading the fence on the property before the sale. What is Max’s amount realized on the sale?

1.    : How might Cody Sexton’s decision differ if he based it on the utilitarian approach versus individualism approach versus practical approach to ethical decision making? Which approach does he appear to be using?

Turtle Creek Partnership had the following revenues, expenses, gains, losses, and distributions: Sales revenue $40,000 Long-term capital gains $2,000 Cost of goods sold ($13,000) Depreciation - MACRS ($3,000) Amortization of organization costs ($1,000) Guaranteed payments to partners for general management ($10,000) Cash distributions to partners ($2,000)

The total solidification times of three casting shapes are to be compared: (1) a sphere, (2) a cylinder, in which the length-to-diameter ratio = 1.0, and (3) a cube. For all three geometries, the volume = 1000 cm3 . The same casting alloy is used in the three cases. (a) Determine the relative solidification times for each geometry. (b) Based on the results of part (a), which geometric element would make the best riser? (c) If the mold constant = 3.5 min/cm2 in Chvorinov's rule, compute the total solidification time for each casting.

Presented below are a number of independent situations. Instructions For each individual situation, determine the amount that should be reported as cash. If the item(s) is not reported as cash, explain the rationale. 1. Checking account balance $925,000; certificate of deposit $1,400,000; cash advance to subsidiary of $980,000; utility deposit paid to gas company $180. 2. Checking account balance $600,000; an overdraft in special checking account at same bank as normal checking account of $17,000; cash held in a bond sinking fund $200,000; petty cash fund $300; coins and currency on hand $1,350. 3. Checking account balance $590,000; postdated check from customer $11,000; cash restricted due to maintaining compensating balance requirement of $100,000; certified check from customer $9,800; postage stamps on hand $620. 4. Checking account balance at bank $37,000; money market balance at mutual fund (has checking privileges) $48,000; NSF check received from customer $800. 5. Checking account balance $700,000; cash restricted for future plant expansion $500,000; short-term Treasury bills $180,000; cash advance received from customer $900 (not included in checking account balance); cash advance of $7,000 to company executive, payable on demand; refundable deposit of $26,000 paid to federal government to guarantee performance on construction contract.

1.    Netflix has successfully adapted to a number of challenges in its industry. What do you see as some emerging opportunities and threats for the company?

What is the range of feature sizes of entities associated with nanotechnology?

Jeremy and Alyssa Johnson have been married for five years and do not have any children.  Jeremy was married previously and has one child from the prior marriage.  He is self-employed and operates his own computer repair store.  For the first two months of the year, Alyssa worked for Office Depot as an employee.  In March, Alyssa accepted a new job with Super Toys Inc. (ST), where she worked for the remainder of the year.  This year, the Johnsons received $255,000 of gross income.  Determine the Johnsons’ AGI for 2024 given the following information:

Draw a similar diagram to Figure 24.7 showing how the price of an individual good imported into country A is determined.

Hyundai is considering opening a plant in two neighboring states. One state has a corporate tax rate of 10 percent. If operated in this state, the plant is expected to generate $1,000,000 pretax profit. The other state has a corporate tax rate of 2 percent. If operated in this state, the plant is expected to generate $930,000 of pretax profit. Which state should Hyundai choose? Why do you think the plant in the state with a lower tax rate would produce a lower before-tax income?

Make out a case for adopting a policy of individual tradable carbon permits, allocated to all citizens within a country. Could such a policy be extended globally?