Question & Answer

Ashlee, Hiroki, Kate, and Albee LLC each own a 25 percent interest in Tally Industries LLC, which generates annual gross receipts of over $10 million. Ashlee, Hiroki, and Kate manage the business, but Albee LLC is a nonmanaging member. Although Tally Industries has historically been profitable, for the last three years losses have been allocated to the members. Given these facts, the members want to know whether Tally Industries can use the cash method of accounting. Why or why not? [Hint: See §448(b)(3).]

Matheny Inc. went public 3 years ago. The board of directors will be meeting shortly after the end of the year to decide on a dividend policy. In the past, growth has been financed primarily through the retention of earnings. A stock or a cash dividend has never been declared. Presented below is a brief financial summary of Matheny Inc. operations. ($000 omitted) 2015 2014 2013 2012 2011 Sales revenue $20,000 $16,000 $14,000 $6,000 $4,000 Net income 2,400 1,400 800 700 250 Average total assets 22,000 19,000 11,500 4,200 3,000 Current assets 8,000 6,000 3,000 1,200 1,000 Working capital 3,600 3,200 1,200 500 400 Common shares: Number of shares  outstanding (000) 2,000 2,000 2,000 20 20 Average market price $9 $6 $4 — — Instructions (a) Suggest factors to be considered by the board of directors in establishing a dividend policy. (b) Compute the return on assets, profit margin on sales, earnings per share, price-earnings ratio, and current ratio for each of the 5 years for Matheny Inc. (c) Comment on the appropriateness of declaring a cash dividend at this time, using the ratios computed in part (b) as a major factor in your analysis.

If the central bank targets real national income rather than inflation, what will be the shape of the MP curve?

SCC corporation (a calendar-year C corporation) has a net operating loss (NOL) carryover to 2024 in the amount of $30,000.  How much tax will SCC pay for 2024 if it reports taxable income from operations of $20,000 before considering loss carryovers under the following assumptions?   a. The NOL originated in 2017.

How many times is income from a C corporation taxed if a retirement fund is the owner of the corporation’s stock? Explain.

Name the four forming processes listed in the video clip on sheet-metal stamping dies and processes

Discuss the different methods that an organisation can use to determine standard costs.

Use the information from BE7-2, assuming Restin Co. uses the net method to account for cash discounts. Prepare the required journal entries for Restin Co.

Dan Aykroyd Corp. was a 30% owner of Steve Martin Company, holding 210,000 shares of Martin’s common stock on December 31, 2013. The investment account had the following entries. Investment in Martin 1/1/12 Cost $3,180,000 12/6/12 Dividend received $150,000 12/31/12 Share of income 390,000 12/5/13 Dividend received 240,000 12/31/13 Share of income 510,000 On January 2, 2014, Aykroyd sold 126,000 shares of Martin for $3,440,000, thereby losing its significant influence. During the year 2014, Martin experienced the following results of operations and paid the following dividends to Aykroyd. Martin Dividends Paid Income (Loss) to Aykroyd 2014 $300,000 $50,400 At December 31, 2014, the fair value of Martin shares held by Aykroyd is $1,570,000. This is the first reporting date since the January 2 sale. Instructions (a) What effect does the January 2, 2014, transaction have upon Aykroyd’s accounting treatment for its investment in Martin? (b) Compute the carrying amount of the investment in Martin as of December 31, 2014 (prior to any fair value adjustment). (c) Prepare the adjusting entry on December 31, 2014, applying the fair value method to Aykroyd’s long-term investment in Martin Company securities.

What were some of the more obvious reasons for the savings institution crisis of the late 1980s? (LO6)

Besides high carbon content, what other alloying element is characteristic of the cast irons?

Explain whether a corporation’s assumption of shareholder liabilities will always constitute boot in a §351 transaction.

DiCenta Corporation reported net income of $270,000 in 2014 and had 50,000 shares of common stock outstanding throughout the year. Also outstanding all year were 5,000 shares of cumulative preferred stock, each convertible into 2 shares of common. The preferred stock pays an annual dividend of $5 per share. DiCenta’s tax rate is 40%. Compute DiCenta’s 2014 diluted earnings per share.

Jack operates a large home repair business as a sole proprietorship. Besides providing services, Jack also sells home repair supplies to homeowners. However, these sales constitute a relatively small portion of Jack’s income. Describe the conditions under which Jack would need to account for sales and purchases of plumbing supplies using the accrual method. (Hint: Read §471(c) and Reg. §1.471-1.)

Cathy, Heathcliff, and Isabelle are equal shareholders in Wuthering Heights (WH), an S corporation. Heathcliff has decided he would like to terminate the S election. In the following alternative scenarios, indicate whether the termination will occur and indicate the date if applicable (assume no alternative termination dates are selected).

Ray Albertson is 72 years old and lives by himself in an apartment in Salt Lake City.Ray’s gross income for the year is $3,000.Ray’s support is provided as follows:Himself (11 percent), his daughters Diane (20 percent) and Karen (15percent), his sons Mike (20 percent) and Kenneth (10 percent), his friend Milt (14 percent), and his cousin Henry (12 percent).Absent a multiple support agreement, of the parties mentioned in the problem, who may claim adependency exemption for Ray as a qualifying relative

Alan Meer inherits a hotel from his grandmother, Mary, on February 11 of the current year. Mary bought the hotel for $730,000 three years ago. Mary deducted $27,000 of cost recovery on the hotel before her death. The fair market value of the hotel in February is $725,000. (Assume that the alternative valuation date is not used.) a. What is Alan’s adjusted basis in the hotel? b. If the fair market value of the hotel at the time of Mary’s death was $500,000, what is Alan’s basis?

How does a corporation’s decision to pay dividends affect its overall tax rate?

What are the primary advantages of having a Codificationof generally accepted accounting principles?

On July 1, 2014, Roberts Corporation issued $3,000,000 of 9% bonds payable in 20 years. The bonds include detachable warrants giving the bondholder the right to purchase for $30 one share of $1 par value common stock at any time during the next 10 years. The bonds were sold for $3,000,000. The value of the warrants at the time of issuance was $100,000. Prepare the journal entry to record this transaction.

Describe the differences between a proportional, progressive, and regressive tax rate structure.

Describe the circumstances under which distributions from defined contribution plan are penalized. What are the penalties?

Explain the revenue recognition principle.

Horatio and Kelly were divorced at the end of last year.Neither Horatio nor Kelly remarried during the current year and Horatio moved out of state.Determine the filing status of Horatio and Kelly for the current year in the following independent situations: a.     Horatio and Kelly did not have any children and neither reported any dependents in the current year.   Horatio and Kelly will both file as single taxpayers.   b.    Horatio and Kelly had one child Amy, who turned 10 years of age in the current year.Amy lived with Kelly for all of the current year and Kelly provided all of her support.

Describe how a business adopts a permissible accounting method. Explain whether a taxpayer can adopt an impermissible accounting method.