Question & Answer

Solve Problem 20.26 except that the height = 60 mm

“The goal of tax planning is to minimize taxes.”  Explain why this statement is not true.

What are some of the key obstacles for the FASB and IASB within their accounting guidance in the area of cash flow reporting? Explain.

Visit your state’s official website and review the information there related to forming and operating business entities in your state. Write a short report explaining the steps for organizing a business in your state and summarizing any tax-related information you found.

The state of Georgia recently increased its tax on a pack of cigarettes by $2.  What type of tax is this?  Why might Georgia choose this type of tax?

Doctor Bones prescribed physical therapy in a pool to treat Jack’s broken back. In response to this advice (and for no other reason), Jack built a swimming pool in his backyard and strictly limited use of the pool to physical therapy. Jack paid $25,000 to build the pool, but he wondered if this amount could be deducted as a medical expense. Determine if a capital expenditure such as the cost of a swimming pool qualifies for the medical expense deduction.

with corporate headquarters in Pittsburgh, Pennsylvania, is one of the largest producers, transporters, distributors, and marketers of natural gas in North America. Periodically, the company experiences a decrease in the value of its gas- and oil-producing properties,and a special charge to income was recorded in order to reduce the carrying value of those assets. Assume the following information. In 2013, CNG estimated the cash inflows from its oil- and gasproducing properties to be $375,000 per year. During 2014, the write-downs described above caused the estimate to be decreased to $275,000 per year. Production costs (cash outflows) associated with all these properties were estimated to be $125,000 per year in 2013, but this amount was revised to $155,000 per year in 2014. Instructions (Assume that all cash flows occur at the end of the year.) (a) Calculate the present value of net cash flows for 2013–2015 (three years), using the 2013 estimates and a 10% discount factor. (b) Calculate the present value of net cash flows for 2014–2016 (three years), using the 2014 estimates and a 10% discount factor. (c) Compare the results using the two estimates. Is information on future cash flows from oil- and gasproducing properties useful, considering that the estimates must be revised each year? Explain.

What types of taxes qualify to be deducted as itemized deductions? Would a vehicle registration fee qualify as a deductible tax?

Timo is the sole owner of Jazz Inc., an S corporation.  On October 31, 2024, Timo executed an unsecured demand promissory note of $15,000 and transferred the note to Jazz (Jazz could require Timo to pay it $15,000 on demand).  When Timo transferred the note to Jazz, his tax basis in his Jazz stock was zero. On January 31, 2025, Timo paid the $15,000 to Jazz as required by the promissory note.  For the taxable year ending December 31, 2024, Jazz incurred a business loss of $12,000.  How much of the loss clears the stock and debt basis hurdles for deductibility?

On December 31, 2014, Mercantile Corp. had a $10,000,000, 8% fixed-rate note outstanding, payable in 2 years. It decides to enter into a 2-year swap with Chicago First Bank to convert the fixed-rate debt to variable-rate debt. The terms of the swap indicate that Mercantile will receive interest at a fixed rate of 8.0% and will pay a variable rate equal to the 6-month LIBOR rate, based on the $10,000,000 amount. The LIBOR rate on December 31, 2014, is 7%. The LIBOR rate will be reset every 6 months and will be used to determine the variable rate to be paid for the following 6-month period. Mercantile Corp. designates the swap as a fair value hedge. Assume that the hedging relationship meets all the conditions necessary for hedge accounting. The 6-month LIBOR rate and the swap and debt fair values are as follows. Date 6-Month LIBOR Rate Swap Fair Value Debt Fair Value December 31, 2014 7.0% — $10,000,000 June 30, 2015 7.5% (200,000) 9,800,000 December 31, 2015 6.0% 60,000 10,060,000 Instructions (a) Present the journal entries to record the following transactions. (1) The entry, if any, to record the swap on December 31, 2014. (2) The entry to record the semiannual debt interest payment on June 30, 2015. (3) The entry to record the settlement of the semiannual swap amount receivables at 8%, less amount payable at LIBOR, 7%. (4) The entry to record the change in the fair value of the debt on June 30, 2015. (5) The entry to record the change in the fair value of the swap at June 30, 2015. (b) Indicate the amount(s) reported on the balance sheet and income statement related to the debt and swap on December 31, 2014. (c) Indicate the amount(s) reported on the balance sheet and income statement related to the debt and swap on June 30, 2015. (d) Indicate the amount(s) reported on the balance sheet and income statement related to the debt and swap on December 31, 2015.

Identify some of the advantages of adhesive bonding compared to alternative joining methods.

1.    Social entrepreneurship is a growing phenomenon. Do you believe that for-profit businesses can have a social mission equal to their profit mission? Should they do so if it means hurting profits?

Two years ago, Kimberly became a 30 percent partner in the KST Partnership with a contribution of investment land with a $10,000 basis and $16,000 fair market value. On January 2 of this year, Kimberly has a $15,000 basis in her partnership interest, and none of her pre-contribution gain has been recognized. On January 2 Kimberly receives an operating distribution of a tract of land (not the contributed land) with a $12,000 basis and an $18,000 fair market value. a. What are the amount and character of Kimberly’s recognized gain or loss on the distribution? b. What is Kimberly’s remaining basis in KST after the distribution? c. What is KST’s basis in the land Kimberly contributed after Kimberly receives this distribution?

What is the technical difference between a screw and a bolt?

Consider the following tax rate structure.  Is it horizontally equitable?  Why or why not?  Is it vertically equitable?  Why or why

Juanita is the sole shareholder of Belize Corporation (a calendar-year S corporation).  She is considering revoking the S election.  It is February 1, year 1.  What options does Juanita have for timing the effective date of the S election revocation?

Campbell, a single taxpayer, earns $400,000 in taxable income and $2,000 in interest from an investment in State of New York bonds.  Using the U.S. tax rate schedule (see Appendix C), how much federal tax will she owe?  What is her average tax rate?  What is her effective tax rate?  What is her current marginal tax rate?

Explain how savings institutions could use interest rate swaps to reduce interest rate risk. Will SIs that use swaps perform better or worse than those that were unhedged during a period of declining interest rates? Explain. (LO4)

Grady received $8,200 of Social Security benefits this year. Grady also reported salary and interest income this year. What amount of the benefits must Grady include in his gross income under the following two independent situations?

Solve Problem 19.12 except that the operation is warm rolling and the strain-hardening exponent is 0.18. Assume the strength coefficient remains at 20,000 lb/in2 .

What is the nature of a “discount” on notes payable?

Explain why mutual funds are attractive to small investors. How can mutual funds generate returns to their shareholders? (LO1)

1.       : How would you apply systems thinking to a problem such as poor performance in your current academic studies? What about a problem with a romantic partner or family member? For each situation, try to identify all the elements and their interdependencies.

Sarazan Company issues a 4-year, 7.5% fixed-rate interest only, nonprepayable $1,000,000 note payable on December 31, 2013. It decides to change the interest rate from a fixed rate to variable rate and enters into a swap agreement with M&S Corp. The swap agreement specifies that Sarazan will receive a fixed rate at 7.5% and pay variable with settlement dates that match the interest payments on the debt. Assume that interest rates have declined during 2014 and that Sarazan received $13,000 as an adjustment to interest expense for the settlement at December 31, 2014. The loss related to the debt (due to interest rate changes) was $48,000. The value of the swap contract increased $48,000. Instructions (a) Prepare the journal entry to record the payment of interest expense on December 31, 2014. (b) Prepare the journal entry to record the receipt of the swap settlement on December 31, 2014. (c) Prepare the journal entry to record the change in the fair value of the swap contract on December 31, 2014. (d) Prepare the journal entry to record the change in the fair value of the debt on December 31, 2014.

1.    : Which do you think would be more effective for shaping long-term ethical behavior in an organization: a written code of ethics combined with ethics training or strong ethical leadership? Which would have more impact on you? Why?