Question & Answer

Differentiate between “accounting for the employer” and “accounting for the pension fund.”

Identify the levels of packaging hierarchy in electronics.

Assume that a firm faces a downward-sloping demand curve. Draw a diagram showing the firm’s AR, MR, AC and MC curves. (Draw them in such a way that the firm can make supernormal profits.) Mark the following on the diagram:          (a)  The firm’s profit-maximising output and price.          (b)  Its sales-revenue-maximising output and price.          (c)  Its sales-maximising output and price (subject to earning at least normal profit).

Strickland Company owes $200,000 plus $18,000 of accrued interest to Moran State Bank. The debt is a 10-year, 10% note. During 2014, Strickland’s business deteriorated due to a faltering regional economy. On December 31, 2014, Moran State Bank agrees to accept an old machine and cancel the entire debt. The machine has a cost of $390,000, accumulated depreciation of $221,000, and a fair value of $180,000. Instructions (a) Prepare journal entries for Strickland Company and Moran State Bank to record this debt settlement. (b) How should Strickland report the gain or loss on the disposition of machine and on restructuring of debt in its 2014 income statement? (c) Assume that, instead of transferring the machine, Strickland decides to grant 15,000 shares of its common stock ($10 par) which has a fair value of $180,000 in full settlement of the loan obligation. If Moran State Bank treats Strickland’s stock as a trading investment, prepare the entries to record the transaction for both parties.

Simon lost $5,000 gambling this year on a trip to Las Vegas. In addition, he paid $2,000 to his broker for managing his $200,000 portfolio, and $1,500 to his accountant for preparing his tax return. In addition, Simon incurred $2,500 in transportation costs commuting back and forth from his home to his employer’s office, which were not reimbursed. Calculate the amount of these expenses that Simon is able to deduct (assuming he itemizes his deductions).

Explain how the prices of bonds were affected by a change in the risk-free rate during the Covid-19 pandemic that began in 2020. Explain how bond prices were affected by a change in the credit risk premium during this period. (LO2)

Schooling is free in state schools in most countries. If parents are given a choice of schools for their children, there will be a shortage of places at popular schools (the analysis will be the same as in Figure 3.8, with the number of places in a given school measured on the horizontal axis). What methods could be used for dealing with this shortage? What are their relative merits?

Grayson (single) is in the 24 percent tax rate bracket and has the sold the following stocks in 2024:

How do grain boundaries contribute to the strain hardening phenomenon in metals?

Which of the following will have positive signs and which will have negative ones? (a) price elasticity of demand; (b) income elasticity of demand (normal good); (c) income elasticity of demand (inferior good); (d) cross elasticity of demand (with respect to changes in price of a substitute good); (e) cross elasticity of demand (with respect to changes in price of a complementary good); (f) price elasticity of supply.

What is the present value of a machine that lasts three years, earns £100 in year 1, £200 in year 2 and £200 in year 3, and then has a scrap value of £100? Assume that the rate of discount is 5 per cent. If the machine costs £500, is the investment worthwhile? Would it be worthwhile if the rate of discount were 10 per cent?

] Brown Thumb Landscaping is a calendar-year, accrual-method taxpayer. In September, Brown Thumb negotiated a $14,000 contract for services it would provide to the city in November of the current year. The contract specifies that Brown Thumb will receive $4,000 in October as a down payment for these services, and it will receive the remaining $10,000 in January of next year.

In the absence of growth in the workforce what does the required investment per worker curve capture?

The Financial Accounting Standards Board (FASB) has developed a conceptual framework for financial accounting and reporting. The FASB has issued eight Statements of Financial Accounting Concepts. These statements are intended to set forth the objective and fundamentals that will be the basis for developing financial accounting and reporting standards. The objective identifies the goals and purposes of financial reporting. The fundamentals are the underlying concepts of financial accounting that guide the selection of transactions, events, and circumstances to be accounted for; their recognition and measurement; and the means of summarizing and communicating them to interested parties. The purpose of the statement on qualitative characteristics is to examine the characteristics that make accounting information useful. These characteristics or qualities of information are the ingredients that make information useful and the qualities to be sought when accounting choices are made. Instructions (a) Identify and discuss the benefits that can be expected to be derived from the FASB’s conceptual framework study. (b) What is the most important quality for accounting information as identified in the conceptual framework? Explain why it is the most important. (c) Statement of Financial Accounting Concepts No. 8 describes a number of key characteristics or qualities for accounting information. Briefly discuss the importance of any three of these qualities for financial reporting purposes.

On the last day of its current tax year, Buy Rite LLC received $300,000 when it sold a machine it had purchased for $200,000 three years ago to use in its business. At the time of the sale, the basis in the equipment had been reduced to $100,000 due to tax depreciation taken. How much did the members’ self-employment earnings from Buy Rite increase when the equipment was sold? [Hint: See §1402(a)(3).]

In light of the full disclosure principle, investors and creditors need to know the balances for assets, liabilities, and equity, as well as the accounting policies adopted by management to measure the items reported in the statement of financial position. Instructions Access the IFRS authoritative literature at the IASB website (http://eifrs.iasb.org/ ). (If necessary, click on the IFRS tab and then register for eIFRS free access.) When you have accessed the documents, you can use the search tool in your Internet browser to respond to the following questions. (Provide paragraph citations.) (a) Identify the literature that addresses the disclosure of accounting policies. (b) How are accounting policies defined in the literature? (c) What are the guidelines concerning consistency in applying accounting policies? (d) What are some examples of common disclosures that are required under this statement?

Explain the amortization convention applicable to intangible assets.

A firm under monopoly or oligopoly that aims to maximise sales revenue will tend to produce more than one that aims to maximise profits. Does this conclusion also apply under (a) perfect competition and (b) monopolistic competition, given that there is freedom of entry?

What are the tax return preparer’s standards to avoid a penalty for recommending a tax return position?

Is the eurozone an optimal currency area? Explain your answer.

Hank started a new business, Hank’s Donut World (HW for short) in June of last year. He has requested your advice on the following specific tax matters associated with HW’s first year of operations. Hank has estimated HW’s income for the first year as follows:  Revenue: Donut sales$ 252,000 Catering revenues   71,550$ 323,550  Expenditures: Donut supplies$ 124,240 Catering expense27,910 Salaries to shop employees52,500 Rent expense40,050 Accident insurance premiums8,400 Other business expenditures   6,850- 259,950 Net Income $  63,600 HW operates as a sole proprietorship, and Hank reports on a calendar year. Hank uses the cash method of accounting and plans to do the same with HW (HW has no inventory of donuts because unsold donuts are not salable). HW does not purchase donut supplies on credit, nor do they generally make sales on credit. Hank has provided the following details for specific first-year transactions. • A small minority of HW clients complained about the catering service. To mitigate these complaints, Hank’s policy is to refund dissatisfied clients 50 percent of the catering fee. By the end of the first year, only two HW clients had complained but had not yet been paid refunds. The expected refunds amount to $1,700, and Hank reduced the reported catering fees for the first year to reflect the expected refund.  • In the first year, HW received a $6,750 payment from a client for catering a monthly breakfast for 30 consecutive months beginning in December. Because the payment didn’t relate to last year, Hank excluded the entire amount when he calculated catering revenues.  • In July, HW paid $1,500 to ADMAN Co. for an advertising campaign to distribute fliers advertising HW catering service. Unfortunately, this campaign violated a city code restricting advertising by fliers, and the city fined HW $250 for the violation. HW paid the fine, and Hank included the fine and the cost of the campaign in “other business” expenditures.  • In July, HW also paid $8,400 for a 24-month insurance policy that covers HW for accidents and casualties beginning on August 1 of the first year. Hank deducted the entire $8,400 as accident insurance premiums. • On May of the first year, Hank signed a contract to lease the HW donut shop for 10 months. In conjunction with the contract, Hank paid $2,000 as a damage deposit and $8,050 for rent ($805 per month). Hank explained that the damage deposit was refundable at the end of the lease. At this time, Hank also paid $30,000 to lease kitchen equipment for 24 months ($1,250 per month). Both leases began on June 1 of the first year. In his estimate, Hank deducted these amounts ($40,050 in total) as rent expense. • Hank signed a contract hiring WEGO Catering to help cater breakfasts. At year-end, WEGO asked Hank to hold the last catering payment for the year, $9,250, until after January 1 (apparently because WEGO didn’t want to report the income on its tax return). The last check was delivered to WEGO in January after the end of the first year. However, because the payment related to the first year of operations, Hank included the $9,250 in last year’s catering expense. • Hank believes that the key to the success of HW has been hiring Jimbo Jones to supervise the donut production and manage the shop. Because Jimbo is such an important employee, HW purchased a “key-employee” term-life insurance policy on his life. HW paid a $5,100 premium for this policy, and it will pay HW a $40,000 death benefit if Jimbo passes away any time during the next 12 months. The term of the policy began on September 1 of last year, and this payment was included in “other business” expenditures. • In the first year, HW catered a large breakfast event to celebrate the city’s anniversary. The city agreed to pay $7,100 for the event, but Hank forgot to notify the city of the outstanding bill until January of this year. When he mailed the bill in January, Hank decided to discount the charge to $5,500. On the bill, Hank thanked the mayor and the city council for their patronage and asked them to “send a little more business our way.” This bill is not reflected in Hank’s estimate of HW’s income for the first year of operations. Required: a) Hank files his personal tax return on a calendar year, but he has not yet filed last year’s personal tax return, nor has he filed a tax return reporting HW’s results for the first year of operations. Explain when Hank should file the tax return for HW and calculate the amount of taxable income generated using the cash method by HW last year.  b) Determine the taxable income that HW will generate if Hank chooses to account for the business under the accrual method.  c) Describe how your solution might change if Hank incorporated HW before he commenced business last year.

From the late 1960s through to 2000 the share of capital spending in total public-sector spending in the UK fell. What could have driven this change and does the composition of public spending matter?

One way to classify forging operations is by the degree to which the work is constrained in the die. By this classification, name the three basic types.

] Paul Vote purchased the following assets this year (ignore §179 expensing and bonus depreciation when answering the questions below): Asset Purchase Date Basis Machinery May 12 $23,500  Computers August 13 $20,000  Warehouse December 13 $180,000  a. What is Paul’s allowable MACRS depreciation for the property? b. What is Paul’s allowable alternative minimum tax (AMT) depreciation for the property? You will need to find the AMT depreciation tables to compute the depreciation.

Why and how did the Fed intervene in the commercial paper market during the 2008 credit crisis? (LO3)