Question & Answer

In its first year of existence, SMS, an S corporation, reported a business loss of $10,000. Sewon, SMS’s sole shareholder, reports $50,000 of taxable income from sources other than SMS. What must you know in order to determine whether she can deduct the $10,000 loss against her other income? Explain.

A bending operation is to be performed on 4.0 mm thick cold-rolled steel sheet that is 25 mm wide and 100 mm long. The sheet is bent along the 25 mm direction, so that the bend is 25 mm long. The resulting sheet metal part has an acute angle of 30° and a bend radius of 6 mm. Determine (a) the bend allowance and (b) the length of the neutral axis of the part after the bend. (Hint: the length of the neutral axis before the bend = 100.0 mm).

In an exchange of services, income has been received in the amount of the value of services received (gross income includes the receipt of services as well as money and goods).  Hence, Jim is taxed on the $275 of car repair services.  b.       The issue is whether the \"credit\" represents a valuable right.  Because the right could be redeemed for property worth $150, then under constructive receipt Jim should recognize income of $150.  c.       If a barter credit can only be redeemed for future services, then the taxpayer could argue that no realization has yet occurred.  But, it would be included in his gross income next year when the credit becomes a valuable right.   In an exchange of services, income has been received in the amount of the value of services received (gross income includes the receipt of services as well as money and goods).  Hence, Jim is taxed on the $275 of car repair services.  b.       The issue is whether the \"credit\" represents a valuable right.  Because the right could be redeemed for property worth $150, then under constructive receipt Jim should recognize income of $150.  c.       If a barter credit can only be redeemed for future services, then the taxpayer could argue that no realization has yet occurred.  But, it would be included in his gross income next year when the credit becomes a valuable right.

One common argument for imposing so-called sin taxes is the social goal of reducing demand for such products.  Using cigarettes as an example, is there a segment of the population that might be sensitive to price and for whom high taxes might discourage purchases?

Should governments or regulators always attempt to eliminate the supernormal profits of monopolists/ oligopolists?

Under what circumstances would you expect the after-tax return from an investment in a capital asset to approach that of tax-exempt assets assuming equal before-tax rates of return?

Do you think that this is an accurate description of how people behave when they acquire extra money?

What types of business entities are taxed as flow-through entities?

Describe the characteristics of subprime mortgages. Why were mortgage companies aggressively offering subprime mortgages before the credit crisis? (LO5)

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

Agua Linda, Inc., is a calendar-year corporation. What is the original due date for the corporate tax return? What happens if the original due date falls on a Saturday?

Compare the minimum distribution requirements for traditional IRAs to those of Roth IRAs.

The major classifications of activities reported in the statement of cash flows are operating, investing, and financing. Classify each of the transactions listed below as: 1. Operating activity—add to net income. 2. Operating activity—deduct from net income. 3. Investing activity. 4. Financing activity. 5. Reported as significant noncash activity. The transactions are as follows. (a) Issuance of common stock. (h) Payment of cash dividends. (b) Purchase of land and building. (i) Exchange of furniture for office equipment. (c) Redemption of bonds. (j) Purchase of treasury stock. (d) Sale of equipment. (k) Loss on sale of equipment. (e) Depreciation of machinery. (l) Increase in accounts receivable during the year. (f) Amortization of patent. (m) Decrease in accounts payable during the year. (g) Issuance of bonds for plant assets.

Is it easier to describe what a capital asset is or what it is not?Explain

What is the difference between a machining center and a turning center?

Identify the two significant disadvantages of electrochemical machining.

Archer Company issued $4,000,000 par value, 7% convertible bonds at 99 for cash. The net present value of the debt without the conversion feature is $3,800,000. Prepare the journal entry to record the issuance of the convertible bonds.

If everyone’s incomes rose in line with inflation, would it matter if inflation were 100 per cent or even 1000 per cent per annum?

Faith Evans Corporation is a regional company which is an SEC registrant. The corporation’s securities are thinly traded on NASDAQ. Faith Evans Corp. has issued 10,000 units. Each unit consists of a $500 par, 12% subordinated debenture and 10 shares of $5 par common stock. The investment banker has retained 400 units as the underwriting fee. The other 9,600 units were sold to outside investors for cash at $880 per unit. Prior to this sale, the 2-week ask price of common stock was $40 per share. Twelve percent is a reasonable market yield for the debentures, and therefore the par value of the bonds is equal to the fair value. Instructions (a) Prepare the journal entry to record Evans’ transaction, under the following conditions. (1) Employing the incremental method. (2) Employing the proportional method, assuming the recent price quote on the common stock reflects fair value. (b) Briefly explain which method is, in your opinion, the better method.

Vande Velde Company made three investments during 2014. (1) It purchased 1,000 shares of Sastre Company, a start-up company. Vande Velde made the investment based on valuation estimates from an internally developed model. (2) It purchased 2,000 shares of GE stock, which trades on the NYSE. (3) It invested $10,000 in local development authority bonds. Although these bonds do not trade on an active market, their value closely tracks movements in U.S. Treasury bonds. Where will Vande Velde report these investments in the fair value hierarchy?

What policy prescriptions could be recommended for an economy experiencing a balance sheet recession?

Distinguish between primary and secondary markets. Distinguish between money and capital markets. (LO2)

Describe the difference in mechanical properties as a function of temperature between a highly crystalline thermoplastic and an amorphous thermoplastic.

When the UK joined the ERM in 1990, it was hoped that this would make speculation pointless. As it turned out, speculation forced the UK to leave the ERM in 1992. Can you reconcile this with the argument that fixed rates discourage speculation?

How do changing tax rates affect the timing strategy? What information do you need to determine the appropriate timing strategy when tax rates change?