Question & Answer

If the government increases the tax on a litre of petrol by 5p, what will determine the amount by which the price of petrol will go up as a result of this tax increase?

How might expectations of higher prices in the United States affect the demand for loanable funds, the supply of loanable funds, and interest rates in the United States? Offer a logical explanation of why such an impact on interest rates in the United States might spread to other countries. (LO1, LO2)

1.    : TikTok, a Chinese video-sharing social networking service, was founded in 2012 and became available in the United States in 2018. TikTok is wildly popular, with a global reach mostly among 16- to 24-year-olds. Why and how might a company such as TikTok want to use contingency planning? Scenario planning? Discuss.

Why is a preemptive right important?

Why may a steeply progressive income tax which is designed to achieve greater vertical equity lead to a reduction in horizontal equity?

Another example of anchoring is partial computation. Assume two different groups of people are given 5 seconds to find the product of eight numbers. The calculation is presented to the first group in ascending order (1 ´ 2 ´ 3 ´ 4 ´ 5 ´ 6 ´ 7 ´ 8) and to the second group in descending order (8 ´ 7 ´ 6 ´ 5 ´ 4 ´ 3 ´ 2 ´ 1). Which group do you think will give the most accurate answers? Explain your reasoning.

Copy Figures 6.17 and 6.18 (which are based on Table 6.8). Now assume that incomes have risen and that as a result two more units per time period can be sold at each price. Draw a new table and plot the resulting new AR, MR and TR curves on your diagrams. Are the new curves parallel to the old ones? Explain.

In Figure 24.6, which countries’ terms of trade improved in the 2000s?

If Ollie were to consume more and more crisps, would his total utility ever (a) fall to zero; (b) become negative? Explain.

For what reasons are plant assets retired? Define inadequacy, supersession, and obsolescence.

Compare and contrast for and from AGI deductions. Why are for AGI deductions likely more valuable to taxpayers than from AGI deductions?

The Volcker Rule is intended to prevent banks from engaging in proprietary trading. Write a short essay offering your opinion on whether banks should be allowed to engage in proprietary trading.

Explain the similarities and differences between support department costs and manufacturing overhead costs.

What would the process of adjustment to the unanticipated size of the increase in aggregate demand look like if people had adjusted their inflationary expectation upwards from zero but to a rate less than p1?

Jack, a geologist, had been debating for years whether or not to venture out on his own and operate his own business. He had developed a lot of solid relationships with clients, and he believed that many of them would follow him if he were to leave his current employer. As part of a New Year’s resolution, Jack decided he would finally do it. Jack put his business plan together, and on January 1 of this year, Jack opened his doors for business as a C corporation called Geo-Jack (GJ). Jack is the sole shareholder. Jack reported the following financial information for the year (assume GJ reports on a calendar year, uses the accrual method of accounting, and elects to account for inventory).  a) In January, GJ rented a small business office about 12 miles from Jack’s home. GJ paid $10,000, which represented a damage deposit of $4,000 and rent for two years ($3,000 annually). b) GJ earned and collected $290,000 performing geological-related services and selling its specialized digging tool [see part (i)]. c) GJ received $50 interest from municipal bonds and $2,100 interest from other investments. d) GJ purchased some new equipment in February for $42,500. It claimed depreciation on these assets during the year in the amount of $6,540. e) GJ paid $7,000 to buy luxury season tickets for Jack’s parents for State University football games. f) GJ paid Jack’s father $10,000 for services that would have cost no more than $6,000 if Jack had hired any other local business to perform the services. While Jack’s dad was competent, he does not command such a premium from his other clients. g) In an attempt to get his name and new business recognized, GJ paid $7,000 for a one-page ad in the Geologic Survey. It also paid $15,000 in radio ads to be run through the end of December. h) GJ leased additional office space in a building downtown. GJ paid rent of $27,000 for the year. i) In November, Jack’s office was broken into, and equipment valued at $5,000 was stolen. The tax basis of the equipment was $5,500. Jack received $2,000 of insurance proceeds from the theft. j) GJ incurred a $4,000 fine from the state government for digging in an unauthorized digging zone. k) GJ contributed $3,000 to lobbyists for their help in persuading the state government to authorize certain unauthorized digging zones. l) On July 1, GJ paid $1,800 for an 18-month insurance policy for its business equipment. The policy covers the period July 1 of this year through December 31 of next year. m) GJ borrowed $20,000 to help with the company’s initial funding needs. GJ used $2,000 of the funds to invest in municipal bonds. At the end of the year, GJ paid the $1,200 of interest expense that accrued on the loan during the year. n) Jack lives 12 miles from the office. He carefully tracked his mileage and drove his truck 6,280 miles between the office and his home. He also drove an additional 7,200 miles between the office and traveling to client sites. Jack did not use the truck for any other purposes. He did not keep track of the specific expenses associated with the truck. However, while traveling to a client site, Jack received a $150 speeding ticket. GJ reimbursed Jack for business mileage and for the speeding ticket. o) GJ purchased two season tickets (20 games) to attend State University baseball games for a total of $1,100. Jack took existing and prospective clients to the games to maintain contact and find further work. This was very successful for Jack as GJ gained many new projects through substantial discussions with the clients following the games. p) GJ paid $3,500 for meals when sales employees met with prospective clients. q) GJ had a client who needed Jack to perform work in Florida. Because Jack had never been to Florida before, he booked an extra day and night for sightseeing. Jack spent $400 for airfare and booked a hotel for 3 nights ($120/night). (Jack stayed two days for business purposes and one day for personal purposes.) He also rented a car for $45 per day. The client provided Jack’s meals while Jack was doing business, but GJ paid all expenses. r) GJ paid a total of $10,000 of wages to employees during the year, and cost of goods sold was $15,000.  Required: a) What is GJ’s net business income for tax purposes for the year? b) As a C corporation, does GJ have a required tax year? If so, what would it be? c) If GJ were a sole proprietorship, would it have a required tax year-end? If so, what would it be? d) If GJ were an S corporation, would it have a required tax year-end? If so, what would it be?

If banks choose to operate a 20 per cent liquidity ratio and receive extra cash deposits of £10 million: (a)  how much credit will ultimately be created? (b)  by how much will total deposits have expanded? (c)  what is the size of the bank deposits multiplier?

What are the major uses of the gross profit method?

Explain the guidelines for credit rating agencies that resulted from the Financial Reform Act of 2010. (LO2)

Explain how the investment account is affected by investee activities under the equity method.

Solve Problem 20.15 except that the operation is performed using a wiping die with die opening dimension = 0.75 in.

What are some of the general defects encountered in casting processes? Name and briefly describe three

Under what circumstances would an expansionary fiscal policy have no effect at all on national income?

What are some of the challenges to the FASB and IASB in developing a converged conceptual framework?

What role does debt basis play in determining the taxability of operating distributions to S corporation shareholders?

1.       An organizational consultant said, “Some aspect of functional structure appears in every organization.” Do you agree? Explain.