Question & Answer

Tones Industries has the following patents on its December 31, 2013, balance sheet. Patent Item Initial Cost Date Acquired Useful Life at Date Acquired Patent A $30,600 3/1/10 17 years Patent B $15,000 7/1/11 10 years Patent C $14,400 9/1/12 4 years The following events occurred during the year ended December 31, 2014. 1. Research and development costs of $245,700 were incurred during the year. 2. Patent D was purchased on July 1 for $36,480. This patent has a useful life of 9½ years. 3. As a result of reduced demands for certain products protected by Patent B, a possible impairment of Patent B’s value may have occurred at December 31, 2014. The controller for Tones estimates the expected future cash flows from Patent B will be as follows. Year Expected Future Cash Flows 2015 $2,000 2016 2,000 2017 2,000 The proper discount rate to be used for these flows is 8%. (Assume that the cash flows occur at the end of the year.) Instructions (a) Compute the total carrying amount of Tones’ patents on its December 31, 2013, balance sheet. (b) Compute the total carrying amount of Tones’ patents on its December 31, 2014, balance sheet.

What is a tolerance?

Explain how pension plans provide tax benefits. (LO3)

Hyundai is considering opening a plant in two neighboring states. One state has a corporate tax rate of 10 percent. If operated in this state, the plant is expected to generate $1,000,000 pretax profit. The other state has a corporate tax rate of 2 percent. If operated in this state, the plant is expected to generate $930,000 of pretax profit. Which state should Hyundai choose? Why do you think the plant in the state with a lower tax rate would produce a lower before-tax income?

What are dark pools? How can they help investors accumulate shares without other investors knowing about the trades? Why are dark pools criticized by public stock exchanges? Explain the strategy used by public stock exchanges to compete with dark pools. (LO2)

1.    : If you are the CEO of a global company, how might you determine whether a globalization, multidomestic, or glocalization strategy would work best for your enterprise? What factors would influence your decision?

Using the IRS Web site (https://www.irs.gov/pub/irs-pdf/p5869.pdf), how large is the current estimated “tax gap” (i.e., the amount of tax underpaid by taxpayers annually) for years 2020-2021? What group of taxpayers represents the largest “contributors” to the tax gap?

Explain the relationships among culture, corporate values, and business performance, and describe the tools a cultural leader can use to create a high-performance culture.

Given your knowledge of how interest rates are influenced by various factors reflecting the demand for funds and the supply of funds available in the credit markets, write a short essay to explain how and why interest rates will change over the next three months.

List the reasons for each of the three factors above. (Re-read section 10.2 and Box 10.7 if you need help.)

Describe how purchased goodwill leads to temporary book-tax differences.

Consider situations where you might consider swapping items with someone. Why are such situations relatively rare? Can you think of circumstances in which this might be more common?

Deluxe Ezra Company purchases equipment on January 1, Year 1, at a cost of $469,000. The asset is expected to have a service life of 12 years and a salvage value of $40,000. Instructions (a) Compute the amount of depreciation for each of Years 1 through 3 using the straight-line depreciation method. (b) Compute the amount of depreciation for each of Years 1 through 3 using the sum-of-the-years’- digits method. (c) Compute the amount of depreciation for each of Years 1 through 3 using the double-declining-balance method. (In performing your calculations, round constant percentage to the nearest one-hundredthof a point and round answers to the nearest dollar.)

Data for Brecker Inc. are presented in E23-13. Instructions Prepare a statement of cash flows using the indirect method.

1.      : Vote to reduce each of the three students’ penalties. Instead of a zero, each student will receive only half of the possible total points for the project, which would be an F. You’re still holding students responsible for the group project, but not imposing catastrophic punishment. This compromise both undercuts the professor’s policy and punishes “innocent” team members to some extent, but not as severely.

What is wheel grade?

Under what circumstances does property received by a corporation in a §351 transaction not receive a carryover basis?  What is the reason for this rule?

The Samsons are trying to determine whether they can claim their 22-year-old adopted son, Jason, as a dependent.Jason is currently a full-time student at an out-of-state university.Jason lived in his parents’ home for three months of the year, and he was away at school for the rest of the year.He received $9,500 in scholarships this year for his outstanding academic performance and earned $4,800of income working a part-time job during the year. The Samsons paid a total of $5,000to support Jason while he was away at college.Jason used the scholarship, the earnings from the part-time job, and the money from the Samsons as his only sources of support. a. Can the Samsons claim Jason as their dependent?

Fatima pays $120,000 cash for Brittany’s one-third interest in the Westlake Partnership. Just prior to the sale, Brittany’s basis in Westlake is $96,000. Westlake reports the following balance sheet: Assets: Tax Basis FMV Cash $ 96,000 $ 96,000 Land 192,000 264,000    Totals $ 288,000 $ 360,000 Liabilities and capital: Capital- Amy 96,000 - Brittany 96,000 - Ben 96,000   Totals $ 288,000 a. What are the amount and character of Brittany’s recognized gain or loss on the sale? b. What is Fatima’s basis in her partnership interest? What is Fatima’s inside basis? c. If Westlake were to sell the land for $264,000 shortly after the sale of Brittany’s partnership interest, how much gain or loss would the partnership recognize? d. How much gain or loss would Fatima recognize if the land were sold for 264,000? e. Suppose Westlake has a §754 election in place. What is Fatima’s special basis adjustment? How much gain or loss would Fatima recognize on a subsequent sale of the land in this situation?

How is the present value of a non-interest-bearing note computed?

Jackson Company adopts acceptable accounting for its defined benefit pension plan on January 1, 2013, with the following beginning balances: plan assets $200,000; projected benefit obligation $250,000. Other data relating to 3 years’ operation of the plan are as follows. 2013 2014 2015 Annual service cost $16,000 $ 19,000 $ 26,000 Settlement rate and expected rate of return 10% 10% 10% Actual return on plan assets 18,000 22,000 24,000 Annual funding (contributions) 16,000 40,000 48,000 Benefi ts paid 14,000 16,400 21,000 Prior service cost (plan amended, 1/1/14) 160,000 Amortization of prior service cost 54,400 41,600 Change in actuarial assumptions establishes a December 31, 2015, projected benefi t obligation of: 520,000 Instructions (a) Prepare a pension worksheet presenting all 3 years’ pension balances and activities. (b) Prepare the journal entries (from the worksheet) to reflect all pension plan transactions and events at December 31 of each year. (c) Indicate the pension-related amounts reported in the financial statements for 2015.

Name some of the important applications of FRPs.

Briefly describe the valuation of (a) biological assets and (b) agricultural produce.

Hans runs a sole proprietorship. Hans has reported the following net §1231 gains and losses since he began business. Net §1231 gains shown are before the look-back rule.   Year Net §1231 Gains/(Losses) Year 1 ($65,000) Year 2 15,000 Year 3 0 Year 4 0 Year 5 10,000 Year 6 0 Year 7 (current year) 50,000   a. What amount, if any, of the year 7 (current year) $50,000 net §1231 gain is treated as ordinary income? b. Assume that the $50,000 net §1231 gain occurs in year 6 instead of year 7. What amount of the gain would be treated as ordinary income in year 6?

What are integral fasteners?