Question & Answer

What is asset stripping? (LO1)

1.       : What are the first rung, glass ceiling, and bamboo ceiling, and why do you think they have proved to be such barriers to women and underrepresented employees?

What other items might be included as basic needs?

Noven Pharmaceuticals, Inc., headquartered in Miami, Florida, describes itself in a recent annual report as follows.   Noven also reported in its annual report that its activities to date have consisted of product development efforts, some of which have been independent and some of which have been completed in conjunction with Rhone-Poulenc Rorer (RPR) and Ciba-Geigy. The revenues so far have consisted of money received from licensing fees, “milestone” payments (payments made under licensing agreements when certain stages of the development of a certain product have been completed), and interest on its investments. The company expects that it will have significant revenue in the upcoming fiscal year from the launch of its first product, a transdermal estrogen delivery system. The current assets portion of Noven’s balance sheet follows. Cash and cash equivalents $12,070,272 Securities held to maturity 23,445,070 Inventory of supplies 1,264,553 Prepaid and other current assets 825,159 Total current assets $37,605,054 Inventory of supplies is recorded at the lower-of-cost (first-in, first-out)-or-net realizable value and consists mainly of supplies for research and development. Instructions (a) What would you expect the physical flow of goods for a pharmaceutical manufacturer to be most like: FIFO, LIFO, or random (flow of goods does not follow a set pattern)? Explain. (b) What are some of the factors that Noven should consider as it selects an inventory measurement method? (c) Suppose that Noven had $49,000 in an inventory of transdermal estrogen delivery patches. These patches are from an initial production run and will be sold during the coming year. Why do you think that this amount is not shown in a separate inventory account? In which of the accounts shown is the inventory likely to be? At what point will the inventory be transferred to a separate inventory account?

What is an “implicit tax,” and how does it affect a taxpayer’s decision to purchase municipal bonds?

Suppose you asked your favorite AI query tool the following question: “How do Democrats and Republicans view a civilized society and a healthy economy?”  The AI tool provided the following response:   Is the AI response to the question accurate?  Explain.

Compare and contrast the recovery periods of §197 intangibles, organizational expenditures, start-up costs, and research and experimentation expenses.

Kenoly Corporation owns a patent that has a carrying amount of $300,000. Kenoly expects future net cash flows from this patent to total $210,000. The fair value of the patent is $110,000. Prepare Kenoly’s journal entry, if necessary, to record the loss on impairment.

Trey has two dependents, his two daughters, ages 14 and 18, at year-end.  Trey files a joint return with his spouse.  What amount of child tax credit (either as child or a qualifying dependent) will Trey be able to claim in 2024 for his daughters in each of the following alternative situations? a. His AGI is $100,000.

What are the three committees that debate proposed tax legislation?  What documents do these committees generate, and how might they be used?

If this analysis is correct, namely that a reduction in wages will reduce the aggregate demand for goods, what assumption must we make about the relative proportions of wages and profits that are spent (given that a reduction in real wage rates will lead to a corresponding increase in rates of profit)?

Under what circumstances can a college student qualify for the earned income credit?

Tanaka Company has land that cost $15,000,000. Its fair value on December 31, 2014, is $20,000,000. Tanaka chooses the revaluation model to report its land. Explain how the land and its related valuation should be reported.

Using the information in E20-2, prepare a pension worksheet inserting January 1, 2014, balances, showing December 31, 2014, balances, and the journal entry recording pension expense.

Assume that bond market participants suddenly expect the Fed to substantially increase the money supply. (LO2) a. Assuming no threat of inflation, how would this expectation affect bond prices? b. Assuming that inflation may result, how would bond prices be affected? c. Given your answers to (a) and (b), explain why expectations of the Fed’s increase in the money supply may sometimes cause bond market participants to disagree about how bond prices will be affected.

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?

Soon after beginning the year-end audit work on March 10 at Engone Company, the auditor has the following conversation with the controller. Controller: The year ended March 31st should be our most profitable in history and, as a consequence, the board of directors has just awarded the officers generous bonuses. Auditor: I thought profits were down this year in the industry, according to your latest interim report. Controller: Well, they were down, but 10 days ago we closed a deal that will give us a substantial increase for the year. Auditor: Oh, what was it? Controller: Well, you remember a few years ago our former president bought stock in Henderson Enterprises because he had those grandiose ideas about becoming a conglomerate. For 6 years we have not been able to sell this stock, which cost us $3,000,000 and has not paid a nickel in dividends. Thursday we sold this stock to Bimini Inc. for $4,000,000. So, we will have a gain of $700,000 ($1,000,000 pretax) which will increase our net income for the year to $4,000,000, compared with last year’s $3,800,000. As far as I know, we’ll be the only company in the industry to register an increase in net income this year. That should help the market value of the stock! Auditor: Do you expect to receive the $4,000,000 in cash by March 31st, your fiscal year-end? Controller: No. Although Bimini Inc. is an excellent company, they are a little tight for cash because of their rapid growth. Consequently, they are going to give us a $4,000,000 zero-interestbearing note with payments of $400,000 per year for the next 10 years. The first payment is due on March 31 of next year. Auditor: Why is the note zero-interest-bearing? Controller: Because that’s what everybody agreed to. Since we don’t have any interest-bearing debt, the funds invested in the note do not cost us anything and besides, we were not getting any dividends on the Henderson Enterprises stock. Instructions Do you agree with the way the controller has accounted for the transaction? If not, how should the transaction be accounted for?

Locate the IRS Web site at http://www.irs.gov/.  For every $100 the IRS collected, how much was spent on the IRS collection efforts?  What tax system criterion does this information help you to evaluate with respect to the current U.S. tax system?

What is the fair value option? Explain how use of the fair value option reflects application of the fair value principle.

} Suppose you asked your favorite AI query tool the following question: “Are athletic scholarships that require student participation in a specific sport taxable for federal income tax purposes?”  The AI tool provided the following response:

What does it mean to “flip” shares? Why would investors want to flip shares? (LO3)

A DC servomotor drives the x-axis of a NC milling machine table. The motor is coupled to the table lead screw using a 4:1 gear reduction (4 turns of the motor for each turn of the lead screw). The leadscrew pitch = 6.25 mm. An optical encoder is connected to the lead screw. The optical encoder emits 500 pulses per revolution. To execute a certain programmed instruction, the table must move from point (x = 87.5 mm, y = 35.0) to point (x = 25.0 mm, y = 180.0 mm) in a straight-line trajectory at a feed rate = 200 mm/min. Determine (a) the control resolution of the system for the x-axis only, (b) the corresponding rotational speed of the motor, and (c) frequency of the pulse train emitted by the optical encoder at the desired feed rate.

Why are agricultural prices subject to greater fluctuations than those of manufactured products?

For the following application, identify one or more nontraditional machining processes that might be used, and present arguments to support your selection. Assume that either the part geometry or the work material (or both) preclude the use of conventional machining. The application is a matrix of 0.1 mm (0.004 in) diameter holes in a plate of 3.2 mm (0.125 in) thick hardened tool steel. The matrix is rectangular, 75 by 125 mm (3.0 by 5.0 in) with the separation between holes in each direction = 1.6 mm ( 0.0625 in).

Telephone Sellers Inc. sells prepaid telephone cards to customers. Telephone Sellers then pays the telecommunications company, TeleExpress, for the actual use of its telephone lines. Assume that Telephone Sellers sells $4,000 of prepaid cards in January 2014. It then pays TeleExpress based on usage, which turns out to be 50% in February, 30% in March, and 20% in April. The total payment by Telephone Sellers for TeleExpress lines over the 3 months is $3,000. Indicate how much income Telephone Sellers should recognize in January, February, March, and April.