Question & Answer

Deirdre sold 100 shares of stock to her brother, James, for $2,400. Deirdre purchased the stock several years ago for $3,000.  a. What gain or loss does Deirdre recognize on the sale? b. What amount of gain or loss does James recognize if he sells the stock for $3,200? c. What amount of gain or loss does James recognize if he sells the stock for $2,600? d. What amount of gain or loss does James recognize if he sells the stock for $2,000?

Explain the use of a balloon-payment mortgage. Why might a financial institution prefer to offer this type of mortgage? (LO2)

Under what conditions would speculators sell a call option? What is the risk to speculators who sell put options? (LO3)

Lowell Company’s December 31, 2014, trial balance includes the following accounts: Inventory $120,000; Buildings $207,000; Accumulated Depreciation—Equipment $19,000; Equipment $190,000; Land (held for investment) $46,000; Accumulated Depreciation—Buildings $45,000; Land $71,000; Timberland $70,000. Prepare the property, plant, and equipment section of the balance sheet.

Simpson, age 45, is a single individual who is employed full time by Duff Corporation. This year Simpson reports AGI of $50,000 and has incurred the following medical expenses:

Write a short essay explaining why there is so much uncertainty surrounding the valuation of a firm that is engaged in an IPO. Why do you think some investors overvalue firms at the time of their IPO?

] Louis files as a single taxpayer. In April of this year he received a $900 refund of state income taxes that he paid last year. How much of the refund, if any, must Louis include in gross income under the following independent scenarios? Assume the standard deduction last year was $13,850.

Explain how the interest rate risk of finance companies differs from that of savings institutions. (LO5)

What is a TPE?

What determines whether someone is considered a tax return preparer?

Brad purchased land for $45,000 this year. At year-end Brad sold the land for $51,700 and paid a sales commission of $450. What effect does this transaction have on Brad’s gross income? Explain.

Where can authoritative IFRS related to accounting changes be found?

A direct extrusion operation produces the cross section shown in Figure P19.32(c) from an aluminum billet whose diameter = 150 mm and length = 500 mm. The flow curve parameters for the aluminum are K = 240 MPa and n = 0.16. In the Johnson strain equation, a = 0.8 and b = 1.2. Determine (a) the extrusion ratio, (b) the shape factor, (c) the force required to drive the ram forward during extrusion at the point in the process when the billet length remaining in the container = 400 mm, and (d) the length of the extruded section at the end of the operation if the volume of the butt left in the container is 600,000 mm3

In 2024, Zach is single with no dependents.  He is not claimed as a dependent on another’s return.  All of his income is from salary and he does not have any for AGI deductions.  What is his earned income credit in 2024 in the following alternative scenarios? a. Zach is 29 years old and his AGI is $5,000.

In the current year, Jolt Inc. reported $40,000 of taxable income before any charitable contribution deduction. Jolt contributed $10,000 this year to Goodwill Industries, a public charity. Compute Jolt’s current E&P.

Explain how a mortgage company’s degree of exposure to interest rate risk differs from other financial institutions. (LO4)

Determine the amount of the late filing and late payment penalties that apply for the following taxpayers.

Dain’s Diamond Bit Drilling purchased the following assets this year. Assume its taxable income for the year was $53,000 for purposes of computing the §179 expense (assume no bonus depreciation).

Michelle operates several food trucks. Indicate the amount (if any) that she can deduct as an ordinary and necessary business deductions in each of the following situations and explain your solution.

What tax issue arises when a shareholder receives a nontaxable stock distribution?

Theory If a downward-sloping yield curve is mainly attributed to segmented markets theory, what does that suggest about the demand for and supply of funds in the short-term and long-term maturity markets? (LO3)

Garner Inc. provides the following information related to its postretirement benefits for the year 2014. Accumulated postretirement benefi t obligation at January 1, 2014 $710,000 Actual and expected return on plan assets 34,000 Prior service cost amortization 21,000 Discount rate 10% Service cost 83,000 Instructions Compute postretirement benefit expense for 2014.

If production were at a point on the production possibility curve below point S, describe the process whereby market forces would return the economy to point S.

Oriole Corporation, a privately held company, has one class of voting common stock, of which 1,000 shares are issued and outstanding. The shares are owned as follows:  Larry Byrd400 Paul Byrd (Larry’s son)200 Lady Byrd (Larry’s daughter)200 Cal Rifkin (unrelated)   200   Total1,000   Larry is considering retirement and would like to have the corporation redeem all of his shares for $400,000.

Winkin, Blinkin, and Nod are equal shareholders in SleepEZ, an S corporation. In the conditions listed below, how much income should each report from SleepEZ for 2025 under both the daily allocation and the specific identification allocation methods?  Refer to the following table for the timing of SleepEZ’s income.   Period Income January 1 through March 15 (74 days) $125,000 March 16 through December 31 (291 days) 345,500 January 1 through December 31, 2025 (365 days) $470,500