Question & Answer

Simon just received a 30-day letter from the IRS indicating a proposed assessment.  Does he have to pay the additional tax?  What are his options?

Several years ago, your client, Brooks Robinson, started an office-cleaning service. His business was very successful, owing much to his legacy as the greatest defensive third baseman in major league history and his nickname, “The Human Vacuum Cleaner.”  Brooks operated his business as a sole proprietorship and used the cash-basis method of accounting. Brooks was advised by his attorney that it is too risky to operate his business as a sole proprietorship and that he should incorporate to limit his liability. Brooks has come to you for advice on the tax implications of incorporation. His balance sheet is presented below. Under the terms of the incorporation, Brooks would transfer the assets to the corporation in return for 100 percent of the company’s common stock. The corporation would also assume the company’s liabilities (payables and mortgage).

Do you think that the U.S. financial system will be able to avoid another credit crisis in the future? (LO5)

Reichenbach Co., organized in 2013, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2014 and 2015. Intangible Assets 7/1/14 8-year franchise; expiration date 6/30/22 $ 48,000 10/1/14 Advance payment on laboratory space (2-year lease) 24,000 12/31/14 Net loss for 2013 including state incorporation fee, $1,000, and related legal fees of organizing, $5,000 (all fees incurred in 2013) 16,000 1/2/15 Patent purchased (10-year life) 84,000 3/1/15 Cost of developing a secret formula (indefinite life) 75,000 4/1/15 Goodwill purchased (indefinite life) 278,400 6/1/15 Legal fee for successful defense of patent purchased above 12,650 9/1/15 Research and development costs 160,000 Instructions Prepare the necessary entries to clear the Intangible Assets account and to set up separate accounts for distinct types of intangibles. Make the entries as of December 31, 2015, recording any necessary amortization and reflecting all balances accurately as of that date. (Ignore income tax effects.)

Using the facts from the previous problem, how would your answer change if Isabel’s after-tax rate of return were 8 percent?

The trial balance before adjustment for Phil Collins Company shows the following balances. Dr. Cr. Accounts Receivable $82,000 Allowance for Doubtful Accounts 2,120 Sales Revenue $430,000 Instructions Using the data above, give the journal entries required to record each of the following cases. (Each situation is independent.) 1. To obtain additional cash, Collins factors without recourse $25,000 of accounts receivable with Stills Finance. The finance charge is 10% of the amount factored. 2. To obtain a 1-year loan of $55,000, Collins assigns $65,000 of specific receivable accounts to Crosby Financial. The finance charge is 8% of the loan; the cash is received and the accounts turned over to Crosby Financial. 3. The company wants to maintain the Allowance for Doubtful Accounts at 5% of gross accounts receivable. 4. The company wishes to increase the allowance account by 1½% of net sales.

Automated inspection can be integrated with the manufacturing process to accomplish certain actions. What are these possible actions?

Clemson Company had the following stockholders’ equity as of January 1, 2014. Common stock, $5 par value, 20,000 shares issued $100,000 Paid-in capital in excess of par—common stock 300,000 Retained earnings 320,000 Total stockholders’ equity $720,000 During 2014, the following transactions occurred. Feb. 1 Clemson repurchased 2,000 shares of treasury stock at a price of $19 per share. Mar. 1 800 shares of treasury stock repurchased above were reissued at $17 per share. Mar. 18 500 shares of treasury stock repurchased above were reissued at $14 per share. Apr. 22 600 shares of treasury stock repurchased above were reissued at $20 per share. Instructions (a) Prepare the journal entries to record the treasury stock transactions in 2014, assuming Clemson uses the cost method. (b) Prepare the stockholders’ equity section as of April 30, 2014. Net income for the first 4 months of 2014 was $130,000.

In computing the interest component of pension expense, what interest rates may be used?

What is self-assembly in nanofabrication?

The market value of Lake Corporation’s inventory has declined below its cost. Sheryl Conan, the controller, wants to use the loss method to write down inventory because it more clearly discloses the decline in market value and does not distort the cost of goods sold. Her supervisor, financial vice president Dick Wright, prefers the cost-of-goods-sold method to write down inventory because it does not call attention to the decline in market value. Instructions Answer the following questions. (a) What, if any, is the ethical issue involved? (b) Is any stakeholder harmed if Dick Wright’s preference is used? (c) What should Sheryl Conan do?

Hawkeye sold farming equipment for $55,000. It bought the equipment four years ago for $75,000, and it has since claimed a total of $42,000 in depreciation deductions against the asset. Explain how to calculate Hawkeye’s adjusted basis in the farming equipment.

Visit your state’s official website and review the information there related to forming and operating business entities in your state. Write a short report explaining the steps for organizing a business in your state and summarizing any tax-related information you found.

1.    : Netflix is transparent with executive salaries; guides team leader behavior with sayings like What is your North Star and Make decisions with context not control; and urges teams to be highly aligned, loosely coupled. What do these viewpoints mean to you, and what type of corporate culture do you think they would promote?

At December 31, 2014, Fell Corporation had a deferred tax liability of $680,000, resulting from future taxable amounts of $2,000,000 and an enacted tax rate of 34%. In May 2015, a new income tax act is signed into law that raises the tax rate to 40% for 2015 and future years. Prepare the journal entry for Fell to adjust the deferred tax liability.

1.    : Two U.S. companies are competing to take over a large factory in the Czech Republic. One delegation tours the facility and asks questions about how the plant might be run more efficiently. The other delegation focuses on ways to improve working conditions and produce a better product. Which delegation do you think is more likely to succeed operating the plant?  Why? What information would you want to collect to decide whether to acquire the plant for your company?

On July 1, 2014, Brigham Corporation purchased Young Company by paying $250,000 cash and issuing a $100,000 note payable to Steve Young. At July 1, 2014, the balance sheet of Young Company was as follows. Cash $ 50,000 Accounts payable $200,000 Accounts receivable 90,000 Stockholders’ equity 235,000 Inventory 100,000 $435,000 Land 40,000 Buildings (net) 75,000 Equipment (net) 70,000 Trademarks 10,000 $435,000 The recorded amounts all approximate current values except for land (fair value of $60,000), inventory (fair value of $125,000), and trademarks (fair value of $15,000). Instructions (a) Prepare the July 1 entry for Brigham Corporation to record the purchase. (b) Prepare the December 31 entry for Brigham Corporation to record amortization of intangibles. The trademark has an estimated useful life of 4 years with a residual value of $3,000.

What are the significant differences in the equipment and operating procedures between injection molding of thermoplastics and injection molding of thermosets?

The following are selected 2014 transactions of Sean Astin Corporation. Sept. 1 Purchased inventory from Encino Company on account for $50,000. Astin records purchases gross and uses a periodic inventory system. Oct. 1 Issued a $50,000, 12-month, 8% note to Encino in payment of account. Oct. 1 Borrowed $50,000 from the Shore Bank by signing a 12-month, zero-interest-bearing $54,000 note. Instructions (a) Prepare journal entries for the selected transactions above. (b) Prepare adjusting entries at December 31. (c) Compute the total net liability to be reported on the December 31 balance sheet for: (1) The interest-bearing note. (2) The zero-interest-bearing note.

What are some aspects of business that require knowledge of taxation?  What are some aspects of personal finance that require knowledge of taxation?

What is the purpose of a free cash flow analysis?

Why would the adjustable peg system have been less suitable in the world of the mid-1970s than it was back in the 1950s?

Fixed, variable, and mixed costs Bridges and Roads is an entity engaged in road construction. Some selected items from its chart of accounts are listed below.   Required For each account, indicate whether the account represents a fixed, variable, or mixed cost for the operation of road construction activity. If mixed, indicate whether it is predominantly fixed or variable. Explain your answers.   (a) Staff wages (f) Office supplies (b) Clerical wages (g) Professional dues (c) Rent (h) Professinal subscriptions (d) Licences (i) Property taxes (e) Insurance (j) Advertising   (LO2)   [Note about problem complexity: These are difficult questions because students will need to first visualise the costs (with very little information) and then apply chapter concepts. The Step 2 questions (A, B, and F) are the ones requiring significant assumptions to generate an answer.]

In a direct extrusion operation the cross section shown in Figure P19.32(b) is produced from a copper billet whose diameter = 100 mm and length = 500 mm. In the flow curve for copper, the strength coefficient = 300 MPa and strain hardening exponent = 0.50. In the Johnson strain equation, a = 0.8 and b = 1.5. 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 = 450 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 350,000 mm3

A solid cube of aluminum with each side = 1.0 m is converted into metallic powders of spherical shape by gas atomization. How much total surface area is added by the process if the diameter of each particle is 100 microns (assume that all particles are the same size)?