Question & Answer

1. If 4x exchange for 3m what are the terms of trade? 2. If the terms of trade are 3, how many units of the imported good could I buy for the money earned by the sale of 1 unit of the exported good? What is the exchange ratio?

The two axes of an x-y positioning table are each driven by a stepping motor connected to a leadscrew with a 4:1 gear reduction. The number of step angles on each stepping motor is 200. Each leadscrew has a pitch = 5.0 mm and provides an axis range = 400.0 mm. There are 16 bits in each binary register used by the controller to store position data for the two axes. (a) What is the controlresolution of each axis? (b) What are the required rotational speeds and corresponding pulse train frequencies of each stepping motor in order to drive the table at 600 mm/min in a straight line from point (25,25) to point (300,150)? Ignore acceleration.

List three types of internal reports and explain how each is used. List three types of external reports and explain how each is used.

Identify and explain the major steps involved in preparing the statement of cash flows.

Danni is a single 30 percent owner of Kolt (a business entity). In the current year, Kolt reported a $1,000,000 business loss. Answer the following questions associated with each of the following alternative scenarios:

Katie, a single taxpayer, is a shareholder in the S Corporation, Engineers One, a civil engineering company. This year, Katie’s share of net business income from Engineers One is $200,000 (net of the associated for AGI self-employment tax deduction). Assume that Katie’s allocation of wages paid by Engineers One to its employees is $300,000 and her allocation of Engineers One’s qualified property is $150,000 (unadjusted basis of equipment, all purchased within past three years). Assume Katie has no other business income and no capital gains or qualified dividends. Her taxable income before the deduction for qualified business income is $400,000. a. Calculate Katie’s deduction for qualified business income. b. Assume the same facts provided above, except Katie’s net business income from Engineers One is $400,000 (net of the associated for AGI self-employment tax deduction) and taxable income before the deduction for qualified business income is $350,000.

Joe operates a business that locates and purchases specialized assets for clients, among other activities. Joe uses the accrual method of accounting, but he does not keep any significant inventories of the specialized assets that he sells. Joe reported the following financial information for his business activities during this year. Determine the effect of each of the following transactions on the taxable business income.  a) Joe has signed a contract to sell gadgets to the city. The contract provides that sales of gadgets are dependent upon a test sample of gadgets operating successfully. In December of this year, Joe delivers $12,000 worth of gadgets to the city that will be tested in March of next year. Joe purchased the gadgets especially for this contract and paid $8,500. b) Joe paid $180 in July of this year to entertain a visiting out-of-town client. The client didn’t discuss business with Joe during this visit, but Joe wants to maintain good relations to encourage additional business next year. c) On November 1 of this year, Joe paid $600 for premiums providing for $40,000 of “key employee” insurance on the life of Joe’s accountant over the next 12 months. d) At the end of this year, Joe’s business reports $9,000 of accounts receivable. Based upon experience, Joe believes that at least $2,000 of his new receivables will be uncollectible.  e) In December of this year, Joe rented equipment to complete a large job. Joe paid $3,000 in December because the rental agency required a minimum rental of three months ($1,000 per month). Joe completed the job before year-end, but he returned the equipment at the end of the lease.  f) Joe hired a new sales representative as an employee and sent them to Dallas for a week to contact prospective out-of-state clients. Joe ended up reimbursing this employee $300 for airfare, $350 for lodging, and $250 for meals (the employee provided adequate documentation to substantiate the business purpose for the meals). Joe requires the employee to account for all expenditures to be reimbursed. g) Joe uses his BMW (a personal auto) to travel to and from his residence to his factory. However, he switches to a business vehicle if he needs to travel after he reaches the factory. In September of this year, the business vehicle broke down and he was forced to use the BMW both to travel to and from the factory and to visit work sites. He drove 120 miles visiting work sites and 46 miles driving back and forth between the factory and his home. Joe uses the standard mileage rate to determine his auto-related business expenses. h) Joe paid a visit to his parents in Dallas over the Christmas holidays this year. While he was in the city, Joe spent $50 to attend a half-day business symposium. Joe paid $200 for airfare, $50 for meals provided during the symposium, and $20 on cab fare to the symposium.

On a diagram similar to Figure 7.4, show the long-run equilibrium for both firm and industry under perfect competition. Now assume that the demand for the product falls. Show the short-run and long-run effects.

A corporation commissioned an accounting firm to recalculate the way it accounted for leasing transactions.  With the new calculations, the corporation was able to file amended tax returns for the past few years that increased the corporation’s net operating loss carryover from $3,000,000 to $5,000,000. Was the corporation wise to pay the accountants for their work that led to the increase in the NOL carryover? What factors should be considered in making this determination?

George purchased a life annuity to provide him monthly payments for as long as he lives. Based on IRS tables, George’s life expectancy is 100 months. Is George able to recover his cost of the annuity if he dies before he receives 100 monthly payments? Explain. What happens for tax purposes if George receives more than 100 payments?

Part A: This year, Gumowski Company has each of the following items in its income statement. 1. Gross profits on installment sales. 2. Revenues on long-term construction contracts. 3. Estimated costs of product warranty contracts. 4. Premiums on officers’ life insurance policies with Gumowski as beneficiary. Instructions (a) Under what conditions would deferred income taxes need to be reported in the financial statements? (b) Specify when deferred income taxes would need to be recognized for each of the items above, and indicate the rationale for such recognition. Part B: Gumowski Company’s president has heard that deferred income taxes can be classified in different ways in the balance sheet. Instructions Identify the conditions under which deferred income taxes would be classified as a noncurrent item in the balance sheet. What justification exists for such classification?

Lonnie Davis has been a general partner in the Highland Partnership for many years and is also a sole proprietor in a separate business. To spend more time focusing on his sole proprietorship, he plans to leave Highland and will receive a liquidating distribution of $50,000 in cash and land with a fair market value of $100,000 (tax basis of $120,000). Immediately before the distribution, Lonnie’s basis in his partnership interest is $350,000, which includes his $50,000 share of partnership debt. Highland Partnership does not hold any hot assets. a. What are the amount and character of any gain or loss to Lonnie? b. What is Lonnie’s basis in the land? c. What are the amount and character of Lonnie’s gain or loss if he holds the land for 13 months as investment property and then sells it for $100,000? d. What are the amount and character of Lonnie’s gain or loss if he places the land into service in his sole proprietorship and then sells it 13 months later for $100,000? e. Do your answers to parts (c) and (d) above suggest a course of action that would help Lonnie to achieve a more favorable tax outcome?

Explain why the cost of commuting from home to work is not deductible as a business expense.

1.      : Go ahead and use the documents to the company’s benefit, but make clear to your boss that you don’t want him passing confidential information to you in the future. If he threatens to fire you, threaten to leak the news to the press.

Corbett’s AMTI is $650,000.  What is his AMT exemption under the following alternative circumstances?

Why do you think it is difficult for investors to assess the financial condition of a financial institution that has purchased a large amount of mortgage-backed securities? (LO5)

Andre constructs and installs cabinets in homes.  Blair sells and installs carpet in apartments.  Andre and Blair worked out an arrangement whereby Andre installed cabinets in Blair’s home and Blair installed carpet in Andre’s home.  Neither Andre nor Blair believes they are required to recognize any gross income on this exchange because neither received cash.  Do you agree with them?  Explain.

Explain how bank regulation can be more effective when there is consolidation of banks and securities firms. (LO2)

Jorge and Anita, married taxpayers, earn $150,000 in taxable income and $40,000 in interest from an investment in City of Heflin bonds.  Using the U.S. tax rate schedule for married filing jointly, how much federal tax will they owe?  What is their average tax rate?  What is their effective tax rate?  What is their current marginal tax rate?

In 2024, SML Corp. reported taxable income of $100,000 before any NOL deductions. SML has a $170,000 NOL carryover that originated in 2017 and a $90,000 NOL carryover that originated in 2023. What is SML’s 2024 taxable income after the NOL deduction? What NOLs can SML carryover to 2025?

What is a clean room and explain the classification system by which clean rooms are rated?

Is it necessary that a trial balance be taken periodically? What purpose does it serve?

Explain why Congress sometimes mandates that businesses use specific accounting methods while other times Congress is content to require businesses to use the same accounting methods for tax purposes that they use for financial accounting purposes.

Apple Union (AU), a C corporation with a March 31 year-end, uses the accrual method of accounting.  If AU elects to be taxed as an S corporation, what will its year-end and method of accounting be (assuming no special elections)?

Last year, TBA Corporation, a calendar-year taxpayer, reported a tax liability of $100,000. TBA confidently anticipates a current-year tax liability of $240,000. Compute the minimum estimated tax payments TBA should make for the first, second, third, and fourth quarters respectively (ignore the annualized income method), assuming the following: