Question & Answer

Compare and contrast the three trial-level courts.

Diderot Drilling Company has leased property on which oil has been discovered. Wells on this property produced 18,000 barrels of oil during the past year that sold at an average sales price of $55 per barrel. Total oil resources of this property are estimated to be 250,000 barrels. The lease provided for an outright payment of $500,000 to the lessor (owner) before drilling could be commenced and an annual rental of $31,500. A premium of 5% of the sales price of every barrel of oil removed is to be paid annually to the lessor. In addition, Diderot (lessee) is to clean up all the waste and debris from drilling and to bear the costs of reconditioning the land for farming when the wells are abandoned. The estimated fair value, at the time of the lease, of this clean-up and reconditioning is $30,000. Instructions From the provisions of the lease agreement, you are to compute the cost per barrel for the past year, exclusive of operating costs, to Diderot Drilling Company.

Susmita purchased a car this year and uses it for both business and personal purposes. Susmita drove the car 11,000 miles on business trips and 9,000 miles for personal transportation. Describe how Susmita will determine the amount of deductible expenses associated with the auto.

} Devon owns 1,000 shares of stock worth $10,000. This year he received 200 additional shares of this stock from a stock dividend. His 1,200 shares are now worth $12,500. Must Devon include the dividend paid in stock in income?

What is meant by the term aspect ratio for a metallic particle?

Assume the following S corporations, gross receipts, passive investment income, and corporate E&P. Will any of these corporations have its S election terminated due to excessive passive income? If so, in what year?  All became S corporations at the beginning of year 1.

Explain why the medical expense and casualty loss provisions are sometimes referred to as “wherewithal” deductions and how this rationale is reflected in the limits on these deductions.

Distinguish between FASB Accounting Standards Updatesand FASB Statements of Financial Accounting Concepts.

Under what circumstances can a taxpayer deduct medical expenses paid for a member of his family?  Does it matter if the family member reports significant amounts of gross income and cannot be claimed as a dependent?

Contingent Costs List some costs that may be considered to be ‘contingent’ sustainability-related costs for the mining industry. (LO4)

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

Suppose you asked your favorite AI query tool “How much tax depreciation could a taxpayer deduct on a computer acquired in January 2024 for $100,000?” and the AI tool provided the following response:

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.

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

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:

For each of the following jobs, check through the above list of determinants (excluding the last), and try to decide whether demand would be relatively elastic or inelastic: firefighters; telesales operators; app developers; bus drivers; accountants; farm workers; car workers.

Why are some deductions called “above the line” deductions and others called “below the line” deductions? What is the “line”?

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

Charles has AGI of $50,000 and has made the following payments related to (1) land he inherited from his deceased aunt and (2) a personal vacation taken last year. Calculate the amount of taxes Charles may include in his itemized deductions for the year under the following circumstances:

What is a TPE?

Once they’ve computed their taxable income, how do taxpayers determine their regular tax liability?  What additional steps must taxpayers take to compute their tax liability when they have preferentially taxed income?

Describe the procedures used in job costing.

Where can authoritative IFRS related to accounting changes be found?

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.

In 2024, Deon and NeNe are married filing jointly.  Deon and NeNe’s taxable income is $1,390,000 (all ordinary), and they itemize their deductions as follows: real property taxes of $10,000, charitable contributions of $30,000, and mortgage interest expense of $40,000 ($700,000 acquisition debt for home).  What is Deon and NeNe’s AMT? Complete Form 6251 for Deon and NeNe.