Question & Answer

What is a eutectic alloy?

Describe the business purpose, step-transaction, and substance-over-form doctrines. What types of tax planning strategies may these doctrines inhibit?

What are the advantages and disadvantages of local collaborations, such as LEPs, as compared to geographically larger collaboration?

How is the shear modulus of elasticity G related to the tensile modulus of elasticity E, on average?

To what extent was the debt crisis of the early 1980s caused by inappropriate policies that had been pursued by the debtor countries?

The controller for Lafayette Inc. recently commented, “If I have to disclose our segments individually, the only people who will gain are our competitors and the only people that will lose are our present stockholders.” Evaluate this comment.

From Table 29.1, C = 0.92 x 10-4 in3/A-min, cathode efficiency E = 15%. Plated volume V = EC∫Idt = EC∫(12 + 0.2t)dt = EC(12t + 0.1t2) over the range 0 to 20 min. V = 0.15(0.92 x 10-4)(12 x 20 + 0.1(20)2) = 0.00386 in3

Explain the use of circuit breakers. (LO3)

Last Chance Mine (LCM) purchased a coal deposit for $750,000. It estimated it would extract 12,000 tons of coal from the deposit. LCM mined the coal and sold it, reporting gross receipts of $1 million, $3 million, and $2 million for years 1 through 3, respectively. During years 1 – 3, LCM reported net income (loss) from the coal deposit activity in the amount of ($20,000), $500,000, and $450,000, respectively. In years 1 – 3, LCM extracted 13,000 tons of coal as follows:   DepletionTons extracted per year (1)  Tons of Coal (2)  Basis (2)/(1) Rate Year 1 Year 2 Year 3 12,000 $750,000 $62.50 2,000 7,200 3,800 a. What is LCM’s cost depletion for years 1, 2, and 3? b. What is LCM’s percentage depletion for each year (the applicable percentage for coal is 10 percent)?  c. Using the cost and percentage depletion computations from parts (a) and (b), what is LCM’s actual depletion expense for each year?

Stock market conditions serve as a leading economic indicator. Assuming the U.S. economy is in a recession, what are the implications of this indicator? Why might this indicator be inaccurate? (LO1)

Explain the meaning of efficient markets. Why might we expect markets to be efficient most of the time? In recent years, several securities firms have been guilty of using inside information when purchasing securities, thereby achieving returns well above the norm (even when accounting for risk). Does this suggest that the security markets are not efficient? Explain. (LO2)

Compare and contrast the three types of tax law sources and give examples of each.

On December 31, 2014, Travis Tritt Inc. has a machine with a book value of $940,000. The original cost and related accumulated depreciation at this date are as follows. Machine $1,300,000 Less: Accumulated depreciation 360,000 Book value $ 940,000 Depreciation is computed at $60,000 per year on a straight-line basis. Instructions Presented below is a set of independent situations. For each independent situation, indicate the journal entry to be made to record the transaction. Make sure that depreciation entries are made to update the book value of the machine prior to its disposal. (a) A fire completely destroys the machine on August 31, 2015. An insurance settlement of $430,000 was received for this casualty. Assume the settlement was received immediately. (b) On April 1, 2015, Tritt sold the machine for $1,040,000 to Dwight Yoakam Company. (c) On July 31, 2015, the company donated this machine to the Mountain King City Council. The fair value of the machine at the time of the donation was estimated to be $1,100,000.

WCC Corp. has a $100,000 net operating loss carryover into 2024. Assume that it reported $75,000 of taxable income in 2024 (before the net operating loss deduction) and $30,000 of taxable income in 2025 (before the net operating loss deduction).

How do the tax consequences of S corporation liquidating distributions differ from the tax consequences of S corporation operating distributions at both the corporate and shareholder levels?

Name the two categories of component mounting to a printed circuit board.

1.    What skills and abilities does a manager need to lead effectively in a virtual environment? Do you believe a leader with a consideration style or an initiating-structure style would be more successful as a virtual leader? Explain your answer.

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.

Keyser Beverage Company reported the following items in the most recent year. Net income $40,000 Dividends paid 5,000 Increase in accounts receivable 10,000 Increase in accounts payable 7,000 Purchase of equipment (capital expenditure) 8,000 Depreciation expense 4,000 Issue of notes payable 20000,3RIEF EXERCISES Compute net cash provided by operating activities, the net change in cash during the year, and free cash flow.

One of the major groups that has been involved in the standardsetting process is the American Institute of Certified Public Accountants. Initially, it was the primary organization that established accounting principles in the United States. Subsequently, it relinquished its power to the FASB. Instructions (a) Identify the two committees of the AICPA that established accounting principles prior to the establishment of the FASB. (b) Speculate as to why these two organizations failed. In your answer, identify steps the FASB has taken to avoid failure. (c) What is the present role of the AICPA in the rule-making environment?

What is the fair value option? Briefly describe the controversy of applying the fair value option to financial liabilities.

Explain why mortgage originators have been criticized for their behavior during the credit crisis. Should other participants in the mortgage securitization process have recognized that lack of complete disclosure in mortgages? (LO5)

Tawana owns and operates a sole proprietorship and has a 37 percent marginal tax rate. She provides her son, Jonathon, $8,000 a year for college expenses. Jonathon works as a pizza delivery person every fall and has a marginal tax rate of 15 percent.  a. What could Tawana do to reduce her family tax burden?  b. How much pretax income does it currently take Tawana to generate the $8,000 (after taxes) given to Jonathon?  c. If Jonathon worked for his mother’s sole proprietorship, what salary would she have to pay him to generate $8,000 after taxes (ignoring any Social Security, Medicare, or self-employment tax issues)?  d. How much money would the strategy in part (c) save?

For what reasons might the price of overseas holidays rise? In each case identify whether these are reasons affecting demand or supply (or both).

Halvor Corporation is having financial difficulty and therefore has asked Frontenac National Bank to restructure its $5 million note outstanding. The present note has 3 years remaining and pays a current rate of interest of 10%. The present market rate for a loan of this nature is 12%. The note was issued at its face value. Instructions Presented below and on the next page are four independent situations. Prepare the journal entry that Halvor and Frontenac National Bank would make for each of these restructurings. (a) Frontenac National Bank agrees to take an equity interest in Halvor by accepting common stock valued at $3,700,000 in exchange for relinquishing its claim on this note. The common stock has a par value of $1,700,000. (b) Frontenac National Bank agrees to accept land in exchange for relinquishing its claim on this note. The land has a book value of $3,250,000 and a fair value of $4,000,000. (c) Frontenac National Bank agrees to modify the terms of the note, indicating that Halvor does not have to pay any interest on the note over the 3-year period. (d) Frontenac National Bank agrees to reduce the principal balance due to $4,166,667 and require interest only in the second and third year at a rate of 10%.