Question & Answer

Why is the distinction between paid-in capital and retained earnings important?

Clark Pierce conducts a wholesale merchandising business that sells approximately 5,000 items per month with a total monthly average sales value of $250,000. Its annual bad debt rate has been approximately 1½% of sales. In recent discussions with his bookkeeper, Mr. Pierce has become confused by all the alternatives apparently available in handling the Allowance for Doubtful Accounts balance. The following information has been presented to Pierce. 1. An allowance can be set up (a) on the basis of a percentage of sales or (b) on the basis of a valuation of all past due or otherwise questionable accounts receivable. Those considered uncollectible can be charged to such allowance at the close of the accounting period, or specific items can be charged off directly against (1) Gross Sales or to (2) Bad Debt Expense in the year in which they are determined to be uncollectible. 2. Collection agency and legal fees, and so on, incurred in connection with the attempted recovery of bad debts can be charged to (a) Bad Debt Expense, (b) Allowance for Doubtful Accounts, (c) Legal Expense, or (d) Administrative Expense. 3. Debts previously written off in whole or in part but currently recovered can be credited to (a) Other Revenue, (b) Bad Debt Expense, or (c) Allowance for Doubtful Accounts. Instructions Which of the foregoing methods would you recommend to Mr. Pierce in regard to (1) allowances and charge-offs, (2) collection expenses, and (3) recoveries? State briefly and clearly the reasons supporting your recommendations.

Did tax law changes effective in 2018 increase or decrease the amount of the double tax on C corporation income?  Explain.

1.    What is transformational leadership? Give examples of organizational situations that would call for transformational, transactional, or charismatic leadership.

Acme Corporation has 1,000 shares outstanding. Joan and Bill are married, and they each own 20 shares of Acme. Joan and Bill’s daughter, Shirley, also owns 20 shares of Acme.  Joan is an equal partner with Jeri in the J&J partnership, and this partnership owns 60 shares of Acme. Jeri is not related to Joan or Bill. How many shares of Acme is Shirley deemed to own under the stock attribution rules?

If importers and exporters believe that the exchange rate has ‘bottomed out’, what will they do?

1.    : Discuss some of the ways that organizations and jobs have changed over the past ten years. What changes do you anticipate over the next ten years? How might these changes affect the manager’s job and the skills that a manager needs to be successful.

Presented below are selected accounts for Alvarez Company as reported in the worksheet at the end of May 2014.   Instructions Complete the worksheet by extending amounts reported in the adjusted trial balance to the appropriate columns in the worksheet. Do not total individual columns.

Describe the annualized income method for determining a corporation’s required estimated tax payments.  What advantages does this method have over other methods?

1. Why are insurance companies unwilling to provide insurance against losses arising from war or ‘civil insurrection’? 2. Name some other events where it would be impossible to obtain insurance. 3. Explain why an insurance company could not pool the risk of flooding in a particular part of a country. Does your answer imply insurance against flooding is unobtainable?

What requirements do an abandoned spouse and qualifying surviving spouse have in common?

FIFO, average-cost, and LIFO methods are often used instead of specific identification for inventory valuation purposes. Compare these methods with the specific identification method, discussing the theoretical propriety of each method in the determination of income and asset valuation.

Elliott Corp. failed to record accrued salaries for 2013, $2,000; 2014, $2,100; and 2015, $3,900. What is the amount of the overstatement or understatement of Retained Earnings at December 31, 2016?

A 300-mm-long wrench is used to tighten a Metric 20x2.5 bolt. The proof strength of the bolt for the particular alloy is 380 MPa. The torque coefficient is 0.21. Determine the maximum force that can be applied to the end of the wrench so that the bolt does not permanently deform.

What is a buckyball?

Jenkins has a one-third capital and profits interest in the Maverick General Partnership. On January 1, year 1, Maverick has $120,000 of general liabilities obligations and Jenkins has a $50,000 tax basis (including his share of Maverick’s liabilities) in his partnership interest. During the year, Maverick incurred a $30,000 nonrecourse liability that is not secured by real estate. Because Maverick is a rental real estate partnership, Jenkins is deemed to be a passive participant in Maverick. His share of the Maverick losses for year 1 is $75,000. Jenkins is not involved in any other passive activities, and this is the first year he has been allocated losses from Maverick. a. Determine how much of the Maverick loss Jenkins will currently be able to deduct on his tax return for year 1, and list the losses suspended due to tax basis, at-risk, and passive activity loss limitations. b. If Jenkins sells his interest on January 1, year 2, what happens to his suspended losses from year 1? [Hint: See §706(c)(2)(A); Reg. §1.704-1(d)(1); Prop. Reg. §1.465-66(a); and Sennett v. Comm’r, 80 TC 825 (1983).]

A 4.50-in-thick slab that is 9 in wide and 24 in long is to be reduced in a single pass in a two-high rolling mill to a thickness of 3.87 in. The roll rotates at a speed of 5.50 rev/min and has a radius of 17.0 in. The work material has a strength coefficient = 30,000 lb/in2 and a strain hardening exponent = 0.15. Determine (a) roll force, (b) roll torque, and (c) power required to accomplish this operation.

Use the information from BE17-5 but assume the stock was purchased as a trading security. Prepare Fairbanks’ journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment.

A 75 mm diameter tube is bent into a rather complex shape with a series of simple tube bending operations. The wall thickness on the tube = 4.75 mm. The tubes will be used to deliver fluids in a chemical plant. In one of the bends where the bend radius is 125 mm, the walls of the tube are flattening badly. What can be done to correct the condition?

Participative strategic planning process and benefits, manager behavior (This problem assumes knowledge from management classes) Quantum Computers produces and sells laptop computers. The entity is currently deciding whether to continue concentrating on the laptop computer market or to expand by entering the highly competitive computer desktop workstation market.   Most of the management staff has been with Quantum for a long time. Michael Mitchem, Quantum’s president, wants his management staff to assist him in Quantum’s strategic planning process. Mitchem has scheduled a three-day offsite meeting for the management staff to join together for the entity’s strategic planning process.   Required (a)     What functional areas should be discussed during the strategic planning process? (b)     Identify at least six factors to be considered in a thorough strategic planning process that will move a company such as Quantum to another level of product development. (c)     Identify at least three benefits that Quantum can derive from a participatory strategic planning process. (d)     Discuss the expected behavior of the managers at Quantum who participate in the three-day offsite strategic planning meeting.

A cemented carbide tool is used to turn a part with a length of 14.0 in and diameter = 4.0 in. The parameters in the Taylor equation are: n = 0.25 and C = 1000 (ft/min). The rate for the operator and machine tool = $45.00/hr, and the tooling cost per cutting edge = $2.50. It takes 2.5 min to load and unload the workpart and 1.50 min to change tools. The feed = 0.015 in/rev. Determine (a) cutting speed for maximum production rate, (b) tool life in min of cutting, and (c) cycle time and cost per unit of product.

Jim recently joined the Austin Barter Club, an organization that facilitates the exchange of services between its members. This year Jim provided lawn-mowing services to other club members. Jim received the following from the barter club. Determine the amount, if any, Jim should include in his gross income in each of the following situations:

In the previous problem, suppose an industrial robot cell were installed to replace the welder. The cell consists of the robot (using GMAW instead of SMAW or FCAW), two welding fixtures, and the fitter who loads and unloads the parts. With two fixtures, fitter and robot work simultaneously, the robot welding at one fixture while the fitter unloads and loads at the other. At the end of each work cycle, they switch places. The electrode wire spool must be changed every five workparts, which task requires 5.0 minutes and is accomplished by the fitter. Determine (a) arc time and (b) production rate for this work cell.

What is extrusion?

On July 1 of year 1, Riverside Corp. (RC), a calendar-year taxpayer, acquired the assets of another business in a taxable acquisition. When the purchase price was allocated to the assets purchased, RC determined it had purchased $1,200,000 of goodwill for both book and tax purposes.  At the end of year 1, the auditors for RC determined that the goodwill had not been impaired during the year.  In year 2, however, the auditors concluded that $200,000 of the goodwill had been impaired, and they required RC to write down the goodwill by $200,000 for book purposes.