Question & Answer

Ashlee, Hiroki, Kate, and Albee LLC each own a 25 percent interest in Tally Industries LLC, which generates annual gross receipts of over $10 million. Ashlee, Hiroki, and Kate manage the business, but Albee LLC is a nonmanaging member. Although Tally Industries has historically been profitable, for the last three years losses have been allocated to the members. Given these facts, the members want to know whether Tally Industries can use the cash method of accounting. Why or why not? [Hint: See §448(b)(3).]

Re-word the explanation of marginal disutility of work in terms of the marginal utility of leisure.

Explain the differences between general and specific knowledge. Give an example of an industry where knowledge is quite general and an example of an industry that requires specific knowledge.

Consider the prevailing conditions that could affect the demand for stocks, including inflation, the economy, the budget deficit, the Fed’s monetary policy, political conditions, and the general mood of investors. Based on these conditions, would you consider purchasing stock index options at this time? Offer some logic to support your answer. Which factor do you think will have the biggest impact on stock index option prices? (LO2, LO5)

What is the distinguishing feature of an excise tax?

1.       : One company had 40 percent of its workers and 20 percent of its managers resign during the first year after it reorganized from a vertical hierarchy into agile teams. What might account for this dramatic turnover? How might managers ensure a smooth transition to agile teams?

Explain the differences and similarities between personal property, real property, intangible property, and natural resources. Also, provide an example of each type of asset.

Industry and organisational value chain With reference to Marino Designs in Self-study problem 2, at the start of this chapter, differentiate between an industry value chain and an organisational value chain.

What types of federal income-based taxes, other than the regular income tax, might taxpayers be required to pay?In general terms, what is the tax base for each of these other taxes on income?

Dakota Conrad owns a parcel of land he would like to sell. Describe the circumstances in which the sale of the land would generate §1231 gain or loss, ordinary gain or loss, or capital gain or loss. Also, describe the circumstances under which Dakota would not be allowed to deduct a loss on the sale.

Presented on the next page are four independent situations. (a) On March 1, 2015, Wilke Co. issued at 103 plus accrued interest $4,000,000, 9% bonds. The bonds are dated January 1, 2015, and pay interest semiannually on July 1 and January 1. In addition, Wilke Co. incurred $27,000 of bond issuance costs. Compute the net amount of cash received by Wilke Co. as a result of the issuance of these bonds. (b) On January 1, 2014, Langley Co. issued 9% bonds with a face value of $700,000 for $656,992 to yield 10%. The bonds are dated January 1, 2014, and pay interest annually. What amount is reported for interest expense in 2014 related to these bonds, assuming that Langley used the effective-interest method for amortizing bond premium and discount? (c) Tweedie Building Co. has a number of long-term bonds outstanding at December 31, 2014. These long-term bonds have the following sinking fund requirements and maturities for the next 6 years. Sinking Fund Maturities 2015 $300,000 $100,000 2016 100,000 250,000 2017 100,000 100,000 2018 200,000 — 2019 200,000 150,000 2020 200,000 100,000 Indicate how this information should be reported in the financial statements at December 31, 2014. (d) In the long-term debt structure of Beckford Inc., the following three bonds were reported: mortgage bonds payable $10,000,000; collateral trust bonds $5,000,000; bonds maturing in installments, secured by plant equipment $4,000,000. Determine the total amount, if any, of debenture bonds outstanding.

Identify some of the ways in which force in flat rolling can be reduced.

Name and sketch the five joint types.

What is manual data input in NC part programming?

Fernandez Corporation purchased a truck at the beginning of 2014 for $50,000. The truck is estimated to have a salvage value of $2,000 and a useful life of 160,000 miles. It was driven 23,000 miles in 2014 and 31,000 miles in 2015. Compute depreciation expense for 2014 and 2015.

Manilow Corporation operates in an industry that has a high rate of bad debts. Before any year-end adjustments, the balance in Manilow’s Accounts Receivable account was $555,000 and Allowance for Doubtful Accounts had a credit balance of $40,000. The year-end balance reported in the balance sheet for Allowance for Doubtful Accounts will be based on the aging schedule shown below. Probability of Days Account Outstanding Amount Collection Less than 16 days $300,000 .98 Between 16 and 30 days 100,000 .90 Between 31 and 45 days 80,000 .85 Between 46 and 60 days 40,000 .80 Between 61 and 75 days 20,000 .55 Over 75 days 15,000 .00 Instructions (a) What is the appropriate balance for Allowance for Doubtful Accounts at year-end? (b) Show how accounts receivable would be presented on the balance sheet. (c) What is the dollar effect of the year-end bad debt adjustment on the before-tax income?

Are there other points in the supply chain/production process where firms could make use of a better understanding of behavioural economics?

On December 31, 2014, Mercantile Corp. had a $10,000,000, 8% fixed-rate note outstanding, payable in 2 years. It decides to enter into a 2-year swap with Chicago First Bank to convert the fixed-rate debt to variable-rate debt. The terms of the swap indicate that Mercantile will receive interest at a fixed rate of 8.0% and will pay a variable rate equal to the 6-month LIBOR rate, based on the $10,000,000 amount. The LIBOR rate on December 31, 2014, is 7%. The LIBOR rate will be reset every 6 months and will be used to determine the variable rate to be paid for the following 6-month period. Mercantile Corp. designates the swap as a fair value hedge. Assume that the hedging relationship meets all the conditions necessary for hedge accounting. The 6-month LIBOR rate and the swap and debt fair values are as follows. Date 6-Month LIBOR Rate Swap Fair Value Debt Fair Value December 31, 2014 7.0% — $10,000,000 June 30, 2015 7.5% (200,000) 9,800,000 December 31, 2015 6.0% 60,000 10,060,000 Instructions (a) Present the journal entries to record the following transactions. (1) The entry, if any, to record the swap on December 31, 2014. (2) The entry to record the semiannual debt interest payment on June 30, 2015. (3) The entry to record the settlement of the semiannual swap amount receivables at 8%, less amount payable at LIBOR, 7%. (4) The entry to record the change in the fair value of the debt on June 30, 2015. (5) The entry to record the change in the fair value of the swap at June 30, 2015. (b) Indicate the amount(s) reported on the balance sheet and income statement related to the debt and swap on December 31, 2014. (c) Indicate the amount(s) reported on the balance sheet and income statement related to the debt and swap on June 30, 2015. (d) Indicate the amount(s) reported on the balance sheet and income statement related to the debt and swap on December 31, 2015.

At December 31, 2014, Indigo Girls Company has outstanding noncancelable purchase commitments for 36,000 gallons, at $3.00 per gallon, of raw material to be used in its manufacturing process. The company prices its raw material inventory at cost or market, whichever is lower. Instructions (a) Assuming that the market price as of December 31, 2014, is $3.30, how would this matter be treated in the accounts and statements? Explain. (b) Assuming that the market price as of December 31, 2014, is $2.70, instead of $3.30, how would you treat this situation in the accounts and statements? (c) Give the entry in January 2015, when the 36,000-gallon shipment is received, assuming that the situation given in (b) above existed at December 31, 2014, and that the market price in January 2015 was $2.70 per gallon. Give an explanation of your treatment.

Indicate some of the advantages of cold working relative to warm and hot working

Four years after issue, debentures with a face value of $1,000,000 and book value of $960,000 are tendered for conversion into 80,000 ordinary shares immediately after an interest payment date. At that time, the market price of the debentures is 104, and the ordinary shares are selling at $14 per share (par value $10). At date of issue, the company recorded Share Premium—Conversion Equity of $50,000. The company records the conversion as follows. Bonds Payable 960,000 Share Premium—Conversion Equity 50,000 Share Capital—Ordinary 800,000 Share Premium—Ordinary 210,000 Discuss the propriety of this accounting treatment.

Virginia Corporation is a calendar-year corporation.  At the beginning of 2024, its election to be taxed as an S corporation became effective.  Virginia Corp.’s balance sheet at the end of 2023 reflected the following assets (it did not have any earnings and profits from its prior years as a C corporation). Asset Adjusted basis FMV Cash $20,000 $20,000 Accounts receivable 40,000 40,000 Inventory 90,000 200,000 Land 150,000 175,000   Totals $300,000 $435,000   In 2024, Virginia Corp. reported business income of $50,000 (this would have been its taxable income if it were still a C corporation). What is Virginia’s built-in gains tax in each of the following alternative scenarios?

Define (a) a contingency and (b) a contingent liability.

Archer Inc. issued $4,000,000 par value, 7% convertible bonds at 99 for cash. If the bonds had not included the conversion feature, they would have sold for 95. Prepare the journal entry to record the issuance of the bonds.

Komissarov Company has a debt investment in the bonds issued by Keune Inc. The bonds were purchased at par for $400,000 and, at the end of 2014, have a remaining life of 3 years with annual interest payments at 10%, paid at the end of each year. This debt investment is classified as held-for-collection. Keune is facing a tough economic environment and informs all of its investors that it will be unable to make all payments according to the contractual terms. The controller of Komissarov has prepared the following revised expected cash flow forecast for this bond investment. Dec. 31 Expected Cash Flows 2015 $ 35,000 2016 35,000 2017 385,000 Total cash flows $455,000 Instructions (a) Determine the impairment loss for Komissarov at December 31, 2014. (b) Prepare the entry to record the impairment loss for Komissarov at December 31, 2014. (c) On January 15, 2015, Keune receives a major capital infusion from a private equity investor. It informs Komissarov that the bonds now will be paid according to the contractual terms. Briefly describe how Komissarov would account for the bond investment in light of this new information.