Question & Answer

Grady received $8,200 of Social Security benefits this year. Grady also reported salary and interest income this year. What amount of the benefits must Grady include in his gross income under the following two independent situations?

The price of Garner stock is $40. There is also a call option on Garner stock that is at the money, with a premium of $2.00. There is also a put option on Garner stock that is at the money, with a premium of $1.80. Why would investors consider writing this call option and this put option? Why would some investors consider buying this call option and this put option?

Aero Inc. had the following balance sheet at December 31, 2013.   During 2014, the following occurred. 1. Aero liquidated its available-for-sale investment portfolio at a loss of $5,000. 2. A tract of land was purchased for $38,000. 3. An additional $30,000 in common stock was issued at par. 4. Dividends totaling $10,000 were declared and paid to stockholders. 5. Net income for 2014 was $35,000, including $12,000 in depreciation expense. 6. Land was purchased through the issuance of $30,000 in additional bonds. 7. At December 31, 2014, Cash was $70,200, Accounts Receivable was $42,000, and Accounts Payable was $40,000. Instructions (a) Prepare a statement of cash flows for the year 2014 for Aero. (b) Prepare the unclassified balance sheet as it would appear at December 31, 2014. (c) Compute Aero’s free cash flow and current cash debt coverage for 2014. (d) Use the analysis of Aero to illustrate how information in the balance sheet and statement of cash flows helps the user of the financial statements.

Morgan Leasing Company signs an agreement on January 1, 2014, to lease equipment to Cole Company. The following information relates to this agreement. 1. The term of the noncancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. 2. The cost of the asset to the lessor is $245,000. The fair value of the asset at January 1, 2014, is $245,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $43,622, none of which is guaranteed. 4. Cole Company assumes direct responsibility for all executory costs. 5. The agreement requires equal annual rental payments, beginning on January 1, 2014. 6. Collectibility of the lease payments is reasonably predictable. There are no important uncertainties surrounding the amount of costs yet to be incurred by the lessor. Instructions (Round all numbers to the nearest cent.) (a) Assuming the lessor desires a 10% rate of return on its investment, calculate the amount of the annual rental payment required. (Round to the nearest dollar.) (b) Prepare an amortization schedule that would be suitable for the lessor for the lease term. (c) Prepare all of the journal entries for the lessor for 2014 and 2015 to record the lease agreement, the receipt of lease payments, and the recognition of income. Assume the lessor’s annual accounting period ends on December 31.

Describe two specific accounting methods that are treated as initiated by the taxpayer without any need for consent of the IRS when the business qualifies under the gross receipts test.

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

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?

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.

Geraldo recently won a lottery and chose to receive $100,000 today instead of an equivalent amount in 10 years, computed using an 8 percent rate of return. Today, he learned that interest rates are expected to increase in the future. Is this good news for Geraldo given his decision?

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.

Komiko Tanaka invests $12,000 in LymaBean, Inc. LymaBean does not pay any dividends. Komiko projects that her investment will generate a 10 percent before-tax rate of return. She plans to invest for the long term.   a) How much cash will Komiko retain, after-taxes, if she holds the investment for five years and then she sells it when the long-term capital gains rate is 15 percent? b) What is Komiko’s after-tax rate of return on her investment in part (a)? c) How much cash will Komiko retain, after-taxes, if she holds the investment for five years and then sells when the long-term capital gains rate is 25 percent? d) What is Komiko’s after-tax rate of return on her investment in part (c)? e) How much cash will Komiko retain, after taxes, if she holds the investment for 15 years and then she sells when the long-term capital gains rate is 15 percent? f) What is Komiko’s after-tax rate of return on her investment in part (e)?

Name and sketch the five joint types.

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

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?

1.       : Why do you think Mary Parker Follett’s ideas tended to be popular with businesspeople of her day but were ignored by management scholars? Why are her ideas appreciated more today?

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

: Think about the highly publicized safety grounding of Boeing’s 737 MAX jetliner. One observer said that the goal of profit had taken precedence over the goal of safety within the company. Do you think managers can succeed at both profit and safety simultaneously? DOrganizational effectiveness is the degree to which the organization achieves a stated goal or succeeds in accomplishing what it tries to do. Organizational efficiency refers to the amount of resources used to achieve an organizational goal. It is based on how much raw materials, money, and people are necessary for producing a given volume of output. The ultimate responsibility of managers is to achieve high performance, which is the organization’s ability to attain its goals by using resources in an efficient and effective manner. Although efficiency and effectiveness are both important for performance, most people would probably say that effectiveness is the more important concept. The reason is that internal efficiency has no value if it does not enable the organization to achieve its goals and respond to the external environment. On the other hand, an organization that is effective does achieve its goals, by definition. One of these goals should involve continuously increasing efficiency. Managers can and should improve both efficiency and effectiveness simultaneously. As noted above, one of any organization’s primary goals should be to continuously improve efficiency. To the extent that the organization increases its success in achieving this goal, along with others, its effectiveness also improves.

1.       : What are the first rung, glass ceiling, and bamboo ceiling, and why do you think they have proved to be such barriers to women and underrepresented employees?

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?