Question & Answer

Kobe strongly dislikes SUVs and is appalled that so many are on the road.  He proposes to eliminate the federal income tax and replace it with a $50,000 annual tax per SUV.  Based on the number of SUVs currently owned in the United States, he estimates the tax will generate exactly the amount of tax revenue currently collected from the income tax.  What is wrong with Kobe’s proposal?  What type of forecasting is Kobe likely using?

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

How could we model a credit market disruption and its impact on interest-rate differentials using the Keynesian cross (Keynesian 45° line) diagram?

During the credit crisis of 2008 and 2009, U.S. interest rates were extremely low, which enabled businesses to borrow at a low cost. Holding other factors constant, this should have resulted in a higher number of feasible projects, which should have encouraged businesses to borrow more money and expand. Yet, many businesses that had access to loanable funds were unwilling to borrow during the credit crisis. What other factor changed during this period that more than offset the potentially favorable effect of the low interest rates on project feasibility, therefore discouraging businesses from expanding? (LO2)

Which tax entity types are generally allowed to use the cash method of accounting?

Explain how estimation of service lives can result in unrealistically high carrying values for fixed assets.

Look through the costs and benefits that we identified from the completion of the internal market. Do the same costs and benefits arise from the enlarged EU of 27 members?

1.    You are a middle manager helping to implement a new corporate cost-cutting strategy, and you’re meeting skepticism, resistance, and, in some cases, outright hostility from your subordinates. In what ways might you or the company have been able to avoid this situation? Where do you go from here?

To stimulate the sales of its Alladin breakfast cereal, Loptien Company places 1 coupon in each box. Five coupons are redeemable for a premium consisting of a children’s hand puppet. In 2015, the company purchases 40,000 puppets at $1.50 each and sells 480,000 boxes of Alladin at $3.75 a box. From its experience with other similar premium offers, the company estimates that 40% of the coupons issued will be mailed back for redemption. During 2015, 115,000 coupons are presented for redemption. Instructions Prepare the journal entries that should be recorded in 2015 relative to the premium plan.

Jennifer Brent Corporation owns equipment that cost $80,000 and has a useful life of 8 years with no salvage value. On January 1, 2014, Jennifer Brent leases the equipment to Donna Havaci Inc. for one year with one rental payment of $15,000 on January 1. Prepare Jennifer Brent Corporation’s 2014 journal entries.

] Meg O’Brien received a gift of some small-scale jewelry manufacturing equipment that her father had used for personal purposes for many years. Her father originally purchased the equipment for $1,500. Because the equipment is out of production and no longer available, the property is currently worth $4,000. Meg has decided to begin a new jewelry manufacturing trade or business. What is her depreciable basis for depreciating the equipment?

Explain when a taxpayer will be subject to the 10 percent penalty when receiving distributions from a Roth IRA.

Why did the Fed purchase long-term Treasury securities in 2010, and how did this strategy differ from the Fed’s usual operations? (LO2, LO3)

For each of the four part drawings in Figure P16.14, indicate which PM class the parts belong to, whether the part must be pressed from one or two directions, and how many levels of press control will be required? Dimensions are mm.

What is the purpose of a fair value hedge?

An integrated circuit used in a microprocessor will contain 1000 logic gates. Use Rent's rule with C = 3.8 and m = 0.6 to determine the approximate number of input/output pins required in the package.

What is a production line?

BCS Corporation is a calendar-year, accrual-method taxpayer. BCS was formed and started its business activities on January 1 of this year. It reported the following information for the year. Indicate BCS’s deductible amount for this year in each of the following alternative scenarios.  a) BCS provides two-year warranties on products it sells to customers. For its current year sales, BCS estimated and accrued $200,000 in warranty expense for financial accounting purposes. During this year, BCS spent $30,000 repairing its product under the warranty.  b) BCS accrued an expense for $50,000 for amounts it anticipated it would be required to pay under the workers’ compensation act. During the year, BCS actually paid $10,000 for workers’ compensation-related liabilities. c) In June of this year, a display of BCS’s product located in its showroom fell and injured a customer. The customer sued BCS for $500,000. The case is scheduled to go to trial next year. BCS anticipates that it will lose the case and this year accrued a $500,000 expense on its financial statements. d) Assume the same facts as in (c) except that BCS was required to pay $500,000 to a court-appointed escrow fund this year. If BCS loses the case next year, the money from the escrow fund will be transferred to the customer suing BCS. e) On December 1 of this year, BCS acquired equipment from Equip Company. As part of the purchase, BCS signed a separate contract which provided that Equip would warranty the equipment for two years (starting on December 1 of this year). The extra cost of the warranty was $12,000, which BCS finally paid to Equip in January of next year.

What are the major sources of cash (inflows) in a statement of cash flows? What are the major uses (outflows) of cash?

What is the full disclosure principle in accounting? Why has disclosure increased substantially in the last 10 years?

Dontae stated that he didn’t want to earn any more money because it would “put him in a higher tax bracket.”  What is wrong with Dontae’s reasoning?

Compare and contrast for and from AGI deductions.Why are for AGI deductions likely more valuable to taxpayers than from AGI deductions?

] Are both corporations and individuals subject to depreciation recapture when they sell depreciable real property at a gain?  Explain.

] In 2024, OCC Corp. made a charitable donation of $400,000 to the International Rescue Committee (a qualifying charity). For the year, OCC reported taxable income of $1,500,000 before deducting any charitable contributions, before deducting its $20,000 dividends-received deduction, and before deducting its $40,000 NOL carryover from last year. Assume the donation is a qualified contribution.

What are the components of an interest rate? Why is it important for accountants to understand these components?