Question & Answer

In each of the following independent cases, determine the taxpayer’s filing status and the number of personal and dependency exemptions the taxpayer is allowed to claim. a.Alexandra is a blind widow (spouse died five years ago) who provides a home for her 18-year-old nephew, Newt.Newt’s parents are dead, and so Newt supports himself.Newt’s gross income is $5,000.

Roland Company uses special strapping equipment in its packaging business. The equipment was purchased in January 2013 for $10,000,000 and had an estimated useful life of 8 years with no salvage value. At December 31, 2014, new technology was introduced that would accelerate the obsolescence of Roland’s equipment. Roland’s controller estimates that expected future net cash flows on the equipment will be $6,300,000 and that the fair value of the equipment is $5,600,000. Roland intends to continue using the equipment, but it is estimated that the remaining useful life is 4 years. Roland uses straightline depreciation. Instructions (a) Prepare the journal entry (if any) to record the impairment at December 31, 2014. (b) Prepare any journal entries for the equipment at December 31, 2015. The fair value of the equipment at December 31, 2015, is estimated to be $5,900,000. (c) Repeat the requirements for (a) and (b), assuming that Roland intends to dispose of the equipment and that it has not been disposed of as of December 31, 2015.

Distinguish earned income from unearned income, and provide an example of each.

Why are historical and international comparisons of deficit and debt measures best presented as proportions of GDP?

What is done to record properly a transaction involving the issuance of a non-interest-bearing long-term note in exchange for property?

What are factors to be considered in estimating the useful alife of an intangible asset?

Presented below is information related to Candlebox Enterprises. J an. 31 Feb. 28 M ar. 31 A pr. 30 Inventory at cost $15,000 $15,100 $17,000 $13,000 Inventory at the lower-of-cost-or-market 14,500 12,600 15,600 12,300 Purchases for the month 20,000 24,000 26,500 Sales revenue for the month 29,000 35,000 40,000 Instructions (a) From the information, prepare (as far as the data permit) monthly income statements in columnar form for February, March, and April. The inventory is to be shown in the statement at cost, the gain or loss due to market fluctuations is to be shown separately, and a valuation account is to be set up for the difference between cost and the lower of cost or market. (b) Prepare the journal entry required to establish the valuation account at January 31 and entries to adjust it monthly thereafter.

Discuss the appropriate treatment in the income statement for the following items: (a) Loss on discontinued operations. (b) Non-controlling interest allocation.

What is the present value of a machine that lasts three years, earns £100 in year 1, £200 in year 2 and £200 in year 3, and then has a scrap value of £100? Assume that the rate of discount is 5 per cent. If the machine costs £500, is the investment worthwhile? Would it be worthwhile if the rate of discount were 10 per cent?

A cup-shaped part is backward extruded from an aluminum slug that is 50 mm in diameter. The final dimensions of the cup are: OD = 50 mm, ID = 40 mm, height = 100 mm, and thickness of base = 5 mm. Determine (a) extrusion ratio, (b) shape factor, and (c) height of starting slug required to achieve the final dimensions. (d) If the metal has flow curve parameters K = 400 MPa and n = 0.25, and the constants in the Johnson extrusion strain equation are: a = 0.8 and b = 1.5, determine the extrusion force.

Bobbie works as an employee for Altron Corp. for the first half of the year and for Betel Inc. for rest of the year. She is relatively well paid. What FICA tax issues is she likely to encounter?  What FICA tax issues do Altron Corp. and Betel Inc. need to consider?

Besides flat rolling and shape rolling, identify some additional bulk forming processes that use rolls to effect the deformation

Describe the all-events test for recognizing taxable income.

Montel argues that a flat income tax rate system is vertically equitable.  Oprah argues that a progressive tax rate structure is vertically equitable.  How do their arguments differ?  Who is correct?

A vertical true centrifugal casting process is used to cast brass tubing that is 15.0 in long and whose outside diameter = 8.0 in. If the speed of rotation during solidification is 1000 rev/min, determine the inside diameters at the top and bottom of the tubing if the total weight of the final casting = 75.0 lbs.

Use a stock valuation framework to explain why the Sarbanes-Oxley Act (SOX) could improve the valuation of a stock. Why might SOX cause a reduction in the valuation of a stock? (See the chapter appendix). (LO1)

] Clyde lives and operates a sole proprietorship in Dallas, Texas. This year Clyde found it necessary to travel to Fort Worth (about 25 miles away) for legitimate business reasons. Is Clyde’s trip likely to qualify as “away from home”? Why would this designation matter?

What is the “call” feature of a bond issue? How does the call feature affect the amortization of bond premium or discount?

Assume the same facts as in the previous problem, except that at the beginning of year 1 Sunita loaned Bikes-R-Us $3,000.  In year 2, Bikes-R-Us reported ordinary income of $12,000. What amount is Sunita allowed to deduct in year 1?  What are her stock and debt bases in the corporation at the end of year 1?  What are her stock and debt bases in the corporation at the end of year 2?

Assume a horizontal yield curve exists. How do you think the yield curve would be affected if foreign investors in short-term securities and long-term securities suddenly anticipate that the value of the dollar will strengthen? (You may find it helpful to refer to the discussion of the yield curve in Chapter 3.) (LO2, LO3)

Zonker Inc. purchases 500 units of an item at an invoice cost of $30,000. What is the cost per unit? If the goods are shipped f.o.b. shipping point and the freight bill was $1,500, what is the cost per unit if Zonker Inc. pays the freight charges? If these items were bought on 2/10, n/30 terms and the invoice and the freight bill were paid within the 10-day period, what would be the cost per unit?

Are different factor markets similarly interdependent? What would happen if the price of capital equipment rose?

Over what period of time should compensation cost be allocated?

Assume that there is a positive economic shock and the economy expands. Why may it continue to expand for some time? Why may the expansion eventually cease and be followed by a recession?

An electron-beam welding operation will join two pieces of steel plate together. The plates are 1.00 in thick. The unit melting energy is 125 Btu/in3. The diameter of the work area focus of the beam is 0.060 in, hence the width of the weld will be 0.060 in. The accelerating voltage is 30 kV and the beam current is 35 milliamp. The heat transfer factor is 0.70 and the melting factor is 0.55. If the beam moves at a speed of 50 in/min, will the beam penetrate the full thickness of the plates?