Question & Answer

Bonnie and Clyde were married this year. Bonnie has a steady job that will pay her about $37,000, while Clyde does odd jobs that will produce about $28,000 of income. They also have a joint savings account that will pay about $400 of interest. If Bonnie and Clyde reside in a community property state and file married-separate tax returns, how much gross income will they each report? Is there any difference if they reside in a common-law state? Explain.

What is centerless grinding?

What are the primary tax differences between traditional IRAs and Roth IRAs?

Allie received a $50,000 distribution from her 401(k) account this year that she established while working for Big Stories, Inc. Assuming her marginal ordinary tax rate is 24 percent, how much tax and penalty will Allie pay on the distribution under the following circumstances?

Use the information in IFRS12-6. Assume that at the end of the year following the impairment (after recording amortization expense), the estimated recoverable amount for the patent is $130,000. Prepare Kenoly’s journal entry, if needed.

Answer each of these unrelated questions. (a) On January 1, 2014, Fishbone Corporation sold a building that cost $250,000 and that had accumulated depreciation of $100,000 on the date of sale. Fishbone received as consideration a $240,000 non-interest-bearing note due on January 1, 2017. There was no established exchange price for the building, and the note had no ready market. The prevailing rate of interest for a note of this type on January 1, 2014, was 9%. At what amount should the gain from the sale of the building be reported? (b) On January 1, 2014, Fishbone Corporation purchased 300 of the $1,000 face value, 9%, 10-year bonds of Walters Inc. The bonds mature on January 1, 2024, and pay interest annually beginning January 1  2015. Fishbone purchased the bonds to yield 11%. How much did Fishbone pay for the bonds? (c) Fishbone Corporation bought a new machine and agreed to pay for it in equal annual installments of $4,000 at the end of each of the next 10 years. Assuming that a prevailing interest rate of 8% applies to this contract, how much should Fishbone record as the cost of the machine? (d) Fishbone Corporation purchased a special tractor on December 31, 2014. The purchase agreement stipulated that Fishbone should pay $20,000 at the time of purchase and $5,000 at the end of each of the next 8 years. The tractor should be recorded on December 31, 2014, at what amount, assuming an appropriate interest rate of 12%? (e) Fishbone Corporation wants to withdraw $120,000 (including principal) from an investment fund at the end of each year for 9 years. What should be the required initial investment at the beginning of the first year if the fund earns 11%?

At the end of last year, Milena, a 35 percent partner in the five-person LAMEC Partnership, has an outside basis of $60,000, including her $30,000 share of LAMEC debt. On January 1 of the current year, Milena sells her partnership interest to MaryLynn for a cash payment of $45,000 and the assumption of her share of LAMEC’s debt. a. What are the amount and character of Milena’s recognized gain or loss on the sale? b. If LAMEC has $100,000 of unrealized receivables as of the sale date, what are the amount and character of Milena’s recognized gain or loss? c. What is MaryLynn’s initial basis in the partnership interest?

Norman Co., a fast-growing golf equipment company, uses GAAP. It is considering the issuance of convertible bonds. The bonds mature in 10 years, have a face value of $400,000, and pay interest annually at a rate of 4%. The equity component of the bond issue has a fair value of $35,000. Greg Shark is curious as to the difference in accounting for these bonds if the company were to use IFRS. (a) Prepare the entry to record issuance of the bonds at par under GAAP. (b) Repeat the requirement for part (a), assuming application of IFRS to the bond issuance. (c) Which approach provides the better accounting? Explain.

Given that annual demand for a product is 20,000 units, cost per unit = $6.00, holding cost rate = 2.5%/month, changeover (setup) time between products averages 2.0 hr, and downtime cost during changeover = $200/hr, determine (a) economic order quantity and (b) total inventory costs for this situation.

Are there any features of free-market capitalism which would discourage innovation?

Jessica’s friend Zachary once stated that he couldn’t understand why someone would take a tax course.  Why is this a rather naïve view?

1.       Why do you think there is a trend toward greater democracy and decentralization in organizations today? Would a radical decentralized system be effective with Gen Z employees? Why?

Distinguish between gross profit as a percentage of cost and gross profit as a percentage of sales price. Convert the following gross profit percentages based on cost to gross profit percentages based on sales price: 25% and 331/3%. Convert the following gross profit percentages based on sales price to gross profit percentages based on cost: 331/3% and 60%.

Why are marginal external benefits typically likely to decline as output increases? Why is some cases might marginal external benefits be constant at all levels of output or even increase as more is produced?

When is the stated interest rate of a debt instrument presumed to be fair?

Briefly discuss the convergence efforts that are underway in the area of intangible assets.

Assume that on February 1, Procter & Gamble (P&G) paid $720,000 in advance for 2 years’ insurance coverage. Prepare P&G’s February 1 journal entry and the annual adjusting entry on June 30.

This year, Leron and Sheena sold their home for $750,000 after all selling costs. Under the following scenarios, how much taxable gain does the home sale generate for Leron and Sheena? Assume the couple is married filing jointly.

Zoop Corporation purchased for $300,000 a 30% interest in Murphy, Inc. This investment enables Zoop to exert significant influence over Murphy. During the year, Murphy earned net income of $180,000 and paid dividends of $60,000. Prepare Zoop’s journal entries related to this investment.

Shimei Inc. purchased computer equipment on March 1, 2014, for $31,000. The computer equipment has a useful life of 10 years and a salvage value of $1,000. For tax purposes, the MACRS class life is 5 years. Instructions (a) Assuming that the company uses the straight-line method for book and tax purposes, what is the depreciation expense reported in (1) the financial statements for 2014 and (2) the tax return for 2014? (b) Assuming that the company uses the double-declining-balance method for both book and tax purposes, what is the depreciation expense reported in (1) the financial statements for 2014 and (2) the tax return for 2014? (c) Why is depreciation for tax purposes different from depreciation for book purposes even if the company uses the same depreciation method to compute them both?

“The financial statements of a company are management’s, not the accountant’s.” Discuss the implications of this statement.

Which would you expect to fluctuate more: the money multiplier (DM4/Dcash), or the simple ratio, M4/cash, illustrated in Figure 18.4?

Why will Pareto optimality not be achieved in markets where there are substantial economies of scale in production?

Will the industry supply be zero below a price of P5 in Figure 7.3?

Explain the differences and similarities among the direct, step-down, and reciprocal methods.