Question & Answer

If increased investment (using current technology) does not lead to increased long-run economic growth, does it bring any benefits?

Katie recently won a ceramic dalmatian valued at $800 on a television game show.  She questions whether this prize is taxable because it was a “gift” she won on the show.     a.  Use an available tax research service to answer Katie’s question.   b.  Write a letter to Katie communicating the results of your research.

Differentiate between investing activities, financing activities, and operating activities.

Since fixed-rate mortgages and bonds have similar payment flows, how is a financial institution with a large portfolio of fixed-rate mortgages affected by rising interest rates? Explain. LO(8-1)

Danny’s Lawn Equipment sells high-quality lawn mowers and offers a 3-year warranty on all new lawn mowers sold. In 2014, Danny sold $300,000 of new specialty mowers for golf greens for which Danny’s service department does not have the equipment to do the service. Danny has entered into an agreement with Mower Mavens to provide all warranty service on the special mowers sold in 2014. Danny wishes to measure the fair value of the agreement to determine the warranty liability for sales made in 2014. The controller for Danny’s Lawn Equipment estimates the following expected warranty cash outflows associated with the mowers sold in 2014. Cash Flow Probability Year Estimate Assessment 2015 $2,500 20% 4,000 60% 5,000 20% 2016 $3,000 30% 5,000 50% 6,000 20% 2017 $4,000 30% 6,000 40% 7,000 30% Instructions Using expected cash flow and present value techniques, determine the value of the warranty liability for the 2014 sales. Use an annual discount rate of 5%. Assume all cash flows occur at the end of the year.

Presented below are comments made in the financial press. Instructions Prepare responses to the requirements in each item. (a) Rep. John Dingell, at one time the ranking Democrat on the House Commerce Committee, threw his support behind the FASB’s controversial derivatives accounting standard and encouraged the FASB to adopt the rule promptly. Indicate why a member of Congress might feel obligated to comment on this proposed FASB standard. (b) In a strongly worded letter to Senator Lauch Faircloth (R-NC) and House Banking Committee Chairman Jim Leach (R-IA), the American Institute of Certified Public Accountants (AICPA) cautioned against government intervention in the accounting standard-setting process, warning that it had the potential of jeopardizing U.S. capital markets. Explain how government intervention could possibly affect capital markets adversely.

This year Jorge received a refund of property taxes that he deducted on his tax return last year.  Jorge is not sure whether he should include the refund in his gross income.  What would you tell him?

What explanations can you give for the increase in both unemployment and inflation in the 1970s?

If you were the owner of a clothes shop, how would you set about deciding what prices to charge for each garment at the end-of-season sale?

Sasha is a self-employed taxpayer. They recently spent $1,000 for airfare to travel to Italy. What amount of the airfare is deductible in each of the following alternative scenarios?

1. If a bank buys a £500 000 Treasury bill at the start of its 91-day life for £480 000, at roughly what price could it sell it to another financial institution after 45 days Why is it not possible to predict that precise price when the bill is first purchased? 2. Suppose there were a sudden surge in demand for cash from the general public. Would the existence of inter-bank market loans help to meet the demand in any way?

Compare and contrast the recovery periods used by MACRS and those used under generally accepted accounting principles (GAAP).

Explain how some government defined-benefit plans have become underfunded as a result of overestimating their rate of return on investment. (LO4)

Presented below are selected accounts for Alvarez Company as reported in the worksheet at the end of May 2014.   Instructions Complete the worksheet by extending amounts reported in the adjusted trial balance to the appropriate columns in the worksheet. Do not total individual columns.

Addison Co. has one temporary difference at the beginning of 2014 of $500,000. The deferred tax liability established for this amount is $150,000, based on a tax rate of 30%. The temporary difference will provide the following taxable amounts: $100,000 in 2015, $200,000 in 2016, and $200,000 in 2017. If a new tax rate for 2017 of 20% is enacted into law at the end of 2014, what is the journal entry necessary in 2014 (if any) to adjust deferred taxes?

] Compare and contrast how bad debt expense is determined for financial accounting purposes and how the deduction for bad debts is determined for accrual-method taxpayers. How do cash-method taxpayers determine their bad debt expense for accounts receivable?

Describe the tax benefits from “bunching” itemized deductions in one year. Describe the characteristics of the taxpayers who are most likely to benefit from using bunching and explain why this is so.

Explain the types of cash flow characteristics that would cause a firm to hedge interest rate risk by swapping floating-rate payments for fixed payments. Why would some firms avoid the use of interest rate swaps, even when they are highly exposed to interest rate risk? (LO1)

Larry purchased an annuity from an insurance company that promises to pay him $1,500 per month for the rest of his life. Larry paid $170,820 for the annuity. Larry is in good health and is 72 years old. Larry received the first annuity payment of $1,500 this month. Use the expected number of payments in Exhibit 5-1 for this problem.

Ramon incorporated his sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation’s stock. The property transferred to the corporation had the following fair market values and adjusted tax-adjusted bases.     FMV                    Adjusted Tax Basis Inventory$    10,000$         4,000 Building      50,000         30,000 Land    100,000         50,000 Total$  160,000$       84,000       The fair market value of the corporation’s stock received in the exchange equaled the fair market value of the assets transferred to the corporation by Ramon. a. What amount of gain or loss does Ramon realize on the transfer of the property to his corporation?

Youngman Corporation has temporary differences at December 31, 2014, that result in the following deferred taxes. Deferred tax asset $24,000 Deferred tax liability $69,000 Indicate how these balances would be presented in Youngman’s December 31, 2014, statement of financial position.

Erin is considering switching her business from the cash method to the accrual method at the beginning of next year. Determine the amount and timing of her §481 adjustment for next year assuming the IRS grants Erin’s request in the following alternative scenarios. a) At the end of this year, Erin’s business has $15,000 of accounts receivables and $18,000 of accounts payables that have not been recorded for tax purposes.  b) At the end of this year, Erin’s business reports $25,000 of accounts receivables and $9,000 of accounts payables that have not been recorded for tax purposes.

What is the purpose of a tombstone that is used with a horizontal machining center (HMC)? What is the purpose of a tombstone that is used with a horizontal machining center (HMC)?

Emily purchased a building to store inventory for her business. The purchase price was $760,000. Emily also paid legal fees of $300 to acquire the building. In March, Emily incurred $2,000 to repair minor leaks in the roof (from storm damage earlier in the month) and $5,000 to make the interior suitable for her finished goods. What is Emily’s cost basis in the new building?

1.    : Studies of women leaders suggest that many of them view power differently than men do and prefer a collaborative, relationship-oriented use of power. If this is the case, what does it suggest about women leaders’ abilities to accomplish goals? What does it suggest about women’s ability to rise to higher organizational levels? Discuss.