Question & Answer

Using examples, discuss the conflicts between using the environment as productive resource and as a dump?

What are the two basic methods of arc shielding?

What are some of the arguments in favor of using the indirect (reconciliation) method as opposed to the direct method for reporting a statement of cash flows?

Jamel and Jennifer have been married 30 years and have filed a joint return every year of their marriage.Their three daughters, Jade, Lindsay, and Abbi, are ages 12, 17, and 22 respectively and all live at home.None of the daughters provide more than half of her own support.Abbi is a full-time student at a local university and does not have any gross income. a.       How many personal and dependency exemptions are Jamel and Jennifer allowed to claim?

AJ is a 30 percent partner in the Trane Partnership, a calendar-year-end entity. On January 1, AJ has an outside basis in his interest in Trane of $73,000, which includes his share of the $50,000 of partnership liabilities. Trane generates $42,000 of income during the year and does not make any changes to its liabilities. On December 31, Trane makes a proportionate distribution of the following assets to AJ to terminate his partnership interest: Tax BasisFMV Inventory $ 55,000 $ 65,000 Land 30,000 25,000    Totals $ 85,000 $90,000 a. What are the tax consequences (gain or loss, basis adjustments) of the distribution to Trane? b. What are the amount and character of any recognized gain or loss to AJ? c. What is AJ’s basis in the distributed assets? d. If AJ sells the inventory four years after the distribution for $70,000, what are the amount and character of his recognized gain or loss?

Are C corporations or flow-through entities (S corporations and entities taxed as partnerships) more flexible in terms of selecting a tax year-end? Why are the tax rules in this area different for C corporations and flow-through business entities?

Use the same information as in E14-22 above except that American Bank reduced the principal to $1,900,000 rather than $2,400,000. On January 1, 2018, Barkley pays $1,900,000 in cash to American Bank for the principal. Instructions (a) Can Barkley Company record a gain under this term modification? If yes, compute the gain for Barkley Company. (b) Prepare the journal entries to record the gain on Barkley’s books. (c) What interest rate should Barkley use to compute its interest expense in future periods? Will your answer be the same as in E14-22 above? Why or why not? (d) Prepare the interest payment schedule of the note for Barkley Company after the debt restructuring. (e) Prepare the interest payment entries for Barkley Company on December 31, of 2015, 2016, and 2017. (f) What entry should Barkley make on January 1, 2018?

In an examination of Arenes Corporation as of December 31, 2014, you have learned that the following situations exist. No entries have been made in the accounting records for these items. 1. The corporation erected its present factory building in 1999. Depreciation was calculated by the straight-line method, using an estimated life of 35 years. Early in 2014, the board of directors conducted a careful survey and estimated that the factory building had a remaining useful life of 25 years as of January 1, 2014. 2. An additional assessment of 2013 income taxes was levied and paid in 2014. 3. When calculating the accrual for officers’ salaries at December 31, 2014, it was discovered that the accrual for officers’ salaries for December 31, 2013, had been overstated. 4. On December 15, 2014, Arenes Corporation declared a cash dividend on its common stock outstanding, payable February 1, 2015, to the common stockholders of record December 31, 2014. Instructions Describe fully how each of the items above should be reported in the financial statements of Arenes Corporation for the year 2014.

Carow Corporation purchased, as a held-for-collection investment, $60,000 of the 8%, 5-year bonds of Harrison, Inc. for $65,118, which provides a 6% return. The bonds pay interest semiannually. Prepare Carow’s journal entries for (a) the purchase of the investment, and (b) the receipt of semiannual interest and premium amortization.

Using the facts from the previous problem, how would your answer change if Manny’s after-tax rate of return were 8 percent?

Explain the revenue recognition principle.

The problem in a certain thermoforming operation is that there is too much thinning in the walls of the large cup-shaped part. The operation is conventional pressure thermoforming using a positive mold, and the plastic is an ABS sheet with an initial thickness of 3.2 mm. (a) Why is thinning occurring in the walls of the cup? (b) What changes could be made in the operation to correct the problem?

In MRP, what are common use items?

Illustrate equilibrium in the market for loanable funds using a demand and supply diagram.

What is a substituted basis as it relates to stock received in exchange for property in a §351 transaction?  What is the purpose of attaching a substituted basis to stock received in a §351 transaction?

The following situations relate to Bolivia Company. 1. Bolivia provides a warranty with all its products it sells. It estimates that it will sell 1,000,000 units of its product for the year ended December 31, 2014, and that its total revenue for the product will be $100,000,000. It also estimates that 60% of the product will have no defects, 30% will have major defects, and 10% will have minor defects. The cost of a minor defect is estimated to be $5 for each product sold, and the cost for a major defect cost is $15. The company also estimates that the minimum amount of warranty expense will be $2,000,000 and the maximum will be $10,000,000. 2. Bolivia is involved in a tax dispute with the tax authorities. The most likely outcome of this dispute is that Bolivia will lose and have to pay $400,000. The minimum it will lose is $20,000 and the maximum is $2,500,000. Instructions Prepare the journal entry to record provisions, if any, for Bolivia at December 31, 2014.

Youngman Corporation has temporary differences at December 31, 2014, that result in the following deferred taxes. Deferred tax liability—current $38,000 Deferred tax asset—current $62,000 Deferred tax liability—noncurrent $96,000 Deferred tax asset—noncurrent $27,000 Indicate how these balances would be presented in Youngman’s December 31, 2014, balance sheet.

What is the difference between dependent and independent demand for products?

On November 10 of year 1, Javier purchased a building, including the land it was on, to assemble his new equipment. The total cost of the purchase was $1,200,000; $300,000 was allocated to the basis of the land, and the remaining $900,000 was allocated to the basis of the building.  a. Using MACRS, what is Javier’s depreciation deduction on the building for years 1 through 3? b. What would be the year 3 depreciation deduction if the building was sold on August 1 of year 3? c. Answer the question in part (a), except assume the building was purchased and placed in service on March 3 instead of November 10. d. Answer the question in part (a), except assume that the building is residential property. e. What would be the depreciation for 2024, 2025, and 2026 if the property were nonresidential property purchased and placed in service November 10, 2007 (assume the same original basis)?

From an employee perspective, how are ISOs treated differently from NQOs for tax purposes? In general, for a given number of options, which type of stock options should employees prefer?

Ryan, Dahir, and Bill have operated Broken Feather LLC for the last four years using a calendar year-end. Each has a one-third interest. Since they began operating, their busy season has run from June through August, with 35 percent of their gross receipts coming in July and August. The members would like to change their tax year-end and have asked you to address the following questions: a. Can they change to an August 31 year-end and, if so, how do they make the change? [Hint: See Rev. Proc. 2002-38.] b. Can they change to a September 30 year-end and, if so, how do they make the change? [Hint: See §444.]

The financial statements of P&G are presented in Appendix 5B. The company’s complete annual report, including the notes to the financial statements, can be accessed at the book’s companion website, www. wiley.com/college/kieso. Instructions Refer to P&G’s financial statements and the accompanying notes to answer the following questions. (a) Using the notes to the consolidated financial statements, determine P&G’s revenue recognitionmpolicies. Discuss the impact of trade promotions on P&G’s financial statements. (b) Give two examples of where historical cost information is reported in P&G’s financial statements and related notes. Give two examples of the use of fair value information reported in either the financial statements or related notes. (c) How can we determine that the accounting principles used by P&G are prepared on a basis consistent with those of last year? (d) What is P&G’s accounting policy related to advertising? What accounting principle does P&G follow regarding accounting for advertising? Where are advertising expenses reported in the financialstatements?

Prior to 2014, Heberling Inc. excluded manufacturing overhead costs from work in process and finished goods inventory. These costs have been expensed as incurred. In 2014, the company decided to change its accounting methods for manufacturing inventories to full costing by including these costs as product costs. Assuming that these costs are material, how should this change be reflected in the financial statements for 2013 and 2014?

An NC machine tool table is powered by a servomotor, leadscrew, and optical encoder. The leadscrew has a pitch = 5.0 mm and is connected to the motor shaft with a gear ratio of 16:1 (16 turns of the motor for each turn of the leadscrew). The optical encoder is connected directly to the leadscrew and generates 200 pulses/rev of the leadscrew. The table must move a distance = 100 mm at a feed rate = 500 mm/min. Determine (a) the pulse count received by the control system to verify that the table has moved exactly 100 mm; and (b) the pulse rate and (c) motor speed that correspond to the feed rate of 500 mm/min.

Describe the circumstances under which distributions from defined contribution plan are penalized. What are the penalties?