Question & Answer

Congress would like to increase tax revenues by 10 percent.  Assume that the average taxpayer in the United States earns $65,000 and pays an average tax rate of 15 percent.  If the income effect is in effect for all taxpayers, what average tax rate will result in a 10 percent increase in tax revenues?  This is an example of what type of forecasting?

The information below pertains to Barkley Company for 2015. Net income for the year $1,200,000 7% convertible bonds issued at par ($1,000 per bond); each bond is convertible into 30 shares of common stock 2,000,000 6% convertible, cumulative preferred stock, $100 par value; each share is convertible into 3 shares of common stock 4,000,000 Common stock, $10 par value 6,000,000 Tax rate for 2015 40% Average market price of common stock $25 per share There were no changes during 2015 in the number of common shares, preferred shares, or convertible bonds outstanding. There is no treasury stock. The company also has common stock options (granted in a prior year) to purchase 75,000 shares of common stock at $20 per share. Instructions (a) Compute basic earnings per share for 2015. (b) Compute diluted earnings per share for 2015.

Frank paid $3,700 in fees for an accountant to tabulate business information (Frank operates as a self-employed contractor and files a Schedule C). The accountant also spent time tabulating Frank’s income from his investments and determining Frank’s personal itemized deductions. Explain to Frank whether or not he can deduct the $3,700 as a business expense or as an itemized deduction, and provide a citation to an authority that supports your conclusion.

Offer an argument for why the terrorist attack on the United States on September 11, 2001, could have placed downward pressure on U.S. interest rates. Offer an argument for why those attacks could have placed upward pressure on U.S. interest rates. (LO1, LO2)

Listed below are various types of accounting changes and errors. ______ 1. Change in a plant asset’s salvage value. ______ 2. Change due to overstatement of inventory. ______ 3. Change from sum-of-the-years’-digits to straight-line method of depreciation. ______ 4. Change from presenting unconsolidated to consolidated financial statements. ______ 5. Change from LIFO to FIFO inventory method. ______ 6. Change in the rate used to compute warranty costs. ______ 7. Change from an unacceptable accounting principle to an acceptable accounting principle. ______ 8. Change in a patent’s amortization period. ______ 9. Change from completed-contract to percentage-of-completion method on construction contracts. ______ 10. Change from FIFO to average-cost inventory method. Instructions For each change or error, indicate how it would be accounted for using the following code letters: (a) Accounted for prospectively. (b) Accounted for retrospectively. (c) Neither of the above.

} Rashaun (62 years old) retired and planned on immediately receiving distributions (making withdrawals) from his traditional IRA account. The balance of his IRA account is $160,000 (before reducing it for withdrawals ∕ distributions described below). Over the years, Rashaun has contributed $40,000 to the IRA. Of his $40,000 contributions, $30,000 was nondeductible and $10,000 was deductible. Assume Rashaun did not make any contributions to the account during the year. a. If Rashaun currently withdraws $20,000 from the IRA, how much tax will he be required to pay on the withdrawal if his marginal tax rate is 24 percent? b. If Rashaun currently withdraws $70,000 from the IRA, how much tax will he be required to pay on the withdrawal if his marginal tax rate is 28 percent? c. Using the information provided in part (b), complete Form 8606, part I, to report the taxable portion of the $70,000 distribution (withdrawal). Use the most current form available.

If countries are so keen to reduce the barriers to trade, why do many countries frequently attempt to erect barriers?

Mask Company has 30,000 shares of $10 par value common stock authorized and 20,000 shares issued and outstanding. On August 15, 2014, Mask purchased 1,000 shares of treasury stock for $18 per share. Mask uses the cost method to account for treasury stock. On September 14, 2014, Mask sold 500 shares of the treasury stock for $20 per share. In October 2014, Mask declared and distributed 1,950 shares as a stock dividend from unissued shares when the market price of the common stock was $21 per share. On December 20, 2014, Mask declared a $1 per share cash dividend, payable on January 10, 2015, to shareholders of record on December 31, 2014. Instructions (a) How should Mask account for the purchase and sale of the treasury stock, and how should the treasury stock be presented in the balance sheet at December 31, 2014? (b) How should Mask account for the stock dividend, and how would it affect the stockholders’ equity at December 31, 2014? Why? (c) How should Mask account for the cash dividend, and how would it affect the balance sheet at December 31, 2014? Why?

The records of Ellen’s Boutique report the following data for the month of April. Sales revenue $99,000 Purchases (at cost) $48,000 Sales returns 2,000 Purchases (at sales price) 88,000 Markups 10,000 Purchase returns (at cost) 2,000 Markup cancellations 1,500 Purchase returns (at sales price) 3,000 Markdowns 9,300 Beginning inventory (at cost) 30,000 Markdown cancellations 2,800 Beginning inventory (at sales price) 46,500 Freight on purchases 2,400 Instructions Compute the ending inventory by the conventional retail inventory method.

Explain why paying dividends is not an effective way to shift income from a corporation to its owners.

What is meant by super-hysteresis? What mechanisms might explain how this phenomenon occurs?

What is meant by “accounting symmetry” between the entries recorded by the debtor and creditor in a troubleddebt restructuring involving a modification of terms? In what ways is the accounting for troubled-debt restructurings non-symmetrical?

Name the three main types of electrochemical machining.

What are some of the design recommendations for glass parts?

Describe the three different tax rates discussed in the chapter and how taxpayers might use them.

Hayes Company sold 10,000 shares of Kenyon Co. common stock for $27.50 per share, incurring $1,770 in brokerage commissions. These securities were classified as trading and originally cost $260,000. Prepare the entry to record the sale of these securities.

How does the yield on a repurchase agreement differ from a loan in the federal funds market? Why? (LO2)

The president recently vetoed a tax act passed by the House and Senate.  Is the tax act dead?  If not, what will it take for the act to be passed?

Allied Trucking moves produce from farms to markets. Its managers       decided to implement a balanced scorecard around the entity’s vision          statement: 'We aim to be the industry leader in cost-effective and timely      delivery of produce’. Provide two potential performance measures for each of the four perspectives for the balanced scorecard for Allied      Trucking.

Dividends are sometimes said to have been paid “out of retained earnings.” What is the error, if any, in that statement?

Danner Inc. has a $395,000 capital loss carryover that will expire at the end of the current tax year if it is not used. Also, Danner Inc. has been a general partner in the Talisman Partnership for three years and plans to end its involvement with the partnership by receiving a liquidating distribution. Initially, all parties agreed that Danner Inc.’s liquidating distribution would include $50,000 in cash and land with a fair market value of $400,000 (tax basis of $120,000). Immediately before the distribution, Danner’s basis in its partnership interest is $150,000, which includes its $100,000 share of partnership debt.  Talisman Partnership does not hold any hot assets. a. What are the amount and character of any gain or loss to Danner Inc.? b. What is Danner Inc.’s basis in the land? c. Can you suggest a course of action that would help Danner Inc. avoid the expiration of its capital loss carryover?

A 4.50-in-thick slab that is 9 in wide and 24 in long is to be reduced in a single pass in a two-high rolling mill to a thickness of 3.87 in. The roll rotates at a speed of 5.50 rev/min and has a radius of 17.0 in. The work material has a strength coefficient = 30,000 lb/in2 and a strain hardening exponent = 0.15. Determine (a) roll force, (b) roll torque, and (c) power required to accomplish this operation.

1.      : With respect to competitive strategy, identify and evaluate Casper’s target customers, its core competence, and how it builds synergy and delivers value.

At two levels of activity within the relevant range, average costs are $192 and $188, respectively. Assuming the cost function is linear, what can be said about the existence of fixed and variable costs?

Explain how the liquidity position of finance companies differs from that of depository institutions such as commercial banks. (LO5)