Question & Answer

Jake is a retired jockey who takes monthly trips to Las Vegas to gamble on horse races. So far this year, Jake has won almost $47,500 during his trips to Las Vegas while spending $27,250 on travel expenses and incurring $62,400 of gambling losses. Explain how Jake’s gambling winnings and related costs will be treated for tax purposes.

Organic Growth Company is presently testing a number of new agricultural seeds that it has recently harvested. To stimulate interest, it has decided to grant to five of its largest customers the unconditional right of return to these products if not fully satisfied. The right of return extends for 4 months. Organic Growth sells these seeds on account for $1,500,000 on January 2, 2014. Companies are required to pay the full amount due by March 15, 2014. Instructions (a) Prepare the journal entry for Organic Growth at January 2, 2014, assuming Organic Growth estimates returns of 20% based on prior experience. (Ignore cost of goods sold.) (b) Assume that one customer returns the seeds on March 1, 2014, due to unsatisfactory performance. Prepare the journal entry to record this transaction, assuming this customer purchased $100,000 of seeds from Organic Growth. (c) Briefly describe the accounting for these sales, if Organic Growth is unable to reliably estimate returns.

Explain what a favourable variance and an unfavourable variance mean in relation to revenue and costs.

In 2014, Elbert Corporation had net cash provided by operating activities of $531,000; net cash used by investing activities of $963,000; and net cash provided by financing activities of $585,000. At January 1, 2014, the cash balance was $333,000. Compute December 31, 2014, cash

Why do managers need to measure, monitor, and motivate performance?

What factors increase the benefits of accelerating deductions or deferring 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?

Apple Union (AU), a C corporation with a March 31 year-end, uses the accrual method of accounting.  If AU elects to be taxed as an S corporation, what will its year-end and method of accounting be (assuming no special elections)?

Name three factors that determine whether a taxpayer is required to file a tax return.

A direct extrusion operation produces the cross section shown in Figure P19.32(d) from an aluminum billet whose diameter = 150 mm and length = 900 mm. The flow curve parameters for the aluminum are K = 240 MPa and n = 0.16. In the Johnson strain equation, a = 0.8 and b = 1.5. Determine (a) the extrusion ratio, (b) the shape factor, (c) the force required to drive the ram forward during extrusion at the point in the process when the billet length remaining in the container = 850 mm, and (d) the length of the extruded section at the end of the operation if the volume of the butt left in the container is 600,000 mm3 .

Peter Henning Tool Company’s December 31 year-end financial statements contained the following errors. December 31, 2014 December 31, 2015 Ending inventory $9,600 understated $8,100 overstated Depreciation expense $2,300 understated — An insurance premium of $66,000 was prepaid in 2014 covering the years 2014, 2015, and 2016. The entire amount was charged to expense in 2014. In addition, on December 31, 2015, fully depreciated machinery was sold for $15,000 cash, but the entry was not recorded until 2016. There were no other errors during 2014 or 2015, and no corrections have been made for any of the errors. (Ignore income tax considerations.) Instructions (a) Compute the total effect of the errors on 2015 net income. (b) Compute the total effect of the errors on the amount of Henning’s working capital at December 31, 2015. (c) Compute the total effect of the errors on the balance of Henning’s retained earnings at December 31, 2015.

Lucy and Ricky Ricardo live in Los Angeles, California.  After they were married, they started a business named ILL Corporation (a C corporation).  For state law purposes, the shares of stock in ILL Corp. are listed under Ricky’s name only.  Ricky signed the Form 2553 electing to have ILL taxed as an S corporation for federal income tax purposes, but Lucy did not sign.  Given that California is a community property state, is the S election for ILL Corp. valid?

Gheorghe Moresan Lumber Company handles three principal lines of merchandise with these varying rates of gross profit on cost. Lumber 25% Millwork 30% Hardware and fi ttings 40% On August 18, a fire destroyed the office, lumber shed, and a considerable portion of the lumber stacked in the yard. To file a report of loss for insurance purposes, the company must know what the inventories were immediately preceding the fire. No detail or perpetual inventory records of any kind were maintained. The only pertinent information you are able to obtain are the following facts from the general ledger, which was kept in a fireproof vault and thus escaped destruction. Lumber Millwork Hardware Inventory, Jan. 1, 2014 $ 250,000 $ 90,000 $ 45,000 Purchases to Aug. 18, 2014 1,500,000 375,000 160,000 Sales revenue to Aug. 18, 2014 2,080,000 533,000 210,000 Instructions Submit your estimate of the inventory amounts immediately preceding the fire.

Discuss the importance of job satisfaction and trust for effective employee performance.

What is the expected value of the above lottery ticket gamble if the chances of purchasing a winning ticket with a prize of £50 are 30 per cent? How much of the expected value of the gamble is a risk-averse person willing to sacrifice if they decide against purchasing the ticket? If they were indifferent between purchasing and not purchasing the ticket, what is their certainty equivalent and risk premium of the gamble?

1. If there was a growth in the total number of worker hours because people worked longer hours, what would happen to GDP per hour worked and GDP per capita? 2. If people worked longer hours how would you assess whether the country was better or worse off?

1.              : Take swift action to notify the venture capitalists of the truth of the situation—and start cleaning house to get rid of people who would knowingly lie to close a deal.

Zopf Company sells its bonds at a premium and applies the effective-interest method in amortizing the premium. Will the annual interest expense increase or decrease over the life of the bonds? Explain.

On January 2, 2014, MacCloud Co. issued a 4-year, $100,000 note at 6% fixed interest, interest payable semiannually. MacCloud now wants to change the note to a variable-rate note. As a result, on January 2, 2014, MacCloud Co. enters into an interest rate swap where it agrees to receive 6% fixed and pay LIBOR of 5.7% for the first 6 months on $100,000. At each 6-month period, the variable rate will be reset. The variable rate is reset to 6.7% on June 30, 2014. Instructions (a) Compute the net interest expense to be reported for this note and related swap transaction as of June 30, 2014. (b) Compute the net interest expense to be reported for this note and related swap transaction as of December 31, 2014.

1.      : Give the job to the candidate with the highest score. You don’t need to make enemies on the Civil Service Board, and, although it is a bureaucratic procedure, the test is an objective way to select a permanent placement.

The plant manager of a manufacturing firm suggested in a conference of the company’s executives that accountants should speed up depreciation on the machinery in the finishing department because improvements were rapidly making those machines obsolete, and a depreciation fund big enough to cover their replacement is needed. Discuss the accounting concept of depreciation and the effect on a business concern of the depreciation recorded for plant assets, paying particular attention to the issues raised by the plant manager.

Consider the following tax rate structure.  Is it horizontally equitable?  Why or why not?  Is it vertically equitable?  Why or why not?

A manual assembly line has 17 workstations with one operator per station. Total work content time to assemble the product = 22.2 minutes. The production rate of the line = 36 units per hour. A synchronous transfer system is used to advance the products from one station to the next, and the transfer time = 6 seconds. The workers remain seated along the line. Proportion uptime = 0.90. Determine the balance efficiency.

Indicate some of the limitations of using surface roughness as a measure of surface texture

Using the IS/MP model analyse how a lower bound on real interest rates might cause the economy to enter a deflationary spiral following a significant decrease in aggregate expenditure.