Question & Answer

Waters Corporation purchased Johnson Company 3 years ago and at that time recorded goodwill of $400,000. The Johnson Division’s net assets, including the goodwill, have a carrying amount of $800,000. The recoverable amount of the division is estimated to be $1,000,000. Prepare Waters’ journal entry, if necessary, to record impairment of the goodwill.

David and Lilly Fernandez have determined their tax liability on their joint tax return to be $1,700. They have made prepayments of $1,500 and also have a child tax credit of $1,000.What is the amount of their tax refund or taxes due?

Bendetta, a high-tax-rate taxpayer, owns several rental properties and would like to shift some income to her daughter, Jenine.  Bendetta instructs her tenants to send their rent checks to Jenine so Jenine can report the rental income.  Will this shift the income from Bendetta to Jenine?  Why or why

Alan Meer inherits a hotel from his grandmother, Mary, on February 11 of the current year. Mary bought the hotel for $730,000 three years ago. Mary deducted $27,000 of cost recovery on the hotel before her death. The fair market value of the hotel in February is $725,000. (Assume that the alternative valuation date is not used.) a. What is Alan’s adjusted basis in the hotel? b. If the fair market value of the hotel at the time of Mary’s death was $500,000, what is Alan’s basis?

Doctor Bones prescribed physical therapy in a pool to treat Jack’s broken back. In response to this advice (and for no other reason), Jack built a swimming pool in his backyard and strictly limited use of the pool to physical therapy. Jack paid $25,000 to build the pool, but he wondered if this amount could be deducted as a medical expense. Determine if a capital expenditure such as the cost of a swimming pool qualifies for the medical expense deduction.

King Company is contemplating the purchase of a smaller company, which is a distributor of King’s products. Top management of King is convinced that the acquisition will result in significant synergies in its selling and distribution functions. The financial management group (of which you are a part) has been asked to analyze the effects of the acquisition on the combined company’s financial statements. This is the first acquisition for King, and some of the senior staff insist that based on their recollection of goodwill accounting, any goodwill recorded on the acquisition will result in a “drag” on future earnings for goodwill amortization. Other younger members on the staff argue that goodwill accounting has changed. Your supervisor asks you to research this issue. Instructions Access the IFRS authoritative literature at the IASB website (http://eifrs.iasb.org/). (Click on the IFRS tab and then register for free eIFRS access if necessary.) When you have accessed the documents, you can use the search tool in your Internet browser to respond to the following questions. (Provide paragraph citations.) (a) Identify the accounting literature that addresses goodwill and other intangible assets. (b) Define goodwill. (c) Is goodwill subject to amortization? Explain. (d) When goodwill is recognized by a subsidiary, should it be tested for impairment at the consolidated level or the subsidiary level? Discuss.

How would the principle of weighing up marginal costs and benefits apply to a worker deciding how much overtime to work in a given week?

Static and flexible budgets Plush pet toys are produced in a largely automated factory in standard lots of 100 toys each. A standard cost system is used to control costs and to assign cost to inventory.       Variable overhead, estimated at $5 per lot, consists of miscellaneous items such as thread, a variety of plastic squeakers, and paints that are applied to create features such as eyes and whiskers. Fixed overhead, estimated at $24 000 per month, consists largely of depreciation on the automated machinery and rent for the building. Variable overhead is allocated based on lots produced. The standard fixed overhead allocation rate is based on the estimated output of 1000 lots per month.             Required (a)        Prepare a production budget for the coming year based on planned production  12 000 lots. (b)       Compare the budget prepared in (a) with a flexible budget based on actual activity of 15 000 lots.

Assume that European countries impose a quota on goods imported from the United States and that the United States does not plan to retaliate. How could this affect the value of the euro? Explain. (LO2)

Presented below are three different transactions related to materiality. Explain whether you would  classify these transactions as material. (a) Blair Co. has reported a positive trend in earnings over the last 3 years. In the current year, it reduces its bad debt allowance to ensure another positive earnings year. The impact of this adjustment is equal to 3% of net income. (b) Hindi Co. has an extraordinary gain of $3.1 million on the sale of plant assets and a $3.3 million loss on the sale of investments. It decides to net the gain and loss because the net effect is considered immaterial. Hindi Co.’s income for the current year was $10 million. (c) Damon Co. expenses all capital equipment under $25,000 on the basis that it is immaterial. The company has followed this practice for a number of years.

L. A. and Paula file as married taxpayers.  In August of this year they received a $5,200 refund of state income taxes that they paid last year.  How much of the refund, if any, must L. A. and Paula include in gross income under the following independent scenarios?  Assume the standard deduction last year was $12,600. a.       Last year L. A. and Paula had itemized deductions of $10,200, and they chose to claim the standard deduction.  b.       Last year L. A. and Paula claimed itemized deductions of $23,200.  Their itemized deductions included state income taxes paid of $7,500. c.       Last year L. A. and Paula claimed itemized deductions of $15,400.  Their itemized deductions included state income taxes paid of $10,500.   Answer:

Continuous tubing is produced in a plastic extrusion operation through a die orifice whose outside diameter = 2.0 in and inside diameter = 1.5 in. The extruder barrel diameter = 5.0 in and length = 12 ft. The screw rotates at 50 rev/min; it has a channel depth = 0.30 in and flight angle = 16°. The head pressure has a value of 350 lb/in2 and the viscosity of the polymer melt is 90 x 10-4 lb-sec/in2 . Under these conditions, what is the production rate in length of tube/min, given that the die swell ratio is 1.25.

1. Will the shape of the long-run AS curve here depend on just how the ‘long’ run is defined? 2. If a shift in the aggregate demand curve from AD to AD1 in Figure 20.17 causes a movement from point a to point d in the long run, would a shift in aggregate demand from AD1 to AD cause a movement from point d back to point a in the long run?

The largest axis of a Cartesian coordinate robot has a total range of 750 mm. It is driven by pulley system capable of a mechanical accuracy = 0.25 mm and repeatability = ±0.15 mm. Determine the minimum number of bits required in the binary register for the axis in the robot's control memory.

1.    : How might Cody Sexton’s decision differ if he based it on the utilitarian approach versus individualism approach versus practical approach to ethical decision making? Which approach does he appear to be using?

What determines the shape and position of the IS curve?

As an illustration of the difficulty in identifying monopolies, try to decide which of the following are monopolies: BT; a local evening newspaper; food sold in a university outlet; a village post office; Interflora; the London Underground; ice creams in the cinema; Guinness; the board game ‘Monopoly’. (As you will quickly realise in each case, it depends how you define the industry.)

Describe the U.S. government’s efforts to infuse capital into all of the very large banks during the credit crisis. (LO6)

Discuss some of the difficulties regulators face when attempting to provide regulatory oversight over fintech. (LO5)

What does the term advanced composites mean?

Anwer owns a rental home and is involved in maintaining it and approving renters. During the year he has a net loss of $8,000 from renting the home. His other sources of income during the year are a salary of $111,000 and $34,000 of long-term capital gains. How much of Anwer’s $8,000 rental loss can he deduct currently if he has no sources of passive income?

Francis Corporation purchased an asset at a cost of $50,000 on March 1, 2014. The asset has a useful life of 8 years and a salvage value of $4,000. For tax purposes, the MACRS class life is 5 years. Compute tax depreciation for each year 2014–2019.

In its 2012 annual report, Gap Inc. reported inventory of $1,615 million on January 25, 2012, and $1,620 million on January 29, 2011, cost of sales of $9,275 million for fiscal year 2012, and net sales of $14,549 million. Compute Gap’s inventory turnover and the average days to sell inventory for the fiscal year 2012.

Why will investment affect both actual (short-term) growth and the long-term growth in potential output? What will be the implications if these two effects differ in magnitude?

At the end of the year, before distributions, Bombay (an S corporation) has an accumulated adjustments account balance of $15,000 and accumulated E&P of $20,000 from a previous year as a C corporation. During the year, Nicolette (a 40 percent shareholder) received a $20,000 distribution (the remaining shareholders received $30,000 in distributions).  What are the amount and character of income or gain Nicolette must recognize from the distribution? What is her basis in her Bombay stock at the end of the year?  (Assume her stock basis is $40,000 after considering her share of Bombay’s income for the year but before considering the effects of the distribution.)