Question & Answer

Charlie was hired by Ajax this year as a corporate executive and a member of the board of directors. During the current year, Charlie received the following payments or benefits paid on his behalf.

On September 30 of last year, Rex received some investment land from Holly as a gift. Holly’s basis was $50,000 and the land was valued at $40,000 at the time of the gift. Holly acquired the land five years ago. What are the amount and character of Rex’s recognized gain (loss) if he sells the land on May 12 this year at the following prices? a. $32,000 b. $70,000 c. $45,000   a. $8,000 short-term capital loss, computed as follows: Description Amount Explanation (1) Amount Realized$32,000 (2) Adjusted Basis 40,000 Rex’s basis is the fair market value of the land at the date of the gift. Gain (Loss) Recognized ($8,000) (1) – (2)

Solve Problem 20.26 except that the height = 60 mm

Evaluate balanced scorecard design             Frieda’s Fizz brews specialty soft drinks, including root beer and other flavours. Its vision is 'To proudly produce and sell extraordinarily smooth, rich, and delicious soft drinks to satisfy kids of all ages.' The entity has a reputation for high quality and unique flavour, enabling it to sell soft drinks at a premium price to gourmet grocery stores in the local area. The entity’s managers plan to expand the business to other geographic regions, but they want to ensure that they maintain high quality as the entity grows. They have decided to implement a balanced scorecard, and they have chosen the following balanced scorecard measures: Financial Perspective 1.       Breakdown of manufacturing cost per case: ingredients, direct labour, packaging materials, and overhead 2.       Operating profit per case 3.       Return on investment          Customer Perspective 4.       Number of customer complaints relating to taste, freshness, package integrity, appearance, and foreign objects 5.       Quality index (an internal measure of manufacturing quality, including microbiology and chemistry) 6.       Percentage sales growth          Internal Business Process Perspective 7.       Ratio of plant production hours to total available time 8.       Throughput (number of cases packaged) 9.       Waste and scrap as a percent of total production cost          Learning and Growth Perspective 10.     Number of work-related injuries 11.     Number of training hours per employee 12.     Number of community volunteer hours per employee   Required  (a)    Explain why uncertainties exist about the best balanced scorecard measures for Frieda’s Fizz. (Do not discuss any of the measures already listed. Instead, focus on why any set of measures might not provide ideal information and on why the managers cannot know with certainty which set of measures is best.) (b)     For the balanced scorecard perspective:                                               (i)          Describe the strengths and weaknesses of the measures chosen for that category.                                             (ii)          Reach a conclusion about the reasonableness of the set of balanced scorecard measures for that category. (c)     What are the pros and cons of implementing a balanced scorecard? (d)     How valuable do you think the balanced scorecard will be in helping the managers of Frieda’s Fizz meet its vision? Explain. (e)     The managers of Frieda’s Fizz want your evaluation of their proposed balanced scorecard. Use the information you learned from the preceding analyses to write a memo to the managers presenting your evaluation of                                               (i)          whether they should adopt a balanced scorecard                                             (ii)          the proposed balanced scorecard design.

Compare the relative effectiveness of fiscal and monetary policy under (a) fixed; (b) free-floating exchange rates.

Why are the nontraditional material removal processes important?

1.              : What does this case illustrate about the risks of starting a business with a partner? How might those risks be minimized? Explain.

Solve Problem 33.3, except using the following additional information. It is known that the diameter of the filament fed into the extruder workhead is 1.25 mm, and the filament is fed into the workhead from its spool at a rate of 30.6 mm of length per second while the workhead is depositing material. Between layers, the feed rate from the spool is zero.

How are state-sponsored 529 educational savings plans taxed if investment returns are used for educational purposes? Are the returns taxed differently if they are not ultimately used to pay for education costs?

In each of the following independent cases, determine the taxpayer’s filing status and the number of dependents the taxpayer is allowed to claim.

How are the tax consequences of a cash distribution different from those of a noncash property distribution to both the S corporation and the shareholders?

Garcia Home Improvement Company installs replacement siding, windows, and louvered glass doors for single-family homes and condominium complexes in northern New Jersey and southern New York. The company is in the process of preparing its annual financial statements for the fiscal year ended May 31, 2014, and Jim Alcide, controller for Garcia, has gathered the following data concerning inventory. At May 31, 2014, the balance in Garcia’s Raw Materials Inventory account was $408,000, and Allowance to Reduce Inventory to Market had a credit balance of $27,500. Alcide summarized the relevant inventory cost and market data at May 31, 2014, in the schedule below. Alcide assigned Patricia Devereaux, an intern from a local college, the task of calculating the amount that should appear on Garcia’s May 31, 2014, financial statements for inventory under the lower-of-costor- market rule as applied to each item in inventory. Devereaux expressed concern over departing from the historical cost principle. Cost Replacement Cost Sales Price Net Realizable Value Normal Profit Aluminum siding $ 70,000 $ 62,500 $ 64,000 $ 56,000 $ 5,100 Cedar shake siding 86,000 79,400 94,000 84,800 7,400 Louvered glass doors 112,000 124,000 186,400 168,300 18,500 Thermal windows 140,000 126,000 154,800 140,000 15,400 Total $408,000 $391,900 $499,200 $449,100 $46,400 Instructions (a) (1) Determine the proper balance in Allowance to Reduce Inventory to Market at May 31, 2014. (2) For the fiscal year ended May 31, 2014, determine the amount of the gain or loss that would be recorded due to the change in Allowance to Reduce Inventory to Market. (b) Explain the rationale for the use of the lower-of-cost-or-market rule as it applies to inventories.

Explain how underwriting costs and accounting and legal fees associated with the issuance of stock should be recorded.

On January 1, 2014, Burke Corporation signed a 5-year noncancelable lease for a machine. The terms of the lease called for Burke to make annual payments of $8,668 at the beginning of each year, starting January 1, 2014. The machine has an estimated useful life of 6 years and a $5,000 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Burke uses the straight-line method of depreciation for all of its plant assets. Burke’s incremental borrowing rate is 10%, and the Lessor’s implicit rate is unknown. Instructions (a) What type of lease is this? Explain. (b) Compute the present value of the minimum lease payments. (c) Prepare all necessary journal entries for Burke for this lease through January 1, 2015.

List two types of transactions that would receive different accounting treatment using (a) strict cash-basis accounting, and (b) a modified cash basis.

In general, what effect does an operating distribution have on the partnership?

If anti-monopoly legislation is effective enough, is there ever any need to prevent mergers from going ahead?

Coy and Matt are equal partners in the Matcoy Partnership. Each partner has a basis in his partnership interest of $28,000 at the end of the current year, prior to any distribution. On December 31, each receives an operating distribution. Coy receives $10,000 cash. Matt receives $3,000 cash and a parcel of land with a $7,000 fair market value and a $4,000 basis to the partnership. Matcoy has no debt or hot assets. a. What is Coy’s recognized gain or loss? What is the character of any gain or loss? b. What is Coy’s ending basis in his partnership interest? c. What is Matt’s recognized gain or loss? What is the character of any gain or loss? d. What is Matt’s basis in the distributed property? e. What is Matt’s ending basis in his partnership interest?

What dangers are there in maturity transformation for (a) financial institutions; (b) society generally?

Winsor Inc. recently purchased Holiday Corp., a large midwestern home painting corporation. One of the terms of the merger was that if Holiday’s income for 2014 was $110,000 or more, 10,000 additional shares would be issued to Holiday’s stockholders in 2015. Holiday’s income for 2013 was $120,000. Instructions (a) Would the contingent shares have to be considered in Winsor’s 2013 earnings per share computations? (b) Assume the same facts, except that the 10,000 shares are contingent on Holiday’s achieving a net income of $130,000 in 2014. Would the contingent shares have to be considered in Winsor’s earnings per share computations for 2013?

Marvin Gaye Company has been having difficulty obtaining key raw materials for its manufacturing process. The company therefore signed a long-term noncancelable purchase commitment with its largest supplier of this raw material on November 30, 2014, at an agreed price of $400,000. At December 31, 2014, the raw material had declined in price to $365,000. Instructions What entry would you make on December 31, 2014, to recognize these facts?

Mike wanted to work for a CPA firm, but he also wanted to work on his parents’ farm in Montana.  Because the CPA firm wanted Mike to be happy, it offered to let him work for the firm as an independent contractor during the fall and winter and return to Montana to work for his parents during the spring and summer.  He was very excited to hear that the firm was also going to give him a 5 percent higher “salary” for the six months he would be working for the firm over what he would have made over the same six-month period if he worked full time as an employee (i.e., an increase from $30,000 to $31,500).  Should Mike be excited about his 5 percent raise?  Why or why not?  What counteroffer could Mike reasonably suggest?

Describe the circumstances in which a taxpayer acquires a home and rents it out and is not allowed to deduct a portion of the interest expense on the loan the taxpayer used to acquire the home.

Willow Corp. (a calendar-year C corporation) reported taxable income before the net operating loss deduction (NOL) in the amount of $100,000 in 2024. Willow had an NOL carryover of $90,000 to 2024 How much tax will Willow Corp. pay for 2024, what is its NOL carryover to 2025, and when will the NOL expire under the following assumptions?

What distinguishes operating from liquidating distributions?