Question & Answer

What is meant by the phrase “double taxation of corporate income”?

What is the difference between a track and a land on a printed circuit board?

On February 1, 2015, one of the huge storage tanks of Viking Manufacturing Company exploded. Windows in houses and other buildings within a one-mile radius of the explosion were severely damaged, and a number of people were injured. As of February 15, 2015 (when the December 31, 2014, financial statements were completed and sent to the publisher for printing and public distribution), no suits had been filed or claims asserted against the company as a consequence of the explosion. The company fully anticipates that suits will be filed and claims asserted for injuries and damages. Because the casualty was uninsured and the company considered at fault, Viking Manufacturing will have to cover the damages from its own resources. Instructions Discuss fully the accounting treatment and disclosures that should be accorded the casualty and related contingent losses in the financial statements dated December 31, 2014.

Longhaul Real Estate exchanged a parcel of land it held for sale in Bryan, Texas, for a warehouse in College Station, Texas. Will the exchange qualify for like-kind treatment?

What is meant by liquidity? Rank the following assets from one to five in order of liquidity. (a) Goodwill. (b) Inventory. (c) Buildings. (d) Short-term investments. (e) Accounts receivable.

Isabel, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship.  In late December she received a $20,000 bill from her accountant for consulting services related to her small business.  Isabel can pay the $20,000 bill anytime before January 30 of next year without penalty.  Assume her marginal tax rate is 40 percent this year and next year, and that she can earn an after-tax rate of return of 12 percent on her investments.  When should she pay the $20,000 bill—this year or next?

What is the difference between adaptive expectations and rational expectations?

1.       : Would you expect the structure of a company such as eBay, which operates almost entirely online, to differ from the structure of a bricks-and-mortar company, such as General Motors, which uses the Internet for some things, such as customer service and business-to-business transactions? Why or why not?

1.       Some people argue that the matrix structure should be adopted only as a last resort because the dual chains of command can create more problems than they solve. Discuss. Do you agree or disagree? Why?

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 not?

Define precipitation hardening.

Describe liquid phase sintering

Explain each of the following terms: authorized capital stock, unissued capital stock, issued capital stock, outstanding capital stock, and treasury stock.

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?

Presented below are four independent situations. (a) On December 31, 2014, Zarle Inc. sold computer equipment to Daniell Co. and immediately leased it back for 10 years. The sales price of the equipment was $520,000, its carrying amount is $400,000, and its estimated remaining economic life is 12 years. Determine the amount of deferred revenue to be reported from the sale of the computer equipment on December 31, 2014. (b) On December 31, 2014, Wasicsko Co. sold a machine to Cross Co. and simultaneously leased it back for one year. The sale price of the machine was $480,000, the carrying amount is $420,000, and it had an estimated remaining useful life of 14 years. The present value of the rental payments for the one  year is $35,000. At December 31, 2014, how much should Wasicsko report as deferred revenue from the sale of the machine? (c) On January 1, 2014, McKane Corp. sold an airplane with an estimated useful life of 10 years. At the same time, McKane leased back the plane for 10 years. The sales price of the airplane was $500,000, the carrying amount $379,000, and the annual rental $73,975.22. McKane Corp. intends to depreciate the leased asset using the sum-of-the-years’-digits depreciation method. Discuss how the gain on the sale should be reported at the end of 2014 in the financial statements. (d) On January 1, 2014, Sondgeroth Co. sold equipment with an estimated useful life of 5 years. At the same time, Sondgeroth leased back the equipment for 2 years under a lease classified as an operating lease. The sales price (fair value) of the equipment was $212,700, the carrying amount is $300,000, the monthly rental under the lease is $6,000, and the present value of the rental payments is $115,753. For the year ended December 31, 2014, determine which items would be reported on its income statement for the sale-leaseback transaction.

Mehta Company traded a used welding machine (cost $9,000, accumulated depreciation $3,000)for office equipment with an estimated fair value of $5,000. Mehta also paid $3,000 cash in the transaction. Prepare the journal entry to record the exchange. (The exchange has commercial substance.)

Volunteer Corporation reported taxable income of $500,000 from operations this year. The company paid federal income taxes of $105,000 on this taxable income.  During the year, the company made a distribution of land to its sole shareholder, Rocky. The land’s fair market value was $75,000 and its tax and E&P basis to Volunteer was $25,000. Rocky assumed a mortgage attached to the land of $15,000. Volunteer had accumulated E&P of $750,000 at the beginning of the year.

What is needed to implement the conversion strategy?

Explain how losses on impaired intangible assets should be reported in income.

(a) Name the four principal noble metals. (b) Why are they called noble metals?

Explain how to calculate a weighted average contribution margin per unit.

Accounting information provides useful information about business transactions and events. Those who provide and use financial reports must often select and evaluate accounting alternatives. The FASB statement on qualitative characteristics of accounting information examines the characteristics of accounting information that make it useful for decision-making. It also points out that various limitations inherent in the measurement and reporting process may necessitate trade-offs or sacrifices among the characteristics of useful information. Instructions (a) Describe briefly the following characteristics of useful accounting information. (1) Relevance. (4) Comparability. (2) Faithful representation. (5) Consistency. (3) Understandability. (b) For each of the following pairs of information characteristics, give an example of a situation in which one of the characteristics may be sacrificed in return for a gain in the other. (1) Relevance and faithful representation. (3) Comparability and consistency. (2) Relevance and consistency. (4) Relevance and understandability. (c) What criterion should be used to evaluate trade-offs between information characteristics?

In 2014, Ghostbusters Corp. spent $420,000 for “goodwill” visits by sales personnel to key customers. The purpose of these visits was to build a solid, friendly relationship for the future and to gain insight into the problems and needs of the companies served. How should this expenditure be reported?

1. What effect did these developments have on (a) the Phillips curve; (b) the aggregate supply curve? 2. What policy implications follow from these arguments?

1.       You’re a manager who employs a participative control approach. You’ve concluded that corrective action is necessary to improve customer satisfaction, but first you need to convince your employees that a problem exists. What kind of evidence do you think employees will find more compelling: quantitative measurements or anecdotes from your interactions with customers? Explain your answer.