Question & Answer

Moana is a single taxpayer who operates a sole proprietorship. She expects her taxable income next year to be $250,000, of which $200,000 is attributed to her sole proprietorship. Moana is contemplating incorporating her sole proprietorship. Using the single individual tax brackets and the corporate tax rate in Appendix C, find out how much current tax this strategy could save Moana (ignore any Social Security, Medicare, or self-employment tax issues). How much income should be left in the corporation?

Show the effect of an increase in government expenditure by using (a) the injections and withdrawals diagram; (b) the income/expenditure diagram (see Figures 17.8 and 17.10).

Assume that your publicly traded company attempts to be completely transparent about its financial condition, and provides thorough information about its debt, sales, and earnings every quarter. Explain why there still may be much uncertainty surrounding your company’s stock price. (LO3)

If expectations were formed rationally with no time lags, what would be the implications for short-run DAS curves and for the response to a rise in aggregate demand?

1. It is sometimes claimed that the market for various stocks and shares is perfectly competitive, or nearly so. Take the case of the market for shares in a large company like Apple. Go through each of the four assumptions above and see if they apply in this case. (Don’t be misled by assumption (1). The ‘firm’ in this case is not Apple itself.) 2. Is the market for gold perfectly competitive?

At the time that a management group of RJR Nabisco initially considered engaging in a leveraged buyout, RJR’s stock price was less than $70 per share. Ultimately, RJR was acquired by the firm Kohlberg, Kravis Roberts (KKR) for about $108 per share. Does the large discrepancy between the stock price before an acquisition was considered and after the acquisition mean that RJR’s price was initially undervalued? If so, does this imply that the market was inefficient? (LO3, LO6)

Solve the previous problem except that the metal to be welded is high carbon steel, the cross-sectional area of the weld = 25.0 mm2, and the melting factor = 0.6.

On January 3, 2013, Martin Company purchased for $500,000 cash a 10% interest in Renner Corp. On that date, the net assets of Renner had a book value of $3,700,000. The excess of cost over the underlying equity in net assets is attributable to undervalued depreciable assets having a remaining life of 10 years from the date of Martin’s purchase. The fair value of Martin’s investment in Renner securities is as follows: December 31, 2013, $560,000, and December 31, 2014, $515,000. On January 2, 2015, Martin purchased an additional 30% of Renner’s stock for $1,545,000 cash when the book value of Renner’s net assets was $4,150,000. The excess was attributable to depreciable assets having a remaining life of 8 years. During 2013, 2014, and 2015, the following occurred. Renner Dividends Paid by Net Income Renner to Martin 2013 $350,000 $15,000 2014 450,000 20,000 2015 550,000 70,000 Instructions On the books of Martin Company, prepare all journal entries in 2013, 2014, and 2015 that relate to its investment in Renner Corp., reflecting the data above and a change from the fair value method to the equity method.

] Megan and Matthew are equal partners in the J & J Partnership (calendar-year-end entity). On January 1 of the current year, they decide to liquidate the partnership. Megan’s basis in her partnership interest is $100,000, and Matthew’s is $35,000. The two partners receive identical distributions, with each receiving the following assets: Tax BasisFMV Cash $ 30,000 $ 30,000 Inventory 5,000 6,000 Land 500 1,000    Totals $ 35,500 $37,000 a. What are the amount and character of Megan’s recognized gain or loss? b. What is Megan’s basis in the distributed assets? c. What are the amount and character of Matthew’s recognized gain or loss? d. What is Matthew’s basis in the distributed assets?

Employees are paid every Saturday for the preceding work week. If a balance sheet is prepared on Wednesday, December 31, what does the amount of wages earned during the first three days of the week (12/29, 12/30, 12/31) represent? Explain.

Classify the types of financial institutions mentioned in this chapter as either depository or nondepository. Explain the general difference between depository and nondepository institutions as sources of funds. It is often said that all types of financial institutions have begun to offer services that were previously offered only by certain types. Consequently, the operations of many financial institutions are becoming more similar. Nevertheless, performance levels still differ significantly among types of financial institutions. Why? (LO3)

Stereolithography is to be used to build the part in Figure 33.1 in the text. Dimensions of the part are: height = 125 mm, outside diameter = 75 mm, inside diameter = 65 mm, handle diameter = 12 mm, handle distance from cup = 70 mm measured from center (axis) of cup to center of handle. The handle bars connecting the cup and handle at the top and bottom of the part have a rectangular cross section and are 10 mm thick and 12 mm wide. The thickness at the base of the cup is 10 mm. The laser beam diameter = 0.25 mm, and the beam can be moved across the surface of the photopolymer at = 500 mm/s. Layer thickness = 0.20 mm. Compute an estimate of the time required to build the part, if 10 s are lost each layer to lower the height of the platform that holds the part. Neglect post-curing time.

What are some of the disadvantages and limitations of brazing?

Pierre recently received a tax penalty for failing to file a tax return.  He was upset to receive the penalty, but he was comforted by the thought that he will get a tax deduction for paying the penalty.     a.  Use an available tax research service to determine if Pierre is correct.   b.  Write a memo communicating the results of your research.

Sunita is a one-third owner in Bikes-R-Us, an S corporation that experienced a $45,000 loss this year (year 1). If her stock basis is $10,000 at the beginning of the year, how much of this loss clears the hurdle for deductibility (assume at-risk limitation equals the tax-basis limitation)? If she cannot deduct the whole loss, what happens to the remainder?  Is she able to deduct the entire loss if she sells her stock at year-end?

Define reorder point inventory system.

Discuss how the international landscape is changing, including the growing influence of China and India.

(i) Will the rate of actual growth have any effect on the rate of potential growth? (ii) For what possible reasons may one country experience a persistently faster rate of economic growth than another?

The invoice price of a machine is $50,000. Various other costs relating to the acquisition and installation of the machine including transportation, electrical wiring, special base, and so on amount to $7,500. The machine has an estimated life of 10 years, with no salvage value at the end of that period. The owner of the business suggests that the incidental costs of $7,500 be charged to expense immediately for the following reasons. 1. If the machine should be sold, these costs cannot be recovered in the sales price. 2. The inclusion of the $7,500 in the machinery account on the books will not necessarily result in a closer approximation of the market price of this asset over the years, because of the possibility of changing demand and supply levels. 3. Charging the $7,500 to expense immediately will reduce federal income taxes. Instructions Discuss each of the points raised by the owner of the business.

What is the difference between a cost that is variable and variable costing?

Hoosier Corporation declared a stock distribution to all shareholders of record on March 25 of this year. Shareholders will receive one share of Hoosier Corporation stock for each share of stock they already own. Hoosier reported current E&P of $600,000 and accumulated E&P of $3,000,000. The total fair market value of the stock distributed was $1,500,000. Barbara owned 1,000 shares of Hoosier stock with a tax basis of $100 per share.

How can target measures be used to promote either short-term or long-            term performance?

: Describe how managers apply the stages of unfreezing, changing, and refreezing to bring about changes in the culture and people of an organization.

What are the three basic components of an automated system?

What is the difference between dependent and independent demand for products?