Question & Answer

Helen’s basis in Haywood Partnership is $270,000. Haywood distributes all the land to Helen in complete liquidation of her partnership interest. The partnership reports the following balance sheet just before the distribution: Assets: Tax Basis FMV Cash $ 220,000 $ 220,000 Stock (investment) 480,000 220,000 Land 110,000 220,000    Totals $ 810,000 $ 660,000 Liabilities and capital: Capital- Charles $ 270,000 - Esther 270,000 - Helen 270,000   Totals $ 810,000 a. What are the amount and character of Helen’s recognized gain or loss? What is the effect on the partnership assets? b. If Haywood has a §754 election in place, what is the amount of the special basis adjustment?

Walker Company is a manufacturer and lessor of computer equipment. What should be the nature of its lease arrangements with lessees if the company wishes to account for its lease transactions as sales-type leases?

1.              : Let Owens know that you care about what he’s going through, but insist that he take a short paid leave and get counseling to deal with his emotional difficulties and evaluate the seriousness of his problems with alcohol. If the alcohol abuse continues, require him to attend a treatment program or find another job.

At the beginning of the year, Poplock began a calendar-year, dog-boarding business called Griff’s Palace. Poplock bought and placed in service the following assets during the year:

Why might it present problems for a firm if managers are overconfident? Can you think of any reason why CEOs might be more inclined to optimism than the population average?

Assume you asked your favorite AI learning tool “Would a taxpayer classify a car used for business as a capital asset for tax purposes?” and the AI tool responded as follows:

How are qualified distributions from Roth IRAs taxed? How are nonqualified distributions taxed?

How are current liabilities related by definition to current assets? How are current liabilities related to a company’s operating cycle?

1.       : Suppose that you are the leader of a team that has just been created to develop a new registration process at your college or university. How can you use an understanding of the stages of team development to improve your team’s effectiveness?

Why are monetary surprises less likely with independent central banks pursuing an inflation target? Would monetary surprises still be possible in such circumstances?

A certain piece of production equipment is used to produce various components for an assembled product. To keep in-process inventories low, it is desired to produce the components in batch sizes of 150 units. Demand for each product is 2500 units per year. Production downtime costs an estimated $200/hr. All of the components made on the equipment are of approximately equal unit cost, which is $9.00. Holding cost rate = 30%/yr. In how many minutes must the changeover between batches be completed in order for 150 units to be the economic order quantity?

Discuss the basic differences between annotated and topical tax services.  How are these services used in tax research?

Glass is classified as a ceramic material; yet glass is different from the traditional and new ceramics. What is the difference?

How is the market price of land related to its productivity?

Quality of decisions Maria and Tracey became good friends while working at the same entity. Two years ago, they both decided to increase their savings so that they could eventually purchase homes. Each began by putting a portion of each month's salary into a savings account. At the end of the first year, they had each accumulated $4000. Because their savings accounts paid a very small interest rate, they decided to invest the savings to earn a higher rate of return. Maria and Tracey both hoped to save enough money to buy homes within five years.   Maria decided to take an investment course offered through the entity. The course taught her about different types of investments and strategies for investing. She then purchased and read an investment book to learn more. Maria learned that some investments are riskier than others, and that investors must balance risk against desired return. Higher risk leads to higher returns on average; but, higher risk could also lead to low returns or even loss. She also learned that investment advisers recommend diversifying risky investments. One way to diversify is to invest in mutual funds, which invest in many different organisations. Maria decided that she was willing to assume some risk, but was not comfortable with a high level. She decided to invest her $4,000 in a share market mutual fund. She read consumer reports to learn about different mutual funds, and selected a fund that invests conservatively in fairly stable companies. However, the share market did not do well in the first year. The value of her mutual fund at the end of a year was $4050.   Tracey talked with her boyfriend and other friends about how they invest. Her boyfriend’s cousin recommended investing in a start-up company that sells video games. He told her that the games were very popular with teenagers and that the company would probably be acquired, resulting in big gains for investors. This opportunity sounded good to Tracey, so she decided to invest her entire $4000 in the company’s shares. After 10 months, she was excited to learn that the company was being acquired. She received shares in the acquiring company in exchange for her original shares. At the end of the year, the market value of her shares was $8200.   Required Evaluate the quality of the investment decisions made by Maria and Tracey. Hint: Refer to figure 1.3 (on page 18). (a)          List the information used by Maria in making her investment decision. (b)          List the information used by Tracey in making her investment decision. (c)           Did Maria appear to use high-quality information? Explain. (d)          Did Tracey appear to use high-quality information? Explain. (e)           Describe Maria’s decision-making process. What did she do to explore her options? Did she appear to be biased? What were her priorities? How did she reach a conclusion? (f)           Describe Tracey’s decision-making process. What did she do to explore her options? Did she appear to be biased? What were her priorities? How did she reach a conclusion? (g)          Did Maria appear to use a high-quality decision-making process? Explain. (h)          Did Tracey appear to use a high-quality decision-making process? Explain. (i)            Given your analyses of the information and decision-making processes used by Maria and Tracey, which investor made a higher-quality decision? Explain.

What should determine the choice of cost allocation method (direct, step-down and reciprocal) discussed in this chapter?

Manny, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December he performed $20,000 of legal services for a client. Manny typically requires his clients to pay his bills immediately upon receipt. Assume Manny’s marginal tax rate is 37 percent this year and next year, and that he can earn an after-tax rate of return of 12 percent on his investments. Should Manny send his client the bill in December or January?

The upper and lower control limits for a p chart are: LCL = 0 and UCL = 0.20. Determine the minimum possible sample size n that is compatible with this control chart.

What is the theoretical justification of the allowance method as contrasted with the direct write-off method of accounting for bad debts?

Is it true that a corporation recognizes all gains and losses on liquidating distributions of property to noncorporate shareholders?  Explain.

How does the above argument about firms’ responses to a rise in demand relate to the shape of their marginal cost curves?

An RSW operation is used to join two pieces of sheet steel having a unit melting energy of 130 Btu/in3. The sheet steel has a thickness of 1/8 in. The weld duration will be set at 0.25 sec with a current of 11,000 amp. Based on the electrode diameter, the weld nugget will have a diameter of 0.30 in. Experience has shown that 40% of the supplied heat melts the nugget and the rest is dissipated by the metal. If the electrical resistance between the surfaces is 130 micro-ohms, what is the thickness of the weld nugget assuming it has a uniform thickness?

Castle Leasing Company signs a lease agreement on January 1, 2014, to lease electronic equipment to Jan Way Company. The term of the noncancelable lease is 2 years, and payments are required at the end of each year. The following information relates to this agreement: 1. Jan Way has the option to purchase the equipment for $16,000 upon termination of the lease. 2. The equipment has a cost and fair value of $160,000 to Castle Leasing Company. The useful economic life is 2 years, with a salvage value of $16,000. 3. Jan Way Company is required to pay $5,000 each year to the lessor for executory costs. 4. Castle Leasing Company desires to earn a return of 10% on its investment. 5. Collectibility of the payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. Instructions (a) Prepare the journal entries on the books of Castle Leasing to reflect the payments received under the lease and to recognize income for the years 2014 and 2015. (b) Assuming that Jan Way Company exercises its option to purchase the equipment on December 31, 2015, prepare the journal entry to reflect the sale on Castle’s books.

Indicate how well the percentage-of-sales method and the aging method accomplish the objectives of the allowance method of accounting for bad debts.

1.       : Why do you think Mary Parker Follett’s ideas tended to be popular with businesspeople of her day but were ignored by management scholars? Why are her ideas appreciated more today?