Question & Answer

When a taxpayer works as an employee and as a self-employed independent contractor during the year, how does the taxpayer determine their employment and self-employment taxes payable?

Harry and Sally formed the Evergreen Partnership by contributing the following assets in exchange for a 50 percent capital and profits interest in the partnership: Harry: Basis Fair Market Value Cash $ 30,000 $ 30,000 Land 100,000 120,000 Totals $ 130,000 $ 150,000 Sally: Equipment used in a business $200,000 $150,000 Totals $ 200,000 $ 150,000 a. How much gain or loss will Harry recognize on the contribution? b. How much gain or loss will Sally recognize on the contribution? c. How could the transaction be structured a different way to get a better result for Sally? d. What is Harry’s tax basis in his partnership interest? e. What is Sally’s tax basis in her partnership interest? f. What is Evergreen’s tax basis in its assets? g. Following the format in Exhibit 20-2, prepare a tax basis balance sheet for the Evergreen Partnership showing the tax capital accounts for the partners.

Elaine pays $40,000 cash for Martha’s one-third interest in Lakewood Partnership. Just prior to the sale, Martha’s basis in Lakewood is $140,000. Lakewood reports the following balance sheet: Assets: Tax Basis FMV Cash $ 50,000 $ 50,000 Land 370,000 70,000    Totals $ 420,000 $ 120,000 Liabilities and capital: Capital- Mary $140,000 - Martha 140,000 - Margaret 140,000   Totals $ 420,000 Assume the land had been purchased several years ago and the partnership does not have a §754 election in place. a. What are the amount and character of Martha’s recognized gain or loss on the sale? b. What is Elaine’s basis in her partnership interest? c. If Lakewood were to sell the land for $70,000 shortly after the sale of Martha’s partnership interest, how much gain or loss would Elaine recognize?

Suppose in Example 30.3 in the text that the fuel used in the welding operation is MAPP instead of acetylene, and the proportion of heat concentrated in the 9 mm circle is 60% instead of 75 %. Compute (a) rate of heat liberated during combustion, (b) rate of heat transferred to the work surface, and (c) average power density in the circular area.

You have been asked by the financial vice president to develop a short presentation on the lower-of-cost-or-market method for inventory purposes. The financial VP needs to explain this method to the president because it appears that a portion of the company’s inventory has declined in value. Instructions The financial VP asks you to answer the following questions. (a) What is the purpose of the lower-of-cost-or-market method? (b) What is meant by “market”? (Hint: Discuss the ceiling and floor constraints.) (c) Do you apply the lower-of-cost-or-market method to each individual item, to a category, or to the total of the inventory? Explain. (d) What are the potential disadvantages of the lower-of-cost-or-market method?

Two parallel surfaces, separated by a space of 0.5 in that is occupied by a fluid, are moving relative to each other at a velocity of 25 in/sec. The motion is resisted by a shear stress of 0.3 lb/in2 due to the viscosity of the fluid. If the velocity gradient in the space between the surfaces is constant, determine the viscosity of the fluid.

Youngman Corporation has temporary differences at December 31, 2014, that result in the following deferred taxes. Deferred tax liability—current $38,000 Deferred tax asset—current $62,000 Deferred tax liability—noncurrent $96,000 Deferred tax asset—noncurrent $27,000 Indicate how these balances would be presented in Youngman’s December 31, 2014, balance sheet.

How can gross interest income rise while the net interest margin remains somewhat stable for a particular bank? (LO2)

There are 20 correct answers in the following multiple choice questions (some questions have multiple answers that are correct). To attain a perfect score on the quiz, all correct answers must be given. Each correct answer is worth 1 point. Each omitted answer or wrong answer reduces the score by 1 point, and each additional answer beyond the correct number of answers reduces the score by 1 point. Percentage score on the quiz is based on the total number of correct answers. 8.1 Of the three polymer types, which one is the most important commercially: (a) thermoplastics, (b) thermosets, or (c) elastomers? 8.2 Which one of the three polymer types is not normally considered to be a plastic: (a) thermoplastics, (b) thermosets, or (c) elastomers? 8.3 Which one of the three polymer types does not involve cross-linking: (a) thermoplastics, (b) thermosets, or (c) elastomers? 8.4 As the degree of crystallinity in a given polymer increases, the polymer becomes denser and stiffer, and its melting temperature decreases: (a) true or (b) false? 8.5 Which one of the following is the chemical formula for the repeating unit in polyethylene: (a) CH2, (b) C2H4, (c) C3H6, (d) C5H8, or (e) C8H8? 8.6 Degree of polymerization is which one of the following: (a) average number of mers in the molecule chain; (b) proportion of the monomer that has been polymerized; (c) sum of the molecule weights of the mers in the molecule; or (d) none of the above? 8.7 A branched molecular structure is stronger in the solid state and more viscous in the molten state than a linear structure for the same polymer: (a) true or (b) false? 8.8 A copolymer is a mixture of the macromolecules of two different homopolymers: (a) true or (b) false? 8.9 As the temperature of a polymer increases, its density (a) increases, (b) decreases, or (c) remains fairly constant? 8.10 Which of the following plastics has the highest market share: (a) phenolics, (b) polyethylene, (c) polypropylene, (d) polystyrene, or (e) polyvinylchloride? 8.11 Which of the following polymers are normally thermoplastic (four best answers): (a) acrylics, (b) cellulose acetate, (c) nylon, (d) phenolics, (e) polychloroprene, (f) polyesters, (g) polyethylene, (h) polyisoprene, and (i) polyurethane? 8.12 Polystyrene (without plasticizers) is amorphous, transparent, and brittle: (a) true or (b) false? 8.13 The fiber rayon used in textiles is based on which one of the following polymers: (a) cellulose, (b) nylon, (c) polyester, (d) polyethylene, or (e) polypropylene? 8.14 The basic difference between low-density polyethylene and high-density polyethylene is that the latter has a much higher degree of crystallinity: (a) true or (b) false? 8.15 Among the thermosetting polymers, the most widely used commercially is which one of the following: (a) epoxies, (b) phenolics, (c) silicones, or (d) urethanes? 8.16 The chemical formula for polyisoprene in natural rubber is which of the following: (a) CH2, (b) C2H4, (c) C3H6, (d) C5H8, or (e) C8H8? 8.17 The leading commercial synthetic rubber is which one of the following: (a) butyl rubber, (b) isoprene rubber, (c) polybutadiene, (d) polyurethane, (e) styrene-butadiene rubber, or (f) thermoplastic elastomers?

Moab Inc. manufactures and distributes high-tech biking gadgets. It has decided to streamline some of its operations so that it will be able to be more productive and efficient. Because of this decision, it has entered into several transactions during the year.    Part (1): Determine the gain/loss realized and recognized in the current year for each of these events. Also determine whether the gain/loss recognized will be §1231, capital, or ordinary.

Villa Company has experienced tough competition, leading it to seek concessions from its employees in the company’s pension plan. In exchange for promises to avoid layoffs and wage cuts, the employees agreed to receive lower pension benefits in the future. As a result, Villa amended its pension plan on January 1, 2014, and recorded negative past service cost of $125,000. Current service cost for 2014 is $26,000. Interest expense is $9,000, and interest revenue is $2,500. Actual return on assets in 2012 is $1,500. Compute Villa’s pension expense in 2014.

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

According to the video on sheet-metal shearing, what is the blade rake angle?

Part of a contract between a union and a company guarantees that all manufacturing employees earn five hours of overtime each week. In the company’s job costing system, should overtime be treated as a direct or indirect cost?

Explain how margin requirements can affect the potential return and risk from investing in a stock. What is the maintenance margin? (LO1)

Wally is employed as an executive with Pay More Incorporated. To entice Wally to work for Pay More, the corporation loaned him $20,000 at the beginning of the year at a simple interest rate of 1 percent. Wally would have paid interest of $2,400 this year if the interest rate on the loan had been set at the prevailing federal interest rate.

Explain how the Treasury uses the primary market to obtain adequate funding from the U.S. government. (LO1)

There are 19 correct answers in the following multiple-choice questions (some questions have multiple answers that are correct). To attain a perfect score on the quiz, all correct answers must be given. Each correct answer is worth 1 point. Each omitted answer or wrong answer reduces the score by 1 point, and each additional answer beyond the correct number of answers reduces the score by 1 point. Percentage score on the quiz is based on the total number of correct answers. 9.1 Anisotropic means which one of the following: (a) composite materials with composition consisting of more than two materials, (b) properties are the same in every direction, (c) properties vary depending on the direction in which they are measured, or (d) strength and other properties are a function of curing temperature? 9.2 The reinforcing phase is the matrix within which the secondary phase is imbedded: (a) true or (b) false? 9.3 Which one of the following reinforcing geometries offers the greatest potential for strength and stiffness improvement in the resulting composite material: (a) fibers, (b) flakes, (c) particles, or (d) infiltrated phase? 9.4 Wood is which one of the following composite types: (a) CMC, (b) MMC, or (c) PMC? 9.5 Which of the following materials are used as fibers in fiber-reinforced plastics (four best answers): (a) aluminum oxide, (b) boron, (c) cast iron, (d) E-glass, (e) epoxy, (f) Kevlar 49, (g) polyester, and (h) silicon? 9.6 Which of the following metals are used as the matrix material in fiber-reinforced MMCs (two best answers): (a) aluminum, (b) copper, (c) iron, (d) magnesium, and (e) zinc? 9.7 Which of the following metals are used as the matrix metals in nearly all WC cemented carbides and TiC cermets (two correct answers): (a) aluminum, (b) chromium, (c) cobalt, (d) lead, (e) nickel, (f) tungsten, and (g) tungsten carbide? 9.8 Ceramic matrix composites are designed to overcome which of the following weaknesses of ceramics (two best answers): (a) compressive strength, (b) hardness, (c) hot hardness, (d) modulus of elasticity, (e) tensile strength, and (f) toughness? 9.9 Which one of the following polymer types are most commonly used in polymer matrix composites: (a) elastomers, (b) thermoplastics, or (c) thermosets? 9.10 Which of the following materials are not composites (two correct answers): (a) cemented carbide, (b) phenolic molding compound, (c) plywood, (d) Portland cement, (e) rubber in automobile tires, (f) wood, and (g) 1020 steel?

Journal entries for job costing At the beginning of the accounting period, the accountant for ABC Industries estimated that total overhead would be $80 000. Overhead is allocated to jobs on the basis of direct labour cost. Direct labour was budgeted to cost $200 000 this period. During the period only three jobs were worked on. The following summarises the direct materials and labour costs for each:       Job 1231 was finished and sold; job 1232 was finished but is waiting to be sold; and job 1233 is still in process. Actual overhead for the period was $82 000.   Required Prepare the following journal entries. (a)          Cost recorded during production (b)          Cost of jobs completed (c)           Cost of sales (d)          Allocation of overapplied or underapplied overhead allocated on a pro rata basis to the ending balances in work in process, finished goods, and cost of sales

What is meant by the designation 12 x 36 inch lathe?

Dave and his friend Stewart each owns 50 percent of KBS. During the year, Dave received $75,000 compensation for services he performed for KBS during the year. He performed a significant amount of work for the entity, and he was heavily involved in management decisions for the entity (he was not a passive investor in KBS). After deducting Dave’s compensation, KBS reported taxable income of $30,000. How much FICA and/or self-employment tax is Dave required to pay on his compensation and his share of the KBS income if KBS is formed as a C corporation, an S corporation, or a limited liability company (taxed as a partnership) (ignore the .9 percent additional Medicare tax)? How much FICA tax would the entity be required to pay on the compensation paid to Dave?

A final assembly plant for a certain automobile model is to have a capacity of 240,000 units annually. The plant will operate 50 weeks/yr, 2 shifts/day, 5 days/week, and 8.0 hours/shift. It will be divided into three departments: (1) body shop, (2) paint shop, (3) trim-chassis-final department. The body shop welds the car bodies using robots, and the paint shop coats the bodies. Both of these departments are highly automated. Trim-chassis-final has no automation. There are 15.5 hours of direct labor content on each car in this department, where cars are moved by a continuous conveyor. Determine (a) hourly production rate of the plant, (b) number of workers and workstations required in trim-chassis-final if no automated stations are used, the average manning level is 2.5, balancing efficiency = 93%, proportion uptime = 95%, and a repositioning time of 0.15 min is allowed for each worker.

1.      : Accept the fact you didn’t quite make your sales goal this year. Figure out ways to work smarter next year to increase the odds of achieving your target.

Omar (single) is a 50 percent owner in Cougar LLC (taxed as a partnership). Omar works half time for Cougar and receives a guaranteed payment of $50,000. Cougar LLC reported $450,000 of business income for the year. Before considering his 50 percent business income allocation from Cougar and the self-employment tax deduction (if any), Omar’s adjusted gross income is $210,000 (includes $50,000 guaranteed payment from Cougar and $180,000 salary from a different employer). Omar reports itemized deductions of $40,000. Answer the following questions for Omar. a. What is Omar’s self-employment tax liability? b. What would be Omar’s self-employment tax liability if he didn’t receive any salary. c. Assume the original facts and that the business income allocated to Omar is not from a specified service, what is Omar’s deduction for qualified business income? Assume that 81.82 percent of the self-employment tax is from self-employment income included in QBI [i.e., $225,000 business income allocation/$275,000 (business income allocation plus guaranteed payment)]. That is, the $50,000 guaranteed payment is not qualified business income. Ignore the wage-based limitation. d. What is Omar’s net investment income tax liability (assume no investment expenses)? e. What is Omar’s additional Medicare tax liability?

What is Circular 230?