Question & Answer

What book-tax differences in year 1 and year 2 associated with its capital gains and losses would ABD Inc. report in the following alternative scenarios? Identify each book-tax difference as favorable or unfavorable and as permanent or temporary.

The following transactions occurred during 2014. Assume that depreciation of 10% per year is charged on all machinery and 5% per year on buildings, on a straight-line basis, with no estimated salvage value. Depreciation is charged for a full year on all fixed assets acquired during the year, and no depreciation is charged on fixed assets disposed of during the year. Jan. 30 A building that cost $132,000 in 1997 is torn down to make room for a new building. The wrecking contractor was paid $5,100 and was permitted to keep all materials salvaged. Mar. 10 Machinery that was purchased in 2007 for $16,000 is sold for $2,900 cash, f.o.b. purchaser’s plant. Freight of $300 is paid on the sale of this machinery. Mar. 20 A gear breaks on a machine that cost $9,000 in 2009. The gear is replaced at a cost of $2,000. The replacement does not extend the useful life of the machine but does make the machine more effi cient. May 18 A special base installed for a machine in 2008 when the machine was purchased has to be replaced at a cost of $5,500 because of defective workmanship on the original base. The cost of the machinery was $14,200 in 2008. The cost of the base was $3,500, and this amount was charged to the Machinery account in 2008. June 23 One of the buildings is repainted at a cost of $6,900. It had not been painted since it was constructed in 2010. Instructions (Round to the nearest dollar.) Prepare general journal entries for the transactions.

How are gains and losses from extinguishment of a debt classified in the income statement? What disclosures are required of such transactions?

What are the criteria to recognize revenue?

Visit your state’s official website and review the information there related to forming and operating business entities in your state. Write a short report explaining the steps for organizing a business in your state and summarizing any tax-related information you found.

What are the principal material handling functions in manufacturing?

Ken sold a rental property for $500,000. He received $100,000 in the current year and $100,000 each year for the next four years. Of the sales price, $400,000 was allocated to the building, and the remaining $100,000 was allocated to the land. Ken purchased the property several years ago for $300,000. When he initially purchased the property, he allocated $225,000 of the purchase price to the building and $75,000 to the land. Ken has claimed $25,000 of depreciation deductions over the years against the building. Ken had no other sales of §1231 or capital assets in the current year. For the year of the sale, determine Ken’s recognized gain or loss and the character of Ken’s gain, and calculate Ken’s tax due because of the sale (assuming his marginal ordinary tax rate is 32 percent). (Hint: See the examples in Reg. §1.453-12.)

Dave Matthew Inc. issues 500 shares of $10 par value common stock and 100 shares of $100 par value preferred stock for a lump sum of $100,000. Instructions (a) Prepare the journal entry for the issuance when the market price of the common shares is $165 each and market price of the preferred is $230 each. (Round to nearest dollar.) (b) Prepare the journal entry for the issuance when only the market price of the common stock is known and it is $170 per share.

Why is a surfacing weld different from the other weld types?

State some of the more serious problems encountered in seeking to achieve the ideal measurement of periodic net income. Explain what accountants do as a practical alternative.

Lanny and Shirley divorced in 2018 and do not live together. Shirley has custody of their child, Art, and Lanny pays Shirley $22,000 per year. All property was divided equally.

Irene is saving for a new car she hopes to purchase either four or six years from now. Irene invests $10,000 in a growth stock that does not pay dividends and expects a 6 percent annual before-tax return (the investment is tax deferred). When she cashes in the investment after either four or six years, she expects the applicable marginal tax rate on long-term capital gains to be 25 percent.    a) What will be the value of this investment four years from now? Six years from now? b) When Irene sells the investment, how much cash will she have after taxes to purchase the new car (four and six years from now)?

Many years ago a famous member of Congress proposed eliminating federal income tax withholding.  What criterion for evaluating tax systems did this proposal violate?  What would likely have been the result of eliminating withholding?

Jefferson Millinery Inc. (JMI) decided to liquidate its wholly owned subsidiary, 8 Miles High Inc. (8MH). 8MH had the following tax accounting balance sheet.       FMV         Tax basisAppreciation Cash$  200,000$     200,000 Building      50,000         10,000        40,000 Land    150,000         90,000        60,000 Total$  400,000$     300,000$    100,000

Explain why systemic risk is a source of concern in the bond and other debt markets. Also explain how the Financial Reform Act of 2010 was intended to reduce systemic risk. (LO2)

Sasha owes additional tax imposed in a recent audit.  In addition to the tax, will she be assessed other amounts?  If so, how will these amounts be determined?

Solve Problem 22.17 except that the workpiece is 5.0 in wide and the cutter is offset to one side so that the swath cut by the cutter = 1.0 in wide. This is called partial face milling, Figure 22.20(b).

With reference to Table 4.2, determine the quantity of heat required to increase the temperature of an aluminum block that is 10 cm x 10 cm x 10 cm from room temperature (21°C) to 300°C.

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.

What is the name of the process most commonly used to grow single crystal ingots of silicon for semiconductor processing?

ROI; transfer prices; taxes; employee motivation Fowler Electronics produces colour plasma screens in its Bien Hoa plant in Vietnam. The screens are then shipped to the entity’s plant in Sturt, South Australia, where they are incorporated into finished televisions. Although the Bien Hoa plant never sells plasma screens to any other assembler, the market for them is competitive. The market price is $750 per screen.   Variable costs to manufacture the screens are $350. Fixed costs at the Windsor plant are $2 000 000 per period. The plant typically manufactures and ships 10 000 screens per period to the Sturt plant. Taxes in Vietnam amount to 30 per cent, of pre-tax income. The Windsor plant has total assets of $20 000 000.   The Sturt plant incurs variable costs to complete the televisions of $110 per set (in addition to the cost of the screens). The Sturt plant’s fixed costs amount to $4 000 000 per period. The 10 000 sets produced each period are sold for an average of $2500 each. For Sturt, the tax rate is 45 per cent of pre-tax income. The Sturt plant has total assets of $30 000 000.   Required (a)        Determine the return on investment for each plant if the screens are transferred at variable cost. (b)        Determine the return on investment for each plant if the screens are transferred at market price. (c)        To reduce taxes, will Fowler prefer a transfer price based on cost or market price? Explain. (d)        Will the top managers in each plant prefer to use cost or market price as the transfer price? Explain. (e)        How would you resolve potential conflict over the transfer price policy?

If economics is the study of choices of how to use scarce resources, can these other objectives be legitimately described as ‘non-economic’?

How do you think the positions of these eight countries will change over the next decade?

Once they’ve computed their taxable income, how do taxpayers determine their regular tax liability?  What additional steps must taxpayers take to compute their tax liability when they have preferentially taxed income?

If speculators on average gain from their speculation, who loses?