Question & Answer

Armando identifies a tax research question as being a question of fact.  What types of authorities should he attempt to locate in his research?

Explain why a stimulative monetary policy might not be effective during a weak economy in which there is a credit crunch. (LO2)

Describe the types of expenses that constitute miscellaneous itemized deductions and explain why these expenses rarely produce any tax benefits.

What is the form of the starting material in thermoforming?

When considering C corporations, the IRS checks to see whether salaries paid are too large.  In S corporations, however, it usually must verify that salaries are large enough. Account for this difference.

Describe the characteristics of multinational corporations and how they might employ the bottom-of-the-pyramid concept.

Relevant information; uncertainties; information for decision-making Janet Baker is deciding where to live during her second year of university. During her first year, she lived in the university residence college. Recently her friend Rachel asked her to share an off-campus flat for the upcoming school year. Janet likes the idea of living in a flat, but she is concerned about how much it will cost.   To help her decide what to do, Janet collected information about costs. She would pay $400 per month in rent. The minimum lease term on the apartment is six months. Janet estimates that her share of the utility bills will be $75 per month. She also estimates that groceries will cost $200 per month. Janet spent $350 on a new couch over the summer. If she lives in the university residence college, she will put the couch in storage at a cost of $35 per month. Janet expects to spend $7500 on university fees and $450 on books each semester. Room and board on campus would cost Janet $2,900 per semester (four months). This amount includes a food plan of 20 meals per week. This cost is non-refundable if the meals are not eaten.   Required (a)     Use only the cost information collected by Janet for the following tasks. (i)    List all of the costs for each option. Note: Some costs may be listed under both options. (ii)   Review your lists and cross out the costs that are irrelevant to Janet’s decision. Explain why these costs are irrelevant. (iii)  Calculate and compare the total relevant costs of each option. (iv)  Given the cost comparison, which living arrangement is the better choice for Janet? Explain. (b)     Identify uncertainties in the cost information collected by Janet. (i)    Determine whether each cost is likely to be (1) known for sure, (2) estimated with little uncertainty, or (3) estimated with moderate or high uncertainty. (ii)   For each cost that is known for sure, explain where Janet would obtain the information. (iii)  For each cost that must be estimated, explain why the cost cannot be known. (c)     List additional information that might be relevant to Janet’s decision (list as many items as you can). (i)    Costs not identified by Janet (ii)   Factors other than costs (d)     Explain why conducting a cost comparison is useful to Janet, even if factors other than costs are important to her decision. (e)     Consider your own preferences for this problem. Do you expect Janet’s preferences to be the same as yours? How can you control for your biases as you give Janet advice? (f)      Think about what Janet’s priorities might be for choosing a housing arrangement. How might different priorities lead to different choices? (g)     Describe how information that Janet gains over this next year might affect her future housing arrangements. Suppose Janet asks for your advice. (h)     Use the information you learned from the preceding analyses to write a memo to Janet with your recommendation and a discussion of its risks. Refer in your memo to the information that would be useful to Janet.

Balanced scorecard perspectives: internal business process, innovation             and growth The Galaxy Hotel Group owns and operates a number of mid-level boutique hotels mostly in regional Australia. Galaxy is structured around regions with a regional general manager usually given the responsibility of working closely with the managers of the hotels within their region. Commonly, a regional general manager is responsible for around 6 to 8 hotels. Within Australia, Galaxy has six regional general managers who report to the CEO, Angelo Vellma. Galaxy’s strategy has focused on meeting the needs of business and holiday travellers seeking 3 to 3.5 star accommodation for relatively short stays that are affordable but comfortable. One thing Galaxy enforces is its objective of having the same high-level service at each hotel. The CFO of Galaxy, Caitlin Zhang, has raised the idea of introducing a balanced scorecard. At this stage it has only been discussed at board level, but most of the board members are in favour of its implementation. As Zhang points out, ‘it will focus the attention of employees on our key priorities as well as provide the opportunity to reinforce our strategy throughout the company’. Zhang’s first draft balanced scorecard developed for use at the individual hotel level is provided below. To date, Zhang has constructed the first draft alone, without consulting others.       Another board member, Patrick Ryan, wonders about using the balanced scorecard a little differently. ‘Perhaps we could use the scorecard to facilitate discussion with our regional managers and individual hotel managers. Not all are the same and they obviously face different challenges. The scorecard could be used by senior management to meet with regional managers and discuss the performance of hotels in the region, and perhaps re-work part of the scorecard and set different priorities as the regions work to meet local challenges.’ Required (a)          Angelo Vellma is a little concerned about the draft scorecard. He had recently attended a seminar on balanced scorecards and is worried about the lack of measures relating to what he thinks are important issues at the individual hotel level. He is particularly concerned at the lack of an internal business process perspective and a learning and growth perspective in the scorecard. Identify two measures relevant at the individual hotel level at Galaxy for the internal business process perspective and the learning and growth perspective. Provide a brief justification for each measure. (b)          Comment on the implementation process of the balanced scorecard at Galaxy to date.

With reference to the above, provide an assessment of the UK balance of payments in 2020.

On June 30, 2014, your client, Ferry Company, was granted two patents covering plastic cartons that it had been producing and marketing profitably for the past 3 years. One patent covers the manufacturing process, and the other covers the related products. Ferry executives tell you that these patents represent the most significant breakthrough in the industry in the past 30 years. The products have been marketed under the registered trademarks Evertight, Duratainer, and Sealrite. Licenses under the patents have already been granted by your client to other manufacturers in the United States and abroad, and are producing substantial royalties. On July 1, Ferry commenced patent infringement actions against several companies whose names you recognize as those of substantial and prominent competitors. Ferry’s management is optimistic that these suits will result in a permanent injunction against the manufacture and sale of the infringing products as well as collection of damages for loss of profits caused by the alleged infringement. The financial vice president has suggested that the patents be recorded at the discounted value of expected net royalty receipts. Instructions (a) What is the meaning of “discounted value of expected net receipts”? Explain. (b) How would such a value be calculated for net royalty receipts? (c) What basis of valuation for Ferry’s patents would be generally accepted in accounting? Give supporting reasons for this basis. (d) Assuming no practical problems of implementation, and ignoring generally accepted accounting principles, what is the preferable basis of valuation for patents? Explain. (e) What would be the preferable theoretical basis of amortization? Explain. (f) What recognition, if any, should be made of the infringement litigation in the financial statements for the year ending September 30, 2014? Discuss.

1.       : Experts advise that most catastrophes in organizations result from a series of small problems or mistakes. As a new, entry-level manager, how might you apply this understanding to help your organization avoid making major mistakes?

In what case does the strength coefficient have the same value as the yield strength?

Selected accounts of Urdu Company are shown below.   Instructions From an analysis of the T-accounts, reconstruct (a) the October transaction entries, and (b) the adjusting journal entries that were made on October 31, 2014. Prepare explanations for each journal entry.

What are the advantages and disadvantages to a firm that issues low- or zero-coupon bonds? (LO2)

Demarco and Janine Jackson have been married for 20 years and have four children who qualify as their dependents (Damarcus, Janine, Michael, and Candice).The couple received salary income of $100,000 and they sold their home this year. They initially purchased the home three years ago for $200,000 and they sold it for $250,000.The gain on the sale qualified for the exclusion from the sale of a principal residence.The Jacksons incurred $16,500 of itemized deductions and they had $6,250 withheld from their paychecks for federal taxes. They are also allowed to claim a child tax credit for each of their children. a. What is the Jacksons’ taxable income and what is their tax liability or (refund)?

1.       : In response to security threats in today’s world, the U.S. government has federalized airport security workers. Many argued that simply making screeners federal workers would not solve the root problem: Bored, low-paid, and poorly trained security workers have little motivation to be vigilant. How might these employees be motivated to provide the security that travel threats now demand?

} Reese, 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.  Reese can pay the $20,000 bill any time before January 30 of next year without penalty.  Assume Reese’s marginal tax rate is 30 percent this year and will be 40 percent 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?

] Rebecca is a calendar-year taxpayer who operates a business. She made the following business-related expenditures in December of this year. Indicate the amount of these payments that she may deduct this year under both the cash method of accounting and the accrual method of accounting.  a) $2,000 for an accountant to evaluate the accounting system of Rebecca’s business. The accountant spent three weeks in January of next year working on the evaluation. b) $2,500 for new office furniture. The furniture was delivered on January 15 of next year.  c) $3,000 for property taxes on her factory.  d) $1,500 for interest on a short-term bank loan relating to the period from November 1 of this year through March 31 of next year.

Give some other examples of changes in one injection or withdrawal that can affect others.

Assume Tamar uses the Tax Court method of allocating expenses to rental use of the property.

The maximum maturity of commercial paper is 270 days. Why would a firm issue commercial paper instead of longerterm securities, even if it needs funds for a long period of time? (LO1)

What was the level of unemployment mid-way between quarter 2 and quarter 3 of 2020?

What adjustments are made annually to a shareholder’s basis in S corporate stock and in what order? What impact do these adjustments have on a subsequent sale of stock?

An annual report of Crestwood Industries states, “The company and its subsidiaries have longterm leases expiring on various dates after December 31, 2014. Amounts payable under such commitments, without reduction for related rental income, are expected to average approximately $5,711,000 annually for the next 3 years. Related rental income from certain subleases to others is estimated to average $3,094,000 annually for the next 3 years.” What information is provided by this note?

To what extent do Keynesians and new classicists agree about the role of fixed exchange rates?