Question & Answer

Outline the accounting procedures involved in applying the capital lease method by a lessee.

What is the difference between a future taxable amount and a future deductible amount? When is it appropriate to record a valuation account for a deferred tax asset?

What is an electrolyte?

Alan inherited $100,000 with the stipulation that he “invest it to financially benefit his family.”  Alan and Alice decided they would invest the inheritance to help them accomplish two financial goals: purchasing a Park City vacation home and saving for their son Cooper’s education.     Vacation Home Cooper’s Education Initial Investment $50,000 $50,000 Investment Horizon 5 years 18 years   Alan and Alice have a marginal income tax rate of 32 percent (capital gains rate of 15 percent) and have decided to investigate the following investment opportunities.     5 Years Annual After-Tax Rate of Return 18 Years Annual After-Tax Rate of Return Corporate bonds (ordinary interest taxed annually) 5.75%   4.75%   Dividend-paying stock (no appreciation and dividends are taxed at 15%)   3.50%     3.50%   Growth stock Future Value is $65,000   Future Value is $140,000   Municipal bond (tax-exempt) 3.20%   3.10%     Complete the two Annual After-Tax Rate of Return columns for each investment and provide investment recommendations for Alan and Alice.

A partial trial balance of Julie Hartsack Corporation is as follows on December 31, 2015. Dr. Cr. Supplies $ 2,700 Salaries and wages payable $ 1,500 Interest receivable 5,100 Prepaid insurance 90,000 Unearned rent –0– Interest payable 15,000 Additional adjusting data: 1. A physical count of supplies on hand on December 31, 2015, totaled $1,100. 2. Through oversight, the Salaries and Wages Payable account was not changed during 2015. Accrued salaries and wages on December 31, 2015, amounted to $4,400. 3. The Interest Receivable account was also left unchanged during 2015. Accrued interest on investments amounts to $4,350 on December 31, 2015. 4. The unexpired portions of the insurance policies totaled $65,000 as of December 31, 2015. 5. $28,000 was received on January 1, 2015, for the rent of a building for both 2015 and 2016. The entire amount was credited to rent revenue. 6. Depreciation on equipment for the year was erroneously recorded as $5,000 rather than the correct figure of $50,000. 7. A further review of depreciation calculations of prior years revealed that equipment depreciation of $7,200 was not recorded. It was decided that this oversight should be corrected by a prior period adjustment. Instructions (a) Assuming that the books have not been closed, what are the adjusting entries necessary at December 31, 2015? (Ignore income tax considerations.) (b) Assuming that the books have been closed, what are the adjusting entries necessary at December 31, 2015? (Ignore income tax considerations.) (c) Repeat the requirements for items 6 and 7, taking into account income tax effects (40% tax rate) and assuming that the books have been closed.

Rubio recently invested $20,000 (tax basis) in purchasing a limited partnership interest. His at-risk amount is $15,000. In addition, Rubio’s share of the limited partnership loss for the year is $22,000, his share of income from a different limited partnership is $5,000, and he has $40,000 in wage income and $10,000 in long-term capital gains. a. How much of Rubio’s $22,000 loss is allowed considering only the tax basis loss limitations? b. How much of the loss from part (a) is allowed under the at-risk limitations? c. How much of Rubio’s $22,000 loss from the limited partnership can he deduct in the current year considering all limitations?

What expenses are deductible when a taxpayer combines both business and personal activities on a trip? How do the rules for international travel differ from the rules for domestic travel?

Assume Jack and Jill, 25 and 75 percent shareholders, respectively, in UpAHill Corporation, have tax bases in their shares at the beginning of year 1 of $24,000 and $56,000, respectively. Also assume no distributions were made. Given the income statement above, what are their tax bases in their shares at the end of year 1?

What is calorizing?

For each of the unrelated transactions described below, present the entry(ies) required to record each transaction. 1. Grand Corp. issued $20,000,000 par value 10% convertible bonds at 99. If the bonds had not been convertible, the company’s investment banker estimates they would have been sold at 95. Expenses of issuing the bonds were $70,000. 2. Hoosier Company issued $20,000,000 par value 10% bonds at 98. One detachable stock purchase warrant was issued with each $100 par value bond. At the time of issuance, the warrants were selling for $4. 3. Suppose Sepracor, Inc. called its convertible debt in 2014. Assume the following related to the transaction. The 11%, $10,000,000 par value bonds were converted into 1,000,000 shares of $1 par value common stock on July 1, 2014. On July 1, there was $55,000 of unamortized discount applicable to the bonds, and the company paid an additional $75,000 to the bondholders to induce conversion of all the bonds. The company records the conversion using the book value method.

What is meant by the term structural adhesive?

What is the difference between the traditional ceramics and the new ceramics, as far as raw materials are concerned?

When incorporating Spotfree, a cleaning company, Jayne transferred accounts receivable (fair market value $20,000 and $0 tax basis) and $12,000 of accounts payable from her cash-method sole proprietorship to Spotfree in exchange for Spotfree stock valued at $8,000. Assume the transfer qualifies under §351.   a. What are the amount and character of the gain Jayne must recognize on the exchange?  b. What is Jayne's basis in the Spotfree stock she received in the exchange?

Consider the loan in BE6-16. What payments must Zach Taylor make to settle the loan at the same interest rate but with the 6 payments beginning on the day the loan is signed?

1.      Why do you think Nicola and Steve are on the defensive? Might the emphasis on core leadership behaviors be handled in a different way? What do you suggest?

At what amount should trading, available-for-sale, and held-to-maturity securities be reported on thebalance sheet?

Presented below is information related to Bobby Engram Company. Cost Retail Beginning inventory $ 58,000 $100,000 Purchases (net) 122,000 200,000 Net markups 10,345 Net markdowns 26,135 Sales revenue 186,000 Instructions (a) Compute the ending inventory at retail. (b) Compute a cost-to-retail percentage (round to two decimals) under the following conditions. (1) Excluding both markups and markdowns. (2) Excluding markups but including markdowns. (3) Excluding markdowns but including markups. (4) Including both markdowns and markups. (c) Which of the methods in (b) above (1, 2, 3, or 4) does the following? (1) Provides the most conservative estimate of ending inventory. (2) Provides an approximation of lower-of-cost-or-market. (3) Is used in the conventional retail method. (d) Compute ending inventory at lower-of-cost-or-market (round to nearest dollar). (e) Compute cost of goods sold based on (d). (f) Compute gross margin based on (d).

Indicate how each of the following accounts should be classified in the stockholders’ equity section. (a) Common Stock. (b) Retained Earnings. (c) Paid-in Capital in Excess of Par—Common Stock. (d) Treasury Stock. (e) Paid-in Capital from Treasury Stock. (f) Paid-in Capital in Excess of Stated Value—Common Stock. (g) Preferred Stock.

For the current year, LNS Corporation reported the following taxable income at the end of its first, second, and third quarters.  What are LNS’s minimum first, second, third, and fourth quarter estimated tax payments using the annualized income method?

Which factors influence the shape of the yield curve? Describe how financial market participants use the yield curve. (LO3)

What are the three layers of a part’s surface after undergoing EDM.

BT Openreach is responsible for providing and maintaining the fixed-line network connections to customers in the UK. This includes the huge system of telegraph poles and cable ducts (small underground tunnels) that carry telecom lines between BT exchanges and houses/business premises. To what extent do you think this is a natural monopoly?

How is nano-imprint lithography different from micro-imprint lithography?

Why is friction generally undesirable in metal forming operations?

The following are three independent, unrelated sets of facts relating to accounting changes. Situation 1: Sanford Company is in the process of having its first audit. The company has used the cash basis of accounting for revenue recognition. Sanford president, B. J. Jimenez, is willing to change to the accrual method of revenue recognition. Situation 2: Hopkins Co. decides in January 2015 to change from FIFO to weighted-average pricing for its inventories. Situation 3: Marshall Co. determined that the depreciable lives of its fixed assets are too long at present to fairly match the cost of the fixed assets with the revenue produced. The company decided at the beginning of the current year to reduce the depreciable lives of all of its existing fixed assets by 5 years. Instructions For each of the situations described, provide the information indicated below. (a) Type of accounting change. (b) Manner of reporting the change under current generally accepted accounting principles, including a discussion where applicable of how amounts are computed. (c) Effect of the change on the balance sheet and income statement.