Question & Answer

1.       : Some senior managers believe they should rely on written information and computer reports because these sources yield more accurate data than do face-to-face communications. Do you agree? Why or why not? \

Explain the difference between a direct cost and indirect cost.

What is the difference between water jet cutting, abrasive water jet cutting, and abrasive jet cutting?

: Explain recent historical trends, including the major concepts of systems thinking and the contingency view.

Describe the ideal mutual fund for investors who wish to generate tax-free income but also maintain a low degree of interest rate risk. (LO2)

How might the volatility of an economy affect the growth of potential output?

Based on the definition of gross income in §61 and related regulations, what is the general presumption regarding the taxability of income realized?

Based on the definition of gross income in §61, related regulations, and judicial rulings, what are the three criteria for recognizing taxable income?

What determines the shape and position of the MP curve?

Describe the concept of realization for tax purposes.

Compare and contrast realization of income with recognition of income.

Lanco Corporation, an accrual-method corporation, reported taxable income of $1,460,000 this year. Included in the computation of taxable income were the following items: • MACRS depreciation of $200,000. Depreciation for earnings and profits purposes is $120,000. • A net capital loss carryover of $10,000 from last year. • A net operating loss carryover of $25,000 from last year. • $65,000 capital gain from the distribution of land to the company’s sole shareholder (see below).   Not included in the computation of taxable income were the following items: • Tax-exempt income of $5,000. • Life insurance proceeds of $250,000. • Excess current-year charitable contribution of $2,500 (to be carried over to next year). • Tax-deferred gain of $20,000 on a like-kind exchange. • Nondeductible life insurance premium of $3,500. • Nondeductible interest expense of $1,000 on a loan used to buy tax-exempt bonds.   Lanco accrued and paid federal income taxes this year of $306,600. Lanco’s accumulated E&P at the beginning of the year was $2,400,000.  During the year, Lanco made the following distributions to its sole shareholder, Luigi Nutt:  • June 30:  $50,000 • September 30:  Parcel of land with a fair market value of $75,000. Lanco’s tax basis in the land was $10,000.  Luigi assumed an existing mortgage on the property of $15,000.

What issue precipitated the return of capital principle?  Explain.

Compare how the return of capital principle applies when (1) a taxpayer sells an asset and collects the sale proceeds all immediately and (2) a taxpayer sells an asset and collects the sale proceeds over several periods (installment sales).  If Congress wanted to maximize revenue from installment sales, how would they have applied the return of capital principle for installment sales?

What is meant by the principal–agent problem? Give two examples of this problem that you have come across in your own experience.

The cash method of accounting means that taxpayers don’t recognize income unless they receive cash or cash equivalents.  True or false?  Explain.

Contrast the constructive receipt doctrine with the claim of right doctrine.

Explain the strategies managers can use to help organizations adapt to an uncertain or turbulent environment.

What are some of the factors that managers should consider when implementing sustainability practices in their organisations?

What is a cupola?

Can a partnership have unrealized receivables if it has no accounts receivable?

Shane has never filed a tax return despite earning excessive sums of money as a gambler.  When does the statute of limitations expire for the years in which Shane has not filed a tax return?

Tiffany is unmarried and has a 15-year-old qualifying child.Tiffany has determined her tax liability to be $3,525, and her employer has withheld $1,500 of federal taxes from her paycheck.Tiffany is allowed to claim a $1,000 child tax credit for her qualifying child.What amount of taxes will Tiffany owe (or what amount will she receive as a refund) when she files her tax return?

On January 1, 2014, Roosevelt Company purchased 12% bonds, having a maturity value of $500,000, for $537,907.40. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2014, and mature January 1, 2019, with interest receivable December 31 of each year. Roosevelt’s business model is to hold these bonds to collect contractual cash flows. Instructions (a) Prepare the journal entry at the date of the bond purchase. (b) Prepare a bond amortization schedule. (c) Prepare the journal entry to record the interest received and the amortization for 2014. (d) Prepare the journal entry to record the interest received and the amortization for 2015.

Dakota Bank has a branch overseas with the following balance sheet characteristics: 50 percent of the liabilities are rate-sensitive and denominated in Swiss francs; the remaining 50 percent of liabilities are rate-insensitive and are denominated in dollars. With regard to assets, 50 percent are rate-sensitive and are denominated in dollars; the remaining 50 percent of assets are rate-insensitive and are denominated in Swiss francs. (LO3, LO7) A. Is the performance of this branch susceptible to interest rate movements? Explain. B. Assume that Dakota Bank plans to replace its short-term deposits denominated in U.S. dollars with short-term deposits denominated in Swiss francs because Swiss interest rates are currently lower than U.S. interest rates. The asset composition would not change. This strategy is intended to widen the spread between the rate earned on assets and the rate paid on liabilities. Offer your insights into how this strategy could backfire. C. One consultant has suggested to Dakota Bank that it could avoid exchange rate risk by making loans in whatever currencies it receives as deposits. In this way, it will not have to exchange one currency for another. Offer your insights into whether this strategy has any disadvantages.