Question & Answer

Why does the tax code allow taxpayers to defer gains on like-kind exchanges?  How do the tax laws ensure that the gains (or losses) are deferred and not permanently excluded from a taxpayer’s income?

What is a carryover basis as it relates to property received by a corporation in a §351 transaction?  What is the purpose of attaching a carryover basis to property received in a §351 transaction?

Describe the method that blockchain technology utilizes to store data. (LO2)

What does the assets/equity ratio of a bank indicate? (LO3)

Why are laminated FRP products made by the spray-up method not as strong as similar products made by hand lay-up?

Reward plan structure Whistlestop Adventure has grown from a one-man operation into a large, soon to be listed, adventure clothing and equipment company. For much of its four-year history, Whistlestop has used one company-wide incentive plan that all employees and managers participated in. The plan is based on equal sharing of a bonus pool determined on the basis of 10 per cent of all profits earned over $2 million. As the company has grown, the benchmark profit figure has changed, but otherwise the plan has remained substantially the same. The company founder explained that the plan was structured this way to encourage an organisational and team view, an objective that has permeated the company’s activities since its beginning.   With the impending stock exchange listing, the newly constituted remuneration committee has been working on the development of new incentive plan for executives and managers. The brief from the board includes the requirement to ‘develop an incentive plan in line with company’s strategy of revenue growth through high-quality products and customer service, and align the interests of the new executive team with shareholders’.   Required (a) If you were a member of the remuneration committee of Whistlestop how would you suggest the incentive plan be structured to meet the requirements set by the board? (b) What are the dangers for Whistlestop in moving away from the current incentive plan to a new one? How could these dangers be overcome? (LO2 and 4)

Explain how cost of goods is treated when a business sells inventory.

How did the Financial Services Modernization Act affect securities firms? (LO2)

Assume that Amazon.com has a stock-option plan for top management. Each stock option represents the right to purchase a share of Amazon $1 par value common stock inthe future at a price equal to the fair value of the stock at the date of the grant. Amazon has 5,000 stock options outstanding, which were granted at the beginning of 2014. The following data relate to the option grant. Exercise price for options $40 Market price at grant date (January 1, 2014) $40 Fair value of options at grant date (January 1, 2014) $6 Service period 5 years Instructions (a) Prepare the journal entry(ies) for the first year of the stock-option plan. (b) Prepare the journal entry(ies) for the first year of the plan assuming that, rather than options, 700 shares of restricted stock were granted at the beginning of 2014. (c) Now assume that the market price of Amazon stock on the grant date was $45 per share. Repeat the requirements for (a) and (b). (d) Amazon would like to implement an employee stock-purchase plan for rank-and-file employees, but it would like to avoid recording expense related to this plan. Which of the following provisions must be in place for the plan to avoid recording compensation expense? (1) Substantially all employees may participate. (2) The discount from market is small (less than 5%). (3) The plan offers no substantive option feature. (4) There is no preferred stock outstanding.

What will be the effect on the UK economy if the European Central Bank cuts interest rates?

Suppose you asked your favorite AI query tool “How do taxpayers treat organizational expenditures for tax purposes?” The AI tool provided the following response:

Explain how stock volatility changed during the credit crisis of 2008–2009. (LO4)

What is tunneling, as referred to in the scanning tunneling microscope?

What does vulcanization do to the rubber?

For each of the following jobs, check through the above list of determinants (excluding the last), and try to decide whether demand would be relatively elastic or inelastic: firefighters; telesales operators; app developers; bus drivers; accountants; farm workers; car workers.

Kano and his wife Hoshi have been married for 10 years and have two children under the age of 12.The couple has been living apart for the last two years and both children live with Kano.Kano has provided all the means necessary to support himself and his children.Kano and Hoshi do not file a joint return. What is Kano’s filing status?

What is the difference between industrial stitching and stapling?

An extruder has a diameter of 5.0 in and a length to diameter ratio of 26. The barrel heats the polypropylene melt to 450°F, which provides a melt viscosity of 0.0025 lb-s/in2 . The pitch of the screw is 4.2 in and the channel depth is 0.15 in. In operation the screw rotates at 50 rev/min and a head pressure of 450 lb/in2 is generated. What is the volume flow rate of polypropylene from the die at the end of the barrel?

How do organisations identify the costs of a cost object?

Explain why a partnership might not want to make a §754 election to allow special basis adjustments.

What items will increase a partner’s basis in the partnership interest?

Explain the difference between equity REITs and mortgage REITs. Which type would likely be a better hedge against high inflation? Why? (LO5)

1.              : What does this case illustrate about the risks of starting a business with a partner? How might those risks be minimized? Explain.

Matheny Inc. went public 3 years ago. The board of directors will be meeting shortly after the end of the year to decide on a dividend policy. In the past, growth has been financed primarily through the retention of earnings. A stock or a cash dividend has never been declared. Presented below is a brief financial summary of Matheny Inc. operations. ($000 omitted) 2015 2014 2013 2012 2011 Sales revenue $20,000 $16,000 $14,000 $6,000 $4,000 Net income 2,400 1,400 800 700 250 Average total assets 22,000 19,000 11,500 4,200 3,000 Current assets 8,000 6,000 3,000 1,200 1,000 Working capital 3,600 3,200 1,200 500 400 Common shares: Number of shares  outstanding (000) 2,000 2,000 2,000 20 20 Average market price $9 $6 $4 — — Instructions (a) Suggest factors to be considered by the board of directors in establishing a dividend policy. (b) Compute the return on assets, profit margin on sales, earnings per share, price-earnings ratio, and current ratio for each of the 5 years for Matheny Inc. (c) Comment on the appropriateness of declaring a cash dividend at this time, using the ratios computed in part (b) as a major factor in your analysis.

1.      : Don’t make the donation, but investigate whether any other ways are available to help Northeast High raise the funds that would allow them to purchase the much-needed educational software.