Question & Answer

Based on previous technological advancements, make some predictions about future developments in fintech that you believe may occur over the 10 years after your graduation. (LO1)

What are some of the advantages of chemical vapor deposition?

Explain why boards of directors will often employ independent             remuneration consultants to assist in developing and assessing      compensation plans.             (LO5)

Button Company has the following two temporary differences between its income tax expense and income taxes payable. 2014 2015 2016 Pretax fi nancial income $840,000 $910,000 $945,000 Excess depreciation expense on tax return (30,000) (40,000) (10,000) Excess warranty expense in fi nancial income 20,000 10,000 8,000 Taxable income $830,000 $880,000 $943,000 The income tax rate for all years is 40%. Instructions (a) Assuming there were no temporary differences prior to 2014, prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2014, 2015, and 2016. (b) Indicate how deferred taxes will be reported on the 2016 balance sheet. Button’s product warranty is for 12 months. (c) Prepare the income tax expense section of the income statement for 2016, beginning with the line “Pretax financial income.”

Michelle operates several food trucks. Indicate the amount (if any) that she can deduct as an ordinary and necessary business deductions in each of the following situations and explain your solution.

How can the market distortions argument be used to justify putting excise duties on specific goods such as petrol, alcohol and tobacco? Is this the only reason why excise duties are put on these particular products?

What are the principal methods used to produce metallic powders?

Under what conditions may a seller who is exposed to continued risks of a high rate of return of the product sold recognize sales transactions as current revenue?

1. Why are insurance companies unwilling to provide insurance against losses arising from war or ‘civil insurrection’? 2. Name some other events where it would be impossible to obtain insurance. 3. Explain why an insurance company could not pool the risk of flooding in a particular part of a country. Does your answer imply insurance against flooding is unobtainable?

At the end of the year, Falabella Co. has pretax financial income of $550,000. Included in the $550,000 is $70,000 interest income on municipal bonds, $25,000 fine for dumping hazardous waste, and depreciation of $60,000. Depreciation for tax purposes is $45,000. Compute income taxes payable, assuming the tax rate is 30% for all periods.

Is the number of working days lost through disputes a good indication of (a) union power; (b) union militancy?

82. LeBron, Dennis, and Susan formed the Bar T LLC at the beginning of the current year. LeBron and Dennis each contributed $200,000 and Susan transferred several acres of agricultural land she had purchased two years earlier to the LLC. The land had a tax basis of $50,000 and was appraised at $300,000. The land was also encumbered with a $100,000 nonrecourse mortgage (i.e., qualified nonrecourse financing) for which no one was personally liable. The members plan to use the land and cash to begin a cattle-feeding operation. Susan will work full time operating the business, but LeBron and Dennis will devote less than two days per year to the operation. All three members agree to split profits and losses equally. At the end of the first year, Bar T had accumulated $40,000 of accounts payable jointly guaranteed by LeBron and Dennis and had made a $9,000 principal payment on the mortgage. None of the members have passive income from other sources or business income from other sources. LeBron and Dennis are married, while Susan is single. For the first year of operations, the partnership records disclosed the following information: Sales revenue $620,000 Cost of goods sold $380,000 Operating expenses $670,000 Dividends $1,200 Municipal bond interest $300 Salary paid as a guaranteed payment to Susan (not included in expenses) $10,000 Cash distributions split equally among the members at year-end $3,000 a. Compute the tax basis of each member’s interest immediately after the formation of the LLC. b. When does each member’s holding period for his or her LLC interests begin? c. What are Bar T’s tax basis and holding period in its land? d. What is Bar T’s required tax year-end? e. What overall methods of accounting were initially available to Bar T? f. List the separate items of partnership income, gains, losses, deductions, and other items that will be included in each member’s Schedule K-1 for the first year of operations. Use the proposed self-employment tax regulations to determine each member’s self-employment income or loss. g. What are the members’ tax bases in their LLC interests at the end of the first year of operations? h. What are the members’ at-risk amounts in their LLC interests at the end of the first year of operations? i. How much loss from Bar T, if any, will the members be able to deduct on their individual returns from the first year of operations?

Wolverine Corporation made a distribution of $500,000 to Jin Inc. in partial liquidation of the company on December 31 of this year. Jin Inc. owns 100 percent of Wolverine Corporation. The distribution was in exchange for 50 percent of Jin Inc.’s stock in the company. At the time of the distribution, the shares had a fair market value of $200 per share. Jin Inc.’s tax basis in the shares was $50 per share. Wolverine had E&P of $8,000,000 at the time of the distribution.

What are the factors on which the selection of feed in a machining operation should be based?

Amiras Corporation began operations on January 1, 2014, with a beginning inventory of $30,100 at cost and $50,000 at retail. The following information relates to 2014. Retail Net purchases ($108,500 at cost) $150,000 Net markups 10,000 Net markdowns 5,000 Sales revenue 126,900 Instructions (a) Assume Amiras decided to adopt the conventional retail method. Compute the ending inventory tobe reported in the balance sheet. (b) Assume instead that Amiras decides to adopt the dollar-value LIFO retail method. The appropriate price indexes are 100 at January 1 and 110 at December 31. Compute the ending inventory to be reported in the balance sheet. (c) On the basis of the information in part (b), compute cost of goods sold.

What policy prescriptions could be recommended for an economy experiencing a balance sheet recession?

Stan Ott is evaluating two recent transactions involving exchanges of equipment. In one case, the exchange has commercial substance. In the second situation, the exchange lacks commercial substance. Explain to Stan the differences in accounting for these two situations.

44. Read the following letter and help Shady Slim with his tax situation. Assume that gross income is $172,900 (which consists only of salary) for purposes of this problem.

Software Galore sells gaming software that is downloaded to the customer’s device on purchase. The owner, Fred, was talking with a friend who sang the praises of flexible budgeting in his manufacturing business. Fred was wondering whether a flexible budget would benefit his business decision making. Comment.

Which of the following are examples of effective countervailing power?

Lacy is a single taxpayer. In 2024, her taxable income is $51,000.  What is her tax liability in each of the following alternative situations?

What is “imputed interest”? In what situations is it necessary to impute an interest rate for notes receivable? What are the considerations in imputing an appropriate interest rate?

What are the primary characteristics of an annuity?Differentiate between an “ordinary annuity” and an “annuity due.”

Juan and Bonita are married and have two dependent children living at home. This year, Juan is killed in an avalanche while skiing.

Woodley Park Corporation currently owns two parcels of land (parcel 1 and parcel 2). It owns a warehouse facility on parcel 1. Woodley needs to acquire a new and larger manufacturing facility. Woodley was approached by Blazing Fast Construction (which specializes in prefabricated warehouses) about acquiring Woodley’s existing warehouse on parcel 1. Woodley indicated that it would prefer to exchange its existing facility for a new and larger facility in a qualifying like-kind exchange. Blazing Fast indicated that it could construct a new manufacturing facility on parcel 2 to Woodley’s specification within four months. Woodley and Blazing Fast agreed to the following arrangement. First, Blazing Fast would construct the new warehouse on parcel 2 and then relinquish the property to Woodley within four months. Woodley would then transfer the warehouse facility and land parcel 1 to Blazing Fast. All of the property exchanged in the deal was identified immediately and the construction was completed within 180 days. Does the exchange of the new building for the old building and parcel 1 qualify as a like-kind exchange? [Hint: See DeCleene v. Comm’r, 115 TC 457 (2000).]