Question & Answer

Conan O’Brien Logging and Lumber Company owns 3,000 acres of timberland on the north side of Mount Leno, which was purchased in 2002 at a cost of $550 per acre. In 2014, O’Brien began selectively logging this timber tract. In May 2014, Mount Leno erupted, burying the timberland of O’Brien under a foot of ash. All of the timber on the O’Brien tract was downed. In addition, the logging roads, built at a cost of $150,000, were destroyed, as well as the logging equipment, with a net book value of $300,000. At the time of the eruption, O’Brien had logged 20% of the estimated 500,000 board feet of timber. Prior to the eruption, O’Brien estimated the land to have a value of $200 per acre after the timber was harvested. O’Brien includes the logging roads in the depletion base. O’Brien estimates it will take 3 years to salvage the downed timber at a cost of $700,000. The timber can be sold for pulp wood at an estimated price of $3 per board foot. The value of the land is unknown, but must be considered nominal due to future uncertainties. Instructions (a) Determine the depletion cost per board foot for the timber harvested prior to the eruption of Mount Leno. (b) Prepare the journal entry to record the depletion prior to the eruption. (c) If this tract represents approximately half of the timber holdings of O’Brien, determine the amount of the extraordinary loss due to the eruption of Mount Leno for the year ended December 31, 2014.

Assume Ellina earns a 10 percent after-tax rate of return and that she owes a friend $1,200. Would she prefer to pay the friend $1,200 today or $1,750 in four years?

Why might it equally result in average cost pricing?

1.       : What are the first rung, glass ceiling, and bamboo ceiling, and why do you think they have proved to be such barriers to women and underrepresented employees?

What is asset stripping? (LO1)

What are “initial direct costs” and how are they accounted for?

What other items might be included as basic needs?

Noven Pharmaceuticals, Inc., headquartered in Miami, Florida, describes itself in a recent annual report as follows.   Noven also reported in its annual report that its activities to date have consisted of product development efforts, some of which have been independent and some of which have been completed in conjunction with Rhone-Poulenc Rorer (RPR) and Ciba-Geigy. The revenues so far have consisted of money received from licensing fees, “milestone” payments (payments made under licensing agreements when certain stages of the development of a certain product have been completed), and interest on its investments. The company expects that it will have significant revenue in the upcoming fiscal year from the launch of its first product, a transdermal estrogen delivery system. The current assets portion of Noven’s balance sheet follows. Cash and cash equivalents $12,070,272 Securities held to maturity 23,445,070 Inventory of supplies 1,264,553 Prepaid and other current assets 825,159 Total current assets $37,605,054 Inventory of supplies is recorded at the lower-of-cost (first-in, first-out)-or-net realizable value and consists mainly of supplies for research and development. Instructions (a) What would you expect the physical flow of goods for a pharmaceutical manufacturer to be most like: FIFO, LIFO, or random (flow of goods does not follow a set pattern)? Explain. (b) What are some of the factors that Noven should consider as it selects an inventory measurement method? (c) Suppose that Noven had $49,000 in an inventory of transdermal estrogen delivery patches. These patches are from an initial production run and will be sold during the coming year. Why do you think that this amount is not shown in a separate inventory account? In which of the accounts shown is the inventory likely to be? At what point will the inventory be transferred to a separate inventory account?

Compare and contrast the recovery periods of §197 intangibles, organizational expenditures, start-up costs, and research and experimentation expenses.

Suppose you asked your favorite AI query tool the following question: “How do Democrats and Republicans view a civilized society and a healthy economy?”  The AI tool provided the following response:   Is the AI response to the question accurate?  Explain.

Trey has two dependents, his two daughters, ages 14 and 18, at year-end.  Trey files a joint return with his spouse.  What amount of child tax credit (either as child or a qualifying dependent) will Trey be able to claim in 2024 for his daughters in each of the following alternative situations? a. His AGI is $100,000.

What are the three committees that debate proposed tax legislation?  What documents do these committees generate, and how might they be used?

If this analysis is correct, namely that a reduction in wages will reduce the aggregate demand for goods, what assumption must we make about the relative proportions of wages and profits that are spent (given that a reduction in real wage rates will lead to a corresponding increase in rates of profit)?

Supply tends to be more elastic in the long run than in the short run. Assume that a tax is imposed on a good that was previously untaxed. How will the incidence of this tax change as time passes? How will the incidence be affected if demand too becomes more elastic over time?

Tanaka Company has land that cost $15,000,000. Its fair value on December 31, 2014, is $20,000,000. Tanaka chooses the revaluation model to report its land. Explain how the land and its related valuation should be reported.

Under what circumstances can a college student qualify for the earned income credit?

Using the information in E20-2, prepare a pension worksheet inserting January 1, 2014, balances, showing December 31, 2014, balances, and the journal entry recording pension expense.

For problem 9.1, determine the modulus of elasticity in (a) the longitudinal direction of the glass fibers and (b) the perpendicular direction to the glass fibers.

Hans runs a sole proprietorship. Hans has reported the following net §1231 gains and losses since he began business. Net §1231 gains shown are before the look-back rule.   Year Net §1231 Gains/(Losses) Year 1 ($65,000) Year 2 15,000 Year 3 0 Year 4 0 Year 5 10,000 Year 6 0 Year 7 (current year) 50,000   a. What amount, if any, of the year 7 (current year) $50,000 net §1231 gain is treated as ordinary income? b. Assume that the $50,000 net §1231 gain occurs in year 6 instead of year 7. What amount of the gain would be treated as ordinary income in year 6?

How is the market price of land related to its productivity?

Soon after beginning the year-end audit work on March 10 at Engone Company, the auditor has the following conversation with the controller. Controller: The year ended March 31st should be our most profitable in history and, as a consequence, the board of directors has just awarded the officers generous bonuses. Auditor: I thought profits were down this year in the industry, according to your latest interim report. Controller: Well, they were down, but 10 days ago we closed a deal that will give us a substantial increase for the year. Auditor: Oh, what was it? Controller: Well, you remember a few years ago our former president bought stock in Henderson Enterprises because he had those grandiose ideas about becoming a conglomerate. For 6 years we have not been able to sell this stock, which cost us $3,000,000 and has not paid a nickel in dividends. Thursday we sold this stock to Bimini Inc. for $4,000,000. So, we will have a gain of $700,000 ($1,000,000 pretax) which will increase our net income for the year to $4,000,000, compared with last year’s $3,800,000. As far as I know, we’ll be the only company in the industry to register an increase in net income this year. That should help the market value of the stock! Auditor: Do you expect to receive the $4,000,000 in cash by March 31st, your fiscal year-end? Controller: No. Although Bimini Inc. is an excellent company, they are a little tight for cash because of their rapid growth. Consequently, they are going to give us a $4,000,000 zero-interestbearing note with payments of $400,000 per year for the next 10 years. The first payment is due on March 31 of next year. Auditor: Why is the note zero-interest-bearing? Controller: Because that’s what everybody agreed to. Since we don’t have any interest-bearing debt, the funds invested in the note do not cost us anything and besides, we were not getting any dividends on the Henderson Enterprises stock. Instructions Do you agree with the way the controller has accounted for the transaction? If not, how should the transaction be accounted for?

What is the fair value option? Explain how use of the fair value option reflects application of the fair value principle.

Explain how the Financial Reform Act is intended to prevent some problems that contributed to the credit crisis. (LO7)

Richardson Company is contemplating the establishment of a share-based compensation plan to provide long-run incentives for its top management. However, members of the compensation committee of the board of directors have voiced some concerns about adopting these plans, based on news accounts related to a recent accounting standard in this area. They would like you to conduct some research on this recent standard so they can be better informed about the accounting for these plans. Instructions If your school has a subscription to the FASB Codification, go to http://aaahq.org/ascLogin.cfm to log in and prepare responses to the following. Provide Codification references for your responses. (a) Identify the authoritative literature that addresses the accounting for share-based payment compensation plans. (b) Briefly discuss the objectives for the accounting for stock compensation. What is the role of fair value measurement? (c) The Richardson Company board is also considering an employee share-purchase plan, but the Board does not want to record expense related to the plan. What criteria must be met to avoid recording expense on an employee stock-purchase plan?

} Suppose you asked your favorite AI query tool the following question: “Are athletic scholarships that require student participation in a specific sport taxable for federal income tax purposes?”  The AI tool provided the following response: