Question & Answer

Claude purchased raw land three years ago for $1,500,000 to develop into lots and sell to individuals planning to build their dream homes. Claude intended to treat this property as inventory, like his other development properties. Before completing the development of the property, however, he decided to contribute it to South Peak Investors LLC when it was worth $2,500,000, in exchange for a 10 percent capital and profits interest. South Peak’s strategy is to hold land for investment purposes only and then sell it later at a gain. a. If South Peak sells the property for $3,000,000 four years after Claude’s contribution, how much gain or loss is recognized and what is its character? [Hint: See §724.] b. If South Peak sells the property for $3,000,000 five and one-half years after Claude’s contribution, how much gain or loss is recognized, and what is its character?

What does it mean to “flip” shares? Why would investors want to flip shares? (LO3)

A DC servomotor drives the x-axis of a NC milling machine table. The motor is coupled to the table lead screw using a 4:1 gear reduction (4 turns of the motor for each turn of the lead screw). The leadscrew pitch = 6.25 mm. An optical encoder is connected to the lead screw. The optical encoder emits 500 pulses per revolution. To execute a certain programmed instruction, the table must move from point (x = 87.5 mm, y = 35.0) to point (x = 25.0 mm, y = 180.0 mm) in a straight-line trajectory at a feed rate = 200 mm/min. Determine (a) the control resolution of the system for the x-axis only, (b) the corresponding rotational speed of the motor, and (c) frequency of the pulse train emitted by the optical encoder at the desired feed rate.

For the following application, identify one or more nontraditional machining processes that might be used, and present arguments to support your selection. Assume that either the part geometry or the work material (or both) preclude the use of conventional machining. The application is a matrix of 0.1 mm (0.004 in) diameter holes in a plate of 3.2 mm (0.125 in) thick hardened tool steel. The matrix is rectangular, 75 by 125 mm (3.0 by 5.0 in) with the separation between holes in each direction = 1.6 mm ( 0.0625 in).

Newton is a one-third owner of ProRite Partnership. Newton has decided to sell his interest in the business to Dunja for $50,000 cash plus the assumption of his share of ProRite’s liabilities. Assume Newton’s inside and outside basis in ProRite are equal. ProRite shows the following balance sheet as of the sale date: Assets: Tax Basis FMV Cash $ 80,000 $ 80,000 Receivables 25,000 25,000 Inventory 40,000 85,000 Land 30,000 20,000    Totals $ 175,000 $ 210,000 Liabilities and capital: Liabilities $ 60,000 Capital- Newton 38,333 - Barbara 38,334 - Liz 38,333    Totals $ 175,000 What are the amount and character of Newton’s recognized gain or loss?

Telephone Sellers Inc. sells prepaid telephone cards to customers. Telephone Sellers then pays the telecommunications company, TeleExpress, for the actual use of its telephone lines. Assume that Telephone Sellers sells $4,000 of prepaid cards in January 2014. It then pays TeleExpress based on usage, which turns out to be 50% in February, 30% in March, and 20% in April. The total payment by Telephone Sellers for TeleExpress lines over the 3 months is $3,000. Indicate how much income Telephone Sellers should recognize in January, February, March, and April.

Using the facts in problem 48, what minimum tax would need to be assessed on Shameika to make the tax progressive with respect to effective tax rates?

The board of directors of Ichiro Corporation is considering whether or not it should instruct the accounting department to shift from a first-in, first-out (FIFO) basis of pricing inventories to a last-in, first-out (LIFO) basis. The following information is available. Sales 21,000 units @ $50 Inventory, January 1 6,000 units @ 20 Purchases 6,000 units @ 22 10,000 units @ 25 7,000 units @ 30 Inventory, December 31 8,000 units @ ? Operating expenses $200,000 Instructions Prepare a condensed income statement for the year on both bases for comparative purposes.

The Simon Corporation issued 10-year, $5,000,000 par, 7% callable convertible subordinated debentures on January 2, 2014. The bonds have a par value of $1,000, with interest payable annually. The current conversion ratio is 14:1, and in 2 years it will increase to 18:1. At the date of issue, the bonds were sold at 98. Bond discount is amortized on a straightline basis. Simon’s effective tax was 35%. Net income in 2014 was $9,500,000, and the company had 2,000,000 shares outstanding during the entire year. Instructions (a) Prepare a schedule to compute both basic and diluted earnings per share. (b) Discuss how the schedule would differ if the security was convertible preferred stock.

Nareh began the year with a tax basis of $45,000 in her partnership interest. Her share of partnership liabilities consists of $6,000 of recourse liabilities and $10,000 of nonrecourse liabilities at the beginning of the year and $6,000 of recourse liabilities and $13,000 of nonrecourse liabilities at the end of the year. During the year, she was allocated $65,000 of partnership ordinary business loss. Nareh does not materially participate in this partnership, and she has $4,000 of passive income from other sources. a. How much of Nareh’s loss is limited by her tax basis? b. How much of Nareh’s loss is limited by her at-risk amount? c. How much of Nareh’s loss is limited by the passive activity loss rules? Nareh began the year with a tax basis of $45,000 in her partnership interest. Her share of partnership liabilities consists of $6,000 of recourse liabilities and $10,000 of nonrecourse liabilities at the beginning of the year and $6,000 of recourse liabilities and $13,000 of nonrecourse liabilities at the end of the year. During the year, she was allocated $65,000 of partnership ordinary business loss. Nareh does not materially participate in this partnership, and she has $4,000 of passive income from other sources. a. How much of Nareh’s loss is limited by her tax basis? b. How much of Nareh’s loss is limited by her at-risk amount? c. How much of Nareh’s loss is limited by the passive activity loss rules?

There are several ways of shaping plate or sheet glass. Name and briefly describe one of them

Under what circumstances could a corporation with earnings and profits make a nontaxable distribution to its shareholders after the S election termination?

In each of the following independent situations, determine the taxpayer’s filing status and the number of personal and dependency exemptions the taxpayer is allowed to claim.Frank is single and supports his 17-year-old brother, Bill.Bill earned $3,000 and did not live with Frank

How might uncertainty propagate the impact of shocks, such as the COVID-19 pandemic, on the macroeconomy?

1.       : If talkative men are viewed as powerful and competent, why do you think talkative women are seen as less capable and pushy? Do you think this perception would be different in an organization with a large percentage of female managers at top levels?

Five friends, Jackie (0.5 percent owner), Jermaine (1 percent owner), Marlon (2 percent owner), Janet (86 percent owner), and Tito (10.5 percent owner) are shareholders in Jackson 5 Inc. (an S corporation).  As employees of the company, each receives health insurance ($10,000 per year benefit), dental insurance ($2,000 per year benefit), and free access to a workout facility located at company headquarters ($500 per year benefit).  What are the tax consequences of these benefits for each shareholder and for Jackson 5 Inc.?

The following table discloses the interest rate sensitivity of two savings institutions (dollar amounts are in millions). Based on this information only, which institution’s stock price would likely be affected more by a given change in interest rates? Justify your opinion. (LO4)

Solve Problem 20.21 except that the stock thickness t = 1/8 in.

A resistance seam-welding operation is performed on two pieces of 2.5-mm-thick austenitic stainless steel to fabricate a container. The weld current in the operation is 10,000 amps, the weld duration = 0.3 sec, and the resistance at the interface is 75 micro-ohms. Continuous motion welding is used, with 200-mm-diameter electrode wheels. The individual weld nuggets formed in this RSEW operation have diameter = 6 mm and thickness = 3 mm (assume the weld nuggets are disc-shaped). These weld nuggets must be contiguous to form a sealed seam. The power unit driving the process requires an off-time between spot welds of 1.0 s. Given these conditions, determine (a) the unit melting energy of stainless steel using the methods of the previous chapter, (b) the proportion of energy generated that goes into the formation of each weld nugget, and (c) the rotational speed of the electrode wheels

The following information has been obtained for the Gocker Corporation. 1. Prior to 2014, taxable income and pretax financial income were identical. 2. Pretax financial income is $1,700,000 in 2014 and $1,400,000 in 2015. 3. On January 1, 2014, equipment costing $1,200,000 is purchased. It is to be depreciated on a straightline basis over 5 years for tax purposes and over 8 years for financial reporting purposes. (Hint: Use the half-year convention for tax purposes, as discussed in Appendix 11A.) 4. Interest of $60,000 was earned on tax-exempt municipal obligations in 2015. 5. Included in 2015 pretax financial income is an extraordinary gain of $200,000, which is fully taxable. 6. The tax rate is 35% for all periods. 7. Taxable income is expected in all future years. Instructions (a) Compute taxable income and income taxes payable for 2015. (b) Prepare the journal entry to record 2015 income tax expense, income taxes payable, and deferred taxes. (c) Prepare the bottom portion of Gocker’s 2015 income statement, beginning with “Income before income taxes and extraordinary item.” (d) Indicate how deferred income taxes should be presented on the December 31, 2015, balance sheet.

The designer has specified that a 3/8-16 UNC low-carbon bolt (3/8 in nominal diameter, 16 threads/in) in a certain application should be stressed to its proof stress of 33,000 lb/in2 (see Table 32.2). Determine the maximum torque that should be used if C = 0.25.

Presented below is information from the annual report of Emporia Plastics, Inc. Operating income $ 532,150 Bond interest expense 135,000 397,150 Income taxes 183,432 Net income $ 213,718 Bonds payable $1,000,000 Common stock 875,000 Retained earnings 375,000 Instructions (a) Compute the return on common stock equity and the rate of interest paid on bonds. (Assume balances for debt and equity accounts approximate averages for the year.) (b) Is Emporia Plastics Inc. trading on the equity successfully? Explain.

The strength coefficient = 550 MPa and strain-hardening exponent = 0.22 for a certain metal. During a forming operation, the final true strain that the metal experiences = 0.85. Determine the flow stress at this strain and the average flow stress that the metal experienced during the operation

Matt hired Apex Services to repair his business equipment. On November 1 of this year, Matt paid $2,000 for the repairs that he expects to begin in early March of next year.  a) What amount of the cost of the repairs can Matt deduct this year if he uses the cash method of accounting for his business? b) What amount of the cost of the repairs can Matt deduct this year if he uses the accrual method of accounting for his business? c) What amount of the cost of the repairs can Matt deduct this year if he uses the accrual method, and he expects the repairs to be done by early February? d) What amount of the cost of the repairs can Matt deduct this year if he uses the cash method of accounting, and he expects the repairs to be done by early February?

Generally accepted accounting principles usually require the use of accrual accounting to “fairly present” income. If the cash receipts and disbursements method of accounting will “clearly reflect” taxable income, why does this method not usually also “fairly present” income?