Question & Answer

How do the AMT tax rates compare to the regular income tax rates?

reported the following information regarding 2013–2014 inventory.     Instructions (a) Why might Robots, Inc., use two different methods for valuing inventory? (b) Comment on why Robots, Inc., might disclose how its LIFO inventories would be valued under FIFO. (c) Why does the LIFO liquidation reduce operating costs? (d) Comment on whether Robots, Inc. would report more or less income if it had been on a FIFO basis for all its inventory.

Gary inherited a Maine summer cabin on 10 acres from his grandmother. His grandparents originally purchased the property for $500 in 1951 and built the cabin at a cost of $10,000 in 1966. His grandfather died in 1981, and when his grandmother recently passed away, the property was appraised at $500,000 for the land and $700,000 for the cabin. Because Gary doesn’t currently live in New England, he decided that it would be best to put the property to use as a rental. What is Gary’s basis in the land and in the cabin?

Berstler Construction Company began operations in 2014. Construction activity for the first year is shown below. All contracts are with different customers, and any work remaining at December 31, 2014, is expected to be completed in 2015. Cash Contract Estimated Total Billings Collections Costs Incurred Additional Contract through through through Costs to Project Price 12/31/14 12/31/14 12/31/14 Complete 1 $ 560,000 $ 360,000 $340,000 $450,000 $130,000 2 670,000 220,000 210,000 126,000 504,000 3 520,000 500,000 440,000 330,000 –0– $1,750,000 $1,080,000 $990,000 $906,000 $634,000 Instructions Prepare a partial income statement and balance sheet to indicate how the above information would be reported for financial statement purposes. Berstler Construction Company uses the completed-contract method.

The following facts pertain to a non-cancelable lease agreement between Lennox Leasing Company and Gill Company, a lessee. (Round all numbers to the nearest cent.) Inception date: May 1, 2014 Annual lease payment due at the beginning of each year, beginning with May 1, 2014: $18,829.49 Bargain-purchase option price at end of lease term: $4,000.00 Lease term: 5 years Economic life of leased equipment: 10 years Lessor’s cost: $65,000.00; fair value of asset at May 1, 2014, $81,000.00 Lessor’s implicit rate: 10%; lessee’s incremental borrowing rate 10% The lessee assumes responsibility for all executory costs. Instructions (a) Discuss the nature of this lease to Gill Company. (b) Discuss the nature of this lease to Lennox Company. (c) Prepare a lease amortization schedule for Gill Company for the 5-year lease term. (d) Prepare the journal entries on the lessee’s books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2014 and 2015. Gill’s annual accounting period ends on December 31. Reversing entries are used by Gill.

Henry Quincy wants to withdraw $30,000 each year for 10 years from a fund that earns 8% interest. How much must he invest today if the first withdrawal is at year-end? How much must he invest today if the first withdrawal takes place immediately?

The following are some costs incurred by a sports footwear manufacturer. Assume the manufacturer wants to increase output over a relatively short time period: i.e. in the economic short-run. Decide whether each one of the following is a fixed cost or a variable cost of expanding output in the short run or has some element of both. Clearly explain any assumptions you have made. (a) The cost of synthetic leather and mesh materials. (b) The fee paid to an advertising agency. (c) Wear and tear on machinery. (d) Business rates on the factory. (e) Electricity for heating and lighting. (f) Electricity for running the machines. (g) Basic minimum wages agreed with the union. (h) Overtime pay. (i) Depreciation of machines as a result purely of their age (irrespective of their condition).

What is a blind hole?

Identify a major technical problem in tube bending?

Consider a period in which stock prices are very high, such that investors begin to think that stocks are overvalued and their valuations are very uncertain. If investors decide to move their money into much safer investments, how do you think this would affect general interest rate levels? In your answer, use the loanable funds framework to explain how the supply or demand for loanable funds would be affected by the investor actions, and how this would affect general interest rate. (LO1)

Compare and contrast the aggregate and entity approaches for a sale of a partnership interest.

Assuming adequate E&P, will the shareholder’s tax basis in noncash property received equal the amount the shareholder includes in gross income as a dividend (assuming adequate E&P)? Under what circumstances will the amounts be different, if any?

Kaymer Corporation issued 300 shares of $10 par value ordinary shares for $4,500. Prepare Kaymer’s journal entry.

Jack and Jill are owners of UpAHill, an S corporation. They own 25 and 75 percent, respectively.  a. What amount of ordinary income and separately stated items are allocated to them for years 1 and 2 based on the information above?  Assume that UpAHill Corporation has $100,000 of qualified property (unadjusted basis) in both years.

The pension fund manager of Utterback (a U.S. firm) purchased German 20-year Treasury bonds instead of U.S. 20-year Treasury bonds. The coupon rate was 2 percentage points lower on the German bonds. Assume that the manager sold the bonds after five years. The yield over the five-year period was substantially more than the yield the manager would have received on the U.S. bonds over the same five-year period. Explain how the German bonds could have generated a higher yield than the U.S. bonds for the manager, even if the exchange rate was stable over this five-year period. (Assume that the price of either bond was initially equal to its respective par value). Be specific. (LO2, LO5)

Before reading on, how would you define scarcity? Must goods be at least temporarily unattainable to be scarce?

Briefly describe some of the similarities and differences between GAAP and IFRS with respect to income tax accounting.

Jane Geddes Engineering Corporation purchased conveyor equipment with a list price of $10,000. Presented below are three independent cases related to the equipment. (Round to the nearest dollar.) (a) Geddes paid cash for the equipment 8 days after the purchase. The vendor’s credit terms are 2/10, n/30. Assume that equipment purchases are initially recorded gross. (b) Geddes traded in equipment with a book value of $2,000 (initial cost $8,000), and paid $9,500 in cash one month after the purchase. The old equipment could have been sold for $400 at the date of trade. (The exchange has commercial substance.) (c) Geddes gave the vendor a $10,800 zero-interest-bearing note for the equipment on the date of purchase. The note was due in one year and was paid on time. Assume that the effective-interest rate in the market was 9%. Instructions Prepare the general journal entries required to record the acquisition and payment in each of the independent cases above.

How do the properties of thermosetting polymers differ from those of thermoplastics?

What are the important variables that affect mass diffusion?

Write a short essay on the future of finance company operations. Should finance companies be merged into the banking industry, or should they remain distinctly different from commercial banks?

The Fed intervened heavily during the 2008 credit crisis. Write a short essay explaining whether you believe the Fed’s intervention improved conditions in financial markets or made conditions worse.

How do grain boundaries contribute to the strain hardening phenomenon in metals?

There are 21 correct answers in the following multiple choice questions (some questions have multiple answers that are correct). To attain a perfect score on the quiz, all correct answers must be given. Each correct answer is worth 1 point. Each omitted answer or wrong answer reduces the score by 1 point, and each additional answer beyond the correct number of answers reduces the score by 1 point. Percentage score on the quiz is based on the total number of correct answers. 20.1 Most sheet metalworking operations are performed as which one of the following: (a) cold working, (b) hot working, or (c) warm working? 20.2 In a sheet-metal-cutting operation used to produce a flat part with a hole in the center, the part itself is called a blank, and the scrap piece that was cut out to make the hole is called a slug: (a) true or (b) false? 20.3 As sheet-metal stock hardness increases in a blanking operation, the clearance between punch and die should be (a) decreased, (b) increased, or (c) remain the same? 20.4 A circular sheet-metal slug produced in a hole punching operation will have the same diameter as (a) the die opening or (b) the punch? 20.5 The cutting force in a sheet-metal blanking operation depends on which mechanical property of the metal (one correct answer): (a) compressive strength, (b) modulus of elasticity, (c) shear strength, (d) strain rate, (e) tensile strength, or (f) yield strength? 20.6 Which of the following descriptions applies to a V-bending operation as compared to an edgebending operation (two best answers): (a) costly tooling, (b) inexpensive tooling, (c) limited to 90° bends or less, (d) used for high production, (e) used for low production, and (f) uses a pressure pad to hold down the sheet metal? 20.7 Sheet-metal bending involves which of the following stresses and strains (two correct answers): (a) compressive, (b) shear, and (c) tensile? 20.8 Which one of the following is the best definition of bend allowance: (a) amount by which the die is larger than the punch, (b) amount of elastic recovery experienced by the metal after bending, (c) safety factor used in calculating bending force, or (d) length before bending of the straight sheetmetal section to be bent? 20.9 Springback in a sheet-metal-bending operation is the result of which one of the following: (a) elastic modulus of the metal, (b) elastic recovery of the metal, (c) overbending, (d) overstraining, or (e) yield strength of the metal? 20.10 Which of the following are variations of sheet-metal-bending operations (two best answers): (a) coining, (b) flanging, (c) hemming, (d) ironing, (e) notching, (f) shear spinning, (g) trimming, and (h) tube bending? 20.10 Which of the following are variations of sheet-metal-bending operations (two best answers): (a) coining, (b) flanging, (c) hemming, (d) ironing, (e) notching, (f) shear spinning, (g) trimming, and (h) tube bending? 20.12 The holding force in drawing is most likely to be (a) greater than, (b) equal to, or (c) less than the maximum drawing force? 20.13 Which one of the following stamping dies is the most complicated: (a) blanking die, (b) combination die, (c) compound die, (d) edge-bending die, (e) progressive die, or (f) V-bending die? 20.14 Which one of the following press types is usually associated with the highest production rates in sheet-metal-stamping operations: (a) adjustable bed, (b) open back inclinable, (c) press brake, (d) solid gap, or (e) straight-sided? 20.15 Which of the following processes are classified as high-energy-rate forming processes (two best answers): (a) electrochemical machining, (b) electromagnetic forming, (c) electron beam cutting, (d) explosive forming, (e) Guerin process, (f) hydroforming, (g) redrawing, and (h) shear spinning

Helen holds 1,000 shares of Fizbo Inc. stock that she purchased 11 months ago. The stock has done very well and has appreciated $20/share since Helen bought the stock. When sold, the stock will be taxed at capital gains rates (long-term rate is 15% and short-term rate is the taxpayer’s marginal tax rate). If Helen’s marginal tax rate is 35 percent, how much would she save by holding the stock an additional month before selling? What might prevent Helen from waiting to sell? Ignore the time value of money.