Question & Answer

Under what circumstances would an expansionary fiscal policy have no effect at all on national income?

Under what circumstances would a rightward shift in the DAD curve lead to a permanent increase in real national income?

What role does debt basis play in determining the taxability of operating distributions to S corporation shareholders?

Define nominal surface.

The grinding wheel in a centerless grinding operation has a diameter = 200 mm, and the regulating wheel diameter = 125 mm. The grinding wheel rotates at 3000 rev/min and the regulating wheel rotates at 200 rev/min. The inclination angle of the regulating wheel = 2.5°. Determine the throughfeed rate of cylindrical workparts that are 25.0 mm in diameter and 175 mm long.

What factors must be present for income shifting to be a viable strategy?

While completing undergraduate schoolwork in information systems, Dallin Bourne and Michael Banks decided to start a technology support company called eSys Answers. During year 1, they bought the following assets and incurred the following start-up fees:

Explain the conditions under which a speculator would like to invest in a foreign currency today even when the speculator has no use for that currency in the future. (LO2, LO3)

How should the disposal of a component of a business be disclosed in the income statement?

How does the current earnings and profits account differ from the accumulated earnings and profits accounts?

Based on the analysis in Figure 21.15 what would the impulse response functions look like for output, unemployment, inflation and real and nominal interest rates?

Gerald Englehart Industries changed from the doubledeclining- balance to the straight-line method in 2015 on all its plant assets. There was no change in the assets’ salvage values or useful lives. Plant assets, acquired on January 2, 2012, had an original cost of $1,600,000, with a $100,000 salvage value and an 8-year estimated useful life. Income before depreciation expense was $270,000 in 2014 and $300,000 in 2015. Instructions (a) Prepare the journal entry(ies) to record depreciation expense in 2015. (b) Starting with income before depreciation expense, prepare the remaining portion of the income nstatement for 2014 and 2015.

While James Craig and his former classmate Paul Dolittle both studied accounting at school, they ended up pursuing careers in professional cake decorating. Their company, Good to Eat (GTE), specializes in custom-sculpted cakes for weddings, birthdays, and other celebrations.  James and Paul formed the business at the beginning of 2024, and each contributed $50,000 in exchange for a 50 percent ownership interest.  GTE also borrowed $200,000 from a local bank.  Both James and Paul had to personally guarantee the loan.  Both owners provide significant services for the business. The following information pertains to GTE’s 2024 activities.   • GTE uses the cash method of accounting (for both book and tax purposes) and reports income on a calendar-year basis.   • GTE received $450,000 of sales revenue and reported $210,000 of cost of goods sold (it did not have any ending inventory). • GTE paid $30,000 compensation to James, $30,000 compensation to Paul, and $40,000 of compensation to other employees (assume these amounts include applicable payroll taxes, if any). • GTE paid $15,000 of rent for a building and equipment, $20,000 for advertising, $14,000 in interest expense, $4,000 for utilities, and $2,000 for supplies. • GTE contributed $5,000 to charity. • GTE received a $1,000 qualified dividend from a great stock investment (it owned 2 percent of the corporation distributing the dividend), and it recognized $1,500 in short-term capital gain when it sold some of the stock. • On December 1, 2024, GTE distributed $20,000 to James and $20,000 to Paul. • GTE has qualified property of $300,000 (unadjusted basis).   Required: a. Assume James and Paul formed GTE as an S corporation.   • Complete GTE’s Form 1120-S page 1; Form 1120-S, Schedule K; and Paul’s Form 1120-S Schedule K-1 (note that you should use 2023 tax forms).  • Compute the tax basis of Paul’s stock in GTE at the end of 2024. • What amount of Paul’s income from GTE is subject to FICA or self-employment taxes? • What amount of income, including its character, will Paul recognize on the $20,000 distribution he receives on December 1? • What amount of tax does GTE pay on the $1,000 qualified dividend it received?

Provide examples of off-balance sheet activities. Why are regulators concerned about them? (LO2)

What are some of the weaknesses of ceramics that might be corrected in fiber-reinforced ceramic matrix composites?

Figure 15.5 shows a decline in actual output in recessions. Redraw the diagram, only this time show a mere slowing down of growth in phase 4.

Use the information for Lockard Company given in BE11-2. (a) Compute 2014 depreciation expense using the double-declining-balance method. (b) Compute 2014 depreciation expense using the double-declining-balance method, assuming the machinery was purchased on October 1, 2014.

Kemper Company signed a long-term noncancelable purchase commitment with a major supplier to purchase raw materials in 2015 at a cost of $1,000,000. At December 31, 2014, the raw materials to be purchased have a market value of $950,000. Prepare any necessary December 31, 2014, entry.

Steve’s tentative minimum tax (TMT) for 2024 is $245,000. What is his AMT if a. His regular tax is $230,000?

What are debentures? How do they differ from subordinated debentures? (LO2)

Everly Corporation acquires a coal mine at a cost of $400,000. Intangible development costs total $100,000. After extraction has occurred, Everly must restore the property (estimated fair value of the obligation is $80,000), after which it can be sold for $160,000. Everly estimates that 4,000 tons of coal can be extracted. If 700 tons are extracted the first year, prepare the journal entry to record depletion.

Compare and contrast the built-in loss duplication rule as it relates to §351 with the built-in loss disallowance rule as it applies to a complete liquidation.

Convers Corporation (calendar-year-end) acquired the following assets during the current tax year:

Presented below are selected ledger accounts of Tucker Corporation as of December 31, 2014. Cash $ 50,000 Administrative expenses 100,000 Selling expenses 80,000 Net sales 540,000 Cost of goods sold 210,000 Cash dividends declared (2014) 20,000 Cash dividends paid (2014) 15,000 Discontinued operations (loss before income taxes) 40,000 Depreciation expense, not recorded in 2013 30,000 Retained earnings, December 31, 2013 90,000 Effective tax rate 30% Instructions (a) Compute net income for 2014. (b) Prepare a partial income statement beginning with income from continuing operations before income tax, and including appropriate earnings per share information. Assume 10,000 shares of common stock were outstanding during 2014.

Assume that inflation depends on two things: the level of aggregate demand, indicated by the inverse of unemployment (1/U), and the expected rate of inflation (π et). Assume that the rate of inflation (πt) is given by the equation:                              πt = (48/U – 6) + πet Assume initially (year 0) that the actual and expected rate of inflation is zero. (a)  What is the current (natural) rate of unemployment   (b)    Now assume in year 1 that the government wishes to reduce unemployment to 4 per cent and continues to expand aggregate demand by as much as is necessary to achieve this. Fill in the rows for years 0 to 4 in the following table. It is assumed for simplicity that the expected rate of inflation in a given year (πet) is equal to the actual rate of inflation in the previous year (πt–1). (c)    Now assume in year 5 that the government, worried about rising inflation, reduces aggregate demand sufficiently to reduce inflation by 3 per cent in that year. What must the rate of unemployment be raised to in that year?   (d)    Assuming that unemployment stays at this high level, continue the table for years 5 to 7.