Question & Answer

Are taxpayers allowed to deduct net capital losses (either net long-term capital loss in excess of net short-term capital gain or net short-term capital loss in excess of net long-term capital gain)? Explain.

Compare and contrast the tax treatment for rental income received in advance with advance payments for goods and services.

The following items relate to operations in a recent year. 1. Serious pressure was placed on profitability by sharply increasing raw material prices. Some raw materials increased in price 50% during the past year. Cost containment programs were instituted and product prices were increased whenever possible, which resulted in profit margins actually improving over the course of the year. 2. The company entered into a revolving credit agreement, under which UTC may borrow the lesser of $15,000,000 or 80% of eligible accounts receivable. At the end of the year, approximately $4,000,000 was outstanding under this agreement. The company plans to use this line of credit in the upcoming year to finance operations and expansion. Instructions (a) Should investors be informed of raw materials price increases, such as described in item 1? Does the fact that the company successfully met the challenge of higher prices affect the answer? Explain. (b) How should the information in item 2 be presented in the financial statements of UTC?

In what situation will there be a common year-end for the principal partners when there is no majority interest taxable year?

Larry recently invested $20,000 (tax basis) in purchasing a limited partnership interest. His at-risk amount is also $20,000. In addition, Larry’s share of the limited partnership loss for the year is $2,000, his share of income from a different limited partnership was $1,000, and he had $3,000 of dividend income from the stock he owns. How much of Larry’s $2,000 loss from the limited partnership can he deduct in the current year?

Tones Company purchased a warehouse in a downtown district where land values are rapidly increasing. Gerald Carter, controller, and Wilma Ankara, financial vice president, are trying to allocate the cost of the purchase between the land and the building. Noting that depreciation can be taken only on the building, Carter favors placing a very high proportion of the cost on the warehouse itself, thus reducing taxable income and income taxes. Ankara, his supervisor, argues that the allocation should recognize the increasing value of the land, regardless of the depreciation potential of the warehouse. Besides, she says, net income is negatively impacted by additional depreciation and will cause the company’s stock price to go down. Instructions Answer the following questions. (a) What stakeholder interests are in conflict? (b) What ethical issues does Carter face? (c) How should these costs be allocated?

1.       : Why is benchmarking an important component of TQM programs? Do you believe a company could have a successful TQM program without using benchmarking? Explain.

How have growth rates varied over the decades? Does the answer vary by country?

Several years ago, your client, Brooks Robinson, started an office-cleaning service. His business was very successful, owing much to his legacy as the greatest defensive third baseman in major league history and his nickname, “The Human Vacuum Cleaner.”  Brooks operated his business as a sole proprietorship and used the cash-basis method of accounting. Brooks was advised by his attorney that it is too risky to operate his business as a sole proprietorship and that he should incorporate to limit his liability. Brooks has come to you for advice on the tax implications of incorporation. His balance sheet is presented below. Under the terms of the incorporation, Brooks would transfer the assets to the corporation in return for 100 percent of the company’s common stock. The corporation would also assume the company’s liabilities (payables and mortgage).

Presented below are selected transactions on the books of Simonson Corporation. May 1, 2014 Bonds payable with a par value of $900,000, which are dated January 1, 2014, are sold at 106 plus accrued interest. They are coupon bonds, bear interest at 12% (payable annually at January 1), and mature January 1, 2024. (Use interest expense account for accrued interest.) Dec. 31 Adjusting entries are made to record the accrued interest on the bonds, and the amortization of the proper amount of premium. (Use straight-line amortization.) Jan. 1, 2015 Interest on the bonds is paid. April 1 Bonds with par value of $360,000 are called at 102 plus accrued interest, and redeemed. (Bond premium is to be amortized only at the end of each year.) Dec. 31 Adjusting entries are made to record the accrued interest on the bonds, and the proper amount of premium amortized.

Lee is 30 years old and single.Lee paid all the costs of maintaining his household for the entire year.Determine Lee’s filing status in each of the following alternative situations: a.       Lee is Ashton’s uncle.Ashton is 15 years old and has gross income of $5,000. Ashton lived in Lee’s home from April 1 through the end of the year. b.      Lee is Ashton’s uncle.Ashton is 20 years old, not a full-time student, and has gross income of $7,000. Ashton lived in Lee’s home from April 1 through the end of the year. c.       Lee is Ashton’s uncle.Ashton is 22 years old and was a full-time student from January through April.Ashton’s gross income was $5,000.Ashton lived in Lee’s home from April 1 through the end of the year. d.      Lee is Ashton’s cousin.Ashton is 18 years old, has gross income of $3,000, and is not a full-time student. Ashton lived in Lee’s home from April 1 through the end of the year. e.       Lee and Ashton are cousins.Ashton is 18 years old, has gross income of $3,000, and is not a full-time student. Ashton lived in Lee’s home for the entire year.

There are 27 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, andeach 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. 11.1 Which one of the following casting processes is the most widely used: (a) centrifugal casting, (b) die casting, (c) investment casting, (d) sand casting, or (e) shell casting? 11.2 In sand casting, the volumetric size of the pattern is (a) bigger than, (b) same size as, or (c) smaller than the cast part? 11.3 Silica sand has which one of the following compositions: (a) Al2O3, (b) SiO, (c) SiO2, or (d) SiSO4? 11.4 For which one of the following reasons is a green mold named: (a) green is the color of the mold, (b) moisture is contained in the mold, (c) mold is cured, or (d) mold is dry? 11.5 Given that Wm = weight of the molten metal displaced by a core and Wc = weight of the core, the buoyancy force is which one of the following: (a) downward force = Wm + Wc, (b) downward force = Wm - Wc, (c) upward force = Wm + Wc, or (d) upward force = Wm - Wc? 11.6 Which of the following casting processes are expendable mold operations (four correct answers): (a) centrifugal casting, (b) die casting, (c) investment casting, (d) low pressure casting, (e) sand casting, (f) shell molding, (g) slush casting, and (h) vacuum molding? 11.7 Shell molding is best described by which one of the following: (a) casting operation in which the molten metal has been poured out after a thin shell has been solidified in the mold, (b) casting process in which the mold is a thin shell of sand bonded by a thermosetting resin, (c) sand-casting operation in which the pattern is a shell rather than a solid form, or (d) casting operation used to make artificial sea shells? 11.8 Investment casting is also known by which one of the following names: (a) fast-payback molding, (b) full-mold process, (c) lost-foam process, (d) lost-pattern process, or (e) lost-wax process? 11.9 In plaster mold casting, the mold is made of which one of the following materials: (a) Al2O3, (b) CaSO4-H2O, (c) SiC, or (d) SiO2? 11.10 Which of the following qualifies as a precision-casting process (two correct answers): (a) ingot casting, (b) investment casting, (c) plaster-mold casting, (d) sand casting, and (e) shell molding? 11.11 Which of the following casting processes are permanent mold operations (three correct answers): (a) centrifugal casting, (b) die casting, (c) expanded polystyrene process, (d) sand casting, (e) shell molding, (f) slush casting, and (g) vacuum molding 11.12 Which of the following metals would typically be used in die casting (three best answers): (a) aluminum, (b) cast iron, (c) steel, (d) tin, (e) tungsten, and (f) zinc? 11.13 Which of the following are advantages of die casting over sand casting (four best answers): (a) better surface finish, (b) closer tolerances, (c) higher melting temperature metals, (d) higher production rates, (e) larger parts can be cast, and (f) mold can be reused? 11.14 Cupolas are furnaces used to melt which of the following metals (one best answer): (a) aluminum, (b) cast iron, (c) steel, or (d) zinc? 11.15 A misrun is which one of the following defects in casting: (a) globules of metal becoming entrapped in the casting, (b) metal is not properly poured into the downsprue, (c) metal solidifies before filling the cavity, (d) microporosity, and (e) \"pipe\" formation? 11.16 Which one of the following casting metals is most important commercially: (a) aluminum and its alloys, (b) bronze, (c) cast iron, (d) cast steel, or (e) zinc alloys?

Explain why diversification across different types of mutual funds is highly recommended. (LO2)

What are the elements in the ceramic material Sialon?

Describe why the IRS might be skeptical of permitting requests for changes in accounting method without a good business purpose.

Listed below are items that are commonly accounted for differently for financial reporting purposes than they are for tax purposes. Instructions For each item below, indicate whether it involves: (1) A temporary difference that will result in future deductible amounts and, therefore, will usually give rise to a deferred income tax asset. (2) A temporary difference that will result in future taxable amounts and, therefore, will usually give rise to a deferred income tax liability. (3) A permanent difference. Use the appropriate number to indicate your answer for each. (a) ______ The MACRS depreciation system is used for tax purposes, and the straight-line depreciation method is used for financial reporting purposes for some plant assets. (b) ______ A landlord collects some rents in advance. Rents received are taxable in the period when they are received. (c) ______ Expenses are incurred in obtaining tax-exempt income. (d) ______ Costs of guarantees and warranties are estimated and accrued for financial reporting purposes. (e) ______ Installment sales of investments are accounted for by the accrual method for financial reporting purposes and the installment method for tax purposes. (f) ______ For some assets, straight-line depreciation is used for both financial reporting purposes and tax purposes but the assets’ lives are shorter for tax purposes. (g) ______ Interest is received on an investment in tax-exempt municipal obligations. (h) ______ Proceeds are received from a life insurance company because of the death of a key officer. (The company carries a policy on key officers.) (i) ______ The tax return reports a deduction for 80% of the dividends received from U.S. corporations. The cost method is used in accounting for the related investments for financial reporting purposes. (j) ______ Estimated losses on pending lawsuits and claims are accrued for books. These losses are tax deductible in the period(s) when the related liabilities are settled. (k) ______ Expenses on stock options are accrued for financial reporting purposes.

What are the desirable characteristics of a brazing flux?

1.              : What does it mean to be "true to yourself"? Is being true to yourself more important than achieving personal career success in a male-dominated company? Is it okay to enable the continuation of an "unhealthy" work environment for women? Why do you think the way you do about this?

A bending operation is to be performed on 4.0 mm thick cold-rolled steel sheet that is 25 mm wide and 100 mm long. The sheet is bent along the 25 mm direction, so that the bend is 25 mm long. The resulting sheet metal part has an acute angle of 30° and a bend radius of 6 mm. Determine (a) the bend allowance and (b) the length of the neutral axis of the part after the bend. (Hint: the length of the neutral axis before the bend = 100.0 mm).

The Fed’s open market operations can change the money supply, which can affect the risk-free rate offered on bonds. Why might the Fed’s policy also affect the risk premium on corporate bonds? (LO2)

Name the two basic mold types that distinguish casting processes.

If a bank shifts its loan policy to pursue more credit card loans, how will its net interest margin be affected? (LO2)

The cost of equipment purchased by Charleston, Inc., on June 1, 2014, is $89,000. It is estimated that the machine will have a $5,000 salvage value at the end of its service life. Its service life is estimated at 7 years, its total working hours are estimated at 42,000, and its total production is estimated at 525,000 units. During 2014, the machine was operated 6,000 hours and produced 55,000 units. During 2015, the machine was operated 5,500 hours and produced 48,000 units. Instructions Compute depreciation expense on the machine for the year ending December 31, 2014, and the year ending December 31, 2015, using the following methods. (a) Straight-line. (d) Sum-of-the-years’-digits. (b) Units-of-output. (e) Declining-balance (twice the straight-line rate). (c) Working hours.

What is the difference between primary and secondary authorities?  Explain the role of each authority type in conducting tax research.

What are the differences between an explicit and an implicit tax?