Question & Answer

Describe the type of event that qualifies as a casualty for tax purposes.

This year William provided $4,200 of services to a large client on credit. Unfortunately, this client has recently encountered financial difficulties and has been unable to pay William for the services. Moreover, William does not expect to collect for his services. William has “written off” the account and would like to claim a deduction for tax purposes.   a) What amount of deduction for bad debt expense can William claim this year if he uses the accrual method? b) What amount of deduction for bad debt expense can William claim this year if he uses the cash method?

{Research}  This week Jim’s residence was heavily damaged by a storm system that spread destruction throughout the region.  While Jim’s property insurance covers some of the damage, there is a significant amount of uninsured loss.  The governor of Jim’s state has requested that the president declare the region a federal disaster area and provide federal disaster assistance.  Explain to Jim the income tax implications of such a declaration and any associated tax planning possibilities.

An extruder has a barrel diameter = 5.0 in and length = 12 ft. The extruder screw rotates at 50 rev/min; it has channel depth = 0.30 in and flight angle = 17.7°. The plastic melt has a shear viscosity = 100 x 10-4 lb-sec/in2 . Find: (a) the extruder characteristic, (b) the values of Q and p at the operating point, given that the die characteristic is Qx = 0.00150 p.

What is a terpolymer?

The following are selected ledger accounts of Spock Corporation at December 31, 2014. Cash $ 185,000 Salaries and wages expense (sales) $284,000 Inventory 535,000 Salaries and wages expense (offi ce) 346,000 Sales revenue 4,275,000 Purchase returns 15,000 Unearned sales revenue 117,000 Sales returns and allowances 79,000 Purchases 2,786,000 Freight-in 72,000 Sales discounts 34,000 Accounts receivable 142,500 Purchase discounts 27,000 Sales commissions 83,000 Selling expenses 69,000 Telephone and Internet expense (sales) 17,000 Accounting and legal services 33,000 Utilities expense (offi ce) 32,000 Insurance expense (offi ce) 24,000 Miscellaneous offi ce expenses 8,000 Advertising expense 54,000 Rent revenue 240,000 Delivery expense 93,000 Extraordinary loss (before tax) 70,000 Depreciation expense (offi ce equipment) 48,000 Interest expense 176,000 Depreciation expense (sales equipment) 36,000 Common stock ($10 par) 900,000 Spock’s effective tax rate on all items is 34%. A physical inventory indicates that the ending inventory is $686,000. Instructions Prepare a condensed 2014 income statement for Spock Corporation.7

1.    : Do you think it is wise for a top executive to fire a manager who is bringing in big sales and profits for the company but not living up to a cultural value of “showing respect for employees”? Explain.

Jake is a retired jockey who takes monthly trips to Las Vegas to gamble on horse races.  Jake also trains race horses part time at his Louisville ranch.  So far this year, Jake has won almost $47,500 during his trips to Las Vegas while spending $27,250 on travel expenses and incurring $62,400 of gambling losses.  Jake also received $60,000 in revenue from his training activities and he incurred $72,000 of associated costs.  Explain how Jake’s gambling winnings and related costs will be treated for tax purposes.  Describe the factors that will influence how Jake’s ranch expenses are treated for tax purposes.

Sustainability disclosures; management accounting tools Search the newspapers/web to find examples of Australian companies disclosing their sustainability practices using management accounting information or tools such as the balanced scorecard. Provide a report on your findings.             (LO 1 and 4)

Sofia (single) is a 50 percent owner in Beehive LLC (taxed as a partnership). Sofia  does not do any work for Beehive. Beehive LLC reported $600,000 of taxable business income for the year. Before considering her 50 percent business income allocation from Beehive and the self-employment tax deduction (if any), Sofia’s adjusted gross income is $150,000 (all employee salary). Sofia has $35,000 in itemized deductions. Answer the following questions for Sofia. a. What is Sofia’s self-employment tax liability? b. Assuming the income allocated to Sofia is not from a specified service trade or business, what is Sofia’s deduction for qualified business income? Assume Sofia’s share of wages paid by Beehive LLC is $130,000 and her share in the unadjusted basis of qualified property used by Beehive was $300,000. c. What is Sofia’s net investment income tax liability (assume no investment expenses)? d. What is Sofia’s additional Medicare tax liability?

During the coronavirus pandemic, between 2020 and 2022, the Fed implemented two different monetary policies. Explain the circumstances that led the Fed to change the monetary policy. (LO2; LO3)

A press release announcing the appointment of the trustees of the new Financial Accounting Foundation stated that the Financial Accounting Standards Board (to be appointed by the trustees) “. . . will become the established authority for setting accounting principles under which corporations report to the shareholders and others” (AICPA news release July 20, 1972). Instructions (a) Identify the sponsoring organization of the FASB and the process by which the FASB arrives at a decision and issues an accounting standard. (b) Indicate the major types of pronouncements issued by the FASB and the purposes of each of these pronouncements.

Which is likely to show the greater variation from one person to another at any given level of income: the short-run mpc or the long-run mpc?

Jekyll and Hyde formed a corporation (Halloween Inc.) on October 31 to develop a drug to address spilt personalities. Jekyll will contribute a patented formula valued at $200,000 in return for 50 percent of the stock in the corporation. Hyde will contribute an experimental formula worth $120,000 and medical services in exchange for the remaining stock.  Jekyll’s tax basis in the patented formula is $125,000, whereas Hyde has a basis of $15,000 in his experimental formula.

Assume that the yield curves in the United States, France, and Japan are flat. If the U.S. yield curve suddenly becomes positively sloped, do you think the yield curves in France and Japan would be affected? If so, how? (LO3)

1.              : How would you characterize Baker’s leadership style? What approach do you think is correct for this situation? Why?

1.       An organizational consultant said, “Some aspect of functional structure appears in every organization.” Do you agree? Explain.

Why might a recovering economy (and hence a fall in government expenditure on social security benefits) make the government feel even more concerned to make discretionary cuts in government expenditure?

1.       Consider the example of drug arrests made by patrol officers described in Section 16-4C, “Expectancy Theory.” How did the “effort leads to performance” expectancy and the “performance leads to outcomes” expectancy lead to high performance? Be specific. How do you think “valence” was involved? Explain.

Explain how the conversion feature of convertible debt has a value (a) to the issuer and (b) to the purchaser.

Sherwin-Williams, based in Cleveland, Ohio, manufactures a wide variety of paint and other coatings, which are marketed through its specialty stores and in other retail outlets. The company also manufactures paint for automobiles. The Automotive Division has had financial difficulty. During a recent year, five branch locations of the Automotive Division were closed, and new management was put in place for the branches remaining. The following titles were shown on Sherwin-Williams’s balance sheet for that year. Accounts payable Machinery and equipment Accounts receivable, less allowance Other accruals Accrued taxes Other capital Buildings Other current assets Cash and cash equivalents Other long-term liabilities Common stock Postretirement obligations other than pensions Employee compensation payable Retained earnings Finished goods inventories Short-term investments Intangibles and other assets Taxes payable Land Work in process and raw materials inventories Long-term debt Instructions (a) Organize the accounts in the general order in which they would have been presented in a classified balance sheet. (b) When several of the branch locations of the Automotive Division were closed, what balance sheet accounts were most likely affected? Did the balance in those accounts decrease or increase?

: If Henry is passed over for promotion, what feedback and advice should he be given about how to improve his management skills for possible future promotions?

Why might changes in the unemployment rate not match one-for-one changes in the output gap?

1.   Call the local environmental advocacy group and get the group to stage a protest of the company.

Why might it be a good tax planning strategy for an S corporation with one shareholder to pay a salary to the shareholder on the low end of what the services are potentially worth?