Question & Answer

What is the theoretical justification of the allowance method as contrasted with the direct write-off method of accounting for bad debts?

Presented below is information related to Aaron Rodgers Corporation for the current year. Beginning inventory $ 600,000 Purchases 1,500,000 Total goods available for sale $2,100,000 Sales revenue 2,500,000 Instructions Compute the ending inventory, assuming that (a) gross profit is 45% of sales; (b) gross profit is 60% of cost; (c) gross profit is 35% of sales; and (d) gross profit is 25% of cost.

Define microelectromechanical system.

What is the purpose of a cash flow hedge?

What is the purpose of the bead coil in a pneumatic tire?

Red Inc. is a C corporation and a calendar-year taxpayer. Red reports sales of $26.1 million in 2021, $30.3 million in Year 2022, and $34.5 million in 2023.

When we calculate average and effective tax rates, do we consider implicit taxes?  What effect does this have on taxpayers’ perception of equity?

On January 1, 2014, Lesley Benjamin signed an agreement to operate as a franchisee of Campbell Inc. for an initial franchise fee of $50,000. The amount of $10,000 was paid when the agreement was signed, and the balance is payable in five annual payments of $8,000 each,  beginning January 1, 2015. The agreement provides that the down payment is not refundable and that no future services are required of the franchisor. Lesley Benjamin’s credit rating indicates that she can borrow money at 11% for a loan of this type. Instructions (a) How much should Campbell record as revenue from franchise fees on January 1, 2014? At what amount should Benjamin record the acquisition cost of the franchise on January 1, 2014? (b) What entry would be made by Campbell on January 1, 2014, if the down payment is refundable and substantial future services remain to be performed by Campbell? (c) How much revenue from franchise fees would be recorded by Campbell on January 1, 2014, if: (1) The initial down payment is not refundable, it represents a fair measure of the services already provided, a significant amount of services is still to be performed by Campbell in future periods, and collectibility of the note is reasonably assured? (2) The initial down payment is not refundable and no future services are required by the franchisor, but collection of the note is so uncertain that recognition of the note as an asset is unwarranted? (3) The initial down payment has not been earned and collection of the note is so uncertain that recognition of the note as an asset is unwarranted?

In 2024, Amanda and Jaxon Stuart have a daughter who is one year old.  The Stuarts are full-time students and are both 23 years old.  Their only sources of income are gains from stock they held for three years before selling and wages from part-time jobs. What is their earned income credit in the following alternative scenarios if they file jointly?

Matt Broderick Company began operations on January 2, 2013. It employs 9 individuals who work 8-hour days and are paid hourly. Each employee earns 10 paid vacation days and 6 paid sick days annually. Vacation days may be taken after January 15 of the year following the year in which they are earned. Sick days may be taken as soon as they are earned; unused sick days accumulate. Additional information is as follows. Actual Hourly Vacation Days Used Sick Days Used Wage Rate by Each Employee by Each Employee 2013 2014 2013 2014 2013 2014 $10 $11 0 9 4 5 Matt Broderick Company has chosen to accrue the cost of compensated absences at rates of pay in effect during the period when earned and to accrue sick pay when earned. Instructions (a) Prepare journal entries to record transactions related to compensated absences during 2013 and 2014. (b) Compute the amounts of any liability for compensated absences that should be reported on the balance sheet at December 31, 2013 and 2014.

Consider the advantages and disadvantages of extending property rights so that everyone would have the right to prevent people imposing any costs on them whatsoever (or charging them to do so).

How does economics predict rational consumers will treat spending on credit cards compared with spending cash? Do you think there are likely to be differences in the way people spend by each? If so, can you explain why?

When salaries and wages expense for the year is computed, why are beginning accrued salaries and wages subtracted from, and ending accrued salaries and wages added to, salaries and wages paid during the year?

What is the nature of a “sale-leaseback” transaction?

What is the indirect effect of a change in accounting policy? Briefly describe the approach to reporting the indirect effects of a change in accounting policy under IFRS.

Last year, Zeno Company recorded an impairment on an intangible asset held for use. Recent appraisals indicate that the asset has increased in value. Should Zeno record this recovery in value?

1.    : Many people who are successful at the start-up stage of a business are not the right people to carry the venture forward to middle age. How do you decide whether you are better suited to be a serial entrepreneur (start a business and then move on to start another) or whether you can guide your venture as it grows and matures?

What is the benefit of a single set of high-quality accounting standards?

Tones Industries has the following patents on its December 31, 2013, balance sheet. Patent Item Initial Cost Date Acquired Useful Life at Date Acquired Patent A $30,600 3/1/10 17 years Patent B $15,000 7/1/11 10 years Patent C $14,400 9/1/12 4 years The following events occurred during the year ended December 31, 2014. 1. Research and development costs of $245,700 were incurred during the year. 2. Patent D was purchased on July 1 for $36,480. This patent has a useful life of 9½ years. 3. As a result of reduced demands for certain products protected by Patent B, a possible impairment of Patent B’s value may have occurred at December 31, 2014. The controller for Tones estimates the expected future cash flows from Patent B will be as follows. Year Expected Future Cash Flows 2015 $2,000 2016 2,000 2017 2,000 The proper discount rate to be used for these flows is 8%. (Assume that the cash flows occur at the end of the year.) Instructions (a) Compute the total carrying amount of Tones’ patents on its December 31, 2013, balance sheet. (b) Compute the total carrying amount of Tones’ patents on its December 31, 2014, balance sheet.

What would happen to the TPP curve if the quantity of the fixed factor used in production were to increase to a new higher fixed level?

Betty joined Jin in forming DBJ Corp. Betty contributed appreciated land for 90 percent of the stock in DBJ. Jin received 10 percent of the DBJ stock valued at $15,000.  Determine Jin's tax consequences in each of the following alternative scenarios.  a. Jin received the stock in exchange for providing computer-related services for the corporation. What amount of income or gain does Jin recognize on the exchange?  What is Jin's basis in the stock he received in the exchange?  b. Jin contributed the rights to a patent he owned to DBJ in exchange for the DBJ stock. The patent was worth $15,000 and Jin's basis in the patent was $8,000. How much gain does Jin recognize on the exchange?  What is Jin's basis in the DBJ stock?

What is an uncertain tax position, and what are the general guidelines for accounting for uncertain tax positions?

What effect does intraperiod tax allocation have on reported net income?

Gingrich Importers provides the following pension plan information. Fair value of pension plan assets, January 1, 2014 $2,400,000 Fair value of pension plan assets, December 31, 2014 2,725,000 Contributions to the plan in 2014 280,000 Benefi ts paid retirees in 2014 350,000 Instructions From the data above, compute the actual return on the plan assets for 2014.

What effect do stock dividends or stock splits have on the computation of the weighted-average number of shares outstanding?