Question & Answer

Explain the similarities and differences between support department costs and manufacturing overhead costs.

Jennifer Capriati Corp. has a deferred tax asset account with a balance of $150,000 at the end of 2013 due to a single cumulative temporary difference of $375,000. At the end of 2014, this same temporary difference has increased to a cumulative amount of $450,000. Taxable income for 2014 is $820,000. The tax rate is 40% for all years. No valuation account related to the deferred tax asset is in existence at the end of 2013. Instructions (a) Record income tax expense, deferred income taxes, and income taxes payable for 2014, assuming that it is more likely than not that the deferred tax asset will be realized. (b) Assuming that it is more likely than not that $30,000 of the deferred tax asset will not be realized, prepare the journal entry at the end of 2014 to record the valuation account.

What are some of the differences in elements in the IASB and FASB conceptual frameworks?

Venture capital firms commonly attempt to cash out as soon as possible following IPOs. Describe the likely effect that would have on the stock price at the time of lockup expiration. Would the effect be different for a firm that relied more heavily on VC firms than on other investors for its funds? (LO3)

Explain how ERISA affects employees who change employers. (LO3)

What are some aspects of business that require knowledge of taxation?  What are some aspects of personal finance that require knowledge of taxation?

1. If a person earning £10 000 per year pays £1000 in a given tax and a person earning £20 000 per year pays £1600, is the tax progressive or regressive? 2. A proportional tax will leave the distribution of income unaffected. Why should this be so, given that a rich person will pay a larger absolute amount than a poor person?

(Threshold Concept 11) 1. Why might consumers not always make efficient consumption decisions? (Threshold Concept 11) 2. Explain the meaning of social efficiency using the concept of Pareto optimality.

Kalin Corporation had 2014 net income of $1,000,000. During 2014, Kalin paid a dividend of $2 per share on 100,000 shares of preferred stock. During 2014, Kalin had outstanding 250,000 shares of common stock. Compute Kalin’s 2014 earnings per share.

1.    b.       Pick two industries of your choice and identify environmental issues that have the potential to create environmental uncertainty. (Examples: automobile, newspaper, medical services, etc.)

Are an employee’s entire wages subject to the FICA tax? Explain.

Using the information from BE4-9, prepare a retained earnings statement for the year ended December 31, 2014. Assume an error was discovered: land costing $80,000 (net of tax) was charged to maintenance and repairs expense in 2011.

What are “initial direct costs” and how are they accounted for?

Name some of the steps that can be taken to reduce or eliminate vibrations in machining

An automated transfer line is to be designed. Based on previous experience, the average downtime per occurrence = 5.0 min, and the probability of a station failure that leads to a downtime occurrence p = 0.01. The total work content time = 9.8 min and is to be divided evenly amongst the workstations, so that the ideal cycle time for each station = 9.8/n. Determine (a) the optimum number of stations on the line n that will maximize production rate, and (b) the production rate and proportion uptime for your answer to part (a).

Wertz Construction Company decided at the beginning of 2014 to change from the completedcontract method to the percentage-of-completion method for financial reporting purposes. The company will continue to use the completed-contract method for tax purposes. For years prior to 2014, pretax income under the two methods was as follows: percentage-of-completion $120,000, and completed-contract $80,000. The tax rate is 35%. Prepare Wertz’s 2014 journal entry to record the change in accounting principle.

In a complete model where there were three injections (I, G and X), and three withdrawals (S, T and M), what else would determine the shape of the ‘JW’ curve?

Zoop Corporation purchased for $300,000 a 30% interest in Murphy, Inc. This investment enables Zoop to exert significant influence over Murphy. During the year, Murphy earned net income of $180,000 and paid dividends of $60,000. Prepare Zoop’s journal entries related to this investment.

It is desired to etch out a region of a silicon dioxide film on the surface of a silicon wafer. The SiO2 film is 100 nm thick. The width of the etched-out area is specified to be 650 nm. (a) If the degree of anisotropy for the etchant in the process is known to be 1.25, what should be the size of the opening in the mask through which the etchant will operate? (b) If plasma etching is used instead of wet etching, and the degree of anisotropy for plasma etching is infinity, what should be the size of the mask opening?

Vania Magazine Company started construction of a warehouse building for its own use at an estimated cost of $5,000,000 on January 1, 2013, and completed the building on December 31, 2013. During the construction period, Vania has the following debt obligations outstanding. Construction loan—12% interest, payable semiannually, issued December 31, 2012 $2,000,000 Short-term loan—10% interest, payable monthly, and principal payable at maturity, on May 30, 2014 1,400,000 Long-term loan—11% interest, payable on January 1 of each year; principal payable on January 1, 2016 1,000,000 Total cost amounted to $5,200,000, and the weighted average of accumulated expenditures was $3,500,000. Jane Esplanade, the president of the company, has been shown the costs associated with this construction project and capitalized on the balance sheet. She is bothered by the “avoidable interest” included in the cost. She argues that, first, all the interest is unavoidable—no one lends money without expecting to be compensated for it. Second, why can’t the company use all the interest on all the loans when computing this avoidable interest? Finally, why can’t her company capitalize all the annual interest that accrued over the period of construction? Instructions (Round the weighted-average interest rate to two decimal places.) You are the manager of accounting for the company. In a memo, explain what avoidable interest is, how you computed it (being especially careful to explain why you used the interest rates that you did), and why the company cannot capitalize all its interest for the year. Attach a schedule supporting any computations that you use.

Use the information provided in BE12-7. Assume that the fair value of the division is estimated to be $750,000 and the implied goodwill is $350,000. Prepare Waters’ journal entry, if necessary, to record impairment of the goodwill.

Wildcat Corporation is owned equally by Evan and his sister Sara, each of whom hold 1,000 shares in Wildcat. Sara wants to reduce her ownership in the company, and it was decided that Wildcat will redeem 500 of her shares for $25,000 per share on December 31 of this year. Sara’s tax basis in each share is $5,000. Wildcat has current E&P of $10,000,000 and at the beginning of the year accumulated E&P is $50,000,000.

Does the use of public-sector deficit targets rule out the use of fiscal policy to reduce economic fluctuations associated with the business cycle.

Discuss the basic differences between annotated and topical tax services.  How are these services used in tax research?   Answer:

Use the information presented in BE5-14 for Martinez Corporation to compute the net cash used (provided) by financing activities.