Question & Answer

Under what circumstances would (a) contractionary and (b) expansionary policies cause no conflict between internal and external objectives?

Compare the relative merits of using GNY statistics with those of various basic needs indicators when assessing both the level and the rate of a country’s economic development.

Why is the earned income credit referred to as a negative income tax?

This is not tax planning.  Instead, this strategy is tax evasion.  The rewards of tax evasion include stiff monetary penalties and imprisonment.

Explain how the Covid-19 pandemic affected the credit risk premium and liquidity in the commercial paper market. (LO1)

Mechanical surface treatments are often performed for reasons other than or in addition to cleaning. What are the reasons?

What is forging?

Explain why securities firms from the United States have expanded into foreign markets. (LO1)

1.       : Do you agree with the idea that people have innate biases and will automatically discriminate if left to their own devices? Discuss.

The following comment appeared in the financial press: “Inadequate financial disclosure, particularly with respect to how management views the future and its role in the marketplace, has always been a stone in the shoe. After all, if you don’t know how a company views the future, how can you judge the worth of its corporate strategy?” What are some arguments for reporting earnings forecasts?

1.    How might a corporate management team go about determining whether the company should diversify? What factors should team members consider? What kinds of information should they collect?

At December 31, 2013, Shiga Naoya Corporation had the following stock outstanding. 10% cumulative preferred stock, $100 par, 107,500 shares $10,750,000 Common stock, $5 par, 4,000,000 shares 20,000,000 During 2014, Shiga Naoya did not issue any additional common stock. The following also occurred during 2014. Income from continuing operations before taxes $23,650,000 Discontinued operations (loss before taxes) $ 3,225,000 Preferred dividends declared $ 1,075,000 Common dividends declared $ 2,200,000 Effective tax rate 35% Instructions Compute earnings per share data as it should appear in the 2014 income statement of Shiga Naoya Corporation. (Round to two decimal places.)

Explain the use of circuit breakers. (LO3)

Kobe strongly dislikes SUVs and is appalled that so many are on the road.  He proposes to eliminate the federal income tax and replace it with a $50,000 annual tax per SUV.  Based on the number of SUVs currently owned in the United States, he estimates the tax will generate exactly the amount of tax revenue currently collected from the income tax.  What is wrong with Kobe’s proposal?  What type of forecasting is Kobe likely using?

If XYZ Corporation is a shareholder of BCD Corporation, how many times will  BCD’s before-tax income potentially be taxed? Has Congress provided any tax relief for this result? Explain.

a.       Elmer should include in gross income the $1,200 gross pay he received for the three days he was not required to work but still received compensation. b.       Amax employees should include the value of the furniture ($250) in gross income.

Explain the differences and similarities between personal property, real property, intangible property, and natural resources. Also, provide an example of each type of asset.

How could we model a credit market disruption and its impact on interest-rate differentials using the Keynesian cross (Keynesian 45° line) diagram?

During the credit crisis of 2008 and 2009, U.S. interest rates were extremely low, which enabled businesses to borrow at a low cost. Holding other factors constant, this should have resulted in a higher number of feasible projects, which should have encouraged businesses to borrow more money and expand. Yet, many businesses that had access to loanable funds were unwilling to borrow during the credit crisis. What other factor changed during this period that more than offset the potentially favorable effect of the low interest rates on project feasibility, therefore discouraging businesses from expanding? (LO2)

Explain how estimation of service lives can result in unrealistically high carrying values for fixed assets.

To stimulate the sales of its Alladin breakfast cereal, Loptien Company places 1 coupon in each box. Five coupons are redeemable for a premium consisting of a children’s hand puppet. In 2015, the company purchases 40,000 puppets at $1.50 each and sells 480,000 boxes of Alladin at $3.75 a box. From its experience with other similar premium offers, the company estimates that 40% of the coupons issued will be mailed back for redemption. During 2015, 115,000 coupons are presented for redemption. Instructions Prepare the journal entries that should be recorded in 2015 relative to the premium plan.

Jennifer Brent Corporation owns equipment that cost $80,000 and has a useful life of 8 years with no salvage value. On January 1, 2014, Jennifer Brent leases the equipment to Donna Havaci Inc. for one year with one rental payment of $15,000 on January 1. Prepare Jennifer Brent Corporation’s 2014 journal entries.

] Meg O’Brien received a gift of some small-scale jewelry manufacturing equipment that her father had used for personal purposes for many years. Her father originally purchased the equipment for $1,500. Because the equipment is out of production and no longer available, the property is currently worth $4,000. Meg has decided to begin a new jewelry manufacturing trade or business. What is her depreciable basis for depreciating the equipment?

Describe assets that are listed property. Why do you think Congress requires them to be “listed”?

Why did the Fed purchase long-term Treasury securities in 2010, and how did this strategy differ from the Fed’s usual operations? (LO2, LO3)