Question & Answer

} Assume Ellina earns a 10 percent after-tax rate of return, and that she owes a friend $1,200.  Would she prefer to pay the friend $1,200 today or $1,750 in four years?

Specific identification is sometimes said to be the ideal method of assigning cost to inventory and to cost of goods sold. Briefly indicate the arguments for and against this method of inventory valuation.

1.      : Are Connie and her staff on the right track to avoid manager mishaps by defining a new set of leader rules and core values and imposing it by fiat, from the top down?

On January 1, 2014, Pennington Corporation purchased 30% of the common shares of Edwards Company for $180,000. During the year, Edwards earned net income of $80,000 and paid dividends of $20,000. Instructions Prepare the entries for Pennington to record the purchase and any additional entries related to this investment in Edwards Company in 2014.

Under what circumstances would you expect the after-tax return from an investment in a capital asset to approach that of tax-exempt assets assuming equal before-tax rates of return?

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

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

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

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.

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?

Explain the use of circuit breakers. (LO3)

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.)

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.

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

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.

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)

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.

] 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?

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.

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)

What is the purpose of a fair value hedge?