Question & Answer

In the current year, LeSean (age 51 and single) has earned income of $3,000. He also has $30,000 of unearned (capital gain) income. a. If he does not participate in an employer-sponsored plan, what is the maximum deductible IRA contribution LeSean can make for the current year? b. If he does participate in an employer-sponsored plan, what is the maximum deductible IRA contribution LeSean can make for the current year? c. If he does not participate in an employer-sponsored plan, what is the maximum deductible IRA contribution LeSean can make for the current year if he has earned income of $10,000?

Presented below are changes in all the account balances of Fritz Reiner Furniture Co. during the current year, except for retained earnings. Increase Increase (Decrease) (Decrease) Cash $ 79,000 Accounts Payable $ (51,000) Accounts Receivable (net) 45,000 Bonds Payable 82,000 Inventory 127,000 Common Stock 125,000 Investments (47,000) Paid-In Capital in Excess of Par—Common Stock 13,000 Instructions Compute the net income for the current year, assuming that there were no entries in the Retained Earnings account except for net income and a dividend declaration of $19,000 which was paid in the current year.

Shown below is the liabilities and stockholders’ equity section of the balance sheet for Jana Kingston Company and Mary Ann Benson Company. Each has assets totaling $4,200,000. Jana Kingston Co. Mary Ann Benson Co. Current liabilities $ 300,000 Current liabilities $ 600,000 Long-term debt, 10% 1,200,000 Common stock ($20 par) 2,900,000 Common stock ($20 par) 2,000,000 Retained earnings (Cash Retained earnings (Cash dividends, $328,000) 700,000 dividends, $220,000) 700,000 $4,200,000 $4,200,000 For the year, each company has earned the same income before interest and taxes. Jana Kingston Co. Mary Ann Benson Co. Income before interest and taxes $1,200,000 $1,200,000 Interest expense 120,000 –0– 1,080,000 1,200,000 Income taxes (45%) 486,000 540,000 Net income $ 594,000 $ 660,000 At year end, the market price of Kingston’s stock was $101 per share, and Benson’s was $63.50. Instructions (a) Which company is more profitable in terms of return on total assets? (b) Which company is more profitable in terms of return on common stock equity? (c) Which company has the greater net income per share of stock? Neither company issued or reacquired shares during the year. (d) From the point of view of net income, is it advantageous to the stockholders of Jana Kingston Co. to have the long-term debt outstanding? Why? (e) What is the book value per share for each company?

Hugh has the choice between investing in a City of Heflin bond at 6 percent or a Surething bond at 9 percent.  Assuming that both bonds have the same nontax characteristics and that Hugh has a 40 percent marginal tax rate, in which bond should he invest?

How do two taxpayers determine who has priority to claim the dependency exemption for a qualifying child of both taxpayers when neither taxpayer is a parent of the child (assume the child does not qualify as a qualifying child for either parent)?How do parents determine who gets to deduct the dependency exemption for a qualifying child of both parents when the parents are divorced or file separate returns

Explain how some high-frequency traders use a form of front running to capitalize on faster access to specific markets. (LO3)

The housing for a certain machinery product is made of two components, both aluminum castings. The larger component has the shape of a dish sink, and the second component is a flat cover that is attached to the first component to create an enclosed space for the machinery parts. Sand casting is used to produce the two castings, both of which are plagued by defects in the form of misruns and cold shuts. The foreman complains that the parts are too thin, and that is the reason for the defects. However, it is known that the same components are cast successfully in other foundries. What other explanation can be given for the defects?

Suppose you asked your favorite AI learning tool “Do stock redemptions have an impact on a corporation's earnings and profits?” and the AI tool provided the following response:

Explain the difference between the voting-interest model and the risk-and-reward model used for consolidation.

The following article appeared in the Wall Street Journal. washington—The Securities and Exchange Commission staff issued guidelines for companies grappling with the problem of dividing up their business into industry segments for their annual reports. An industry segment is defined by the Financial Accounting Standards Board as a part of an enterprise engaged in providing a product or service or a group of related products or services primarily to unaffiliated customers for a profit. Although conceding that the process is a “subjective task” that “to a considerable extent, depends on the judgment of management,” the SEC staff said companies should consider . . . various factors . . . to determine whether products and services should be grouped together or reported as segments. Instructions (a) What does financial reporting for segments of a business enterprise involve? (b) Identify the reasons for requiring financial data to be reported by segments. (c) Identify the possible disadvantages of requiring financial data to be reported by segments. (d) Identify the accounting difficulties inherent in segment reporting.

Presently, the profession requires that earnings per share be disclosed on the face of the income statement. What are some disadvantages of reporting ratios on the financial statements?

The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://corporate.marksandspencer.com/documents/publications/2012/ Annual_Report_2012. Instructions Refer to M&S’s financial statements and the accompanying notes to answer the following questions. (a) Does M&S report any intangible assets and goodwill in its financial statements and accompanying notes? Briefly explain. (b) How much selling and marketing expenses does M&S report in 2011 and 2012? Briefly discuss the significance of these expenses to M&S’s operating results.

The U.S. Securities and Exchange Commission (SEC) was created in 1934 and consists of five commissioners and a large professional staff. The SEC professional staff is organized into five divisions and several principal offices. The primary objective of the SEC is to support fair securities markets. The SEC also strives to foster enlightened stockholder participation in corporate decisions of publicly traded companies. The SEC has a significant presence in financial markets, the development of accounting practices, and corporation-shareholder relations, and has the power to exert influence on entities whose actions lie within the scope of its authority. Instructions (a) Explain from where the Securities and Exchange Commission receives its authority. (b) Describe the official role of the Securities and Exchange Commission in the development of financial accounting theory and practices. (c) Discuss the interrelationship between the Securities and Exchange Commission and the Financial Accounting Standards Board with respect to the development and establishment of financial accounting theory and practices.

What are the possible arguments in favour of fixing prices (a) below and (b) above the equilibrium? Are there any means of achieving the same social goals without fixing prices?

What should be the pattern of amortization for a limitedlife intangible?

Using the lead-tin phase diagram in Figure 6.3, determine the liquid and solid phase compositions for a nominal composition of 40% Sn and 60% Pb at 204°C (400°F).

What are the two depreciation conventions that apply to tangible personal property under MACRS? Explain why Congress provides two methods.

Birch Corp., a calendar-year corporation, was formed three years ago by its sole shareholder, James, who has operated it as an S corporation since its inception.  Last year, James made a direct loan to Birch Corp. in the amount of $5,000.  Birch Corp. has paid the interest on the loan but has not yet paid any principal.  (Assume the loan qualifies as debt for tax purposes.)  For the year, Birch experienced a $25,000 business loss.  What amount of the loss clears the tax-basis limitation, and what is James’s basis in his Birch Corp. stock and Birch Corp. debt in each of the following alternative scenarios?

Brooklyn has been contributing to a traditional IRA for seven years (all deductible contributions) and has a total of $30,000 in the account. In the current year, she is 39 years old and has decided that she wants to get a new car. She withdraws $20,000 from the IRA to help pay for the car. She is currently in the 24 percent marginal tax bracket. What amount of the withdrawal, after tax considerations, will Brooklyn have available to purchase the car?

What is reaction injection molding?

What are some of the key environmental forces that have the way projects are managed? What has been the effect of these forces on the management of project?

What evidence is necessary to demonstrate the ability to defer settlement of short-term debt?

In what way may the use of percentage depletion violate sound accounting theory?

Viscosity is an important property of a polymer melt in plastics shaping processes. Upon what parameters does viscosity depend?

Theory If the segmented markets theory causes an upward-sloping yield curve, what does this imply? If markets are not completely segmented, should we dismiss the segmented markets theory as even a partial explanation for the term structure of interest rates? Explain. (LO3)