Question & Answer

Henry Quincy wants to withdraw $30,000 each year for 10 years from a fund that earns 8% interest. How much must he invest today if the first withdrawal is at year-end? How much must he invest today if the first withdrawal takes place immediately?

Distinguish between a debt security and an equity security.

When is revenue recognized in the following situations:(a) Revenue from selling products? (b) Revenue from services performed? (c) Revenue from permitting others to use enterprise assets? (d) Revenue from disposing of assets other than products?

Slaton Corporation traded a used truck for a new truck. The used truck cost $20,000 and has accumulated depreciation of $17,000. The new truck is worth $35,000. Slaton also made a cash payment of $33,000. Prepare Slaton’s entry to record the exchange. (The exchange has commercial substance.)

Distinguish among the following: (1) a general checking account, (2) an imprest bank account, and (3) a lockbox account.

What two assumptions are central to the IASB conceptual framework?

Equipment was purchased on January 2, 2014, for $24,000, but no portion of the cost has been charged to depreciation. The corporation wishes to use the straight-line method for these assets, which have been estimated to have a life of 10 years and no salvage value. What effect does this error have on net income in 2014? What entry is necessary to correct for this error, assuming that the books are not closed for 2014?

Rode Inc. incurred a net operating loss of $500,000 in 2014. Combined income for 2012 and 2013 was $350,000. The tax rate for all years is 40%. Rode elects the carryback option. Prepare the journal entries to record the benefits of the loss carryback and the loss carryforward. Rode expects to return to profitability in 2015.

What is the major distinction (a) between revenues and gains and (b) between expenses and losses?

{Planning} Clark owns stock in BCS Corporation that he purchased in January of the current year.  The stock has appreciated significantly during the year.  It is now December of the current year, and Clark is deciding whether or not he should sell the stock.  What tax and nontax factors should Clark consider before making the decision on whether to sell the stock now?

What is thermal conductivity as a material property?

Mancuso Corporation amended its pension plan on January 1, 2014, and granted $160,000 of prior service costs to its employees. The employees are expected to provide 2,000 service years in the future, with 350 service years in 2014. Compute prior service cost amortization for 2014.

Sofia (single) is a 50 percent owner in Beehive LLC (taxed as a partnership). Sofia  does not do any work for Beehive. Beehive LLC reported $600,000 of taxable business income for the year. Before considering her 50 percent business income allocation from Beehive and the self-employment tax deduction (if any), Sofia’s adjusted gross income is $150,000 (all employee salary). Sofia has $35,000 in itemized deductions. Answer the following questions for Sofia. a. What is Sofia’s self-employment tax liability? b. Assuming the income allocated to Sofia is not from a specified service trade or business, what is Sofia’s deduction for qualified business income? Assume Sofia’s share of wages paid by Beehive LLC is $130,000 and her share in the unadjusted basis of qualified property used by Beehive was $300,000. c. What is Sofia’s net investment income tax liability (assume no investment expenses)? d. What is Sofia’s additional Medicare tax liability?

Target in 2012 reported net income of $2.9 billion, net sales of $69.8 billion, and average total assets of $45.2 billion. What is Target’s asset turnover? What is Target’s return on assets?

Hillsborough Co. has an available-for-sale investment in the bonds of Schuyler Corp. with a carrying (and fair) value of $70,000. Hillsborough determined that due to poor economic prospects for Schuyler, the bonds have decreased in value to $60,000. It is determined that this loss in value is other-thantemporary. Prepare the journal entry, if any, to record the reduction in value.

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.

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

How does Level 5 leadership differ from the concept of servant leadership? Do you believe that anyone has the potential to become a Level 5 leader? Discuss.

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?

Harriet, Herm, and Ronde formed an S corporation called Innovet. Harriet and Herm both contributed cash of $25,000 to get things started. Ronde was a bit short on cash but had a parcel of land valued at $60,000 (basis of $50,000) that he decided to contribute.  The land was encumbered by a $35,000 mortgage. What tax bases will each of the three have in their stock of Innovet?

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?

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

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?