Question & Answer

Explain why Congress allows self-employed taxpayers to deduct the cost of health insurance as a for AGI deduction when employees can only itemize this cost as a medical expense. Would a self-employed taxpayer ever prefer to claim health insurance premiums as an itemized deduction rather than a deduction for AGI? Explain.

Explain how a non-consolidated subsidiary can be a form of off-balance-sheet financing.

The following note related to stockholders’ equity was reported in Wiebold, Inc.’s annual report.   Instructions (a) What is the significance of the date of record and the date of distribution? (b) Why might Wiebold have declared a 3-for-2 for stock split? (c) What impact does Wiebold’s stock split have on (1) total stockholders’ equity, (2) total par value, (3) outstanding shares, and (4) book value per share?

Jones Mills Inc. (JMI) decided to liquidate its wholly owned subsidiary, Most Help Inc. (MH). MH had the following tax accounting balance sheet:     FMV         Tax BasisAppreciation Cash$  200,000$     200,000 Building      50,000         10,000        40,000 Land    150,000       200,000      (50,000) Total$  400,000$     410,000$    (10,000)

Lebron Co. owns most but not all of the shares of its subsidiary Bryant Inc. Lebron reported net income of $124,700. The amount to be attributed to the noncontrolling interest in Bryant is $30,000. Indicate how Lebron will report the noncontrolling interest in its income statement.

What are the two methods of amortizing discount and premium on bonds payable? Explain each.

How do partners measure the amount they have at risk in the partnership?

Other than corporations, are there other legal business entities that offer liability protection? Are any of them taxed as flow-through entities? Explain.

Describe a call option on interest rate futures. How does it differ from purchasing a futures contract? (LO6)

Presented below is information related to Gonzales Corporation for the month of January 2014. Cost of goods sold $208,000 Salaries and wages expense $ 61,000 Delivery expense 7,000 Sales discounts 8,000 Insurance expense 12,000 Sales returns and allowances 13,000 Rent expense 20,000 Sales revenue 350,000 Instructions Prepare the necessary closing entries.

Why do you think partnerships, rather than the individual partners, are responsible for making most of the tax elections related to the operation of the partnership?

Determine the shear strain that is experienced by the material that is shear spun in Problem 20.33

Why are aluminum and copper alloys unsuitable for use in hot chamber die casting?

Explain how the credit crisis of 2008–2009 encouraged some securities firms to convert to a bank holding company (BHC) structure. Why might the expected return on equity be lower for securities firms that convert to this structure? (LO5)

Are hysteresis effects likely to be asymmetrical (i.e. of different magnitude) following an economic boom rather than an economic slowdown?

What is the difference between crystalline and noncrystalline structures in materials?

How does information from the balance sheet help users of the financial statements?

Using the facts from the previous problem, when should Reese pay the bill if she expects her marginal tax rate to be 33 percent next year? 25 percent next year?

Terry Hutchison worked as a self-employed lawyer until two years ago, when he retired.  He used the cash method of accounting in his business for tax purposes.  Five years ago, Terry represented his client ABC Corporation in an antitrust lawsuit against XYZ Corporation.  During that year, Terry paid self-employment taxes on all of his income.  ABC won the lawsuit, but Terry and ABC could not agree on the amount of his earnings.  Finally, this year, the issue got resolved and ABC paid Terry $90,000 for the services he provided five years ago.  Terry plans to include the payment in his gross income, but because he spends most of his time playing golf and absolutely no time working on legal matters, he does not intend to pay self-employment taxes on the income.  Is Terry subject to self-employment taxes on this income?

Identify and explain the three types of classifications for investments in debt securities.

Juanita paid $50,000 of interest on a mortgage on her home (loan of $1,000,000 at 5% interest rate to buy the residence in 2018; $1,200,000 original purchase price and value at purchase) and $6,500 of interest on a $100,000 home-equity loan on her home (loan proceeds were used to buy furniture). Juanita’s AGI is $600,000. How much interest expense can Juanita deduct as an itemized deduction?

Illustrate the effect of a fall in demand for an imperfectly competitive firm (a) in the presence of menu costs and (b) in the absence of menu costs?

Shumway Oil uses successful-efforts accounting and also provides full-cost results as well. Under full-cost, Shumway Oil would have reported retained earnings of $42 million and net income of $4 million. Under successfulefforts, retained earnings were $29 million, and net income was $3 million. Explain the difference between full-costing and successful-efforts accounting.

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.

Explain how financial crowding out can reduce the effectiveness of fiscal policy. What determines the magnitude of crowding out?