Question & Answer

Tanaka Company has land that cost $15,000,000. Its fair value on December 31, 2014, is $20,000,000. Tanaka chooses the revaluation model to report its land. Explain how the land and its related valuation should be reported.

Are there any costs associated with motoring that would not be included as marginal costs? Explain.

Assume that in an annual audit of Harlowe Inc. at December 31, 2014, you find the following transactions near the closing date. 1. A special machine, fabricated to order for a customer, was finished and specifically segregated in the back part of the shipping room on December 31, 2014. The customer was billed on that date and the machine excluded from inventory although it was shipped on January 4, 2015. 2. Merchandise costing $2,800 was received on January 3, 2015, and the related purchase invoice recorded January 5. The invoice showed the shipment was made on December 29, 2014, f.o.b. destination. 3. A packing case containing a product costing $3,400 was standing in the shipping room when the physical inventory was taken. It was not included in the inventory because it was marked “Hold for shipping instructions.” Your investigation revealed that the customer’s order was dated December 18, 2014, but that the case was shipped and the customer billed on January 10, 2015. The product was a stock item of your client. 4. Merchandise received on January 6, 2015, costing $680 was entered in the purchase journal on January 7, 2015. The invoice showed shipment was made f.o.b. supplier’s warehouse on December 31, 2014. Because it was not on hand at December 31, it was not included in inventory. 5. Merchandise costing $720 was received on December 28, 2014, and the invoice was not recorded. You located it in the hands of the purchasing agent; it was marked “on consignment.” Instructions Assuming that each of the amounts is material, state whether the merchandise should be included in theclient’s inventory, and give your reason for your decision on each item.

If taxpayers are not allowed to claim deductions for dependency exemptions, is it necessary to determine who qualifies as a taxpayer’s dependent(s)? Briefly explain.

In 2024, Laureen is currently single.  She paid $2,800 of qualified tuition and related expenses for each of her twin daughters Sheri and Meri to attend State University as freshmen ($2,800 each for a total of $5,600).  Sheri and Meri qualify as Laureen’s dependents.  Laureen also paid $1,900 for her son Ryan’s (also Laureen’s dependent) tuition and related expenses to attend his junior year at State University.  Finally, Laureen paid $1,200 for herself to attend seminars at a community college to help her improve her job skills.  What is the maximum amount of education credits Laureen can claim for these expenditures in each of the following alternative scenarios?    a.  Laureen’s AGI is $45,000.

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?

Why might it be argued that a redistribution of consumption, while not involving a Pareto improvement, could still be desirable?

All else being equal, would a taxpayer with passive losses prefer to have wage income or passive income?

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

Which types of investments are valued at amortized cost? Explain the rationale for this accounting.

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?

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?

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 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?

What are the product categories usually listed in the master production schedule?

What are the processes by which polymer foams are produced?

Holder-Webb Company began operations on January 1, 2012, and uses the average-cost method of pricing inventory. Management is contemplating a change in inventory methods for 2015. The following information is available for the years 2012–2014. Net Income Computed Using Average-Cost Method FIFO Method LIFO Method 2012 $15,000 $19,000 $12,000 2013 18,000 23,000 14,000 2014 20,000 25,000 17,000 Instructions (Ignore all tax effects.) (a) Prepare the journal entry necessary to record a change from the average-cost method to the FIFO method in 2015. (b) Determine net income to be reported for 2012, 2013, and 2014, after giving effect to the change in accounting principle. (c) Assume Holder-Webb Company used the LIFO method instead of the average-cost method during the years 2012–2014. In 2015, Holder-Webb changed to the FIFO method. Prepare the journal entry necessary to record the change in principle.

What implicit and explicit costs would a firm avoid if it decided not to expand production?

Historically, taxpayers have implemented strategies to mitigate or eliminate the effects of double taxation. Why might taxpayers think twice before implementing such strategies today?  Explain.

What are the major advantages of notes to the financial statements? What types of items are usually reported in notes?

Elroy, who is single, has taken over the care of his mother Irene in her old age. Elroy pays the bills relating to Irene’s home.He also buys all her groceries and provides the rest of her support.Irene has no gross income.What is Elroy’s filing status?

Lowell Corporation has used the accrual basis of accounting for several years. A review of the records, however, indicates that some expenses and revenues have been handled on a cash basis because of errors made by an inexperienced bookkeeper. Income statements prepared by the bookkeeper reported $29,000 net income for 2013 and $37,000 net income for 2014. Further examination of the records reveals that the following items were handled improperly. 1. Rent was received from a tenant in December 2013. The amount, $1,000, was recorded as revenue at that time even though the rental pertained to 2014. 2. Salaries and wages payable on December 31 have been consistently omitted from the records of that date and have been entered as expenses when paid in the following year. The amounts of the accruals recorded in this manner were: December 31, 2012 $1,100 December 31, 2013 1,200 December 31, 2014 940 3. Invoices for supplies purchased have been charged to expense accounts when received. Inventories of supplies on hand at the end of each year have been ignored, and no entry has been made for them. December 31, 2012 $1,300 December 31, 2013 940 December 31, 2014 1,420 Instructions Prepare a schedule that will show the corrected net income for the years 2013 and 2014. All items listed should be labeled clearly. (Ignore income tax considerations.)

Solve the previous problem only the servomotor is connected to the leadscrew through a gear box whose reduction ratio = 12:1 (12 revolutions of the motor for each revolution of the leadscrew).