Question & Answer

Jasmine transferred land she held as an investment (fair market value $140,000; basis $110,000) in exchange for 50 percent of Kandy Corporation stock (40 shares valued at $100,000) and $40,000 cash in a qualifying §351 exchange. What are the amount and character of gain Jasmine recognizes on the transfer?

Rania has a $68,000 basis in her 50 percent partnership interest in the KD Partnership before receiving a current distribution of $6,000 cash and land with a fair market value of $35,000 and a basis to the partnership of $18,000. a. What are the amount and character of Rania’s recognized gain or loss? b. What is Rania’s basis in the land? c. What is Rania’s remaining basis in her partnership interest?

What is truing, in reference to grinding wheels?

What is centerless grinding?

What are the primary tax differences between traditional IRAs and Roth IRAs?

Allie received a $50,000 distribution from her 401(k) account this year that she established while working for Big Stories, Inc. Assuming her marginal ordinary tax rate is 24 percent, how much tax and penalty will Allie pay on the distribution under the following circumstances?

At the end of last year, Milena, a 35 percent partner in the five-person LAMEC Partnership, has an outside basis of $60,000, including her $30,000 share of LAMEC debt. On January 1 of the current year, Milena sells her partnership interest to MaryLynn for a cash payment of $45,000 and the assumption of her share of LAMEC’s debt. a. What are the amount and character of Milena’s recognized gain or loss on the sale? b. If LAMEC has $100,000 of unrealized receivables as of the sale date, what are the amount and character of Milena’s recognized gain or loss? c. What is MaryLynn’s initial basis in the partnership interest?

Assume the same facts as in the previous problem, and that Nancy would like to have Alfonzo stay on as a consultant after all of his shares are redeemed. She would pay him a modest amount of $500 per month. Nancy wants to know if there is any de minimis rule such that Alfonso would not be treated as having retained a prohibited interest in the company because he is receiving such a small amount of money. Consult Lynch v. Comm’r, 801 F.2d 1176 (9th Cir. 1986), reversing 83 TC 597 (1984); Seda v. Comm’r, 82 TC 484 (1984); and Cerone v. Comm’r, 87 TC 1 (1986).

Use the information in IFRS12-6. Assume that at the end of the year following the impairment (after recording amortization expense), the estimated recoverable amount for the patent is $130,000. Prepare Kenoly’s journal entry, if needed.

Aminata is a tax expert, whereas Rob is a tax novice.  Explain how their process in identifying tax issues may differ.

Norman Co., a fast-growing golf equipment company, uses GAAP. It is considering the issuance of convertible bonds. The bonds mature in 10 years, have a face value of $400,000, and pay interest annually at a rate of 4%. The equity component of the bond issue has a fair value of $35,000. Greg Shark is curious as to the difference in accounting for these bonds if the company were to use IFRS. (a) Prepare the entry to record issuance of the bonds at par under GAAP. (b) Repeat the requirement for part (a), assuming application of IFRS to the bond issuance. (c) Which approach provides the better accounting? Explain.

Explain how the amount of cash payments to suppliers is computed under the direct method.

What interest rates should be used in determining the amount of interest to be capitalized? How should the amount of interest to be capitalized be determined?

What is the difference between external customers and internal customers in TQM?

Are there any features of free-market capitalism which would discourage innovation?

1.       : Can you think of a bad decision from your own school or work experience, or from recent business or political news stories, that was made in an effort to correct or justify a past decision? As a new manager, how might you resist the urge to choose a decision alternative based on the idea that it might correct or validate a previous decision?

Distinguish between gross profit as a percentage of cost and gross profit as a percentage of sales price. Convert the following gross profit percentages based on cost to gross profit percentages based on sales price: 25% and 331/3%. Convert the following gross profit percentages based on sales price to gross profit percentages based on cost: 331/3% and 60%.

How should changes in the estimated unguaranteed residual value be handled by the lessor?

When is the stated interest rate of a debt instrument presumed to be fair?

Briefly discuss the convergence efforts that are underway in the area of intangible assets.

Assume that on February 1, Procter & Gamble (P&G) paid $720,000 in advance for 2 years’ insurance coverage. Prepare P&G’s February 1 journal entry and the annual adjusting entry on June 30.

The federal income tax scores very high on the economy criterion because the current IRS budget is relatively low compared to the costs of a typical collection agency.”  Explain why this statement may be considered wrong.

Shimei Inc. purchased computer equipment on March 1, 2014, for $31,000. The computer equipment has a useful life of 10 years and a salvage value of $1,000. For tax purposes, the MACRS class life is 5 years. Instructions (a) Assuming that the company uses the straight-line method for book and tax purposes, what is the depreciation expense reported in (1) the financial statements for 2014 and (2) the tax return for 2014? (b) Assuming that the company uses the double-declining-balance method for both book and tax purposes, what is the depreciation expense reported in (1) the financial statements for 2014 and (2) the tax return for 2014? (c) Why is depreciation for tax purposes different from depreciation for book purposes even if the company uses the same depreciation method to compute them both?

What are the two methods of component placement and soldering in surface-mount technology?

Zoop Corporation purchased for $300,000 a 30% interest in Murphy, Inc. This investment enables Zoop to exert significant influence over Murphy. During the year, Murphy earned net income of $180,000 and paid dividends of $60,000. Prepare Zoop’s journal entries related to this investment.