Question & Answer

Presented below are three independent situations. Answer the question at the end of each situation. 1. During 2014, Salt-n-Pepa Inc. became involved in a tax dispute with the IRS. Salt-n-Pepa’s attorneys have indicated that they believe it is probable that Salt-n-Pepa will lose this dispute. They also believe that Salt-n-Pepa will have to pay the IRS between $900,000 and $1,400,000. After the 2014 financial statements were issued, the case was settled with the IRS for $1,200,000. What amount, if any, should be reported as a liability for this contingency as of December 31, 2014? 2. On October 1, 2014, Alan Jackson Chemical was identified as a potentially responsible party by the Environmental Protection Agency. Jackson’s management along with its counsel have concluded that it is probable that Jackson will be responsible for damages, and a reasonable estimate of these damages is $5,000,000. Jackson’s insurance policy of $9,000,000 has a deductible clause of $500,000. How should Alan Jackson Chemical report this information in its financial statements at December 31, 2014? 3. Melissa Etheridge Inc. had a manufacturing plant in Sudan, which was destroyed in the civil war. It is not certain who will compensate Etheridge for this destruction, but Etheridge has been assured by governmental officials that it will receive a definite amount for this plant. The amount of the compensation will be less than the fair value of the plant, but more than its book value. How should the contingency be reported in the financial statements of Etheridge Inc.?

Name the three basic tire constructions and briefly identify the differences in their construction

Briefly describe the injection molding process.

In 2024, for a taxpayer with $50,000 of taxable income, without doing any actual computations, which filing status do you expect to provide the lowest tax liability?  Which filing status provides the highest tax liability?

What are two subclasses of assembly processes? Provide an example process for each subclass

What are the basic factors that affect surface finish in machining?

Barry Porter and Winnie Weeks are considering making an S election on March 1, 2024, for their C corporation, Omniocular. However, first they want to consider the implications of the following information: • Winnie is a U.S. citizen and resident. • Barry is a citizen of the United Kingdom but a resident of the United States. • Barry and Winnie each own 50 percent of the voting power in Omniocular.  However, Barry’s stock provides him with a claim on 60 percent of the Omniocular assets in liquidation. • Omniocular was formed under Arizona state law, but it plans on eventually conducting some business in Mexico.   a) Is Omniocular eligible to elect S corporation status?  If so, when is the election effective?

In recent years, many banks have been relying more heavily on noninterest income as a proportion of their total income. Write a short essay explaining whether banks that rely more heavily on noninterest income will have better or worse performance than banks that rely more heavily on traditional sources of income (such as loans)?

Is there any truth in the saying that the price of a good is a reflection of its quality?

1.    Jeff Immelt, CEO of GE, tweeted for the first time in September 2012, prompting this response: “@JeffImmelt how come my grandfather got on twitter before you?” Do you think managers should use Twitter and other social media? Can you be an effective manager today without using new media? Why?

On July 1, 2014, Wheeler Company purchased $4,000,000 of Duggen Company’s 8% bonds, due on July 1, 2021. The bonds, which pay interest semiannually on January 1 and July 1, were purchased for $3,500,000 to yield 10%. Determine the amount of interest revenue Wheeler should report on its income statement for the year ended December 31, 2014.

Mary and Scott formed a partnership that maintains its records on a calendar-year basis. The balance sheet of the MS Partnership at year-end is as follows: Basis Fair Market Value Cash $ 60 $ 60 Land 60 180 Inventory 72 60 $192 $300 Mary $ 96 $150 Scott 96 150 $192 $300

Kasten Inc. provides paid vacations to its employees. At December 31, 2014, 30 employees have each earned 2 weeks of vacation time. The employees’ average salary is $500 per week. Prepare Kasten’s December 31, 2014, adjusting entry.

Use the information from BE17-5 but assume the stock was purchased as a trading security. Prepare Fairbanks’ journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment.

A torsion test specimen has a radius = 25 mm, wall thickness = 3 mm, and gage length = 50 mm. In testing, a torque of 900 N-m results in an angular deflection = 0.3°. Determine (a) the shear stress, (b) shear strain, and (c) shear modulus, assuming the specimen had not yet yielded. (d) If failure of the specimen occurs at a torque = 1200 N-m and a corresponding angular deflection = 10°, what is the shear strength of the metal?

What is the difference between the traditional ceramics and the new ceramics?

What are the common book-tax differences relating to accounting for capital gains and losses?  Do these differences create favorable or unfavorable book-to-tax adjustments?

Where, if at all, should the following items be classified on a balance sheet? (a) Goods out on approval to customers. (b) Goods in transit that were recently purchased f.o.b. destination. (c) Land held by a realty firm for sale. (d) Raw materials. (e) Goods received on consignment. (f) Manufacturing supplies.

Describe when economic performance occurs for the following expenses: a)Workers’ compensation  b) Rebates and refunds c) Insurance, warranties, and service contracts provided to the business d) Taxes

What is the nature of an installment sale? How do installment sales differ from ordinary credit sales?

In an orthogonal cutting operation, the rake angle = -5°, chip thickness before the cut = 0.2 mm and width of cut = 4.0 mm. The chip ratio = 0.4. Determine (a) the chip thickness after the cut, (b) shear angle, (c) friction angle, (d) coefficient of friction, and (e) shear strain.

Grady received $8,200 of Social Security benefits this year.  Grady also reported salary and interest income this year.  What amount of the benefits must Grady include in his gross income under the following two independent situations? a.       Grady files single and reports salary of $12,100 and interest income of $250. b.       Grady files single and reports salary of $22,000 and interest income of $600. c.       Grady files married joint and reports salary of $75,000 and interest income of $500. d.       Grady files married joint and reports salary of $44,000 and interest income of $700. e.            Grady files married separate and reports salary of $22,000 and interest income of $600

What are the advantages and disadvantages for a developing country of pursuing a policy of ISI?

Think of three examples of monopolies (local or national) and consider how contestable their markets are.

If price regulation results in lower profits, will this always imply lower investment? How might a government incentivise innovation in a regulated industry?