Question & Answer

Presented below are selected accounts for Alvarez Company as reported in the worksheet at the end of May 2014.   Instructions Complete the worksheet by extending amounts reported in the adjusted trial balance to the appropriate columns in the worksheet. Do not total individual columns.

Addison Co. has one temporary difference at the beginning of 2014 of $500,000. The deferred tax liability established for this amount is $150,000, based on a tax rate of 30%. The temporary difference will provide the following taxable amounts: $100,000 in 2015, $200,000 in 2016, and $200,000 in 2017. If a new tax rate for 2017 of 20% is enacted into law at the end of 2014, what is the journal entry necessary in 2014 (if any) to adjust deferred taxes?

What accounting assumption, principle, or constraint would Target Corporation use in each of the situations below? (a) Target was involved in litigation over the last year. This litigation is disclosed in the financial statements. (b) Target allocates the cost of its depreciable assets over the life it expects to receive revenue from these assets. (c) Target records the purchase of a new Dell PC at its cash equivalent price.

] Compare and contrast how bad debt expense is determined for financial accounting purposes and how the deduction for bad debts is determined for accrual-method taxpayers. How do cash-method taxpayers determine their bad debt expense for accounts receivable?

Describe the tax benefits from “bunching” itemized deductions in one year. Describe the characteristics of the taxpayers who are most likely to benefit from using bunching and explain why this is so.

Explain the types of cash flow characteristics that would cause a firm to hedge interest rate risk by swapping floating-rate payments for fixed payments. Why would some firms avoid the use of interest rate swaps, even when they are highly exposed to interest rate risk? (LO1)

Larry purchased an annuity from an insurance company that promises to pay him $1,500 per month for the rest of his life. Larry paid $170,820 for the annuity. Larry is in good health and is 72 years old. Larry received the first annuity payment of $1,500 this month. Use the expected number of payments in Exhibit 5-1 for this problem.

Ramon incorporated his sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation’s stock. The property transferred to the corporation had the following fair market values and adjusted tax-adjusted bases.     FMV                    Adjusted Tax Basis Inventory$    10,000$         4,000 Building      50,000         30,000 Land    100,000         50,000 Total$  160,000$       84,000       The fair market value of the corporation’s stock received in the exchange equaled the fair market value of the assets transferred to the corporation by Ramon. a. What amount of gain or loss does Ramon realize on the transfer of the property to his corporation?

Youngman Corporation has temporary differences at December 31, 2014, that result in the following deferred taxes. Deferred tax asset $24,000 Deferred tax liability $69,000 Indicate how these balances would be presented in Youngman’s December 31, 2014, statement of financial position.

Erin is considering switching her business from the cash method to the accrual method at the beginning of next year. Determine the amount and timing of her §481 adjustment for next year assuming the IRS grants Erin’s request in the following alternative scenarios. a) At the end of this year, Erin’s business has $15,000 of accounts receivables and $18,000 of accounts payables that have not been recorded for tax purposes.  b) At the end of this year, Erin’s business reports $25,000 of accounts receivables and $9,000 of accounts payables that have not been recorded for tax purposes.

What is the purpose of a tombstone that is used with a horizontal machining center (HMC)? What is the purpose of a tombstone that is used with a horizontal machining center (HMC)?

Emily purchased a building to store inventory for her business. The purchase price was $760,000. Emily also paid legal fees of $300 to acquire the building. In March, Emily incurred $2,000 to repair minor leaks in the roof (from storm damage earlier in the month) and $5,000 to make the interior suitable for her finished goods. What is Emily’s cost basis in the new building?

1.    : Studies of women leaders suggest that many of them view power differently than men do and prefer a collaborative, relationship-oriented use of power. If this is the case, what does it suggest about women leaders’ abilities to accomplish goals? What does it suggest about women’s ability to rise to higher organizational levels? Discuss.

Define a provision, and give three examples of a provision.

Think of two things that are provided free of charge. In each case, identify whether and in what form a shortage might occur. In what ways are/could these shortages be dealt with? Are they the best solution to the shortages?

Cameron purchases stock in Corporation X and in Corporation Y. Neither corporation pays dividends. The stocks both earn an identical before-tax rate of return. Cameron sells the stock in Corporation X after three years, and he sells the stock in Corporation Y after five years. Which investment likely earned a greater after-tax return? Why?

Suppose in the previous problem that a roll spot-welding operation is performed instead of seam welding. The interface resistance increases to 100 micro-ohms, and the center-to-center separation between weld nuggets is 25 mm. Given the conditions from the previous problem, with the changes noted here, determine (a) the proportion of energy generated that goes into the formation of each weld nugget, and (b) the rotational speed of the electrode wheels. (c) At this higher rotational speed, how much does the wheel move during the current on-time, and might this have the effect of elongating the weld nugget (making it elliptical rather than round)?

If customers were all charged the same price for a product could this ever be classed as an example of price discrimination? Explain your answer.

Karen Sepan, a recent graduate of the local state university, ispresently employed by a large manufacturing company. She has been asked by Jose Martinez, controller, toprepare the company’s response to a current Preliminary Views published by the Financial Accounting Standards Board (FASB). Sepan knows that the FASB has a conceptual framework, and she believes that these concept statements could be used to support the company’s response to the Preliminary Views. She has prepared a rough draft of the response citing the objective of financial reporting. Instructions (a) Identify the objective of financial reporting. (b) Describe the level of sophistication expected of the users of financial information by the objective of financial reporting.

Recording transactions in the accounting system requires knowledge of the important characteristics of the elements of financial statements, such as assets and liabilities. In addition, accountants must understand the inherent uncertainty in accounting measures and distinctions between related accounting concepts that are important in evaluating the effects of transactions on the financial statements. Instructions Go to http://aaahq.org/asclogin.cfm to log in and provide explanations for the following items. (Provide paragraph citations.) When you have accessed the documents, you can use the search tool in your Internet browser. (a) The three essential characteristics of assets. (b) The three essential characteristics of liabilities. (c) Uncertainty and its effect on financial statements. (d) The difference between realization and recognition.

Controlling the money supply is sometimes advocated as an appropriate policy for controlling inflation. What implications do different assumptions about the relationship between M and V, and M and Y in the equation MV = PY have for the effectiveness of this policy?

Corbett’s AMTI is $650,000.  What is his AMT exemption under the following alternative circumstances?

Helaina was just hired by Acme Corporation and has decided to purchase disability insurance. This insurance promises to pay her weekly benefits to replace her salary should she be unable to work because of disability. Disability insurance is also available through Acme as part of its compensation plan. Acme pays these premiums as a nontaxable fringe benefit, but the plan promises to pay about 10 percent less in benefits. If Helaina elects to have Acme pay the premiums, then her compensation will be reduced by an equivalent amount. Should tax considerations play a role in Helaina's choice to buy disability insurance through Acme or on her own? Explain.

Discuss the reasons why individuals generally prefer capital gains over ordinary gains. Explain why corporate taxpayers might prefer capital gains over ordinary gains.

It has been suggested that tax policy favors deductions for AGI compared to itemized deductions.  Describe two ways in which deductions for AGI are treated more favorably than itemized deductions