Question & Answer

Tremaine would like to organize UTA as either an S Corporation or a C corporation. In either form, the entity will generate a 9 percent annual before-tax return on a $1,000,000 investment. Tremaine’s marginal income tax rate is 37 percent, and his tax rate on dividends and capital gains is 23.8 percent (including the net investment income tax). If Tremaine organizes UTA as an S corporation, he will be allowed to claim the deduction for qualified business income. Also, because Tremaine will participate in UTA’s business activities, the income from UTA will not be subject to the net investment income tax. Assume that UTA will pay out 25 percent of its after-tax earnings every year as a dividend if it is formed as a C corporation.   a. How much cash after taxes would Tremaine receive from his investment in the first year if UTA is organized as either an S corporation or as a C corporation?  b. What is the overall tax rate on UTA’s income in the first year if UTA is organized as an S corporation or as a C corporation? c. What is the overall tax rate on UTA’s income in the first year if it is organized as an S corporation, but UTA’s income is not qualified business income? d. What is the overall tax rate on UTA’s income if it is organized as an S corporation, UTA’s income is not qualified business income, and Tremaine is a passive investor in UTA?

Compare and contrast the personal traits associated with great leaders and those associated with ineffective leaders.

: Explain the differences between management and leadership and why organizations need both types of skills.

With reference to Table 4.2, determine the quantity of heat required to increase the temperature of an aluminum block that is 10 cm x 10 cm x 10 cm from room temperature (21°C) to 300°C.

What are some of the reasons why a controlled atmosphere furnace is desirable in sintering?

Schwartzkopf Co. purchased for $2,200,000 property that included both land and a building to be used in operations. The seller’s book value was $300,000 for the land and $900,000 for the building. By appraisal, the fair value was estimated to be $500,000 for the land and $2,000,000 for the building. At what amount should Schwartzkopf report the land and the building at the end of the year?

Using the IRS Web site (www.irs.gov/uac/The-Tax-Gap), how large is the current estimated “tax gap” (i.e., the amount of tax underpaid by taxpayers annually)?  What group of taxpayers represents the largest “contributors” to the tax gap?

The cutting force and thrust force in an orthogonal cutting operation are 1470 N and 1589 N, respectively. The rake angle = 5°, the width of the cut = 5.0 mm, the chip thickness before the cut = 0.6, and the chip thickness ratio = 0.38. Determine (a) the shear strength of the work material and (b) the coefficient of friction in the operation.

What is meant by par value, and what is its significance to stockholders

Larry Bounds has won the Gold Bat Award for hitting the longest home run in Major League Baseball this year. The bat is worth almost $35,000. Under what conditions can Larry exclude the award from his gross income? Explain.

Is a shareholder allowed to increase their basis in S corporation stock by their share of the corporation’s liabilities, as partners are able to increase the basis of their ownership interest by their share of partnership liabilities?  Explain.

Daniel Hardware Co. is considering alternative financing arrangements for equipment used in its warehouses. Besides purchasing the equipment outright, Daniel is also considering a lease. Accounting for the outright purchase is fairly straightforward, but because Daniel has not used equipment leases in the past, the accounting staff is less informed about the specific accounting rules for leases. The staff is aware of some lease rules related to a “90 percent of fair value,” “75 percent of useful life,” and “residual value deficiencies,” but they are unsure about the meanings of these terms in lease accounting. Daniel has asked you to conduct some research on these items related to lease capitalization criteria. Instructions If your school has a subscription to the FASB Codification, go to http://aaahq.org/ascLogin.cfm to log in and prepare responses to the following. Provide Codification references for your responses. (a) What is the objective of lease classification criteria? (b) An important element of evaluating leases is determining whether substantially all of the risks and rewards of ownership are transferred in the lease. How is “substantially all” defined in the authoritative literature? (c) Besides the noncancelable term of the lease, name at least three other considerations in determining the “lease term.” (d) A common issue in the accounting for leases concerns lease requirements that the lessee make up a residual value deficiency that is attributable to damage, extraordinary wear and tear, or excessive usage (e.g., excessive mileage on a leased vehicle). Do these features constitute a lessee guarantee of the residual value such that the estimated residual value of the leased property at the end of the lease term should be included in minimum lease payments? Explain.

What are some forms of off-balance-sheet financing?

Rocky and Bullwinkle Partnership sold a parcel of land during the current year and realized a gain of $250,000. Rocky and Bullwinkle did not recognize gain related to the sale of the land on its tax return. Is this possible? Explain how a taxpayer could realize a gain but not recognize it.

How will advertising affect the cartel’s MC and AR curves? How will this affect the profit-maximising output? Is there any problem here for the cartel in fixing the price?

In its first year of existence, SMS, an S corporation, reported a business loss of $10,000. Sewon, SMS’s sole shareholder, reports $50,000 of taxable income from sources other than SMS. What must you know in order to determine whether she can deduct the $10,000 loss against her other income? Explain.

Given that crystal yield = 55%, crystal-to-slice yield = 60%, wafer yield = 75%, multiprobe yield = 65%, and final test yield = 95%, if a starting boule weighs 125 kg, what is the final weight of silicon that is represented by the non-defective chips after final test?

Schooling is free in state schools in most countries. If parents are given a choice of schools for their children, there will be a shortage of places at popular schools (the analysis will be the same as in Figure 3.8, with the number of places in a given school measured on the horizontal axis). What methods could be used for dealing with this shortage? What are their relative merits?

Anne purchased an annuity from an insurance company that promised to pay her $20,000 per year for the next 10years.  Anne paid $145,000 for the annuity, and in exchange she will receive $200,000 over the term of the annuity.            a.  How much of the first $20,000 payment should Anne include in gross income? b.  How much income will Anne recognize over the term of the annuity?

Richardson Company cans a variety of vegetable-type soups. Recently, the company decided to value its inventories using dollar-value LIFO pools. The clerk who accounts for inventories does not understand how to value the inventory pools using this new method, so, as a private consultant, you have been asked to teach him how this new method works. He has provided you with the following information about purchases made over a 6-year period. Ending Inventory Date (End-of-Year Prices) Price Index Dec. 31, 2010 $ 80,000 100 Dec. 31, 2011 111,300 105 Dec. 31, 2012 108,000 120 Dec. 31, 2013 128,700 130 Dec. 31, 2014 147,000 140 Dec. 31, 2015 174,000 145 You have already explained to him how this inventory method is maintained, but he would feel better about it if you were to leave him detailed instructions explaining how these calculations are done and why he needs to put all inventories at a base-year value. Instructions (a) Compute the ending inventory for Richardson Company for 2010 through 2015 using dollar-value LIFO. (b) Using your computation schedules as your illustration, write a step-by-step set of instructions explaining how the calculations are done. Begin your explanation by briefly explaining the theory behind this inventory method, including the purpose of putting all amounts into base-year price levels.

What do you understand by the policy ineffectiveness proposition? On what assumptions is the proposition based?

Lacy is divorced and the custodial parent of a three-year-old girl named Bailey. Lacy and Bailey live with Lacy’s parents, who pay all the costs of maintaining the household (such as mortgage, property taxes, and food). Lacy pays for Bailey’s clothing, entertainment, and health insurance costs. These costs comprised only a small part of the total costs of maintaining the household. Lacy does not qualify as her parents’ dependent.

Briefly describe the two fundamental qualities of useful accounting information

Why, under oligopoly, might a particular industry be collusive at one time and yet highly price competitive at another?

Springsteen Inc. reported in a recent annual report “Restricted cash for debt redemption.” What section of the balance sheet would report this item?