Question & Answer

Explain the assignment of income doctrine. In what situations would this doctrine potentially apply?

Rocco operates a beauty salon as a sole proprietorship. Rocco also owns and rents an apartment building. In 2024, Rocco had the following income and expenses. Determine Rocco’s AGI and complete page 1 (through line 11) and Schedule 1 of Form 1040 for Rocco. You may assume that Rocco will owe $2,502 in self-employment tax on his salon income, with $1,251 representing the employer portion of the self-employment tax. You may also assume that his divorce from Svetlana was finalized in 2016.

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.

Rondo and his business associate, Larry, are considering forming a business entity called R&L, but they are unsure about whether to form it as a C corporation, an S corporation, or an LLC taxed as a partnership for tax purposes. Rondo and Larry would each invest $50,000 in the business. Thus, each owner would take an initial basis in his ownership interest of $50,000 no matter which entity type is formed. Shortly after the formation of the entity, the business borrowed $30,000 from the bank. If applicable, this debt will be shared equally between the two owners. a. After taking the loan into account, what is Rondo’s tax basis in his R&L stock if R&L is formed as a C corporation? b. After taking the loan into account, what is Rondo’s tax basis in his R&L stock if R&L is formed as an S corporation? c. After taking the loan into account, what is Rondo’s tax basis in his R&L ownership interest if R&L is formed as an LLC and taxed as a partnership?

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?

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.

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

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?

Define what a printed circuit board (PCB) is

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.

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

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?

Juliette formed a new business to sell sporting goods this year. The business opened its doors to customers on June 1. Determine the amount of start-up costs Juliette can immediately expense (not including the portion of the expenditures that are amortized over 180 months) this year in the following alternative scenarios. a. She incurred start-up costs of $2,000. b. She incurred start-up costs of $45,000. c. She incurred start-up costs of $53,500. d. She incurred start-up costs of $63,000. e. How would you answer parts (a) through (d) if she formed a partnership or a corporation and she incurred the same amount of organizational expenditures rather than start-up costs (how much of the organizational expenditures would be immediately deductible)?

Assume that Denis Savard Inc. has the following accounts at the end of the current year. 1. Common Stock. 2. Discount on Bonds Payable. 3. Treasury Stock (at cost). 4. Notes Payable (short-term). 5. Raw Materials. 6. Preferred Stock Investments (long-term). 7. Unearned Rent Revenue. 8. Work in Process. 9. Copyrights. 10. Buildings. 11. Notes Receivable (short-term). 12. Cash. 13. Salaries and Wages Payable. 14. Accumulated Depreciation—Buildings. 15. Restricted Cash for Plant Expansion. 16. Land Held for Future Plant Site. 17. Allowance for Doubtful Accounts. 18. Retained Earnings. 19. Paid-in Capital in Excess of Par—Common Stock. 20. Unearned Subscriptions Revenue. 21. Receivables—Officers (due in one year). 22. Inventory (finished goods). 23. Accounts Receivable. 24. Bonds Payable (due in 4 years). 25. Noncontrolling Interest. nstructions Prepare a classified balance sheet in good form. (No monetary amounts are necessary.)

1.       : Explain the difference between risk and ambiguity. How might decision making differ for a risky situation versus an ambiguous situation?

You have been asked to provide the managing director with an approximate cost function for the entity’s activities, and it must be done by this afternoon. Some members of the board of directors want to understand why performance varies so much across store locations. They have asked for a quick analysis today and want a more detailed analysis next week. Which cost estimation technique(s) should you consider using? Explain.

How do whole life and term insurance differ from the perspective of insurance companies? From the perspective of the policyholders? (LO3)

For taxpayers qualifying for home office deductions, what are considered to be indirect expenses of maintaining the home? How are these expenses allocated to personal and home office use? Can taxpayers choose to calculate home office expenses without regard to actual expenses allocated to the home office? Explain.

Try this brain teaser. A monopoly would be expected to face an inelastic demand. After all, there are no direct substitutes. An yet,  if it produces where MR = MC, MR must be positive and demand must therefore be elastic. Therefore the monopolist must face an elastic demand! Can you solve this conundrum?

1.              : Continue the current policy that leaves it up to the Muslim workers as to when they leave the assembly line to perform their sunset rituals.

When interest is involved in installment-sales transactions, how should it be treated for accounting purposes?

Omar (single) is a 50 percent owner in Cougar LLC (taxed as a partnership). Omar works half time for Cougar and receives a guaranteed payment of $50,000. Cougar LLC reported $450,000 of business income for the year. Before considering his 50 percent business income allocation from Cougar and the self-employment tax deduction (if any), Omar’s adjusted gross income is $210,000 (includes $50,000 guaranteed payment from Cougar and $180,000 salary from a different employer). Omar reports itemized deductions of $40,000. Answer the following questions for Omar. a. What is Omar’s self-employment tax liability? b. What would be Omar’s self-employment tax liability if he didn’t receive any salary. c. Assume the original facts and that the business income allocated to Omar is not from a specified service, what is Omar’s deduction for qualified business income? Assume that 81.82 percent of the self-employment tax is from self-employment income included in QBI [i.e., $225,000 business income allocation/$275,000 (business income allocation plus guaranteed payment)]. That is, the $50,000 guaranteed payment is not qualified business income. Ignore the wage-based limitation. d. What is Omar’s net investment income tax liability (assume no investment expenses)? e. What is Omar’s additional Medicare tax liability?

The board of directors of Gifford Corp. declared cash dividends of $260,000 during the current year. If dividends payable was $85,000 at the beginning of the year and $90,000 at the end of the year, how much cash was paid in dividends during the year?

Why is flash desirable in impression die forging?