Question & Answer

What is a tax bracket?  What is the relationship between filing status and the width of the tax brackets in the tax rate schedule?

] Rivendell Corporation uses the accrual method of accounting and has the following assets as of the end of 2023. Rivendell converted to an S corporation on January 1, 2024.   Asset Adjusted basis FMV Cash $40,000 $40,000 Accounts receivable 30,000 30,000 Inventory 130,000 60,000 Land 100,000 125,000   Totals $300,000 $255,000   a. What is Rivendell’s net unrealized built-in gain at the time it converted to an S corporation?

1.    : Many successful entrepreneurs say that they did little planning, perhaps scratching notes on a legal pad. How was it possible for them to do well, even so?

1.   Mind your own business and just do your job. The company isn’t breaking any laws, and if Petro-Tech ‘s economic situation doesn’t improve, a lot of people will be thrown out of work.

Beilman Inc. reports the following pretax income (loss) for both book and tax purposes. (Assume the carryback provision is used where possible for a net operating loss.) Year Pretax Income (Loss) Tax Rate 2012 $120,000 40% 2013 90,000 40% 2014 (280,000) 45% 2015 120,000 45% The tax rates listed were all enacted by the beginning of 2012. Instructions (a) Prepare the journal entries for years 2012–2015 to record income tax expense (benefit) and income taxes payable (refundable), and the tax effects of the loss carryback and loss carryforward, assuming that based on the weight of available evidence, it is more likely than not that one-half of the benefits of the loss carryforward will not be realized. (b) Prepare the income tax section of the 2014 income statement beginning with the line “Operating loss before income taxes.” (c) Prepare the income tax section of the 2015 income statement beginning with the line “Income before income taxes.”

Compare how the return of capital principle applies when (1) a taxpayer sells an asset and collects the sale proceeds all immediately and (2) a taxpayer sells an asset and collects the sale proceeds over several periods (an installment sale). If Congress wanted to maximize revenue from installment sales, how would it have applied the return of capital principle for installment sales?

What disclosures are required relative to long-term debt and sinking fund requirements?

What are the limitations on the number and type of shareholders an S corporation may have?  How are these limitations different from restrictions on the number and type of shareholders C corporations or partnerships may have?

A fillet weld has a cross-sectional area of 25.0 mm2 and is 300 mm long. (a) What quantity of heat (in joules) is required to accomplish the weld, if the metal to be welded is low carbon steel? (b) How much heat must be generated at the welding source, if the heat transfer factor is 0.75 and the melting factor = 0.63?

Tim is a single, cash-method taxpayer with an AGI of $50,000. In April of this year Tim paid $1,020 with his state income tax return for the previous year. During the year, Tim had $5,400 of state income tax and $18,250 of federal income tax withheld from his salary. In addition, Tim made estimated payments of $1,360 and $1,900 for state and federal income taxes, respectively. Finally, Tim expects to receive a refund of $500 for state income taxes when he files his state tax return for this year in April next year. What is the amount of taxes that Tim can deduct as an itemized deduction?

If a firm has a typically shaped average cost curve and sets prices 10 per cent above average cost, what will its supply curve look like?

On January 1, year 1, ABC Inc. issued 5,000 stock options with an estimated value of $10 per option. Each option entitles the owner to purchase one share of ABC stock for $25 a share (the per-share price of ABC stock on January 1, year 1). Assume the options vest on December 31, year 1, and that all 5,000 stock options were exercised on the vesting date when the stock was valued at $31 per share. Identify ABC’s tax deduction and book-tax difference associated with the stock options under the following alternative scenarios:

Jackel Industries presents you with the following information. Accumulated Date Salvage Life in Depreciation Depreciation to Depreciation Description Purchased Cost Value Years Method 12/31/15 for 2016 Machine A 2/12/14 $142,500 $16,000 10 (a) $33,350 (b) Machine B 8/15/13 (c) 21,000 5 SL 29,000 (d) Machine C 7/21/12 75,400 23,500 8 DDB (e) (f) Machine D 10/12/(g) 219,000 69,000 5 SYD 70,000 (h) Instructions Complete the table for the year ended December 31, 2016. The company depreciates all assets using the half-year convention.

Some individuals have indicated that the FASB must becognizant of the economic consequences of its pronouncements.What is meant by “economic consequences”?What dangers exist if politics play too much of a role inthe development of GAAP?

In the iron-iron carbide phase diagram of Figure 6.4, identify the phase or phases present at the following temperatures and nominal compositions: (a) 650°C (1200°F) and 2% Fe3C, (b) 760°C (1400°F) and 2% Fe3C, and (c) 1095°C (2000°F) and 1% Fe3C.

Production rate for a certain assembled product is 47.5 units per hour. The total assembly work content time = 32 minutes of direct manual labor. The line operates at 95% uptime. Ten workstations have two workers on opposite sides of the line so that both sides of the product can be worked on simultaneously. The remaining stations have one worker. Repositioning time lost by each worker is 0.2 min/cycle. It is known that the number of workers on the line is two more than the number required for perfect balance. Determine (a) number of workers, (b) number of workstations, (c) the balancing efficiency, and (d) average manning level.

Laura Davis is a member in a limited liability company that has historically been profitable but is expecting to generate losses in the near future because of a weak local economy. In addition to the hours she works as an employee of a local business, she currently spends approximately 150 hours per year helping to manage the LLC. Other LLC members each work approximately 175 hours per year each in the LLC, and the time Laura and other members spend managing the LLC has remained constant since she joined the company three years ago. Laura’s tax basis and amount at-risk are large compared to her share of projected losses; however, she is concerned that her ability to deduct her share of the projected losses will be limited by the passive activity loss rules. a. As an LLC member, will Laura’s share of losses be presumed to be passive as they are for limited partners? Why or why not? [Hint: See §469(h)(2); Garnett v. Comm’r, 132 TC 368 (2009); and Prop. Reg. § 1.469-5(e)(3)(i).] b. Assuming Laura’s losses are not presumed to be passive, is she devoting sufficient time to the LLC to be considered a material participant? Why or why not? c. What would you recommend to Laura to help her achieve a more favorable tax outcome?

Lucy and Ricky Ricardo live in Los Angeles, California.  After they were married, they started a business named ILL Corporation (a C corporation).  For state law purposes, the shares of stock in ILL Corp. are listed under Ricky’s name only.  Ricky signed the Form 2553 electing to have ILL taxed as an S corporation for federal income tax purposes, but Lucy did not sign.  Given that California is a community property state, is the S election for ILL Corp. valid?

Cordero Corporation has an employee stock-purchase plan which permits all full-time employees to purchase 10 shares of common stock on the third anniversary of their employment and an additional 15 shares on each subsequent anniversary date. The purchase price is set at the market price on the date purchased and no commission is charged. Discuss whether this plan would be consideredcompensatory.

What is the difference between absolute positioning and incremental positioning?

Explain the role of the Emerging Issues Task Force inestablishing generally accepted accounting principles.

What are the limitations of scanning tunneling microscope in nanofabrication that inhibit its commercial application?

A lease agreement between Mooney Leasing Company and Rode Company is described in E21-8. Instructions (Round all numbers to the nearest cent.) Refer to the data in E21-8 and do the following for the lessor. (a) Compute the amount of the lease receivable at the inception of the lease. (b) Prepare a lease amortization schedule for Mooney Leasing Company for the 5-year lease term. (c) Prepare the journal entries to reflect the signing of the lease agreement and to record the receipts and income related to this lease for the years 2014, 2015, and 2016. The lessor’s accounting period ends on December 31. Reversing entries are not used by Mooney.

} Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $20,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal tax rate is 32 percent this year and will be 37 percent next year, and that he can earn an after-tax rate of return of 12 percent on his investments. Should Hank send his client the bill in December or January?

Swarten Corporation issued 600 shares of no-par common stock for $8,200. Prepare Swarten’s journal entry if (a) the stock has no stated value, and (b) the stock has a stated value of $2 per share.