Question & Answer

Youngman Corporation has temporary differences at December 31, 2014, that result in the following deferred taxes. Deferred tax liability—current $38,000 Deferred tax asset—current $62,000 Deferred tax liability—noncurrent $96,000 Deferred tax asset—noncurrent $27,000 Indicate how these balances would be presented in Youngman’s December 31, 2014, balance sheet.

Moab Inc. manufactures and distributes high-tech biking gadgets. It has decided to streamline some of its operations so that it will be able to be more productive and efficient. Because of this decision, it has entered into several transactions during the year.    Part (1): Determine the gain/loss realized and recognized in the current year for each of these events. Also determine whether the gain/loss recognized will be §1231, capital, or ordinary.

If inventory physically increases during the period, income under absorption costing will be higher than income using variable costing. Explain.

From an employee perspective, how are ISOs treated differently from NQOs for tax purposes? In general, for a given number of options, which type of stock options should employees prefer?

What effects will the following have on the equilibrium rate of interest? (You should consider which way the demand and/or supply curves of money shift.)          (a)  Banks find that they have a higher liquidity ratio than they need.          (b)  A rise in incomes.          (c)  A growing belief that interest rates will rise from their current level.

The financial statements of P&G are presented in Appendix 5B. The company’s complete annual report, including the notes to the financial statements, can be accessed at the book’s companion website, www. wiley.com/college/kieso. Instructions Refer to P&G’s financial statements and the accompanying notes to answer the following questions. (a) Using the notes to the consolidated financial statements, determine P&G’s revenue recognitionmpolicies. Discuss the impact of trade promotions on P&G’s financial statements. (b) Give two examples of where historical cost information is reported in P&G’s financial statements and related notes. Give two examples of the use of fair value information reported in either the financial statements or related notes. (c) How can we determine that the accounting principles used by P&G are prepared on a basis consistent with those of last year? (d) What is P&G’s accounting policy related to advertising? What accounting principle does P&G follow regarding accounting for advertising? Where are advertising expenses reported in the financialstatements?

In January, Prahbu purchased for $90,000 a new machine for use in an existing production line of his manufacturing business. Assume that the machine is a unit of property and is not a material or supply. Prahbu pays $2,500 to install the machine, and after the machine is installed, he pays $1,300 to perform a critical test on the machine to ensure that it will operate in accordance with quality standards. On November 1, the critical test is complete, and Prahbu places the machine in service on the production line. On December 3, Prahbu pays another $3,300 to perform periodic quality control testing after the machine is placed in service. How much will Prahbu be required to capitalize as the cost of the machine?

What are the basic differences between regulations, revenue rulings, and private letter rulings?

Direct costs in flexible budget Paper Bright Industries uses flexible budgeting to assess budgeted expectations against actual performance. Last month Paper Bright produced 12 000 units and incurred direct materials cost of $150 000. Its static budget for the year has a direct materials cost of $200 000 for 150 000 units.                                    Required (a) Calculate the direct materials cost in the flexible budget. (b) Calculate the direct materials flexible budget variance.

Assume that there are 200 consumers in the market. Of these, 100 have schedules like Kate’s and 100 have schedules like Simon’s. What would be the total market demand schedule for potatoes now?                                Price(pence per kg) Total market demand(kg)             20             40             60             80           100                 4400                 2600                 1400                   800                   600 1. How much would be demanded at a price of 30p per kilogram? 2. Assuming that demand does not change from month to month, plot the annual market demand for potatoes.

Explain the difference between calculating a loss deduction for a business asset that was partially damaged in an accident and calculating a loss deduction for a business asset that was stolen or completely destroyed in an accident.

Compute MV Corp.’s 2024 taxable income given the following information relating to its current-year activities. Also, compute MV’s Schedule M-1 assuming that MV’s federal income tax expense for book purposes is $100,000.   • Gross profit from inventory sales of $500,000 (no book-tax differences). • Dividends MV received from 25 percent-owned corporation of $100,000 (assume this is also MV’s pro rata share of the distributing corporation’s earnings). • Expenses other than DRD, charitable contribution (CC), and net operating loss (NOL) are $350,000 (no book-tax differences). • NOL carryforward from 2023 of $10,000. • Cash charitable contribution of $120,000.

Shlee Corporation issued a 4-year, $60,000, zero-interest-bearing note to Garcia Company on January 1, 2014, and received cash of $60,000. In addition, Shlee agreed to sell merchandise to Garcia at an amount less than regular selling price over the 4-year period. The market rate of interest for similar notes is 12%. Prepare Shlee Corporation’s January 1 journal entry.

Keyser’s Fleece Inc. holds a drove of sheep. Keyser shears the sheep on a semiannual basis and then sells the harvested wool into the specialty knitting market. Keyser has the following information related to the shearing sheep at January 1, 2014, and during the first six months of 2014 Shearing Sheep Carrying value (equal to net realizable value), January 1, 2014 $74,000 Change in fair value due to growth and price changes 4,700 Change in fair value due to harvest (575) Wool harvested during the fi rst 6 months (at NRV) 9,000 Prepare the journal entry(ies) for Keyser’s biological asset (shearing sheep) for the first six months of 2014.

(LO1)

Describe the gross receipts test and identify how this test relates to the business interest deduction.

What is the qualified business income deduction, and how does it affect the tax rate on flow-through business entity income?

Under what circumstances is it possible for partners to recognize gain when contributing property to partnerships?

How did the Financial Services Modernization Act affect securities firms? (LO2)

Assume that the yield curve for Treasury bonds has a slight upward slope, starting at 6 percent for a 10- year maturity and slowly rising to 8 percent for a 30-year maturity. Create a yield curve that you believe would exist for A-rated bonds, and a corresponding yield curve for B-rated bonds. (LO1, LO3)

Dewey is a lawyer who uses the cash method of accounting.  Last year Dewey provided a client with legal services worth $55,000, but the client could not pay the fee.  This year Dewey requested that in lieu of paying Dewey $55,000 for the services, the client could make a $45,000 gift to Dewey’s daughter.  Dewey’s daughter received the check for $45,000 and deposited it in her bank account.  How much of this income is taxed, if any, to Dewey?  Explain.

List the four general categories of adjustments that a corporation makes to taxable income or net loss to compute current E&P.  What is the rationale for making these adjustments?

1.      : Give the job to the candidate with the highest score. You don’t need to make enemies on the Civil Service Board, and, although it is a bureaucratic procedure, the test is an objective way to select a permanent placement.

How does the tax treatment of employee fringe benefits reflect the hybrid nature of the S corporation?

If the industry under perfect competition faces a downward-sloping demand curve, why does an individual firm face a horizontal demand curve?