Question & Answer

Relative to the average tax rate, the effective tax rate provides a better depiction of a taxpayer’s tax burden because it depicts the taxpayer’s total tax paid as a ratio of the sum of both taxable and nontaxable income earned.

On June 3, Hunt Company sold to Ann Mount merchandise having a sales price of $8,000 with terms of 2/10, n/60, f.o.b. shipping point. An invoice totaling $120, terms n/30, was received by Mount on June 8 from the Olympic Transport Service for the freight cost. Upon receipt of the goods, June 5, Mount notified Hunt Company that merchandise costing $600 contained flaws that rendered it worthless. The same day, Hunt Company issued a credit memo covering the worthless merchandise and asked that it be returned at company expense. The freight on the returned merchandise was $24, paid by Hunt Company on June 7. On June 12, the company received a check for the balance due from Mount. Instructions (a) Prepare journal entries for Hunt Company to record all the events noted above under each of the following bases. (1) Sales and receivables are entered at gross selling price. (2) Sales and receivables are entered net of cash discounts. (b) Prepare the journal entry under basis (2), assuming that Ann Mount did not remit payment until August 5.

Why might a foreign government’s policies be closely monitored by investors in other countries, even if the investors plan no investments in that country? Explain how monetary policy in one country can affect interest rates in other countries. (LO6)

List and briefly describe some of the plastic forming methods used to shape traditional ceramic products.

Hyundai is considering opening a plant in two neighboring states.  One state has a corporate tax rate of 10 percent.  If operated in this state, the plant is expected to generate $1,000,000 pretax profit.  The other state has a corporate tax rate of 2 percent.  If operated in this state, the plant is expected to generate $930,000 of pretax profit.  Which state should Hyundai choose?  Why do you think the plant in the state with a lower tax rate would produce a lower before-tax income?

Fiedler Co. follows the practice of valuing its inventory at the lower-of-cost-or-market. The following information is available from the company’s inventory records as of December 31, 2014 Item Quantity Unit Cost Replacement Cost/Unit Estimated Selling Price/Unit Completion & Disposal Cost/Unit Normal Profit Margin/Unit A 1,100 $7.50 $8.40 $10.50 $1.50 $1.80 B 800 8.20 7.90 9.40 0.90 1.20 C 1,000 5.60 5.40 7.20 1.15 0.60 D 1,000 3.80 4.20 6.30 0.80 1.50 E 1,400 6.40 6.30 6.70 0.70 1.00 Instructions Greg Forda is an accounting clerk in the accounting department of Fiedler Co., and he cannot understand why the market value keeps changing from replacement cost to net realizable value to something that he cannot even figure out. Greg is very confused, and he is the one who records inventory purchases and calculates ending inventory. You are the manager of the department and an accountant. (a) Calculate the lower-of-cost-or-market using the “individual item” approach. (b) Show the journal entry he will need to make in order to write down the ending inventory from cost to market. (c) Then write a memo to Greg explaining what designated market value is as well as how it is computed. Use your calculations to aid in your explanation.

George Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period of 10 years. The normal selling price of the equipment is $278,072, and its unguaranteed residual value at the end of the lease term is estimated to be $20,000. National will pay annual payments of $40,000 at the beginning of each year and all maintenance, insurance, and taxes. George incurred costs of $180,000 in manufacturing the equipment and $4,000 in negotiating and closing the lease. George has determined that the collectibility of the lease payments is reasonably predictable, that no additional costs will be incurred, and that the implicit interest rate is 10%. Instructions (a) Discuss the nature of this lease in relation to the lessor and compute the amount of each of the following items. (1) Lease receivable. (2) Sales price. (3) Cost of sales. (b) Prepare a 10-year lease amortization schedule. (c) Prepare all of the lessor’s journal entries for the first year.

What are some of the taxes that currently are unique to state and local governments?  What are some of the taxes that the federal, state, and local governments each utilize?

What are the advantages and disadvantages of the singlestep income statement?

What are adjusting entries and why are they necessary?

Rockland Corporation earned net income of $300,000 in 2014 and had 100,000 shares of common stock outstanding throughout the year. Also outstanding all year was $800,000 of 10% bonds, which are convertible into 16,000 shares of common. Rockland’s tax rate is 40%. Compute Rockland’s 2014 diluted earnings per share.

Presented below is information related to Waveland Inc. Cost Retail Inventory, 12/31/14 $250,000 $ 390,000 Purchases 914,500 1,460,000 Purchase returns 60,000 80,000 Purchase discounts 18,000 — Gross sales revenue (after employee discounts) — 1,410,000 Sales returns — 97,500 Markups — 120,000 Markup cancellations — 40,000 Markdowns — 45,000 Markdown cancellations — 20,000 Freight-in 42,000 — Employee discounts granted — 8,000 Loss from breakage (normal) — 4,500 Instructions Assuming that Waveland Inc. uses the conventional retail inventory method, compute the cost of its ending inventory at December 31, 2015.

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?

What are some of the factors that affect the fluidity of a molten metal during pouring into a mold cavity?

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.

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

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.”

Joy Cunningham Co. purchased a machine on January 1, 2012, for $550,000. At that time, it was estimated that the machine would have a 10-year life and no salvage value. On December 31, 2015, the firm’s accountant found that the entry for depreciation expense had been omitted in 2013. In addition, management has informed the accountant that the company plans to switch to straight-line depreciation, starting with the year 2015. At present, the company uses the sum-of-the-years’-digits method for depreciating equipment. Instructions Prepare the general journal entries that should be made at December 31, 2015, to record these events. (Ignore tax effects.)

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?

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?

In MRP, what are common use items?

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.

Why did the U.S. government rescue AIG during the credit crisis in 2008? (LO5)