Question & Answer

When is an S corporation required to pay a built-in gains tax?

What will determine the size of the shift in the BP curve in each case?

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) What investments does P&G report in 2011, and how are these investments accounted for in its financial statements? (b) How are P&G’s investments valued? How does P&G determine fair value? (c) How does P&G use derivative financial instruments?

AMP Corporation (calendar-year-end) has 2024 taxable income of $1,900,000 for purposes of computing the §179 expense. During 2024, AMP acquired the following assets:

Identify the two recognized lease accounting methods for lessees and distinguish between them.

1.              : Discipline Darius Hayes for coercing his subordinates to spend their own time on his volunteer work at the community after-school program. This action will send a signal that coercing employees is a clear violation of leadership authority.

Cosmo contributed land with a fair market value of $400,000 and a tax basis of $90,000 to the Y Mountain partnership in exchange for a 25 percent profits and capital interest in the partnership. The land is secured by a $120,000 nonrecourse liability. Other than this nonrecourse liability, Y Mountain partnership does not have any liability. a. How much gain will Cosmo recognize from the contribution? b. What is Cosmo’s tax basis in his partnership interest?

Solve the previous problem, except that the metal to be welded is aluminum, and the corresponding melting factor is half the value for steel.

The bookkeeper for Geronimo Company has prepared the following balance sheet as of July 31, 2014.   The following additional information is provided. 1. Cash includes $1,200 in a petty cash fund and $15,000 in a bond sinking fund. 2. The net accounts receivable balance is comprised of the following two items: (a) accounts receivable $44,000 and (b) allowance for doubtful accounts $3,500. 3. Inventory costing $5,300 was shipped out on consignment on July 31, 2014. The ending inventory balance does not include the consigned goods. Receivables in the amount of $5,300 were recognized on these consigned goods. 4. Equipment had a cost of $112,000 and an accumulated depreciation balance of $28,000. 5. Income taxes payable of $6,000 were accrued on July 31. Geronimo Company, however, had set up a cash fund to meet this obligation. This cash fund was not included in the cash balance but was offset against the income taxes payable amount. Instructions Prepare a corrected classified balance sheet as of July 31, 2014, from the available information, adjusting the account balances using the additional information.

Wayne Rogers Corp. maintains its financial records on the cash basis of accounting. Interested in securing a long-term loan from its regular bank, Wayne Rogers Corp. requests you as its independent CPA to convert its cash-basis income statement data to the accrual basis. You are provided with the following summarized data covering 2013, 2014, and 2015.   Instructions (a) Using the data above, prepare abbreviated income statements for the years 2013 and 2014 on the cash basis. (b) Using the data above, prepare abbreviated income statements for the years 2013 and 2014 on the accrual basis.

What dangers are there in maturity transformation for (a) financial institutions; (b) society generally?

Suppose you asked your favorite AI query tool the following question: “I am single and earned $13,000 in 2024 in the United States. Should I file a U.S. federal income tax return?”  The AI tool provided the following response:   Is the AI response correct? Explain.

Identify some of the important factors that should enter into the make or buy decision.

The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://annualreport.marksandspencer.com/_assets/downloads/Marksand- Spencer-Annual-report-and-financial-statements-2012.pdf. Instructions Refer to M&S’s financial statements and the accompanying notes to answer the following questions. (a) What investments does M&S report in 2012, and where are these investments reported in its financial statements? (b) How are M&S’s investments valued? How does M&S determine fair value? (c) How does M&S use derivative financial instruments?

What are the reporting issues in a sale and buyback agreement?

Dillons Corporation made credit sales of $30,000 which are subject to 6% sales tax. The corporation also made cash sales which totaled $20,670 including the 6% sales tax. (a) Prepare the entry to record Dillons’ credit sales. (b) Prepare the entry to record Dillons’ cash sales.

Instructions Go to the book’s companion website and use information found there to answer the following questions related to The Coca-Cola Company and PepsiCo, Inc. (a) Based on the information contained in these financial statements, determine each of the following for each company. (1) Cash used in (for) investing activities during 2011 (from the statement of cash flows). (2) Cash used for acquisitions and investments in unconsolidated affiliates (or principally bottling companies) during 2011. (3) Total investment in unconsolidated affiliates (or investments and other assets) at the end of 2011. (b) (1) Briefly identify from Coca-Cola’s December 31, 2011, balance sheet the investments it reported as being accounted for under the equity method. (2) What is the amount of investments that Coca-Cola reported in its 2011 balance sheet as “cost method investments,” and what is the nature of these investments? (c) In its Note 2 on Investments, what total amounts did Coca-Cola report at December 31, 2011, as: (1) trading securities, (2) available-for-sale securities, and (3) held-to-maturity securities?

Explain why, if the firm can practise first-degree price discrimination by selling every unit at the maximum price each consumer is prepared to pay, its revenue from selling 200 units will be the sum of both the shaded areas in Figure 8.13.

Provide examples of the four types of corporate culture.

How do partners determine whether they are passive participants in partnerships when applying the passive activity loss limitation rules?

Presented below are the comparative income and retained earnings statements for Denise Habbe Inc. for the years 2014 and 2015. LIFO Basis FIFO Basis 2014 2013 2014 2013 Sales $3,000 $3,000 $3,000 $3,000 Cost of goods sold 1,130 1,000 1,100 940 Operating expenses 1,000 1,000 1,000 1,000 Income before profi t-sharing 870 1,000 900 1,060 Profi t-sharing expense 87 100 96 100 Net income $ 783 $ 900 $ 804 $ 960 2015 2014 Sales $340,000 $270,000 Cost of sales 200,000 142,000 Gross profi t 140,000 128,000 Expenses 88,000 50,000 Net income $ 52,000 $ 78,000 Retained earnings (Jan. 1) $125,000 $ 72,000 Net income 52,000 78,000 Dividends (30,000) (25,000) Retained earnings (Dec. 31) $147,000 $125,000 The following additional information is provided: 1. In 2015, Denise Habbe Inc. decided to switch its depreciation method from sum-of-the-years’-digits to the straight-line method. The assets were purchased at the beginning of 2014 for $100,000 with an estimated useful life of 4 years and no salvage value. (The 2015 income statement contains depreciation expense of $30,000 on the assets purchased at the beginning of 2014.) 2. In 2015, the company discovered that the ending inventory for 2014 was overstated by $24,000; ending inventory for 2015 is correctly stated. Instructions Prepare the revised retained earnings statement for 2014 and 2015, assuming comparative statements. (Ignore income taxes.)

The Buildings account of Postera Inc. includes the following items that were used in determining the basis for depreciating the cost of a building. (a) Organization and promotion expenses. (b) Architect’s fees. (c) Interest and taxes during construction. (d) Interest revenue on investments held to fund construction of a building. Do you agree with these charges? If not, how would you deal with each of the items above in the corporation’s books and in its annual financial statements?

What are some of the simple measures used to assess the feasibility of a proposed cup-drawing operation?

What is the distinction between comparability and consistency?

The outstanding capital stock of Edna Millay Corporation consists of 2,000 shares of $100 par value, 8% preferred, and 5,000 shares of $50 par value common. Instructions Assuming that the company has retained earnings of $90,000, all of which is to be paid out in dividends, and that preferred dividends were not paid during the 2 years preceding the current year, state how much each class of stock should receive under each of the following conditions. (a) The preferred stock is noncumulative and nonparticipating. (b) The preferred stock is cumulative and nonparticipating. (c) The preferred stock is cumulative and participating. (Round dividend rate percentages to four decimal places.)