Question & Answer

Maria Rodriquez and Lynette Kingston are discussing accounting for income taxes. They are currently studying a schedule of taxable and deductible amounts that will arise in the future as a result of existing temporary differences. The schedule is as follows. Future Years 2014 2015 2016 2017 2018 Taxable income $850,000 Taxable amounts $375,000 $375,000 $375,000 $375,000 Deductible amounts (2,400,000) Enacted tax rate 50% 45% 40% 35% 30% Instructions (a) Explain the concept of future taxable amounts and future deductible amounts as illustrated in the schedule. (b) How do the carryback and carryforward provisions affect the reporting of deferred tax assets and deferred tax liabilities?

Horatio and Kelly were divorced at the end of last year. Neither Horatio nor Kelly remarried during the current year and Horatio moved out of state. Determine the filing status of Horatio and Kelly for the current year in the following independent situations:

Briefly define the three types of mechanized workpart transfer systems used in production lines.

An extruder has a barrel diameter = 5.0 in and length = 12 ft. The extruder screw rotates at 50 rev/min; it has channel depth = 0.30 in and flight angle = 17.7°. The plastic melt has a shear viscosity = 100 x 10-4 lb-sec/in2 . Find: (a) the extruder characteristic, (b) the values of Q and p at the operating point, given that the die characteristic is Qx = 0.00150 p.

Sunita is a one-third owner in Bikes-R-Us, an S corporation that experienced a $45,000 loss this year (year 1). If her stock basis is $10,000 at the beginning of the year, how much of this loss clears the hurdle for deductibility (assume at-risk limitation equals the tax-basis limitation)? If she cannot deduct the whole loss, what happens to the remainder?  Is she able to deduct the entire loss if she sells her stock at year-end?

Cost drivers; value chain; strategy; organisational structure Australian fashion designer Sean Ashby commenced his men’s swimwear and clothing business aussieBum in 2001. A keen swimmer and surfer, he was unable to find a good pair of men’s cossies and used his life savings of $20 000 to make a series of prototypes, buy materials and commence manufacturing in Australia. Despite rejection from local retailers who did not see the potential for aussieBum to compete with international brands, Ashby has proven critics wrong. He had no choice but to take his business online, with instant exposure to the international market. It now takes thousands of orders a day.   Since the company’s inception, Ashby says that aussieBum has ‘taken on its own little cult revolution’, with celebrities such as Ewan McGregor, Billy Connolly and David Beckham fans of the aussieBum brand. Even Kylie Minogue’s male dancers wore aussieBum cossies in the film clip for her song ‘Slow’. The marketing thrust behind Ashby’s aussieBum is to live the dream — ‘the dream to be independent and present our gear in a way that gets noticed. We don’t apologise for pushing the boundaries . . . We have a saying at aussieBum — If you doubt yourself, wear something else’.   The company doubled in size every year in its first five years and continued to grow by 20 per cent every quarter. By 2005, aussieBum earned more than $5 million in sales and carried no debt. The aussieBum brand now takes pride of place in stores such as Selfridges in the UK; Brown Thomas in Ireland; La Maison Stores in Canada; Alpha Male in Melrose Drive, Los Angeles; KaDeWa in Germany; as well as others in Spain, The Netherlands, Sweden, Poland and Russia. As well as direct department store sales, aussieBum’s internet retail orders are booming, with aussieBum being distributed to more than 70 countries. It now has over 200 000 consumers ordering direct via its custom built e-commerce site.   Most of the raw materials are sourced from Italy and China. By manufacturing in Australia, aussieBum hopes to promote Australia’s culture and relaxed lifestyle as well as eliminate restrictions that might come with outsourcing production to other countries. Moreover, producing locally (through independent manufacturers) provides flexibility and a reduced timeframe in getting new products to market. With a heavy emphasis on innovative product design, aussieBum pays close attention to the design phase of the product process.   Two recent examples of aussieBum’s flexibility and innovative approach to product development and marketing are worthy of note. First, it was able to capitalise on the consumer backlash against competitor Bonds when that company transferred more of its manufacturing offshore. Ashby estimates that aussieBum’s sales grew by at least 40 per cent as a result. Second, aussieBum was able to achieve continued growth during the global financial crisis. The company continues to avoid debt and own all its assets outright.       Required (a) With reference to the information provided, distinguish between structural and executional cost drivers. (b) Illustrate and describe the industry and organisational value chain in which aussieBum operates. (c) Classify aussieBum’s likely strategy as low cost or product differentiation. Explain. (d) Classify aussieBum’s organisational structure as centralised or decentralised. Explain. (e) With reference to disruptive innovation, do you consider aussieBum to be a disruptor to the traditional garment industry value chain? Discuss why or why not.

What is the major distinction (a) between revenues and gains and (b) between expenses and losses?

What is the starting material in fused-deposition modeling?

1.      Vote in support of Hank Schmidt’s decision to hold each individual member accountable for the entire project. The professor clearly stated his policy at the beginning of the semester, and the students should have been more vigilant. The committee should not undercut a professor’s explicit policy.

What are two other names for ram type EDMs?

Lina purchased a new car for use in her business during 2024. The auto was the only business asset she purchased during the year, and her business was extremely profitable. Calculate her maximum depreciation deductions (including §179 expense unless stated otherwise) for the automobile in 2024 and 2025 (Lina doesn’t want to take bonus depreciation for 2024) in the following alternative scenarios (assuming half-year convention for all):  a. The vehicle cost $35,000, and business use is 100 percent (ignore §179 expense). b. The vehicle cost $80,000, and business use is 100 percent. c. The vehicle cost $80,000, and she used it 80 percent for business. d. The vehicle cost $80,000, and she used it 80 percent for business. She sold it on March 1 of year 2. e. The vehicle cost $80,000, and she used it 20 percent for business. f. The vehicle cost $80,000 and is an SUV that weighed 6,500 pounds. Business use was 100 percent.

Why is the heat transfer factor in arc-welding processes that utilize consumable electrodes greater than in those that use nonconsumable electrodes?

Use the information from BE17-1 but assume the bonds are purchased as an available-for-sale security. Prepare Garfield’s journal entries for (a) the purchase of the investment, (b) the receipt of annual interest and discount amortization, and (c) the year-end fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.) The bonds have a year-end fair value of $75,500.

provides products and services to oil and natural gas exploration, production, transmission, and processing companies. The following is taken from a recent income statement. (Dollaramounts are in millions.) Sales revenue $2,697.0 Service revenue 1,933.9 Share of earnings of unconsolidated affi liates 92.4 Total revenues 4,723.3 Cost of sales 1,722.7 Cost of services 1,799.9 Total costs of sales and services 3,522.6 Gross earnings $1,200.7 Selling, engineering, administrative and general expenses (919.8) Special charges (70.0) Other income (deductions) Interest expense (47.4) Interest earned 19.1 Other, net 4.8 Earnings before income taxes and other items below 187.4 Income taxes (79.4) Noncontrolling interest (10.3) Earnings from continuing operations 97.7 Discontinued operations (35.3) Earnings before extraordinary items 62.4 Extraordinary items (6.3) Net earnings $ 56.1 Instructions Assume that 177,636,000 shares of stock were issued and outstanding. Prepare the per share portion of the income statement. Remember to begin with “Earnings from continuing operations.”

What is meant by the term make-to-stock production?

Sophia recently won a tax case litigated in the 7th Circuit.  She recently heard that the Supreme Court denied the writ of certiorari.  Should she be happy or not, and why?

What tests are applied to determine if losses should be characterized as passive?

1. Give some other examples of public goods. Does the provider of these goods (the government or local authority) charge for their use? If so, is the method of charging based on the amount of the good that people use? Is it a good method of charging? Could you suggest a better method? 2. Name some goods or services provided by the government or local authorities that are not public goods. 3. Are there ways in which we could overcome the free-rider problem? Start by thinking about the provision of a public good amongst a group of friends or neighbours.

1.15     Uncertainties, degree of uncertainty Community Children’s Hospital can invest in one of two different projects. The first project is to purchase and operate a hotel that is located two blocks from the hospital. The CEO of the hospital has no experience operating a hotel, but the hospital does provide rooms for in-patients, and so she is familiar with cleaning requirements and managing housekeeping staff. However, the hospital does little advertising and does not have a large public relations staff. In addition, the hospital and hotel are located in a part of town that is deteriorating. The other investment opportunity is to replace the heart monitors in the neonatal intensive care unit (critical care for newborns and infants). The new monitors would provide a range of functions, including monitoring the body temperature and blood pressure of infants, as well as monitoring heart functions. Each monitor can be used for up to four infants with information about each infant forwarded to one computer that is monitored by a special technician. The current monitors are bedside monitors that need to be read every 10 minutes by nursing staff.   Required (a)          Prepare a list of uncertainties that the CEO faces if she buys the hotel. (b)          Prepare a list of uncertainties the CEO faces if she replaces the heart monitors. (c)           Which scenario appears to have a greater degree of uncertainty? Why?

Compare and contrast the lifetime learning credit with the American opportunity tax credit.

What will be the effect on the UK economy if the European Central Bank cuts interest rates?

Why might the role of the accountant be referred to as one of a ‘detective’ in relation to variance analysis?

Look ahead to Table 3.1. It shows the income elasticity of demand for various foodstuffs. Explain the difference in the figures for milk, fish and fruit juice..

Why is the supply curve drawn as a vertical straight line in Figure 3.10?

What is earnings management?