Question & Answer

] Megan and Matthew are equal partners in the J & J Partnership (calendar-year-end entity). On January 1 of the current year, they decide to liquidate the partnership. Megan’s basis in her partnership interest is $100,000, and Matthew’s is $35,000. The two partners receive identical distributions, with each receiving the following assets: Tax BasisFMV Cash $ 30,000 $ 30,000 Inventory 5,000 6,000 Land 500 1,000    Totals $ 35,500 $37,000 a. What are the amount and character of Megan’s recognized gain or loss? b. What is Megan’s basis in the distributed assets? c. What are the amount and character of Matthew’s recognized gain or loss? d. What is Matthew’s basis in the distributed assets?

What are the potential costs and benefits of mergers to (i) shareholders; (ii) managers; (iii) customers?

List some factors that could cause an increase in the credit items of the balance of payments and a decrease in the debit items. What would be the effect on the exchange rate (assuming that it is freely floating)? What effect would these exchange rate movements have on the balance of payments?

Why is flash desirable in impression die forging?

1. Name some industries where external economies of scale are gained. What are the specific external economies in each case? 2. Would you expect external economies to be associated with the concentration of an industry in a particular region?

What is a contact input interface?

An aluminum alloy is to be ground in an external cylindrical grinding operation to obtain a good surface finish. Specify the appropriate grinding wheel parameters and the grinding conditions for this job.

A 3/8-24 UNF nut and bolt (3/8 in nominal diameter, 24 threads/in) are inserted through a hole in two stacked steel plates. They are tightened so the plates are clamped together with a force of 1000 lb. The torque coefficient is 0.20. (a) What is the torque required to tighten them? (b) What is the resulting stress in the bolt?

Name the various ways in which a workpart can be held in a lathe

You manage a hotel resort located on the South Beach on the Island of Kauai in Hawaii. You are shifting the focus of your resort from a traditional fun-in-the-sun destination to eco-tourism. (Eco-tourism focuses on environmental awareness and education.) How would you classify the following projects in terms of compliance, strategic, and operational?   a.   Convert the pool heating system from electrical to solar power. b.   Build a 4-mile nature hiking trail. c.   Renovate the horse barn. d.   Launch a new promotional campaign with Hawaii Airlines. e.   Convert 12 adjacent acres into a wildlife preserve. f.    Update all the bathrooms in condos that are 10 years or older. g.   Change hotel brochures to reflect eco-tourism image. h.   Test and revise disaster response plan.                                                         How easy was it to classify these projects? What made some projects more difficult than others?

How can adaptive expectations of inflation result in clockwise Phillips loops? Why would these loops not be completely regular?

Mike Devereaux Company shows the following entries in its Equipment account for 2015. All amounts are based on historical cost. Equipment 2015 2015 Jan. 1 Balance 134,750 June 30 Cost of equipment sold Aug. 10 Purchases 32,000 (purchased prior 12 Freight on equipment to 2015) 23,000 purchased 700 25 Installation costs 2,700 Nov. 10 Repairs 500 Instructions (a) Prepare any correcting entries necessary. (b) Assuming that depreciation is to be charged for a full year on the ending balance in the asset account, compute the proper depreciation charge for 2015 under each of the methods listed below. Assume an estimated life of 10 years, with no salvage value. The machinery included in the January 1, 2015, balance was purchased in 2013. (1) Straight-line. (2) Sum-of-the-years’-digits.

Daisy Taylor has developed a viable new business idea. Her idea is to design and manufacture cookware that remains cool to the touch when in use. She has had several family members and friends try out her prototype cookware, and they have consistently given the cookware rave reviews. With this encouragement, Daisy started giving serious thought to starting up a business called “Cool Touch Cookware” (CTC). Daisy understands that it will take a few years for the business to become profitable.  She would like to grow her business and perhaps at some point “go public” or sell the business to a large retailer.   Daisy, who is single, decided to quit her full-time job so that she could focus all of her efforts on the new business. Daisy had some savings to support her for a while, but she did not have any other source of income. She was able to recruit Kesha and Aryan to join her as initial equity investors in CTC. Kesha has an MBA and a law degree. She was employed as a business consultant when she decided to leave that job to work with Daisy and Aryan. Aryan owns a very profitable used car business. Because buying and selling used cars takes all his time, he is interested in becoming only a passive investor in CTC. He wanted to get in on the ground floor because he really likes the product and believes CTC will be wildly successful. While CTC originally has three investors, Daisy and Kesha have plans to grow the business and seek more owners and capital in the future.   The three owners agreed that Daisy would contribute land and cash for a 30 percent interest in CTC, Kesha would contribute services (legal and business advisory) for the first two years for a 30 percent interest, and Aryan would contribute cash for a 40 percent interest. The plan called for Daisy and Kesha to be actively involved in managing the business, while Aryan would not be. The three equity owners’ contributions are summarized as follows:     Daisy Contributed FMV Adjusted  Basis Ownership Interest Land (held as investment) $120,000 $70,000 30% Cash$30,000   Kesha Contributed Services $150,000 30%   Aryan Contributed Cash $200,000 40%   Working together, Daisy and Kesha made the following five-year income and loss projections for CTC. They anticipate the business will be profitable and that it will continue to grow after the first five years.   Cool Touch Cookware 5-Year Income and Loss Projections     Year Income (Loss) 1 ($200,000) 2 ($80,000) 3 ($20,000) 4 $60,000 5 $180,000     With plans for Daisy and Kesha to spend a considerable amount of their time working for and managing CTC, the owners would like to develop a compensation plan that works for all parties. Down the road, they plan to have two business locations (in different cities). Daisy would take responsibility for the activities of one location and Kesha would take responsibility for the other. Finally, they would like to arrange for some performance-based financial incentives for each location.  To get the business activities started, Daisy and Kesha determined CTC would need to borrow $800,000 to purchase a building to house its manufacturing facilities and its administrative offices (at least for now). Also, in need of additional cash, Daisy and Kesha arranged to have CTC borrow $300,000 from a local bank and to borrow $200,000 cash from Aryan. CTC would pay Aryan a market rate of interest on the loan, but there was no fixed date for principal repayment.   Required: Identify significant tax and nontax issues or concerns that may differ across entity types and discuss how they are relevant to the choice of entity decision for CTC.   Several issues or concerns exist in forming a new business and choosing an entity. Some of the non-tax issues are:

Why is it necessary to develop a definitional framework for the basic elements of accounting?

Aaron, Deanne, and Keon formed the Blue Bell General Partnership at the beginning of the current year. Aaron and Deanne each contributed $110,000 and Keon transferred an acre of undeveloped land to the partnership. The land had a tax basis of $70,000 and was appraised at $180,000. The land was also encumbered with a $70,000 nonrecourse mortgage for which no one was personally liable. All three partners agreed to split profits and losses equally. At the end of the first year, Blue Bell made a $7,000 principal payment on the mortgage. For the first year of operations, the partnership records disclosed the following information: Sales revenue $470,000 Cost of goods sold $410,000 Operating expenses $70,000 Long-term capital gains $2,400 §1231 gains $900 Charitable contributions $300 Municipal bond interest $300 Salary paid as a guaranteed payment to Deanne (not included in expenses) $3,000 a. Compute the adjusted basis of each partner’s interest in the partnership immediately after the formation of the partnership. b. List the separate items of partnership income, gains, losses, and deductions that the partners must show on their individual income tax returns that include the results of the partnership’s first year of operations. c. Using the information generated in answering parts (a) and (b), prepare Blue Bells’ page 1 and Schedule K to be included with its Form 1065 for its first year of operations along with Schedule K-1 for Deanne. d. What are the partners’ adjusted bases in their partnership interests at the end of the first year of operations?

What are the three basic categories of material removal processes?

How does accounting help the capital allocation process?

Presented below is the balance sheet of Sargent Corporation for the current year, 2014.   The following information is presented. 1. The current assets section includes cash $150,000, accounts receivable $170,000 less $10,000 for allowance for doubtful accounts, inventories $180,000, and unearned rent revenue $5,000. Inventoy is stated on the lower-of-FIFO-cost-or-market. 2. The investments section includes the cash surrender value of a life insurance contract $40,000; investments in common stock, short-term (trading) $80,000 and long-term (available-for-sale) $270,000; and bond sinking fund $250,000. The cost and fair value of investments in common stock are the same. 3. Property, plant, and equipment includes buildings $1,040,000 less accumulated depreciation $360,000; equipment $450,000 less accumulated depreciation $180,000; land $500,000; and land held for future use $270,000. 4. Intangible assets include a franchise $165,000; goodwill $100,000; and discount on bonds payable $40,000. 5. Current liabilities include accounts payable $140,000; notes payable—short-term $80,000 and longterm $120,000; and income taxes payable $40,000. 6. Long-term liabilities are composed solely of 7% bonds payable due 2022. 7. Stockholders’ equity has preferred stock, no par value, authorized 200,000 shares, issued 70,000 shares for $450,000; and common stock, $1.00 par value, authorized 400,000 shares, issued 100,000 shares at an average price of $10. In addition, the corporation has retained earnings of $320,000. Instructions Prepare a balance sheet in good form, adjusting the amounts in each balance sheet classification as affected by the information given above.

(1)   {Planning} Laurie is thinking about investing in one or several of the following investment options: Corporate bonds (ordinary interest paid annually) Dividend-paying stock (qualified dividends) Life insurance (tax-exempt) Savings account Growth stock   a. Assuming all of the options earn similar returns before taxes, rank Laurie’s investment options from highest to lowest according to their after-tax returns.   b. Which of the investments employ the deferral and/or conversion tax planning strategies?   c. How does the time period of the investment affect the returns from these alternatives?   d. How do these alternative investments differ in terms of their nontax characteristics?

Go through each of the determinants we have identified so far and show how the respective elasticity of demand makes the problem of traffic congestion a difficult one to tackle.

To what extent do Keynesians and new classicists agree about the role of fixed exchange rates?

Explain how the value-at-risk (VaR) method can be used to determine whether a bank has adequate capital. (LO3)

What is a polymer?

Larry recently invested $20,000 (tax basis) in purchasing a limited partnership interest. His at-risk amount is also $20,000. In addition, Larry’s share of the limited partnership loss for the year is $2,000, his share of income from a different limited partnership was $1,000, and he had $3,000 of dividend income from the stock he owns. How much of Larry’s $2,000 loss from the limited partnership can he deduct in the current year?

What is the deposit method and when might it be applied?