Question 1
66. Jeremy and Alyssa Johnson have been married for five years and do not have any children. Jeremy was married previously and has one child from the prior marriage. He is self-employed and operates his own computer parts store. For the first two months of the year, Alyssa worked for Staples, Inc., as an employee. In March, Alyssa accepted a new job with Super Toys, Inc. (ST), where she worked for the remainder of the year. This year, the Johnsons received $255,000 of gross income. Determine the Johnson?s AGI given the following information: a. Expenses associated with Jeremy?s store include $40,000 in salary (and employment taxes) to employees, $45,000 of cost of goods sold, and $18,000 in rent and other administrative expenses. b. As a salesperson, Alyssa incurred $2,000 in travel expenses related to her employment that were not reimbursed by her employer. c. The Johnsons own a piece of investment real estate. They paid $500 of real property taxes on the property and they incurred $200 of expenses in travel costs to see the property and to evaluate other similar potential investment properties. d. The Johnsons own a rental home. They incurred $8,500 of expenses associated with the property. e. The Johnson?s home was only five miles from the Staples store where Alyssa worked in January and February. The ST store was 60 miles from their home, so the Johnsons decided to move to make the commute easier for Alyssa. The Johnson?s new home was only ten miles from the ST store. However, it was 50 miles from their former residence. The Johnsons paid a moving company $2,000 to move their possessions to the new location. They also drove the 50 miles to their new residence. They stopped along the way for lunch and spent $60 eating at Denny?s. None of the moving expenses were reimbursed by ST. f. Jeremy paid $4,500 for health insurance coverage for himself. Alyssa was covered by health plans provided by her employer, but Jeremy is not eligible for the plan until next year. chapter 6 Individual Deductions 6-51 g. Jeremy paid $2,500 in self-employment taxes. h. Alyssa contributed $4,000 to ST?s employer-provided traditional 401k plan. i. Jeremy paid $5,000 in alimony and $3,000 in child support from his prior marriage. j. Alyssa paid $3,100 of tuition and fees to attend night classes at a local university. The Johnsons would like to deduct as much of this expenditure as possible rather than claim a credit. k. The Johnsons donated $2,000 to their favorite charity.
Question 2
"Parent, Inc. is contemplating a tender offer to acquire 80 percent of Subsidiary Corporation's common stock. Subsidiary's shares are currently quoted on the New York Stock Exchange at $85 per share. In order to have a reasonable chance of the tender offer attracting 80 percent of Subsidiary's stock, Parent believes it will have to offer at least $105 per share. If the tender offer is made and is successful, the purchase will be consummated on January 1, 2009. A typical part of the planning of a proposed business combination is the preparation of projected or pro forma consolidated financial statements. As a member of Parent's accounting group, you have been asked to prepare the pro forma 2009 consolidated financial statements for Parent and Subsidiary assuming that 80 percent of Subsidiary's stock is acquired at a price of $105 per share. To support your computations, Martha Franklin, the chairperson of Parent's acquisitions committee, has provided you with the projected 2009 financial statements for Subsidiary. (The projected financial statements for Subsidiary and several other companies were prepared earlier for the acquisition committee's use in targeting a company for acquisition.) The projected financial statements for Subsidiary for 2009 and Parent's actual 2008 financial statements are presented in table 1. Ms. Franklin has asked you to use the following assumptions to project Parent's 2009 financial statements: Sales will increase by 10 percent in 2009. All sales will be on account. Accounts receivable will be 5 percent lower on December 31, 2009, than on December 31, 2008. Cost of goods sold will increase by 9 percent in 2009. All purchases of merchandise will be on account. Accounts payable are expected to be $50,500 on December 31, 2009. Inventory will be 3 percent higher on December 31, 2009, than on December 31, 2008. Straight-line depreciation is used for all fixed assets. No fixed assets will be disposed of during 2009. The annual depreciation on existing assets is $40,000 per year. Equipment will be purchased on January 1, 2009, for $48,000 cash. The equipment will have an estimated life of 10 years with no salvage value. Operating expenses, other than depreciation, will increase by 14 percent in 2009. All operating expenses, other than depreciation, will be paid in cash. Parent's income tax rate is 40 percent, and taxes are paid in cash in four equal payments. Payments will be made on the 15th of April, June, September, and December. For simplicity, assume taxable income equals financial reporting income before taxes. Parent will continue the $2.50 per share annual cash dividend on its common stock. If the tender offer is successful, Parent will finance the acquisition by issuing $170,000 of 6 percent non-convertible bonds at par on January 1, 2009. The bonds would first pay interest on July 1, 2009, and would pay interest semi-annually thereafter each January 1 and July 1 until maturity on January 1, 2019. The acquisition will be accounted for as a purchase and Parent will account for the investment using the equity method. Although most of the legal work related to the acquisition will be handled by Parent's staff attorney, direct costs to prepare and process the tender offer will total $2,000 and will be paid in cash by Parent in 2009. As of January 1, 2009, all of Subsidiary's assets and liabilities are fairly valued except for machinery with a book value of $8,000, an estimated fair value of $9,500, and a 5-year remaining useful life. Assume that straight-line depreciation is used to amortize any revaluation increment. No transactions between these companies occurred prior to 2009. Regardless of whether they combine, Parent plans to buy $50,000 of merchandise from Subsidiary in 2009 and will have $3,600 of these purchases remaining in inventory on December 31, 2009. In addition, Subsidiary is expected to buy $2,400 of merchandise from Parent in 2009 and to have $495 of these purchases in inventory on December 31, 2009. Parent and Subsidiary price their products to yield a 65 percent and 80 percent markup on cost, respectively. Parent intends to use three financial yardsticks to determine the financial attractiveness of the combination. First, Parent wishes to acquire Subsidiary Corporation only if 2009 consolidated earnings per share will be at least as high as the earnings per share Parent would report if no combination takes place. Second, Parent will consider the proposed combination unattractive if it will cause the consolidated current ratio to fall below 2 to 1. Third, return on average stockholders' equity must remain above 20 percent for the combined entity. If the financial yardsticks described above and the non-financial aspects of the combination are appealing, then the tender offer will be made. On the other hand, if these objectives are not met, the acquisition will either be restructured or abandoned. Prepare pro forma consolidated worksheet. Prepare a pro forma consolidation worksheet for Parent, Inc. and its proposed subsidiary as of December 31, 2009. To ensure you are starting with the right numbers, use the solution provided to Milestone 1 for the adjusted pro forma 2009 financial statements of Parent, Inc., and the projected 2009 financial statements of Subsidiary Corporation in table 1. Show all consolidation adjusting entries including minority interest entries.
Question 3
Question 1 ? Assessable Income (10 marks) Explain what is meant by the term ?ordinary income? and provide some examples of receipts which may be included in a taxpayer?s ordinary income. You should discuss relevant cases. Discuss, with reference to legislation or case law, whether the following are ordinary income in the hands of the recipient: ? Qantas frequent flyer points received by a solicitor in relation to work-related travel paid for by his employer ? a gift received under a will of a deceased estate ? proceeds from the sale of trading stock (e.g. electrical appliance sold by a retailer) ? a cash prize received by a competitor on a quiz show ? payment made by an employer to a former employee in consideration of the employee agreeing not to sue the employer for unfair dismissal ? a payment made by a television station to a netballer for being named best and fairest in the national netball competition. Question 2 ? Fringe Benefits Tax (6 marks) Discuss how to determine whether a fringe benefit has been provided. Outline, with reference to legislation, whether the following are fringe benefits, and if so, how to calculate the value of the benefit: ? a trainee accountant is able to park for free on his employer?s business premises each working day ? a secretary of a law firm is provided legal services by her firm, in relation to her divorce, at a 40% discount to normal rates ? an entertainment allowance paid to a sales representative employed by a publishing company ? an oil rig worker is provided a flight to return home to see his family for a 2 week holiday. Question 3 ? Deductions (10 marks) Discuss the various tests developed by the courts for deciding whether a loss or outgoing is ?on revenue account? or ?capital in nature?. Discuss the deductibility, with reference to legislation or case law, of the following outgoings of Felix?s Florist: ? Felix borrowed $100,000 to use as working capital in the business. He also incurred $4,500 in borrowing costs in relation to this loan. ? He incurred $40,000 interest for the year on additional borrowings of $220,000 used to purchase the goodwill and stock of a rival business ? Felix had to pay $150,000 in damages after being sued by a competitor for using the same business name. He also incurred legal costs of $25,000 in relation to the lawsuit ? Felix incurred $12,000 for advertising his business for sale. ACC00132 ? Unit Information 15 Question 4 ? Capital Gains (8 marks) Sarah is considering selling her hairdressing business that she has owned for 13 years, and has come t you for advice to minimise her tax in relation to the sale. She estimates she will make a gain on sale of $84,000. She also has a parcel of shares (owned for 5 years) that she is considering selling, that would realise a capital loss of $14,000. Discuss what options are available to minimise the amount of capital gains tax she might have to pay, including any conditions that must be met to access these concessions. Question 5 ? Tax Offsets and Obligations (6 marks) Georgia has a taxable income of $75,000 for the current 2012 tax year. She is 58 years old and is a sole parent to a dependent child. Her child has had substantial surgery and rehabilitation in the current tax year after a serious sporting injury at school. Georgia has no private health insurance.Outline the tax offsets Georgia might be entitled to claim for the year, and explain any special conditions that must be met to obtain these offsets. Explain any additional levies or tax Georgia may be required to pay, based on the information provided above. It is essential that reference to the legislation and other authorities (not the Master Tax Guide) be made in relation to the issues arising in all four questions.
Question 4
"14-4. (Financial forecasting?percent of sales) Tulley Appliances Inc. projects next year?s sales to be $20 million. Current sales are $15 million, based on current assets of $5 million and fixed assets of $5 million. The firm?s net profit margin is 5 percent after taxes. Tulley forecasts that its current assets will rise in direct proportion to the increase in sales, but that its fixed assets will increase by only $100,000. Currently, Tulley has $1.5 million in accounts payable (which vary directly with sales), $2 million in long-term debt (due in 10 years), and common equity (including $4 million in retained earnings) totaling $6.5 million. Tulley plans to pay $500,000 in common stock dividends next year. a. What are Tulley?s total financing needs (i.e., total assets) for the coming year? b. Given the firm?s projections and dividend payments plans, what are its discretionary financing needs? c. Based on your projections, and assuming that the $100,000 expansion in fixed assets will occur, what is the largest increase in sales the firm can support without having to resort to the use of discretionary sources of financing? 15-8. (Cost of accounts receivable) Johnson Enterprises Inc. is involved in the manufacture and sale of electronic components used in small AM/FM radios. The firm needs $300,000 to finance an anticipated expansion in receivables due to increased sales. Johnson?s credit terms are net 60, and its average monthly credit sales are $200,000. In general, the firm?s customers pay within the credit period; thus, the firm?s average accounts receivable balance is $400,000. Chuck Idol, Johnson?s comptroller, approached the firm?s bank with a request for a loan for the $300,000 using the firm?s accounts receivable as collateral. The bank offered to make a loan at a rate of 2 percent over prime plus a 1 percent processing charge on all receivables pledged ($200,000 per month). Furthermore, the bank agreed to lend up to 75 percent of the face value of the receivables pledged. a. Estimate the cost of the receivables loan to Johnson when the firm borrows the $300,000. The prime rate is currently 11 percent. b. Idol also requested a line of credit for $300,000 from the bank. The bank agreed to grant the necessary line of credit at a rate of 3 percent over prime and required a 15 percent compensating balance. Johnson currently maintains an average demand deposit of $80,000. Estimate the cost of the line of credit to Johnson. c. Which source of credit should Johnson select? Why? 16-9. (Interest rate risk) Two years ago your corporate treasurer purchased for the firm a 20-year bond at its par value of $1,000. The coupon rate on this security is 8 percent. Interest payments are made to bondholders once a year. Currently, bonds of this particular risk class are yielding investors 9 percent. A cash shortage has forced you to instruct your treasurer to liquidate the bond. a. At what price will your bond be sold? Assume annual compounding. b. What will be the amount of your gain or loss over the original purchase price? c. What would be the amount of your gain or loss had the treasurer originally purchased a bond with a 4-year rather than a 20-year maturity? (Assume all characteristics of the bonds are identical except their maturity periods.) d. What do we call this type of risk assumed by your corporate treasurer? 16-13. (Ratio analysis) Assuming a 360-day year, calculate what the average investment in inventory would be for a firm, given the following information in each case. a. The firm has sales of $600,000, a gross profit margin of 10 percent, and an inventory turnover ratio of 6. b. The firm has a cost-of-goods-sold figure of $480,000 and an average age of inventory of 40 days. c. The firm has a cost-of-goods-sold figure of $1.15 million and an inventory turnover rate of 5. d. The firm has a sales figure of $25 million, a gross profit margin of 14 percent, and an average age of inventory of 45 days. "
Question 5
I have attached the readings so that the question below may be answered. I would really appreciate it if you could get thid back to me before the assigned due date/time. Will I need to make any changes before turning in to the instructor or worry about plagarism? Please help me out. It would be so awsome of you.. Thank you. Introduction Coca-Cola Blak was introduced to various international markets including the USA and discontinued in the US market in 2007. In this case you are to analyze a famous firm's product failure and in doing so demonstrate your understanding of a promotion strategy, what elements in the overall marketing strategy communicate about a product. Case Question Write a 2-3 page paper in which you respond to the following case question: Analyze the failure of Coca-Cola Blak in the U.S. market. Assume that Coca-Cola has decided to re-formulate the product's taste and re-launch it and you are in charge of the promotions campaign for the re-launch. Explain the issues and factors you would take into account and the elements you would include in developing your promotions strategy for the re-formulated product. In answering this case question aim to demonstrate your learning not only of the materials from MOD04, but also those from MOD01-03. Ensure that you repeat the case question in full and verbatim on the title page of your submission. Excluding your title and reference pages, your paper should be no more than three pages long. Please submit your case for grading by the end of this module. CASE EXPECTATIONS Use information from the background readings as well as the case articles and any good quality sources you can find. Please cite all sources and provide a reference list at the end of the paper. The following will be assessed in particular: Your demonstrated understanding of the marketing concepts central to the case question. Your demonstrated understanding of factors related to the development of an effective promotions strategy through the analysis you conduct in the context of the case. The criteria used for assessment will be those explained on the MOD01 Home page, namely: Focus. Breadth. Depth. Critical thinking. Effective and appropriate communication skills.
