Question 1
ACC432A SIGNATURE PROBLEM TAX PROBLEM Using the information provided below complete a Form 1040 and all supporting Schedules and Forms to complete a 2011 tax return for John and Ellen Brite. John and Ellen Brite (SSN 265-32-1497 and 571-07-7345, respectively) are married and file a joint return. They have no dependents. John owns an unincorporated specialty electrical lighting retail store, Brite-On. Brite-On had the following assets on January 2, 2011: Assets Cost Old store building purchased April 1, 2000 $100,000 Equipment (7-year recovery) purchased January 10, 2006 30,000 Inventory valued using FIFO method: 4,000 light bulbs $5/bulb Brite-On purchased a competitor?s store on March 1, 2011 for $107,000. The purchase price included the following: New store building $60,000 (FMV) Land 18,000 (FMV) Equipment (5-year recovery) 11,000 (FMV) Inventory: 3,000 light bulbs $6/bulb (cost) On June 30, 2011, Brite-On sold the 7-year recovery period equipment for $12,000. Brite-On leased a $30,500 car for $500/month beginning on January 1, 2011. The car is used 100% for business and was driven 14,000 miles during the year. Brite-On sold 8,000 light bulbs at a price of $15/bulb during the year. Also, Brite-On made additional purchases of 4,000 light bulbs in August 2011 at a cost of $7/bulb. Brite-On had the following revenues (in addition to the light bulbs) and additional expenses: Service revenues $64,000 Interest expense on business loans 4,000 Auto expenses (gas, oil, etc) 3,800 Taxes and licenses 3,000 Utilities 2,800 Salaries 24,000 John and Ellen also had some personal expenses: Medical bills $ 4,500 Real property taxes 3,800 Home mortgage interest 9,000 Charitable contributions (cash) 600 The Brites received interest income on a bank savings account of $275, John and Ellen made four $5,000 quarterly estimated tax payments. For self employment tax purpose, assume John spent 100% of his time at the store while Ellen spend no time at the store. Additional Facts: 1) Equipment acquired in 2006: The Brites elected out of bonus depreciation and did not elect Sec. 179. 2) Equipment acquired in 2011: The Brites elect Sec. 179 to expense the cost of the 5-year equipment but elected out of bonus depreciation. 3) Lease inclusion rules required that Brite-On reduce its deductible lease expense by $30.,It's missing a couple of forms, schedule A, SE, C, forms 1040, 4562 and form 4797 as well as notes. I only received one form. There was a lot of information that was left out.,schedule C,schedule A,Schedule SE,form 4562,form 4797,Can I get an update? I need it by tomorrow, September 25, 2012.
Question 2
Use the M&Ms? data to complete this assignment. You will be using the methods of 7.4 for the color proportions and 7.2 for the mean number of candies per bag. For the Bonus you will be using the methods of 7.5. You can use StatCrunch to assist with the calculations. A link for StatCrunch can be found under Tools for Success in Course Home. Here is also a link: http://statcrunch.pearsoncmg.com/statcrunch/larson_les4e/dataset/index.html. You can also find additional help on both confidence intervals and StatCrunch in the Online Math Workshop under Tab: ?MAT300 Archived Workshops?. Specifically you will be looking for Hypothesis Tests and Using Technology ? Hypothesis Testing. Submit your answers in Excel, Word or pdf format. Place the file in the dropbox. Be sure to state clear hypotheses, test statistic values, critical value or p-value, decision (reject/fail to reject), and conclusion in English (what does reject/fail to reject the null mean in terms of your hypotheses). When doing calculations for the color proportions, keep at least 4-6 decimal places sample proportions, otherwise you will encounter large rounding errors. Masterfoods USA states that their color blends were selected by conducting consumer preference tests, which indicated the assortment of colors that pleased the greatest number of people and created the most attractive overall effect. On average, they claim the following percentages of colors for M&Ms? milk chocolate candies: 24% blue, 20% orange, 16% green, 14% yellow, 13% red and 13% brown. 3 pts. Test their claim that the true proportion of blue M&Ms? candies is 0.24 at the 0.05 significance level. 3 pts. Test their claim that the true proportion of orange M&Ms? candies is 0.20 at the 0.05 significance level. 3 pts. Test their claim that the true proportion of green M&Ms? candies is 0.16 at the 0.05 significance level. 3 pts. Test their claim that the true proportion of yellow M&Ms? candies is 0.14 at the 0.05 significance level. 3 pts. Test their claim that the true proportion of red M&Ms? candies is 0.13 at the 0.05 significance level. 3 pts. Test their claim that the true proportion of brown M&Ms? candies is 0.13 at the 0.05 significance level. 3 pts. On average, they claim that a 1.69 oz bag will contain more than 54 candies. Test this claim (? > 54) at the 0.01 significance (? unknown). BONUS: 5 pts. It is important that the total number of candies per bag does not vary very much. As a result of this quality control, the desired standard deviation is 1.5. Test the claim (? = 0.05) that the true standard deviation for number of candies per 1.69 oz bag is less than 1.5 (? 54) at the 0.01 significance (? unknown). BONUS: 5 pts. It is important that the total number of candies per bag does not vary very much. As a result of this quality control, the desired standard deviation is 1.5. Test the claim (? = 0.05) that the true standard deviation for number of candies per 1.69 oz bag is less than 1.5 (? < 1.5).
Question 3
? Pinnacle Manufacturing: Part VI 50 marks Part VI of the Pinnacle Manufacturing case covers analytical procedures and tests of details of balances for accounts payable. Assume that the understanding of internal controls over acquisitions and cash payments, and the related tests of controls and substantive tests of transactions support an assessment of a low control risk. The accounts payable listing at year-end shows 519 accounts, making up the accounts payable balance of $11,277,989 at 31 December 20X2. Accounts payable balances between $50,001 and $200,000 total $4,075,355 and balances less than $50,000 are $4,792,683. Required: 1. List the relationships, ratios and trends that will provide useful information about the overall reasonableness of accounts payable. Consider income statement accounts that affect accounts payable in selecting the analytical procedures. (6 marks) 2. Prepare a substantive audit programme for accounts payable in a performance format. Group the procedures under the headings General, Ending Balances, Cut off and Disclosure & Classification. (10 marks) Note: Use Figure 12.14 (page 427) as an example of the format of a balances audit programme. 3. Assume that a) assessed control risk had been high rather than low for each transaction-related audit objective; b) inherent risk was high for each balance-related audit objective; and c) analytical procedures indicated a high potential for misstatement. What would be the effect on the audit procedures and sample sizes in the audit programme in 2? (5 marks)
Question 4
Read the Closing Case entitled A Stephenson Real Estate Recapitalization (attached) and answer the five questions posed on this sheet. 1. If Stephenson wishes to maximize its total market value, would you recommend that it issue debt or equity to finance the land purchase? Explain. Stephenson should issue debt, since interest is tax deductible and so provides a tax shield which will increase the value of the firm 2. Construct Stephenson?s market value balance sheet before it announces the purchase. Market Value Balance Sheet Assets Equity Total assets Debt & Equity 3. Suppose Stephenson decides to issue equity to finance the purchase. a. What is the net present value (NPV) of the project? (Hint: Calculate the after-tax increase in earnings as a result of the land purchase as a perpetuity.) The after tax cash flows each year are 14 million X (1-0.4) = $8.4 million Since the cash flows are a perpetuity, the present value is calculated as Annual cash flow/discounting rate. As the firm is all equity financed, the discounting rate should be the cost of equity which is the current cost of capital which is 12.5%. PV of cash flows = 8.4/12.5% = $67.2 million The cost of project is 60 million NPV = 67.2 - 60 = $7.2 million Presently the market value of equity is 20 million shares X $33.50 = $670 million After the project the value of equity will increase to 670+7.2 = 677.2 million Given that there are 20 million shares, price per share will be 677.2/20 = $33.86 Number of shares to be issued = 60,000,000/33.86 = 1,772,002 b. Construct Stephenson?s market value balance sheet after it announces the purchase will be financed with equity. (Hint: The market value of equity increases by the market value or NPV of the land purchase.) Market Value Balance Sheet Old assets NPV of project Equity Total assets Debt & Equity What would be the new price per share of the firm?s stock? How many shares will Stephenson need to issue in order to finance the issue? c. Construct Stephenson?s market value balance sheet after the equity issue, but before the purchase has been made. Market Value Balance Sheet Cash Old assets NPV of project Equity Total assets Debt & Equity How many shares of common stock does Stephenson have outstanding after the new equity issue? What is the price per share of the firm?s stock? d. Construct Stephenson?s market value balance sheet after the purchase has been made. Market Value Balance Sheet Old assets PV of project Equity Total assets Debt & Equity 4. Suppose Stephenson decides to issue debt to finance the purchase. a. What will the market value of the Stephenson company be if the purchase is financed with debt? (Hint: VL = VU + tCB.) b. Construct Stephenson?s market value balance sheet after both the debt issue and the land purchase. What is the price per share of the firm?s stock after the debt issue? Market Value Balance Sheet Value unlevered Debt Tax shield Equity Total assets Debt & Equity 5. Which method of financing maximizes the per-share stock price of Stephenson?s equity? Explain.,Thanks, really just worried about question 4. Trying to check my work.
Question 5
The Grey Sky Company presented the following equity section of their balance sheet as of December 31, 2010, the end of its accounting year. Common stock, $1 par (10,000,000 shares authorized, 4,500,000 shares issued and outstanding) 4,500,000 Paid-in Capital in Excess of Par ? Common Stock 85,500,000 Preferred stock, 8%, $100 par (1,000,000 shares authorized, 250,000 shares issued and outstanding) 25,000,000 Paid-in Capital in Excess of Par ? Preferred Stock 6,250,000 Retained Earnings 45,000,000 $166,250,000 As of December 31, 2010, the common stock had a market value of $55 per share and the preferred stock had a market value of $110 per share. During 2011, the company took the following actions: 1. January 15: The board of directors authorized the payment of the annual cash dividend on preferred stock for 2011 to which the preferred shareholders are entitled. The payment is to be made to shareholders of record as of January 31. 2. February 15: The Company paid the dividend on preferred stock declared on January 15. 3. March 1: The board of directors authorized the Company?s usual quarterly $0.75 per share cash dividend on common stock to shareholders of record as of March 15. 4. March 31: The Company paid the dividend on common stock declared on March 31. 5. April 1: The Company issued 500,000 shares of common stock at $57 per share. 6. May 1: The Company issued 50,000 shares of preferred stock at $120 per share. 7. June 1: The board of directors authorized the Company?s usual quarterly $0.75 per share cash dividend on common stock to shareholders of record as of June 15. 8. July 1: The Company paid the common stock dividend declared on June 1. 9. August 1: The Company reacquired 25,000 shares of its own common stock for $52 per share. 10. September 1: The board of directors authorized the Company?s usual quarterly $0.75 per share cash dividend on common stock to shareholders of record as of September 15. 11. October 1: The Company paid the common stock dividend declared on September 1. 12. October 1: The board of directors authorized a 5% stock dividend on the outstanding common stock to shareholders of record as of October 15. The market price of the stock was $54 per share on October 1 and $53 per share on October 15. 13. November 1: Issued the common stock dividend declared on October 1. The market price of the stock was $52 on November 1. 14. November 15: Exchanged 10,000 shares of treasury stock for the inventory of a small competitor in liquidation. The inventory originally cost the competitor $480,000 and had an appraised value of $550,000 on November 15. 15. November 15: Sold 5,000 shares of treasury stock at $50 per share. 16. December 1: The board of directors authorized the Company?s usual quarterly $0.75 per share cash dividend on common stock to shareholders of record as of December 15. Instructions: Assume that the Company uses the cost method to account for treasury stock. Assume that the Company?s net income for 2011 was $17,500,000. a) Prepare the journal entries to record the items listed above. b) Prepare the December 31, 2011 equity section of the balance sheet.
