Question 1
Chapter 13 Case Study You have been given a research project by your boss regarding the classification of short- term obligations repaid prior to being replaced by a long- term security. Kraft Foods, Inc., issued $5,000,000 of short-term commercial paper during 2008 to finance construction of a plant. At September 30, 2009, Kraft?s fiscal year-end, the company intends to refinance the commercial paper by issuing long-term bonds. However, because Kraft temporarily has excess cash, in November 2009 it pays off $2,000,000 of the commercial paper as the paper matures. In December 2009, the company completes a $10,000,000 long-term bond issue. Later during December, it issues its September 30, 2009 financial statements. The proceeds of the long- term bond issue are to be used to replenish $2,000,000 in working capital used in November to pay off a part of the commercial paper, to pay $3,000,000 of commercial paper as it matures in January 2010, and to pay $5,000,000 of construction costs expected to be incurred later that year to complete the plant. You initially are hesitant because you don?t recall encountering a situation in which short-term obligations were repaid prior to being replaced by a long-term security. However, you are encouraged by remembering that this general topic is covered by an old FASB pronouncement: ? Classification of Obligations Expected to Be Refinanced,? Statement of Financial Accounting Standards No. 6 (Stamford, Conn.: FASB, 1975). Also, ?Classification of Obligation Repaid Prior to Being Replaced by a Long-Term Security,? FASB Interpretation No. 8, addresses this situation specifically. Required: Format: List each question and after the question, state your answer in complete sentences/paragraph form. If calculations are involved, show ALL calculations for complete credit. 1. Formulate your own opinion on the proper treatment for the $5,000,000 commercial paper based on your reading in the text. Explain how you think the item should be reported and give textbook pages to support your conclusions. 2. Determine how the $5,000,000 of commercial paper should be classified by researching the FASB Accounting Standards Codification (ASC). Explain the results of your research and cite the appropriate section of the Codification. NOTE: The FASB Codification link and sign-in information is in Course Material. You must use the Accounting Standards Codification (ASC) citations for your answers. You may use the old FASB statement information given above to find the Codification location, but your citations MUST be in ASC format. For example, ASC 740-10-25 is the format for your citation (however, 740-10-25 has nothing to do with this case solution--it is only an example of how to show the citation). 3. Compare your previous answer in #1 based on your reading of the textbook to the FASB Codification required treatment in #2. What are the differences?
Question 2
To raise operating funds, Signal Aviation sold an airplane on January 1, 2011, to a finance company for $850,000. Signal immediately leased the plane back for a 13-year period, at which time ownership of the airplane will transfer to Signal. The airplane has a fair value of $883,116. Its cost and its book value were $684,412. Its useful life is estimated to be 15 years. The lease requires Signal to make payments of $108,783 to the finance company each January 1. Signal depreciates assets on a straight-line basis. The lease has an implicit rate of 10%. Required: (1) Prepare the appropriate entries for Signal on January 1, 2011, to record the sale-leaseback. (Omit the "$" sign in your response.) Date General Journal Debit Credit Jan. 1, 2011 (2) Prepare the appropriate entries for Signal on December 31, 2011, to record necessary adjustments. (Round your answers to the nearest whole dollar amount. Omit the "$" sign in your response.) Date General Journal Debit Credit Dec. 31, 2011 Record interest Record depreciation Recognize deferred gain rev: 03-03-2011 ask your instructor a questioncheck my workeBook Links (2)references,On the last parts of this, can you please give me an example as to how it is worked? I don't understand the depreciation and the gain. Thank you
Question 3
Use the attached pdf to "Prepare a balance sheet as of December 31, 2007",RIGHT document is uploaded now. "Use the attached pdf to "Prepare a statement of owner's equity for the three months ended December 31, 2007",RIGHT DOC is uploaded now. "Use the attached pdf to "Prepare a balance sheet as of December 31, 2007",asdf,I will love you so much if you could finish this soon. Like in the next few hours or a guarantee to finish in the next 10 or 12.. Please... I am so stressed, it would really brighten up my day if you did these 3 things for me first!,Is there anyway to speed up deadline to at the most 10 hours preferably a few hours? I can pay the $30 fee if it is guaranteed in 2 hours.,Please please I sent in this question 2 days ago but attached the wrong file, I need it today in a few hours, can you please please just do this one real quickly?,Can you do this: 1. "Prepare a statement of owner's equity for the three months ended December 31, 2007" and 2. "Prepare an income statement for the three months ended December 31,2007" or do you need me to open 2 new questions?
Question 4
True/False Questions (two points each) 1. S corporations offer advantages of passing profits, deductions, and credits through to shareholders but protect their investors from personal liability. a. True b. False 2. Decisions made by a Court of Appeals carry great weight because each Court of Appeals is independent from the others and can be overruled only by the U.S. Supreme Court, which agrees to hear very few tax cases each year. a. True b. False 3. If a group of partners that collectively owns more than a 50-percent interest in the partnership's capital and profits has the same year-end, the partners' tax year is the required tax year of the partnership. a. True b. False 4. The IRS does not need to approve a change to a different tax year for a business to compute its taxable income and file its income tax returns. a. True b. False 5. Only individuals and C corporations actually pay income taxes to the federal government. a. True b. False 6. The definition of gross income varies among the various types of tax-paying entities. a. True b. False Multiple Choice Questions (three points each) 1. A tax structure in which the average tax rate stays constant as the tax base fluctuates is called a proportional tax, which is also commonly called: a. an alternative tax. b. a proactive tax. c. a flat tax. d. None of the above. 2. A tax on the consumption, use, or storage of goods and services otherwise not subject to sales tax is known as: a. consumption tax. b. use tax. c. marginal tax. d. none of the above. 3. Which notion recognizes that mere appreciation in value does not necessarily mean that the owner has the resources to pay the tax associated with the appreciation? a. cash-on-delivery principle. b. wherewithal-to-pay concept. c. capital recovery doctrine. d. None of the above. 4. Which of the following is an example of a consideration the government takes into account when creating a tax? a. Equity. b. Administrative convenience. c. Redistribution of wealth. d. Both a and b. e. All of the above. 5. What are the two Congressional Committees that have primary responsibility for the drafting of tax bills? a. Senate Ways and Means Committee and the House Finance Committees. b. House Ways and Means and the Senate Finance Committees. c. House Tax Committee and the Senate Tax Committees. d. House Revenue Committee and the Senate Revenue Committees. 6. Which of the following is an example of a primary source of law? a. Citators. b. Periodicals. c. Commercial tax services. d. None of the above. 7. Which of the following best describes tax treaties? a. Bilateral agreements between two countries to promote tax enforcement and prevent double taxation of income. b. Long dissertations on tax law written by legal experts. c. Special payments made to foreign countries to help promote trade with the United States. d. Foreign Income Tax Regulations. 8. Which of the following is not true with respect to a determination letter? a. Applies the principles and precedents previously announced by the IRS to a specific set of facts. b. Issued at the request of a taxpayer. c. Issued only when the question presented is specifically answered by a statute, a tax treaty, the regulations, a conclusion stated in a revenue ruling, or an opinion or court decision that represents the IRS's position. d. Issued if a question involves a novel issue. 9. Which of the following statements is not true with respect to IRS/taxpayer litigation? a. The appeal of decisions rendered by the Federal Court of Claims is heard by the Federal Circuit Court of Appeals. b. The U.S. Tax Court is a special court established to provide a forum to dispute tax deficiencies determined by the IRS and unlike other federal courts, the Tax Court hears only federal tax cases. c. When litigating a dispute in the U.S. Tax Court, a taxpayer first must pay the full amount of taxes, interest, and penalties that the IRS has determined that the taxpayer owes and then the taxpayer must sue the IRS for a refund. d. Of the three types of opinions issued by the Tax Court, regular opinions are those that the Tax Court considers important or expressive of some new point not previously covered by one of its published opinions. 10. Which one of the following statements about GAAP is not true? a. GAAP provides a series of rules that businesses must follow that are intended to fairly present a business's accounting income. b. GAAP does provide some flexibility. c. GAAP sometimes allows businesses to choose among various acceptable accounting methods. d. GAAP provides a series of rules that are intended to fairly present a business's taxable income. 11. Which one of the following statements about flow-through entities is accurate? a. Owners of flow-through entities are considered to have recognized all profits or losses from a flow-through entity on the last day of the flow-through entity's tax year. b. When a flow-through entity uses a year-end that is different from the year-end of its owners, a deferral of income results. c. Both a. and b are accurate statements. d. None of the above. 12. Which one of the following statements about the "natural business tax year" is correct? a. Demonstrating a natural business is impossible for a business that has been in existence for only two years. b. A natural business year can be demonstrated by satisfying the "25-percent gross receipts test" for five consecutive years. c. The "25-percent gross receipts test" requires a calculation of the percentage of gross receipts that comes from the last three months of the requested tax year. d. Both a. and c. e. Both b. and c. 13. Which one of the following statements about the cash receipts and disbursements method is correct? a. Partnerships that have a C corporation as a partner cannot use the cash receipts and disbursements method of accounting. b. The cash receipts and disbursements method of accounting is popular because it requires a minimum of recordkeeping and allows taxpayers to postpone recognition of income by refusing to accept cash receipts. c. Sole proprietors must use the cash receipts and disbursements method of accounting to account for their businesses if they use it to account for their other (personal) items of income and expense. d. All of the above. 14. Which one of the following statements about accounting for expenses is incorrect? a. Under the cash method of accounting, businesses ordinarily may not deduct (or capitalize) an expense until the year during which the expense actually is paid. b. An expense may be deducted the year payment is made, even though payment is made with borrowed funds. c. Amounts paid by check are considered paid when the check is mailed or delivered, provided that the bank honors the check. d. Amounts paid by credit card are considered paid when the business pays the credit card bill. 15. Under the all-events test, a business has to include an amount in its income when any one of the following events occurs other than: a. Required performance is completed. b. Payment of income becomes due. c. Payment is received. d. Economic performance has occurred with respect to the liability. 16. A corporation's taxable income before the dividends received deduction (DRD) is $70,000. Included in this amount is dividend income of $60,000 from another corporation in which the taxpayer owns 85 percent of its stock outstanding. The corporation's taxable income after the DRD is: a. $70,000. b. $10,000. c. $19,000. d. $22,000. e. none of the above. 17. Rachelle Earhart had $60,000 in profits from her sole proprietorship, $5,000 in dividends, and $3,000 in interest. She deducted $3,000 for health insurance premiums, $6,000 for real property taxes, $4,239 for self-employment taxes, $10,000 for mortgage loan interest, and $2,500 for state income taxes. Based on this information, what is Rachelle's adjusted gross income? a. $42,261 b. $60,761 c. $65,000 d. $68,000 18. Judith Beane had a regular tax liability of $20,000 and a tentative minimum tax of $23,000. What is the amount of her alternative minimum tax? a. $0 b. $3,000 c. $20,000 d. $23,000 19. Which one of the following items has to be included in gross income (unless an exception applies)? a. The amount by which property has increased in value during the year. b. The proceeds of a loan. c. Discharge of a debt. d. The amount of adjusted basis when property is sold. 20. Which one of the following statements regarding LIFO is not correct? a. LIFO is a method of assigning cost to products sold during the year. b. When prices are declining, LIFO produces a higher cost of goods sold than FIFO. c. A taxpayer can use LIFO for tax purposes but FIFO for financial accounting purposes. d. During inflationary times, LIFO decreases a business's profits. 21. Each of the following is an above-the-line deduction EXCEPT: a. Self-employed health insurance deduction. b. Health savings account deduction. c. Contributions to traditional IRAs. d. Medical expenses. 22. Bethell Management performed consulting services for one client and was paid $3,000. It performed consulting services for another client in exchange for tax preparation services for which it normally would be billed $2,000. It purchased from a third client a computer whose retail price was $1,000 but which was on sale for $750. How much of these amounts received does it have to include in its gross income? a. $3,000 b. $3,250 c. $5,000 d. $5,250 Essay Questions (eleven points each) 1. Melissa Wimberley sold 100 shares of ABC stock with an adjusted basis of $1,000 for $2,000. She also sold 500 shares of XYZ stock with an adjusted basis of $20,000 for $12,000. She had no other sales of capital assets for the year. Her ordinary income for the year was $50,000. The previous tax year she had a capital gain of $2,000 and $45,000 of ordinary income. How should Melissa report her loss on the sale of XZY stock? 2. William Nowland?s filing status is qualifying surviving spouse. His taxable income for 2009 is $76,000. Included in that amount is $5,000 of qualified dividends. How much federal income tax does he have to pay for the year?,Hello, I can't open the file attached. Please help. Thank you. spvasq@msn.com
Question 5
I have a tricky question by my professor and I need your help I posted in my discussion board the the following :Discussion Unit 6 A. If Patty wants to show the bank the maximum profit over the previous 2-year period, which costing method should she present? In this case the issue is not what type of financial statements Patty wants to show to the bank it is what she has to show to the bank. It is important to understand the difference between these two methods. A manufacturer has two general ways to account for fixed manufacturing costs: variable costing and absorption costing also know as full costing (this method is mandatory by GAAP). Under variable costing you do not include fixed manufacturing costs in the calculation of the cost of each item produced. Under full costing you allocate a portion of those fixed cost to each item. Variable costing has distinct advantage for internal planning and assessment, because variable costing provides a more accurate picture of the cash flow, which is a critical for small manufactures operating with a tighter margin. Also costing method provides all the data necessary for break ? even analysis, a key tool in determining how much the company must sell at certain price before it shows a manufacturing profit. Variable costing has great advantages in business the variable costing data are quite useful in avoiding incorrect decisions about product discontinuation and so on. Having both sets of profit figures enables the executive to form judgments with much greater facility than if only profit figure were available; it also facilitates responsibility accounting by making it possible to have information by organizational levels. This dual approach provides the additional information that management needs for making decisions and still follows generally accepted accounting principles. A system combining variable costing and absorption costing with standard costs and flexible budgets provides more effective cost control. But the use of this report is strict only for internal analysis and cannot be used it for external financial reports. For this company the variable costing shows a better outlook of the organization. The reason is because variable costing method clearly separates the cost that rise in tandem with production from those that remain constant, treats all fixed overhead cost as period cost, this includes a reasonable portion of production overhead incurred in connection with manufacturing the inventory, and that affecting the operating income results. But the variable costing financial statement reports is only for internal purposes on internal documents inside the company. Patty has to provide to the bank the Full Costing Income statements. B. But, the bank requires that all financial statements conform to Generally Accepted Accounting Principles (GAAP). Based on that requirement, which costing method should she present? Generally accepted accounting principles (GAAP), require the use of full costing in financial statements prepared for outsider observers, such a potential investor for the business and for a bank that the company is approaching for a loan. The GAAP standard setters believe that full costing better upholds the matching principle, which requires that expenses be reported in the same period as the revenue is generated by those expenses. Since fixed manufacturing costs contribute revenue only when manufactured goods are actually sold for revenue. C. The bank has delivered a memo in preparation for the meeting to negotiate the Credit Line; the memo states that they will expect a significant Net Income. Based on your responses to parts A and B, what are the legal and ethical issues facing Stacy Lynn? For Stacy Lynn Inc. The ethical issue is the honesty in what model of reporting the company is willing to use to show the better outlook of the business. For instance variable costing profits are higher than those under full costing method. Variable costing will not show overhead which means it does not show a complete picture. This appears to be a legal issue. Full costing accounting must be used because Banks follow the regulations of the federal government and follow GAAP rules as FASB has not recognized variable as a generally accepted inventory valuation method because of its belief that fixed production costs are as much a part of manufacturing the product, as are variable costs. In addition, variable costing violates the cost attaching and matching principal. Likewise, the IRS does not recognize variable costing as an acceptable inventory method. The Tax Reform Act (TRA) of 1986 changed inventory accounting for income tax purposes by requiring the capitalization of additional costs to inventory. This will tell the bank whether Patty should receive a high line of credit or low or none according to the company profit and credibility. and An the professor asked me this Nagibe, is it ethical for a business owner to overlook sound business decisions just because the the full costing method is the only method that is accepted by GAAP? I am reminded that owners are profit driven and they are also driven by trying to impact an overall competitive advantage in the marketplace. I need about 300 words to answer this to my professor please help me thank you
