Question 1
C:2-1 What entities or business forms are available for a new business? Explain the advantages and disadvantages of each. C:2-2 Alice and Bill plan to go into business together. They anticipate losses in the first two or three years, which they would like to use to offset income from other sources. They also are concerned about exposing their personal assets to business liabilities. Advise Alice and Bill as to what business form would best meet their needs. C:2-21 What are the advantages and disadvantages of using debt in a firm?s capital structure? C:2-31 Transfer of Property and Services to a Controlled Corporation. In 2010, Ed, Fran, and George form Jet Corporation. Ed contributes land having a $35,000 FMV purchased as an investment in 2006 for $15,000 in exchange for 35 shares of Jet stock. Fran contributes machinery (Sec. 1231 property) purchased in 2006 and used in her business in exchange for 35 shares of Jet stock. Immediately before the exchange, the machinery had a $45,000 adjusted basis and a $35,000 FMV. George contributes services worth $30,000 in exchange for 30 shares of Jet stock. a. What is the amount of Ed?s recognized gain or loss? b. What is Ed?s basis in his Jet shares? When does his holding period begin? c. What is the amount of Fran?s recognized gain or loss? d. What is Fran?s basis in her Jet shares? When does her holding period begin? e. How much income, if any, does George recognize? f. What is George?s basis in his Jet shares? When does his holding period begin? g. What is Jet?s basis in the land and the machinery? When does its holding period begin? How does Jet treat the amount paid to George for his services? h. How would your answers to Parts a through g change if George instead contributed $5,000 in cash and services worth $25,000 for his 30 shares of Jet stock? C:2-33 Control Requirement. In which of the following exchanges is the Sec. 351 control requirement met? If the transaction does not meet the Sec. 351 requirements, suggest ways in which the transaction can be structured so as to meet these requirements. a. Fred exchanges property worth $50,000 and services worth $50,000 for 100 shares of New Corporation stock. Greta exchanges $100,000 cash for the remaining 100 shares of New stock. b. Maureen exchanges property worth $2,000 and services worth $48,000 for 100 shares of Gemini Corporation stock. Norman exchanges property worth $50,000 for the remaining 100 shares of Gemini stock. C:2-36 Control Requirement. In which of the following exchanges is the Sec. 351 control requirement met? If the transaction does not meet the Sec. 351 requirements, suggest ways in which the transaction can be structured so as to meet these requirements. a. Fred exchanges property worth $50,000 and services worth $50,000 for 100 shares of New Corporation stock. Greta exchanges $100,000 cash for the remaining 100 shares of New stock. b. Maureen exchanges property worth $2,000 and services worth $48,000 for 100 shares of Gemini Corporation stock. Norman exchanges property worth $50,000 for the remaining 100 shares of Gemini stock. C:2-44 D Transfer of Business Properties. Jerry transfers property having a $32,000 adjusted basis and a $50,000 FMV to Emerald Corporation in exchange for all of Emerald?s stock worth $15,000 and Emerald?s assumption of a $35,000 mortgage on the property. a. What is the amount of Jerry?s recognized gain or loss? b. What is Jerry?s basis in the Emerald stock? c. What is Emerald?s basis in the property? d. How would your answers to Parts a through c change if the mortgage assumed by Emerald were $15,000 and the Emerald stock were worth $35,000?
Question 2
P21-13(Lessor Computations and Entries, Sales-Type Lease with Guaranteed Residual Value) AmiranteInc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers MedicalCenter for a period of 10 years. The normal selling price of the machine is $411,324, and its guaranteedresidual value at the end of the noncancelable lease term is estimated to be $15,000. The hospital will payrents of $60,000 at the beginning of each year and all maintenance, insurance, and taxes. Amirante Inc. in-curred costs of $250,000 in manufacturing the machine and $14,000 in negotiating and closing the lease.Amirante Inc. has determined that the collectibility of the lease payments is reasonably predictable, thatthere will be no additional costs incurred, and that the implicit interest rate is 10%. Instructions (Round all numbers to the nearest dollar.) Prepare all of the lessor?s journal entries for the first year. P21-14(Lessee Computations and Entries, Capital Lease with Guaranteed Residual Value) Assumethe same data as in P21-13 and that Chambers Medical Center has an incremental borrowing rateof10%. Instructions (Round all numbers to the nearest dollar.) (a) Discuss the nature of this lease in relation to the lessee, and compute the amount of the initialobligation under capital leases. (b) Prepare a 10-year lease amortization schedule. (c) Prepare all of the lessee?s journal entries for the first year
Question 3
Fancy Distributing Company of Atlanta sells fans and heaters to retail outlets throughout the Southeast. Joe Fancy, the president of the company, is thinking about changing the firm?s credit policy to attract customers away from competitors. The present policy calls for 1/10, net 30 cash discount. The new policy would call for a 5/10, net 45 cash discount. Currently, 35 percent of Fancy customers are taking the discount, and it is anticipated that this number would go up to 65 percent with the new discount policy. It is further anticipated that annual sales would increase from a level of $200,000 to $600,000 as a result of the change in the cash discount policy. The increased sales would also affect the inventory level. The average inventory carried by Logan is based on a determination of an EOQ. Assume sales of fans and heaters increase from 11,500 to 23,750 units. The ordering cost for each order is $175, and the carrying cost per unit is $2.50 (these values will not change with the discount). The average inventory is based on EOQ/2. Each inventory has an average cost of $12.50. Cost of goods sold is equal to 60 percent of net sales; general and administrative expenses are 15 percent of net sales; and interest payments of 14 percent will only be necessary for the increase in the accounts receivable and inventory balances. Taxes will be 34 percent of before-tax income. a. Compute the accounts receivable balance before and after the change in the cash discount policy. Use the net sales (total sales minus cash discounts) to determine the average daily sales. b. Determine the EOQ before and after the change in the cash discount policy. Translate this into average inventory (in units and dollars) before and after the change in the cash discount policy. c. Compute the following income statement. d. Should the new cash discount policy be utilized? Briefly comment.
Question 4
Revenue recognition at time of sale. Marks and Spencer Group. Plc., a U.K. retailer, applies IFRS and reports its results in millions of pounds sterling (?). The notes to its financial statements for the year ended March 29, 2008, provide the following information: ? Revenue comprises sales of goods to customers less an appropriate deduction for returns and discounts. Marks and Spencer records revenues for sales of furniture and items purchased online upon delivery to the customer. ? Marks and Spencer records trade receivables at their nominal amount less an allowance for any doubtful accounts and sales returns. The beginning balance in the allowance for uncollectible accounts and sales returns was ?1.1 million, and the ending balance was ?3.3 million. There were no recoveries of uncollectible accounts during the year. For the year ended March 29, 2008, Marks and Spencer reported revenues (before discounts and returns) of ?9,022.0 million. The cost of merchandise sold in 2008 was ?5535.2 million. Assume that Marks and Spencer estimates discounts and returns of 1% of sales. Further assume that it made all sales on credit and that it estimates that 1.5% of revenue will be uncollectible. a. What journal entry did Marks and Spencer record during the ar ended March 29, 2008, to recognize revenues and expenses? b. What journal entry did Marks and Spencer make in the year ended March 29, 2008, to recognize sales returns and bad debts expense? c. What wits the combined amount of sales returns and write-offs of uncollectible accounts during the year ended March 29, 2008? SOLUTION (Marks and Spencer; revenue recognition at time of sale.) (a) Journal entry to recognize revenues and expenses: Accounts Receivable, Gross 9,022.0 Cost of Goods Sold 5,535.2 Sales Revenue _____? Merchandise Inventory _____? (b) Journal entry to recognize sales returns and bad debts expense (combined): Sales Returns 90.22 Bad Debt Expense 135.33 Allowance for Doubtful Accounts and Sales Returns ______? (c) Beginning Balance, Allowance ? 1.10 Sales Returns 90.22 Bad Debt Expense _____? Less Ending Balance, Allowance (3.30) Total Returns and Writeoffs ? 223.35 I just need the four blank answers, what i came up with was wrong. thanks
Question 5
Read Mattel and Toy Safety, which is Case Eight in the Cases in Business and Society section at the end of the book. This case describes the 2007 Mattel toy recalls, which were in response to findings that several children?s toys were coated in lead-based paint. Write an eight to ten page paper that addresses the following questions. Support your opinions with scholarly research. Do you believe that Mattel acted in a socially responsible and ethical manner with regard to the safety of its toys? Why or why not? What should or could Mattel have done differently, if anything? Be sure to support your answer using your research findings. Who or what do you believe was responsible for the fact that children were exposed to potentially dangerous toys? Why do you think so? Be sure to support your answer using your research findings. What is the best way to ensure the safety of children?s toys? In responding, please consider how the following groups would answer this question: government regulators (in the U.S. and China); consumer advocates, the toy industry, children?s product retailers; and standard-setting organizations. What might explain the differences in their point of view? Be sure to support your answer using your research findings. What do you think is the best way for society to protect children from harmful toys? Specifically, what are the appropriate roles for various stakeholders in this process? Be sure to support your answer using your research findings.,Read Mattel and Toy Safety, which is Case Eight in the Cases in Business and Society section at the end of the book. This case describes the 2007 Mattel toy recalls, which were in response to findings that several children?s toys were coated in lead-based paint. Write an eight to ten page paper that addresses the following questions. Support your opinions with scholarly research. Do you believe that Mattel acted in a socially responsible and ethical manner with regard to the safety of its toys? Why or why not? What should or could Mattel have done differently, if anything? Be sure to support your answer using your research findings. Who or what do you believe was responsible for the fact that children were exposed to potentially dangerous toys? Why do you think so? Be sure to support your answer using your research findings. What is the best way to ensure the safety of children?s toys? In responding, please consider how the following groups would answer this question: government regulators (in the U.S. and China); consumer advocates, the toy industry, children?s product retailers; and standard-setting organizations. What might explain the differences in their point of view? Be sure to support your answer using your research findings. What do you think is the best way for society to protect children from harmful toys? Specifically, what are the appropriate roles for various stakeholders in this process? Be sure to support your answer using your research findings.
