Question: The shareholders’ equity of ILP Industries includes

> What are the three committees that debate proposed tax legislation? What documents do these committees generate, and how might they be used?

> The state of Georgia recently increased its tax on a pack of cigarettes by $2.00. What type of tax is this? Why might Georgia choose this type of tax?

> What is stare decisis and how does it relate to the Golsen rule?

> What is the distinguishing feature of an excise tax?

> In researching a tax question, you find only one authority (a trial-level court opinion) that is directly on point. Which court would you least prefer to have heard this case and why?

> In choosing a trial-level court, how should a court’s previous rulings influence the choice? How should circuit court rulings influence the taxpayer’s choice of a trial-level court?

> Tyrone recently read a regulation that Congress specifically requested the IRS to issue. What type of regulation is this? How does this regulation’s authoritative weight compare to other regulations?

> Carlos has located a regulation that appears to answer his tax research question. He is concerned because the regulation is a temporary regulation. Evaluate the authoritative weight of this type of regulation. Should he feel more or less confident in his

> Arnold and Lilly have recently had a heated discussion about whether a sales tax is a proportional tax or a regressive tax. Lilly argues that a sales tax is regressive. Arnold counters that the sales tax is a flat tax. Who is correct?

> Ahmed does not have enough cash on hand to pay his taxes. He was excited to hear that he can request an extension to file his tax return. Does this solve his problem? What are the ramifications if he doesn’t pay his tax liability by April 15?

> Describe the differences between a proportional, progressive, and regressive tax rate structure.

> Agua Linda, Inc., is a calendar-year corporation. What is the original due date for the corporate tax return? What happens if the original due date falls on a Saturday?

> Describe the three different tax rates discussed in the chapter and how taxpayers might use them.

> Dontae stated that he didn’t want to earn any more money because it would “put him in a higher tax bracket.” What is wrong with Dontae’s reasoning?

> Compare and contrast the three types of tax law sources and give examples of each.

> If the general objective of our tax system is to raise revenue, why does the income tax allow deductions for charitable contributions and retirement plan contributions?

> Simon just received a 30-day letter from the IRS indicating a proposed assessment. Does he have to pay the additional tax? What are his options?

> Using the facts from the previous problem, how would your answer change if Latoya understated her income by 40 percent? How would your answer change if Latoya intentionally failed to report as taxable income any cash payments she received from her client

> Describe the differences between the three types of audits in terms of their scope and taxpayer type.

> Explain the difference between the DIF system and the National Research Program. How do they relate to each other?

> Explain why paying dividends is not an effective way to shift income from a corporation to its owners.

> Latoya filed her tax return on February 10th this year. When will the statute of limitations expire for this tax return?

> As part of its stock-based compensation package, on January 1, 2018, International Electronics granted restricted stock units (RSUs) representing 50 million $1 par common shares. At exercise, holders of the RSUs are entitled to receive cash or stock equa

> For each of the following inventory errors occurring in 2018, determine the effect of the error on 2018’s cost of goods sold, net income, and retained earnings. Assume that the error is not discovered until 2019 and that a periodic inve

> The statement of retained earnings of Gary Larson Publishers is presented below. GARY LARSON PUBLISHERS Statement of Retained Earnings For the Year Ended December 31, 2018 ($ in millions) Retained earnings, January 1 ……………………………………………………………………………………. $20

> Below are three independent and unrelated errors. a. On December 31, 2017, Wolfe-Bache Corporation failed to accrue office supplies expense of $1,800. In January 2018, when it received the bill from its supplier, Wolfe-Bache made the following entry: b

> The accounting records of EZ Company provided the data below. Prepare a reconciliation of net income to net cash flows from operating activities. Net income …………………………………………………. $50,000 Depreciation expense ………………………………………. 7,000 Increase in inventory ……

> On January 1, 2018, Beilich Enterprises bought 20% of the outstanding common stock of Wolfe Construction Company for $600 million cash. Wolfe’s net income for the year ended December 31, 2018, was $300 million. During 2018, Wolfe declar

> Wilson Foods Corporation leased a commercial food processor on September 30, 2018. The five-year finance lease agreement calls for Wilson to make quarterly lease payments of $195,774, payable each September 30, December 31, March 31, June 30, with the fi

> American Optical Corporation provides a variety of share-based compensation plans to its employees. Under its executive stock option plan, the company granted options on January 1, 2018, that permit executives to acquire 4 million of the company’s $1 par

> When determining the amount of cash paid for income taxes, what would be indicated by an increase in the deferred income tax liability account?

> In preparation for developing its statement of cash flows for the year ended December 31, 2018, Millennium Solutions, Inc. collected the following information: __________________________________________________($ in millions) Payment for the early exting

> Refer to the situation described in BE 21–5. What would be the amount(s) related to the bonds that Agee would report in its statement of cash flows for the year ended December 31, 2018, if it uses the indirect method? In BE 21–5 Agee Technology, Inc., i

> How would the acquisition of a building be reported on a statement of cash flows if purchased by issuing a mortgage note payable in addition to a significant cash down payment?

> Does the statement of cash flows report only transactions that cause an increase or a decrease in cash? Explain.

> When DeSoto Water Works purchased a machine at the end of 2017 at a cost of $65,000, the company debited Buildings and credited Cash $65,000. The error was discovered in 2018. What journal entry will DeSoto use to correct the error? What other step(s) wo

> At the end of 2017, Majors Furniture Company failed to accrue $61,000 of interest expense that accrued during the last five months of 2017 on bonds payable. The bonds mature in 2029. The discount on the bonds is amortized by the straight-line method. The

> Agee Technology, Inc., issued 9% bonds, dated January 1, with a face amount of $400 million on July 1, 2018, at a price of $380 million. For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and Decembe

> Target Corporation prepares its financial statements according to U.S. GAAP. Target’s financial statements and disclosure notes for the year ended January 30, 2016, are available in Connect. This material is also available under the Investor Relations li

> Air France–KLM (AF), a Franco-Dutch company, prepares its financial statements according to International Financial Reporting Standards. AF’s financial statements and disclosure notes for the year ended December 31, 2015, are available in Connect. This m

> Late in 2018, you and two other officers of Curbo Fabrications Corporation just returned from a meeting with officials of the City of Jackson. The meeting was unexpectedly favorable even though it culminated in a settlement with city authorities that you

> Mayfair Department Stores operates over 30 retail stores in the Pacific Northwest. Prior to 2018, the company used the FIFO method to value its inventory. In 2018, Mayfair decided to switch to the dollar-value LIFO retail inventory method. One of your re

> Webster Products, Inc., adopted the dollar-value LIFO method of determining inventory costs for financial and income tax reporting on January 1, 2018. Webster continues to use the FIFO method for internal decision-making purposes. Webster’s FIFO inventor

> Danville Bottlers is a wholesale beverage company. Danville uses the FIFO inventory method to determine the cost of its ending inventory. Ending inventory quantities are determined by a physical count. For the fiscal yearend June 30, 2018, ending invento

> Some inventory errors are said to be “self-correcting,” in that the error has the opposite financial statement effect in the period following the error, thereby “correcting,” the original account balance errors. Required: Despite this self-correcting fe

> Sometimes a business entity will change its method of accounting for certain items. The change may be classified as a change in accounting principle, a change in accounting estimate, or a change in reporting entity. Listed below are three independent, un

> Facebook Inc. included the following disclosure note in an annual report: Share-Based Compensation (in part) . . . . Compensation expense related to these grants is based on the grant date fair value of the RSUs and is recognized on a straight-line basis

> Direct Assurance Company revised the estimates of the useful life of a trademark it had acquired three years earlier. How should Direct account for the change?

> Van Frank Telecommunications has a patent on a cellular transmission process. The company has amortized the $18 million cost of the patent on a straight-line basis since it was acquired at the beginning of 2014. Due to rapid technological advances in the

> Sunset Acres reported net income of $60 million. Included in that number were trademark amortization expense of $2 million and a gain on the sale of land of $1 million. Records reveal decreases in accounts receivable, accounts payable, and inventory of $

> Ray Solutions decided to make the following changes in its accounting policies on January 1, 2018: a. Changed from the cash to the accrual basis of accounting for recognizing revenue on its service contracts. b. Adopted straight-line depreciation for all

> DRS Corporation changed the way it depreciates its computers from the sum-of-the-year’s-digits method to the straight-line method beginning January 1, 2018. DRS also changed its estimated residual value used in computing depreciation for its office build

> Early one Wednesday afternoon, Ken and Larry studied in the dormitory room they shared at Fogelman College. Ken, an accounting major, was advising Larry, a management major, regarding a project for Larry’s Business Policy class. One asp

> In 2018, the Marion Company purchased land containing a mineral mine for $1,600,000. Additional costs of $600,000 were incurred to develop the mine. Geologists estimated that 400,000 tons of ore would be extracted. After the ore is removed, the land will

> During 2016 and 2017, Faulkner Manufacturing used the sum-of-the-years’-digits (SYD) method of depreciation for its depreciable assets, for both financial reporting and tax purposes. At the beginning of 2018, Faulkner decided to change

> Fantasy Fashions had used the LIFO method of costing inventories, but at the beginning of 2018 decided to change to the FIFO method. The inventory as reported at the end of 2017 using LIFO would have been $20 million higher using FIFO. Retained earnings

> The Rockwell Corporation uses a periodic inventory system and has used the FIFO cost method since inception of the company in 1979. In 2018, the company decided to change to the average cost method. Data for 2018 are as follows: Additional Information:

> In keeping with a modernization of corporate statutes in its home state, UMC Corporation decided in 2018 to discontinue accounting for reacquired shares as treasury stock. Instead, shares repurchased will be viewed as having been retired, reassuming the

> Shown below are net income amounts as they would be determined by Weihrich Steel Company by each of three different inventory costing methods ($ in thousands). Required: 1. Assume that Weihrich used FIFO before 2018, and then in 2018 decided to switch

> In 2017, Quapau Products introduced a new line of hot water heaters that carry a one-year warranty against manufacturer’s defects. Based on industry experience, warranty costs were expected to approximate 5% of sales revenue. First-year sales of the heat

> The Pyramid Company has used the LIFO method of accounting for inventory during its first two years of operation, 2016 and 2017. At the beginning of 2018, Pyramid decided to change to the average cost method for both tax and financial reporting purposes.

> On January 1, 2018, VKI Corporation awarded restricted stock units (RSUs) representing 12 million of its $1 par common shares to key personnel, subject to forfeiture if employment is terminated within three years. After the recipients of the RSUs satisfy

> Sheen Awnings reported net income of $90 million. Included in that number were depreciation expense of $3 million and a loss on the sale of equipment of $2 million. Records reveal increases in accounts receivable, accounts payable, and inventory of $1 mi

> The Cecil-Booker Vending Company changed its method of valuing inventory from the average cost method to the FIFO cost method at the beginning of 2018. At December 31, 2017, inventories were $120,000 (average cost basis) and were $124,000 a year earlier.

> Shown below in T-account format are the changes affecting the retained earnings of Brenner-Jude Corporation during 2018. At January 1, 2018, the corporation had outstanding 105 million common shares, $1 par per share. Required: 1. From the information

> George Young Industries (GYI) acquired industrial robots at the beginning of 2015 and added them to the company’s assembly process. During 2018, management became aware that the $1 million cost of the machinery was inadvertently recorded as repair expens

> You are internal auditor for Shannon Supplies, Inc., and are reviewing the company’s preliminary financial statements. The statements, prepared after making the adjusting entries, but before closing entries for the year ended December 3

> Conrad Playground Supply underwent a restructuring in 2018. The company conducted a thorough internal audit, during which the following facts were discovered. The audit occurred during 2018 before any adjusting entries or closing entries are prepared. a.

> Wilkins Food Products Inc. acquired a packaging machine from Lawrence Specialists Corporation. Lawrence completed construction of the machine on January 1, 2016. In payment for the machine Wilkins issued a three-year installment note to be paid in three

> Whaley Distributors is a wholesale distributor of electronic components. Financial statements for the years ended December 31, 2016 and 2017, reported the following amounts and subtotals ($ in millions): In 2018, the following situations occurred or ca

> Williams-Santana Inc. is a manufacturer of high-tech industrial parts that was started in 2006 by two talented engineers with little business training. In 2018, the company was acquired by one of its major customers. As part of an internal audit, the fol

> Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org). Determine the specific citation for accounting for each of the following items: 1. Initial measurement of stock options. 2. The measurement date for share-based payment

> Williams-Santana Inc. is a manufacturer of high-tech industrial parts that was started in 2006 by two talented engineers with little business training. In 2018, the company was acquired by one of its major customers. As part of an internal audit, the fol

> The Collins Corporation purchased office equipment at the beginning of 2016 and capitalized a cost of $2,000,000. This cost included the following expenditures: Purchase price ………………………………………….. $1,850,000 Freight charges ……………………………………………….. 30,000 Inst

> You have been hired as the new controller for the Ralston Company. Shortly after joining the company in 2018, you discover the following errors related to the 2016 and 2017 financial statements: a. Inventory at 12/31/2016 was understated by $6,000. b. In

> Refer to the situation described in BE 21–9. What amount should Carter report as net cash from financing activities? In BE 21–9 Carter Containers sold marketable securities, land, and common stock for $30 million, $15 million, and $40 million, respectiv

> Allied Paper Products, Inc. offers a restricted stock award plan to its vice presidents. On January 1, 2018, the company granted 16 million of its $1 par common shares, subject to forfeiture if employment is terminated within two years. The common shares

> At the beginning of 2018, Wagner Implements undertook a variety of changes in accounting methods, corrected several errors, and instituted new accounting policies. Required: Indicate for each item 1 to 10 below the type of change and the reporting appro

> Described below are six independent and unrelated situations involving accounting changes. Each change occurs during 2018 before any adjusting entries or closing entries were prepared. Assume the tax rate for each company is 40% in all years. Any tax eff

> On December 12, 2018, an investment costing $80,000 was sold for $100,000. The total of the sale proceeds was credited to the investment account. Required: 1. Prepare the journal entry to correct the error, assuming it is discovered before the books are

> The following excerpt is from an article reported in an online issue of Bloomberg. (Bloomberg) Ford Motor Co. (F) said it will repurchase $1.8 billion of its shares to reduce dilution from recent stock grants to executives. The par amount per share for F

> Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org). Determine the specific citation for accounting for each of the following items: 1. Reporting most changes in accounting principle. 2. Disclosure requirements for a chan

> Companies often invest in the common stock of other corporations. The way we report these investments depends on the nature of the investment and the investor’s motivation for the investment. The FASB Accounting Standards Codification represents the sing

> Three programmers at Feenix Computer Storage, Inc., write an operating systems control manual for Hill-McGraw Publishing, Inc., for which Feenix receives royalties equal to 12% of net sales. Royalties are payable annually on February 1 for sales the prev

> The Crump Companies, Inc., has ownership interests in several public companies. At the beginning of 2018, the company’s ownership interest in the common stock of Silken Properties increased to the point that it became appropriate to begin using the equit

> In keeping with a modernization of corporate statutes in its home state, UMC Corporation decided in 2018 to discontinue accounting for reacquired shares as treasury stock. Instead, shares repurchased will be viewed as having been retired, reassuming the

> Aquatic Equipment Corporation decided to switch from the LIFO method of costing inventories to the FIFO method at the beginning of 2018. The inventory as reported at the end of 2017 using LIFO would have been $60,000 higher using FIFO. Retained earnings

> During 2016 (its first year of operations) and 2017, Batali Foods used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2018, Batali decided to change to the average method for both financial reporting

> Douglas McDonald Company’s balance sheet included the following shareholders’ equity accounts at December 31, 2017: ????????__________________________________($ in millions) Paid-in capital: Common stock, 900 million shares at $1 par …………………….. $ 900 Pai

> Indicate with the appropriate letter the nature of each adjustment described below: Type of Adjustment A. Change in accounting principle (reported retrospectively) B. Change in accounting principle (exception reported prospectively) C. Change in estimate

> During 2018, WMC Corporation discovered that its ending inventories reported on its financial statements were misstated by the following amounts: WMC uses the periodic inventory system and the FIFO cost method. Required: 1. Determine the effect of the

> Indicate with the appropriate letter the nature of each situation described below: Type of Change PR ……………………. Change in principle reported retrospectively PP …………..………… Change in principle reported prospectively E ………………………. Change in estimate EP ………………

> Carter Containers sold marketable securities, land, and common stock for $30 million, $15 million, and $40 million, respectively. Carter also purchased treasury stock, equipment, and a patent for $21 million, $25 million, and $12 million, respectively. W

> Wardell Company purchased a mini computer on January 1, 2016, at a cost of $40,000. The computer has been depreciated using the straight-line method over an estimated five-year useful life with an estimated residual value of $4,000. On January 1, 2018, t

> The Peridot Company purchased machinery on January 2, 2016, for $800,000. A five-year life was estimated and no residual value was anticipated. Peridot decided to use the straight-line depreciation method and recorded $160,000 in depreciation in 2016 and

> As part of its stock-based compensation package, International Electronics granted 24 million stock appreciation rights (SARs) to top officers on January 1, 2018. At exercise, holders of the SARs are entitled to receive cash or stock equal in value to th

> Bronson Industries reported a deferred tax liability of $8 million for the year ended December 31, 2017, related to a temporary difference of $20 million. The tax rate was 40%. The temporary difference is expected to reverse in 2019, at which time the de

> Listed below are several terms and phrases associated with earnings per share. Pair each item from List A with the item from List B (by letter) that is most appropriately associated with it. List A List B 1. Subtract preferred dividends 2. Time-weig

> Woodmier Lawn Products introduced a new line of commercial sprinklers in 2017 that carry a one-year warranty against manufacturer’s defects. Because this was the first product for which the company offered a warranty, trade publications

> The Commonwealth of Virginia filed suit in October 2016, against Northern Timber Corporation seeking civil penalties and injunctive relief for violations of environmental laws regulating forest conservation. When the financial statements were issued in 2