The cost of beginning inventory according to the company’s costing system was $11,040 of

which $8,120 was for materials and the rem

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Morrisey & Brown, Ltd., of Sydney is a merchandising company that is the sole distributor of a
product that is increasing in popularity among Australian consumers. The company’s income
statements for the three most recent months follow: Required: 1. Identify each of the
company’s expenses (including cost of goods

What is the difference between a contribution approach income statement and a traditional
approach income statement?

Hoi Chong Transport, Ltd; operates a fleet of delivery trucks in Singapore. The company has
determined that if a truck is driven 105,000 kilometers during a year, the average operating cost
is 11.4 cents per kilometer. If a truck is driven only 70,000 kilometers during a year, the average
operating cost increases to 13

The Lakeshore Hotel’s guest-days of occupancy and custodial supplies expense over the last
seven months were; Guest-days is a measure of the overall activity at the hotel. For example, a
guest who stays at the hotel for three days is counted as three guest-days. Required: 1. Using the
high-low method, estimate a co

Angora Wraps of Pendleton, Oregon, makes fine sweaters out of pure angora wool. The business
is seasonal, with the largest demand during the fall, the winter, and Christmas holidays. The
company must increase production each summer to meet estimated demand. The company has
been analyzing its costs to determine which co

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Pleasant View Hospital of British Columbia has just hired a new chief administrator who is
anxious to employ sound management and planning techniques in the business affairs of the
hospital. Accordingly, she has directed her assistant to summarize the cost structure of the
various departments so that data will be avail

Platinum Tracks, Inc., is a small audio recording studio located in Los Angeles. The company
handles work for advertising agencies—primarily for radio ads—and has a few singers and
bands as clients. Platinum Tracks handles all aspects of recording from editing to making a
digital master from which CDs can be copied

The Ferre Publishing Company has three service departments and two operating departments.
Selected data from a recent period on the five departments follow: The company allocates
service department costs by the step-down method in the following order: Administration
(number of employees), Janitorial (space occupied),
Chocolaterie de Geneve, SA, is located in a French-speaking canton in Switzerland. The
company makes chocolate truffles that are sold in popular embossed tins. The company has two
processing departments—Cooking and Molding. In the Cooking Department, the raw
ingredients for the truffles are mixed and then cooked in s

Selzik Company makes super-premium cake mixes that go through two processing departments,
Blending and Packaging. The following activity was recorded in the Blending Department
during July: All materials are added at the beginning of work in the Blending Department. The
company uses the FIFO method in its process cost

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Refer to the data for the Blending Department of Sunspots Beverages, Ltd., in Problem 4—13.
Assume that the company uses the FIFO method rather than the weighted-average method in its
process costing system. Required: 1. Determine the equivalent units for June for the Blending
Department. 2. Compute the costs per e

AOZT Volzhskije Motory of St. Petersburg, Russia, makes marine motors for vessels ranging in
size from harbor tugs to open-water icebreakers. (The Russian currency is the ruble, which is
denoted by RUR. All currency amounts below are in thousands of RUR.) The company uses a
job-order costing system. Only three jobs—

Clonex Labs, Inc., uses a process costing system. The following data are available for one
department for October: The department started 175,000 units into production during the month
and transferred 190.000 completed units to the next department. Required: Compute the
equivalent units of production for October assum

Distinguish between (a) A variable cost, (b) A mixed cost, and (c) A step-variable cost. Plot the
three costs on a graph, with activity plotted horizontally and cost plotted vertically.

Espresso Express operates a number of espresso coffee stands in busy suburban malls. The
fixed .weekly expense of a coffee stand is $1,200 and the variable cost per cup of coffee served
is $0.22. Required: 1. Fill in the following table with your estimates of total costs and cost per
cup of coffee at the indicated lev

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Distinguish between discretionary fixed costs and committed fixed costs.

St. Mark’s Hospital contains 450 beds. The average occupancy rate is 80% per month. In
other words, on average, 80% of the hospital’s beds are occupied by patients. At this level of
occupancy, the hospital’s operating costs are $32 per occupied bed per day, assuming a 30-
day month. This $32 figure contains both v
Marwick’s Pianos, Inc., purchases pianos from a large manufacturer and sells them at the
retail level. The pianos cost, on the average, $2,450 each from the manufacturer. Marwick’s
Pianos, Inc., sells the pianos to its customers at an average price of $3,125 each. The selling and
administrative costs that the compa

Refer to the data for Lakeshore Hotel in Exercise 5—8. Required: 1. Prepare a scattergraph
using the data from Exercise 5—8. Plot cost on the vertical axis and activity on the horizontal
axis. Using a ruler fit a straight line to your plotted points. 2. Using the quick-and-dirty method,
what is the approximate mon

This is really an odd situation, said Jim Carter, general manager of Highland Publishing
Company. “We get most of the jobs we bid on that require a lot of press time in the Printing
Department, yet profits on those jobs are never as high as they ought to be. On the other hand,
we lose most of the jobs we bid on that

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Woodbury Hospital has three service departments and three operating departments. Estimated
cost and operating data for all departments in the hospital for the forthcoming quarter arc
presented in the table below: The costs of the service departments are allocated by the step-down
method using the allocation bases and

Assume that a company has two processing departments-mixing followed by Firing. Explain
what costs might be added to the Firing Department’s Work in Process account during a
period.

Builder Products, Inc., manufactures a caulking compound that goes through three processing
stages prior to completion. Information on work in the first department, cooking, is given below
for May: The company uses the weighted-average method Required: 1. Compute the equivalent
units of production. 2. Compute the co

Schroeder Baking Corporation uses a process costing system in its large-scale baking operations.
The Mixing Department is one of the company’s processing departments. In the Mixing
Department in July, the cost of beginning work in process inventory was $1,460, the cost of
ending work in process inventory was $3,120,

Refer to the data for Hielta Oy in Exercise 4—7. Assume that the company uses the FIFO
method in its process costing system. Required: 1. Compute the number of tons of pulp
completed and transferred out during June. 2. Compute the equivalent units of production for
materials and for labor and overhead for June.

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Seattle Western University has provided the following data to be used in its service department
cost allocations: Required: Using the direct method, allocate the costs of the service departments
to the two operating departments. Allocate the costs of Administration on the basis of student
credit-hours and Facility Ser

A number of graphs displaying cost behavior patterns are shown below. The vertical axis on each
graph represents total cost, and the horizontal axis represents level of activity (volume).
Required: 1. For each of the following situations, identify the graph below that illustrates the cost
behavior pattern involved. An

What is meant by the term least-squares regression?

Cora was in Europe from Thanksgiving of 2015 until early January of 2016. When she returned
to her home, she found it had been broken into and jewelry with a fair market value of $40,000
and a basis of $54,000 was missing. Her adjusted gross incomes in 2015and 2016 are $56,000
and $72,000, respectively. If she is a cal

Jessica, a professional violinist with the Lincoln Symphony Orchestra, purchased a 100-year-old
antique violin at a cost of $180,000. She thinks that it is a good investment because she knows
that it will continue to appreciate in value as a treasured work of art. She plays this violin in
concerts and wants to know if

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Sheralyn was in the wholesale distribution business for pecans and peanuts grown in Georgia.
She and her brother owned and operated several warehouses. Seven years ago, they purchased
property for another warehouse in the eastern part of Georgia because the nut crop had been
getting progressively larger over the past s

What is the overall charitable contribution deduction limitation? How are charitable
contributions in excess of the current year's limit treated?

Why is investment interest expense limited to net investment income?

Scott is 15 years old and qualifies as a dependent on his parents' tax return. During 2016 he earns
$2,500 from a part-time job and also receives $800 of dividend income on stock given to him by
his aunt. What is Scott's taxable income?

Barry is very dedicated to the arts and has made a career of purchasing copyrights to various art
forms. Once purchased, he publicizes these works to capitalize on the copyrights and has been
very successful. Last year, he acquired a book manuscript that he believes would be better suited
to a mainstream publisher. He

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Barbara sold three assets during 2016. How much and what kind of gain or loss does she
recognize from each sale? What tax rate applies to the net gain if Barbara's ordinary income is
taxed at 25 percent? a. On February 25 she sold 200 shares of XYZ stock for $19,000. She
bought the stock for $16,000 on February 23, 20

Suzanne owns a vacation home at the beach in which she lived for 30 days and rented out for 61
days during the current year. Her gross rental income is $2,600. Her total expenses for the
vacation home are as follows: Mortgage interest..................................$1,500 Property
taxes.............................

Lynn paid $12,000 of investment interest expense in a year in which she has the following
investment income: $3,000 taxable dividend income, $4,000 taxable interest income, $1,000
from a short-term capital gain, and $4,000 from a long-term capital gain. Explain the election
Lynn should make to maximize her deduction fo

What is a corporate reorganization? Briefly define each of the types of corporate reorganizations.

What is the purpose of the accumulated earnings tax? What is the penalty tax rate that applies to
excess accumulated earnings? How does a company avoid this tax?

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Danny's living room furniture and his flat screen television were damaged in a fire in his home in
January2016. In March2016, his golf cart was damaged in a flood. He was able to establish the
following information to determine his losses on these assets. Danny's AGI is $37,000 before
considering these casualties and

In 2016, Gregory, a single person, had $375,000 of ordinary taxable income. He sold Section
1202 stock at a taxable gain of $45,000, his art collection at a taxable gain of $102,000, and
stock at a taxable gain of $55,000. Compare the tax result if Congress would simplify the capital
gains tax provisions by having a si

Is a depreciation deduction allowed for realty (such as a warehouse used in a business) in the
year the property is sold? If yes, explain how it is calculated.

Explain how a taxpayer determines if he or she is required to file a tax return?

What is the purpose of the personal holding company tax? What is the penalty rate that applies to
a personal holding company? How does a personal holding company avoid this tax?

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Sarah pays $800 per month for her five-year-old daughter to attend a private kindergarten from
8:30 A.M. until 2:30 P.M. and after-school care until 5:30 P.M. The price of the kindergarten
without the after-school care is $300 per month. Assuming Sarah pays the $800 each month of
the year, how much will qualify for the

Kensington Corporation, Inc. (an October 31 fiscal year-end corporation) plans to purchase
$2,700,000 of used office fixtures (7-year property), its only personalty acquired during the year.
Kensington's management is willing to purchase and place the property in service anytime during
the year to maximize its deprecia

Corando Corporation (a calendar-year taxpayer) purchased $840,000 of used factory equipment

in April 2016. Determine the maximum depreciation deduction for the equipment for 2016 and
2017.

What is the effect on total taxes if a corporation with $200,000 of taxable income pays a bonus
of $50,000 to its single shareholder-owner who has $100,000 of other taxable income and is
taxed at the28% tax rate? What is the total effective tax rate on the $200,000 of taxable income?

Azona Corporation (a calendar-year taxpayer) purchased only one business asset during the year,
7-year used property that cost $2,600,000. Compute Azona's depreciation for the current year
assuming that a. The asset was purchased and placed in service on September 30, 2015. b. The
asset was purchased and placed in

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A subsidiary of Corporation A, an electrical utility located in Springfield, and a subsidiary of

Corporation B, a diversified manufacturer also located in Springfield, formed a joint venture
under the general partnership laws of their state. The partnership was formed to construct and
ultimately operate another electri

Martin Galloway, the sole proprietor of a consulting business, has gross receipts of $45,000 in
2016. His address is: 1223 Fairfield Street, Westfield, New Jersey and his SSN is 158-68-7799.
Expenses paid by his business are: Advertising..............................................$500
Supplies......................

Kondar Corporation (a calendar-year taxpayer) spent $2,060,000 to purchase used machinery in

February 2016. a. What is the maximum that Kondar can elect to expense under Section 179? b.
What is the basis for calculating regular MACRS depreciation on this machinery if the maximum
Section 179 deduction is elected? c.

Cecilia is married and files a joint return with her husband, Steve. They have modified adjusted
gross income of $135,000. Cecilia paid $2,700 in student loan interest this year. How much of
this interest is deductible?

Can a corporation have negative amounts in both its current and accumulated earnings and
profits accounts? Explain
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Robert owns some investment land that has a basis of $1,000 and a fair market value of $22,000.
He expects that it will continue to appreciate in value. Robert's uncle, Mike has a terminal illness
and is expected to survive no more than six months. Robert would like to increase the basis of
the land and has devised a s

Monicon Corporation purchased a $24,000 computer in 2013 and elected to expense it under
Section 179. In 2016, the IRS audited Monicon and determined that its taxable income was
incorrectly calculated and was only $20,000 before considering Section 179 expensing instead of
the $24,000 reported on its 2013 tax return.

Cheryl owned six horses that she and her family used for riding and occasionally showing in
hunter-jumper competitions. At the beginning of May, one of the horses showed signs of severe
illness and was diagnosed with equine encephalitis. She was required to destroy all of her horses,
none of which was insured. The hors

Which types of taxes qualify as itemized deductions?

Blanco Corporation (a calendar-year taxpayer) purchased $2,200,000 of used manufacturing

equipment in July, $400,000 of computer equipment in August, and purchased an office building
for $850,000 (of which $170,000 was for the land) in November. Compute Blanco's depreciation
deduction for the current year.

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Six years ago, Sharon purchased her personal residence for $500,000. In the current year, she
converts the property to rental use because she has been unable to sell it due to the depressed real
estate market. The property's current fair market value is $400,000 (of which $100,000 is for the
land). What basis does Shar

Explain how itemized deductions are phased out. Can a taxpayer lose the benefit of all of his or
her itemized deductions?

In January, Marco incurs $2,800 in expenses traveling to San Diego to investigate the feasibility
of acquiring a new business. He acquires the business and on March 1 forms a new corporation,
Marco Enterprises, Inc. and pays $6,000 for organization costs. In April he begins operations and
incurs $4,600 of start-up expe

Columbo Corporation, a calendar-year corporation, began business in 2013. With the initial
capital contributions from its sole shareholder, it purchased a building on March 12 for
$250,000. It also purchased the following items, all used, for use in the business: Item Purchase
Date Acquisition Cost Office Furnitu
Clarice became very ill in February of 2016 and was unable to work the rest of the year. She had
only $12,000 of income from her sole proprietorship for the time she worked and was forced to
sell the following investments to pay for her living expenses. She sold 10,000 shares of BBC
stock purchased two years ago for $3

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Sam Johnson started a small machine shop, Machines, Inc., in his garage and incorporated it in
March of 2013 as a calendar-year corporation. At that time, he began using his personal
computer and tools solely for the business as part of his contribution to the corporation. The
computer cost $2,700 but had a fair market

What is the total deduction for personal and dependency exemptions for the following taxpayers
in 2016 if their AGI is $350,500? a. Married filing jointly with three dependents b. Single with
no dependents

Maureen operates a cosmetic sales business from her home. She uses 400 of 1,600 square feet of
the home as an office for the entire year. Her income before her home office deduction is $3,400
and unapportioned expenses for the home are as follows: Mortgage interest...............................
$5,000 Property taxes.

Jessica and Jason are married, file a joint return, and have 4 dependent children. Calculate their
2016 personal and dependency deductions for each of the following independent situations: a.
Their AGI is $275,000. b. Their AGI is $375,000. c. Their AGI is $475,000.

Mark wants to purchase a new luxury sedan for $50,000 for use exclusively in his business. The
car salesman told Mark that he could expense $25,000 of the cost immediately using Section 179
and depreciate an additional $5,000 using the regular depreciation rates for a total first-year
deduction of $30,000. Is he correc

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Core Carpet Factory purchased a $40,000 binding machine (seven year property) six months ago
that they expected to use for at least ten years. They began to use the machine immediately.
Unfortunately, the machine kept breaking down and the company finally returned it to the
manufacturer. Because Core would not allow th

What are "points" paid on a home mortgage and when are they deductible?

Calahan Corporation regularly factors its receivables when they are short of cash. This spring
they not only factored $325,000 of receivables at 80 percent of their value but sold two company
automobiles that they had purchased five months earlier for $45,000 for only $38,000. What are
Calahan's losses on these sales a
On June 26, 2014, Elaine purchased and placed into service a new computer system costing
$8,000. The computer system was used 80 percent for business and 20 percent for personal use
in both 2014 and 2015 and Elaine claimed only regular MACRS depreciation. In 2016, the
computer system was used 45 percent for business an

What are the passive activity loss rules and how do they affect the deductibility of losses from
rental property?

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Bill had the following gains and losses on asset sales: $500 gain on stock held 11 months; a
$2,300 gain on land held two years; $1,900 loss on gold coins held two years; $1,200 gain on
antique toys held three years; and a $1,300 loss on investment land held six months. Determine
Bill's (a) Net capital gain or loss,

Compare the requirements for claiming a dependency exemption for a qualifying child and a
qualifying relative.

Contrast ceiling and floor limitations for itemized deductions. Provide an example of each.

Mario and Kaitlin are married and file a joint tax return. They have adjusted gross income of
$385,000 that includes $4,700 of investment income ($3,000 short-term capital gains and $1,700
of corporate bond interest). They paid the following expenses for the year: Unreimbursed
medical expenses.........................

Herald Corporation, a calendar-year taxpayer, purchased and placed the following business
assets in service during 2016: Asset Date Placed in Service Initial Cost Used computer
equipment...............April 3..............................$ 50,000 Used office furniture......................July
14...............

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What is difference in the tax treatment for losses realized by a corporation in a partial liquidation
and a complete liquidation?

Juan owns 40 percent and Mario owns 60 percent of Crispy Donuts, Inc. (CDI). Juan wants to
buy out Mario's interest in CDI, so he arranges a stock sale agreement under which CDI will
redeem (purchase) all of Mario's shares for $900,000. This will then make Juan the sole
shareholder of CDI. Juan wants to ensure that Mar

Joseph provides $12,000 of support for his mother, Miriam, who lives with him. Miriam is single
and a U.S. citizen. Her only income is Social Security of $5,000 and taxable pension income of
$4,200. Miriam uses the Social Security income for support but puts her pension income into her
savings account. Joseph provides
Describe the two types of Medicare surtaxes and explain how they are computed.

Juno Corporation had ordinary taxable income of $127,000 in the current year before
consideration of any of the following property transactions. It sold two blocks of stock held for
investment. One yielded a short-term capital gain of $8,000 and the other a long-term capital loss
of $14,000. In addition, Juno sold four

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A number of specific transactions do not necessarily follow the general tax provisions applicable
to property transactions. Following are a group of transactions that are subject to specific tax
provisions. For each of the situations, you are to answer the questions and cite the source for
your answer. a. Martin, a se

Karen is an employee of KF Corporation (a calendar-year taxpayer). In February 2015, KF

purchased a new $40,000 car for Karen's use. During 2015, 2016, and 2017, 60 percent of
Karen's mileage on the car was business related and 40 percent was for her personal driving. Her
personal use was properly treated as taxable fr

Natalie expects her ordinary income to exceed the 39.6 percent tax bracket this year. So far this
year, she has a $5,000 short-term capital loss. As of June 1, she is holding 1,000 shares of Dritco
stock purchased on June 15 of last year for $15,000. The market value of the stock as of May 21
is $27,000. Lately the val

Rebecca and Gregory, a married couple filing a joint return, reported adjusted gross income of
$70,000 and total allowable itemized deductions of $12,800, including$3,100 for state income
taxes, in 2016. They received a $900 refund of state income taxes in April 2017. How much of
the state income tax refund must be inc

John is a teacher at a local high school. During 2016, he travels three days per week to a school
in the next county to work with gifted children in an after-school program that does not end until
6:30 P.M. He normally eats dinner before driving home. If he drives 75 miles each way on 90
days to the gifted program, his

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In July 2016, Lenux Corporation (a calendar-year taxpayer) purchased $2,110,000 of new office
furniture. Lenux claimed the maximum allowable Section 179 expensing and regular MACRS
depreciation (but no bonus depreciation). Calculate Lenux's total depreciation deduction for the
first two years for this office furniture.

What is the difference between accumulated and current earnings and profits?

What are the two types of controlled groups?

List five items that are added to a corporation's taxable income to determine earnings and profits.
List five items that are deducted from a corporation's taxable income to determine earnings and
profits.

Gisela gave Ellen stock worth $50,000 this year. Gisela purchased the stock for $60,000 four
years ago. Calculate Ellen's basis for the stock if she sells it a. for $65,000. b. for $45,000. c. for
$55,000.

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Charlie exchanged land valued at $450,000 and a sports car valued at $50,000 for a 40 percent
interest in a partnership that planned to build an apartment complex on the property. The land
has a $325,000 basis and the auto a $40,000 basis. Explain the tax effects of this exchange for
Charlie and the partnership.

On May 10 of the current year, Claire purchased 1,000 shares of ABCO stock for $10 per share
because she believed the price had hit bottom. She did not know that her broker had sold 500
shares that he held in her brokerage account at $18 per share on April 18 when the price dropped
from its $22 purchase price. Explain

Luis, a self-employed individual, flies from New York to Rome. He spends seven days in Rome
on business and stays in Rome for an additional three days to vacation. Transportation costs
incurred were $1,400; his hotel cost $200 per day for a total of $2,000; and his meals cost $100
per day for a total of $1,000. What ex

Jewel's home was completely destroyed by fire in 2016. The building had an appraised value of
$185,000 before the fire. Four years ago, Jewel paid $160,000 for the house and the land, with
$25,000 of the price allocated to the land. a. What is Jewel's loss on the fire, assuming no
insurance? b. What is her deductible

Gary Sanders owns his own real estate business. He has a reputation within the community for
honesty and integrity and believes that this is one of the reasons his firm has been so successful.
Gary was a 30 percent shareholder in an unsuccessful fast-food restaurant, Escargot-to-Go.
Although he personally thought the b

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Nicko Corporation (a calendar-year corporation) purchased a new machine (7-year property) in

July 2014 for $20,000. Nicko did not elect Section 179 for this asset but did claim 50 percent
bonus depreciation. In November 2017, Nicko sells the machine. What is the machine's adjusted
basis at the date of sale?

Conroy Corporation agrees to sell some of its excess machinery for $190,000 consisting of a
$70,000 down payment in year of sale and additional payments of $60,000 in each of the next
two years, plus interest. Conroy purchased this machinery several years ago for $156,000 and
had claimed accumulated depreciation of $47

In 2013, Chris purchased a machine (7-year property) that cost $20,000 for use in his sole
proprietorship. He claimed only regular MACRS depreciation (no Section 179 expensing or
bonus depreciation) due to his low income that year. In 2014 and 2015 his business had
operating losses and he claimed no depreciation in tho

Al Shalou, a single individual, had only $14,000 of salary income in 2016, but he had a number
of taxable gains and losses on his property transactions during the year with the following
results: a. $26,000 Section 1202 gain on ABC stock b. $5,000 short-term capital loss on Zephyr
bonds c. $24,000 long-term capital

Ben is the chief executive officer of a restaurant chain based in Maine. Ben began the business
15 years ago and it has grown into a multimillion-dollar company, franchising restaurants all
over the country. Ben has a new interest, however, in horse breeding. He previously raised
horses with some success over the years

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Joe, June, and Jim-co-workers-decide that they want to start their own business. Joe has
$200,000 to contribute, June has equipment valued at $100,000 (basis = $90,000) and Jim has
real estate suitable for the business valued at $200,000 (basis = $110,000). Joe and Jim are each
to receive 40 percent of the corporate st

What limits are placed on the deductibility of casualty and theft losses of personal-use property
in 2016?

Willis Corporation (a calendar-year corporation) purchased $550,000 of used machinery (7-year

property) on August 1. No other property was acquired in 2016. a. What is Willis Corporation's
depreciation expense for 2016 and 2017 if Section 179 is not elected? b. What is Willis
Corporation's depreciation expense for 2

Joy purchased a home in Maine on December 15, 1998 for $250,000 and lived in it full-time
until she purchased a second home in Florida on October 1, 2011 for $380,000. In 2011 and 2012
she continued to have her primary residence in Maine. On October 1, 2013, however, she
changed her primary residence to Florida. She ne

A single taxpayer has $15,000 of ordinary taxable income in 2016 (after his exemption and
standard deduction but before consideration of the following recognized gains), a $9,000 long-
term capital gain on the sale of an antique painting, a $10,000 unrecaptured Section 1250 gain on
realty, and a $25,000 gain on the sale

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Charlie sold Whiteacre for $40,000 cash and the buyer assumed Charlie's $19,000 mortgage on
the property. Charlie paid a realtor commission of $2,000 on the sale. What is his realized gain or
loss if Whiteacre's adjusted basis is a. $47,000? b. $67,000?

Robert Lento, the sole proprietor of a consulting business, has gross receipts of $600,000 in
2016. Expenses paid by his business are: Advertising ..................................................$ 2,500
Employee salaries..........................................150,000 Office rent..................................

Bing Corporation can buy a new car for business use for $40,000 (including tax, license, and title
fees) or it can lease an identical car for $450 per month, paying $2,100 up front for tax, license,
and title fees. The corporation normally keeps its cars for three years, and if the car is purchased,
expects that it wil

Describe the types of expenses allowed as miscellaneous itemized deductions. What limitation is
imposed on these expenses?

On April 1, Radcliff Corporation, a calendar year taxpayer, purchased land, a warehouse, and
used equipment (7-year property) for a total price of $500,000. An appraiser determined that the
land has a value of $220,000, the warehouse a value of $264,000, and the equipment a value of
$66,000. If Radcliff does not elect

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McDowell Corporation (a calendar-year corporation) purchased and placed in service in 2016 a

$25,000new automobile on August 15, $300,000 of new furniture on September 1, and a
$680,000 warehouse (of which $100,000 was for the land) on November 8. Compute the
maximum depreciation deductions for the first two years of t

Wally sells the auto he used 80 percent for business and 20 percent for personal use annually for
$6,000. He purchased the car four years ago for $20,000. If used 100 percent for business, he
would have claimed $16,000 in depreciation. What is his gain or loss on the sale of the auto and
how is it classified?

Arco Corporation acquired some heavy equipment mid-year (in addition to the $2,600,000 in
equipment purchased in January of this year). The new equipment is 7-year class property, but
Arco expects to use the equipment for 8 years. It could purchase the equipment for $120,000
cash and at the end of 8 years it would have

Cornelia transfers property valued at $500 (basis = $350) to Wayside Corporation in exchange
for 50 percent of its stock. Ferdinand transfers property valued at $450 (basis = $260) in
exchange for 40 percent of Wayside's stock and $50 cash. Cheryl transfers $100 cash in
exchange for the remaining 10% of the stock. a.
Kelly was active in the market, buying and selling stocks for her own account. Below are a series
of transactions Kelly initiated during the last quarter of 2016: The XYZ stock sold on 11/01 had
been purchased two years earlier for $18 per share. What is Kelly's realized and recognized gain
or loss on each of the sa

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Marino Corporation pays $6,500 to rent a 10-seat skybox for three football games to use for
business entertainment at each game. The price for a regular nonluxury box seat at each game is
$45. How much can Marino Corporation deduct for this entertainment expense?

Explain how a corporation's income is subject to double taxation.

Suzanne, who is a head of household, has the following deductions before considering any
phaseouts: Interest on qualified acquisition debt........................$9,800 Real property
taxes...............................................3,000 State income taxes................................................5,000
Cha

Taylor bought 10,000 shares of qualifying Section 1202 stock from a start-up company A on
May 1, 2012 for $1,000,000 and 5,000 shares of Section 1202 stock from start-up company B on
June 1, 2013 for $200,000. In February 2016, she sold 1,000 shares of A for $500,000; in
December she also sold 2,000 shares of B for $3

Carlotta moved into a smaller home ten months ago, after her husband died. She sold the home
that they had lived in together for fifteen years and elected Section 121 so she would not have to
recognize the $150,000 of gain on that home. She then purchased the smaller home for $210,000.
She is unhappy in the neighborhoo

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Peter exchanges a building valued at $400,000 for land also valued at $400,000 in a qualifying
like-kind exchange. The building has a basis of $230,000. What are Peter's realized gain or loss
and the basis of the land?

What is the kiddie tax and when does it apply?

In the current year, Melbourne Corporation pays the $2,000 annual premium for a life insurance
policy on its president, for which Melbourne Corporation is the beneficiary. Melbourne also pays
$20,000 in annual premiums for group term life insurance for its employees as an employee
benefit; the employees designate the b

Alpha Semiconductors experienced the following activity in its Photolithography Department

during December. Materials are added at the beginning of the photolithography process. Units:
Work in process, December 1 (80% of the way through the process) ........ 6,000 units
Transferred in from the Polishing and Cutting
Refer to Broadway Floral's data in E6-25A. Use the high-low method to determine Broadway
Floral's cost equation for van operating costs. Use your results to predict van operating costs at a
volume of 16,500 miles.

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Anthony Zelinski operates Anthony's Cricket Farm in Atlanta, Georgia. Anthony's raises about
18 million crickets a month. Most are sold to pet stores at $9.23 for a box of 1,000 crickets. Pet
stores sell the crickets for $0.05 to $0.10 each as live feed for reptiles. Raising crickets requires a
two-step process: incu

Early Start Bakery mass-produces bread using three sequential processing departments: Mixing,
Baking, and Packaging. The following transactions occurred during February: 1. Direct materials
used in the Packaging Department ........................... $ 30,000 2. Costs assigned to units
completed and transferred out

Lakeview Apartments is an 800-unit apartment complex. When the apartments are 90%
occupied, monthly operating costs total $220,040. When occupancy dips to 80%, monthly
operating costs fall to $215,480. The owner of the apartment complex is worried because many
of the apartment residents work at a nearby manufacturing p

For several years running, the Bacchanel Buffet, a Caesars Palace® Las Vegas all-you-can-eat
attraction, has been voted the best buffet by "USA Today" and other publications. The Bacchanal
Buffet offers a seemingly unlimited selection of food. Menu items include fried chicken and
waffles, Japanese curry, a seafood sta

Many costs are associated with owning a car. Assuming that miles driven is the volume activity,
classify each of the following costs associated with car ownership as mainly variable or fixed. a.
Purchase price of the car $25,000 b. Finance charges on car loan c. Gas d. Oil changes every
5,000 miles e. Replacement

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Brookman Semiconductors experienced the following activity in its Photolithography

Department during May. Materials are added at the beginning of the photolithography process.
Units: Work in process, May 1 (80% of the way through the process) ......................... 9,000 units
Transferred in from the Polishing an

The Color World Paint Company prepares and packages paint products. The company has two
departments: (1) Blending and (2) Packaging. Direct materials are added at the beginning of the
blending process (dyes) and at the end of the packaging process (cans). Conversion costs are
incurred evenly throughout each process. Da
Creekside Apartments is a 900-unit apartment complex. When the apartments are 90% occupied,
monthly operating costs total $223,360. When occupancy dips to 80%, monthly operating costs
fall to $218,320. The owner of the apartment complex is worried because many of the apartment
residents work at a nearby manufacturing p

Kushner Company's Work in Process Inventory account had a $61,000 beginning balance on
March 1 ($36,000 of this related to direct materials used during February, while $25,000 related
to conversion costs incurred during February). During March, the following costs were incurred
in the department: Direct materials used

Antique Accessories manufactures auto roof racks in a two-stage process that includes shaping
and plating. Steel alloy is the basic raw material of the shaping process. The steel is molded
according to the design specifications of automobile manufacturers. The Plating Department then
adds an anodized finish. At March

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Melody Leigh, owner of Broadway Floral, operates a local chain of floral shops. Each shop has
its own delivery van. Instead of charging a flat delivery fee, Leigh wants to set the delivery fee
based on the distance driven to deliver the flowers. Leigh wants to separate the fixed and
variable portions of her van operati

Scott Equipment produces high-quality soccer balls. If the fixed cost per ball is $3 when the
company produces 15,000 balls, what is the fixed cost per ball when it produces 22,500 balls?
Assume that both volumes are in the same relevant range.

The Surgical Care Unit of Gold Care Health Group uses the high-low method to predict its total
surgical unit supplies costs. It appears that nursing hours worked is a good predictor of surgical
unit supplies costs in the unit. The supervisor for the unit has gone through the records for the
past year and has found that

Refer to the Whitman Drycleaners in E6-41B. Assume that Whitman charges customers $9 per
garment for dry cleaning. Prepare Whitman's projected income statement if 4,220 garments are
cleaned in March. First, prepare the income statement using the traditional format; then prepare
Whitman's contribution margin income stat

Following are a series of cost behavior graphs. The total cost is shown on the vertical (y) axis
and the volume (activity) is shown on the horizontal (x) axis. For each of the following
situations, identify the graph that most closely represents the cost behavior pattern of the cost in
that situation. Some graphs may

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The manager of the main laboratory facility at Rosedale Health Center (from E6-50B) collects
seven additional months of data after obtaining the regression results in the prior period. The
number of tests performed and the total monthly overhead costs for the lab follows: Use Excel to
perform the requirements. Requir

Decker Cosmetics produces a lip balm used for cold-weather sports. The balm is manufactured
in a single processing department. No lip balm was in process on May 31, and Decker Lips
started production on 20,000 lip balm tubes during June. Direct materials are added at the
beginning of the process, but conversion costs a

Sheldon Products produces plastic containers through a blow-molding process. The company
uses process costing because its products are generally homogeneous and are produced in large
batches. Mitchell Jackson is the controller at Sheldon Products. It is December 31, 2017, and
Jackson is supervising a physical count of

Using the data provided in E6-50B, the laboratory manager performed a regression analysis to
predict total laboratory overhead costs. The output generated by Excel is as follows:
Requirements 1. Determine the lab's cost equation (use the output from the Excel regression). 2.
Determine the R-square (use the output fr

Charleston Carriage Company offers guided horse-drawn carriage rides through historic
Greenville, South Carolina. The carriage business is highly regulated by the city. Charleston
Carriage Company has the following operating costs during April: Monthly depreciation expense
on carriages and stable .....................

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Refer to the laboratory overhead cost and activity data for Rosedale Health Center in E6-50B.
Use the high-low method to determine the laboratory's cost equation for total laboratory
overhead. Use your results to predict total laboratory overhead if 2,700 lab tests are performed
next month. Requirements 1. Prepare a

Paul's Pies collected the following production information relating to November's baking
operations: Requirements Complete the first two steps in the process costing procedure: 1.
Summarize the flow of physical units. 2. Compute output in terms of equivalent units.

Refer to the laboratory overhead cost and activity data for Elmhurst Health Center in E6-29A.
Use the high-low method to determine the laboratory's cost equation for total laboratory
overhead. Use your results to predict total laboratory overhead if 3,100 lab tests are performed
next month.

Record the following process costing transactions in the general journal: a. Purchase of raw
materials on account, $9,900 b. Requisition of direct materials to: Assembly Department, $4,500
Finishing Department, $2,200 c. Incurrence and payment of manufacturing labor, $10,900 (these
costs should be debited to WIP I

Tastee Foods produces canned chicken a la king. The chicken a la king passes through three
departments: (1) Mixing, (2) Retort (sterilization), and (3) Packing. In the Mixing Department,
chicken and cream are added at the beginning of the process, the mixture is partly cooked, then
chopped green peppers and mushrooms a

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Suppose Anytime Wireless offers an international calling plan that charges $8.00 per month plus
$0.20 per minute for calls outside the United States. 1. Under this plan, what is your monthly
international long-distance cost if you call Europe for a. 30 minutes? b. 60 minutes? c. 120
minutes? 2. Draw a graph illust

Golden Sun Bakery mass-produces bread using three sequential processing departments: Mixing,
Baking, and Packaging. The following transactions occurred during April: 1. Direct materials
used in the Packaging Department ................................. $ 34,000 2. Costs assigned to units
completed and transferred ou

Chief Industries has one product. Information about the production and sales of that product for
the past year follows. Selling price per unit .......................................................................... $
65.00 Direct material per unit ...................................................................

The Bright Day Paint Company prepares and packages paint products. The company has two
departments: (1) Blending and (2) Packaging. Direct materials are added at the beginning of the
blending process (dyes) and at the end of the packaging process (cans). Conversion costs are
incurred evenly throughout each process. Dat

Bates Company, which uses the high-low method to analyze cost behavior, has determined that
machine hours best predict the company's total utilities cost. The company's cost and machine
hour usage data for the first six months of the year follow: Requirements Using the high-low
method, answer the following questions:

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The annual data that follow pertain to Aqua Goggles, a manufacturer of swimming goggles (the
company had no beginning inventory): Sales
price ....................................................................................... $ 45 Variable manufacturing
expense per unit ....................................... $ 2

Refer to the Churning Department information for Landon Dairy in E5-42B. Requirements 1.
What journal entry(s) would have been made during the month to record manufacturing costs?
(Use Wages Payable as the credit for the direct labor costs.) 2. What journal entry is needed at
the end of the month to transfer the cos

Klein's Packaging Department had the following information at January 31. All direct materials
are added at the end of the conversion process. The units in ending work in process inventory
were only 32% of the way through the conversion process. Complete the schedule by computing
the total equivalent units of direct m

Refer to the Arctic Springs Bottling Department Data Set and your answer to S5-20. Arctic
Springs produces premium bottled water. The preceding Short Exercises considered the first
process in bottling premium water-Filtration. We now consider Arctic Springs' second process-
Bottling. In the Bottling Department, workers

Top Care Brushes produces a premium hair brush. Total manufacturing costs are $250,000 when
20,000 brushes are produced. Of this amount, total variable costs are $80,000. What are the total
production costs when 25,000 hairbrushes are produced? Assume the same relevant range.

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Farnsworth Drycleaners has capacity to clean up to 7,500 garments per month. Requirements 1.
Complete the following schedule for the three volumes shown. 2. Why does the average cost per
garment change? 3. Suppose the owner, Dustin Farnsworth, erroneously uses the average cost
per unit at full capacity to predict t

Paulson Winery in Albany, New York, has two departments: Fermenting and Packaging. Direct
materials are added at the beginning of the fermenting process (grapes) and at the end of the
packaging process (bottles). Conversion costs are incurred evenly throughout each process. Data
from the month of March for the Ferment

The Carrollton Buffet offers an all-you-can-eat buffet meal for $30 per person. The restaurant
employs ten salaried employees. Rent for the building, employee salaries, and other fixed costs
for the restaurant are $143,000 per month when the restaurant serves meals to up to 14,000
guests in that month. If the restauran

Melcher Mailboxes produces decorative mailboxes. The company's average cost per unit is
$20.43 when it produces 1,000 mailboxes. Requirements 1. What is the total cost of producing
1,000 mailboxes? 2. If $10,430 of the total costs are fixed, what is the variable cost of producing
each mailbox? 3. Write Melcher Mail

Wendell's Hot Sauce uses a process costing system to determine its product's cost. The last of the
three processes is packaging. The Packaging Department reported the following information for
the month of August: The units in ending work in process inventory were 90% complete with
respect to direct materials, but onl
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Bruno Industries manufactures and sells a single product. The controller has prepared the
following income statement for the most recent year: The company produced 8,000 units and
sold 7,000 units during the year ending December 31. Fixed manufacturing overhead (MOH) for
the year was $152,000, while fixed operating ex

The manager of the main laboratory facility at Elmhurst Health Center (from E6-29A) collects
seven additional months of data after obtaining the regression results in E6-31A. The number of
tests performed and the total monthly overhead costs for the lab follow: Use Excel to do the
following: Requirements 1. Run a re

The local Hyatt Place hotel collected seven months of data on the number of room-nights rented
per month and the monthly utilities cost. The data were graphed, resulting in the following
scatter plot: 1. Based on this scatter plot, how strong a relationship does there appear to be
between the number of room-nights ren

Refer to E5-42B and E5-43B. Assume the Landon Dairy Forming Department has the following
costs per equivalent unit (EU) on its own production cost report for the month of January: Cost
per EU transferred in from Churning Department (see your answer from E5-42B) Cost per Direct
Materials EU 5 $0.10 Cost per Conversio

Return to the Blending Department for the Color World Paint Company in E5-26A. In E5-26A
Department are as follows: Gallons: Beginning work in process
inventory .............................................................. 0 Started
production ......................................................................

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Using the data provided in E6-29A, the laboratory manager performed a regression analysis to
predict total laboratory overhead costs. The output generated by Excel is as follows:
Requirements 1. Determine the lab's cost equation (use the output from the Excel regression). 2.
Determine the R-square (use the output fr

The Assembly Department of Thomas Motors began September with no work in process
inventory. During the month, production that cost $35,282 (direct materials, $8,242, and
conversion costs, $27,040) was started on 23,000 units. Thomas completed and transferred to the
Testing Department a total of 12,000 units. The ending

Whitman Drycleaners has the capacity to clean up to 6,000 garments per month. Requirements 1.
Complete the following schedule for the three volumes shown. 2. Why does the average cost per
garment change? 3. The owner, Ellen Whitman, uses the average cost per unit at full capacity to
predict total costs at a volume
Summerville Company, which uses the high-low method to analyze cost behavior, has
determined that machine hours best predict the company's total utilities cost. The company's cost
and machine hour usage data for the first six months of the year follow: Requirements Using the
high-low method, answer the following ques

Refer to the Hyatt Place scatter plot in S6-11. Scatter plot in S6-11 1. Would the high-low
method or regression analysis result in a more accurate cost equation for the data pictured in the
scatter plot? Explain. 2. A regression analysis of the data revealed an R-square figure of 0.939.
Interpret this figure in lig

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The Assembly Department of Easton Motors began September with no work in process
inventory. During the month, production that cost $41,352 (direct materials, $12,532, and
conversion costs, $28,820) was started on 28,000 units. Easton completed and transferred to the
Testing Department a total of 22,000 units. The endin

Record the following process costing transactions in the general journal: a. Purchase of raw
materials on account, $9,300 b. Requisition of direct materials to Assembly Department, $4,300
Finishing Department, $2,400 c. Incurrence and payment of direct labor, $10,500 (these costs
should be debited to WIP Invento

Refer to the Churning Department information for Woodson Dairy in E5-28A. In E5-28A Data
for the Churning Department for January follows: Units in beginning Work in Process (WIP)
inventory........................................100,000 units Units started during the month (all direct
materials, including cream and

Refer to the Broadway Floral data in E6-25A. Use Microsoft Excel to do the following:
Requirements 1. Run a regression analysis. 2. Determine the company's cost equation (use the
output from the Excel regression). 3. Determine the R-square (use the output from the Excel
regression). What does Broadway Floral's R-sq

Hadlock Manufacturing manufactures a single product that it will sell for $68 per unit. The
company is looking to project its operating income for its first two years of operations. Cost
information for the single unit of its product is as follows: • Direct material per unit produced
$30 • Direct labor cost per

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The manager of the main laboratory facility at Rosedale Health Center is interested in being able
to predict the overhead costs each month for the lab. The manager believes that total overhead
varies with the number of lab tests performed but that some costs remain the same each month
regardless of the number of lab te
The manager of the main laboratory facility at Elmhurst Health Center is interested in being able
to predict the overhead costs each month for the lab. The manager believes that total overhead
varies with the number of lab tests performed but that some costs remain the same each month
regardless of the number of lab te

Return to the Blending Department for the Bright Day Paint Company in E5-40B. In E5-40B
Gallons: Beginning work in process inventory ..................................................................... 0
Started production .............................................................................. 9,600 gallons

Skye Entertainment is a provider of cable, Internet, and on-demand video services. Skye
currently sends monthly bills to its customers via the postal service. Because of a concern for the
environment and recent increases in postal rates, Skye's management is considering offering an
option to its customers for paperless

Sandler Industries manufactures plastic bottles for the food industry. On average, Sandler pays
$72 per ton for its plastics. Sandler's waste-disposal company has increased its waste-disposal
charge to $54 per ton for solid and inert waste. Sandler generates a total of 500 tons of waste per
month. Sandler's managers h

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Refer to the Fourth Street Floral data in E6-46B. Use Microsoft Excel to run a regression
analysis, then do the following calculations: Requirements 1. Determine the firm's cost equation
(use the output from the Excel regression). 2. Determine the R-square (use the output from the
Excel regression). What does Fourth

Moonlight Entertainment is a provider of cable, Internet, and on-demand video services.

Moonlight currently sends monthly bills to its customers via the postal service. Because of a
concern for the environment and recent increases in postal rates, Moonlight management is
considering offering an option to its customers

Jelly Treats produces jelly beans in three sequential processing departments: Centers, Shells, and
Packaging. Assume that the Shells processing department began April with $18,500 of
unfinished jelly bean centers. During April, the Shells process used $42,200 of direct materials,
used $12,500 of direct labor, and was a

Tammy Lotta, owner of Fourth Street Floral, operates a local chain of floral shops. Each shop
has its own delivery van. Instead of charging a flat delivery fee, Lotta wants to set the delivery
fee based on the distance driven to deliver the flowers. Lotta wants to separate the fixed and
variable portions of her van ope

Vintage Accessories manufactures auto roof racks in a two-stage process that includes shaping
and plating. Steel alloy is the basic raw material of the shaping process. The steel is molded
according to the design specifications of automobile manufacturers. The Plating Department then
adds an anodized finish. At March

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Assume that Fourth Street Floral does a regression analysis on the next year's data using Excel.
The output generated by Excel is as follows: Requirements 1. Determine the firm's cost equation
(use the output from the Excel regression). 2. Determine the R-square (use the output from the
Excel regression). What does

Lundeen Soda's Bottling Department had 15,000 units in the beginning inventory of Work in
Process on September 1. During September, 125,000 units were started into production. On
September 30, 29,000 units were left in ending inventory of Work in Process. Summarize the
physical flow of units in a schedule.

Woodson Dairy produces an organic butter that is sold by the pound. The production of the
butter begins in the Churning Department. Data for the Churning Department for January
follows: Units in beginning Work in Process (WIP) inventory........................................100,000
units Units started during the mo

The Minerva Buffet offers an all-you-can-eat buffet meal for $35 per person. The restaurant
employs ten salaried employees. Rent for the building, employee salaries, and other fixed costs
for the restaurant are $148,500 per month when the restaurant serves meals to up to 14,000
guests in that month. If the restaurant w

Patty's Pumpkin Pies collected the following production information relating to November's
baking operations: Requirements Complete the first two steps in the process costing procedure:
Summarize the flow of physical units. Compute output in terms of equivalent units.

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At the end of October, Cranston Bottling's mixing department had "Total costs to account for" of
$739,731. Of this amount, $271,596 related to direct materials costs, while the remainder related
to conversion costs. The department had 52,230 total equivalent units of direct materials and
45,450 total equivalent units o

Refer to E5-28A and E5-29A. Assume the Woodson Dairy Forming Department has the
following costs per equivalent unit (EU) on its own production cost report for the month of
January: Cost per EU transferred in from Churning Department (see your answer from E5-28A)
Cost per Direct Materials EU 5 $0.10 Cost per Conversi

A legal firm wanted to determine the relationship between its monthly operating costs and a
potential cost driver, professional hours. An excerpt from the output of a regression analysis
performed using Excel showed the following information: a. Given this output, write the legal
firm's monthly cost equation. b. Shou

Cool Balm produces a lip balm used for cold-weather sports. The balm is manufactured in a
single processing department. No lip balm was in process on May 31, and Cool Balm started
production on 20,900 lip balm tubes during June. Direct materials are added at the beginning of
the process, but conversion costs are incurr

Landon Dairy produces an organic butter that is sold by the pound. The production of the butter
begins in the Churning Department. Data for the Churning Department for January follows:
Units in beginning Work in Process (WIP) inventory........................................35,000 units Units
started during the mont

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Bradley Wilmer operates Bradley's Cricket Farm in Fairview, Georgia. Bradley's raises about 18
million crickets a month. Most are sold to pet stores at $10.26 for a box of 1,000 crickets. Pet
stores sell the crickets for $0.05 to $0.10 each as live feed for reptiles. Raising crickets requires a
two-step process: incu

The Timber brook Furniture Company produces dining tables in a three-stage process: Sawing,
Assembly, and Staining. Costs incurred in the Sawing Department during September are
summarized as follows: Direct materials (lumber) are added at the beginning of the sawing
process, while conversion costs are incurred evenly

Dalton's Products manufactures a single product. Cost, sales, and production information for the
company and its single product is as follows: • Selling price per unit is $65 • Variable
manufacturing costs per unit manufactured (includes direct materials [DM], direct labor [DL],
and variable MOH) $31 • Variabl

Refer to the Arctic Springs Bottling Department Data Set and your answers to S5-18 and S5-19.
Complete Step 5 of the process costing procedure: Assign costs to units completed and to units in
ending inventory Arctic Springs produces premium bottled water. The preceding Short Exercises
considered the first process in b

Grammer Chicken produces canned chicken a la king. The chicken a la king passes through three
departments: (1) Mixing, (2) Retort (sterilization), and (3) Packing. In the Mixing Department,
chicken and cream are added at the beginning of the process, the mixture is partly cooked, and
chopped green peppers and mushrooms

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The Frying Department of Ripple Chips had 110,000 partially completed units in work in
process at the end of July. All of the direct materials had been added to these units, but the units
were only 70% of the way through the conversion process. In addition, 1,050,000 units had been
completed and transferred out of the

The following chart shows three different costs: Cost A, Cost B, and Cost C. For each cost, the
chart shows the total cost and cost per unit at two different volumes within the same relevant
range. Based on this information, identify each cost as fixed, variable, or mixed. Explain your
answers.

Boswell's Hot Sauce uses a process costing system to determine its product's cost. The last of the
three processes is packaging. The Packaging Department reported the following information for
the month of July: The units in ending work in process inventory were 90% complete with
respect to direct materials but only 6

The following information was taken from the ledger of Cleveland Foundry: The Forming
Department had 10,150 partially complete units in beginning work in process inventory. The
department started work on 71,050 units during the month and ended the month with 8,200 units
still in work in process. These unfinished units

Royal Industries has one product. Information about the production and sales of that product for
the past year follows. Selling price per unit ..................................................................... $ 49.00
Direct material per unit ................................................................. $ 18.0

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Refer to Lotta's Fourth Street Floral data in E6-46B. Use the high-low method to determine the
company's cost equation for van operating costs. Use your results to predict van operating costs
at a volume of 15,500 miles.

Pharma-True Company produces its product using a single production process. For the month of
March, the company determined its "cost per equivalent unit" to be as follows:
___________________________Direct Materials __________ Conversion Costs Cost per
equivalent unit:...........................$3.80.................

Rollins Mailbox produces decorative mailboxes. The company's average cost per unit is $23.43
when it produces 1,400 mailboxes. Requirements 1. What is the total cost of producing 1,400
mailboxes? 2. If $20,202 of the total costs is fixed, what is the variable cost of producing each
mailbox? 3. Write Rollins Mailbox

Newton Winery in Newton, Massachusetts, has two departments: Fermenting and Packaging.
Direct materials are added at the beginning of the fermenting process (grapes) and at the end of
the packaging process (bottles). Conversion costs are incurred evenly throughout each process.
Data from the month of March for the Ferm
The following information was taken from the ledger of Denver Foundry: The Forming
Department had 10,470 partially complete units in beginning work in process inventory. The
department started work on 67,530 units during the month and ended the month with 9,000 units
still in work in process. These unfinished units we

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The Weaver Furniture Company produces dining tables in a three-stage process: Sawing,
Assembly, and Staining. Costs incurred in the Sawing Department during September are
summarized as follows: Direct materials (lumber) are added at the beginning of the sawing
process, while conversion costs are incurred evenly throug

Naomi's Quilt Shoppe sells homemade Amish quilts. Naomi buys the quilts from local Amish
artisans for $290 each, and her shop sells them for $490 each. She also pays a sales commission
of 8% of sales revenue to her sales staff. Naomi leases her country-style shop for $1,300 per
month and pays $1,800 per month in payrol

PEZ Candy Inc. produces the popular small candy that is dispensed in collectible flip-top
dispensers. In the United States, PEZ candies are produced in a factory in Connecticut. Over 3
billion of the small brick-shaped candies are consumed in the U.S. each year. PEZ candy is made
from sugar, fruit flavoring, coloring,

Five Macaws is a specialty pet gift shop selling exotic pet-related items online. The shop has no
physical location. Results for last year are shown next: For internal planning and decision-
making purposes, the owner of Five Macaws would like to translate the company's income
statement into the contribution margin for

Gleason Manufacturing manufactures a single product. Cost, sales, and production information
for the company and its single product is as follows: • Sales price per unit $47 • Variable
manufacturing costs per unit manufactured (DM, DL, and variable MOH) $23 • Variable
operating expenses per unit sold $1 • F

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Assume that Broadway Floral does a regression analysis on the next year's data using Excel. The
output generated by Excel is as follows: Requirements 1. Determine the firm's cost equation (use
the output from the Excel regression). 2. Determine the R-square (use the output from the Excel
regression). What does Broad

Refer to the Farnsworth Drycleaners in E6-20A. Assume that Farnsworth charges customers $10
per garment for dry cleaning. Prepare Farnsworth's projected income statement if 4,260 garments
are cleaned in July. First, prepare the income statement using the traditional format; then prepare
Farnsworth's contribution margin
Revol Industries manufactures plastic bottles for the food industry. On average, Revol pays $76
per ton for its plastics. Revol's waste-disposal company has increased its waste-disposal charge
to $57 per ton for solid and inert waste. Revol generates a total of 500 tons of waste per month.
Revol's managers have been e

Renata Corporation purchased equipment in 2015 for $180,000 and has taken $83,000 of regular
MACRS depreciation. Renata Corporation sells the equipment in 2017 for $110,000. What is the
amount and character of Renata's gain or loss?

Alice J. and Bruce M. Byrd are married taxpayers who file a joint return. Their Social Security
numbers are 123-45-6789 and 111-11-1112, respectively. Alice's birthday is September 21,
1969, and Bruce's is June 27, 1968. They live at 473 Revere Avenue, Lowell, MA 01850. Alice
is the office manager for Lowell Dental Cli

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Bonnie and Jake (ages 35 and 36, respectively) are married with no dependents and live in
Montana (not a community property state). Because Jake has large medical expenses, they seek
your advice about filing separately to save taxes. Their income and expenses for 2017 are as
follows: Bonnie's salary ..................

Rod Clooney purchases Agnes Mitchell's sole proprietorship for $990,000 on August 15, 2017.
The assets of the business are as follows: a. Calculate Agnes's realized and recognized gain. b.
Determine Rod's basis for each of the assets. c. Write a letter to Rod informing him of the tax
consequences of the purchase. Hi

Mary's diamond ring was stolen in 2016. She originally paid $8,000 for the ring, but it was worth
considerably more at the time of the theft. Mary filed an insurance claim for the stolen ring, but
the claim was denied. Because the insurance claim was denied, Mary took a casualty loss
deduction for the stolen ring on he

Joyce, a widow, lives in an apartment with her two minor children (ages 8 and 10), whom she
supports. Joyce earns $33,000 during 2017. She uses the standard deduction. a. Calculate the
amount, if any, of Joyce's earned income credit. b. During the year, Joyce is offered a new job
that has greater future potential tha

Esther owns a large home on the East Coast. Her home is surrounded by large, mature oak trees
that significantly increase the value of her home. In August 2016, a hurricane damaged many of
the trees surrounding her home. In September 2016, Esther engaged a local arborist to evaluate
and treat the trees, but five of the

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Provide examples of three different bases of power used by Raj Gupta in his dealings with
Andrew Liveris and Dow Chemical.

Mitchell, a calendar year taxpayer, is the sole proprietor of a fast-food restaurant. His adjusted
basis for the building and the related land is $450,000. On March 12, 2017, state authorities
notify Mitchell that his property is going to be condemned so that the highway can be widened.
On June 20, Mitchell's property

Reba, who is single, does a lot of business entertaining at home. Lawrence, Reba's 84-year-old
dependent grandfather, lived with Reba until this year, when he moved to Lakeside Nursing
Home because he needs medical and nursing care. During the year, Reba made the following
payments on behalf of Lawrence: Room at Lakes

Compute the taxable income for 2017 for Emily on the basis of the following information. Her
filing status is single. Salary ........................................................................... $85,000 Interest
income from bonds issued by Xerox ................................ 1,100 Alimony payments received

Emma Doyle is employed as a corporate attorney. For calendar year 2017, she had AGI of
$100,000 and paid the following medical expenses: Medical insurance
premiums ...................................................... $3,700 Doctor and dentist bills for Bob and April
(Emma's parents) ................. 6,800 Doctor

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In late 2016, Randy and Rachel Erwin paid $7,000 in legal fees, adoption fees, and other
expenses directly related to the adoption of an infant son, Jameson. In 2017, the year in which
the adoption becomes final, they pay an additional $8,000. Their AGI in 2017 is $135,000. a.
Determine the amount of the Erwins' adopt

For tax year 2017, determine the number of personal and dependency exemptions in each of the
following independent situations: a. Leo and Amanda (ages 48 and 46, respectively) are husband
and wife and furnish more than 50% of the support of their two children, Elton (age 18) and
Trista (age 24). During the year, Elton

Helen Derby borrowed $150,000 to acquire a parcel of land to be held for investment purposes.
During the current year, she reported AGI of $90,000 and paid interest of $12,000 on the loan.
Other items related to Helen's investments include the following: Interest and annuity
income ....................................

Finch, Inc., purchases 1,000 shares of Bluebird Corporation stock on October 3, 2017, for
$300,000. On December 12, 2017, Finch purchases an additional 750 shares of Bluebird stock
for $210,000. According to market quotations, Bluebird stock is selling for $285 per share on
December 31, 2017. Finch sells 500 shares of
Donna donates stock in Chipper Corporation to the American Red Cross on September 10, 2017.
She purchased the stock for $18,100 on December 28, 2016, and it had a fair market value of
$27,000 when she made the donation. a. What is Donna's charitable contribution deduction? b.
Assume instead that the stock had a fair

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Peyton sells an office building and the associated land on May 1, 2017. Under the terms of the
sales contract, Peyton is to receive $1,600,000 in cash. The purchaser is to assume Peyton's
mortgage of $950,000 on the property. To enable the purchaser to obtain adequate financing,
Peyton is to pay the $9,000 in points c

Lance H. and Wanda B. Dean are married and live at 431 Yucca Drive, Santa Fe, NM 87501.
Lance works for the convention bureau of the local Chamber of Commerce, while Wanda is
employed part-time as a paralegal for a law firm. During 2016, the Deans had the following
receipts: Wanda was previously married to John Allen

Maria held vacant land that qualified as an investment asset. She purchased the vacant land on
April 10, 2013. She exchanged the vacant land for a rental house in a qualifying like-kind
exchange on January 22, 2017. Maria was going to hold the house for several years and then sell
it. However, she got an "offer she cou

Herbert was employed for the first six months of 2017 and earned $90,000 in salary. During the
next six months, he collected $8,800 of unemployment compensation, borrowed $12,000 (using
his personal residence as collateral), and withdrew $2,000 from his savings account (including
$60 of interest earned this year). He r

Why do you think organizational politics is triggered primarily by uncertainty?

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A number of years ago, Lee acquired a 20% interest in the Blue-Sky Partnership for $60,000.
The partnership was profitable through 2016, and Lee's amount at risk in the partnership interest
was $120,000 at the beginning of 2017. Blue-Sky incurred a loss of $400,000 in 2017 and
reported income of $200,000 in 2018. Assu

Is everyone cut out to be a leader? Explain.

To what extent does Lynn Tilton display situational approaches toward leadership? Explain.

In 2017, Bertha Jarow had a $28,000 loss from the sale of a personal residence. She also
purchased from an individual inventor for $7,000 (and resold in two months for $18,000) a
patent on a rubber bonding process. The patent had not yet been reduced to practice. Bertha
purchased the patent as an investment. In additio
Wesley, who is single, listed his personal residence with a real estate agent on March 3, 2017, at
a price of $390,000. He rejected several offers in the $350,000 range during the summer. Finally,
on August 16, 2017, he and the purchaser signed a contract to sell for $363,000. The sale (i.e.,
closing) took place on Sep

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Does it make more sense to change a person's leadership style or the situation? How would Fred
Fiedler and Robert House answer this question?

Which of the communication barriers do you think are most likely to affect Brian Dunn when
communicating via social media with Best Buy employees?

In 2017, Muhammad purchased a new computer for $16,000. The computer is used 100% for
business. Muhammad did not make a § 179 election with respect to the computer. He does not
claim any available additional first-year depreciation. If Muhammad uses the MACRS statutory
percentage method, determine his cost recovery de

Paul and Karen are married, and both are employed (Paul earns $44,000 and Karen earns $9,000
during 2017). Paul and Karen have two dependent children, both under the age of 13 (Samuel
and Joy). So they can work outside the home, Paul and Karen pay $3,800 ($1,900 for each child)
to Sunnyside Day Care Center (422 Sycamor

Jayden calculates his 2017 income tax by using both the Tax Tables and the Tax Rate Schedules.
Because the Tax Rate Schedules yield a slightly lower tax liability, he plans to pay this amount.
a. Why is there a difference? b. Is Jayden's approach permissible? Why or why not?

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Examine the tax reform bills or laws (if not yet passed, consider the "Blueprint" issued by the
House Republicans in June 2016) that suggest changes in the amount and treatment of the
standard deduction and personal exemptions. How do the changes compare to the rules described
in this chapter? Explain whether you suppo

Is Lynn Tilton more of a transactional or transformational leader?

On September 18, 2017, Gerald received land and a building from Frank as a gift. Frank's
adjusted basis and the fair market value at the date of the gift are as follows: Asset
_____________ Adjusted Basis _________ FMV Land ........................ $100,000 ............
$212,000 Building ...................... 80,00

Compute the 2017 standard deduction for the following taxpayers. a. Margie is 15 and claimed
as a dependent by her parents. She has $800 in dividend income and $1,400 in wages from a
part-time job. b. Ruby and Woody are married and file a joint tax return. Ruby is age 66, and
Woody is 69. Their taxable retirement inc