Trina’s Trinkets Inc. (Trina’s) is a corporation incorporated and headquartered in Orem, Utah. Trina’s sells more than 3,600 different types of small trinkets and gifts, primarily to the end consumer, but also to wholesalers.  

Trina’s has operated in Utah for the past 15 years. The company made a strategic decision to target expansion of its sales into specific geographic regions outside of Utah as well. This helps encourage word-of-mouth advertising, which reduces the costs of general advertising expenses. To that end, Trina’s is now selling in several nearby states, including Arizona, Idaho, Montana, Washington and Wyoming. Trina’s plans to expand further throughout the western United States in the coming years.

The founder, Trina, comes from rural Utah and has worked to increase opportunities in rural areas by building her manufacturing and warehousing facilities in the city of Ephraim in Sanpete County, Utah. Since Trina’s established its operations in Ephraim, both the city and county have grown significantly and the area is now considered urban.  

Trina’s uses catalogs, phone calls and sales calls to make sales, but does not yet sell online. Trina’s ships all goods from Ephraim, Utah, using a third-party carrier (e.g., UPS, FedEx).^[1]Trina’s only sells non-food items and does not offer services.

To handle customer inquiries, Trina’s opened a small call center in rural Riverton, Wyoming, three years ago. The call center employs eight people who help take orders, solve customer issues and take care of phone solicitations from small businesses. Trina chose Wyoming for the call center because she has extended family in the area and wanted to provide work opportunities for them.

In 2017, Trina’s began a pilot program in which salespeople are sent to several states to try and increase sales at larger businesses that buy Trina’s products and then resell them. To date, Trina’s has sent salespeople to Utah, Montana and Washington. This pilot program appears to be successful. In the coming years, Trina’s hopes to expand the program to all of the states in which she currently sells products and then she plans to reach several new markets.

Margins are slim for this business, ranging from 5% to 15% of sales before state sales taxes are determined. The industry is extremely competitive and Trina’s faces competition from many online companies that are not required to pay state sales tax. Because of the high competition (which is different than most companies), Trina’s does not feel that it can increase prices to collect sales tax, and instead sales taxes come out of the margins.

Given the tight margins and relatively high costs to manufacture in the United States, Trina is considering moving some of her manufacturing to Mexico and then purchasing warehouse space in Arizona. She has also considered trying to sell her products through Amazon.com. She continues to consider how her operations can positively impact rural areas.

Trina’s has struggled to compute sales taxes correctly for each jurisdiction. Trina’s hired you, a tax advisor, to answer a variety of sales-tax-related questions and create a system (or tool) to compute sales taxes for the business. Additionally, Trina is interested to know how the potential operational changes she is considering would affect her sales tax collection obligations.

For purposes of this case, you can ignore sales tax issues related to the shipping costs.

• Provide the most important operational and tax policy issues related to collecting state sales taxes.
  • This should not be specific to Trina’s specific circumstances or a particular state, rather it should discuss the important principles and considerations that should be considered when analyzing the state sales tax collection process for any business.
  • 1. US Constitution-Due Process Clause and the Commerce Clause
  • 2. Nexus
  • 3. Origin v. destination state classification

In vitro fertilization (IVF) has become commonplace and fertility clinics in the US can nearly guarantee the child's gender. Gender selection is forbidden in many countries because politicians assume it will be used to produce boy babies. India and China have areas of the country where the gender imbalance is so skewed to men that they will have trouble finding spouses. In the Fertility Institutes of LA Dr. Steinberg asserts that there is roughly a 50/50 balance. What do you think of gender selection? Would you avail yourself of IVF if necessary?

An alternative assignment would be to discuss medical tourism where people go abroad to get a dental or medical procedure done, usually because of expense. Do you know someone who went abroad for medical tourism? What was the outcome? Would you go abroad if the cost savings were significant?

Since the SUTA rates changes are made at the end of each year and there is much discussion about changes to the FUTA rate, the available 2018 rates were used for FUTA and SUTA.

Note: For this textbook edition the rate 0.6% was used for the FUTA tax rate for employers.

Example 5-5

Sutcliffe Company had taxable wages totaling $87,500 in 2019. During the year, the company paid some of its state contributions after the January 31, 2020, cutoff. The penalty for tardiness is shown in the following calculation of the firm's net FUTA tax for 2019:

Example 5-6

Yeldon Company has a $70,000 federal and state taxable payroll and has earned a reduced state tax rate of 4 percent. If none of its state tax payments are timely, the FUTA tax calculation is as follows:

If Yeldon Company had made its SUTA payments before the due date of Form 940, the credit for the payments (4%) and the additional credit (1.4%) would have provided a total credit of $3,780 and a FUTA tax savings of $280.

Roofling Company paid wages of $319,600 this year. Of this amount, $193,900 was taxable for net FUTA and SUTA purposes. The state's contribution tax rate is 4.3% for Roofling Company. Due to cash flow problems, the company did not make any SUTA payments until after the Form 940 filing date. Compute the following; round your answers to the nearest cent.

a. Amount of credit the company would receive against the FUTA tax for its SUTA contributions
$

b. Amount that Roofling Company would pay to the federal government for its FUTA tax
$

c. Amount that the company lost because of its late payments
$

Cruz Company has gathered the information needed to complete its Form 941 for the quarter ended September 30, 2019. They are a monthly depositor with the following monthly tax liabilities for this quarter:

State unemployment taxes are only paid to California. The company does not use a third-party designee, the tax returns are signed by the president, Carlos Cruz (Phone: 916-555-9739), and the date filed is October 31, 2019.

Complete Parts 2, 4, and 5 of Form 941 for Cruz Company for the third quarter of 2019.

Cruz Company has gathered the information needed to complete its Form 941 for the quarter ended September 30, 2019.

Using the information presented below, complete Part 1 of Form 941, rounding to the nearest cent.

• # of employees for pay period that included September 12-14 employees
• Wages paid third quarter-$79,750.17
• Federal income tax withheld in the third quarter-$9,570.00
• Taxable social security and Medicare wages-$79,750.17
• Total tax deposits for the quarter-$21,771.83

Hint: Line 7 instructions. Fill in Form 941 through line 6, then fill in Part 2, line 16. Take that information and fill in line 13. Lines 12 and 13 must equal. If the amounts are not the same, correct by entering amount to make equal on line 7. Line 7 differences are caused by how calculations are made on Form 941 and the amounts withheld from employee's earning plus the employer's payroll tax amounts each pay.

Thermal Rising, Inc., makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglider model, but also makes custom-designed paragliders. Management has designed an activity-based costing system with the following activity cost pools and activity rates:

Activity Cost Pool Activity Rate
Supporting direct labor $20 per direct labor-hour
Order processing $192 per order
Custom designing processing $255 per custom design
Customer service $428 per customer

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Management would like an analysis of the profitability of a particular customer, Big Sky Outfitters, which has ordered the following products over the last 12 months:


Standard
Model Custom
Design
Number of gliders 11 3
Number of orders 1 3
Number of custom designs 0 3
Direct labor-hours per glider 27.50 33.00
Selling price per glider $1,600 $2,320
Direct materials cost per glider $472 $580

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The company's direct labor rate is $22 per hour.


Required:
Using the company's activity-based costing system, compute the customer margin of Big Sky Outfitters. (Round intermediate calculations and final answer to the nearest whole number. Omit the "$" sign in your response.)

Do you think that the auditors' responsibility in auditing small public firms that are exempt from Section 404(b) of SOX is different from their role in auditing large accelerated filers that are subject to SOX 404(b) reporting requirements? please explain in detail

College Coasters is a San Diego–based merchandiser specializing in logo-adorned drink coasters. The company reported the following balances in its unadjusted trial balance at December 1.

The company buys coasters from one supplier. All amounts in Accounts Payable on December 1 are owed to that supplier. The inventory on December 1 consisted of 1,000 coasters, all of which were purchased in a batch on July 10 at a unit cost of $0.50. College Coasters records its inventory using perpetual inventory accounts and the FIFO cost flow method.

During December, the company entered into the following transactions. Some of these transactions are explained in greater detail below.

1. Purchased 500 coasters on account from the regular supplier on 12/1 at a unit cost of $0.52, with terms of n/60.
2. Purchased 1,000 coasters on account from the regular supplier on 12/2 at a unit cost of $0.55, with terms of n/60.
3. Sold 2,000 coasters on account on 12/3 at a unit price of $0.90.
4. Collected $1,000 from customers on account on 12/4.
5. Paid the supplier $1,600 cash on account on 12/18.
6. Paid employees $500 on 12/23, of which $300 related to work done in November and $200 was for wages up to December 22.
7. Loaded 100 coasters on a cargo ship on 12/31 to be delivered the following week to a customer in Kona, Hawaii. The sale was made FOB destination with terms of n/60.

Other relevant information includes the following at 12/31:

8. College Coasters has not yet recorded $200 of office expenses incurred in December on account.
9. The company estimates that the equipment depreciates at a rate of $10 per month. One month of depreciation needs to be recorded.
10. Wages for the period from December 23–31 are $100 and will be paid on January 15.
11. The $600 of Prepaid Rent relates to a six-month period ending on May 31 of next year.
12. The company incurred $789 of income tax but has made no tax payments this year.
13. No shrinkage or damage was discovered when the inventory was counted on December 31.
14. The company did not declare dividends and there were no transactions involving common stock.

What are the journal entries for a-n?

true or false

A taxpayer should invest in tax exempt bonds instead of taxable bonds if the interest on the exempt
bonds is greater than the interest on the taxable bonds multiplied by 1 minus the taxpayer's marginal
tax rate

In 20-- the annual salaries paid each of the officers of Abrew, Inc., follow. The officers are paid semimonthly on the 15th and the last day of the month. Compute the FICA taxes to be withheld from each officer's pay on (a) November 15 and (b) December 31.

Round your answers to the nearest cent. If an amount is zero, enter "0".

a.

b.

Herbal Care is ready to begin its third quarter. The company has requested a $40,000, 90-day loan for its bank to
help meet cash requirements during the quarter. The bank’s loan officer has asked the Herbal to prepare a cash
budget for the quarter. In response, the following data have been assembled:

1. On July 1, the beginning of the third quarter, the company will have a cash balance of $65,000.
2. Actual sales for the last two months and budgeting sales for the third quarter are shown below. Past
experience shows that 20% of a month’s sales are collected in the month of the sale, 50% in the month
following the sale, and 25% in the second month following the sale. The remainder is uncollectible.

Month Amount
May (actual) $350,000
June (actual) $380,000
July (budgeted) $450,000
August (budgeted) $550,000
September (budgeted) $260,000

3. Budgeted merchandise purchases and budgeted expenses for the third quarter are shown below.
Merchandise purchases are paid in full during the month following the purchase. Accounts payable for
merchandise purchases on June 30, which will be paid during July, total $240,000. All other cash expenses are
paid in the month of the expense.

Item    July    August    September
Merchandise purchases    $ 250,000 $ 250,000 $ 245,000
Salaries and wages 50,000    50,000 50,000
Advertising    130,000 110,000 90,000
Rent payments 9,000 9,000 9,000
Depreciation    20,000 20,000 20,000

4. Equipment costing $30,000 will be purchased for cash during July.
5. In preparing the cash budget, assume that the $40,000 loan will be made in July and repaid in September.
Interest on the loan, $1200, will be paid in September.

Required:
Prepare a cash budget for the third quarter (July, August, and September). Include four columns in your cash
budget: one for each month, and one for the entire third quarter.   

Joe operates a business that locates and purchases specialized assets for clients, among other activities. Joe uses the accrual method of accounting but he doesn’t keep any significant inventories of the specialized assets that he sells. Joe reported the following financial information for his business activities during year 0.

Determine the effect of each of the following transactions on the taxable business income. (Select "No Effect" from the dropdown if no change in the taxable business income.)

Required:

Joe has signed a contract to sell gadgets to the city. The contract provides that sales of gadgets are dependent upon a test sample of gadgets operating successfully. In December, Joe delivers $13,350 worth of gadgets to the city that will be tested in March. Joe purchased the gadgets especially for this contract and paid $9,450.

Joe paid $275 for entertaining a visiting out-of-town client. The client didn’t discuss business with Joe during this visit, but Joe wants to maintain good relations to encourage additional business next year.

On November 1, Joe paid $590 for premiums providing for $59,000 of “key man” insurance on the life of Joe’s accountant over the next 12 months.

At the end of year 0, Joe’s business reports $11,850 of accounts receivable. Based upon past experience, Joe believes that at least $2,570 of his new receivables will be uncollectible.

In December of year 0, Joe rented equipment to complete a large job. Joe paid $5,850 in December because the rental agency required a minimum rental of three months ($1,950 per month). Joe completed the job before year-end, but he returned the equipment at the end of the lease.

Joe hired a new sales representative as an employee and sent her to Dallas for a week to contact prospective out-of-state clients. Joe ended up reimbursing his employee $490 for airfare, $540 for lodging, $440 for meals, and $340 for entertainment (Joe provided adequate documentation to substantiate the business purpose for the meals and entertainment). Joe requires the employee to account for all expenditures in order to be reimbursed.

Joe uses his BMW (a personal auto) to travel to and from his residence to his factory. However, he switches to a business vehicle if he needs to travel after he reaches the factory. Last month, the business vehicle broke down and he was forced to use the BMW both to travel to and from the factory and to visit work sites. He drove 215 miles visiting work sites and 84 miles driving to and from the factory from his home. Joe uses the standard mileage rate to determine his auto-related business expenses. (Round your answer to whole number. Use standard mileage rate.)

Joe paid a visit to his parents in Dallas over the Christmas holidays. While he was in the city, Joe spent $145 to attend a half-day business symposium. Joe paid $390 for airfare, $126 for meals during the symposium, and $77 on cab fare to the symposium.

Fredo, Inc., purchased 10% of Sonny Enterprises for $1,000,000 on January 1, 2018. Sonny recognized a total of $400,000 net income during 2018, paid $30,000 of dividends to Fredo during 2018, and at December 31, 2018, the market value of the Sonny investment increased to $1,040,000.

Required: Prepare the journal entries necessary to account for the Sonny investment, assuming that Fredo:

(1) Lacks significant influence

(2) Assume that with the 10% purchase Fredo has significant influence over the operating and financial policies of the investee.

Dillon Products manufactures various machined parts to customer specifications. The company uses a job-order costing system and applies overhead cost to jobs on the basis of machine-hours. At the beginning of the year, the company used a cost formula to estimate that it would incur $4,192,500 in manufacturing overhead cost at an activity level of 559,000 machine-hours. The company spent the entire month of January working on a large order for 12,800 custom-made machined parts. The company had no work in process at the beginning of January. Cost data relating to January follow: Raw materials purchased on account, $319,000. Raw materials used in production, $252,000 (80% direct materials and 20% indirect materials). Labor cost accrued in the factory, $156,000 (one-third direct labor and two-thirds indirect labor). Depreciation recorded on factory equipment, $62,800. Other manufacturing overhead costs incurred on account, $84,800. Manufacturing overhead cost was applied to production on the basis of 40,720 machine-hours actually worked during the month. The completed job for 12,800 custom-made machined parts was moved into the finished goods warehouse on January 31 to await delivery to the customer. (In computing the dollar amount for this entry, remember that the cost of a completed job consists of direct materials, direct labor, and applied overhead.) Required: 1. Prepare journal entries to record items (a) through (f) above [ignore item (g) for the moment]. 2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant items from your journal entries to these T-accounts. 3. Prepare a journal entry for item (g) above. 4. If 10,300 of the custom-made machined parts are shipped to the customer in February, how much of this job’s cost will be included in cost of goods sold for February?

Timberly Construction negotiates a lump-sum purchase of several assets from a company that is going out of business. The purchase is completed on January 1, 2017, at a total cash price of $830,000 for a building, land, land improvements, and four vehicles. The estimated market values of the assets are building, $485,100; land, $297,000; land improvements, $39,600; and four vehicles, $168,300. The company’s fiscal year ends on December 31. Required: 1-a. Prepare a table to allocate the lump-sum purchase price to the separate assets purchased. 1-b. Prepare the journal entry to record the purchase. 2. Compute the depreciation expense for year 2017 on the building using the straight-line method, assuming a 15-year life and a $32,000 salvage value. 3. Compute the depreciation expense for year 2017 on the land improvements assuming a five-year life and double-declining-balance depreciation.

Compute the depreciation expense for year 2017 on the land improvements assuming a five-year life and double-declining-balance depreciation.

Compute the depreciation expense for year 2017 on the building using the straight-line method, assuming a 15-year life and a $32,000 salvage value. (Round your answers to the nearest whole dollar.)