Jay and JoAnn Jefferson are married and have a joint consulting business. The business taxable income of $100,000 for 2016 and they both take $35,000 out of the business to live on and leave $26,000 in the business to expand. Here are the business revenue and expenses:

Consulting revenue $256,000

Salaries expense, employees 100,000

Payroll tax expense 18,000

Owners’ Draw 70,000

Rent expense 12,000

New Computer equipment (total cost) Claim section 179 deduction 10,000

Travel expense 4,000

Health Insurance (employees) 6,000

Health Insurance (owners) 4,000

Meals 1,000

Entertainment 1,000

Supplies 5,000

Assuming Jeff and JoAnn have this same business that they run as a partnership, prepare their joint Federal income tax return for 2018. Assume that they have no dependents, do have insurance coverage, do not have any other income or itemized deductions, and they made quarterly Federal income tax payments totaling $24,000.

Don’t forget to include a standard deduction and personal exemptions.  (They are each under 65 years of age.) You should complete a Schedule E (page 2), Schedules SE, Form 4562, and a Form 1040.

Note: In computing the income distributed on this K-1. There were no salaries only the Line 1 income and the medical insurance paid by the partnership was shown as a guaranteed payment to partners and reported on a separate line. The section 179 depreciation was also reported separately.

Argosy Gaming

Argosy Gaming Company is the owner and operator of six riverboat gambling casinos and hotels in the United States. Argosy has developed a centralized enterprise data warehouse to capture the data generated at each property. As part of this effort, Argosy selected an extract-transform-load (ETL) tool to gather and integrate the data from six different operational databases to create its data warehouse.

The plan is to use the data to help Argosy management make quicker, well-informed decisions based on patrons’ behaviors, purchases, and preferences. Argosy hopes to pack more entertainment value into each patron’s visit by better understanding their gambling preferences and favorite services. The data will also be used to develop targeted direct mail campaigns, customize offers for specific customer segments, and adapt programs for individual casinos.

Review Questions

1. What are the key components that Argosy must put into place to create an environment for a successful BI and analytics program?
2. What complications can arise from gathering data from six different operational databases covering six riverboat gambling casinos and hotels?

Critical Thinking Questions

1. The Argosy BI and analytics program is aimed at boosting revenue not at reducing costs. Why do you think this is so?
2. What specific actions must Argosy take to have a successful program that will boost revenue and offset some of the increases in costs?

Information for Entity A for the year ended December 31, 2019 ($ in millions):

  

Show work.

A. Prepare the appropriate journal entry to record income taxes. Show work where possible.

B. What is Entity A's net income?

C. Sometimes a temporary difference will produce future deductible amounts. Explain what is meant by future deductible amounts. Describe at least one situation that has this effect, for example, one example is when rent revenue is collected in advance from tenants (deferred rent revenue for financial accounting purposes) but will be recognized as the tenants occupy the property. You can think of others. How are future deductible amounts recognized in the financial statements? As between deferred tax assets and deferred tax liabilities, which would management prefer and why?  

Define and explain the relationship between total revenue, average revenue, and marginal revenue for a monopolist. What is monopoly profit? Should a monopolist produce quantities of product greater than that which would maximize profits?

1. Revenue model is a number revenue model that e-commerce is adopted to generator revenue and profits?

2. The types of revenue model, describe each one?

3. What are the benefit of Internet options to the seller to the buyer.?Benefit and the cost of online options.?

4. What are the five steps a social marking, describe each one?

5. What is the five step of analyzing ethical dilemmas, And describe each one?

25. Revenue recognition is a major accounting challenge. Most industrial and retail firms recognize revenue as earned at the point of sale. More generally, according to IAS 18, revenue from the sale of goods should be recognized when the significant risks and rewards of ownership have been transferred to the buyer, the seller loses control over the items, the revenue and related costs can be measured reliably, and collection is reasonably assured. Revenue from services and long-term contracts can be recognized as the work progresses.

It is often not clear just when these general criteria are met. For example, revenue recognition at point of sale may be a reasonable tradeoff between relevance and reliability in most cases. However, relevance is increased (and reliability decreased) if revenue is recognized earlier than point of sale.

Furthermore, revenue recognition policy may be used by firms to impress investors. For example, firms with no earnings history (e.g., startup firms) and firms that are incurring significant losses or declines in earnings have an incentive to record revenue as early as possible, so as to improve, at least temporarily, the appearance of their financial statements.

Consider the case of Lucent Technologies Inc. (now called Alcatel-Lucent). In December 2000, Lucent restated its revenue for its fiscal year ended September 30, 2000, reducing the amounts (in millions) originally reported as follows:

The vendor financing component of the restatement represents previously unrecorded credits granted by Lucent to customers, to help them finance purchases of Lucent products. That is, the customer sales were originally recorded gross, rather than net, of the credits. The distribution partners’ component represents product

shipped to firms with which Lucent did not deal at arm’s length, but which was not resold by these firms at year-end. These firms included certain distributors in which Lucent had an ownership interest. The practice of over shipping to distributors is called “stuffing the channels.”

In its 2000 annual report, Lucent reported net income of $1,219 million, compared to $4,789 million for 1999 and $1,065 million for 1998.

Despite these December, 2000 adjustments, on May 17, 2004, the SEC announced charges against Lucent and several of its officers for overstating revenues by $1,148 million in 2000 in order to meet sales targets. The company’s share price fell by 5.5% on that day. Tactics used, the SEC claimed, included the granting of improper credits to customers to encourage them to buy company products, and invoicing sales to customers that were subject to renegotiation in subsequent periods.

Subsequently, Lucent paid a fine of $25 million for “lack of cooperation.” In addition, the company, and some of the executives charged, settled the allegations by paying penalties, without admitting or denying guilt.

Required

a. What is the most relevant point of revenue recognition? The most reliable? Explain. In your answer, consider manufacturing firms, oil and gas exploration firms, retail firms, and firms with long-term contracts.

b. Explain whether or not you feel that Lucent’s original recognition of the $679 million of items listed above as revenue was consistent with revenue recognition criteria? While Lucent was a U.S. company, assume that U.S. revenue recognition criteria are similar to the IASB criteria given in the question. In your answer, consider the tradeoff between relevance and reliability.

c. What additional revenue recognition questions arise when the vendor has an ownership interest in the customer?

1. Consider recent (this century) interactions between politics and
   1. entertainment,
   2. advertising,
   3. social media.

Identify 2 trends you have observed in each area. Explain why you believe the trends are generally positive or negative.

Assume you hold a valid, current, and active license as a sales associate. A client of yours, who purchased three $60,000 houses from you, calls from New York advising you he has located a purchaser interested in a $100,000 tract of land in your area. The client also reveals he has experienced a considerable entertainment expense surrounding procuring the buyer. You may

a. compensate him for his expense, because he is not subject to comply with Florida's Real Estate Licensure Law.

b. give him reasonable compensation, provided you send it to him through a bank outside of Florida.

c.compensate him with a gift of equal value, but not with monetary compensation.

d. not legally compensate him for the entertainment expense.

Eli owns one share of stock of Indigo River Media and one share of stock of Red Royal Entertainment. The total value of his holdings is 174.83 dollars. Both stocks pay annual dividends that are expected to continue forever. The expected return for Indigo River Media stock is 15.8 percent and its annual dividend is expected to remain at 13.81 dollars forever. What is the expected return for Red Royal Entertainment stock if its next dividend is expected to be 7.99 dollars and all subsequent dividends are expected to grow by 3.16 percent annually? The next dividend for both firms’ stocks will be paid in one year. Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.