Executive Pay

1. Explain the Ratio between CEO and average worker pay

2. Explain how the economy is suffering from executive pay

3. What are the principles of executive compensation

Ayres Services acquired an asset for $86 million in 2018. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset’s cost is depreciated by MACRS. The enacted tax rate is 40%. Amounts for pretax accounting income, depreciation, and taxable income in 2018, 2019, 2020, and 2021 are as follows:

Required:
Determine (a) the temporary book–tax difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account. (Leave no cell blank, enter "0" wherever applicable. Negative amounts should be indicated by a minus sign. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)
  

          Fjällräven is a Swedish company specializing in outdoor equipment—mostly clothing and rucksacks. Fjällräven was founded in 1960 by Åke Nordin(1936–2013). Its most popular product is the Kånken rucksack (shown below). The Fjällräven Kånken rucksack which is made from tent fabric proved comfortable and durable. It made the brand well known in just a decade.

          The company has a strong market presence in the Nordic countries. It is also represented in other European countries, especially Germany. The company would like to expand and increase sales in the US market, however, the US market is crowded with strong competitors such as JanSport, the North Face, among others.

          Your task is to come up with a promotional strategy for Fjällräven’s Kånken rucksack. Feel free to use any promotional tools we have talked about in class so far, be creative! Make sure you specify the target market (e.g., segments) and have a clear message.

Describe how an ethically challenged CEO can affect the liability of a health care organization. Identify ethical responsibilities of a CEO in a health care setting, and state five most important responsibilities you believe will assist a CEO in maintaining a culture of ethical and legal behavior.

Jane Smith, age 40, is single and has no dependents. She is employed as a legal secretary by Legal Services, Inc. She owns and operates Typing Services located near the campus of Florida Atlantic University at 1986 Campus Drive. Jane is a material participant in the business. She is a cash basis taxpayer. Jane lives at 2020 Oakcrest Road, Boca Raton, FL 33431. Jane’s Social Security number is 123-45-6789. Jane indicates that she wants to designate $3 to the Presidential Election Campaign Fund. Jane had health insurance for all months of 2018. During 2018, Jane had the following income and expense items: $100,000 salary from Legal Services, Inc. $20,000 gross receipts from her typing services business. $700 interest income from Third National Bank. $1,000 Christmas bonus from Legal Services, Inc. $60,000 life insurance proceeds on the death of her sister. $5,000 check given to her by her wealthy aunt. $100 won in a bingo game. Expenses connected with the typing service: Office rent $7,000 Supplies 4,400 Utilities and telephone 4,680 Wages to part-time typists 5,000 Payroll taxes 500 Equipment rentals 3,000 $9,500 interest expense on a home mortgage (paid to San Jose Savings and Loan). $15,000 fair market value of silverware stolen from her home by a burglar on October 12, 2018. Jane had paid $14,000 for the silverware on July 1, 2008. She was reimbursed $10,000 by her insurance company. Jane had loaned $2,100 to a friend, Joan Jensen, on June 3, 2014. Joan declared bankruptcy on August 14, 2018, and was unable to repay the loan. Assume that the loan is a bona fide debt. Legal Services, Inc., withheld Federal income tax of $15,000 and the appropriate amount of FICA tax from her wages. Alimony of $10,000 received from her former husband, Ted Smith; divorce was finalized in 2012, and no changes have been made to the divorce decree since that time. Interest income of $800 on City of Boca Raton bonds. Jane made estimated Federal tax payments of $2,000. Sales taxes from the sales tax table of $946. Property taxes on her residence of $3,200. Charitable contribution of $2,500 to her alma mater, Citrus State College. On November 1, 2018, Jane was involved in an automobile accident. At the time of the accident, Jane’s automobile had an FMV of $45,000. After the accident, the automobile’s FMV was $38,000. Jane acquired the car on May 2, 2017, at a cost of $52,000. Jane’s car was covered by insurance, but because the policy had a $5,000 deduction clause, Jane decided not to file a claim for the damage. Part 1—Tax Computation Compute Jane Smith’s 2018 Federal income tax payable (or refund due). If you use tax forms for your computations, you will need Forms 1040 and 4684 and Schedules A, C, and D.

VAT Deductible and VAT Received for Company C in a given tax period are as follows.

Required: a) Fill VAT tax return number on the table for each month.

b) Close the VAT Accounts and make the journal entries at the end of April, May, June 2020.

c) If it is necessary make journal entries for VAT payment to the tax offices on 26 May, 26 June, 26 July 2020.

Change in Reporting for Equity Investment

Stream Company buys 10 percent of Topsia Company’s stock for $2 million in cash on January 1, 2020, and reports the investment as having no significant influence. Fair value of the investment on December 31, 2020 is $2.1 million. On January 1, 2021, Stream acquires another 30 percent of Topsia’s stock for $8 million in cash, and changes to the equity method of reporting for this investment. Fair value of the 40 percent interest on December 31, 2021, is $12 million. Topsia reported the following amounts for the years 2020 and 2021:

Topsia reported no other comprehensive income, and any basis difference is attributed to goodwill. Stream and Topsia have no intercompany transactions.

Required

Calculate the balances appearing in the following accounts of Stream Company for 2020 and 2021:

a. Investment in Topsia, reported on Stream’s December 31, 2020 and December 31, 2021 balance sheets.

b. Dividend income reported on Stream’s income statements, 2020 and 2021.

c. Unrealized gain on investment in Topsia, reported on Stream’s 2020 and 2021 income statements.

d. Equity in net income of Topsia, reported on Stream’s 2020 and 2021 income statements.

Dent Company has the following inventory information:

                                      Inventory at   

            Year        year-end prices (FIFO)                            Price Index

            2017(base)               $180,000                                   1.00

            2018                           252,000                                   1.05

            2019                           368,000                                   1.15

            2020                           387,500                                   1.25

Instructions

Using the dollar-value LIFO method, compute the ending inventory value for each year.

SHOW ALL THE STEPS YOU USED TO ARRIVE AT THE FINAL ANSWER.

Answers:

2017 $_______________

2018 $_______________

2019 $_______________

2020 $_______________

Based on your answers from above, record the journal entry required to adjust the inventory to dollar-value LIFO for 2018 and 2019 only

On December 31, 2020, Flounder Company borrowed $67,653 from Paris Bank, signing a 5-year, $114,000 zero-interest-bearing note. The note was issued to yield 11% interest. Unfortunately, during 2022, Flounder began to experience financial difficulty. As a result, at December 31, 2022, Paris Bank determined that it was probable that it would receive back only $85,500 at maturity. The market rate of interest on loans of this nature is now 12%.

1. Prepare the entry to record the issuance of the loan by Paris Bank on December 31, 2020.

2. Prepare the entry, if any, to record the impairment of the loan on December 31, 2022, by Paris Bank

In this problem, assume that the distribution of differences is approximately normal. Note: For degrees of freedom d.f. not in the Student's t table, use the closest d.f. that is smaller. In some situations, this choice of d.f. may increase the P-value by a small amount and therefore produce a slightly more "conservative" answer.

Are America's top chief executive officers (CEOs) really worth all that money? One way to answer this question is to look at row B, the annual company percentage increase in revenue, versus row A, the CEO's annual percentage salary increase in that same company. Suppose a random sample of companies yielded the following data:

Do these data indicate that the population mean percentage increase in corporate revenue (row B) is different from the population mean percentage increase in CEO salary? Use a 5% level of significance. (Let d = B − A.)

(a) What is the level of significance?
State the null and alternate hypotheses.

(b) What sampling distribution will you use? What assumptions are you making?

What is the value of the sample test statistic? (Round your answer to three decimal places.)

(c) Find the P-value. (Round your answer to four decimal places.)

(d) Based on your answers in parts (a) to (c), will you reject or fail to reject the null hypothesis? Are the data statistically significant at level α?

(e) Interpret your conclusion in the context of the application.