As a part of the federal Clean Air Act Amendments Congress established a national goal of preventing future and resolving existing regional haze in national parks and wilderness areas when the visibility impairment results from manmade air pollution. The law requires states to submit implementation plans to the United States Environmental Protection Agency (EPA). The implementation plans must include identifying major industrial sources of air pollution that have caused or contributed to visibility impairment in national park and wilderness areas.

In the state implementation plan, any facility identified as a major source of air pollution must reduce air pollution by installing the best available retrofit technology (BART)—as determined by the state. To determine the BART, the law requires the following factors be considered: (1) the technology available, (2) the costs of compliance, (3) the energy impacts and non-air quality environmental impacts of compliance, (4) any pollution control equipment currently being used at the source, (5) the remaining useful life of the source, and (6) the degree of improvement in visibility reasonably anticipated to result from the use of such technology. The law requires the EPA Regional Administrator—“after an opportunity for a public hearing”—to approve or disapprove a state’s determination of the BART and the emission limits for any identified source. The legislative history for the Clean Air Act doesn’t indicate what type of hearing is required or the specific procedures to be used in the “public hearing.”

A party may request the EPA Administrator reconsider the approval or disapproval of the state’s BART determination, but that request for reconsideration doesn’t extend the time for filing a petition for judicial review or postpone the effectiveness of the action. Any Petition for Judicial Review of the BART determination must be filed in the District of Columbia Court of Appeals within 60 days of the Regional Administrator’s decision of the approval or disapproval of the BART determination.

If a facility fails to install the air pollution control measures required by the BART determination by the deadline set forth in the determination, the EPA can bring an action in court to enforce the BART determination, which could include imposing a substantial fine.

The state of West Dakota has identified the Poison Valley Power Plant—a coal-fired power plant in West Dakota—as a major source of air pollution contributing to visibility impairment in White Hills National Park. The West Dakota Department of Natural Resources issued a determination that the best available retrofit technology (BART) for the Poison Valley Power Plant is Selective Noncatalytic Reduction (SNCR) technology and set an emission limit of 0.20 lbs/MMBtu (pounds per million British thermal units).

In its determination, the state rejected a proposal by the Stormy Plateau Tribe, an Indian tribe with a reservation located within a mile of the Poison Valley Power Plant, and an environmental group, Citizens Advocating Renewable Energy (CARE) to use Selective Catalytic Reduction (SCR) technology—a more costly but more effective emission-reducing technology. The state also rejected the Poison Valley Power Plant’s proposal, which was that no additional emissions controls should be installed because the new pollution control equipment would be too expensive and could close the plant. The basis for the state’s BART determination was that additional emission controls were required because Poison Valley Power Plant was a substantial contributor to the haze problem in White Hills National Park. In terms of the choosing SNCR over SCR, the state determined the estimated 5 percent increase in visibility improvement using SCR technology was outweighed by the increased cost of SCR. State documents estimated SNCR technology would cost about $4.3 million per year compared to $16.3 million per year for SCR technology.

The Region 25 Office of the United States EPA issued the attached notice to interested parties on July 15, 2017. The notice was posted on the EPA Region 25 Facebook page and the notice was emailed to all the parties who participated and offered comments to the state of West Dakota DNR in its BART proceeding.Poison Valley Power Plant, Stormy Plateau Tribe, and CARE all opposed West Dakota’s determination of the BART (for different reasons). Each objected to the “open-house” process outlined in the notice and contended a trial-type hearing was required by the US Constitution and federal APA to challenge West Dakota’s determination of the BART and the emission limits. In addition, Poison Valley Power Plant, Stormy Plateau Tribe and Care requested the underlying data used by West Dakota officials in making its BART determination be disclosed and an opportunity to cross-examine a DNR official about the data. Regional Administrator Giva Hoot denied the requests for a trial-type hearing, disclosure of data, and cross-examination. The parties provided written and oral comments at the open house. Regional Administrator Giva Hoot approved West Dakota’s determination that SNCR technology is the BART for Poison Valley Power Plant and approved the 0.20 lbs/MMBtu limit on NOx, but she offered no reasons for her action. Instead, on October 1, 2017, she mailed a letter to all those participating in the open house and posted a statement on www.facebook.com/EPA/Region25 stating she had the discretion to approve or deny the BART determination and no law or rule required her to give her reasons. The statement simply

July 15, 2017                          NOTICE

ENVIRONMENTAL PROTECTION AGENCY ANNOUNCES PROPOSED BEST AVAILABLE RETROFIT TECHNOLOGY (BART) DETERMINATION, OPEN HOUSE, AND REQUEST FOR PUBLIC COMMENT

The Region 25 Office of the United States Environmental Protection Agency (EPA) requests public comment on a proposed state implementation plan for implementing Best Available Retrofit Technology (BART) at Poison Valley Power Plant located near Peabody, West Dakota. The Clean Air Act’s Regional Haze Rule requires the use of BART at older coal-fired power plants like PVPP to reduce haze and improve visibility in nearby national parks and wilderness areas.

EPA is proposing to approve West Dakota’s determination that Selective Non-catalytic Reduction (SNCR) technology is the BART for Poison Valley Power Plant and its limits on emissions of nitrogen oxide (NOx) is set at 0.20 lbs/MMBtu (pounds per million British thermal units), which must be implemented by January 1, 2020.

EPA is holding an open house on the proposal and an opportunity for the public to comment on September 1, 2017, at the Peabody High School in Peabody, West Dakota. Any person may provide written comments and/or oral comments regarding our proposal at the open house.

If you have questions about the public hearings or how to submit comments, please contact Giva Hoot, EPA Region 25 Administrator at 415-947-4139, or at [email protected]. Please bring this notice to the attention of all persons who may have an interest in our proposal.

Posted on www.facebook.com/EPA/Region25 and sent to interested parties

GIVA HOOT

Region 25 Administrator

Poison Valley Power Plant, Stormy Plateau Tribe, and CARE all opposed West Dakota’s determination of the BART (for different reasons). Each objected to the “open-house” process outlined in the notice and contended a trial-type hearing was required by the US Constitution and federal APA to challenge West Dakota’s determination of the BART and the emission limits. In addition, Poison Valley Power Plant, Stormy Plateau Tribe and Care requested the underlying data used by West Dakota officials in making its BART determination be disclosed and an opportunity to cross-examine a DNR official about the data. Regional Administrator Giva Hoot denied the requests for a trial-type hearing, disclosure of data, and cross-examination. The parties provided written and oral comments at the open house. Regional Administrator Giva Hoot approved West Dakota’s determination that SNCR technology is the BART for Poison Valley Power Plant and approved the 0.20 lbs/MMBtu limit on NOx, but she offered no reasons for her action. Instead, on October 1, 2017, she mailed a letter to all those participating in the open house and posted a statement on www.facebook.com/EPA/Region25 stating she had the discretion to approve or deny the BART determination and no law or rule required her to give her reasons. The statement simply concluded “West Dakota’s determination is approved.”

In individual petitions for judicial review filed in federal court on November 1, 2017, Poison Valley Power Plant, Stormy Plateau Tribe, and CARE all challenged Regional Administrator Giva Hoot’s decision to approve West Dakota’s BART determination and emission limit for the Poison Valley Power Plant and the process used to approve the determination as violating the Constitution and the federal APA. None of the parties requested reconsideration of the decision before filing their lawsuits.

In its complaint, Poison Valley Power Plant alleged the approval violated the Clean Air Act and was arbitrary and implementing SNCR technology would cause economic hardship for the company.

In its complaint, Stormy Plateau Tribe alleged that the approval violated the Clean Air Act, just rubber-stamped the state’s action, and ignored the evidence that Poison Valley Power Plant’s mercury emissions were causing health problems for tribal members, which would be reduced by implementing Selective Catalytic Reduction (SCR) technology.

CARE’s members all reside in South Dakota and its complaint alleged that the EPA’s selection of SNCR technology as the BART for Poison Valley Power Plant might be used as precedent in its upcoming review of South Dakota’s state implementation plan. CARE alleged its members are concerned about the haze problems in Mount Rushmore and Badlands National Parks in South Dakota and contend that only SCR technology will fix the pollution problems with the South Dakota power plants.

You are the judge and must write a decision analyzing the legality of EPA Regional Administrator Giva Hoot’s actions, and in doing so, address the following points (make sure you define and explain the important terms and principles mentioned below):

Assume the decision can be reviewed by the court in answering all the questions below.

Applying the principles of Citizens to Preserve Overton Park v. Volpe, explain what you—as the reviewing judge—would do to overcome the failure of the EPA Regional Administrator to provide any justification for her decision and why??

On May 1, 2020, Johnson Corporation issued $300,000, ten-year, 12% bonds which were priced to yield 14%. The bonds were dated March 1, 2020, and pay interest semiannually on March 1 and September 1. Johnson is a calendar year corporation. Determine the issue price of the bonds and prepare the September 1, 2020 journal entry for Johnson Corporation.

During 2020, Harris Inc. reported revenues of $237,000 and expenses of $130,000, and declared cash dividends of $65,000. Retained Earnings on December 31, 2019 was $165,000. Required: Prepare closing journal entries as at December 31, 2020; show your journal entries. Calculate the balance in Retained Earnings on December 31, 2020. Please show your work.

(use appendix to solve)

On 1 July 2020, Brooklyn Ltd (lessor) leased Equipment to New Ltd (lessee).

The lease agreement contained the following:

What would be the journal entries on 1 July 2020 for the lessor (Brooklyn Ltd)?

X Company estimates the following for its only two products for 2020 - X and Y:

Total fixed costs in 2020 are expected to be $17,400. What is the expected weighted average contribution margin per unit in 2020 (rounded to two decimal places)?

Big Ink is a chain of tattoo parlors that follows IFRS. The following data is for 2020:

Golf club dues were $30,000.

Automated tattoo machinery was acquired on January 1, 2019, for $200,000. Straight‐line depreciation is over a 10‐year life with a $20,000 residual value. For taxes, the 30% rate class is used, and Big Ink applied the CRA half year rule in 2019.

On December 31, 2020, Big Ink accrued a provision for legal expense of $40,000. The estimated legal liability of $40,000 relates to four pending lawsuits. In addition to the $40,000, legal costs paid out in cash during 2020 were $60,000. These related to lawsuits started and settled during 2020. Big Ink believes that the new automated equipment will reduce the number of lawsuits.

Pretax accounting income for 2020 is $880,000. The income tax rate is 25%.

Instructions

1. WRITE a schedule (starting with pretax accounting income) to calculate taxable income. On your schedule, indicate a subtotal for accounting income after permanent differences.
2. Prepare the journal entries to record income taxes for 2020.

Tia is married and is employed by Carrera Auto Parts. In 2019, established high-deductible health insurance for all its employees. The plan has a $2,700 deductible for married taxpayers. Carrera also contributes 5% of each employee’s salary to a Health Savings Account. Tia’s salary is $43,000 in 2019 and $45,000 in 2020. Tia makes the maximum allowable contribution to her HSA in 2019 and 2020. She received $600 from the HSA for her 2019 medical expenses. In 2020, she spends $2,000 on medical expenses from her HSA. The MSA earns $30 in 2019 and $48 in 2020.

Round intermediate computations and final tax liability to the nearest dollar.

a. What is the effect of the HSA transactions on Tia's adjusted gross income?

The maximum aggregate contribution to an HSA for a family in 2019 is $______. The earnings of an HSA, as well as medical reimbursements, are (excludable/included). Based on Carrera's contribution, in 2019, Tia (can/cannot deduct) for AGI $_______

b. What is the balance in Tia's HSA account at the end of 2020?

Tia has $_________ in her HSA account at the end of 2020.

Questions #2 Basic and diluted earnings per share

The following data are presented by Quentin Corp. for calendar 2020

Net income                                                                                                                                                                               $ 4,500,000

Common shares outstanding, 1,000,000 shares

10%, cumulative preferred shares, convertible into 120,000 common shares                             $ 1,600,000

8% convertible bonds; convertible into 105,000 common shares                                                        $ 7,500,000

360,000 call options exercisable at $ 25 per share

Additional information

1.       The common and preferred shares and the convertible bonds were outstanding from the beginning of the year.

2.       In 2020, a $ 500,000 dividend was declared and distributed; however, no dividends were declared in 2019.

3.       The average market price of the common shares in 2020 was $ 30. The stock price was $ 27 on January 1, 2020, and $ 35 on December 31, 2020.

4.       The convertible bonds were sold at par.

5.       The income tax rate for 2020 is 30%.

Instructions

a)      Calculate basic EPS.

b)      Calculate diluted EPS.

c)      Briefly discuss the usefulness of the EPS measure in general. What is the additional importance of reporting diluted EPS?

2. On January 1, 2020, Firm Lessor leased a building to Firm Lessee. The relevant information related to the lease is as follows.

1) The lease arrangement is for 2 years.

2) Equal rental payments are due on January 1 of each year, beginning in 2020.

3) The building’s fair value at commencement of the lease is $100,000. The building is depreciated on a straight-line basis. Its estimated economic life is 4 years with salvage value of $25,000 at the end of the lease and $0 at the end of the economic life.

4) The lease contains no renewal options. The building reverts to Firm Lessor at the termination of the lease.

5) Both firms use the discount factor of 10%. 6) Both the lessor and the lessee are on a calendar-year basis.

(a) Discuss whether this is an operating lease.

(b) Prepare the journal entries that Firm Lessee should make in 2020

For the dates 1/1/2020, 1/1/2020, 1/1/2021 & Include Lease Payment, Interest, Reduction of Lease Liability, Lease Liability

(c) Prepare the journal entries that Firm Lessor should make in 2020.