Wonka Incorporated, is a C corporation that operates and operates on a calendar year. The sole shareholder of the corporation is Willy Wonka. Wonka’s only business since its incorporation in 2015 has been land-surveying services. In Wonka’s state of incorporation, only a licensed surveyor can perform land surveying. Willy, Wonka’s only employee, is a licensed surveyor but he is not a licensed engineer. Upon audit of Wonka’s 2015 and 2016 tax returns, the IRS assessed tax deficiencies stemming from its conclusion that the corporation was a personal service corporation subject to the flat tax rate of 35%. Willy believes that the IRS’s determination is incorrect, and he has asked you for advice on how to proceed. Evaluate the IRS’s position regarding the treatment of Wonka Corporation as a personal service corporation, and prepare a memo for the client files describing the results of your research.

Closing the Balances in The Variance Accounts at the End of the Year

Yohan Company has the following balances in its direct materials and direct labor variance accounts at year-end:

Unadjusted Cost of Goods Sold equals $1,530,000, unadjusted Work in Process equals $336,000, and unadjusted Finished Goods equals $200,000.

Required:

1. Assume that the ending balances in the variance accounts are immaterial and prepare the journal entries to close them to Cost of Goods Sold. Note: Close the variances with a debit balance first. If an amount box does not require an entry, leave it blank or enter "0".

What is the adjusted balance in Cost of Goods Sold after closing out the variances?

$

2. What if any ending balance in a variance account that exceeds $12,000 is considered material? (a) Close the immaterial variance accounts to Cost of Goods Sold. (b) Prorate the largest of the labor variances among Cost of Goods Sold, Work in Process, and Finished Goods on the basis of prime costs in these accounts. (c) Prorate the largest of the material variances among Cost of Goods Sold, Work in Process, and Finished Goods on the basis of prime costs in these accounts. The prime cost in Cost of Goods Sold is $1,060,000, the prime cost in Work in Process is $161,800, and the prime cost in Finished Goods is $130,000. If an amount box does not require an entry, leave it blank or enter "0".

Note: Round all interim calculations to three decimal places, and round your final answers to the nearest dollar. Adjust credit entry for rounding to ensure debits equal credits in journal entry.

What are the adjusted balances in Work in Process, Finished Goods, and Cost of Goods Sold after closing out all variances?

Check My Work1 more Check My Work uses remaining.

Depreciation by Two Methods

A storage tank acquired at the beginning of the fiscal year at a cost of $126,000 has an estimated residual value of $7,500 and an estimated useful life of 5 years.

a. Determine the amount of annual depreciation by the straight-line method.
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b. Determine the amount of depreciation for the first and second years computed by the double-declining-balance method. Do not round the double-declining balance rate. If required, round your answers to the nearest dollar.

A magazine collects data each year on the price of a hamburger in a certain fast food restaurant in various countries around the world. The price of this hamburger for a sample of restaurants in Europe in January resulted in the following hamburger prices (after conversion to U.S. dollars).

The mean price of this hamburger in the U.S. in January was $4.62. For purposes of this exercise, assume it is reasonable to regard the sample as representative of these European restaurants. Does the sample provide convincing evidence that the mean January price of this hamburger in Europe is greater than the reported U.S. price? Test the relevant hypotheses using

α = 0.05.

(Use a statistical computer package to calculate the P-value. Round your test statistic to two decimal places and your P-value to three decimal places.)

State your conclusion.

Reject H₀. We have convincing evidence that the mean price of a hamburger in a certain fast food restaurant in Europe is greater than $4.62.Do not reject H₀. We do not have convincing evidence that the mean price of a hamburger in a certain fast food restaurant in Europe is greater than $4.62.    Do not reject H₀. We have convincing evidence that the mean price of a hamburger in a certain fast food restaurant in Europe is greater than $4.62.Reject H₀. We do not have convincing evidence that the mean price of a hamburger in a certain fast food restaurant in Europe is greater than $4.62.

The E.N.D. partnership has the following capital balances as of the end of the current year:

Answer each of the following independent questions:

a. Assume that the partners share profits and losses 3:3:2:2, respectively. Fergie retires and is paid $280,000 based on the terms of the original partnership agreement. If the goodwill method is used, what is the capital balance of the remaining three partners?

b. Assume that the partners share profits and losses 4:3:2:1, respectively. Pineda retires and is paid $320,000 based on the terms of the original partnership agreement. If the bonus method is used, what is the capital balance of the remaining three partners?

At the beginning of the year Donald opens a margin account and purchases 500 shares of FIN Corp at $40. Donald borrows $5000 from his broker at an annual interest rate of 10% to fund the purchase.
a) What is the initial margin?
b) What would be the margin if the price of FIN Corp fell to $30 at the end of the year?
c) What is the annual return that Donald would make from his investment if the price of FIN Corp fell to $30 at the end of the year?
d) What is the annual return that Donald would make from his investment if the price of FIN Corp rose to $50 at the end of the year?
e) Discuss the implications of margin trading for the risk of Donald’s portfolio.
f) What is the stock price of FIN Corp that would lead to Donald receiving a margin call? Assume that the price decline happens immediately. A margin of 30% will lead to a margin call.

Lisa and Page are equal partners in the Law Lady Partnership, and they are calendar year taxpayers. The partnership incurred the following items during the year:

a) Compute the partnership’s ordinary income and separately stated items. Show Lisa and Page’s share of each of the items.

b) What are the partner’s ending bases in their partnership interests? Assume beginning balances are $130,000 each.