1. Explain what happens to the efficiency of free markets if:

a) There is market power exercised by buyers or sellers.

b) There are externalities

2. What is the relationship between a change in the size of a tax, and the change in the deadweight loss of the tax?

3. What is the best predictor of whether reducing a tax in a market will increase or decrease tax revenue? Explain.

1. Explain why you agree or disagree with the following statement: “All municipal bonds are exempt from federal income taxes.”

2. Explain why you agree or disagree with the following statement: “All municipal bonds are exempt from state and local taxes.”

3. What is the difference between a tax-backed bond and a revenue bond?

T/F   

______ 21.    A member may omit answering a question on a tax return if reasonable grounds exist for omitting the answer to a question applicable to the taxpayer.

SSTS: ___________________________________________

______ 22. A member should not omit an answer to a question because it might prove disadvantageous to the taxpayer.

SSTS: ___________________________________________

______ 23.   If reasonable grounds do not exist for omission of an answer to an applicable question, a taxpayer is not required to provide on the return an explanation of the reason for the omission.

SSTS: ___________________________________________

______ 24. A member shall make a reasonable effort to obtain from the taxpayer that the taxpayers has maintained books and records or substantiating documentation to support reported deduction or tax treatments of items on a tax return.   SSTS: ___________________________________________

______ 25. A member can use estimates if fire, computer failure, or natural disaster has destroyed the taxpayer’s records.

SSTS: ___________________________________________

______ 26. A practitioner may endorse or otherwise negotiate any check issued to a client if the client has authorized the practitioner to do so.

230: ___________________________________________

______ 27. Tax advisors should provide clients with the highest quality representation concerning Federal tax issues by adhering to best practices in providing advice and in preparing or assisting in preparation of a submission to the Internal Revenue Service.

230: ___________________________________________

_____ 28. An enrolled agent has the same ability to practice before the Internal Revenue Service as does an attorney or CPA.

       230: ___________________________________________

______ 29. Practice before the Internal Revenue Service include preparing documents, filing documents, corresponding and communicating with the Internal Revenue Service and representing a client at conferences, hearings, and meetings.

230: ___________________________________________

______ 30. Enrolled Agents, enrolled retirement plan agents, and registered tax return preparers must renew their status with the Internal Revenue Service to maintain eligibility to practice before the IRS.

230: ___________________________________________

31. A CPA may be denied to practice before the IRS if he or she has not filed their own individual income tax returns.

230: ___________________________________________

______ 32. An employee of the Mississippi Department of Revenue may not practice before the Internal Revenue Service if such employment may disclose facts or information applicable to Federal tax matters.

230: ___________________________________________

______ 33. In order to practice before the Internal Revenue Service, an individual must be twenty-one years old.

230: ___________________________________________

______ 34. An individual must pass a written examination administered by the Internal Revenue Service in order to receive status as an enrolled agent.

230: ___________________________________________

______ 35. An enrolled agent must complete a minimum of 72 hours of continuing education credit during an enrollment cycle with a minimum of 16 during each enrollment year.

230: ___________________________________________

______ 36. An enrolled agent must complete two hours of ethics or professional credit each enrollment year.

230: ___________________________________________

______ 37. A practitioner who, having been retained by a client with respect to a matter administered by the Internal Revenue Service, knows that the client has not complied with the revenue laws of the United States or has made an error in or omission from any return, document, affidavit, or other paper which the client submitted or executed under the revenue laws of the United States, must advise the client promptly of such noncompliance, error, or omission.

230: ___________________________________________

______ 38. A practitioner should always exercise due diligence in determining the correctness or oral or written representations made by the practitioner to the Department of the Treasury.

230: ___________________________________________

______ 39. A practitioner should not publish the availability of a written schedule of fees and disseminate since it may be considered to be advertising.

230: ___________________________________________

______ 40. A practitioner should refrain from any type of advertising.

230: ___________________________________________

Use engine size to predict the car’s width. Answer the questions.

I) For each additional 3.0 liter in engine size how much the car’s width will change? (11.11 points)

• a. It will increase by 2.42 units.
• b. It will increase by 7.27 units.
• c. It will increase by 68.2 units.
• d. It will increase by 63.3 units.
• e. Not applicable.

II) After performing the regression analysis you are asked to pick one number that would best answer the question: Are these two variables, engine size and car width, related or not? What is this number and why? (11.11 points)

• a. The number is the slope and it clearly indicates the relation: For each additional liter in engine size the car’s width increases.
• b. This number is R-square and since it is not close to 1 we cannot claim that these two variables are related.
• c. The number is the P-value, which in this case is very low indicating a strong probability that the two variables are related.
• d. None of these.

III) Given a car that has engine size of 2.0 liters use regression analysis and all available information in there, in order to predict this car’s width. What is your interval prediction?   (11.11 points)

• a. [66.36, 70.09]
• b. ± 1.8
• c. 68.2
• d. 63.3
• e. Not applicable

Winkler Furniture manufactures two different types of china cabinets: a French provincial model and a Danish Modern model. Each cabinet produced must go through three departments: carpentry, painting, and finishing. The table below contains all relevant information concerning production times per cabinet produced and production capacities for each operation per day, along with net revenue per unit produced. The firm has a contract with an Indiana distributor to produce a minimum of 300 of each cabinet per week (or 60 cabinets per day). Owner Bob Winkler would like to determine a product mix to maximize his daily revenue.

Formulate as an LP problem and obtain the revenue      

For a monopolist:

Price is greater than marginal revenue.

Marginal revenue equals zero.

Marginal cost equals zero.

Average total cost equals marginal cost.

1. Fill in the missing data for price (P), total revenue (TR), marginal revenue (MR), total cost (TC), marginal cost (MC), profit (π), and marginal profit (Mπ) in the following table:

Graph the firm’s demand curve and marginal revenue curve.

Graph the firm’s total cost curve, total revenue curve, and total profit curve.

Cash Received before Revenue is Earned (Deferred Revenue)

1) The Insurance Company in (1) above received the cash paid by Nordstrom. What is the entry to record on the books of the Insurance Company?

Entry on the books of the Insurance Company

2) The Insurance Company provides protection for the next 12 months. What is the entry on a monthly basis?

3) On March 1, a friend gives you a $100 Nordstrom gift card. How does Nordstrom record this entry?4) You redeem your gift card. How does Nordstrom record this entry on March 31?

Expense Incurred before Cash is Paid (Accrued Liability/Accrued Expense)

1) Nordstrom pays a total of $280,000 in wages every other Friday. What is the journal entry on June 14th?

2) Nordstrom owes employees’ wages for the last two days of June and must recognize an expense for the wages earned by employees for those days. Assume the store is open seven days a week and the daily cost is 1/14th of the biweekly amount of $280,000 or 20,000. What is the entry to adjust the records for the last two days of the month (June)?

3) Using information obtained from (1) and (2) above. What entry will be made on the next payday (July 12)?

4) Assume Granger Company takes out a 9%, 90-day, $20,000 loan with its bank on March 1. Granger will repay the principal and interest on May 30. What is the entry on Granger’s books?

5) What is the entry to record 1 month of interest at the end of March? April? 6) What is the entry when Granger repays the principal and interest on May 30?

Revenue Earned before Cash is Received (Accrued Asset/Accrued Revenue)

1) Grant Management Company rents warehouse space to tenants. The contract calls for prepayment of rent for six months at a time. Grant allows one tenant to pay $2,500 in monthly rent anytime within the first ten days of the following month. The entry on Grants books at April 30 is?

2) What is the entry when the tenant pays the rent on May 7?

Exercise 2:

1) ABC purchases a 24 month fire insurance policy on January 1 for 54,000? What is the Journal Entry on January 31?

2) On April 1, GHI Corp took out a 12% 120 day, $10,000 loan at its bank. What is the journal entry on April 30?

Complete Table 1 by computing the Total Revenue, Marginal Revenue, Total Cost, and Profit columns, each rounded to two decimal places. The cost of duplicating a video on a DVD and mailing the DVD, the Marginal Cost, is $5.56. (1 point)

Table 1

b. The President wants the GSTCG to provide videos to generate the most possible donations (Total Revenue). What price is the President of the GSTCG favoring and how many people will receive the DVD if this becomes the price of the suggested donation? Explain your answers. (1 point)

c. The Education Outreach Committee wants the GSTCG to provide videos to the most possible number of people. What price is the Educational Outreach Committee favoring and how many people will receive the DVD if this becomes the price of the suggested donation? Explain your answers. (1 point)

d. The Treasurer of the GSTCG wants the DVD program to be as efficient as possible so that the marginal revenue equals marginal cost. What price is the Treasurer favoring and how many people will receive the DVD if this becomes the price of the suggested donation? Explain your answers. (1 point)

e. The Fundraising Committee wants the DVD program to generate as much profit in donations as possible. What price is the Fundraising Committee favoring and how many people will receive the DVD if this becomes the price of the suggested donation? Explain your answers. (1 point)

1. A 345-room hotel’s food and beverage department recorded food revenue of $3,460,397.5 and beverage revenue of $1,483,027.5. The cost of sales was 27.3% of F & B revenue, and the departmental expenses were 43.2% of F & B revenue. What is the gross profit percentage for the hotel’s F&B department?

2.

Determine the Profit Margin if the Gross Room Rate increases by 15% in year 2.

In dollar and percentage terms, how much did Net Profit increase in year 2?

In absolute and relative terms, how much did profit margin increase in year 2?

What would the Gross Room Rate need to be if a Profit Margin of 50% is required?