Sherrod, Inc., reported pretax accounting income of $74 million for 2021. The following information relates to differences between pretax accounting income and taxable income:

1. Income from installment sales of properties included in pretax accounting income in 2021 exceeded that reported for tax purposes by $7 million. The installment receivable account at year-end 2021 had a balance of $8 million (representing portions of 2020 and 2021 installment sales), expected to be collected equally in 2022 and 2023.
2. Sherrod was assessed a penalty of $3 million by the Environmental Protection Agency for violation of a federal law in 2021. The fine is to be paid in equal amounts in 2021 and 2022.
3. Sherrod rents its operating facilities but owns one asset acquired in 2020 at a cost of $68 million. Depreciation is reported by the straight-line method, assuming a four-year useful life. On the tax return, deductions for depreciation will be more than straight-line depreciation the first two years but less than straight-line depreciation the next two years ($ in millions):

4. For tax purposes, warranty expense is deducted when costs are incurred. The balance of the warranty liability was $1 million at the end of 2020. Warranty expense of $3 million is recognized in the income statement in 2021. $2 million of cost is incurred in 2021, and another $3 million of cost anticipated in 2022. At December 31, 2021, the warranty liability is $2 million (after adjusting entries).
5. In 2021, Sherrod accrued an expense and related liability for estimated paid future absences of $14 million relating to the company’s new paid vacation program. Future compensation will be deductible on the tax return when actually paid during the next two years ($8 million in 2022; $6 million in 2023).
6. During 2020, accounting income included an estimated loss of $2 million from having accrued a loss contingency. The loss is paid in 2021, at which time it is tax deductible.

Balances in the deferred tax asset and deferred tax liability accounts at January 1, 2021, were $0.8 million and $1.5 million, respectively. The enacted tax rate is 25% each year.

1. Determine the amounts necessary to record income taxes for 2021, and prepare the appropriate journal entry. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50).)

Journal entry worksheet

2. What is the 2021 net income? (Enter your answer in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50)

3.Show how any deferred tax amounts should be classified and reported in the 2021 balance sheet. (Enter your answer in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50

Ingvar Kamprad—Wealthy Man, Frugal Man, Entrepreneur Extraordinaire Although octogenarian Ingvar Kamprad, the founder of Swedish-based IKEA, is one of the wealthiest individuals in the world, he nonetheless lives quite frugally. Kamprad avoids wearing suits, flies economy class, takes the subway to work, drives a ten-year-old Volvo and frequents inexpensive restaurants.i “It has long been rumored in Sweden that when his self-discipline fails and he drinks an overpriced Coke out of a hotel minibar, he will go to a grocery store to buy a replacement.”ii Kamprad was “born in Småland in the south of Swedena region known as home to many entrepreneurs and hard-working people, who are adept at using efficiently what  limited resources they have.”iii Kamprad developed an entrepreneurial spirit in his youth. As a youngster, Kamprad rode his bicycle throughout the neighborhood, selling matches, pens, and Christmas cards to the local residents.iv Then in 1943 when he was only 17 years old, Kamprad used a cash gift from his father to form a company called IKEA. The name IKEA was derived from Ingvar Kamprad’s initials plus the first letters of the farm and village where he grew up (Elmtaryd and Agunnaryd).v Initially, IKEA was a catalog company that sold pens, picture frames, wallets, and other bargain goods. “Kamprad used his village’s milk van to deliver his products when he first started the business. In 1951, IKEA began selling furniture made by local carpenters; six years later Kamprad opened the first IKEA store in Sweden. In 1985 the first U.S. IKEAwhich measured three football fields longopened in a Philadelphia suburb called Plymouth Meeting.”vi By 2010, IKEA had grown to 316 stores around the world with 699 million visitors, in-person and online.vii IKEA “has stores in thirty-three countries, while continuing to expand markets in China and Russia.”viii As stated on the company’s website, “[t]he IKEA vision is to create a better everyday life for  many people. We make this possible by offering a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them”ix and to do so without compromising quality.x “Consistent with the Swedish lifestyle, the IKEA product range is functional, attractive, child-friendly and family-centered, covering the needs of all family members.”xi “IKEA uses natural materials such as pale wood, natural textiles (linen and cotton), glass, clay and untreated surfaces. The natural character of these products has bestowed on them a universal utilitarian appeal.”xii A signature characteristic of the company is that “all IKEA productsfrom furniture to the now famous mobile kitchenscould be packed in flat, stackable boxes that could be mailed or transported and reassembled at home.” xiii Interestingly, the flatpack idea for furniture arose by accident when an employee took the legs off a table in order to load it into a customer’s car.xiv “[T]he IKEA way of doing business combines a very Scandinavian embrace of paternalistic employment policies and a social safety net with a hard-core drive for profits and market share that bows to no competitor, anywhere, anytime.”xv IKEA’s unrelenting quest for profits reflects Kamprad’s frugality. Indeed, Kamprad’s thriftiness is infused into IKEA’s culture; for example, employees become catalog models and managers share hotel rooms when they travel.xvi “Kamprad obviously appreciates what it takes to earn his money and realizes that there are no guarantees to economic success tomorrow apart from hard work.”xvii Kamprad founded IKEA on the basis of a family business model, and the company’s values are still based on this model. The family business model has special features that differentiate it from other business models. Typically, the owner of a family business has a strong entrepreneurial character, establishes the company’s
objectives and operational strategies, and desires to control most, if not all, of the business areas.xviii An important characteristic of the family business model is that the workforce feels that they are members of the familythey identify with and are committed to the company, which boosts both their dedication and performance.xix As head of the “family business,” Kamprad, like many fathers, leads by example. As Kamprad says: “ ‘If there is such a thing as good leadership, it is to give a good example’ and ‘I have to do so for all the IKEA employees.’ “ xx Kamprad firmly believes that the best example he can provide for his employees is to work hard and adhere to strict business ethics.xxi Another characteristic of Kamprad’s leadership approach is a willingness to admit his mistakes and own up to his weaknesses. Even with his long career and extraordinary success with IKEA, Kamprad had his share of challenges. “As IKEA grew, so did Kamprad’s problemsalcoholism, allegations of a Nazi past, deaths at a store openingbut nothing deflected him.”xxii Kamprad describes “his association with the ‘new Swedish’ wartime pro-Nazi party [as] ‘the greatest mistake of my life.’ “xxiii The manner in which Kamprad dealt with the revelation of his involvement with the Swedish pro-Nazi party helped people to “fully accept him as a leader. By showing human weaknesses rather than only strengths, his employees and the general public could  relate to him and learn from his behavior. The episode also  [shows] that Ingvar Kamprad is  a leader who really impacts the people around him in an inspirational and positive way.”xxiv Some of Kamprad’s other leadership characteristics include humbleness, a caring nature for IKEA’s employees, a commitment to simplicity and frugality, and a constant desire for renewal.xxv At different times throughout his career, Kamprad has become reflective about what he has accomplished and he proceeded to jot down bits of his management philosophy. One philosophical gem is: “By always asking why we are doing this or that, we can find new paths. By refusing to accept a pattern simply because it is well established, we make progress. We dare to do it a different way! Not just in large matters, but in solving small everyday problems, too.”xxvi Another of his lofty pronouncements is: “Wasting resources is ‘a mortal sin’.”xxvii Kamprad also promises “a better life for many.”xxviii From the mistakes and the successes, what lessons should otherscurrent leaders or those aspiring to become leaderstake away from Ingvar Kamprad’s experiences?


Discussion Questions

1. In what ways is Ingvar Kamprad a manager? In what ways is he a leader?

2. Describe the nature of followership that Kamprad seems to have encouraged at IKEA.

3. Using the Leadership Grid and its underlying leader behaviors of ‘concern for results’ and ‘concern for people,’ explain the leadership orientation of Ingvar Kamprad.

4. Use the concepts of transactional, transformational, charismatic, and authentic leaders to describe the leadership of Ingvar Kamprad.

5. What are the key leadership lessons provided by Kamprad’s experiences?

6. What skills would you personally need to develop or refine to become a leader like Kamprad? What could you do to develop or refine these skills?

Martin Martindale, the 40-year-old founder and president of Martindale Corporation (an accrual-basis, calendar-year C corporation), owns 60 percent of the stock and receives a salary of $600,000. Four unrelated shareholders own the rest of the stock equally. The corporation has paid dividends regularly to the shareholders and plans to continue to do so in the future. Martin plans to recommend that the board of directors authorize the payment of a bonus to himself and two other employees (all cash-basis, calendar-year individuals). The first employee is the vice president, who owns 10 percent of the corporation and receives a salary of $400,000. The other employee is the controller, who is not currently a shareholder in the corporation and receives a salary of $200,000. Martin would like the bonus to equal 75 percent of each recipient’s current salary. Martin believes that the total compensation is probably a little high when compared to the corporation’s competitors but Martindale is much more profitable. Martindale’s profits have increased by more than 20 percent in the last two years due to the efforts of the individuals who will receive the bonuses, while other businesses in the same industry showed an increase in profits of less than 10 percent. Martin asks you, as the corporation’s tax advisor, to recommend what the corporation needs to do so that it gets a deduction for the planned bonuses. Martin would prefer to pay the bonuses next year but deduct them this year.

1. Locate and read Mayson Manufacturing Co., 178 F.2d 115, 38 AFTR 1028, 49–2 USTC 9467 (CA6, 1949) and Elliotts Inc. 716 F.2d 1241, 52 AFTR 2d 83-5976, 83-2 USTC ¶9610 (CA9, 1985). Summarize the important points of these cases as they relate to Martindale.
2. Prepare a summary of the relevant Code and regulation sections as they apply to Martindale.
3. Prepare a one-paragraph summary for Martin on what the corporation needs to do to qualify for a deduction for the planned bonuses.

What should society do to reduce the possibility of discrimination in the workplace? What policies would you propose if you were the CEO?

Please make answer less than a 150 words and able to copy. Thank you.

If you were the President/CEO of General Electric, what terms would you insist upon when designing lease terms for lessees of large scale GE products, such as MRI's and other large medical equipment, and why?

A typical factor that creates principal-agent problems is

the level of CEO and executive compensation

the fluctuations of the stock market

lack of transparency in some manager/agent actions

the small number of agents relative to the number of principals

the concept of loyalty

Why was Mathias Muller replaced as VW's CEO (despite being incredibly successful )?. Did leadership style play a role in his ouster ?

What leadership traits did Mark Zuckerberg display in his Congressional testimony?

1.) What is the role of the Chief Executive Officer (CEO) in the strategy formulation and strategy execution process? Why has their job become increasingly difficult?

Your answers will be short essays and should be three full paragraphs or longer.