Juan acquires a new 5-year class asset on March 14, 2020, for $200,000. This is the only asset Juan acquired during the year. He does not elect immediate expensing under § 179. He does not claim any available additional first-year depreciation. On July 15, 2021, Juan sells the asset.

Click here to access depreciation table to use for this problem.

a. Determine Juan's cost recovery for 2020.
$

b. Determine Juan's cost recovery for 2021.
$

On August 2, 2020, Wendy purchased a new office building for $3,800,000. On October 1, 2020, she began to rent out office space in the building. On July 15, 2024, Wendy sold the office building.

If required, round your answers to the nearest dollar.

Click here to access the depreciation table to use for this problem.

a. What MACRS convention applies to the new office building?
Half-year

b. What is the life of the asset for MACRS?
15 years

c. Determine Wendy's cost recovery deduction for 2020 and 2024.
2020: $
2024: $

Windmill Ltd commenced a takeover of its principal competitor WindPower Ltd in June 2019. The takeover was hostile and WindPower Ltd fought it vigorously.

WindPower Ltd was under financial stress due to misappropriation of funds by a former employee. This provided Windmill Ltd with the opportunity to mount the takeover.

Legal costs were significant due to the hostility against the takeover.

Just prior to the finalisation of the documentation, the senior management staff of Windpower Ltd won Lotto and were in a position to take over the company and pay off all outstanding debts.

Windmill Ltd spent a total of $1.5 m on the unsuccessful takeover in both 2019 and 2020.

Mr Abbott, the Managing Director of Windmills Ltd, has asked for your advice of how this large expense is to be treated for tax purposes.

This section must be referenced in accordance with the Australian Guide to Legal Citation (AGLC).

Part B (300 – 500 words)

Prepare a letter of advice to Mr Abbott explaining how this expense can be treated for tax purposes.

Consider the following hypothetical data for the U.S. economy in 2020​ (in trillions of​ dollars), and assume that there are no statistical​ discrepancies, zero net incomes earned​ abroad, and zero taxes on production and imports of net subsidies. Category Value Category Value Corporate profits before taxes deducted ​$2.7 Exports ​$1.5 Proprietorial income 0.8 Net transfers and interest earnings 2.2 Rent 0.8 Nonincome expense items 1.8 Interest 0.9 Imports 1.8 Wages 8.4 Corporate taxes 0.6 Depreciation 1.2 Social security contributions 2.1 Consumption 12.1 Government spending 1.9 a. Calculate the gross domestic income LOADING.... ​$ nothing trillion.  ​(Enter your response rounded to one decimal​ place.)     Calculate GDP. ​$ nothing trillion.  ​(Enter your response rounded to one decimal​ place.)

As of July, 2020 the unemployment rate fell to 11.1%. The U.S. unemployment rate is at its lowest level in months and the economy added a record number of jobs in June. How do you interpret this rate? identify the national unemployment rate. How do you interpret this rate? Identify at least two changes to the Unemployment Insurance Policy that were instituted in March 2020 in response to the COVID-19 crisis. What might be some of the short-term and long-term consequences of this change.

Reconciliation from IFRS to GAAP

You are the CFO for Mills company (reporting using IFRS) and must reconcile your financial statements for the years ending 2008, 2009, and 2010 to U.S. GAAP (The Income Statement and Statement Stockholders’ Equity). Youhave identified the following 5 areas where there are differences between IFRS and U.S. GAAP at various dates.  Be sure to consider the cumulative effects of prior year transactions for each year.

Intangible Assets

As part of a business combination in January 2004, the company acquired a brand for $15,000,000.  The brand is classified as an intangible asset with a 15 year useful life.  At year-end 2008, the brand is determined to have a selling price of $8,000,000 with zero cost to sell.  Expected future cash flows from continued use of the brand are $13,000,000 (undiscounted) and the present value of future cash flows is 9,000,000

Research and Development Costs

The company incurred research and development costs of $2,000,000 in 2008.  Of this amount, 70% related to development activities subsequent to the point at which criteria had been met that an intangible asset existed.  The development costs were completed at the end of 2008 and will be amortized over 10 years beginning 2009.

Property Plant and Equipment

On January 1, 2009 a building that had an original cost of $20,000,000 and (Purchase date January 1 2001) and was being depreciated over 20 years was determined to have a fair value of $15,000,000.   The company uses the revaluation model for such assets.

Sale Leaseback

On January 1, 2006 the company realized a gain on a sales leaseback of $6,000,000.  The term of the lease (starting the date of the sale) is 15 years.

THE MBA DECISION

Ben Bates graduated from college six years ago with a finance undergraduate degree. Although he is satisfied with his current job, his goal is to become an investment banker. He feels that an MBA degree would allow him to achieve this goal. After examining schools, he has narrowed his choice to either Wilton University or Mount Perry College. Although Internships are encouraged by both schools, to get class credit for the internship, no salary can be paid. Other than internships, neither school will allow its students to work while enrolled in its MBA program.

Ben Currently works at the money management firm of Dewey and Louis. His Annual salary at the firm is $53,000 per year, and his salary is expected to increase at 3 percent per year until retirement. He is currently 28 years old and expects to work for 38 more years. His current job includes a fully paid health insurance plan, and his current average tax rate is 26 percent. Ben has a savings account with enough money to cover the entire cost of his MBA program.

         The Ritter College of Business at Wilton University is one of the top MBA programs in the Country. The MBA degree requires two years of full-time enrollment at the university. The annual tuition is $58,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $2000 per year. Ben expects that after graduation from Wilton, he will receive a job offer for about $87,000 per year, with a $10,000 signing bonus. The salary at this job will increase at 4 percent per year. Because of the higher salary, his average income tax rate will increase to 31 percent.

The Bradley School of Business at Mount Perry College began its MBA program 16 years ago. The Bradley School is smaller and less well known than Ritter College. Bradley offers an accelerated one-year program, with a tuition cost of $75,000 to be paid upon matriculation. Books and other supplies for the program are expected to cost $4,200. Ben thinks that he will receive an offer of $78,000 per year upon graduation, with an $8,000 signing bonus. The salary at this job will increase at 3.5 percent per year. His average tax rate at this level of income will be at 29%.

         Both Schools offer a health insurance plan that will cost $3,000 per year, payable at the beginning of the year. Ben has also found that both schools offer graduate housing. His room and board expenses will decrease by $4,000 per year at either school he attends. The appropriate discount rate is 5.5 percent.

Wilton MBA:

Costs:

Total direct costs = $58,000 + 2,000 + 3,000 – 4,000 = $59,000

PV of direct costs = $59,000 + 59,000 / (1.055) = $114,924.17

Salary:

PV of after-tax bonus paid in 2 years = $10,000(1 – .31) / 1.0552 = $6,199.32

After-tax salary = $87,000(1 – .31) = $60,030

Mount Perry MBA:

Cost: Total direct: $75,000 + 4,200 + 3000 – 4000 = $78,200

How to find the direct cost and salary for Mount Perry MBA?

Instructions:

You are the Chief Financial Officer (CFO) of a firm that is being sued for damages it caused. It is the end of your fiscal year, and you are trying to determine the appropriate treatment of this matter. Your boss, the Chief Executive Officer (CEO) acknowledges (privately) that your firm is responsible for the damages and that the judgment will be made against your firm. Your legal counsel estimates that the penalty levied by the court will be in the range of $2 million to $6 million, with a most likely amount of $4 million. The CEO's posture on the matter is that because of the wide variance in the range of possible outcomes (i.e. penalties levied) that the best thing to do is to simply wait until the case is settled (next year), and record at that time the actual damages assessed by the court.

Answer the following questions:

What are some possible reasons that the CEO may hold his viewpoint?

What should be your response to the CEO?

Do you think it is necessary to make an accrual for an estimated amount of the assessment or settlement? If so, what amount do you think is appropriate?

Explain. Would your answer to any of the above questions be different if the financials are being prepared under IFRS instead of U.S. GAAP?

March 1 purchase 100 units $50 each

March 5 purchase 400 units $55 each

March 9 sales 420 $85 each

March 18 purchase 120 units $60

March 25 purchase 200 units $62

March 29 sales 160 units $95

1. The CEO has asked you to help her decide whether to use LIFO or FIFO for inventory costing. Compute the gross profit earned by the company for both LIFO and FIFO.
2. The CEO’s bonus is calculated using net income before income taxes. If the CEO wishes to maximize her bonus, which of the following methods would you recommend?
3. Alternatively, the CEO desires the method that minimizes income taxes paid by the company in the current year. If income taxes are based on a percentage of net income, which method would you recommend to the CEO?

Perpetual

On January 1, 20X5, Pirate Company acquired all of the outstanding stock of Ship Inc., a Norwegian company, at a cost of $169,200. Ship's net assets on the date of acquisition were 700,000 kroner (NKr). On January 1, 20X5, the book and fair values of the Norwegian subsidiary's identifiable assets and liabilities approximated their fair values except for property, plant, and equipment and patents acquired. The fair value of Ship's property, plant, and equipment exceeded its book value by $18,000. The remaining useful life of Ship's equipment at January 1, 20X5, was 10 years. The remainder of the differential was attributable to a patent having an estimated useful life of 5 years. Ship's trial balance on December 31, 20X5, in kroner, follows:

Additional Information:

1. Ship uses the FIFO method for its inventory. The beginning inventory was acquired on December 31, 20X4, and ending inventory was acquired on December 15, 20X5. Purchases of NKr430,000 were made evenly throughout 20X5.
2. Ship acquired all of its property, plant, and equipment on July 1, 20X3, and uses straight-line depreciation.
3. Ship’s sales were made evenly throughout 20X5, and its operating expenses were incurred evenly throughout 20X5.
4. The dividends were declared and paid on July 1, 20X5.
5. Pirate's income from its own operations was $231,000 for 20X5, and its total stockholders' equity on January 1, 20X5, was $3,600,000. Pirate declared $140,000 of dividends during 20X5.
6. Exchange rates were as follows:

Assume the U.S. dollar is the functional currency, not the krone.

a. Prepare a schedule remeasuring the trial balance from Norwegian kroner into U.S. dollars.

b. Assume that Pirate uses the fully adjusted equity method. Record all journal entries that relate to its investment in the Norwegian subsidiary during 20X5. Provide the necessary documentation and support for the amounts in the journal entries.

c. Prepare a schedule that determines Pirate's consolidated net income for 20X5

d. Compute Pirate's total consolidated stockholders' equity at December 31, 20X5