Comprehensive Problem (TAX RETURN PROBLEM)

Barry and Connie, Husband and wife, are both age 24, and have two sons. Barry earned $51,000 and Connie earned $45,000 during 2020. They both paid $4,200 state income taxes, $12,000 federal income taxes, $5,500 property taxes, $14,600 to First Presbyterian Church, $600 to needy families, $6,400 interest on their mortgage, and $6,800 medical expenses. In addition, they had the following transaction:

a) They sold their personal residence for $170,000. Their basis in the residence was $104,000. They incurred $7,000 in selling expenses. They purchases a new residence six months later for $220,000.

b) Connie sold for $40,000 property she had inherited from her father in 2015. Her father's basis in the property was $15,000 and the fair market value on the date of death was $30,000.

c) They sold for $6,000 business property which they had acquired as a gift in 2017. The basis to the donor was $7,500 and the fair market value on the date of the gift was $7,000.

d) they exchanged 100 shares of Conway Corp. common stock, with a basis of $3,000, for 75 shares of Conway Corp. nonvoting common stock with a fair market value of 10,0000.

Determine Barry and Connie's lowest taxable income. Treat all income as ordinary income.

The following transactions occurred during 2020. Assume that depreciation of 10% per year is charged on all machinery and 5% per year on buildings, on a straight-line basis, with no estimated salvage value. Depreciation is charged for a full year on all fixed assets acquired during the year, and no depreciation is charged on fixed assets disposed of during the year.

Prepare general journal entries for the transactions

Tudor Company acquired $500,000 of Carr Corporation bonds for $487,706.69 on January 1, 2018. The bonds carry an 11% stated interest rate, pay interest semiannually on January 1 and July 1, were issued to yield 12%, and are due January 1, 2021.

Required:

This is the only one I am having trouble with. Its the preparing the investment income and discount amortization schedule using straight-line method.

PLEASE READ AND ANSWER QUESTIONS

Global View: International Privacy Laws

Today’s online world, including the increasing use of the cloud to store data on remote third-party servers, offers unprecedented opportunities for the global storage and transfer of personal information. To address the risks associated with the unregulated exchange of personal information, many jurisdictions around the world have enacted privacy laws, regulations, and rules dealing with data collection, processing, storage, disclosure, and use. Although definitions of the term privacy vary, common elements include freedom or protection of individuals and sometimes groups from unauthorized or unwanted intrusion into, or observation of, their personal information and from violation of the integrity of this information.

The type of protection, as well as the speed, level of completeness, and depth of regulation and implementation, varies from country to country. Increasingly, countries have addressed the cross-border transfer of personal information and taken steps to prevent the circumvention of existing national laws governing the storage, processing, and disclosure of information through the “off-shoring” of these activities. Accordingly, when multinational companies do business outside their home country, including offering products or services on the Internet, and collect personal information from residents of a foreign country, they are likely to fall under the privacy laws and regulations in that country.

The following is a brief overview of privacy laws and regulations in several key jurisdictions.

European Union

The European Union (EU) Data Protection Directive (Directive 95/46/EC), adopted in 1995, requires its Member States to safeguard the privacy of personal data by

(1)

giving notice to individuals about how their information will be used;

(2)

offering a choice when disclosing information to third parties (with opt-in consent required for sensitive information);

(3)

maintaining the security of personal information;

(4)

ensuring that the data are reliable, accurate, and current; and

(5)

giving individuals access to examine, correct, and delete information about themselves.

Because each EU Member State had to incorporate the provisions of the Data Protection Directive into national law for them to be binding, there is some variation in the privacy laws among the states.

The EU adopted the General Data Protection Regulation (GDPR) in 2016. It will enter into full force across all Member States on May 25, 2018. The GDPR will replace Directive 95/46/EC and affect organizations based within the EU, as well as foreign organizations doing business there. Although the GDPR is intended to make it easier for multinational entities operating across the EU to comply with data protection law, certain aspects of the regulation permit Member States to enact their own legislation, so inconsistencies in application may exist.

An important principle of both the Data Protection Directive and the GDPR is that personal information generally should not be collected unless the collection is

(1)

proportional (meaning adequate and not excessive relative to its purpose),

(2)

transparent (meaning that the affected individual must be informed as to the circumstances of the collection and consent to it), and

(3)

for a legitimate purpose.

The GDPR will make it easier for individuals to access and control their own data, including information on how their data are processed; make it easier to transfer personal data between service providers; clarify the “right to be forgotten,” which allows an individual to require that certain personal data be deleted (the subject of the “Inside Story” in Chapter 24); and, under certain circumstances, require notification when data have been hacked (e.g., if the breach is likely to result in a “high risk” to the data subject). Additionally, a data subject’s consent to process personal data must be “as easy to withdraw as to give.” In the case of “sensitive data,” consent must be explicit.

By modernizing and unifying the rules, cutting red tape, and reinforcing consumer trust, the GDPR will help businesses reap the benefits of the “Digital Single Market.” The legislation will create a “one-stop-shop” so that businesses can deal with only one privacy supervisory authority, making it less costly to do business in the EU; require companies based abroad to apply the same rules as EU-based firms when offering services inside the EU; provide for a “risk-based approach” to incorporating the rules; and require firms to build in data protection safeguards when developing products and services in the beginning stages of development (so-called data protection by design).

The GDPR broadened the definition of personal and sensitive data to include political opinions, religious and philosophical beliefs, health and sex life, and genetic and biometric data. The regulation applies both to data controllers (the entities determining how and why personal data are processed) in the EU and to data processors (the entities that process the personal data on behalf of data controllers) in the EU. The GDPR also applies to controllers and processors outside of the EU whose processing activities involve offering goods or services to EU data subjects or monitoring these subjects’ behavior within the EU.Penalties for breaching the GDPR can be significant.

Unlike the Data Protection Directive, the GDPR does not require a company that processes personal information (“personal data”) to register or notify data protection supervisory authorities before it starts collecting personal information. Instead, data controllers are required to maintain appropriate records to evidence compliance with the GDPR. Personal information may be transferred into third countries (countries outside the EU) only if the third country provides an adequate level of protection for the information.

Although the United States is not regarded as providing adequate protection, the EU and the United States adopted the EU-U.S. Privacy Shield in 2016 to permit the transfer of personal information from any EU member state to the United States under certain circumstances. The EU-U.S. Privacy Shield requires U.S. companies to ensure that individuals’ digital information, “from social media posts and search queries to information about workers’ pensions and payroll,” is not misused. Companies must adhere to seven principles: notice; choice; accountability for onward transfer; security; data integrity and purpose limitation; access; and recourse, enforcement, and liability, all as determined by self-assessment or assessment of a third party, with recertification required each year. The rules apply to all companies regardless of whether they are social media platforms, pharmaceutical companies, or industrial conglomerates subject to the jurisdiction of the FTC or the U.S Department of Transportation. In addition, the agreement requires the United States to provide an annual guarantee that its intelligence agencies will not have “indiscriminate access” to Europeans’ digital data when these data are sent to the United States. The agreement enables about $260 billion of trade in digital services, with nearly 2,000 companies (including Facebook, Google, and Microsoft) relying on the EU-U.S. Privacy Shield to store data about EU citizens on U.S. servers. A separate Swiss-U.S. Privacy Shield became effective in April 2017 and covers data transfers from Switzerland.

In January 2017, the European Commission proposed a revision to the ePrivacy Directive that aims to reinforce the right to privacy and control of data for European citizens. (Directive 2002/58/EC, referred to as the ePrivacy Directive, protects the privacy of communications over public electronic networks.) The revision would require messaging, email, and voice service providers to guarantee the “confidentiality of conversations and metadata around the time, place and other factors of those conversations.” The rules would prohibit service providers, such as Facebook Messenger, Google, WhatsApp, Skype, and others, from listening to, tapping, intercepting, scanning, or storing communications without users’ consent (except for certain “critical” functions); require “explicit consent” before data could be used for advertising; and eliminate consent requirements for cookies that do not affect privacy (“privacy intrusive” cookies would still require consent). As with the GDPR, the fines for noncompliance would be significant. The proposed rule was designed to close the “perceived regulation gap between traditional telecom[] companies and predominantly US-based internet communications companies” and to also allow telecom companies to use certain metadata—for example, the length and location of calls—to provide more services and earn more revenue. Although one EU regulator asserted that the proposed regulation is balanced because it gives consumers a high level of protection while also permitting businesses to innovate, others have stated that the EU is “on the verge of a regulation overload,” as this proposal follows shortly after the adoption of the GDPR.Further, an industry spokesperson representing Google and other companies argued that the proposed revision risks “incoherence and confusion” because the GDPR requires one approach to safeguarding privacy and ePrivacy calls for another approach.

Exercise:

Read Global View article on international privacy laws [pages 247-249 of textbook.]

Note especially the European Union General Data Protection Regulation [GDPR] which entered into force on May 25, 2018. Note that the EU approach to data privacy is that the data is a digital asset of the owner and that organizations seeking to use your data must secure your affirmative consent and that the consent needs to be proportionate, transparent and for a legitimate purpose, including the right to be forgotten. The regulation applies to organizations outside the EU to the extent that they handle the data of EU nationals.

You are the Chief Privacy Officer of Facebook. Facebook accumulates and analyzes the data of persons accessing its service [even if open on your computer when doing other activities.] Facebook then sells advertising to third parties based on the data. Facebook currently considers your accession to their service as consent for the collection and use of your data. Facebook currently benefits from increased use. This is called a network effect. 'Network effect' is a phenomenon whereby a product or service gains additional value as more people use it.

Write a one [1] paragraph response in Word format and post to the Course Discussion Board:

If data is a digital asset owned by the individual, do individuals in the EU have the right to charge Facebook for each use of the individual's data? If so, what impact will this have on the market value of Facebook's stock

Financial Accounting: Question about Business Ethics

Maurice Stokes was one of the best classmates of Roy Russell while he studied his MBA in the USA. Maurice grew up in Addis Ababa, the capital of Ethiopia. Ethiopia’s GDP per capita ranked 187 out of 191 countries due to adverse geopolitics and civil wars in the past. Maurice is talented and hard working. He went through his bachelor degree in Ethiopia and luckily won a scholarship to study an MBA in the USA. Right after he got his MBA degree, Maurice joined AB&T, the world’s biggest mobile phone service provider, as a management trainee. After 5 years’ working in the USA, Maurice was assigned to work as the Vice President in Addis Ababa, where AB&T’s African headquarter is located, to oversee all African operations.

After his MBA graduation, Roy Russell joined his father’s family business– a medium size mobile phone service provider in Hong Kong. Three years later, AB&T acquired Roy’s family business and retained all existing staff. Roy then became an employee of AB&T and he was happy to work for a multinational company with good reputation. After 3 years’ working as financial controller in AB&T’s Singapore office, Roy was offered an opportunity for promotion to work as chief financial officer (CFO) in its African headquarter in Addis Ababa. Eager to get more international exposure, Roy said yes to this offer. This is how Roy came to a reunion with Maurice.

AB&T provides its senior employees in Addis Ababa with a monthly housing allowance of up to $2,500. Compared with the US standard, most of the housing in Addis Ababa is of low quality, and in many regions the law and order are bad. By giving a generous allowance, AB&T aims to ensure that its senior employees live in areas that are safe, convenient and comfortable to ensure that senior executives can have good rest, that they live in a district that is appropriate to the company’s reputation. For housing allowance claim, senior executives need to hand in their monthly receipts for reimbursement. Every month Maurice submits a bill of $2,500 from his landlord to the finance office for re-imbursement. Roy suggested paying a visit Maurice’s house for a few times. However, every time Maurice rejected this suggestion, claiming that he had never entertained any coworkers at home so that his family members would not be distributed. Roy considered this understandable and so did not insist.

After working for six months in Addis Ababa, Roy had a business dinner with a supplier. The supplier mentioned that Maurice was a neighbor in a district called Winter Town. Winter Town is a district quite far from AT&T’s African office and is well-known for its high crime rate in Addis Ababa. Roy was surprised to hear that, as Maurice told him that he lived in Spring Town, a district that many foreign ambassadors lived and a lot more expensive than Winter Town. Through some connection, Roy verified that what the supplier said was true.

Roy decided to confront Maurice about the housing allowance issue. Maurice at first denied but later admitted that his apartment was in Winter Town and the rent was less than $2,500. He defended his action by saying that “Every AB&T senior executive gets $2,500 a month. If I live in an economically way, why should I be penalized? I just receive the same as others”. As a reply, Roy stressed that “It is AB&T objective to let senior employees to live in a safe place and have good rest for the challenging duties during office hours. Besides, the districts that the company’s senior executives live in represent the image of the company. Moreover, the company’s housing allowance policy is reimbursement on an actual basis, i.e. the amount of monthly claim should be the same as the rental value of the apartment and not to allow staff to make a profit. As the regional CFO, I have to maintain my professional standing”. When Roy challenged Maurice for using falsified rental receipts for disbursement claims, Maurice admitted but replied that this is a common and well-accepted practice in Ethiopia.

Later in the discussion, Maurice tried to convince Roy regarding his housing allowance claim practice. Maurice explained his situation that “You may not understand my situation. I have to save every dollar to pay school fees for my ten nephews and nieces. I got my family members’ great support to finish my education. I owe it to my brothers and sisters to give their children the same chance to study as I did. My parents can never understand why I live in a big apartment instead of helping their grandchildren. I am just doing what I should do. The company has no extra expense to reimburse me $2,500 housing allowance per the monthly receipt I submit. As my old classmate and my best friend, please pretend you know nothing and pay me $2,500 housing allowance as before. As a person grown up in Ethiopia, I know all business practice here and have good connection in this country. I know many senior executives in the government tax department and that will be helpful to your work here. I will fully support you to do an excellent job to save some tax for the benefit of our company. You will be compliment by your boss for paying a lower tax than other companies here”.

Roy does not want to lose his friendship with Maurice and he believes it will make his working life easier if he can make use of Maurice’s connection in Africa. Roy is not sure what should be his next step.

Required

1. Identify the ethical issue, if any, involved in this case?                                
2. Who are the stakeholders in this situation? How are they affected? (Hins: state all stakeholder)   
3. What are Roy’s alternatives? (Hins: state at least 3)
4. What course of action will you suggest Roy Russell to take and justify your suggestion? (Hins: reply the alternative in Q3)

I would like to ask this question about ethics in business. Thank you.

Maurice Stokes was one of the best classmates of Roy Russell while he studied his MBA in the USA. Maurice grew up in Addis Ababa, the capital of Ethiopia. Ethiopia’s GDP per capita ranked 187 out of 191 countries due to adverse geopolitics and civil wars in the past. Maurice is talented and hard working. He went through his bachelor degree in Ethiopia and luckily won a scholarship to study an MBA in the USA. Right after he got his MBA degree, Maurice joined AB&T, the world’s biggest mobile phone service provider, as a management trainee. After 5 years’ working in the USA, Maurice was assigned to work as the Vice President in Addis Ababa, where AB&T’s African headquarter is located, to oversee all African operations.

After his MBA graduation, Roy Russell joined his father’s family business– a medium size mobile phone service provider in Hong Kong. Three years later, AB&T acquired Roy’s family business and retained all existing staff. Roy then became an employee of AB&T and he was happy to work for a multinational company with good reputation. After 3 years’ working as financial controller in AB&T’s Singapore office, Roy was offered an opportunity for promotion to work as chief financial officer (CFO) in its African headquarter in Addis Ababa. Eager to get more international exposure, Roy said yes to this offer. This is how Roy came to a reunion with Maurice.

AB&T provides its senior employees in Addis Ababa with a monthly housing allowance of up to $2,500. Compared with the US standard, most of the housing in Addis Ababa is of low quality, and in many regions the law and order are bad. By giving a generous allowance, AB&T aims to ensure that its senior employees live in areas that are safe, convenient and comfortable to ensure that senior executives can have good rest, that they live in a district that is appropriate to the company’s reputation. For housing allowance claim, senior executives need to hand in their monthly receipts for reimbursement. Every month Maurice submits a bill of $2,500 from his landlord to the finance office for re-imbursement. Roy suggested paying a visit Maurice’s house for a few times. However, every time Maurice rejected this suggestion, claiming that he had never entertained any coworkers at home so that his family members would not be distributed. Roy considered this understandable and so did not insist.

After working for six months in Addis Ababa, Roy had a business dinner with a supplier. The supplier mentioned that Maurice was a neighbor in a district called Winter Town. Winter Town is a district quite far from AT&T’s African office and is well-known for its high crime rate in Addis Ababa. Roy was surprised to hear that, as Maurice told him that he lived in Spring Town, a district that many foreign ambassadors lived and a lot more expensive than Winter Town. Through some connection, Roy verified that what the supplier said was true.

Roy decided to confront Maurice about the housing allowance issue. Maurice at first denied but later admitted that his apartment was in Winter Town and the rent was less than $2,500. He defended his action by saying that “Every AB&T senior executive gets $2,500 a month. If I live in an economically way, why should I be penalized? I just receive the same as others”. As a reply, Roy stressed that “It is AB&T objective to let senior employees to live in a safe place and have good rest for the challenging duties during office hours. Besides, the districts that the company’s senior executives live in represent the image of the company. Moreover, the company’s housing allowance policy is reimbursement on an actual basis, i.e. the amount of monthly claim should be the same as the rental value of the apartment and not to allow staff to make a profit. As the regional CFO, I have to maintain my professional standing”. When Roy challenged Maurice for using falsified rental receipts for disbursement claims, Maurice admitted but replied that this is a common and well-accepted practice in Ethiopia.

Later in the discussion, Maurice tried to convince Roy regarding his housing allowance claim practice. Maurice explained his situation that “You may not understand my situation. I have to save every dollar to pay school fees for my ten nephews and nieces. I got my family members’ great support to finish my education. I owe it to my brothers and sisters to give their children the same chance to study as I did. My parents can never understand why I live in a big apartment instead of helping their grandchildren. I am just doing what I should do. The company has no extra expense to reimburse me $2,500 housing allowance per the monthly receipt I submit. As my old classmate and my best friend, please pretend you know nothing and pay me $2,500 housing allowance as before. As a person grown up in Ethiopia, I know all business practice here and have good connection in this country. I know many senior executives in the government tax department and that will be helpful to your work here. I will fully support you to do an excellent job to save some tax for the benefit of our company. You will be compliment by your boss for paying a lower tax than other companies here”.

Roy does not want to lose his friendship with Maurice and he believes it will make his working life easier if he can make use of Maurice’s connection in Africa. Roy is not sure what should be his next step.

Required

1. Identify the ethical issue, if any, involved in this case?                                     

2. Who are the stakeholders in this situation? How are they affected?

3. What are Roy’s alternatives?   

4. What course of action will you suggest Roy Russell to take and justify your suggestion?

At January 1, 2020, Headland Company had plan assets of $286,300 and a projected benefit obligation of the same amount. During 2020, service cost was $28,400, the settlement rate was 10%, actual and expected return on plan assets were $25,500, contributions were $20,600, and benefits paid were $17,900.

Prepare a pension worksheet for Headland Company for 2020.

On Feb 1, 2019, the price of a T-bill maturing on July 31, 2019 is $96.98, the price of a T-bill with maturity on Jan 31, 2020 is $97.11, and the price of a stripe with maturity on July 31 of 2020 is $97.76. A semiannual coupon treasury note that has the coupon rate 4.75% and will mature on July 31, 2020. What is the price of this T-note?

Concord Corporation had 129,600 shares of stock outstanding on January 1, 2020. On May 1, 2020, Concord issued 64,800 shares. On July 1, Concord purchased 10,560 treasury shares, which were reissued on October 1. Compute Concord’s weighted-average number of shares outstanding for 2020. Weighted-average number of shares outstanding

As we emerge from COVID-19’s lockdowns, there will be many new features to the landscapes of our lives. The most significant will be the shifting economic path from the capitalism of interdependent free trade to the mercantilism of independent economic nationalism.

To those who study the future, the COVID-19 pandemic is a singularity — an event, usually unanticipated, that fundamentally upends the way we live. In other words, it is a major paradigm shift.

One classic example is the mass production of the automobile early in the last century, shifting transportation from organic sources (horses) to mechanical alternatives (cars). A more recent case is the development of the Information Superhighway in the 1980s that ushered in the world of the personal computer in which we now live.

The COVID-19 pandemic originated late last fall in Wuhan, China. Wuhan is a city in Central China with 10 million people and a major transportation hub for domestic rail travel and international air flights. It was also the host of an international athletic meet and a Chinese New Year celebration that attracted tens of thousands of tourists who then unwittingly spread the deadly new virus rapidly across the globe.

For whatever reasons, both the Chinese communist government and the United Nations’ World Health Organization failed to alert the world in sufficient time to stop this spread. As a result, it has now reached literally every country in the world.

At this writing, there are more than 3 million COVID-19 cases and more than 200,000 deaths worldwide. The United States is the world’s leader with in excess of 1 million cases and about 60,000 deaths.

To break the spread of this pandemic, stay-at-home orders have been imposed for individuals and shutdowns for most nonessential businesses (variously defined) for the past six to eight weeks. As we emerge from the wreckage, what we behold are eerily invisible societies and ruined economies.

In the United States, there are nearly 30 million unemployed and a contraction of the economy not seen since the Great Depression of the 1930s.

From these horrendous statistics, there is an automatic compulsion to assign blame. Since President Trump is at the national helm, it is easy to blame him, and his sub-par performance at the daily White House press conferences has not helped. If he was a little slow to recognize the threat of COVID-19, Democrats such as Nancy Pelosi, Charles Schumer and Andrew Cuomo were no faster.

If blame is to be pinned on anyone, it must be on the communist government of China, which withheld information on the pandemic for far too long. And, bluntly, the World Health Organization was complicit in this silence.

In truth, we have much to be proud of in the American response. Under the capable leadership of Vice President Mike Pence, the COVID-19 Task Force has brought before the American public the reassuring medical expertise of Drs. Anthony Fauci and Deborah Birx. For all the bitter partisanship to our politics, a welcome bipartisanship between Republicans and Democrats in both houses of Congress, together with the White House, has enacted several pieces of legislation that has brought some $3 trillion of financial relief to individuals and businesses.

Further, government and private industry are cooperating to achieve massive production shifts — like General Motors’ switch from making cars to manufacturing ventilators in just weeks — at a level of coordination not seen since World War II.

In confronting the COVID-19 singularity, three new features immediately come to mind. One is a migration from crowded, vulnerable cities to the safety of small-town America. Another is a dramatic increase in the reliance on the internet for employment, retail spending, education and even health care, and away from the brick-and-mortar settings of person-to-person interactions.

The most far-reaching of this paradigm shift, however, will be the rise of mercantilism at the expense of free trade liberalism. Since much of our pre-COVID-19 prosperity came from this interdependence of resources, labor and capital to the least costly place of production, this may seem strange.

The beneficiary of this “free” trade was the global consumer who enjoyed the reasonable prices that came from cheap imports. The flaw to this “prosperous” system was that most of the global supply chains, and especially that of medical supplies and equipment, led to China. Indeed, by 2020, fully half of all global manufacturing is “made in China.” The flaw lies in the loss of independence, both economic and political, to the winner of such interdependence.

The father of mercantilism, Friedrich List (1789-1846), contended that an industrial economy was the bedrock of national power, and that the goal of any economy was to achieve trade surpluses to preserve the nation’s economic independence and political sovereignty. Indeed, such mercantilism has been the guiding light to China’s massive growth and trade surpluses all over the world. Hopefully, rising from the invisible devastation of COVID-19 will be a visible counteracting forest of signs saying “made in the USA.”

• Summarize the article
• How do this relate to the 16^th century theory of mercantilism?