Note: This problem is for the 2018 tax year. Alfred E. Old and Beulah A. Crane, each age 42, married on September 7, 2016. Alfred and Beulah will file a joint return for 2018. Alfred's Social Security number is 111-11-1112. Beulah's Social Security number is 123-45-6789, and she adopted "Old" as her married name. They live at 211 Brickstone Drive, Atlanta, GA 30304. Alfred was divorced from Sarah Old in March 2016. Under the divorce agreement, Alfred is to pay Sarah $1,250 per month for the next 10 years or until Sarah's death, whichever occurs first. Alfred pays Sarah $15,000 in 2018. In addition, in January 2018, Alfred pays Sarah $50,000, which is designated as being for her share of the marital property. Also, Alfred is responsible for all prior years' income taxes. Sarah's Social Security number is 123-45-6788. Alfred's salary for 2018 is $150,000, and his employer, Cherry, Inc. (Federal I.D. No. 98-7654321), provides him with group term life insurance equal to twice his annual salary. His employer withheld $24,900 for Federal income taxes and $8,000 for state income taxes. The proper amounts were withheld for FICA taxes. Beulah recently graduated from law school and is employed by Legal Aid Society, Inc. (Federal I.D. No. 11-1111111), as a public defender. She receives a salary of $42,000 in 2018. Her employer withheld $7,500 for Federal income taxes and $2,400 for state income taxes. The proper amounts were withheld for FICA taxes. Beulah has $500 in qualified dividends on Yellow Corporation stock she inherited. Alfred and Beulah receive a $1,900 refund on their 2017 state income taxes. They itemized deductions on their 2017 Federal income tax return (total of $15,000). Alfred and Beulah pay $4,500 interest and $1,450 property taxes on their personal residence in 2018. Their charitable contributions total $2,400 (all to their church). They paid sales taxes of $1,400, for which they maintain the receipts. Both spouses had health insurance for all months of 2018 and do not want to contribute to the Presidential Election Campaign. Provide the following that would be reported on Alfred and Beulah's Schedule A: 1. Calculate the deduction allowed for medical and dental expenses. $ 2. Calculate the deduction for taxes. $ 3. Calculate the deduction for interest. $ 4. Calculate the charitable deduction allowed. $ 5. Calculate total itemized deductions:

A 5 year bond has a YTM of 7% and a coupon rate of 8%. Assuming a par value of $1,000 and semi-annual coupon payments, what should this bond be trading for?

The total factory overhead for Bardot Marine Company is budgeted for the year at $1,262,000, divided into two departments: Fabrication, $990,000, and Assembly, $272,000. Bardot Marine manufactures two types of boats: speedboats and bass boats. The speedboats require three direct labor hours in Fabrication and one direct labor hour in Assembly. The bass boats require two direct labor hours in Fabrication and three direct labor hours in Assembly. Each product is budgeted for 8,000 units of production for the year.

If required, round all per unit answers to the nearest cent.

a. Determine the total number of budgeted direct labor hours for the year in each department.

b. Determine the departmental factory overhead rates for both departments.

c. Determine the factory overhead allocated per unit for each product using the department factory overhead allocation rates.

On January 1, 2017, Loud Company enters into a 2-year contract with a customer for an unlimited talk and 5 GB data wireless plan for $65 per month. The contract includes a smartphone for which the customer pays $299. Loud also sells the smartphone and monthly service plan separately, charging $649 for the smartphone and $65 for the monthly service for the unlimited talk and 5 GB data wireless plan. On July 1, 2017, the customer realizes that she needs less data in her wireless plan and downgrades to the unlimited talk and 2 GB data plan for the remaining term of the contract (18 months). The unlimited talk and 2 GB data plan is priced at $55 per month. The $55 per month is Loud’s current stand-alone price for this plan that is available to all customers.

Required:

1. How should Loud account for this contract modification?

2. Provide Loud’s new monthly revenue recognition journal entry.

Rick is a partner in the Ten Hicks Partnership. This year, he received a distribution consisting of two properties. Property 1 was worth $40,000 at the date of the distribution and had a tax basis to the partnership of $28,000. Property 2 was worth $60,000 and had a tax basis of $12,000. Rick’s tax basis in his partnership interest was $30,000 prior to the distribution. The partnership did not have any hot assets either before or after the distribution.

a. Will Rick recognize any gain or loss on receipt of the distribution?

b. What will be Rick’s tax basis in each of the properties received?

c.What will be his remaining tax basis in his partnership interest?

On December 1 of the current year (the declaration date), Z’s board of directors vote to pay a $600 distribution by mailing checks on December 31 of the current taxable year (the payment date) to shareholders of record on December 15 (the record date). The checks are actually received by shareholders on January 2. Shareholder C is an individual with a stock basis of $120. C sells his stock on December 10 for $1,620.

A bond is currently selling for $1,300 and pays $65/year (on an annual basis) for 10 years. What is the IRR of the bond? (Note that this is the same as asking the bond’s YTM.)

For a period of three (3) years, a building can be leased for $125,000 per year with an explicit maintenance cost of $40,000 and an implicit maintenance cost of $32,500 per year. Assume that all revenues are received and costs borne at the end of each year and the interest rate is 4.5% per year. Over the period of three (3) years, determine the present value of the stream of (a) accounting and (b) economic profits on the building. Clearly show your steps and manual calculations (by hand and calculator).

You annually (at the end of the year) invest $1,500 in an individual retire-

ment account (IRA) starting at the age of 20 and make the contributions for 10 years,

(until the age of 30), after which you make no more contributions and just let the money

grow at the account’s annual interest rate. Your twin sister annually (at the end of the

year) invests $1,500 in an individual retirement account starting at age 30 and makes

the contributions for 30 years (until she turns 60). Both of you earn 7 percent annually

on your investment. (MUST BE DONE ON EXCEL)

(a) How much do you have in your account when you are 60 years old?

(b) How much does your sister have in her account when she is 60 years

old?

(c) Comparing your answers from parts (a) and (b), what is an implication

of the result?

At the end of the first year of operations, Key Company had a current equity securities portfolio classified as available‐for‐sale securities with a cost of $500,000 and a fair value of $550,000. At the end of its second year of operations, Key had a current equity securities portfolio classified as available‐for‐sale securities with a cost of $525,000 and a fair value of $475,000. No securities were sold during the first year. One security with a cost of $80,000 and a fair value of $70,000 at the end of the first year was sold for $100,000 during the second year.

Required:

How should Key Company report the preceding facts in its balance sheets and income statements for both years? Discuss the rationale for your answer.

How would your answer differ if the security had been classified as trading securities?