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?

After the accounts have been adjusted at April 30, the end of the fiscal year, the following balances were taken from the ledger of Nuclear Landscaping Co.:

Journalize the four entries required to close the accounts. Refer to the Chart of Accounts for exact wording of account titles.

Midlands Inc. had a bad year in 2019. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 79,000 units of product: net sales $1,580,000; total costs and expenses $1,637,040; and net loss $57,040. Costs and expenses consisted of the following.

Management is considering the following independent alternatives for 2020.

(a) Compute the break-even point in dollars for 2019. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answer to 0 decimal places, e.g. 2,510.)

(b) Compute the break-even point in dollars under each of the alternative courses of action for 2020. (Round contribution margin ratio to 3 decimal places e.g. 0.251 and final answers to 0 decimal places, e.g. 2,510.)

1. Increase selling price =

2. Change compensation =

3. Purchase machinery =

Which course of action do you recommend?

The data presented in worksheet 4 is the results of a 4-year study conducted to assess how age, weight, and gender influence the risk of diabetes. Risk is interpreted as the probability (times 100) that the patient will have diabetes over the next 4-year period.

a) What predictive model you suggest to relate risk of diabetes to the person’s age, weight and the gender. Why? b)Develop an estimated multiple regression model that relates risk of diabetes to the person’s age, weight, gender and life style. Present the regression formula as a mathematical equation. Interpret the coefficients of the regression and comment on the strength of the regression.

c) What is the risk percentage of diabetes over the next 4 years for a 52-year-old woman living in a small town with 80 kg weight?

The Dorset Corporation produces and sells a single product. The following data refer to the year just completed:

Beginning inventory 0 Units produced 32,700 Units sold 27,100 Selling price per unit $ 459 Selling and administrative expenses: Variable per unit $ 20 Fixed per year $ 406,500 Manufacturing costs: Direct materials cost per unit $ 298 Direct labor cost per unit $ 52 Variable manufacturing overhead cost per unit $ 30 Fixed manufacturing overhead per year $ 425,100 Assume that direct labor is a variable cost.

Required:

a. Compute the unit product cost under both the absorption costing and variable costing approaches.

b. Prepare an income statement for the year using absorption costing.

c. Prepare an income statement for the year using variable costing.

d. Reconcile the absorption costing and variable costing net operating income figures in (b) and (c) above.