Early in the year, Charles, Lane, and Tami form the Harrier Corporation for the express purpose of developing a shopping center. All parties are experienced contractors, and they transfer various business assets to Harrier in exchange for all of its stock. Three months after it is formed, Harrier purchases two cranes from Lane for their fair market value of $400,000 by issuing four annual installment notes of $100,000 each. Because the adjusted basis of the cranes is $550,000, Lane plans to recognize a loss of $150,000 in the year of the sale. Does Lane have any potential income tax problem with this plan?

Garden Depot is a retailer that is preparing its budget for the upcoming fiscal year. Management has prepared the following summary of its budgeted cash flows:

The company’s beginning cash balance for the upcoming fiscal year will be $40,000. The company requires a minimum cash balance of $10,000 and may borrow any amount needed from a local bank at a quarterly interest rate of 3%. The company may borrow any amount at the beginning of any quarter and may repay its loans, or any part of its loans, at the end of any quarter. Interest payments are due on any principal at the time it is repaid. For simplicity, assume that interest is not compounded.

Required:

Prepare the company’s cash budget for the upcoming fiscal year. (Repayments, and interest, should be indicated by a minus sign.)

Materials and Labor Variances

At the beginning of the year, Craig Company had the following standard cost sheet for one of its plastic products:

The actual results for the year are as follows:

1. Units produced: 390,000.
2. Materials purchased: 2,730,000 pounds @ $5.65.
3. Materials used: 2,301,000 pounds.
4. Direct labor: 702,000 hours @ $13.68.

Required:

1. Compute price and usage variances for materials. Enter amounts as positive numbers and select Favorable or Unfavorable.

2. Compute the labor rate and labor efficiency variances. Enter amounts as positive numbers and select Favorable or Unfavorable.

You are considering a project with the following cash​ flows:

YEAR                      PROJECT CASH FLOW

    0                         -60,000

    1                         25,000

    2                         25,000

    3                         25,000

    4                         25,000

If the appropriate discount rate is 11 ​percent, what is the​ project's discounted payback​ period in years?

Twenty calculus students are comparing grades on their first two quizzes of the year. The class discovers that every pair of students received the same grade on at least one of the two quizzes. Prove that the entire class received the same grade on at least one of the two quizzes.

A company sells 1,200 units during the first quarter of the year at a selling price of $25 per unit.  In addition, the company has a beginning inventory of 600 units that were purchased at $10 per unit, and the following purchases and sales.

Date Units sold Units purchased Cost per unit

January 10         300    $11

January 25 450

February 7    400 $12

February 14 200

March 5 300 $14

March 27 550

If the company uses a periodic inventory system and the weighted average cost method of inventory valuation, then what is the company's ending inventory?

The following transactions apply to Ozark Sales for Year 1:  

1. The business was started when the company received $50,000 from the issue of common stock.
2. Purchased equipment inventory of $380,000 on account.
3. Sold equipment for $510,000 cash (not including sales tax). Sales tax of 8 percent is collected when the merchandise is sold. The merchandise had a cost of $330,000.
4. Provided a six-month warranty on the equipment sold. Based on industry estimates, the warranty claims would amount to 2 percent of sales.
5. Paid the sales tax to the state agency on $400,000 of the sales.
6. On September 1, Year 1, borrowed $50,000 from the local bank. The note had a 4 percent interest rate and matured on March 1, Year 2.
7. Paid $6,200 for warranty repairs during the year.
8. Paid operating expenses of $78,000 for the year.
9. Paid $250,000 of accounts payable.
10. Recorded accrued interest on the note issued in transaction no. 6.

Prepare the journal entries for the preceding transactions and post them to the appropriate T-accounts. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers nearest dollar amount.)

The Landers Corporation needs to raise $1.70 million of debt on a 20-year issue. If it places the bonds privately, the interest rate will be 14 percent. Fifteen thousand dollars in out-of-pocket costs will be incurred. For a public issue, the interest rate will be 12 percent, and the underwriting spread will be 1 percent. There will be $130,000 in out-of-pocket costs. Assume interest on the debt is paid semiannually, and the debt will be outstanding for the full 20-year period, at which time it will be repaid. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.

a. For each plan, compare the net amount of funds initially available—inflow—to the present value of future payments of interest and principal to determine net present value. Assume the stated discount rate is 18 percent annually. Use 9.00 percent semiannually throughout the analysis. (Disregard taxes.) (Assume the $1.70 million needed includes the underwriting costs. Input your present value of future payments answers as negative values. Do not round intermediate calculations and round your answers to 2 decimal places.)
  

b. Which plan offers the higher net present value?
  

Marcie is a new client and a 22-year-old female who works as a receptionist in a doctor's office. She has just revealed to you during the intake session that she has recently lost interest in most activities, has been sleeping a great deal yet feels tired all the time, and sometimes wishes she could cease to exist. She mentioned feeling as though she has been "on an emotional roller coaster" during the past year, throughout her on-again/off-again relationship with a 35-year-old married man. The last breakup with him seemed final, and Marcie has felt herself sinking deeper and deeper into depression ever since. When probed further about suicidal ideations, Marcie admitted that she has considered killing herself, although she is uncertain whether or not she would actually do it. She said that she is currently in possession of a gun that her friend allowed her to keep in her home following a rash of burglaries in the neighborhood, but she does not know whether she would actually use it.

You have consulted with your supervisor, who has agreed that Marcie should be referred immediately for a psychiatric evaluation and has instructed you to arrange for Marcie to go directly from your office to a nearby hospital. Marcie told you that her mother accompanied her and is in the waiting room, but she has emphatically stated that she does not want her mother to know what is going on with her. How should this delicate situation be handled? Why? What are three ethical and/or legal concerns about this case?