Fred Stone is an employee of Henrock Company. During the first part of the year, Stone earned $4,340 while working in State Q. For the remainder of the year, the company transferred him to State S where he earned $27,000. Henrock Company's tax rate in State Q is 4.6%, and in State S, 4.0% on the first $7,000. If reciprocal arrangements exist between the two states, determine the SUTA tax that the company paid on Stone's earnings in State S.

Answer:

Explanation:

a) What was the accountant referring to in his comment?

The accountant was referring to the fact that because passive activity losses can only offset passive activity income, she will not be able to deduct the losses in this year. However, she would be able to carry forward the loss to future years to offset any passive activity income generated in those years.

b) You learn that Maxine's current at-risk basis in her investment is $1,000 and that her share of the current loss is expected to be $13,000. Based on these facts, how will her loss be treated?

Based upon the fact that her basis in her investment is only $1000, her losses will be of that amount because of the at-risk limitation, which limits the taxpayer’s deduction by the amount “at risk”. If there is no passive activity income, this would be carried forward to when Maxine would dispose of her entire interest.

c) After reviewing her situation, Maxine's financial adviser suggests that she invest at least an additional $12,000 in Teal to ensure a full loss deduction in the current year. How do you react to his suggestion?

I believe that her financial adviser’s advice to Maxine is a good idea because if her current lossis expected to be $13,000, by contributing $12,000 in Teal, she would be able to deduct the full basis of $13,000 invested into the company. If there is no passive activity income, this would be carried forward to when Maxine would dispose of her entire interest in Teal.

d) What would you suggest Maxine consider as she attempts to maximize her current year deductible loss? She should consider the advice given to her by her accountant.

Answer:

a. Labor Productivity:

Country     Sales (Units)    Labour (hours)     Productivity (Sales/Labour hours)

U.S              100,000              20,000              5 units / hours

LDC             20,000                15,000               1.33 units/ hours

Capital Productivity

Country     Sales (Units)    Capital (hours)     Productivity (Sales/Capital hours)

U.S              100,000               60,000                1.67 units / hour

LDC             20,000                 5,000                  4 units / hours

Conclusion: Yes, the result seems confusing. The labour productivity in U.S. is higher than LDC while the capital productivity in U.S. is lower than LDC which is contradictory.

b. Multi-factor productivity for Labor and Capital

Country      Sales                  Input                  Productivity

                  (Units)         (Labor + Capital)       (units/hours)

U.S.          100,000                80,000                1.25 units/hour

                                       (20,000 + 60,000)

LDC           20,000                 20,000                1 units/hour

                                        (15,000 + 5,000)

Conclusion: Yes it make sense as multi-factor productivity is better than partial productivity. Labor and capital are subtitles and that gives better presentation of the productivity.

c. Raw material productivity

Country      Sales           Raw material            Productivity

                  (Units)            (Currency)              (units/hours)

U.S.            100,000         $20,000                  5 units per dollar

LDC            20,000          = $2,000                 10 units per dollar        

Conclusion: The figures are greater in subsidiary because the price paid for raw material is much slower than the parent country.

Note: $1 = FC 10

$20,000 = FC 10

FC = $20,000 / 10 = $2,000

Answer:

$2,316.67

Explanation:

From the question we know that the asset is depreciated in 3 years

The monthly depreciation expenses before re-determine savage value

= ($64,800-$11,400)/36 = $1,483.33

Because management determine to reduce $5,000 in salvage value (=$11,400-$6,400) just before 6 months ending depreciation period, then we have to allocate $5,000 in next 6 months.

The depreciation expense during the last six months of Year 3 would be:

= current depreciation expense $1,483.33 + $5,000/6

= $2,316.67

The cars will wait an average of 1.67 hours before being served at routine repairs while they'll wait an average of 3 hours before being served at major repairs.

From the information given, at the routine repair hoist, 5 people waiting on average and the cars are processed at a rate of 3 per hour, therefore the flow time (T) will be:

= I/R = 5/3 = 1.67 hours.

Also, at the major repair hoist, 3 people wait on average and the cars are processed at a rate of 1 per hour. Therefore, the Flow time (T) will be:

= I/R = 3/1 = 3 hours.

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Answer:

The Cars wait an average of 1.67 hours before being served at routine repairs.

The Cars wait an average of 3 hours before being served at major repairs.

Explanation:

At the routine repair hoist, 5 people waiting on average hence the Inventory (I) = 5 cars. The cars are processed at a rate of 3 per hour, hence the Throughput (R) = 3 cars per hour.

Therefore the Flow time (T) = I/R = 5/3 = 1.67 hours.  

The Cars wait an average of 1.67 hours before being served at routine repairs.  

At the major repair hoist, 3 people waiting on average hence the Inventory (I) = 3 cars. The cars are processed at a rate of 1 per hour, hence the Throughput (R) = 1 cars per hour.

Therefore the Flow time (T) = I/R = 3/1 = 3 hours.  

The Cars wait an average of 3 hours before being served at major repairs.

Answer:

cash       900,000,000 debit

  common stock          50,000,000 credit

  additional paid-in    850,000,000 credit

---   Jan 9th issuance   ---

Equipment       81,000 debit

    Common Stock          4,500 credit

   Addtional paid-in      76,500 credit

---    March 11th issuance ---

Equity at end of Year 1:

  common stock          50,004,500 credit

  additional paid-in    850,076,500 credit

Explanation:

cash proceeds: 50 millions x 18 dolllars = 900 millions

      face value:  50 millions x  1 dollars   =  50 million

             additional paid-in                           850 millions

Equipment: 4,500 x 18 = 81,000

face value  4,500 x 1 =      4,500

addiional                          76,500

Equity at year-end will be the sum of both

Final answer:

The appropriate journal entries for the transactions related to shareholders' equity are provided for the first and second year of operations.

Explanation:

To record the transactions related to shareholders' equity for the first year of operations, the appropriate journal entries are as follows:

• January 9: Debit Cash for $900,000,000 and Credit Common Stock for $50,000,000 and Paid-in Capital in Excess of Par for $850,000,000
• March 11: Debit Custom-Made Equipment for $81,000 and Credit Common Stock for $81,000

For the second year of operations, the journal entries recorded by the new staff accountant are:

• January 12: Debit Land for $5,000,000 and Credit Paid-in Capital—Donation of Land for $5,000,000
• September 1: Debit Common Stock for $2,000,000, Debit Retained Earnings for $44,000,000, and Credit Cash for $46,000,000
• December 1: Debit Cash for $24,000,000, Credit Common Stock for $1,000,000, and Credit Gain on Sale of Previously Issued Shares for $23,000,000

Learn more about Journal entries here:

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