It would be my advice for Mr. Jones to not buy the stock because of the liability of current and future tax obligations which Mr. Jones would incur from the purchase of the stock. Since the tax identity of Smithon corporation would have not ceased, it is not a favorable purchase for Mr. Jones. Ina a case where the tax identity of a firm does not cease not to exist, the tax aspects will remain the same and so will the existing tax schedule. So in this case it would mean that Mr. Jones would not be allowed to change the financial year to end on December 31. The buyer in cases where he can’t change the legal entity is in a non -benefice situation, the buyer is limited to follow the current tax basis on the company’s assets even if the buyer paid more for the
If the IRR is less than the WACC, the project should be rejected, as it impoverishes the firm’s owners. If the IRR equals the WACC, it earns only normal profits (i.e., the owners’ opportunity costs) and accepting it is a matter of indifference. In this care the project’s IRR is 18.031 > 11.88%, therefore the IRR rule tells us the same as the NPV rule: this project will enrich the firm’s owners. We note in passing that in more advanced courses in finance you would learn about projects for which this rule cannot be used. Broadly speaking, they are projects whose cash flows changes sign more than once—e.g., from negative to positive to negative again.
For purposes of external financial reporting, LIFO may not be used with the lower of cost or market approach. c. If LIFO is used for external financial reporting, then it cannot be used for tax purposes. d. None of these. 83. If inventory levels are stable or increasing, an argument which is not an advantage of the LIFO method as compared to FIFO is a. income taxes tend to be reduced in periods of rising prices.
Mr. Smith, The $300,000 fee that you earned off of the case could be used in your gross income as directed by Section 61(a) of the Code. The code states that gross income is limited to this item, but that this is merely the most typical source of income. Due to not knowing your combined AGI, it is not known what the tax implications would be completely. Being a LLC has major advantages of a corporation. Your personal assets are not subject to claims of the corporation’s creditors, only your investments in the corporation are subject to any claims.
One fallacy is that trade is a zero sum activity, if one trading party gains, the other must lost. 2. Imports reduce employment and act as a drag on the economy, while exports promote growth and employment. This fallacy stems from a failure to consider the link between imports and exports. 3.
ii) Compliance with U.S. GAAP for Tesco: Tesco was also incorrect in their dealing of the refund from a customer’s perspective. Article 605-50-25-10 on “Customer's Accounting for Certain Consideration Received from a Vendor” states that “a rebate or refund of a specified amount of cash consideration… shall be recognized as a reduction of the cost of sales based on a systematic and rational allocation of the cash consideration offered to each of the underlying transactions” (FASB ASC). This means that Tesco should not have recorded the £750 million as sales
We discount a project’s cash flows by its risk- adjusted cost of capital, which is a weighted average (WACC) of the cost of debts, preferred stock, and common equity, adjusted for the project’s risk and debt capacity. Question 2 The $262,500 test marketing cost should not be included in the capital budget analysis because it is a sunk cost. Sunk Costs are defined as an outlay related to the project that was incurred in the past and cannot be recovered in the future regardless of whether or not the project is accepted. Therefore, sunk costs are not incremental costs and are not relevant in a capital budgeting analysis. Question 3 Question 4 If Heavenly Foods does not have an opportunity to lease the space, it is not free or costless to the lite product project.
Productive efficiency is absent in the monopolistic competition. This exists because the price the company would have to set is above the average cost of that product, product efficiency is not achieved (The McGraw-Hill Companies, Inc.,
Due to the lack of substance of a patent and the long term benefit a patent can provide, a patent is classified as an intangible asset for accounting treatment. FASB Accounting Standard Codification subtopic 350 discusses accounting for intangible assets. The costs associated with an intangible asset are amortized over the useful life of the asset. The useful life is determined by the expected period of time the asset is expected to contribute to future cash flows of the reporting entity (ASC 350-30-35-2). Legal or contractual obligations can also help determine the useful life of an intangible asset.
Market failure refers to a situation in which the market does not allocate resources efficiently. ANSWER: T TYPE: T KEY1: D SECTION: 2 OBJECTIVE: 7 RANDOM: Y [cxxii]. Since taxes affect only the price paid by the buyer, they cannot have an adverse impact on the allocation of society’s resources. ANSWER: F TYPE: T KEY1: C SECTION: 2 OBJECTIVE: 7 RANDOM: Y [cxxiii]. A monopolist has market power.