b) For Arnold, the $18,000 is tax deductible since the title of ownership was transferred to Barbara. c) For Arnold, the $18,000 (6 x $3,000) are tax deductible since alimony payments will cease upon the death of the spouse. The alimony payments should be listed on Barbara’s return. The child support payments made by Arnold would not be deductible and they would not be taxable for Barbara. Exercise 5-26 The bonds for the industrial development of mass transit would be a better investment for the investor.
Bridgeton Industries: Automotive Component & Fabrication Plant Case Assignment Submission 1. Using exhibit 2, we find that the total direct labor cost budgeted for the 1987 model year was $24,682,000 and the total overhead cost was $107,954,000. Using the definition given in the Strategic Analysis part of the case, we can compute the overhead allocation rate in 1987 as follows: (Total overhead cost in 1987)/(Total direct labor cost in 1987)=$107,954,000/$24,682,000=437% After rounding, this calculation explains how the 435% rate was computed in the case. Following the same method of calculation for years 1988 through 1990, we can compute the overhead allocation rates for those years too: Model year Overhead allocation rate 1987 437% 1988 434% 1989 577% 1990 563% It then appears that there is a significant increase in the overhead allocation rate between model years 1988 and 1989. This increase can be explained, for the most part, by the discontinuation of muffler-exhaust systems and oil pans at the end of model year 1988.
The loss ratio (or claims ratio) should always be less than 100 in order for an insurance company to make a profit; this means that premiums earned are sufficient to cover losses incurred on a particular line. The second way that these funds are used is to pay expenses incurred in the selling and providing of insurance protection. Some examples would be loss adjustment expenses, commissions, and other expenses. The underwriting gain or loss can be calculated by subtracting claims and expenses incurred from net premiums written. The combined ratio is a common measure of the overall underwriting profitability.
Agoura Manufacturing Mini-Case In the case of Agoura Manufacturing and their decision to buy, it’s more important that Agoura considers accounting profits earned as opposed to project free cash flows because the latter focuses on finding the salvage value of non-cash assets. According to the information on Agoura’s situation, it clearly states that there will be no salvageable value of their non-cash assets. Accounting profits earned equals the total earnings and includes the working capital, depreciation, interest and taxes. Depreciation is subtracted out of the net operating income and the taxable income. Depreciation is also a non-cash flow expense.
If you were TDC's CEO, how would you react toTelmore's entry? * Lower prices to compete against Telmore * Differentiate from Telmore to maintain or increase customer willingness to pay * Do nothing Does Telmore have any advantage relative to TDC? How would you describe its advantage? Telmore has a competitive advantage over TDC due to its lower, lean cost structure, completely different value chain and a unique fact of having only one plan, which facilitated low-cost structure. Telmore could reduce its costs due to offering its customers only one product – pre-paid service.
A total rise of 240.72%. The annual growth per annum is 18.18% for 1987 to 1988, 16.39% for 1988 to 1989, 14.89% for 1989 to 1990, 13.79% for 1990 to 1991, 12.85% for 1991 to 1992, 12.06% for 1992 to 1993, 11.41% for 1993 to 1994, 10.84% for 1994 to 1995, 10.38% for 1995 to 1996 and 9.92% for 1996 to 1997. | |EBIT |Depreciation |Capex | | |Annual Growth Rates: |1,045 |1,05 |1,02 | | |Year |EBIT |Depreciation |Capex |Cash Flow | |1987 |82,40 |42,10 |79,60 |16,06 | |1988 |86,11 |44,21 |81,19 |18,98 | |1989 |89,98 |46,42 |82,82 |22,09 | |1990 |94,03 |48,74 |84,47 |25,38 | |1991 |98,26 |51,17 |86,16 |28,88 | |1992 |102,69 |53,73 |87,88 |32,59
Net operating losses cannot be used to shelter personal income but can be carried forward by a C corporation to provide tax benefit in future when the business expects profit. Apparently, Mr. Jones is already in the top tax bracket. S-Corporation income tends to support start-up businesses and taxpayers with little income, because the corporation is taxed at the individual's lower personal income tax rate. The initial
Remember that supply is a schedule of how many units suppliers are willing to offer at different prices. When costs fall, the supply curve increases or shifts to the right. Since changes in producer costs is not a demand factor, there would be no impact on demand. | | | | Points Received: | 10 of 10 | | Comments: | | | | 2. | Question : | (TCO A) Ceteris paribus, coffee Brand X and coffee Brand A are substitutes in consumption.
Second, most of the time, for a promising industry, there is no need for any government assistance to the initial firms. It would be much better if these firms could borrow from private lenders to cover their initial losses and repay these loans from future profits. If there are defects in the lending markets, then the government could extend loans. If the industry will create external benefits, such as training workers or new technologies, then the best government policy acts directly on the source of the external benefits (for instance, subsidies to training, or subsidies to research and development). Third, the argument could be misused because there are too many uncertainties, as indeed the industry could grow up, or not.
The price of plastics decreased from $0.19 to $0.12.The price of copper rod stayed the same at $.48 a pound. The increase in price of plastics can explain why inventories of plastics and copper changed. The expected value of Copper Rod = 5,900,000*.48 = 2,832,000 The expected value of plastics = 1,100,000 * .12 = 132,000 The expected value of plastics is not consistent with carrying costs at lower of cost or market pricing. This area needs to be checked by the auditor. The square footage allotment also needs further examination.