Question: Freon Corporation, a U.S. corporation, manufactures

> The financial statements at the end of Atlas Realty’s first month of operations follow: Instructions By analyzing the interrelationships among the four financial statements, determine the proper amounts for (a) through (p). Atlas

> Bev’s Dry Cleaners is owned and operated by Beverly Zahn. A building and equipment are currently being rented, pending expansion to new facilities. The actual work of dry cleaning is done by another company for a fee. The assets and the liabilities of th

> On April 1, 2019, Maria Adams established Custom Realty. Maria completed the following transactions during the month of April: a. Opened a business bank account with a deposit of $24,000 from personal funds. b. Paid rent on office and equipment for the m

> Jose Loder established Bronco Consulting on August 1, 2019. The effect of each transaction and the balances after each transaction for August follow: Instructions 1. Prepare an income statement for the month ended August 31, 2019. 2. Prepare a statemen

> On June 1 of the current year, Chad Wilson established a business to manage rental property. He completed the following transactions during June: a. Opened a business bank account with a deposit of $30,000 from personal funds. b. Purchased office supplie

> Lowe’s Companies Inc., a major competitor of The Home Depot in the home improvement business, operates over 1,800 stores. Lowe’s recently reported the following balance sheet data (in millions): a. Determine the tota

> The Home Depot is the world’s largest home improvement retailer and one of the largest retailers in the United States based on net sales volume. The Home Depot operates over 2,200 Home Depot® stores that sell a wide assortmen

> Fritz Evans is the owner and operator of Be-The-One, a motivational consulting business. At the end of its accounting period, December 31, 2018, Be-The-One has assets of $395,000 and liabilities of $97,000. Using the accounting equation, determine the fo

> We-Sell Realty, organized August 1, 2019, is owned and operated by Omar Farah. How many errors can you find in the following statements for We-Sell Realty, prepared after its first month of operations? We-Sell Realty Income Statement August 31, 2019

> A summary of cash flows for Ethos Consulting Group for the year ended May 31, 2019, follows: Cash receipts: Cash received from customers ……………………………………………………. $637,500 Cash received from additional investment of owner ………………………… 62,500 Cash payments: Cas

> Using the income statement for Sentinel Travel Service shown in Practice Exercise 1-4B, prepare a statement of owner’s equity for the year ended August 31, 2019. Barb Schroeder, the owner, invested an additional $36,000 in the business during the year an

> The financial statements at the end of Wolverine Realty’s first month of operations are as follows: Instructions By analyzing the interrelationships among the four financial statements, determine the proper amounts for (a) through (p)

> Each of the following items is shown in the financial statements of Exxon Mobil Corporation: 1. Accounts payable 2. Cash equivalents 3. Crude oil inventory 4. Equipment 5. Exploration expenses 6. Income taxes payable 7. Investments 8. Long-term debt 9. M

> Financial information related to the proprietorship of Ebony Interiors for February and March 2019 is as follows: a. Prepare balance sheets for Ebony Interiors as of February 29 and March 31, 2019. b. Determine the amount of net income for March, assum

> One item is omitted in each of the following summaries of balance sheet and income statement data for the following four different proprietorships: Determine the missing amounts, identifying them by letter. Freeman Heyward Jones Ramirez Beginning o

> Dairy Services was organized on August 1, 2019. A summary of the revenue and expense transactions for August follows: Fees earned ……………………………………….. $783,000 Wages expense …………………………………….. 550,000 Rent expense …………………………………………. 35,000 Supplies expense ………

> Financial information related to Udder Products Company, a proprietorship, for the month ended April 30, 2019, is as follows: Net income for April …………………………………………………. $166,000 Mark Kominksy’s withdrawals during April ……………………. 25,000 Mark Kominksy’s cap

> Seth Feye established Reliance Financial Services on July 1, 2019. Reliance Financial Services offers financial planning advice to its clients. The effect of each transaction and the balances after each transaction for July follow: Instructions 1. Prep

> From the following list of selected items taken from the records of Rosewood Appliance Service as of a specific date, identify those that would appear on the balance sheet: 1. Accounts Payable 2. Accounts Receivable 3. Andrew King, Capital 4. Cash 5. Fee

> Terry Fleming is the owner and operator of Go-For-It LLC, a motivational consulting business. At the end of its accounting period, December 31, 2018, Go-For-It has assets of $675,000 and liabilities of $215,000. Using the accounting equation, determine t

> Four different proprietorships, Jupiter, Mars, Saturn, and Venus, show the same balance sheet data at the beginning and end of a year. These data, exclusive of the amount of owner’s equity, are summarized as follows: On the basis of t

> Using the income statement for Adventure Travel Service shown in Practice Exercise 1-4A, prepare a statement of owner’s equity for the year ended April 30, 2019. Jerome Foley, the owner, invested an additional $60,000 in the business during the year and

> The amounts of the assets and liabilities of Nordic Travel Agency at December 31, 2019, the end of the year, and its revenue and expenses for the year follow. The capital of Ian Eisele, owner, was $670,000 on January 1, 2019, the beginning of the year. D

> Teri West operates her own catering service. Summary financial data for July are presented in equation form as follows. Each line designated by a number indicates the effect of a transaction on the equation. Each increase and decrease in ownerâ&#12

> The following selected transactions were completed by Silverado Delivery Service during February: 1. Received cash from owner as additional investment, $25,000. 2. Purchased supplies for cash, $750. 3. Paid rent for February, $3,000. 4. Paid advertising

> Annie Rasmussen is the owner and operator of Go44, a motivational consulting business. At the end of its accounting period, December 31, 2018, Go44 has assets of $720,000 and liabilities of $180,000. Using the accounting equation and considering each cas

> a. A vacant lot acquired for $115,000 is sold for $298,000 in cash. What is the effect of the sale on the total amount of the seller’s (1) Assets, (2) Liabilities, and (3) Owner’s equity? b. Assume that the seller owes $80,000 on a loan for the land. Aft

> Describe how the following business transactions affect the three elements of the accounting equation: a. Invested cash in business. b. Paid for utilities used in the business. c. Purchased supplies for cash. d. Purchased supplies on account. e. Received

> The following data were taken from Alvarado Company’s balance sheet: a. Compute the ratio of liabilities to owner’s equity. b. Has the creditor’s risk increased or decreased from December 31, 2018,

> The following data were taken from Mesa Company’s balance sheet: a. Compute the ratio of liabilities to owner’s equity. b. Has the creditor’s risk increased or decreased from December 31, 2018, to D

> Indicate whether each of the following is identified with (1) An asset, (2) A liability, or (3) Owner’s equity: a. accounts receivable b. accounts payable c. cash d. fees earned e. land f. rent expense g. supplies

> A fertilizer manufacturing company wants to relocate to Lakeside County. A report from a fired researcher at the company indicates the company’s product is releasing toxic by-products. The company suppressed that report. A later report commissioned by th

> D’Lite Dry Cleaners is owned and operated by Joel Palk. A building and equipment are currently being rented, pending expansion to new facilities. The actual work of dry cleaning is done by another company for a fee. The assets and liabilities of the busi

> The following is a list of well-known companies: 1. Alcoa Inc. 2. Boeing 3. Caterpillar 4. Citigroup Inc. 5. CVS 6. Delta Air Lines 7. eBay Inc. 8. FedEx 9. Ford Motor Company 10. Gap Inc. 11. H&R Block 12. Hilton Hospitality, Inc. 13. Procter & Gamble 1

> Why is a treaty important to a nonresident worker in the United States?

> What is a permanent establishment and why is it an important part of most income tax treaties?

> What is the primary goal of the United States in negotiating income tax treaties with other countries?

> Describe a reason why a generation-skipping tax was necessary to augment the estate and gift taxes.

> People sometimes confuse the unified credit with the exemption equivalent. Describe how these terms differ and how they are related.

> True or False: Including taxable gifts when calculating the estate tax subjects these transfers to double taxation. Explain.

> Describe a reason why transfers of terminable interests should not qualify for the marital deduction.

> Explain why the fair market value of a life estate is more difficult to estimate than an income interest.

> Jack and Jill are owners of UpAHill, an S corporation. They own 25 and 75 percent, respectively. a. What amount of ordinary income and separately stated items are allocated to them for years 1 and 2 based on the information above? b. Complete UpAHill’s

> Spartan Corporation, a U.S. corporation, reported $2 million of pretax income from its business operations in Spartania, which were conducted through a foreign branch. Spartania taxes branch income at 25 percent, and the United States taxes corporate inc

> Explain how a remainder and an income interest are valued for transfer tax purposes.

> Identify the factors that determine the proportion of the value of property held in joint tenancy with the right of survivorship that will be included in a decedent’s gross estate.

> List the conditions for making an election to split gifts.

> Describe the conditions for using the annual exclusion to offset an otherwise taxable transfer.

> Renée operates Scandinavian Imports, a furniture shop in Olney, Maryland that ships goods to customers in all 50 states. Scandinavian Imports also appraises antique furniture and has recently conducted in-home appraisals in the District of Columbia, Mary

> Identify two types of transfers for inadequate consideration that are specifically excluded from imposition of the gift tax.

> Describe a situation in which a transfer of cash to a trust might be considered an incomplete gift.

> Describe a property transfer or payment that is not, by definition, a transfer for inadequate consideration.

> Describe the requirements for a complete gift, and contrast a gift of a present interest with a gift of a future interest.

> IBM incurs $250 million of research and experimental expenditures (R&E) in the United States. How does the “exclusive apportionment” of this deduction differ depending on the R&E apportionment method chosen in the computation of the foreign tax credit li

> Hank is a single individual who possesses a life insurance policy worth $300,000 that will pay his two children a total of $800,000 upon his death. This year Hank transferred the policy and all incidents of ownership to an irrevocable trust that pays inc

> Suppose Vince dies this year with a gross estate of $15 million and no adjusted prior gifts. Calculate the amount of estate tax due (if any) under the following alternative conditions. a. Vince leaves his entire estate to his spouse, Millie. b. Vince lea

> Winkin, Blinkin, and Nod are equal shareholders in SleepEZ, an S corporation. In the conditions listed below, how much income should each report from SleepEZ for 2016 under both the daily allocation and the specific identification allocation methods? Ref

> Montgomery has decided to engage in wealth planning and has listed the value of his assets below. The life insurance has a cash surrender value of $120,000 and the proceeds are payable to Montgomery’s estate. The trust is an irrevocable

> Jack is single and he made his first taxable gift of $1,000,000 in 2008. Jack made additional gifts in 2009, at which time he gave $1,750,000 to each of his three children and an additional $1,000,000 to State University (a charity). The annual exclusion

> What is the difference between a sales tax and a use tax?

> Carmen SanDiego, a U.S. citizen, is employed by General Motors Corporation, a U.S. corporation. On April 1, 2016, GM relocated Carmen to its Brazilian operations for the remainder of 2016. Carmen was paid a salary of $120,000 and was employed on a 5-day

> Owl Vision Corporation (OVC) is a North Carolina corporation engaged in the manufacture and sale of contact lens and other optical equipment. The company handles its export sales through sales branches in Belgium and Singapore. The average tax book value

> Waco Leather, Inc., a U.S. corporation, reported total taxable income of $5 million. Taxable income included 1.5 million of foreign source taxable income from the company’s branch operations in Mexico. All of the branch income is general category income.

> Mackinac Corporation, a U.S. corporation, reported total taxable income of $5 million. Taxable income included $1.5 million of foreign source taxable income from the company’s branch operations in Canada. All of the branch income is general category inco

> Distinguish between a definitely related deduction and a not definitely related deduction in the allocation and apportionment of deductions to foreign source taxable income.

> How does the U.S.-Belgium treaty define a permanent establishment for determining nexus? Look at Article 5 of the 2007 U.S.-Belgium income tax treaty, which you can find on the IRS Website, www.irs.gov.

> Falmouth Kettle Company, a U.S. corporation, sells its products in the United States and Europe. During the current year, selling, general, and administrative (SG&A) expenses included: Personnel department………………………………………………………………………………$

> Spartan Corporation, a U.S. company, manufactures green eye shades for sale in the United States and Europe. All manufacturing activities take place in Michigan. During the current year, Spartan sold 10,000 green eye shades to European customers at a pri

> Sam Smith is a citizen and bona fide resident of Great Britain (United Kingdom). During the current year, Sam received the following income: o Compensation of $30 million from performing concerts in the United States. o Cash dividends of $10,000 from a F

> Pavel, a citizen and resident of Russia, spent 100 days in the United States working for his employer, Yukos Oil, a Russian corporation. Under what conditions will Pavel be subject to U.S. tax on the portion of his compensation earned while working in th

> Carol receives $500 of dividend income from Microsoft, Inc., a U.S. company. True or False: Absent any treaty provisions, Carol will be subject to U.S. tax on the dividend regardless of whether she is a resident or nonresident. Explain.

> Compare and contrast general sales and use tax nexus and the new “Amazon” rule creating nexus in New York.

> Why are the income source rules important to a U.S. citizen or resident?

> Why does the United States allow U.S. taxpayers to claim a credit against their precredit U.S. tax for foreign income taxes paid?

> Use the facts in problem 41. If Guido meets the statutory requirements to be considered a resident of both the United States and Belgium, what criteria does the U.S.-Belgium treaty use to “break the tie” and determine Guido’s country of residence? Look a

> Distinguish between allocation and apportionment in sourcing deductions in computing the foreign tax credit limitation.

> Natasha is not a citizen of the United States, but she spends 200 days per year in the United States on business. She does not have a green card. True or False: Natasha will always be considered a resident of the United States for U.S. tax purposes becau

> Maria is not a citizen of the United States, but she spends 180 days per year in the United States on business-related activities. Under what conditions will Maria be considered a resident of the United States for U.S. tax purposes?

> What are the two categories of income that can be taxed by the United States when earned by a nonresident? How does the United States tax each category of income?

> Cathy, Heathcliff, and Isabelle are equal shareholders in Wuthering Heights (WH), an S corporation. Heathcliff has decided he would like to terminate the S election. In the following alternative scenarios, indicate whether the termination will occur and

> What are the major U.S. tax issues that apply to an outbound transaction?

> What are the major U.S. tax issues that apply to an inbound transaction?

> True or False: Subpart F income is always treated as a deemed dividend to the U.S. shareholders of a controlled foreign corporation. Explain.

> Discuss why restaurant meals, rental cars, and hotel receipts are often taxed at a higher-than-average sales tax rate.

> What is foreign base company sales income? Why does the United States include this income in its definition of subpart F income?

> True or False: A foreign corporation owned equally by 11 U.S. individuals can never be a controlled foreign corporation? Explain.

> True or False: A taxpayer will always prefer deducting an expense against U.S. source income and not foreign source income when filing a tax return in the United States. Explain.

> Why does the United States not allow deferral on all foreign source income earned by a controlled foreign corporation?

> Guido is a citizen and resident of Belgium. He has a full-time job in Belgium and has lived there with his family for the past 10 years. In 2014, Guido came to the United States for the first time. The sole purpose of his trip was business. He intended t

> What are the requirements for a foreign corporation to be a controlled foreign corporation for U.S. tax purposes?

> What is a “per se” entity under the check-the-box rules?

> What is a hybrid entity for U.S. tax purposes? Why is a hybrid entity a popular organizational form for a U.S. company expanding its international operations? What are the potential drawbacks to using a hybrid entity?

> What is a functional currency? What role does it play in the computation of an indirect credit for foreign tax credit purposes?

> Missy is one of 100 unrelated shareholders of Dalmatian, an S corporation. She is considering selling her shares. Under the following alternative scenarios, would the S election be terminated? Why or why not? a. Missy wants to sell half her shares to a f

> What is an indirect credit for foreign tax credit purposes? What is the tax policy reason for allowing such a credit?

> Describe how the failure to collect sales tax can result in a larger tax liability for a business than failing to pay income taxes.

> True or False: All dividend income received by a U.S. taxpayer is classified as passive category income for foreign tax credit limitation purposes. Explain.

> What are the potential U.S. tax benefits from engaging in a §863(b) sale?

> In what circumstances would a business be subject to income taxes in more than one state?

> Jane has been operating Mansfield Park as a C corporation and decides she would like to make an S election. What is the earliest the election will become effective under each of these alternative scenarios? a. Jane is on top of things and makes the elec