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C3-67Permtemp Corporation formed in 2012 and, for that year, re.docx
- 1. C:3-67 Permtemp Corporation formed in 2012 and, for that year, reported the following book income statement and balance sheet, excluding the federal income tax expense, deferred tax assets, and deferred tax liabilities: Sales $20,000,000 Cost of goods sold (15,000,000) Gross profit $ 5,000,000 Dividend income 50,000 Tax-exempt interest income 15,000 Total income $ 5,065,000 Expenses: Depreciation $ 800,000 Bad debts 400,000 Charitable contributions 100,000
- 2. Interest 475,000 Meals and entertainment 45,000 Other 3,855,000 Total expenses (5,675,000) Net loss before federal income taxes $ (610,000) Cash $ 500,000 Accounts receivable $ 2,000,000 Allowance for doubtful accounts (250,000) 1,750,000 Inventory 4,000,000 Fixed assets $10,000,000 Accumulated depreciation (800,000) 9,200,000 Investment in corporate stock
- 3. 1,000,000 Investment in tax-exempt bonds 50,000 Total assets $16,500,000 Accounts payable $2,610,000 Long-term debt 8,500,000 Common stock 6,000,000 Retained earnings (610,000) Total liabilities and equity $16,500,000 Additional information for 2012: · • The investment in corporate stock is comprised of less-than- 20%-owned corporations. · • Depreciation for tax purposes is $1.4 million under MACRS. · • Bad debt expense for tax purposes is $150,000 under the direct writeoff method. · • Limitations to charitable contribution deductions and meals and entertainment expenses must be tested and applied if necessary. · • Qualified production activities income is zero. Required for 2012: · a. Prepare page 1 of the 2012 Form 1120, computing the corporation’s NOL. · b. Determine the corporation’s deferred tax asset and deferred
- 4. tax liability situation, and then complete the income statement and balance sheet to reflect proper GAAP accounting under ASC 740. Use the balance sheet information to prepare Schedule L of the 2012 Form 1120. · c. Prepare the 2012 Schedule M-3 for Form 1120. · d. Prepare a schedule that reconciles the corporation’s effective tax rate to the statutory 34% tax rate. Note: For 2012 forms, go to forms and publications, previous years, at the IRS website, www.irs.gov. For 2013, Permtemp reported the following book income statement and balance sheet, excluding the federal income tax expense, deferred tax assets, and deferred tax liabilities: Sales $33,000,000 Cost of goods sold (22,000,000) Gross profit $11,000,000 Dividend income 55,000 Tax-exempt interest income 15,000 Total income $11,070,000 Expenses: Depreciation $ 800,000
- 5. Bad debts 625,000 Charitable contributions 40,000 Interest 455,000 Meals and entertainment 60,000 Other 4,675,000 Total expenses (6,655,000) Net income before federal income taxes $ 4,415,000 Cash $ 2,125,000 Accounts receivable $ 3,300,000 Allowance for doubtful accounts (450,000) 2,850,000 Inventory 6,000,000 Fixed assets $10,000,000
- 6. Accumulated depreciation (1,600,000) 8,400,000 Investment in corporate stock 1,000,000 Investment in tax-exempt bonds 50,000 Total assets $20,425,000 Accounts payable $ 2,120,000 Long-term debt 8,500,000 Common stock 6,000,000 Retained earnings 3,805,000 $20,425,000 Additional information for 2013: · • Depreciation for tax purposes is $2.45 million under MACRS. · • Bad debt expense for tax purposes is $425,000 under the direct writeoff method. · • Qualified production activities income is $3 million. Required for 2013: · a. Prepare page 1 of the 2013 Form 1120, computing the corporation’s taxable income and tax liability.
- 7. · b. Determine the corporation’s deferred tax asset and deferred tax liability situation, and then complete the income statement and balance sheet to reflect proper GAAP accounting ASC 740. Use the balance sheet information to prepare Schedule L of the 2013 Form 1120. · c. Prepare the 2013 Schedule M-3 for Form 1120. · d. Prepare a schedule that reconciles the corporation’s effective tax rate to the statutory 34% tax rate. CASE STUDY PROBLEMS C:3-68 Marquette Corporation, a tax client since its creation three years ago, has requested that you prepare a memorandum explaining its estimated tax requirements for the current year. The corporation is in the fabricated steel business. Its earnings have been growing each year. Marquette’s taxable income for the last three tax years has been $500,000, $1.5 million, and $2.5 million, respectively. The Chief Financial Officer expects its taxable income in the current year to be approximately $3 million. Required: Prepare a one-page client memorandum explaining Marquette’s estimated tax requirements for the current year, providing the necessary supporting authorities. C:3-69 Susan Smith accepted a new corporate client, Winter Park Corporation. One of Susan’s tax managers conducted a review of Winter Park’s prior year tax returns. The review revealed that an NOL for a prior tax year was incorrectly computed, resulting in an overstatement of NOL carrybacks and carryovers to prior tax years. Apply the Statements on Standards for Tax Services (SSTSs) to the following situtations. The SSTSs are in Appendix E of this text. · a. Assume the incorrect NOL calculation does not affect the current year’s tax liability. What recommendations (if any) should Susan make to the new client? See SSTS No. 6. · b. Assume the IRS is currently auditing a prior year. What are Susan’s responsibilities in this situation? See SSTS No. 6.
- 8. · c. Assume the NOL carryover is being carried to the current year, and Winter Park does not want to file amended tax returns to correct the error. What should Susan do in this situation? See SSTS No. 1. C:3-70 The Chief Executive Officer of a client of your public accounting firm saw the following advertisement in a financial newspaper: · DONATIONS WANTED · The Center for Restoration of Waters · A Nonprofit Research and Educational Organization Needs Donations—Autos, Boats, Real Estate, Etc. · ALL DONATIONS ARE TAX-DEDUCTIBLE Prepare a memorandum to your client Phil Nickelson explaining how the federal income tax laws regarding donations of cash, automobiles, boats, and real estate apply to corporate taxpayers. MAT 273 — Applied Statistics PROJECT II 50 points This project is to be done in groups of three people. You may submit only one final project for the group. Passing Rate for the 12th Grade Proficiency Examination – c. 1995 This project is a regression study done on the rate at which students in schools in northwest Ohio passed the 12th grade proficiency examinations about the year 1995. (This is the year for which I have data.) The data comprises 8 variables for 88 districts. 6 additional school districts’ data has been placed at the right of the sheet. These have been removed from the data because they are outliers. A detailed description of the variables in the data set is below, and the data file is in the web portal.
- 9. Your job is to do a regression analysis, and then think about the results and draw conclusions. Use the “Project 2 Data Schools file to complete the following: 1. Using the data in the Welfare Percentage Data sheet, produce a scatter plot with the passing rate as the response variable and ‘Percent of Families Receiving Welfare in the District’ as the explanatory variable. Print as a full page. 2. Repeat Step 1. using ‘Instructional Spending per Student’ as the explanatory variable in the Instructional Spending Data sheet. Print as a full page. 3. Repeat Step 2. using the ‘Average Daily Attendance Rate’ as the explanatory variable in the Attendance Data sheet. Print as a full page. 4. Run a simple regression with the passing rate as the response variable and ‘Percent of Families Receiving Welfare in the District’ as the explanatory variable. On the results sheet : Indicate the correlation coefficient (R) Interpret the coefficient of determination (R²) Interpret the significance Give the linear regression equation Use the regression equation to predict one passing rate value. Note: These can be written by hand on the printouts, or typed into the sheet before printing. Print this as one page. 5. Run a simple regression with the passing rate as the response variable and ‘Instructional Spending per Student’ as the
- 10. explanatory variable. On the Results sheet : Indicate the correlation coefficient (R) Interpret the coefficient of determination (R²) Interpret the significance Give the linear regression equation Use the regression equation to predict one passing rate value. Note: These can be written by hand on the printouts, or typed into the sheet before printing. Print this as one page. 6. Run a simple regression with the passing rate as the response variable and ‘Average Daily Attendance Rate’ as the explanatory variable. On the Results sheet : Indicate the correlation coefficient (R) Interpret the coefficient of determination (R²) Interpret the significance Give the linear regression equation Use the regression equation to predict one passing rate value. Note: These can be written by hand on the printouts, or typed into the sheet before printing. Print this as one page. Report your findings:
- 11. Submit a typewritten 6-paragraph summary of the assignment and your findings. The summary should be formatted with one paragraph each for the introduction and conclusion and one paragraph of ANALYSIS/INTERPRETATION for each of the four questions below. Attach a copy of the EXCEL printouts to the report. Put the scatterplots first and the regression results second. Do not forget to write the interpretations on the regression printouts. The questions you are asked to consider are: · Are any of the three possible explanatory variables significantly tied to the passing rate? Which one or ones? Justify your answer using significance. · Which of the three possible explanatory variables is the best predictor of the passing rate? Justify your answer using correlation. · Do any of the relationships look nonlinear? Which one or ones? · Are any of the regression equations surprising? Which one or ones? Print your paper. Attach a copy of the EXCEL printouts to the report. Put the scatterplots first and the regression results second. Do not forget to write the interpretations on the regression printouts! Schools Students Income Property Welfare Salary Instruct
- 20. 95.90 69 Kenton 2228 20418 61155 13.80 30907 2512 93.70 54 Liberty Center 1009 24723 57685 4.10 30904 2431 95.80 82 Patrick Henry 1176 23061 63134 5.20 31895 2552 95.90 75 Napoleon Area 2331 25304 84245 6.60 32773 2422
- 35. Toledo 36790 21079 62668 42.80 36190 2611 90.70 28 Outlier-Students, Welfare, Attendance Ottawa Hills 933 45723 122356 0.20 43256 4150 95.70 95 Outlier-Income Kelleys Island 20 19854 802081 11.40
- 37. Ottoville 610 24128 46582 0.20 26125 2588 99.80 86 Outlier-Attendance Variable Name Description Students Number of students in the school district. Income Mean family income in the district. Property Mean property value in the district Welfare Percent of families receiving welfare. Salary Mean salary of classroom teachers. Instruct Amount spent per pupil. Attend
- 38. Mean daily attendance rate Passing Percent passing the 12th grade proficiency examination. Welfare Percentage DataSchoolsWelfarePassingX4YBluffton1.8085Shawnee2.6073S pencerville5.4068Delphos6.2065Elida8.9062Northeastern1.7072 Ayersville3.9068Defiance11.2063Hicksville7.0059Central4.605 6Berlin- Milan4.0077Perkins3.3074Huron4.6074Margaretta2.8066Sandus ky25.2037Pettisville3.9078Wauseon4.9075Evergreen5.2072Arc hbold-Area4.1069Pike-Delta-York6.1066Gorham- Fayette6.9051Swanton6.3050Arlington2.7084Vanlue4.1083Libe rty-Benton1.5078Van Buren1.8075Cory- Rawson2.4073Arcadia2.5064McComb5.7061Findlay7.6060Ada5 .3069Kenton13.8054Liberty Center4.1082Patrick Henry5.2075Napoleon Area6.6073Holgate6.0071Monroeville4.3064Bellevue6.9055Wil lard14.3053Norwalk12.2050Anthony Wayne3.1075Sylvania3.8072Maumee3.9069Oregon8.7052Washi ngton11.8051Springfield12.2049Benton Carroll Salem4.7081Danbury3.2065Genoa4.8065Port Clinton10.5050Paulding8.6059Columbus Grove8.4084Kalida0.7081Continental10.0079Ottawa- glandorf6.5077Pandora- Gilboa1.2067Leipsic16.1047Gibsonburg17.8071Lakota10.5066F remont16.2057Woodmore10.9056Clyde-Green Springs7.0047Bettsville6.1083Seneca East4.8080Old Fort19.3078Hopewell-Loudon4.7074New Riegel2.7073Tiffin9.0067Fostoria20.4034Van Wert7.1061Edon- Northwest2.7073Milcreek-West Unity3.2071Bryan4.2069North Central2.9068Montpelier8.2067Edgerton4.1061Stryker3.4047Pe rrysburg2.6098Elmwood7.5068Bowling Green7.5068Otsego5.0064Northwood7.9061Eastwood4.7060Lak e6.2055Rossford7.2054North Baltimore10.6050Upper Sandusky3.9062Carey6.0059
- 39. Instructional Spending DataSchoolsInstructPassingX6YBluffton213085Shawnee257073 Spencerville226268Delphos250665Elida225062Northeastern243 172Ayersville269368Defiance243863Hicksville235159Central2 49656Berlin- Milan256477Perkins286174Huron296874Margaretta246466Sand usky276637Pettisville283478Wauseon225275Evergreen225072 Archbold-Area283769Pike-Delta-York230966Gorham- Fayette249251Swanton261550Arlington220584Vanlue242083Li berty-Benton206378Van Buren258475Cory- Rawson241673Arcadia275264McComb232161Findlay286060Ad a238069Kenton251254Liberty Center243182Patrick Henry255275Napoleon Area242273Holgate245471Monroeville247464Bellevue237455 Willard234753Norwalk238450Anthony Wayne284475Sylvania294372Maumee393369Oregon294152Was hington299751Springfield277449Benton Carroll Salem344481Danbury315865Genoa284565Port Clinton292650Paulding256059Columbus Grove217484Kalida227481Continental222579Ottawa- glandorf215477Pandora- Gilboa207867Leipsic281147Gibsonburg224271Lakota230666Fr emont261657Woodmore222756Clyde-Green Springs238347Bettsville239483Seneca East243580Old Fort274378Hopewell-Loudon256474New Riegel250173Tiffin250667Fostoria245534Van Wert251161Edon-Northwest191673Milcreek-West Unity238271Bryan270669North Central234968Montpelier265467Edgerton247061Stryker261747 Perrysburg301198Elmwood264368Bowling Green284968Otsego253964Northwood297961Eastwood249960L ake282055Rossford325854North Baltimore233150Upper Sandusky226762Carey251359 Attendance DataSchoolsAttendPassingX7YBluffton95.7085Shawnee94.7073 Spencerville95.5068Delphos96.5065Elida94.1062Northeastern9
- 40. 6.1072Ayersville95.6068Defiance94.2063Hicksville95.7059Cen tral94.8056Berlin- Milan96.1077Perkins95.8074Huron95.4074Margaretta95.5066S andusky93.0037Pettisville96.1078Wauseon95.3075Evergreen95. 0072Archbold-Area96.2069Pike-Delta-York94.8066Gorham- Fayette94.6051Swanton94.9050Arlington96.5084Vanlue96.2083 Liberty-Benton96.7078Van Buren96.4075Cory- Rawson96.4073Arcadia95.9064McComb95.9061Findlay94.9060 Ada95.9069Kenton93.7054Liberty Center95.8082Patrick Henry95.9075Napoleon Area94.6073Holgate94.9071Monroeville95.8064Bellevue95.105 5Willard94.6053Norwalk94.0050Anthony Wayne95.3075Sylvania95.5072Maumee95.0069Oregon94.7052 Washington93.7051Springfield93.8049Benton Carroll Salem95.6081Danbury95.3065Genoa95.9065Port Clinton94.5050Paulding94.5059Columbus Grove96.2084Kalida96.8081Continental95.5079Ottawa- glandorf96.5077Pandora- Gilboa96.5067Leipsic93.9047Gibsonburg94.4071Lakota95.2066 Fremont94.7057Woodmore96.5056Clyde-Green Springs94.6047Bettsville95.8083Seneca East95.9080Old Fort96.0078Hopewell-Loudon94.6074New Riegel97.0073Tiffin94.7067Fostoria92.7034Van Wert95.3061Edon-Northwest95.1073Milcreek-West Unity95.9071Bryan95.2069North Central95.6068Montpelier94.8067Edgerton95.9061Stryker95.70 47Perrysburg96.1098Elmwood95.2068Bowling Green94.7068Otsego95.4064Northwood94.9061Eastwood95.906 0Lake95.2055Rossford94.9054North Baltimore94.5050Upper Sandusky95.6062Carey95.5059 Full Data SetSchoolsStudentsIncomePropertyWelfareSalaryInstructAttend PassingX1X2X3X4X5X6X7YBluffton113224487626781.803122 1213095.7085Shawnee2472297771309102.6034860257094.7073 Spencerville102623161516455.4030155226295.5068Delphos110 421792884536.2032273250696.5065Elida320424446655508.903
- 43. Baltimore839220755838310.6029579233194.5050Upper Sandusky180121063683483.9032778226795.6062Carey9152165 8514976.0030968251395.5059Removed from data (DO NOT INCLUDE IN ANALYSIS):StudentsIncomePropertyWelfareSalaryInstructAtte ndPassingX1X2X3X4X5X6X7YToledo36790210796266842.803 6190261190.7028Outlier-Students, Welfare, AttendanceOttawa Hills933457231223560.2043256415095.7095Outlier- IncomeKelleys Island201985480208111.40271441122695.00100Outlier- Property, InstructPut-in- Bay70192664264191.4030242782494.5033Outlier-Property, InstructLima5963183944413833.8033142265792.3040Outlier- WelfareOttoville61024128465820.2026125258899.8086Outlier- Attendance