Calvin's Computer Case

Consider journal entry that recognized $35 million of revenue in 2001 from the EDS contract based on WorlCom’s expectation that the five-year required cumulative minimum payment would not be met. Based on your own analysis of GAAP, explain the propriety to impropriety of this journal entry.

Corporate finance is important to all managers because it allows a manager to be able to predict the funds the company will need for their upcoming projects and think about ways to organize and acquire those funds.

Taxable income includes a deduction for $40,000 of depreciation that exceeds the depreciation allowed for E&P purposes.

Under the Reg. §1.47-3(f) (5) (ii), the transferor of the section 38 property in any taxable year dose not retain a substantial interest in the trade or business directly or indirectly. According to this code, the transferor does not need to make the payment for tax of the interest during the property transaction only if the property can be qualified to “section 38 property” which indicate property (1) with respect to which depreciation is allowable to the taxpayer (2) has an estimated useful life of 3 years or more (3) which is tangible personal property or other tangible property. In this case, the machinery purchased by the individual two years ago can be applied for the “section 38 property” which also means the transferor does not need to pay for the interest happened during the transaction. And because of the gift of stock made by the individual caused a reduction in his interest. Which occurred at a time when the useful lives were just taken into account in computing the credit about the “section 38 property”. Unless his remain interest is a substantial interest, the section 47(b) would no longer be applicable and total

Lyn may hire employees to work in the Main St. Computer Store that she manages despite the fact that her employment agreement with Main St. says nothing about her being able to hire employees. This is

D: General: Other part-time work, confidentiality clauses, using company equipment for private use (eg phones, computers, vehicles) general codes of behaviour and adherence to certain corporate practices, health & safety regulations.

Over two years after the downfall of myredbook.com, infrequent Las Vegas visitors still seek out Redbook escorts in Vegas, as they are unaware that the company’s operations ceased, amid serious legal charges against Eric Omuro, the company’s founder. Omuro, a Mountain View, California tech entrepreneur, launched the site in 1999, under the name sfredbook.com, as a way to retain, review and advertise various adult services in San Francisco and the greater Bay Area. Services advertised included, but were not limited to, striptease and private massage. Within a few short years, the company expanded beyond its initial coverage area to include Los Angeles, Central California, Seattle, Portland, Reno and Las Vegas Redbook sections. In 2002,

Additionally, colleges and universities nationwide had to comply with the Supreme Court decision, ending the practice segregation in those environments. The Supreme Court decision had mixed reaction from both the White and Black community. According to the Houston Informer, Sweatt said, “I think it is a milestone in the progress of applied democracy. I most certainly shall enroll in the university in September and without malice.” It was a victory for him as he fought against the state for his admittance into the law school. On the other hand, schools affected by the decision held a different opinion. Although, Dr. George L. Cross, the president of the University of Oklahoma conceded the victory of the NAACP efforts in desegregating colleges,

Bob cancels (forgives) the debt. The cancellation is not a gift, and Sam is bankrupt. Which of the following statements is correct concerning the impact of this transaction?

| The objectives are (1) audit of KCN’s financial statements for the year ended 12/31/05, and (2) issuance of a letter on compliance with covenants of the client’s letter of credit agreement.

CASE 7 ARMSTRONG HELMET COMPANY 1. Item Administrative salaries Advertising for helmets Depreciation on factory building Depreciation on office equipment Insurance on factory building Miscellaneous expenses— factory Office supplies expense

Bed, Bath and Beyond (BBBY) currently has $400 million more in cash than they need for ongoing growth and operations requirements. While the company is financially sound analysts and investors worry about the company’s capital structure decisions. Investors do not want to see that much cash on the books and worry that the current capital structure is not the most effective for the future. They prefer that BBBY change their capital structure by paying out excess cash and issuing debt. This could allow BBBY to improve their return on equity and raise earnings per share. Given the low interest rates available it seems like the perfect time for BBBY to add debt to its capital structure. Until now they

As opposed to purchasing new equipment, we could opt to maintain the equipment we currently have, which has an estimated service life of 11 years remaining. We could retain all of our claimed Investment Tax Credit for this purchase, which has two years of depreciation left, and would not be required to invest in any new training for our employees. We would recognize $31,000 in depreciation in present value terms, as well as save an estimated $200,000 in training costs and losses due to lower production during the “learning curve”. I estimate these savings to be approximately one month of payroll to include both the time spent on training, and our reduced production as employees learn how to use the new equipment. Additional detail of this option is provided in Appendix B, C, & D.

1. Consider Dunlap’s statement on page 3 of the case: “Stakeholders! Every time I hear the word, I ask how much did they pay for their stake? There is only one constituency I am concerned about and that is the shareholder primacy? Do you agree or disagree with Dunlap’s view of shareholder primacy? Explain

In this scenario, the labor cost is to print his shop in order to save some costs, and it incurred by him in the course of carrying on his business, which is consistent with the section DA 1(b) ITA 2007 (DA 1(b) General Permission, 2004). Therefore, the labor cost $1,000 is allowed to deduct.