Which of the following statements is true regarding economic events?
A) The signing of a service contract is an example of an external event that is recorded in the accounting records.
B) Every event which affects an entity can be identified from a source document.
C) All internal and external events must be measured with sufficient reliability.
D) External events involve exchanges between an entity and another entity outside the company.
D
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At the end of the current year, Brothers company claims a $225,000 tax credit on its income tax return. Brothers is uncertain about whether the IRS will accept the credit. After some research it is determined that the IRS may not accept all of the tax credit. Brothers estimates the likelihood using the following probability distribution: Dollar Amount of Tax Benefit that it Anticipates will be upheld ? Probability that the Tax Position will be Upheld Cumulative Probability that the Tax Position will be Upheld $ 225,000 20% 35% $ 150,000 55% 65% $ 75,000 25% 100% ? Required:For the current year determine:1) the amount Brothers will be able to recognize as a current tax benefit2) the amount that will be record as the unrecognized tax benefit.
What will be an ideal response?
On January 2, 2015, Roof Master Construction, Inc issued $500,000, 10-year bonds for $574,540 . The bonds pay interest on June 30 and December 31 . The face rate is 8% and the market rate is 6%. At the maturity date, besides an interest payment, Roof Master would repay the bondholders
a. $574,540 . b. $520,000 . c. $500,000. d. only the last interest payment.
Which of the following is the best audit procedure for the discovery of damaged merchandise in an entity's ending inventory?
A. Review the management's inventory representation letter for accuracy. B. Observe the condition of merchandise and raw materials during the entity's physical inventory count. C. Test overall fairness of inventory values by comparing the company's turnover ratio with the industry average. D. Compare the physical quantities of slow-moving items with corresponding quantities of the prior year.
Suppose a new company decides to raise a total of $200 million, with $100 million as common equity and $100 million as long-term debt. The debt can be mortgage bonds or debentures, but by an iron-clad provision in its charter, the company can never raise any additional debt beyond the original $100 million. Given these conditions, which of the following statements is CORRECT?
A. The higher the percentage of debt represented by mortgage bonds, the riskier both types of bonds will be and, consequently, the higher the firm's total dollar interest charges will be. B. If the debt were raised by issuing $50 million of debentures and $50 million of first mortgage bonds, we could be certain that the firm's total interest expense would be lower than if the debt were raised by issuing $100 million of debentures. C. In this situation, we cannot tell for sure how, or even whether, the firm's total interest expense on the $100 million of debt would be affected by the mix of debentures versus first mortgage bonds. The interest rate on each type of bond would increase as the percentage of mortgage bonds used was increased, but the average cost might well be such that the firm's total interest charges would not be affected materially by the mix between the two. D. The higher the percentage of debentures, the greater the risk borne by each debenture, and thus the higher the required rate of return on the debentures. E. If the debt were raised by issuing $50 million of debentures and $50 million of first mortgage bonds, we could be certain that the firm's total interest expense would be lower than if the debt were raised by issuing $100 million of first mortgage bonds.