ACCOUNTING

PLEASE EVERY ANSWER WITH MIN 3 SENTENCES! THANKS A LOT

Chapter 10

1. Lynn Company acquires the land and building owned by Noble Company. What types of costs may be incurred to make the asset ready for its intended use if Lynn wants to use a) the land-(land is NOT depreciable)-and b) the building? What are Land Improvements- (they ARE depreciable).

2. Contrast Depreciation-PP & E-Property, Plant and Equipment-with Depletion-timber, oil, gas, minerals, and Amortization-Intangible Assets, such as Patents, Copyrights, Trademarks.

3. 'Capitalizing' something means you are going to depreciate that asset, which usually means that it has a certain dollar value and has a life of 3 years or more. How do you decide whether to Capitalize or Expense something? Example: Years ago, Bernie Ebers, the founder & CEO of WorldCom, capitalized over 7 billion dollars of operating expenses to increase both profits and the company's stock price. The fraud was discovered which led to bankruptcy and jail time for Ebers.

Chapter 11

4. What is a contingent liability? Give an example of a contingent liability that is usually recorded in the accounts. HINT: To be recorded on the 'books', it must be 'probable' or 'reasonably probable'. REMOTE = do nothing.

5. Which payroll tax is levied on both employers and employees? HINT: SS-Social Security tax is 6.2%. For tax year 2020, you are taxed up to $137,700 of earnings. Medicare tax is 1.45%...with no 'cap' on earnings. The total payroll tax for the employer also includes SUT-State Unemployment Tax, and FUT-Federal Unemployment Tax.

6. Contrast a Defined Contribution Plan-401k-with a Defined Benefit Plan-Pension-which most companies once offered to all employees.

Chapter 12

7. Chapter 12 is all about Partnerships. Fortunately, we won't be delving into the 'accounting' for partnerships, which can get complex. So, let's try to make it 'easy'. Most Partnerships are set-up as LLP's-Limited Liability Partnerships-or LLC's-Limited Liability Companies-which is more expensive to create. Driving or walking around office buildings, you will see LLP or LLC signage for most accounting, doctor and lawyer set-ups. Mutual Agency means that the act of one partner is binding on the other partners. Unlike a Corporation-either private or public-a Partnership is NOT taxed as a legal entity-that means that the partner's income is taxed as a 'flow-through' or directly onto the partner's tax form 1040.

REQUIRED:

List 2 or 3 Advantages and Disadvantages of creating a LLP-Limited Liability Partnership. Why or why not would you set up your business this way?

Chapter 13-Corporations

1. We've already covered Corporations. Let's review: a corporation can be public-you and I can buy stock-or it can be private-as most are. Mars Incorporated is the 5th largest privately-owned company in the world-think M & M's! Most, if not all of the stock, is owned by the family. In & Out is also privately owned. Jack in the Box and McDonald's have been public for years. Most companies are for-profit businesses, but some, like The San Diego Zoo, the Salvation Army, the Humane Society...and thousands of others, are non-profits. You can make a lot of money owning or working for a non-profit. The Big Advantage: no taxes! It takes about 6 months to get approved by the IRS-Internal Revenue Service.

REQUIRED: List 3-4 advantages and disadvantages of incorporating. We all know the Big One: Limited Liability. Why or why would you not incorporate?

Chapter 14-Cash Dividends

2. Once companies become 'established', and have reached a 'mature' stage in their growth, many will start paying a Cash Dividend. The Board of Directors has to approve a Cash Dividend every quarter, or '3' months. It's a reward to the the shareholders for investing in the company. Apple did not start paying a dividend until over 20 years after going public. Investors did not care since a $1,000 investment in Apple 20 years ago is worth over $500,000 today! Dividends usually pay around 2%. That means if you bought one share for $100, you would receive a $2 dividend per year, or .50 cents per quarter. A Stock Split is also sometimes declared...it's a positive signal from the company. You do not make any more money, but the stock price usually increases due to investor enthusiasm. Example: you have 100 shares at $50/share = $5,000. After a 2 for 1 Stock Split, you now have 200 shares at $25/share, which still equals $5,000.

REQUIRED: '3' dates are required for a Cash Dividend: the Declaration date, the Record date, and the Payment date. Define each, keeping in mind that the Board of Directors must go through these steps every quarter.