ADMS 3541 Study Guide - Quiz Guide: Financial Planner, Risk Management, Asset Allocation

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burgundymarten543

31 Oct 2015

School

York University

Department

Administrative Studies

Course

ADMS 3541

Professor

Alan Go

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Document Summary

I/yr = [ (0. 08 x (1 - 0. 35) 0. 025) / (1 + 0. 025) ] x 100. Sui will need ,922 at the beginning of her retirement if she want to withdraw. Assets & liabilities owned/owed on separation day- june 1, 2014. Subtract: assets & liabilities owned/owed the day of the wedding. Difference between bill"s net asset value and betty"s net asset value. ,000 - ,000 = ,000 in bill"s favor. To equalize the family asset for divorce purposes, bill will have to pay half of the difference which is: ,000 / 2 = ,500 to betty. After the payment, bill and betty"s net assets will both equal to ,500. Question 3: attribution rules state that when a gift is given from one spouse to another; the income generated from the gift will be attributed to the giving spouse and therefore, included in his/her taxable income.

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Short Story:
What We Hope to Accomplish

Charlie Munger, Berkshireâs Vice Chairman and my partner, and I expect Berkshireâs normalized earning power per share to increase every year. Actual earnings, of course, will sometimes decline because of periodic weakness in the U.S. economy. In addition, insurance mega-catastrophes or other industry-specific events may occasionally reduce earnings at Berkshire, even when most American businesses are doing well. Itâs our job, though, to over time deliver significant growth, bumpy or not.

After all, as stewards of your capital, Berkshire directors have opted to retain all earnings. Indeed, in both 2015 and 2016 Berkshire ranked first among American businesses in the dollar volume of earnings retained, in each year reinvesting many billions of dollars more than did the runner-up. Those reinvested dollars must earn their keep.

Some years, the gains in underlying earning power we achieve will be minor; very occasionally, the cash register will ring loud. Charlie and I have no magic plan to add earnings except to dream big and to be prepared mentally and financially to act fast when opportunities present themselves.Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, itâs imperative that we rush outdoors carrying washtubs, not teaspoons. And that we will do.

That wreck was followed by three key happenings â two positive, one negative â that set us firmly on our present course. At the beginning of 1996, we acquired the half of GEICO we didnât already own, a cash transaction that changed our holding from a portfolio investment into a wholly-owned operating business. GEICO. Unfortunately, I followed the GEICO purchase by foolishly using Berkshire stock â a boatload of stock â to buy General Reinsurance in late 1998.

After some early problems, General Re has become a fine insurance operation that we prize. It was, nevertheless, a terrible mistake on my part to issue 272,200 shares of Berkshire in buying General Re, an act that increased our outstanding shares by a whopping 21.8%. Early in 2000, I atoned for that folly by buying 76% (since grown to 90%) of MidAmerican Energy. The MidAmerican cash purchase â I was learning â firmly launched us on our present course of (1) continuing to build our insurance operation; (2) energetically acquiring large and diversified non-insurance businesses and (3) largely making our deals from internally-generated cash. (Today, I would rather prep for a colonoscopy than issue Berkshire shares.)

Our portfolio of bonds and stocks, de-emphasized though it is, has continued in the post-1998 period to grow and to deliver us hefty capital gains, interest, and dividends. Those portfolio earnings have provided us major help in financing the purchase of businesses. Though unconventional, Berkshireâs two-pronged approach to capital allocation gives us a real edge.

Our expectation is that investment gains will continue to be substantial â though totally random as to timing â and that these will supply significant funds for business purchases. Concurrently, Berkshireâs superb corps of operating CEOs will focus on increasing earnings at the individual businesses they manage, sometimes helping them to grow by making bolt-on acquisitions. By our avoiding the issuance of Berkshire stock, any improvement in earnings will translate into equivalent per-share gains.

Our efforts to materially increase the normalized earnings of Berkshire will be aided â as they have been throughout our managerial tenure â by Americaâs economic dynamism. One word sums up our countryâs achievements: miraculous. From a standing start 240 years ago â a span of time less than triple my days on earth â Americans have combined human ingenuity, a market system, a tide of talented and ambitious immigrants, and the rule of law to deliver abundance beyond any dreams of our forefathers

Question:
Explain what Buffett means by ânormalized earnings.â

azuremanatee374

You are internal auditor for Shannon Supplies, Inc., and arereviewing the companyâs preliminary financial statements. Thestatements, prepared after making the adjusting entries, but beforeclosing entries for the year ended December 31, 2016, are asfollows:

SHANNON SUPPLIES, INC.

Accounts receivable, net 850

Inventory 1,100

Property, plant, and equipment 1,280

Less: Accumulated depreciation (520)

Total assets $ 5,440

Liabilities and Stockholdersâ Equity

Accounts payable and accrued expenses $ 3,360

Income tax payable 260

Common stock, $1 par 240

Additional paid-in capital 790

Retained earnings 790

Total liabilities and shareholdersâ equity $ 5,440

SHANNON SUPPLIES, INC.

Income Statement

For the Year Ended December 31, 2016

($ in 000s)

Sales revenue $ 3,480

Operating expenses:

Cost of goods sold $ 1,180

Selling and administrative 900

Depreciation 80 2,160

Income before income tax $ 1,320

Income tax expense (528)

Net income $ 792

Shannonâs income tax rate was 40% in 2016 and previous years.During the course of the audit, the following additionalinformation (not considered when the above statements wereprepared) was obtained:

Shannonâs investment portfolio consists of blue chip stocksheld for long-term appreciation. To raise working capital, some ofthe shares with an original cost of $184,000 were sold in May 2016.Shannon accountants debited cash and credited investments for the$228,000 proceeds of the sale.

At December 31, 2016, the fair value of the remainingsecurities in the portfolio was $316,000.

The state of Alabama filed suit against Shannon in October2014 seeking civil penalties and injunctive relief for violationsof environmental regulations regulating emissions. Shannonâs legalcounsel previously believed that an unfavorable outcome was notprobable, but based on negotiations with state attorneys in 2016,now believe eventual payment to the state of $134,000 is probable,most likely to be paid in 2019.

The $1,100,000 inventory total, which was based on a physicalcount at December 31, 2016, was priced at cost. Based on yourconversations with company accountants, you determined that theinventory cost was overstated by $136,000.

Electronic counters costing $84,000 were added to theequipment on December 29, 2015. The cost was charged torepairs.

Shannonâs equipment on which the counters were installed had aremaining useful life of four years on December 29, 2015, and isbeing depreciated by the straight-line method for both financialand tax reporting.

A new tax law was enacted in 2016 which will cause Shannonâsincome tax rate to change from 40% to 35% beginning in 2017.

Required:

Prepare journal entries to record the effects on Shannonâsaccounting records at December 31, 2016, for each of the itemsdescribed above. (If no entry is required for a transaction/event,select "No journal entry required" in the first account field. Donot round intermediate calculations. Enter your answers in wholedollars not in thousands of dollars.)

ReferenceseBook & Resources

General JournalDifficulty: 3 HardLearning Objective: 20-06Understand and apply the four-step process of correcting andreporting errors, regardless of the type of error or the timing ofits discovery.

pinkhound346

Michigan state tax:The following information relates to Davidand Mary Hopkins for tax year 2014. Please use this information toprovide answers to the questions on the separate page. You willsubmit the âanswer pageâ only.

David (50) and Mary (49) are married and file a joint taxreturn. David is the office manager for an accounting firm and Maryis the manager of a restaurant in their town. David and Mary have 3children: Kim (10), Karen (17) and Karl (25) who lived with themall year. Kim is in elementary school. Karen is a high schoolsenior. Karl is in graduate school and commutes to classes. Karenearned $4,300 as a waitress and Karl earned $3,100 as a sailinginstructor during the summer and $2,500 as a graduate researchassistant during the regular school year. David and Mary furnish60% of the support of Davidâs aunt, Ann, who lived alone in her ownresidence during the year. Ann provided the rest of her supportfrom her non taxable Social Security benefits and $4,000 ofinterest from a City of Grand Rapids, MI bond. Ann passed away inApril and David was the beneficiary on her life insurance policyand received $100,000 in life insurance proceeds on May 2nd. TheHopkins had the following income and expenses during the 2014 taxyear:

ITEM	AMOUNT
Property taxes	$5,210
Interest on home mortgage	6,308
Repairs to the furnace of their home	750
Utilities for their home	3,500
Fire and theft insurance for their home	1,500
Medical insurance premiums	12,530
Doctor for Ann (from 2013 paid in 2014)	2,410
Operation for Ann	9,000
Prescription medicine for Ann	3,600
Hospital expenses for Ann	12,700
Reimbursement from medical insurance (received in 2014 for 2014expenses)	5,600
Additional state income tax paid when return filed	1,700
Tickets to fashion show for the Youth Association (qualifiedcharitable organization) comparable cost would be $75.	325
Contribution to Lutheran Church	7,000
Used clothing to Salvation Army (cost $1,600)	FMV $470
Received interest income from National Bank	1,740
Received interest income from Providence, RI bonds	2,500
Uniforms for Mary (required by employer)	460
Fee paid to have tax return prepared	380
David donated 20 hours of services to the church	FMV of services 1,000
Davidâs subscription to Office Management Quarterly	230
Laundry for required uniforms	270
Maryâs subscription to âJournal of Franchise Managementâ	300
Davidâs W-2 income	117,000
Davidâs state income tax withheld	6,950
Maryâs W-2 income	62,900
Maryâs state income tax withheld	4,100

NAME _________________________________

ACC 7120

Extra Credit Project #1

Answer Sheet

Please provide your answers to the following questions on thispage. This is the only page you must submit for potential extracredit. There is no partial credit for this project. Only theanswers submitted in the boxes will be graded (1 point each). Thisassignment is due no later than August 11, 2015. This assignment isworth a possible 10 points.

Number of exemptions allowed for 2014 for the Hopkins

Total Gross Income for 2014 for David and Mary Hopkins

Allowable miscellaneous itemized deductions for the Hopkins for2014 prior to any limitations

Allowable medical deduction for the Hopkins for 2014 prior toany limitations

Allowable interest deduction for the Hopkins for 2014

Allowable taxes deduction for the Hopkins for 2014

Allowable charitable contribution deduction for 2014 for theHopkins

Assume the Hopkins Taxable Income was $230,000. Tax liabilityfor 2014

Assume the Hopkins Taxable Income was $75,900. Tax liability for2014

Assume the Hopkinsâ Adjusted Gross Income is $168,000, they areentitled to 7 exemptions, and their itemized deductions after alllimitations are $9,500. What is their Taxable Income

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ADMS 3541 Study Guide - Quiz Guide: Financial Planner, Risk Management, Asset Allocation

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