Research Problem 1. Gray Chemical Company manufactured pesticides that were toxic. Over the course of several years, the toxic waste contaminated the air and water around the company's plant. Several employees suffered toxic poisoning, and the Environmental Protection Agency cited the company for violations. In court, the judge found Gray guilty and imposed fines of $15 million. The company voluntarily set up a charitable fund for the purpose of bettering the environment and funded it with $8 million. The company incurred legal expenses in setting up the foundation and defending itself in court. The court reduced the fine from $15 million to $7 million. Gray deducted the $8 million paid to the foundation and the legal expenses incurred. The IRS disallowed both deductions on the grounds that the payment was, in fact, a fine and in violation of public policy. Gray's president, Ted Jones, has contacted you regarding the deductibility of the $7 million fine, the $8 million payment to the foundation, and the legal fees. Write a letter to Mr. Jones that contains your advice, and prepare a memo for the tax files. Gray's address is 200 Lincoln Center, Omaha, NE 68182. Partial list of research aids: §$ 162(a) and (f). Reg. § 1.162-21(b).

Chip and Dale run separate logging companies in the same forest. Both pollute the river flowing through the forest with debris from their work. In the table below, the first row shows the current level of debris that makes its way into the river from their work. The following rows show how much it would cost each logger to reduce its pollution by additional increments of 10 pounds. If the government imposes a pollution tax of $7 for each 10 pounds of debris, total pollution will fall by. pounds, at a total cost of Chip Dale Current debris in pounds 60 80 Cost of reducing debris by 10 pounds $5 $2 Cost of reducing debris by a second 10 pounds $10 $4 Cost of reducing debris by a third $15 $6 10 pounds Cost of reducing debris by a fourth 10 pounds $20 $8 Cost of reducing debris by a fifth $25 $10 10 pounds a) 40, $28

Allocated on the basis of program revenues. The head administrator of Jackson County Senior Services, Judith Miyama, considers last year's net operating income of $33,800 to be unsatisfactory; therefore, she is considering the possibility of discontinuing the housekeeping program. The depreciation in housekeeping is for a small van that is used to carry the housekeepers and their equipment from job to job. If the program were discontinued, the van would be donated to a charitable organization. None of the general administrative overhead would be avoided if the housekeeping program were dropped, but the liability insurance and the salary of the program administrator would be avoided. Required: 1-a. What is the financial advantage (disadvantage) of discontinuing the Housekeeping program? 1-b. Based on the financial advantage (disadvantage) of discontinuing the Housekeeping program calculated in requirement Req 1A, should the Housekeeping program be discontinued? 2-a. Prepare a properly…

Swifty Corporation is being sued for illness caused to local residents as a result of negligence on the company's part in permitting the local residents to be exposed to highly toxic chemicals from its plant. Swifty's lawyer states that it is probable that Swifty will lose the suit and be found liable for a judgment costing Swifty anywhere from $ 1830000 to $ 8960000. However, the lawyer states that the most probable cost is $ 5410000. As a result of the above facts, Swifty should accrue a loss contingency of $ 1830000 and disclose an additional contingency of up to $ 7130000. a loss contingency of $ 5410000 and disclose an additional contingency of up to $ 3550000. no loss contingency but disclose a contingency of $ 1830000 to $ 8960000. a loss contingency of $ 5410000 but not disclose any additional contingency.

Dakota Corporation is an owner/operator of 15 water filtration systems in the Northwestern region of the United States.  During February 2022, 4 of the tanks had leaks which contaminated the water and surrounding environment.  Dakota is very concerned about their obligation to the community to maintain the environment.  Dakota corrected the leaks by installing new water filters and liners which cost $500,000.  These corrections will extend the life of the tanks and improve future production.  These improvements will also prevent any future environmental contamination.   Overall, the $500,000 spent on the new water filters and liners have improved the facility.   Dakota is unsure whether the $500,000 spent for this environmental issue should be capitalized or expensed.    Accounting Issue:  Should Dakota capitalize or expense the $500,000 spent on the new water filters and liners?

Check In the current year, the building occupied by Sunshine City's Culture and Recreation Department suffered severe structural damage as a result of a hurricane. It had been 48 years since a hurricane had hit the Sunshine City area, although hurricanes in Sunshine City's geographic area are not uncommon. The building had been purchased 10 years earlier at a cost of $3,800,000 and had accumulated depreciation of $950,000 as of the date of the hurricane. Based on a restoration cost analysis, city engineers estimate the impairment loss at $410,000; however, the city expects during the next fiscal year to receive insurance recoveries of $210,000 for the damage. Required a. Should the estimated impairment loss be reported as an extraordinary item? As a special item? A special item An extraordinary item Ordinary expense, disclosed in the notes to the financial statements b. Record the estimated impairment loss in the journal for governmental activities at the government-wide level. (If no…