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During 2007, Salt n Pepa Inc. became involved in a tax dispute with the IRS. Salt n Pepa s attorneys have indicated that they believe it is probable that Salt n Pepa will lose this dispute. They also believe that Salt n Pepa will have to pay the IRS between $900,000 and $1,400,000. After the 2007 financial statements were issued, the case was settled with the IRS for $1,200,000. What amount, if any, should be reported as a liability for this contingency as of December 31, 2007?

On October 1, 2007, Alan Jackson Chemical was identified as a potentially responsible party by the Environmental Protection Agency. Jackson s management along with its counsel have concluded that it is probable that Jackson will be responsible for damages, and a reasonable estimate of these damages is $5,000,000. Jackson s insurance policy of $9,000,000 has a deductible clause of $500,000. How should Alan Jackson Chemical report this information in its financial statements at December 31, 2007?

Melissa Etheridge Inc. had a manufacturing plant in Bosnia, which was destroyed in the civil war. It is not certain who will compensate Etheridge for this destruction, but Etheridge has been assured by governmental officials that it will receive a definite amount for this plant. The amount of the compensation will be less than the fair value of the plant, but more than its book value. How should the contingency be reported in the financial statements of Etheridge Inc.?

Power Electronics manufactures portable power supply units. Power has recently decided to use an activity based approach to cost its products. Production line setups is a major activity at Power. Next year Power expects to perform 1,000 setups at a total cost of $1,510,000. Power plans to produce 710 units of product EP150, which will require three setups. How much setup cost will be allocated to each unit of EP150 produced?

The fair value of Carnes Land and Buildings are $650,000 and $550,000, respectively. On May 1, 2000, Riley Company issues 30,000 shares of its $10 par value ($25 fair value) common stock in exchange for all of the shares of Carnes common stock.

On May 1, 2000, what value is assigned to the investment account?

The ABC Company was incorporated (as an LLC) two years ago. The success of the company is exceeding the owners expectations. The land owned by the company is used as a site for special events and parties. The rental income from the events and fees for services rendered at these events are substantial for a new business.

The ABC Company has budgeted a profit of $300,000 for the third year of business operations. To date Don and Jane have not been compensated or withdrawn any funds from the company, but feel that the time has come for them to be rewarded.
Don and Jane turn to you, their tax advisor for assistance in determining how to reward themselves financially from their successful business.

What are the tax issues facing Don and Jane in connection with withdrawing money from the (LLC) corporation? Discuss different options and provide support with computations showing the tax consequences of the various choices.

Should be on MS Word document with citations and APA style.