Question 1

You are preparing a tax return and note that your client received several 1099-Bs, Proceeds from Broker and Barter Exchange Transactions. Unfortunately, the brokerage statements that your client provided do not identify the cost basis for the stock that was sold. Your client received proceeds of $875,000 from the sale of 40 different stocks that were purchased over 20 years, received as gifts or inherited. What will you do to prepare an accurate tax return? What questions will you ask your client?

Assume that your client says that the cost basis, to the best of her knowledge, is equal to the proceeds of the sale. How will that impact how you prepare Schedule D?

What ethical issues do you, as a tax preparer, have to deal with?

Question 2

Read the following scenario and use the information to help you answer the discussion questions that follow:

Scenario:

You work for a large company in which the CEO is not entirely involved in the day-to-day workings of the financial department. As the CEO is walking through your department, he sees you working on a Statement of Cash Flows. Intrigued, he asks "what's that you're working on?"

Now, you are well aware of the importance and use of the SOCF within the business world. You are presented with the unique opportunity in explaining this to your boss. What key points would you address with the CEO? What makes those points so important? Explain.

Question 3

How do sensitivity analysis, scenario analysis, decision tree analysis, and computer simulations assist in making the financial investment decisions? How do these relate to our primary financial investment decision tool of NPV?