Question & Answer

Discuss at least two situations in which estimates could affect the usefulness of information in the balance sheet.

What are the major limitations of the balance sheet as a source of information?

Some argue that having various organizations establish accounting principles iswasteful and inefficient. Rather than mandating accounting rules, each company could voluntarily disclosethe type of information it considered important. In addition, if an investor wants additional information, the investor could contact the company and pay to receive the additional information desired. Instructions Comment on the appropriateness of this viewpoint.

{Research} XYZ declared a $1 per share dividend on August 15.  The date of record for the dividend was September 1 (the stock began selling ex-dividend on September 2).  The dividend was paid on September 10.  Ellis is a cash-method taxpayer.  Determine if he must include the dividends in gross income under the following independent circumstances

How is the date of transition and the date of reporting determined in first-time adoption of IFRS?

Assume that the economy is at potential output and the natural rate of unemployment and that inflation is at the target rate set for the central bank by the government. In each of the following scenarios apply the integrated EAPC, DAD/DAS and IS/MP framework to analyse the economy’s adjustment path. (a) A temporary fall in aggregate demand under the assumption that inflationary expectations remain anchored. (b) A temporary fall in aggregate demand where inflationary expectations are based on the rate of inflation in the previous period. (c) A temporary positive supply shock where inflationary expectations are based on the rate of inflation in the previous period.

In this chapter, we discussed three basic tax planning strategies. What different features of taxation does each of these strategies exploit?

The following table shows the average cost and average revenue (price) for a firm at each level of output.            1 2 3 4 5 6 7 8 9 10 AC (£) 7.00 5.00 4.00 3.30 3.00 3.10 3.50 4.20 5.00 6.00 AR (£) 10.00 9.50 9.00 8.50 8.00 7.50 7.00 6.50 6.00 5.50   (a)  Construct a table to show TC, MC, TR and MR at each level of output (put the figures for MC and MR mid-way between the output figures). (b)  Using MC and MR figures, find the profit-maximising output. (c)  Using TC and TR figures, check your answer to (b). (d)  Plot the AC, MC, AR and MR figures on a graph. (e)  Mark the profit-maximising output and the AR and AC at this output. (f)   Shade in an area to represent the level of profits at this output.

What is the likely limitation of “general-purpose financialstatements”?

Under what circumstances does a growth in financial flows make exchange rates less stable?

If this is the case, need firms worry about losing competitiveness in world markets if domestic inflation is higher than world inflation?

What can a mill-turn center do that a conventional turning center cannot do?

If you were given complete authority in the matter, howwould you propose that GAAP should be developed andenforced?

Identify and explain the different types of classifications for investments in equity securities.

The amount of the child and dependent care credit is based on the amount of the taxpayer’s expenditures to provide care for one or more qualifying persons.  Who is considered to be a qualifying person for this purpose?

What is a performance obligation, and how is it used to determine when revenue should be recognized?

Francis Equipment Co. closes its books regularly on December 31, but at the end of 2014 it held its cash book open so that a more favorable balance sheet could be prepared for credit purposes. Cash receipts and disbursements for the first 10 days of January were recorded as December transactions. The information is given below. 1. January cash receipts recorded in the December cash book totaled $45,640, of which $28,000 represents cash sales, and $17,640 represents collections on account for which cash discounts of $360 were given. 2. January cash disbursements recorded in the December check register liquidated accounts payable of $22,450 on which discounts of $250 were taken. 3. The ledger has not been closed for 2014. 4. The amount shown as inventory was determined by physical count on December 31, 2014. The company uses the periodic method of inventory. Instructions (a) Prepare any entries you consider necessary to correct Francis’s accounts at December 31. (b) To what extent was Francis Equipment Co. able to show a more favorable balance sheet at December 31 by holding its cash book open? (Compute working capital and the current ratio.) Assume that the balance sheet that was prepared by the company showed the following amountsZOBLEMS See the book’s companion website, at www.wiley.com/college/kieso, for an additional set of exercises.XERCISES SET B Dr. Cr. Cash $39,000 Accounts receivable 42,000 Inventory 67,000 Accounts payable $45,000 Other current liabilities 14,200

Why don’t farmers benefit from a high income elasticity of demand for convenience foods?

What is the benefit of a single set of high-quality accounting standards?

List the basic steps in the traditional ceramics processing sequence.

At the end of 2013, Lucretia McEvil Company has $180,000 of cumulative temporary differences that will result in reporting future taxable amounts as shown on the next page. 2014 $ 60,000 2015 50,000 2016 40,000 2017 30,000 $180,000 Tax rates enacted as of the beginning of 2012 are: 2012 and 2013 40% 2014 and 2015 30% 2016 and later 25% McEvil’s taxable income for 2013 is $320,000. Taxable income is expected in all future years. Instructions (a) Prepare the journal entry for McEvil to record income taxes payable, deferred income taxes, and income tax expense for 2013, assuming that there were no deferred taxes at the end of 2012. (b) Prepare the journal entry for McEvil to record income taxes payable, deferred income taxes, and income tax expense for 2013, assuming that there was a balance of $22,000 in a Deferred Tax Liability account at the end of 2012.

Part of a contract between a union and a company guarantees that all manufacturing employees earn five hours of overtime each week. In the company’s job costing system, should overtime be treated as a direct or indirect cost?

What are the three steps in the LIGA process?

Explain how consideration of a liquidity premium affects the estimate of a forward interest rate. (LO3)

What is meant by the term “underlying” as it relates to derivative financial instruments?