Question & Answer

Use the information for Boyne Inc. from BE9-8. Compute ending inventory at cost using the LIFO retail method.

A turning operation uses a 2/64 in nose radius cutting tool on a free machining steel with a feed rate = 0.010 in/rev and a cutting speed = 300 ft/min. Determine the surface roughness for this cut.

Tweedie Company issues 10,000 shares of restricted stock to its CFO, Mary Tokar, on January 1, 2014. The stock has a fair value of $500,000 on this date. The service period related to this restricted stock is 5 years. Vesting occurs if Tokar stays with the company until December 31, 2018. The par value of the stock is $10. At December 31, 2014, the fair value of the stock is $450,000. Instructions (a) Prepare the journal entries to record the restricted stock on January 1, 2014 (the date of grant), and December 31, 2015. (b) On July 25, 2018, Tokar leaves the company. Prepare the journal entry (if any) to account for this forfeiture.

Balanced scorecard measures Curry House owns a number of stores that sell fast food. As part of its compensation packages, Curry House provides employees with bonuses based on customer satisfaction surveys. Recent analysis of the data shows a positive correlation between survey ratings and sales; that is, as customer satisfaction increases, sales increase. However, at a certain point in this trend, sales plateau even though the ratings continue to increase. In addition, increasing customer satisfaction causes costs to also increase because more time is spent with each customer and more employees are on hand to help with food preparation and cashiering to reduce the time that customers wait for their food to be prepared. Other factors that appear to affect customer satisfaction are the general cleanliness of the store and the attitudes of the cashiers as they provide customer service. A factor that strongly affects sales at each store is its health rating from the local council. These ratings are published in the local daily newspaper. When a store has a low rating, sales at that outlet drop off until publication of an improved rating occurs. The owner wants to add one or more financial performance measures to the bonus package so that employees will earn more money when customer satisfaction increases at the same time that financial performance is also increasing.   Required                         (a)     Describe advantages and disadvantages of using a combination of performance measures reflecting the customer and financial perspectives. (b)     Management would like to add other customer-related measures and is considering replacing survey satisfaction with some other measure. List one potential measure and list at least one advantage and one disadvantage for it. (c)     List one additional performance measure that could be included in the compensation package. Explain what it is and what it would contribute. (d)     Explain how the scorecard measures (particularly the customer perspective) are being used in part as a boundary system.

Teresa Ramirez and Lenny Traylor are examining the following statement of cash flows for Pacific Clothing Store’s first year of operations. PACIFIC CLOTHING STORE STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JANUARY 31, 2014 Sources of cash From sales of merchandise $ 382,000 From sale of capital stock 380,000 From sale of investment 120,000 From depreciation 80,000 From issuance of note for truck 30,000 From interest on investments 8,000 Total sources of cash 1,000,000 PACIFIC CLOTHING STORE STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JANUARY 31, 2014 (CONTINUED) Uses of cash For purchase of fi xtures and equipment 330,000 For merchandise purchased for resale 253,000 For operating expenses (including depreciation) 170,000 For purchase of investment 95,000 For purchase of truck by issuance of note 30,000 For purchase of treasury stock 10,000 For interest on note 3,000 Total uses of cash 891,000 Net increase in cash $ 109,000 Teresa claims that Pacific’s statement of cash flows is an excellent portrayal of a superb first year, with cash increasing $109,000. Lenny replies that it was not a superb first year—that the year was an operating failure, the statement was incorrectly presented, and $109,000 is not the actual increase in cash. Instructions (a) With whom do you agree, Teresa or Lenny? Explain your position. (b) Using the data provided, prepare a statement of cash flows in proper indirect method form. The only noncash items in income are depreciation and the gain from the sale of the investment  purchase and sale are related).

Mason Advertising Agency was founded in January 2010. Presented below are adjusted and unadjusted trial balances as of December 31, 2014.   Instructions (a) Journalize the annual adjusting entries that were made. (Omit explanations.) (b) Prepare an income statement and a statement of retained earnings for the year ending December 31, 2014, and an unclassified balance sheet at December 31. (c) Answer the following questions. (1) If the note has been outstanding 3 months, what is the annual interest rate on that note? (2) If the company paid $12,500 in salaries and wages in 2014, what was the balance in Salaries and Wages Payable on December 31, 2013?

What are the major factors considered in determining what depreciation method to use?

A product whose total work content time = 50 minutes is to be assembled on a manual production line. The required production rate is 30 units per hour. From previous experience with similar products, it is estimated that the manning level will be close to 1.5. Assume that the uptime proportion and line balancing efficiency are both = 1.0. If 9 seconds will be lost from the cycle time for repositioning, determine (a) the cycle time and (b) the numbers of workers and stations that will be needed on the line.

Microsoft is the leading developer of software in the world. To continue to be successful Microsoft must generate new products, which requires significant amounts of cash. The following is the current asset and current liability information from Microsoft’s current balance sheets (in millions). Following the Microsoft data is the current asset and current liability information from Oracle’s current balance sheets (in millions). Oracle is another major software developer.   Part 1 (Cash and Cash Equivalents) Instructions (a) What is the definition of a cash equivalent? Give some examples of cash equivalents. How do cash equivalents differ from other types of short-term investments? (b) Calculate (1) the current ratio and (2) working capital for each company for 2011 and discuss your results. (c) Is it possible to have too many liquid assets? Part 2 (Accounts Receivable) Microsoft provided the following disclosure related to its accounts receivable.   Instructions (a) Compute Microsoft’s accounts receivable turnover for 2011 and discuss your results. Microsoft had sales revenue of $69,943 million in 2011. (b) Reconstruct the summary journal entries for 2011 based on the information in the disclosure. (c) Briefly discuss how the accounting for bad debts affects the analysis in Part 2 (a).

In each of the following independent cases, indicate the amount (1) deductible for AGI, (2) deductible from AGI, and (3) neither deductible for nor deductible from AGI before considering income limitations or the standard deduction.

Does this mean, therefore, that there were no positive incentive effects from the 1979–97 Conservative government’s tax measures?

Does the use of floating-rate loans eliminate interest rate risk? Explain. (LO3)

What types of business entities are taxed as flow-through entities?

One of the mandrel types in electroforming is a solid mandrel. How is the part removed from a solid mandrel?

Do you think that this provides a moral argument for redistributing income from the rich to the poor? Does it prove that income should be so redistributed?

1.    : How do you think planning in today’s organizations compares to planning 25 years ago? Do you think planning becomes more important or less important in a world where everything is changing quickly and crises are a regular part of organizational life? Why?

Can we incorporate trade effects into endogenous growth models?

Assume a calendar-year corporation has positive current E&P of $120 and a deficit in accumulated E&P of ($200). Under this circumstance, a cash distribution of $100 to the corporation’s sole shareholder at year-end will not be treated as a dividend because total E&P is negative. True or false? Explain.

What method(s) might be used in the accounts to record a loss due to a price decline in the inventories? Discuss.

How does behavioural economics differ from standard economics?

Part B: $187,222 computed as follows: Description Amount Explanation (1) AGI$207,000  From AGI deductions: a) and b) Medical expenses 0 Medical expenses in excess of 7.5 percent of AGI are deductible. See note A below. c) and d) State taxes 2,050 State income taxes paid last year are deductible ($1,800 withheld and $250 overpayment applied on last year’s return treated as paid last year. e) Real property taxes 3,200 Real property taxes deductible from AGI. Payment to developer is not a tax. f) Personal property taxes 200 Property tax on personal property based on value deductible from AGI g) Interest on loans secured by her home 12,300 Primary home loan and home equity loan deductible from AGI h) Charitable contributions 1,828 See note B below i) Investment expenses and tax return preparation fees 0 Nondeductible expenses j) Horse racing activities 0 Nondeductible hobby expenses k) Gambling losses 200 Gambling losses are limited to earnings from gambling deductible as a miscellaneous itemized deduction but not subject to 2% of AGI floor or phase out. (2) Total itemized deductions19,778 (3) Standard deduction 14,600 Single taxpayer (4) Greater of Itemized deductions or standard deduction 19,778 Greater of (2) or (3). Shauna should choose to itemize deductions. Taxable income $187,222 (1) − (4) Note A: $0. Medical expenses = $4,680 (medical expenses for broken ankle), + $24 (115 miles × 21¢ per mile) + 3,400 (unreimbursed health insurance premiums) + 3,000 (Lasik eye surgery) + 450 (other medical expenses) − $15,525 (AGI of 207,000 × 7.5 percent) < $0. Because 7.5 percent of Shauna’s AGI exceeds her total medical expenses, Shauna is unable to deduct any medical expenses. Note B: $1,828. Capital gain property generally in the form of stock is deductible at FMV; Thus, Shauna can deduct $1,000 for her ZYX stock donation to the Red Cross. Cash contributions of $300 are fully deductible. Religious artifacts are used by church in its normal function as a non-profit organization and thus are deductible at FMV of $500. Finally, Shauna may deduct $28 (as a cash donation) expense for her charitable mileage (200 miles × 14¢ per mile). Note that the value of services donated is not deductible. Accordingly, Shauna’s charitable contribution deduction is $1,828 (1,000 + 300 + 500 + 28). Shauna need not be concerned about the AGI-based limitations on her contributions because her AGI is relatively high and her contributions are relatively low.

Describe the procedures involved in segregating various deferred tax amounts into current and noncurrent categories.

When stock market volatility is high, corporate bond yields tend to increase. Which market forces cause the increase in corporate bond yields under these conditions? (LO2)

Explain how a partner’s debt relief affects their amount realized in a sale of partnership interest.

Anne Cleves Company reported the following amounts in the stockholders’ equity section of its December 31, 2013, balance sheet. Preferred stock, 10%, $100 par (10,000 shares authorized, 2,000 shares issued) $200,000 Common stock, $5 par (100,000 shares authorized, 20,000 shares issued) 100,000 Additional paid-in capital 125,000 Retained earnings 450,000 Total $875,000 During 2014, Cleves took part in the following transactions concerning stockholders’ equity. 1. Paid the annual 2013 $10 per share dividend on preferred stock and a $2 per share dividend on common stock. These dividends had been declared on December 31, 2013. 2. Purchased 1,700 shares of its own outstanding common stock for $40 per share. Cleves uses the cost method. 3. Reissued 700 treasury shares for land valued at $30,000. 4. Issued 500 shares of preferred stock at $105 per share. 5. Declared a 10% stock dividend on the outstanding common stock when the stock is selling for $45 per share. 6. Issued the stock dividend. 7. Declared the annual 2014 $10 per share dividend on preferred stock and the $2 per share dividend on common stock. These dividends are payable in 2015. Instructions (a) Prepare journal entries to record the transactions described above. (b) Prepare the December 31, 2014, stockholders’ equity section. Assume 2014 net income was $330,000.