Question & Answer

The following table discloses the interest rate sensitivity of two savings institutions (dollar amounts are in millions). Based on this information only, which institution’s stock price would likely be affected more by a given change in interest rates? Justify your opinion. (LO4)

What is the nature of an installment sale? How do installment sales differ from ordinary credit sales?

Sasha is a self-employed taxpayer. They recently spent $1,000 for airfare to travel to Italy. What amount of the airfare is deductible in each of the following alternative scenarios?

Suppose you asked your favorite AI query tool the following question: “Is total income on Form 1040 the same thing as gross income?”  The AI tool provided the following response:   Is the AI response to the question correct?  Explain.

A face milling operation is performed on the top surface of a steel rectangular workpiece 12.0 in long by 2.5 in wide. The milling cutter follows a path that is centered over the workpiece. It has five teeth and a 3.0 in diameter. Cutting speed = 250 ft/min, feed = 0.006 in/tooth, and depth of cut = 0.150 in. Determine (a) the actual cutting time to make one pass across the surface and (b) the maximum metal removal rate during the cut. (c) If an additional approach distance of 0.5 in is provided at the beginning of the pass (before cutting begins), and an overtravel distance is provided at the end of the pass equal to the cutter radius plus 0.5 in, what is the duration of the feed motion

Seven years ago, Halle (currently age 41) contributed $4,000 to a Roth IRA account. The current value of the Roth IRA is $9,000. In the current, year Halle withdraws $8,000 of the account balance to use as a down payment on her first home. Assuming Halle is in the 24 percent marginal tax bracket, how much of the $8,000 withdrawal will she retain after taxes to fund her house down payment?

The surface finish specification in a turning job is 0.8 µm. The work material is cast iron. Cutting speed = 75 m/min, feed = 0.3 mm/rev, and depth of cut = 4.0 mm. The nose radius of the cutting tool must be selected. Determine the minimum nose radius that will obtain the specified finish in this operation.

Snider Corporation, a publicly traded company, is preparing the interim financial data which it will issue to its shareholders at the end of the first quarter of the 2014–2015 fiscal year. Snider’s financial accounting department has compiled the following summarized revenue and expense data for the first quarter of the year. Sales revenue $60,000,000 Cost of goods sold 36,000,000 Variable selling expenses 1,000,000 Fixed selling expenses 3,000,000 Included in the fixed selling expenses was the single lump-sum payment of $2,000,000 for television advertisements for the entire year. Instructions (a) Snider Corporation must issue its quarterly financial statements in accordance with IFRS regarding interim financial reporting. (1) Explain whether Snider should report its operating results for the quarter as if the quarter were a separate reporting period in and of itself, or as if the quarter were an integral part of the annual reporting period. (2) State how the sales revenue, cost of goods sold, and fixed selling expenses would be reflected in Snider Corporation’s quarterly report prepared for the first quarter of the 2014–2015 fiscal year. Briefly justify your presentation. (b) What financial information, as a minimum, must Snider Corporation disclose to its shareholders in its quarterly reports?

How do volume discounts from suppliers affect our assumption that the cost function is linear? Explain how we incorporate this type of cost into a CVP analysis.

What are the functions of the screen pack and breaker plate at the die end of the extruder barrel?

What is the primary polymer ingredient in natural rubber?

Simpson Corp. is an entertainment firm that derives approximately 30% of its income from the Casino Knights Division, which manages gambling facilities. As auditor for Simpson Corp., you have recently overheard the following discussion between the controller and financial vice president. Vice President: If we sell the Casino Knights Division, it seems ridiculous to segregate the results of the sale in the income statement. Separate categories tend to be absurd and confusing to the stockholders. I believe that we should simply report the gain on the sale as other income or expense without detail. Controller: Professional pronouncements would require that we report this information separately in the income statement. If a sale of this type is considered unusual and infrequent, it must be reported as an extraordinary item. Vice President: What about the walkout we had last month when employees were upset about their commission income? Would this situation not also be an extraordinary item? Controller: I am not sure whether this item would be reported as extraordinary or not. Vice President: Oh well, it doesn’t make any difference because the net effect of all these items is immaterial, so no disclosure is necessary. Instructions (a) On the basis of the foregoing discussion, answer the following questions. Who is correct about handling the sale? What would be the correct income statement presentation for the sale of the Casino Knights Division? (b) How should the walkout by the employees be reported? (c) What do you think about the vice president’s observation on materiality? (d) What are the earnings per share implications of these topics?

Flexible budget Helium Industries manufactures glitter balloons used as party accessories. The balloons are bagged in packages of 100 and sold for $20 per pack. The company incurs fixed manufacturing overhead of $25 000 per year and the fixed overhead is applied based on packs produced. Standard costs are: material $8 per unit, direct labour $5 per unit and variable overhead $3 per unit. The marketing manager believes sales for the coming year will be somewhere between 10 000 and 15 000 packs.   Required (a) Prepare a flexible budget for sales of 10 000, 12 000 and 15 000. (Allocate fixed overhead based on the sales volume.) (b) What advantages are there for Helium Industries in using a flexible budget?

Spartan Corporation redeemed 25 percent of its shares for $2,000 on July 1 of this year, in a transaction that qualified as an exchange under §302(a).  Spartan’s accumulated E&P at the beginning of the year was $2,000. Its current E&P is $12,000.  Spartan made dividend distributions of $1,000 on June 1 and $4,000 on August 31.  Determine the balance in Spartan’s accumulated E&P at the beginning of next year.  See Rev. Rul. 74-338 and Rev. Rul. 74-339 for help in making this calculation.

1.    : The MBO technique has been criticized for putting too much emphasis on achieving goals (ends) and not enough on the methods that people use to achieve them (means). Do you think this is a flaw in the technique or in the way managers apply it? How might you achieve a balanced emphasis on ends and means?

Why do forecasts of interest rates made by experts differ? (LO3)

Identify the important reasons why metals are annealed.

Why is friction generally undesirable in metal forming operations?

A deep drawing operation is to be performed on a sheet-metal blank that is 1/8 in thick. The height (inside dimension) of the cup = 3.8 in and the diameter (inside dimension) = 5.0 in. Assuming the punch radius = 0, compute the starting diameter of the blank to complete the operation with no material left in the flange. Is the operation feasible (ignoring the fact that the punch radius is too small)?

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 the economic income and the amount he must include in gross income under the following independent circumstances.

R.E.M., a calendar-year corporation and Athens, Georgia band, recently sold tickets ($20,000,000) for concerts scheduled in the United States for next year and the following two years. For financial statement purposes, R.E.M. will recognize the income from the ticket sales when it performs the concerts, and R.E.M is obligated to return the ticket payments should a concert be cancelled. For tax purposes, R.E.M. uses the accrual method and would prefer to defer the income from the ticket sales until after the concerts are performed. This is the first time that it has sold tickets one or two years in advance. Michael Stipe, the group’s frontman, has asked your advice. Write a memo to Michael explaining your findings.

Explain why certain long-lived assets are capitalized and recovered over time rather than immediately expensed.

David and Lilly Fernandez have determined their tax liability on their joint tax return to be $3,100. They have made prepayments of $1,900 and also have a child tax credit of $2,000. What is the amount of their tax refund or taxes due?

The qualitative characteristics that make accounting information useful for decision-making purposes are as follows. Relevance Neutrality Verifi ability Faithful representation Completeness Understandability Predictive value Timeliness Comparability Confi rmatory value Materiality Free from error Instructions Identify the appropriate qualitative characteristic(s) to be used given the information provided below. (a) Qualitative characteristic being employed when companies in the same industry are using the same accounting principles. (b) Quality of information that confirms users’ earlier expectations. (c) Imperative for providing comparisons of a company from period to period. (d) Ignores the economic consequences of a standard or rule. (e) Requires a high degree of consensus among individuals on a given measurement. (f) Predictive value is an ingredient of this fundamental quality of information. (g) Four qualitative characteristics that are related to both relevance and faithful representation. (h) An item is not recorded because its effect on income would not change a decision. (i) Neutrality is an ingredient of this fundamental quality of accounting information. (j) Two fundamental qualities that make accounting information useful for decision-making purposes. (k) Issuance of interim reports is an example of what enhancing quality of relevance?

Kenseth Company has the following securities in its trading portfolio of securities on December 31, 2013. Investments (Trading) Cost Fair Value 1,500 shares of Gordon, Inc., Common $ 73,500 $ 69,000 5,000 shares of Wallace Corp., Common 180,000 175,000 400 shares of Martin, Inc., Preferred 60,000 61,600 $313,500 $305,600 All of the securities were purchased in 2013. In 2014, Kenseth completed the following securities transactions. March 1 Sold the 1,500 shares of Gordon, Inc., Common, @ $45 less fees of $1,200 April 1 Bought 700 shares of Earnhart Corp., Common, @ $75 plus fees of $1,300 Kenseth Company’s portfolio of trading securities appeared as follows on December 31, 2014. Investments (Trading) Cost Fair Value 5,000 shares of Wallace Corp., Common $180,000 $175,000 700 shares of Earnhart Corp., Common 53,800 50,400 400 shares of Martin, Inc., Preferred 60,000 58,000 $293,800 $283,400 Instructions Prepare the general journal entries for Kenseth Company for: (a) The 2013 adjusting entry. (b) The sale of the Gordon stock. (c) The purchase of the Earnhart stock. (d) The 2014 adjusting entry for the trading portfolio.