Question & Answer

Rick Kleckner Corporation recorded a capital lease at $300,000 on January 1, 2014. The interest rate is 12%. Kleckner Corporation made the first lease payment of $53,920 on January 1, 2014. The lease requires eight annual payments. The equipment has a useful life of 8 years with no salvage value. Prepare Kleckner Corporation’s December 31, 2014, adjusting entries.

According to the video on composites, list the primary purpose of the matrix and the reinforcement in a composite.

What is the purpose of a statement of cash flows? How does it differ from a balance sheet and an income statement?

Some believe that accounting depreciation measures the decline in the value of fixed assets. Do you agree? Explain.

Streep Factory provides a 2-year warranty with one of its products which was first sold in 2014. In that year, Streep spent $70,000 servicing warranty claims. At year-end, Streep estimates that an additional $400,000 will be spent in the future to service warranty claims related to 2014 sales. Prepare Streep’s journal entry to record the $70,000 expenditure and the December 31 adjusting entry, assuming the expenditures are inventory costs.

1.       Some people argue that the matrix structure should be adopted only as a last resort because the dual chains of command can create more problems than they solve. Discuss. Do you agree or disagree? Why?

Janice Traylor is single. She has an 18-year-old son named Marty. Marty is Janice’s only child. Marty has lived with Janice his entire life. However, Marty recently joined the Marines and was sent on a special assignment to Australia. During the current year, Marty spent nine months in Australia. Marty was extremely homesick while in Australia because he had never lived away from home. However, Marty knew this assignment was only temporary, and he couldn’t wait to come home and find his room just the way he left it. Janice has always filed as head of household, and Marty has always been considered a qualifying child (and he continues to meet all the tests with the possible exception of the residence test due to his stay in Australia). However, this year Janice is unsure whether she qualifies as head of household due to Marty’s nine-month absence during the year. Janice has come to you for advice on whether she qualifies for head of household filing status. How would you advise her?

The following are two independent situations. Situation 1: Conchita Cosmetics acquired 10% of the 200,000 shares of common stock of Martinez Fashion at a total cost of $13 per share on March 18, 2014. On June 30, Martinez declared and paid a $75,000 cash dividend. On December 31, Martinez reported net income of $122,000 for the year. At December 31, the market price of Martinez Fashion was $15 per share. The securities are classified as available-for-sale. Situation 2: Monica, Inc. obtained significant influence over Seles Corporation by buying 30% of Seles’s 30,000 outstanding shares of common stock at a total cost of $9 per share on January 1, 2014. On June 15, Seles declared and paid a cash dividend of $36,000. On December 31, Seles reported a net income of $85,000 for the year. Instructions Prepare all necessary journal entries in 2014 for both situations.6

George and Weezy received $30,200 of Social Security benefits this year ($12,000 for George; $18,200 for Weezy).  They also received $5,000 of interest from jointly owned City of Ranburne Bonds and dividend income. What amount of the Social Security benefits must George and Weezy include in their gross income under the following independent situations? a.       George and Weezy file married joint and receive $8,000 of dividend income from stocks owned by George. b.       George and Weezy file married separate and receive $8,000 of dividend income from stocks owned by George. c.       George and Weezy file married joint and receive $30,000 of dividend income from stocks owned by George. d.     George and Weezy file married joint and receive $15,000 of dividend income from stocks owned by George

What is meant by the terms elements and items as they relate to the income statement? Why might items have to be disclosed in the income statement?

: Describe how ethical behavior relates to behavior governed by law or free choice.

What are the major uses of the gross profit method?

Tensile testing is not appropriate for hard brittle materials such as ceramics. What is the test commonly used to determine the strength properties of such materials?

Arantxa Corporation made the following cash purchases of securities during 2014, which is the first year in which Arantxa invested in securities. 1. On January 15, purchased 10,000 shares of Sanchez Company’s common stock at $33.50 per share plus commission $1,980. 2. On April 1, purchased 5,000 shares of Vicario Co.’s common stock at $52.00 per share plus commission $3,370. 3. On September 10, purchased 7,000 shares of WTA Co.’s preferred stock at $26.50 per share plus commission $4,910. On May 20, 2014, Arantxa sold 4,000 shares of Sanchez Company’s common stock at a market price of $35 per share less brokerage commissions, taxes, and fees of $3,850. The year-end fair values per share were Sanchez $30, Vicario $55, and WTA $28. In addition, the chief accountant of Arantxa told you that Arantxa Corporation plans to hold these securities for the long term but may sell them in order to earn profits from appreciation in prices. Instructions (a) Prepare the journal entries to record the above three security purchases. (b) Prepare the journal entry for the security sale on May 20. (c) Compute the unrealized gains or losses and prepare the adjusting entries for Arantxa on December 31, 2014.

Why do firms engage in IPOs? What is the amount of the fees that the lead underwriter and its syndicate charge a firm that is going public? Why are there many IPOs in some periods and few IPOs in other periods? (LO3)

Cost function judgement and methodology Suppose you have the responsibility of creating a cost function for the costs of an Internet service provider’s help line.   Required (a)          What is the cost object? Identify where you might obtain information about past costs for the cost object. (b)          Identify at least two potential cost drivers. Explain where you might obtain information about past volumes for each cost driver. (c)           What other information would you like to obtain before estimating the cost function? How might you obtain that information? (d)          Identify the techniques introduced in this chapter that you would be most likely to use in creating the cost function. Explain why.

How would the political business cycle be affected if governments were able to choose when to hold elections?

Should the Fed or Congress decide the fate of large financial institutions that are near bankruptcy? (LO2, LO3)

Horatio and Kelly were divorced at the end of last year. Neither Horatio nor Kelly remarried during the current year and Horatio moved out of state. Determine the filing status of Horatio and Kelly for the current year in the following independent situations:

What are some of the fuels used in oxyfuel cutting?

Money that individual and institutional investors previously invested in stocks is now being invested in private equity funds. Explain why this should result in improved business conditions. (LO5)

What are the differences between an explicit and an implicit tax?

Is the assumption of rational expectations on its own sufficient for anticipated demand shocks to have no impact on economic activity even in the short run?

What determines the rate of depreciation of capital? What would happen if the rate of depreciation fell?

Explain why participants in the stock market monitor the VIX. What does a decline in VIX imply about a change in expected volatility by market participants? (LO4)