Question & Answer

Adriana Co., with annual net sales of $5 million, maintains a markup of 25% based on cost. Adriana’s expenses average 15% of net sales. What is Adriana’s gross profit and net profit in dollars?

What is the primary polymer ingredient in natural rubber?

(Corrected Trial Balance) The trial balance of Watteau Co. (shown on the next page) does not balance.   Each of the listed accounts should have a normal balance per the general ledger. An examination of the ledger and journal reveals the following errors. 1. Cash received from a customer on account was debited for $570, and Accounts Receivable was credited for the same amount. The actual collection was for $750. 2. The purchase of a computer printer on account for $500 was recorded as a debit to Supplies for $500 and a credit to Accounts Payable for $500. 3. Services were performed on account for a client for $890. Accounts Receivable was debited for $890 and Service Revenue was credited for $89. 4. A payment of $65 for telephone charges was recorded as a debit to Office Expense for $65 and a debit to Cash for $65. 5. When the Unearned Service Revenue account was reviewed, it was found that service revenue amounting to $325 was performed prior to June 30 (related to Unearned Service Revenue). 6. A debit posting to Salaries and Wages Expense of $670 was omitted. 7. A payment on account for $206 was credited to Cash for $206 and credited to Accounts Payable for $260. 8. A dividend of $575 was debited to Salaries and Wages Expense for $575 and credited to Cash for $575. Instructions Prepare a correct trial balance. (Note: It may be necessary to add one or more accounts to the trial balance.)

How does high credit risk affect the yield offered on securities? (LO1)

In blanking of a circular sheet-metal part, is the clearance applied to the punch diameter or the die diameter?

: Contrast the hierarchical and decentralized methods of control.

Kreter Co. provides the following information about its postretirement benefit plan for the year 2014. Service cost $ 45,000 Contribution to the plan 10,000 Actual and expected return on plan assets 11,000 Benefi ts paid 20,000 Plan assets at January 1, 2014 110,000 Accumulated postretirement benefi t obligation at January 1, 2014 330,000 Discount rate 8% Instructions Compute the postretirement benefit expense for 2014.

Bobbie works as an employee for Altron Corp. for the first half of the year and for Betel Inc. for rest of the year. She is relatively well paid. What FICA tax issues is she likely to encounter?  What FICA tax issues do Altron Corp. and Betel Inc. need to consider?

Briefly describe some of the similarities and differences between GAAP and IFRS with respect to statement of financial position (balance sheet) reporting.

An aluminum alloy is to be ground in an external cylindrical grinding operation to obtain a good surface finish. Specify the appropriate grinding wheel parameters and the grinding conditions for this job.

If an industry regulator adopts an RPI – X formula for price regulation, is it desirable that the value of X should be adjusted as soon as cost conditions change?

Theory Explain the preferred habitat theory. (LO3)

In what situation will there be a common year-end for the principal partners when there is no majority interest taxable year?

Are there any goods or services where consumers do not experience diminishing marginal utility?

What is the policy directive, and who carries it out? (LO2)

Identify and briefly describe the two methods generally employed to account for the cash received in situations where the collection of the sales price is not reasonably assured.

Book What is the Beige book, and why is it important to the FOMC? (LO2)

If a bond’s coupon rate is greater than the investor’s required rate of return on the bond, would the bond’s price be greater than or less than its par value? Explain. (LO1)

What is the meaning of the forward rate in the context of the term structure of interest rates? Why might forward rates consistently overestimate future interest rates? How could such a bias be avoided? (LO3)

Chapman Company, a major retailer of bicycles and accessories, operates several stores and is a publicly traded company. The comparative balance sheet and income statement for Chapman as of May 31, 2014, are as follows. The company is preparing its statement of cash flows. CHAPMAN COMPANY COMPARATIVE BALANCE SHEET AS OF MAY 31 2014 2013 Current assets Cash $ 28,250 $ 20,000 Accounts receivable 75,000 58,000 Inventory 220,000 250,000 Prepaid expenses 9,000 7,000 Total current assets 332,250 335,000 Plant assets Plant assets 600,000 502,000 Less: Accumulated depreciation—plant assets 150,000 125,000 Net plant assets 450,000 377,000 Total assets $782,250 $712,000 Current liabilities Accounts payable $123,000 $115,000 Salaries and wages payable 47,250 72,000 Interest payable 27,000 25,000 Total current liabilities 197,250 212,000 Long-term debt Bonds payable 70,000 100,000 Total liabilities 267,250 312,000 Stockholders’ equity Common stock, $10 par 370,000 280,000 Retained earnings 145,000 120,000 Total stockholders’ equity 515,000 400,000 Total liabilities and stockholders’ equity $782,250 $712,000 CHAPMAN COMPANY INCOME STATEMENT FOR THE YEAR ENDED MAY 31, 2014 Sales revenue $1,255,250 Cost of goods sold 722,000 Gross profi t 533,250 Expenses Salaries and wages expense 252,100 Interest expense 75,000 Depreciation expense 25,000 Other expenses 8,150 Total expenses 360,250 Operating income 173,000 Income tax expense 43,000 Net income $ 130,000 The following is additional information concerning Chapman’s transactions during the year ended May 31, 2014. 1. All sales during the year were made on account. 2. All merchandise was purchased on account, comprising the total accounts payable account. 3. Plant assets costing $98,000 were purchased by paying $28,000 in cash and issuing 7,000 shares of stock. 4. The “other expenses” are related to prepaid items. 5. All income taxes incurred during the year were paid during the year. 6. In order to supplement its cash, Chapman issued 2,000 shares of common stock at par value. 7. Cash dividends of $105,000 were declared and paid at the end of the fiscal year. Instructions (a) Compare and contrast the direct method and the indirect method for reporting cash flows from operating activities. (b) Prepare a statement of cash flows for Chapman Company for the year ended May 31, 2014, using the direct method. Be sure to support the statement with appropriate calculations. (A reconciliation of net income to net cash provided is not required.) (c) Using the indirect method, calculate only the net cash flow from operating activities for Chapman Company for the year ended May 31, 2014.

: Define leadership and explain the differences between formal and informal leaders.

1.    As an administrator for a medium sized hospital, you and the board of directors have decided to change the business from a short-term, acute-care facility to a drug dependency hospital. How would you go about executing this strategy?

The credit crisis that occurred in 2008–2009 could also be called an equity crisis due to systemic risk. Write a short essay to explain the impact of the credit markets on the equity markets during the crisis.

Relative performance evaluation Relative performance evaluation at the company level often results in using a market index like the ASX100 as the peer group.   Required Outline the potential advantages and disadvantages of this practice.             (LO2, 3 and 5)

1.      : What should Clarke do now to try to recover from the negative impact of his e-mails? Suggest specific steps.