Question & Answer

ROI; residual income; explaining the better measure The following financial data are for the evaluation of performance for Sandy Point Construction:       Sandy Point Construction currently uses return on investment to evaluate investment centre managers. An accounting intern from the local university suggested to the controller that residual income may be a better performance measure.   Required (a)     Calculate ROI for Sandy Point Construction. (b)     Calculate residual income for Sandy Point Construction. (c)     Write a brief memo to the controller explaining why residual income is a better performance measure.

Roundtree Manufacturing Co. is preparing its year-end financial statements and is considering the accounting for the following items. 1. The vice president of sales had indicated that one product line has lost its customer appeal and will be phased out over the next 3 years. Therefore, a decision has been made to lower the estimated lives on related production equipment from the remaining 5 years to 3 years. 2. The Hightone Building was converted from a sales office to offices for the Accounting Department at the beginning of this year. Therefore, the expense related to this building will now appear as an administrative expense rather than a selling expense on the current year’s income statement. 3. Estimating the lives of new products in the Leisure Products Division has become very difficult because of the highly competitive conditions in this market. Therefore, the practice of deferring and amortizing preproduction costs has been abandoned in favor of expensing such costs as they are incurred. Identify and explain whether each of the above items is a change in principle, a change in estimate, or an error.

Which limitations might restrict a corporation’s deduction for a cash charitable contribution?  Explain how to determine the amount of the limitation.

Describe the major uses of funds by finance companies. (LO2)

Would you expect a bank to charge a higher rate on a term loan or a highly leveraged transaction (HLT) loan? Why? (LO3)

How is it determined whether deferred tax amounts are considered to be “related” to specific asset or liability amounts?

Planning} Todd and Margo are seeking a divorce and no longer live together.  Margo has offered to pay Todd $42,000 per year for five years if Margo receives sole title to the art collection.  This collection cost them $100,000, but is now worth $360,000.  All other property is to be divided equally. a.       If Margo’s payments cease in the event of Todd’s death, how are the payments treated for tax purposes?  b.       How much of the gain would be taxed to Todd if Margo sells the art at the end of five years? c.       Compute the tax cost (benefit) to Todd (Margo) if the payments qualify as alimony.  Assume that Todd (Margo) has a marginal tax rate of 15 percent (35 percent) and ignore the time value of money. d.       How much more over the five year period should Todd demand in order to agree to allow the payments to cease in the event of his death?  (How much more will make him indifferent between receiving $42,000 a year in non alimony payments and receiving higher payments that are considered to be alimony?)

For each of the following citations, identify the type of authority     (statutory, administrative, or judicial) and explain the citation.

An open side planer is to be used to plane the top surface of a rectangular workpart, 20.0 in by 45.0 in. The cutting speed is 30 ft/min, the feed is 0.015 in/pass, and the depth of cut is 0.250 in. The length of the stroke across the work must be set up so that 10 in are allowed at both the beginning and end of the stroke for approach and overtravel. The return stroke, including an allowance for acceleration and deceleration, takes 60% of the time for the forward stroke. The workpart is made of carbon steel with a tensile strength of 50,000 lb/in2 and a Brinell hardness of 110 HB. How long will it take to complete the job, assuming that the part is oriented in such a way as to minimize the time?

How would you attempt to assess whether a particular period of inflation was the result of cost-push or demand-pull pressures?

Explain how finance companies benefit from offering consumers a credit card. (LO2)

: Summarize the impact of people of color, immigrants, and women on the creation of new businesses.

On its year 1 financial statements, Seatax Corporation, an accrual-method taxpayer, reported federal income tax expense of $570,000.  On its year 1 tax return, it reported a tax liability of $650,000. During year 1, Seatax made estimated tax payments of $700,000. What book-tax difference, if any, associated with its federal income tax expense should Seatax have reported when computing its year 1 taxable income?  Is the difference favorable or unfavorable?  Is it temporary or permanent?

: Define entrepreneurship and the five classifications of entrepreneurs.

Explain the importance of contingency planning, scenario building, stretch goals, and crisis planning for managers today.

Many of the design guidelines that are applicable to plastics are also applicable to rubber. However, the extreme flexibility of rubber results in certain differences. What are some examples of these differences?

List the most common allocation bases used in job costing and explain under what circumstances each base would be most appropriate.

Describe important steps for starting an online or mobile app business.

: Outline the planning necessary to launch an entrepreneurial start-up.

To what extent is national defence a pure public good? Can it ever be rivalrous or excludable in consumption?

On January 1, Santiago Company, a lessee, entered into three noncancelable leases for brand-new equipment, Lease L, Lease M, and Lease N. None of the three leases transfers ownership of the equipment to Santiago at the end of the lease term. For each of the three leases, the present value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executory costs such as insurance, maintenance, and taxes to be paid by the lessor, is 75% of the fair value of the equipment. The following information is peculiar to each lease. 1. Lease L does not contain a bargain-purchase option. The lease term is equal to 80% of the estimated economic life of the equipment. 2. Lease M contains a bargain-purchase option. The lease term is equal to 50% of the estimated economic life of the equipment. 3. Lease N does not contain a bargain-purchase option. The lease term is equal to 50% of the estimated economic life of the equipment. Instructions (a) How should Santiago Company classify each of the three leases above, and why? Discuss the rationale for your answer. (b) What amount, if any, should Santiago record as a liability at the inception of the lease for each of the three leases above? (c) Assuming that the minimum lease payments are made on a straight-line basis, how should Santiago record each minimum lease payment for each of the three leases above?

Sylvester files as a single taxpayer during 2024.  He itemizes deductions for regular tax purposes.  He paid charitable contributions of $7,000, real estate taxes of $1,000, state income taxes of $4,000, and mortgage interest of $2,000 on $30,000 of acquisition indebtedness on his home. Sylvester’s regular taxable income is $100,000. What is Sylvester’s AMTI?

1.              What decision style did John Tate use (Exhibit 9.5) and what mistakes do you think he made with the way he solved the problem of limited office space? Explain.

: Explain three approaches to corporate-level strategy: the portfolio, the Boston Consulting Group (BCG) matrix, and diversification.

Explain why savings institutions may benefit when interest rates fall. (LO4)