Question & Answer

Transactions for Mehta Company for the month of May are presented below. Prepare journal entries for each of these transactions. (You may omit explanations.) May 1 B.D. Mehta invests $4,000 cash in exchange for common stock in a small welding corporation. 3 Buys equipment on account for $1,100. 13 Pays $400 to landlord for May rent. 21 Bills Noble Corp. $500 for welding work done.

There are 16 correct answers in the following multiple choice questions (some questions have multiple answers that are correct). To attain a perfect score on the quiz, all correct answers must be given. Each correct answer is worth 1 point. Each omitted answer or wrong answer reduces the score by 1 point, and each additional answer beyond the correct number of answers reduces the score by 1 point. Percentage on the quiz is based on the total number of correct answers. 34.1 How many electronic devices would be contained in an IC chip in order for it to be classified in the VLSI category: (a) 1000, (b) 10,000, (c) 1 million, or (d) 100 million? 34.2 An alternative name for chip in semiconductor processing is which one of the following (one best answer): (a) component, (b) device, (c) die, (d) package, or (e) wafer? 34.3 Which one of the following is the source of silicon for semiconductor processing: (a) pure Si in nature, (b) SiC, (c) Si3N4, or (d) SiO2? 34.4 Which one of the following is the most common form of radiation used in photolithography: (a) electronic beam radiation, (b) incandescent light, (c) infrared light, (d) ultraviolet light, or (e) X-ray? 34.5 After exposure to light, a positive resist becomes (a) less soluble or (b) more soluble to the chemical developing fluid? 34.6 Which of the following processes are used to add layers of various materials in IC fabrication (three best answers): (a) chemical vapor deposition, (b) diffusion, (c) ion implantation, (d) physical vapor deposition, (e) plasma etching, (f) thermal oxidation, and (g) wet etching? 34.7 Which of the following are doping processes in IC fabrication (two best answers): (a) chemical vapor deposition, (b) diffusion, (c) ion implantation, (d) physical vapor deposition, (e) plasma etching, (f) thermal oxidation, and (g) wet etching? 34.8 Which one of the following is the most common metal for intraconnection of devices in a silicon integrated circuit: (a) aluminum, (b) copper, (c) gold, (d) nickel, (e) silicon, or (f) silver? 34.9 Which etching process produces the more anisotropic etch in IC fabrication: (a) plasma etching or (b) wet chemical etching? 34.10 Which of the following are the two principal packaging materials used in IC packaging: (a) aluminum, (b) aluminum oxide, (c) copper, (d) epoxies, and (e) silicon dioxide? 34.11 Which of the following metals are commonly used for wire bonding of chip pads to the lead frame (two best answers): (a) aluminum, (b) copper, (c) gold, (d) nickel, (e) silicon, and (f) silver?

Various types of accounting changes can affect the financial statements of a business enterprise differently. Assume that the following list describes changes that have a material effect on the financial statements for the current year of your business enterprise. 1. A change from the completed-contract method to the percentage-of-completion method of accounting for long-term construction-type contracts. 2. A change in the estimated useful life of previously recorded fixed assets as a result of newly acquired information. 3. A change from deferring and amortizing preproduction costs to recording such costs as an expense when incurred because future benefits of the costs have become doubtful. The new accounting method was adopted in recognition of the change in estimated future benefits. 4. A change from including the employer share of FICA taxes with payroll tax expenses to including it with “Retirement benefits” on the income statement. 5. Correction of a mathematical error in inventory pricing made in a prior period. 6. A change from presentation of statements of individual companies to presentation of consolidated statements. 7. A change in the method of accounting for leases for tax purposes to conform with the financial accounting method. As a result, both deferred and current taxes payable changed substantially. 8. A change from the FIFO method of inventory pricing to the LIFO method of inventory pricing. Instructions Identify the type of change that is described in each item above and indicate whether the prior year’s financial statements should be recast when presented in comparative form with the current year’s financial statements.

What is the definition of control for purposes of §351?  Why does Congress require the shareholders to control a corporation to receive tax deferral?

Hermione must include the value of the nugget in her gross income.  The value of the nugget is realized income because gold is marketable in a nugget form and easily valued.  The authorities (Reg § 1.61-14(a).; Rev. Rul. 61, 1953-1 C.B. 17) refer to the finder of a “treasure trove” and hold that there is gross income (to the extent of the ascertainable value in U.S. currency) in the tax year in which the property is reduced to the taxpayer’s undisputed possession.

A sheet-metal bending operation produces bent parts with an included angle = 92.1°. The process is in statistical control and the values of included angle are normally distributed with a standard deviation = 0.23°. The design specification on the angle = 90 ± 2°. (a) Determine the process capability. (b) If the process could be adjusted so that its mean = 90.0°, determine the value of the process capability index.

Oxford Corporation began operations in 2014 and reported pretax financial income of $225,000 for the year. Oxford’s tax depreciation exceeded its book depreciation by $40,000. Oxford’s tax rate for 2014 and years thereafter is 30%. In its December 31, 2014, balance sheet, what amount of deferred tax liability should be reported?

Claude purchased raw land three years ago for $1,500,000 to develop into lots and sell to individuals planning to build their dream homes. Claude intended to treat this property as inventory, like his other development properties. Before completing the development of the property, however, he decided to contribute it to South Peak Investors LLC when it was worth $2,500,000, in exchange for a 10 percent capital and profits interest. South Peak’s strategy is to hold land for investment purposes only and then sell it later at a gain. a. If South Peak sells the property for $3,000,000 four years after Claude’s contribution, how much gain or loss is recognized and what is its character? [Hint: See §724.] b. If South Peak sells the property for $3,000,000 five and one-half years after Claude’s contribution, how much gain or loss is recognized, and what is its character?

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How do banks resolve illiquidity problems? (LO2)

Why might a company choose not to use revaluation accounting?

Compare and contrast the basis of property acquired via purchase, conversion from personal use to business or rental use, tax-deferred exchange, gift, and inheritance.

Simmons Corporation owns stock of Armstrong, Inc. Prior to 2014, the investment was accounted for using the equity method. In early 2014, Simmons sold part of its investment in Armstrong, and began using the fair value method. In 2014, Armstrong earned net income of $80,000 and paid dividends of $95,000. Prepare Simmons’s entries related to Armstrong’s net income and dividends, assuming Simmons now owns 10% of Armstrong’s stock.

Harding Corporation has the following accounts included in its December 31, 2014, trial balance: Accounts Receivable $110,000; Inventory $290,000; Allowance for Doubtful Accounts $8,000; Patents $72,000; Prepaid Insurance $9,500; Accounts Payable $77,000; Cash $30,000. Prepare the current assets section of the balance sheet, listing the accounts in proper sequence.

Rayburn Corporation has a building that it bought during year 0 for $850,000. It sold the building in year 5. During the time it held the building, Rayburn depreciated it by $100,000. What are the amount and character of the gain or loss Rayburn will recognize on the sale in each of the following alternative situations?    a. Rayburn receives $840,000.  b. Rayburn receives $900,000. c. Rayburn receives $700,000.

On May 3, 2014, Eisler Company consigned 80 freezers, costing $500 each, to Remmers Company. The cost of shipping the freezers amounted to $840 and was paid by Eisler Company. On December 30, 2014, a report was received from the consignee, indicating that 40 freezers had been sold for $750 each. Remittance was made by the consignee for the amount due, after deducting a commission of 6%, advertising of $200, and total installation costs of $320 on the freezers sold. Instructions (a) Compute the inventory value of the units unsold in the hands of the consignee. (b) Compute the profit for the consignor for the units sold. (c) Compute the amount of cash that will be remitted by the consignee.

The information shown below and on page 1170 was disclosed during the audit of Elbert Inc. 1. Amount Due Year per Tax Return 2014 $130,000 2015 104,000 2. On January 1, 2014, equipment costing $600,000 is purchased. For financial reporting purposes, the company uses straight-line depreciation over a 5-year life. For tax purposes, the company uses the elective straight-line method over a 5-year life. (Hint: For tax purposes, the half-year convention as discussed in Appendix 11A must be used.) 3. In January 2015, $225,000 is collected in advance rental of a building for a 3-year period. The entire $225,000 is reported as taxable income in 2015, but $150,000 of the $225,000 is reported as unearned revenue in 2015 for financial reporting purposes. The remaining amount of unearned revenue is to be recognized equally in 2016 and 2017. 4. The tax rate is 40% in 2014 and all subsequent periods. (Hint: To find taxable income in 2014 and 2015, the related income taxes payable amounts will have to be “grossed up.”) 5. No temporary differences existed at the end of 2013. Elbert expects to report taxable income in each of the next 5 years. Instructions (a) Determine the amount to report for deferred income taxes at the end of 2014, and indicate how it should be classified on the balance sheet. (b) Prepare the journal entry to record income taxes for 2014. (c) Draft the income tax section of the income statement for 2014, beginning with “Income before income taxes.” (Hint: You must compute taxable income and then combine that with changes in cumulative temporary differences to arrive at pretax financial income.) (d) Determine the deferred income taxes at the end of 2015, and indicate how they should be classified on the balance sheet. (e) Prepare the journal entry to record income taxes for 2015. (f) Draft the income tax section of the income statement for 2015, beginning with “Income before income taxes.”

A corporation commissioned an accounting firm to recalculate the way it accounted for leasing transactions.  With the new calculations, the corporation was able to file amended tax returns for the past few years that increased the corporation’s net operating loss carryover from $3,000,000 to $5,000,000. Was the corporation wise to pay the accountants for their work that led to the increase in the NOL carryover? What factors should be considered in making this determination?

Springsteen Co. had the following activity in its most recent year of operations. (a) Pension expense exceeds amount funded. (g) Amortization of intangible assets. (b) Redemption of bonds payable. (h) Purchase of treasury shares. (c) Sale of building at book value. (i) Issuance of bonds for land. (d) Depreciation. (j) Payment of dividends. (e) Exchange of equipment for furniture. (k) Increase in interest receivable on notes receivable. (f) Issuance of ordinary shares. (l) Purchase of equipment. Instructions Classify the items as (1) operating—add to net income, (2) operating—deduct from net income, (3) investing, (4) financing, or (5) significant non-cash investing and financing activities. Use the indirect method.

{Planning} Jackie has a corporate client that has recently received a 30-day notice from the IRS with a $100,000 tax assessment.  Her client is considering requesting an appeals conference to contest the assessment.  What factors should Jackie advise her client to consider before requesting an appeals conference?

How would the principle of weighing up marginal costs and benefits apply to a worker deciding how much overtime to work in a given week?

When is revenue recognized under the cost-recovery method?

Wire stock of initial diameter = 0.125 in is drawn through two dies each providing a 0.20 area reduction. The starting metal has a strength coefficient = 40,000 lb/in2 and a strain hardening exponent = 0.15. Each die has an entrance angle of 12°, and the coefficient of friction at the work-die interface is estimated to be 0.10. The motors driving the capstans at the die exits can each deliver 1.50 hp at 90% efficiency. Determine the maximum possible speed of the wire as it exits the second die.

Under what circumstances will managers want sensitivity analysis results relating to a CVP analysis?

Two new software projects are proposed to a young, start-up company. The Alpha project will cost $150,000 to develop and is expected to have annual net cash flow of $40,000. The Beta project will cost $200,000 to develop and is expected to have annual net cash flow of $50,000. The company is very concerned about their cash flow. Using the payback period, which project is better from a cash flow standpoint? Why?