Question & Answer

Job Costing, determination of manufacturing overhead rates One Glass Brewery estimates the following activity for the coming year:       At the end of the financial period the following information was collected:       Required (a)   What was the predetermined manufacturing overhead rate calculated at the beginning of the year? (b)   What was the actual manufacturing overhead rate for the year? (c)    Explain the difference between the rates calculated in (a) and (b) above.

Assume the same information as in E14-4, except that Celine Dion Company uses the effective-interest method of amortization for bond premium or discount. Assume an effective yield of 9.7705%. Instructions Prepare the journal entries to record the following. (Round to the nearest dollar.) (a) The issuance of the bonds. (b) The payment of interest and related amortization on July 1, 2014. (c) The accrual of interest and the related amortization on December 31, 2014.

What does it mean to characterize a gain or loss?  Why is characterizing a gain or loss important?

To what extent do Keynesians and new classicists agree about the role of fixed exchange rates?

What tests are applied to determine if losses should be characterized as passive?

Assume the same information as E11-16, except that Suarez intends to dispose of the equipment in the coming year. It is expected that the cost of disposal will be $20,000. Instructions (a) Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2014. (b) Prepare the journal entry (if any) to record depreciation expense for 2015. (c) The asset was not sold by December 31, 2015. The fair value of the equipment on that date is $5,300,000. Prepare the journal entry (if any) necessary to record this increase in fair value. It is expected that the cost of disposal is still $20,000.

An electric discharge machining operation is being performed on two work materials: tungsten and zinc. Determine the amount of metal removed in the operation after one hour at a discharge amperage = 20 amps for each of these metals. Use U.S. Customary units and express the answer in in3/hr. From Table 4.1, the melting temperatures of tungsten and zinc are 6170°F and 420°F, respectively.

What types of management decisions can benefit through using sustainability cost information?

If there have been clear benefits from the single market programme, why do individual member governments still try to erect barriers, such as new technical standards

A national company, Fast Print, decided to expand into several developing countries. The company has been managed under a centralised organisational form, but is considering changing to a decentralised form. List the advantages and disadvantages of making this change.

Fergiehas the choice between investing in a State of New York bond at 5 percent and a Surething bond at 8 percent.  Assuming that both bonds have the same nontax characteristics and that Fergie has a 30 percent marginal tax rate, in which bond should she invest?

How much flexibility do partnerships have in allocating partnership items to partners?

What impact has the SEC’s Regulation Fair Disclosure (FD) had on securities firms? (LO2)

The board of directors of Ichiro Corporation is considering whether or not it should instruct the accounting department to shift from a first-in, first-out (FIFO) basis of pricing inventories to a last-in, first-out (LIFO) basis. The following information is available. Sales 21,000 units @ $50 Inventory, January 1 6,000 units @ 20 Purchases 6,000 units @ 22 10,000 units @ 25 7,000 units @ 30 Inventory, December 31 8,000 units @ ? Operating expenses $200,000 Instructions Prepare a condensed income statement for the year on both bases for comparative purposes.

If factor X costs twice as much as factor Y (Px/Py = 2), what can be said about the relationship between the MPPs of the two factors if the optimum combination of factors is used?

] Fergie has the choice between investing in a State of New York bond at 5 percent and a Surething Inc. bond at 8 percent.  Assuming that both bonds have the same nontax characteristics and that Fergie has a 30 percent marginal tax rate, in which bond should she invest?

Direct and indirect costs; and cost driver selection         LO2,3 Venture Buses operates throughout the south-eastern suburbs of Melbourne, with its depot located in Cheltenham. Every day, fuel is delivered and stored in tanks located in the depot. This fuel is used by all the buses and administration vehicles. The accountant has been requested to develop a system to assign the cost to the different vehicles in the depot. He has asked your assistance in coming up with a way to identify the fuel costs. Required (a) From the perspective of the depot, is the cost of fuel a direct or indirect cost? (b) From the perspective of the vehicles attached to the depot, can the cost be classified as either direct or indirect?  Briefly explain. (c) What system would be required to have the cost classified as direct?  (d) If the accountant decided to go with an indirect cost classification, how could the cost be allocated? (e) Identify some factors that would determine which method would be the best for the assignment of fuel costs to the vehicles.

In countries experiencing high inflation, the annual interest rate may exceed 50 percent; in other countries such as the United States and many European countries, the annual interest rates are typically less than 10 percent. Do you think such a large difference in interest rates is due primarily to country-specific differences in the risk-free rates or in the credit risk premiums? Explain. (LO3)

Jim purchased 100 shares of stock this year and elected to participate in a dividend reinvestment program. This program automatically uses dividends to purchase additional shares of stock. This year Jim’s shares paid $350 of dividends, and these funds were used to purchase additional shares of stock. These additional shares are worth $375 at year-end. What amount of dividends, if any, should Jim declare as income this year? Explain.

As of January 1, 2014, Aristotle Inc. installed the retail method of accounting for its merchandise inventory. To prepare the store’s financial statements at June 30, 2014, you obtain the following data. Cost Selling Price Inventory, January 1 $ 30,000 $ 43,000 Markdowns 10,500 Markups 9,200 Markdown cancellations 6,500 Markup cancellations 3,200 Purchases 104,800 155,000 Sales revenue 154,000 Purchase returns 2,800 4,000 Sales returns and allowances 8,000 Instructions (a) Prepare a schedule to compute Aristotle’s June 30, 2014, inventory under the conventional retail method of accounting for inventories. (b) Without prejudice to your solution to part (a), assume that you computed the June 30, 2014, inventory to be $59,400 at retail and the ratio of cost to retail to be 70%. The general price level has increased from 100 at January 1, 2014, to 108 at June 30, 2014. Prepare a schedule to compute the June 30, 2014, inventory at the June 30 price level under the dollar-value LIFO retail method.

: Outline the factors managers should consider that will influence work team effectiveness.

When considering C corporations, the IRS checks to see whether salaries paid are too large.  In S corporations, however, it usually must verify that salaries are large enough. Account for this difference.

Assume that IBM leased equipment that was carried at a cost of $150,000 to Sharon Swander Company. The term of the lease is 6 years beginning January 1, 2014, with equal rental payments of $30,044 at the beginning of each year. All executory costs are paid by Swander directly to third parties. The fair value of the equipment at the inception of the lease is $150,000. The equipment has a useful life of 6 years with no salvage value. The lease has an implicit interest rate of 8%, no bargain-purchase option, and no transfer of title. Collectibility is reasonably assured with no additional cost to be incurred by IBM. Prepare IBM’s January 1, 2014, journal entries at the inception of the lease.

Compute the unit energy for melting for the following metals: (a) aluminum and (b) plain low carbon steel.

In a §351 exchange, how does the tax treatment differ in cases where liabilities are assumed with a tax-avoidance purpose versus where liabilities assumed exceed basis?