Question & Answer

The 2011 Annual Report of Tootsie Roll Industries contains the following information. (in millions) December 31, 2011 December 31, 2010 Total assets $857.9 $858.0 Total liabilities 191.9 190.6 Net sales 528.4 517.1 Net income 43.9 53.0 Instructions Compute the following ratios for Tootsie Roll for 2011. (a) Asset turnover. (b) Return on assets. (c) Profit margin on sales. (d) How can the asset turnover be used to compute the return on assets?

Look in a business periodical for news about a recent financial transaction involving two financial institutions. For this transaction, determine the following: a. How will each institution’s balance sheet be affected? b. Will either institution receive immediate income from the transaction? c. Who is the ultimate user of funds? d. Who is the ultimate source of funds? (LO3)

What is the link between sustainability strategies and management accounting?

What do you think you now know that would be useful for managing projects at the hotel?

List the types of environments that can be present during the sintering process according to the powder metallurgy video.

Kenoly Corporation owns a patent that has a carrying amount of $300,000. Kenoly expects future net cash flows from this patent to total $210,000 over its remaining life of 10 years. The recoverable amount of the patent is $110,000. Prepare Kenoly’s journal entry, if necessary, to record the loss on impairment.

Mike Macinski Leasing Company leases a new machine that has a cost and fair value of $95,000 to Sharrer Corporation on a 3-year noncancelable contract. Sharrer Corporation agrees to assume all risks of normal ownership including such costs as insurance, taxes, and maintenance. The machine has a 3-year useful life and no residual value. The lease was signed on January 1, 2014. Mike Macinski Leasing Company expects to earn a 9% return on its investment. The annual rentals are payable on each December 31. Instructions (a) Discuss the nature of the lease arrangement and the accounting method that each party to the lease should apply. (b) Prepare an amortization schedule that would be suitable for both the lessor and the lessee and that covers all the years involved.

. Identify how structure is influenced by an organization’s strategic goals and its workflow technology

To estimate revenues, costs and profits across a range of activity, we usually assume that the cost and revenue functions are linear. What are the specific underlying assumptions for linear cost and revenue functions, and how reasonable are these assumptions?

1.       : Why is benchmarking an important component of TQM programs? Do you believe a company could have a successful TQM program without using benchmarking? Explain.

At what phase of the business cycle is the average duration of unemployment likely to be the highest? Explain.

Molto Stancha Corporation had zero earnings this fiscal year; in fact, it lost money. Must the corporation file a tax return?

What is an operating agreement for an LLC? Are operating agreements required for limited liability companies? If not, why might it be important to have one?

1.    : Both China and India are rising economic powers. How might your approach to doing business with China, a communist country, differ from your approach to doing business with India, the world’s most populous democracy? In which country would you expect to encounter the most rules? The most bureaucracy? Why?

What is the due date for individual tax returns?  What extensions are available?

What is the purpose of annealing in glassworking?

Name two departments that are typically classified as manufacturing support departments

For tax purposes, how is the compensation paid to an S corporation shareholder similar to compensation paid to an owner of an entity taxed as a partnership?  How is it different?

As a new intern for the local branch office of a national brokerage firm, you are excited to get an assignment that allows you to use your accounting expertise. Your supervisor provides you the spreadsheet below, which contains data for the most recent quarter for three companies that the firm has been recommending to its clients as “buys.” Each of the companies’ returns on assets has outperformed their industry cohorts in the past. But, given recent challenges in their markets, there is concern that the companies may experience operating challenges and lower earnings. (All numbers in millions, except return on assets.)   Instructions (a) The fair value for each of these companies is lower than the corresponding book value. What implications does this have for each company’s future prospects? (b) To date, none of these companies has recorded goodwill impairments. Your supervisor suspects that they will need to record impairments in the near future, but he is unsure about the goodwill impairment rules. Is it likely that these companies will recognize impairments? Explain. (c) Estimate the amount of goodwill impairment for each company and prepare the journal entry to record the impairment. For each company, you may assume that the book value less the carrying value of the goodwill approximates the fair value of the companies’ net assets. (d) Discuss the effects of your entries in part (c) on your evaluation of these companies based on the return on assets ratio.

: Explain how expense budgets and cash budgets are useful as management controls.

Explain how the federal funds market facilitates bank operations. (LO2)

Do theories of the long-run and short-run consumption functions help us to understand consumer reactions to a change in taxes? (See section 17.1 and Case Studies 17.1 – 17.4 on the student website.

Theory Suppose that the U.S. Treasury decided to finance its deficit with mostly long-term funds. How could this decision affect the term structure of interest rates? If short-term and long-term markets were segmented, would the Treasury’s decision have a more or less pronounced impact on the term structure? Explain. (LO3)

] Fred is considering using the accrual method for his next business venture. Explain to Fred the conditions for recognizing income for tax purposes under the accrual method.

Diderot Stores Inc., which uses the conventional retail inventory method, wishes to change to the LIFO retail method beginning with the accounting year ending December 31, 2014. Amounts as shown below appear on the store’s books before adjustment. Cost Retail Inventory, January 1, 2014 $ 15,800 $ 24,000 Purchases in 2014 116,200 184,000 Markups in 2014 12,000 Markdowns in 2014 5,500 Sales revenue in 2014 175,000 You are to assume that all markups and markdowns apply to 2014 purchases, and that it is appropriate to treat the entire inventory as a single department. Instructions Compute the inventory at December 31, 2014, under the following methods. (a) The conventional retail method. (b) The last-in, first-out retail method, effecting the change in method as of January 1, 2014. Assume that the cost-to-retail percentage for 2013 was recomputed correctly in accordance with procedures necessary to change to LIFO. This ratio was 59%.