Question & Answer

Just under two million pensioners were identified as living in poverty in the UK in 2020. In the same year it was estimated that total property wealth of pensioner households had grown to a record high of £1.133 trillion. What does this imply about inequality and poverty?

How should changes in the estimated unguaranteed residual value be handled by the lessor?

If a developing country has a comparative advantage in primary products, should the government allow market forces to dictate the pattern of trade?

Explain how the Fed’s monetary policy affects the unemployment level. (LO2)

What is the range of carbon percentages which defines an iron-carbon alloy as cast iron?

What adverse internal effects may follow from (a) a depreciation of the exchange rate; (b) an appreciation of the exchange rate?

Shimmer Inc. is a calendar-year-end, accrual-method corporation. This year, it sells the following long-term assets:

What other factors will determine the MPP of land for industry?

The molten filler metal in brazing is distributed throughout the joint by capillary action. What is capillary action?

Which of the three types of merger (horizontal, vertical and conglomerate) are most likely to lead to (a) reductions in average costs; (b) increased market power?

Dumars Corporation reports in the current liability section of its balance sheet at December 31, 2014 (its year-end), short-term obligations of $15,000,000, which includes the current portion of 12% long-term debt in the amount of $10,000,000 (matures in March 2015). Management has stated its intention to refinance the 12% debt whereby no portion of it will mature during 2015. The date of issuance of the financial statements is March 25, 2015. Instructions (a) Is management’s intent enough to support long-term classification of the obligation in this situation? (b) Assume that Dumars Corporation issues $13,000,000 of 10-year debentures to the public in January2015 and that management intends to use the proceeds to liquidate the $10,000,000 debt maturing in March 2015. Furthermore, assume that the debt maturing in March 2015 is paid from these proceeds prior to the issuance of the financial statements. Will this have any impact on the balance sheet classification at December 31, 2014? Explain your answer. (c) Assume that Dumars Corporation issues common stock to the public in January and that management intends to entirely liquidate the $10,000,000 debt maturing in March 2015 with the proceeds of this equity securities issue. In light of these events, should the $10,000,000 debt maturing in March 2015 be included in current liabilities at December 31, 2014? (d) Assume that Dumars Corporation, on February 15, 2015, entered into a financing agreement with a commercial bank that permits Dumars Corporation to borrow at any time through 2016 up to $15,000,000 at the bank’s prime rate of interest. Borrowings under the financing agreement mature three years after the date of the loan. The agreement is not cancelable except for violation of a provision with which compliance is objectively determinable. No violation of any provision exists at the date of issuance of the financial statements. Assume further that the current portion of long-term debt does not mature until August 2015. In addition, management intends to refinance the $10,000,000 obligation under the terms of the financial agreement with the bank, which is expected to be financially capable of honoring the agreement. (1) Given these facts, should the $10,000,000 be classified as current on the balance sheet at December 31, 2014? (2) Is disclosure of the refinancing method required?

Give an example of a transaction that results in: (a) A decrease in an asset and a decrease in a liability. (b) A decrease in one asset and an increase in another asset. (c) A decrease in one liability and an increase in another liability.

Briefly describe the Glass-Steagall Act, and then explain how the related regulations have changed since it was enacted. (LO2)

A cold heading operation is performed to produce the head on a steel nail. The strength coefficient for this steel is 600 MPa, and the strain hardening exponent is 0.22. Coefficient of friction at the die-work interface is 0.14. The wire stock out of which the nail is made is 5.00 mm in diameter. The head is to have a diameter of 9.5 mm and a thickness of 1.6 mm. The final length of the nail is 120 mm. (a) What length of stock must project out of the die in order to provide sufficient volume of material for this upsetting operation? (b) Compute the maximum force that the punch must apply to form the head in this open-die operation.

An accountant must be familiar with the concepts involved in determining earnings of a business entity. The amount of earnings reported for a business entity is dependent on the proper recognition, in general, of revenues and expenses for a given time period. In some situations, costs are recognized as expenses at the time of product sale. In other situations, guidelines have been developed for recognizing costs as expenses or losses by other criteria. Instructions (a) Explain the rationale for recognizing costs as expenses at the time of product sale. (b) What is the rationale underlying the appropriateness of treating costs as expenses of a period instead of assigning the costs to an asset? Explain. (c) In what general circumstances would it be appropriate to treat a cost as an asset instead of as an expense? Explain. (d) Some expenses are assigned to specific accounting periods on the basis of systematic and rational allocation of asset cost. Explain the underlying rationale for recognizing expenses on the basis of systematic and rational allocation of asset cost. (e) Identify the conditions under which it would be appropriate to treat a cost as a loss.

What is the defining characteristic of a Newtonian fluid?

What are the four most common elements in the earth's crust?

Anderson Nuclear Power Plant will be “mothballed” at the end of its useful life (approximately 20 years) at great expense. The expense recognition principle requires that expenses be matched to revenue. Accountants Ana Alicia and Ed Bradley argue whether it is better to allocate the expense of mothballing over the next 20 years or ignore it until mothballing occurs. Instructions Answer the following questions. (a) What stakeholders should be considered? (b) What ethical issue, if any, underlies the dispute? (c) What alternatives should be considered? (d) Assess the consequences of the alternatives. (e) What decision would you recommend?

On January 2, 2014, Jones Company purchases a call option for $300 on Merchant common stock. The call option gives Jones the option to buy 1,000 shares of Merchant at a strike price of $50 per share. The market price of a Merchant share is $50 on January 2, 2014 (the intrinsic value is therefore $0). On March 31, 2014, the market price for Merchant stock is $53 per share, and the time value of the option is $200. Instructions (a) Prepare the journal entry to record the purchase of the call option on January 2, 2014. (b) Prepare the journal entry(ies) to recognize the change in the fair value of the call option as of March 31, 2014. (c) What was the effect on net income of entering into the derivative transaction for the period January 2 to March 31, 2014?

What is work hardening?

The wage rate a firm has to pay and the output it can produce varies with the number of workers as follows (all figures are hourly): Number of workers 1 2 3 4 5 6 7 8 Wage rate (ACL) (£) 3 4 5 6 7 8 9 10 Total output (TPPL) 10 22 32 40 46 50 52 52 Assume that output sells at £2 per unit. (a)  Copy the table and add additional rows for TCL, MCL, TRPL and MRPL. Put the figures for MCL and MRPL in the spaces between the columns (b)  How many workers will the firm employ in order to maximise profits?     (c)  What will be its hourly wage bill at this level of employment?     (d)  How much hourly revenue will it earn at this level of employment?       (e)  Assuming that the firm faces other (fixed) costs of £30 per hour, how much hourly profit will it make?       (f)   Assume that the workers now formed a union and that the firm agreed to pay the negotiated wage rate to all employees. What is the maximum to which the hourly wage rate could rise without causing the firm to try to reduce employment below that in (b) above? (See Figure 10.10.) (g)  What would be the firm’s hourly profit now?

Describe the process of bookbuilding. Why is bookbuilding sometimes criticized as a means of setting the offer price? (LO3)

What do bauxite and corundum have in common?

Create a balance sheet for a typical bank, showing its main liabilities (sources of funds) and assets (uses of funds). (LO2, LO3)

Show the effect of an increase in government expenditure by using (a) the injections and withdrawals diagram; (b) the income/expenditure diagram (see Figures 17.8 and 17.10).