Question & Answer

Assessing rewards based on accounting profit Stevan is the divisional manager with the Liberty Property Development Group. His performance report shows a positive divisional margin but a loss for the year. Stevan has complained to the CEO about the common costs that have been charged to his division, and questions the method of charging. If they were not charged or were allocated in a different way, he would have a favourable profit figure and would be awarded his bonus.   Required Should Stevan’s bonus be awarded based on the profit or loss figure? Why? (LO2 and 4)

What are the major characteristics of plant assets?

The stockholders’ equity accounts of G.K. Chesterton Company have the following balances on December 31, 2014. Common stock, $10 par, 300,000 shares issued and outstanding $3,000,000 Paid-in capital in excess of par—common stock 1,200,000 Retained earnings 5,600,000 Shares of G.K. Chesterton Company stock are currently selling on the Midwest Stock Exchange at $37. Instructions Prepare the appropriate journal entries for each of the following cases. (a) A stock dividend of 5% is declared and issued. (b) A stock dividend of 100% is declared and issued. (c) A 2-for-1 stock split is declared and issued.

What is ‘learning by doing? Why is this a possible hysteresis channel?

How do brazing and soldering differ from the fusion-welding processes?

Why do the world’s top footballers earn millions of pounds per year, while the top lacrosse players are paid less than the equivalent of £30 000?

Risk profiling You are required to offer advice to a small but growing community bank. Describe the steps you would take to prepare a risk profile for this organisation. (LO6)

Janyce, a single taxpayer, has AGI of $125,000 and paid the following taxes this year. Calculate how much Janyce can deduct for taxes as an itemized deduction this year.

Actions to mitigate risk Ben, an employee of Joseph’s, appears to be extremely enthusiastic about his back-office accounting role. He has been with Joseph’s company for about four years and has performed well in his position. Ben is very keen to progress in the company and Joseph has recently decided to offer him a posting at a small international operation in Asia. While the role is to remain in the back office, the position will not require efforts on a full-time basis. Instead, Joseph decides to provide Ben with an opportunity to manage the currently vacant front-office trading role. While the operation is small and Ben has limited trading skills, Joseph is sure Ben will be able to manage both roles and hopefully learn about, and at the same time develop, the trading arm of this international operation. Joseph decides to award Ben an uncapped bonus on profits earned for the group on top of his negotiated annual base salary.   Required Prepare a report advising Joseph on the risk management ramifications of his decisions. What actions should Joseph take to mitigate any perceived risk? (LO6)

Burnitz Manufacturing Company was organized on January 1, 2014. During 2014, it has used in its reports to management the straight-line method of depreciating its plant assets. On November 8, you are having a conference with Burnitz’s officers to discuss the depreciation method to be used for income tax and stockholder reporting. James Bryant, president of Burnitz, has suggested the use of a new method, which he feels is more suitable than the straight-line method for the needs of the company during the period of rapid expansion of production and capacity that he foresees. Following is an example in which the proposed method is applied to a fixed asset with an original cost of $248,000, an estimated useful life of 5 years, and a salvage value of approximately $8,000. Accumulated Years of Depreciation Book Value Life Fraction Depreciation at End at End Year Used Rate Expense of Year of Year 1 1 1/15 $16,000 $ 16,000 $232,000 2 2 2/15 32,000 48,000 200,000 3 3 3/15 48,000 96,000 152,000 4 4 4/15 64,000 160,000 88,000 5 5 5/15 80,000 240,000 8,000 The president favors the new method because he has heard that: 1. It will increase the funds recovered during the years near the end of the assets’ useful lives when maintenance and replacement disbursements are high. 2. It will result in increased write-offs in later years and thereby will reduce taxes. Instructions (a) What is the purpose of accounting for depreciation? (b) Is the president’s proposal within the scope of generally accepted accounting principles? In making your decision, discuss the circumstances, if any, under which use of the method would be reasonable and those, if any, under which it would not be reasonable. (c) The president wants your advice on the following issues. (1) Do depreciation charges recover or create funds? Explain. (2) Assume that the Internal Revenue Service accepts the proposed depreciation method in this case. If the proposed method were used for stockholder and tax reporting purposes, how would it affect the availability of cash flows generated by operations?

A dial-indexing table has 6 stations. One station is used for loading and unloading, which is accomplished by a human worker. The other five perform processing operations. The longest process takes 25 sec and the indexing time = 5 sec. Each station has a frequency of failure = 0.015. When a failure occurs it takes an average of 3.0 min to make repairs and restart. Determine (a) hourly production rate and (b) line efficiency.

Describe the accounting for actuarial gains and losses.

Give some other examples of monopolistic competition. (Try looking at www.yell.com if you are stuck.)

Value chain in the public sector Traditionally, government organisations have tended to operate in silos, focusing on their own objectives and managing and protecting their own budgets. Recently, however, faced with seemingly intractable economic, social and environmental problems, many government organisations have sought to develop new ways of working. In particular, they have sought to explore how their objectives overlap and depend on other organisations and how they might share information and resources. One example is provided by attempts to reduce crime and enhance public safety in the criminal justice sector.   In New Zealand the Ministry of Justice is the lead agency in the justice sector. The sector includes the New Zealand Police, the Serious Fraud Office, Child Youth and Family, the Department of Corrections and the Crown Law Office.   The organisations in the criminal justice system can be thought of as being involved in a ‘pipeline’ that begins with crime prevention and the investigation of crime and proceeds all the way through to rehabilitation (see the figure below). Looking at the sector as a pipeline, we can see that policies and actions in any part of the system will affect other parts of the system. By working as a coordinated ‘justice sector’, changes can be made that result in the best outcomes for the sector as a whole.   Within this pipeline, the operations within one agency, Public Prisons, can be further analysed to show the links between its key activities and between the department and other organisations in the sector.   Key activities follow this path: • offenders are convicted in the courts • offenders are sentenced and sent to prison • prisoners undergo an initial assessment • the serving of the sentence is planned • the offender’s sentence is managed, including provision of relevant rehabilitation programs • the offender’s release is planned and managed.   Required (a) With reference to the information provided, distinguish between the structural and executional cost drivers in this value chain. (b) Is there an ability for governments to outsource any of these value chain activities?

Francine’s mother Donna and her father Darren separated and divorced in September of this year. Francine lived with both parents until the separation. Francine does not provide more than half of her own support. Francine is 15 years old at the end of the year.  a. Is Francine a qualifying child to Donna?

List the stages of extrusion blow molding according to the video.

On December 31, 2014, Iva Majoli Company borrowed $62,092 from Paris Bank, signing a 5-year, $100,000 zero-interest-bearing note. The note was issued to yield 10% interest. Unfortunately, during 2016, Majoli began to experience financial difficulty. As a result, at December 31, 2016, Paris Bank determined that it was probable that it would receive back only $75,000 at maturity. The market rate of interest on loans of this nature is now 11%. Instructions (a) Prepare the entry to record the issuance of the loan by Paris Bank on December 31, 2014. (b) Prepare the entry, if any, to record the impairment of the loan on December 31, 2016, by Paris Bank.

What is the present value of a machine that lasts three years, earns £100 in year 1, £200 in year 2 and £200 in year 3, and then has a scrap value of £100? Assume that the rate of discount is 5 per cent. If the machine costs £500, is the investment worthwhile? Would it be worthwhile if the rate of discount were 10 per cent?

Suppose you asked your favorite AI learning tool “What permanent book-tax differences are common for a C corporation?” and the AI tool responded as follows:

1.      Have you heard of Casper, purchased a Casper mattress, or visited a Casper store? What is your impression? What do you value most and what do you want to avoid when buying a mattress?

What are some of the basic types of microsystem devices?

What kinds of questions about future cash flows do investors and creditors attempt to answer with information in the income statement?

If the CPI went up from 150 to 162 over 12 months, what would be the rate of inflation?

Henning Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the year 2014 in which no benefits were paid. 1. The actuarial present value of future benefits earned by employees for services rendered in 2014 amounted to $56,000. 2. The company’s funding policy requires a contribution to the pension trustee amounting to $145,000 for 2014. 3. As of January 1, 2014, the company had a projected benefit obligation of $900,000, an accumulated benefit obligation of $800,000, and a debit balance of $400,000 in accumulated OCI (PSC). The fair value of pension plan assets amounted to $600,000 at the beginning of the year. The actual and expected return on plan assets was $54,000. The settlement rate was 9%. No gains or losses occurred in 2014 and no benefits were paid. 4. Amortization of prior service cost was $50,000 in 2014. Amortization of net gain or loss was not required in 2014. Instructions (a) Determine the amounts of the components of pension expense that should be recognized by the company in 2014. (b) Prepare the journal entry or entries to record pension expense and the employer’s contribution to the pension trustee in 2014. (c) Indicate the amounts that would be reported on the income statement and the balance sheet for the year 2014.

Although indifference curves will normally be bowed in toward the origin, on odd occasions they might not be. Which of the diagrams correspond to which of the following? Explain the shape of each curve. (a)  X and Y are left shoes and right shoes. (b)  X and Y are two brands of the same product, and the consumer cannot tell them apart. (c)  X is a good but Y is a ‘bad’ – like household refuse.