Question & Answer

Leppard Corporation sells DVD players. The corporation also offers its customers a 2-year warranty contract. During 2014, Leppard sold 20,000 warranty contracts at $99 each. The corporation spent $180,000 servicing warranties during 2014, and it estimates that an additional $900,000 will be spent in the future to service the warranties. Prepare Leppard’s journal entries for (a) the sale of contracts, (b) the cost of servicing the warranties, and (c) the recognition of warranty revenue. Assume the service costs are inventory costs.

Why can convertible bonds be issued by firms at a higher price than other bonds? (LO2)

Magilke Industries acquired equipment this year to be used in its operations. The equipment was delivered by the suppliers, installed by Magilke, and placed into operation. Some of it was purchased for cash with discounts available for prompt payment. Some of it was purchased under longterm payment plans for which the interest charges approximated prevailing rates. What costs should Magilke capitalize for the new equipment purchased this year? Explain.

Determine the shrink rule to be used by mold makers for die casting of zinc. Using the shrinkage value in Table 10.1, express your answer in terms of decimal mm of elongation per 300 mm of length compared to a standard 300-mm scale.

Why can expectations of an acquisition affect the value of the target’s stock? (LO3)

1.       : This chapter suggested that structure should be designed to fit strategy. Some theorists argue that strategy should be designed to fit the organization’s structure. With which theory do you agree? Explain.

The following amortization and interest schedule reflects the issuance of 10-year bonds by Capulet Corporation on January 1, 2008, and the subsequent interest payments and charges. The company’s year-end is December 31, and financial statements are prepared once yearly.BLEMS Amortization Schedule Amount Carrying Year Cash Interest Unamortized Value 1/1/2008 $5,651 $ 94,349 2008 $11,000 $11,322 5,329 94,671 2009 11,000 11,361 4,968 95,032 2010 11,000 11,404 4,564 95,436 2011 11,000 11,452 4,112 95,888 2012 11,000 11,507 3,605 96,395 2013 11,000 11,567 3,038 96,962 2014 11,000 11,635 2,403 97,597 2015 11,000 11,712 1,691 98,309 2016 11,000 11,797 894 99,106 2017 11,000 11,894 100,000 Instructions (a) Indicate whether the bonds were issued at a premium or a discount and how you can determine this fact from the schedule. (b) Indicate whether the amortization schedule is based on the straight-line method or the effectiveinterest method, and how you can determine which method is used. (c) Determine the stated interest rate and the effective-interest rate. (d) On the basis of the schedule above, prepare the journal entry to record the issuance of the bonds on January 1, 2008. (e) On the basis of the schedule above, prepare the journal entry or entries to reflect the bond transactions and accruals for 2008. (Interest is paid January 1.) (f) On the basis of the schedule above, prepare the journal entry or entries to reflect the bond transactions and accruals for 2015. Capulet Corporation does not use reversing entries.

Explain how each of the following would use banker’s acceptances: (a) exporting firms, (b) importing firms, (c) commercial banks, and (d) investors. (LO1)

Describe an active monetary policy. (LO2; LO3)

How do grain boundaries contribute to the strain hardening phenomenon in metals?

Suppose you asked your favorite AI query tool the following question: “How do the tax laws treat family members for purposes of limiting the number of owners an S corporation may have?”  The AI tool provided the following response:

1.      : Press the board to devise a more comprehensive set of selection criteria—including test results, but also taking into account supervisory experience, ability to motivate employees, and knowledge of agency procedures—that can be explained and justified to the board and to employees.

Construct a table similar to Table 17.3, only this time assume that the mpcd is ¾. Show that national income will increase by £640 million.

Explain how circuit breakers are used to reduce the likelihood of a large stock market crash. (LO4)

Moxley Corporation had January 1 and December 31 balances as follows. 1/1/14 12/31/14 Inventory $95,000 $113,000 Accounts payable 61,000 69,000 For 2014, cost of goods sold was $500,000. Compute Moxley’s 2014 cash payments to suppliers.

Ken is 63 years old and unmarried. He retired at age 55 when he sold his business, Understock.com. Though Ken is retired, he is still very active. Ken reported the following financial information this year. Assume Ken files as a single taxpayer. Determine Ken’s gross income and complete page 1 of Form 1040 (through line 9) and Schedule 1 for Ken.

What are the criteria to recognize revenue?

How does the amount of liability allocated to a partner affect the amount of gain a partner recognizes when contributing property secured by a liability?

Compare and contrast for and from AGI deductions. Why are for AGI deductions likely more valuable to taxpayers than from AGI deductions?

Briefly describe some of the similarities and differences between GAAP and IFRS with respect to the accounting for inventories.

How does a boring operation differ from a turning operation?

Estate agents consistently ‘talk up’ the housing market, often predicting price rises when other commentators are more cautious. Explain why they might have a vested interest in doing so.

Draw a diagram like that in Figure 6.21. Now illustrate the effect of a rise in demand for the product. Mark the new profit-maximising price and output. Will the profit-maximising output, price, average cost and profit necessarily be higher than before?

Describe highly leveraged transactions (HLTs) and explain why regulators closely monitor a bank’s exposure to HLTs. (LO2)

What requirements do an abandoned spouse and qualifying widow or widower have in common?