Question & Answer

What are the risks of investing in stocks in emerging markets? (LO7)

Explain how the expected interest rate in 1 year depends on your expectation of economic growth and inflation. (LO2)

Moon Hardware is planning to factor some of its receivables. The cash received will be used to pay for inventory purchases. The factor has indicated that it will require recourse” on the sold receivables. Explain to the controller of Moon Hardware what “recourse” is and how the recourse will be reflected in Moon’s financial statements after the sale of the receivables.

: Explain the difference between intrinsic and extrinsic rewards.

What are some of the ingredients usually added to the metallic powders during blending and/or mixing?

Describe the open-market operations necessary to sterilise the monetary effects of a balance of payments surplus. Would this in turn have any effect on the current or financial accounts of the balance of payments?

A deep drawing operation is performed in which the inside of the cylindrical cup has a diameter of 4.25 in and a height = 2.65 in. The stock thickness = 3/16 in, and the starting blank diameter = 7.7 in. Punch and die radii = 5/32 in. The metal has a tensile strength = 65,000 lb/in2 , a yield strength = 32,000 lb/in2 , and a shear strength of 40,000 lb/in2 . Determine (a) drawing ratio, (b) reduction, (c) drawing force, and (d) blankholder force

1.      : Do you think Vinson’s desire for changes in culture are related to changes in the external environment? Explain.

Pistons Inc. recently hired a new accountant with extensive experience in accounting for partnerships. Because of the pressure of the new job, the accountant was unable to review what he had learned earlier about corporation accounting. During the first month, he made the following entries for the corporation’s capital stock. May 2 Cash 192,000 Capital Stock 192,000 (Issued 12,000 shares of $5 par value common stock at $16 per share) 10 Cash 600,000 Capital Stock 600,000 (Issued 10,000 shares of $30 par value preferred stock at $60 per share) May 15 Capital Stock 15,000 Cash 15,000 (Purchased 1,000 shares of common stock for the treasury at $15 per share) 31 Cash 8,500 Capital Stock 5,000 Gain on Sale of Stock 3,500 (Sold 500 shares of treasury stock at $17 per share) Instructions On the basis of the explanation for each entry, prepare the entries that should have been made for the capital stock transactions.

1.       : Describe the advantages of using a balanced scorecard to measure and control organizational performance. Suppose that you created a balanced scorecard for a Walmart Neighborhood Market. Which specific customer service measures would you include?

Seaver Company uses the installment-sales method in accounting for its installment sales. On January 1, 2014, Seaver Company had an installment account receivable from Jan Noble with a balance of $1,800. During 2014, $500 was collected from Noble. When no further collection could be made, the merchandise sold to Noble was repossessed. The merchandise had a fair value of $650 after the company spent $60 for reconditioning of the merchandise. The merchandise was originally sold with a gross profit rate of 30%. Instructions Prepare the entries on the books of Seaver Company to record all transactions related to Noble during 2014. (Ignore interest charges.)

Which is easier – for managers to make decisions that maximise profits or for consumers to make decisions that maximise their utility? Discuss some of the arguments in favour of each case

On January 1, year 1, ABC Inc. issued 5,000 stock options with an estimated value of $10 per option. Each option entitles the owner to purchase one share of ABC stock for $25 a share (the per-share price of ABC stock on January 1, year 1). Assume the options vest on December 31, year 1, and that all 5,000 stock options were exercised on the vesting date when the stock was valued at $31 per share. Identify ABC’s tax deduction and book-tax difference associated with the stock options under the following alternative scenarios:

On February 20, 2014, Barbara Brent Inc., purchased a machine for $1,500,000 for the purpose of leasing it. The machine is expected to have a 10-year life, no residual value, and will be depreciated on the straight-line basis. The machine was leased to Rudy Company on March 1, 2014, for a 4-year period at a monthly rental of $19,500. There is no provision for the renewal of the lease or purchase of the machine by the lessee at the expiration of the lease term. Brent paid $30,000 of commissions associated with negotiating the lease in February 2014. Instructions (a) What expense should Rudy Company record as a result of the facts above for the year ended December 31, 2014? Show supporting computations in good form. (b) What income or loss before income taxes should Brent record as a result of the facts above for the year ended December 31, 2014? (Hint: Amortize commissions over the life of the lease.)

Isabel, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December she received a $20,000 bill from her accountant for consulting services related to her small business. Isabel can pay the $20,000 bill anytime before January 30 of next year without penalty. Assume her marginal tax rate is 37 percent this year and next year, and that she can earn an after-tax rate of return of 12 percent on her investments. When should she pay the $20,000 bill—this year or next?

Rembrandt Company acquired a plant asset at the beginning of Year 1. The asset has an estimated service life of 5 years. An employee has prepared depreciation schedules for this asset using three different methods to compare the results of using one method with the results of using other methods. You are to assume that the following schedules have been correctly prepared for this asset using (1) the straight-line method, (2) the sum-of-the-years’-digits method, and (3) the double-declining-balance method. Year Straight-Line Years’-Digits Balance 1 $ 9,000 $15,000 $20,000 2 9,000 12,000 12,000 3 9,000 9,000 7,200 4 9,000 6,000 4,320 5 9,000 3,000 1,480 Total $45,000 $45,000 $45,000 Instructions Answer the following questions. (a) What is the cost of the asset being depreciated? (b) What amount, if any, was used in the depreciation calculations for the salvage value for this asset? (c) Which method will produce the highest charge to income in Year 1? (d) Which method will produce the highest charge to income in Year 4? (e) Which method will produce the highest book value for the asset at the end of Year 3? (f) If the asset is sold at the end of Year 3, which method would yield the highest gain (or lowest loss) on disposal of the asset?

If banks choose to operate a 20 per cent liquidity ratio and receive extra cash deposits of £10 million: (a)  how much credit will ultimately be created? (b)  by how much will total deposits have expanded? (c)  what is the size of the bank deposits multiplier?

Identify the factors that affect a stock portfolio’s volatility and explain their effects. (LO4)

Are exports likely to continue growing faster than GDP indefinitely? What will determine the outcome?

Give two examples of positive statements about the economy, and two examples of normative ones. Now give two examples that are seemingly positive, but which have normative implications or undertones.

Assume Alexa receives $30,000 in gross rental receipts. a. What effect do the expenses associated with the property have on her AGI? b. What effect do the expenses associated with the property have on her itemized deductions?

Explain why certain long-lived assets are capitalized and recovered over time rather than immediately expensed.

Dillon rented his personal residence at Lake Tahoe for 14 days while he was vacationing in Ireland. He resided in the home for the remainder of the year. Rental income from the property was $6,500. Expenses associated with use of the home for the entire year were as follows:

The following are the trial balance and the other information related to Yorkis Perez, a consulting engineer.   1. Fees received in advance from clients $6,000. 2. Services performed for clients that were not recorded by December 31, $4,900. 3. Bad debt expense for the year is $1,430. 4. Insurance expired during the year $480. 5. Equipment is being depreciated at 10% per year. 6. Yorkis Perez gave the bank a 90-day, 10% note for $7,200 on December 1, 2014. 7. Rent of the building is $750 per month. The rent for 2014 has been paid, as has that for January 2015. 8. Office salaries and wages earned but unpaid December 31, 2014, $2,510. Instructions (a) From the trial balance and other information given, prepare annual adjusting entries as of December 31, 2014. (Omit explanations.) (b) Prepare an income statement for 2014, a statement of owner’s equity, and a classified balance sheet. Yorkis Perez withdrew $17,000 cash for personal use during the year.

Some bank managers argue that U.S. banks’ access to capital is restricted because the capital requirements imposed by U.S. regulators are too high. Write a short essay that offers logical insights into why high capital requirements may restrict a bank’s access to capital. Also, describe why high capital requirements for all banks in the United States might actually allow the banks to have easier access to capital. Which of the arguments do you believe?