Question & Answer

Jim Carrie Company shows a balance of $181,140 in the Accounts Receivable account on December 31, 2013. The balance consists of the following. Installment accounts due in 2014 $23,000 Installment accounts due after 2014 34,000 Overpayments to vendors 2,640 Due from regular customers, of which $40,000 represents accounts pledged as security for a bank loan 79,000 Advances to employees 1,500 Advance to subsidiary company (due in 2015) 81,000 Instructions Illustrate how the information above should be shown on the balance sheet of Jim Carrie Company on December 31, 2013.

Why do developed countries experience a degree of convergence over time? Would you expect there to be total convergence of GDP per head?

Distinguish between the accounting treatment for availablefor- sale equity securities and trading equity securities.

Describe stablecoins and explain how they differ from bitcoins. (LO3)

(Threshold Concept 8) 1. Assume that a firm is selling 1000 units of a product at £20 each and that each unit on average costs £15 to produce. Assume also that to produce additional units will cost the firm £19 each and that the price will remain at £20. To produce additional products will therefore reduce the average profit per unit. Should the firm expand production? Explain? (Threshold Concept 8) 2. Assume that a ferry has capacity for 500 passengers. Its operator predicts that it will typically have only 200 passengers on each of its mid-week sailings over the winter. Assume also that each sailing costs the company £10,000. This means that mid-week winter sailings cost the company an average of £10 000/200 = £50 per passenger. Currently tickets cost £60. Should the company consider selling stand-by tickets during the winter for (a) less than £60; (b) less than £50? (Clue: think about the marginal cost of taking additional passengers.)

On July 1, 2014, Agincourt Inc. made two sales. 1. It sold land having a fair value of $700,000 in exchange for a 4-year zero-interest-bearing promissory note in the face amount of $1,101,460. The land is carried on Agincourt’s books at a cost of $590,000. 2. It rendered services in exchange for a 3%, 8-year promissory note having a face value of $400,000 (interest payable annually). Agincourt Inc. recently had to pay 8% interest for money that it borrowed from British National Bank. The customers in these two transactions have credit ratings that require them to borrow money at 12% interest. Instructions Record the two journal entries that should be recorded by Agincourt Inc. for the sales transactions above that took place on July 1, 2014.

Management accounting function Differentiate between the management accounting function and the management accountant.

Explain why some meme stocks were misvalued by investors.

This year BPS billed clients for $86,700 and collected $61,000 in cash for golf lessons completed during the year. In addition, BPS collected an additional $14,500 in cash for lessons that will commence after year-end. Binu hopes to collect about half of the outstanding billings next year, but the rest will likely be written off.  Besides providing private golf lessons, BPS also contracted with the country club to staff the driving range. This year, BPS billed the country club $27,200 for the service. The club paid $17,000 of the amount but disputed the remainder. By year-end, the dispute had not been resolved, and while Binu believes BPS is entitled to the money, the remaining $10,200 has not been paid. BPS has accrued the following expenses (explained below): Advertising (in the clubhouse)$ 13,150 Pro golf teachers’ membership fees860 Supplies (golf tees, balls, etc.)4,720 Club rental6,800 Malpractice insurance2,400 Accounting fees8,820 The expenditures were all paid for this calendar year, with several exceptions. First, Binu initiated his golfer’s malpractice insurance on June 1 of this year. The $2,400 insurance bill covers the last six months of this calendar year and the first six months of next year. At year-end, Binu had only paid $600, but has assured the insurance agent the remaining $1,800 will be paid early next year. Second, the amount paid for club rental ($100 per week) represents rental charges for the last 6 weeks of the previous year, the 52 weeks in this calendar year, and the first 10 weeks of next year. Binu has also mentioned that BPS only pays for supplies that are used at the club. Although BPS could buy the supplies for half the cost elsewhere, Binu likes to “throw some business” to the golf pro shop because it is operated by his brother. Complete a draft of Parts I and II on the front page of a Schedule C for BPS.

Presented below is information related to Zonker Company. 1. On July 6, Zonker Company acquired the plant assets of Doonesbury Company, which had discontinued operations. The appraised value of the property is: Land $ 400,000 Buildings 1,200,000 Equipment 800,000 Total $2,400,000 Zonker Company gave 12,500 shares of its $100 par value common stock in exchange. The stock had a market price of $168 per share on the date of the purchase of the property. 2. Zonker Company expended the following amounts in cash between July 6 and December 15, the date when it first occupied the building. Repairs to building $105,000 Construction of bases for equipment to be installed later 135,000 Driveways and parking lots 122,000 Remodeling of offi ce space in building, including new partitions and walls 161,000 Special assessment by city on land 18,000 3. On December 20, the company paid cash for equipment, $260,000, subject to a 2% cash discount, and freight on equipment of $10,500. Instructions Prepare entries on the books of Zonker Company for these transactions.

Plant assets often require expenditures subsequent to acquisition. It is important that they be accounted for properly. Any errors will affect both the balance sheets and income statements for a number of years. Instructions For each of the following items, indicate whether the expenditure should be capitalized (C) or expensed (E) in the period incurred. (a) __________ Improvement. (b) __________ Replacement of a minor broken part on a machine. (c) __________ Expenditure that increases the useful life of an existing asset. (d) __________ Expenditure that increases the efficiency and effectiveness of a productive asset but does not increase its salvage value. (e) __________ Expenditure that increases the efficiency and effectiveness of a productive asset and increases the asset’s salvage value. (f) __________ Expenditure that increases the quality of the output of the productive asset. (g) __________ Improvement to a machine that increased its fair market value and its productioncapacity by 30% without extending the machine’s useful life. (h) __________ Ordinary repairs.

Clark owns stock in BCS Corporation that he purchased in January of the current year. The stock has appreciated significantly during the year. It is now December of the current year, and Clark is deciding whether he should sell the stock. What tax and nontax factors should Clark consider before making the decision on whether to sell the stock now?

Explain the use of a sinking-fund provision. How can it reduce the investor’s risk? (LO2)

The conventional retail inventory method yields results that are essentially the same as those yielded by the lowerof- cost-or-market method. Explain. Prepare an illustration of how the retail inventory method reduces inventory to market.

During the current year, Marshall Construction trades an old crane that has a book value of $90,000 (original cost $140,000 less accumulated depreciation $50,000) for a new crane from Brigham Manufacturing Co. The new crane cost Brigham $165,000 to manufacture and is classified as inventory. The following information is also available. Marshall Const. Brigham Mfg. Co. Fair value of old crane $ 82,000 Fair value of new crane $200,000 Cash paid 118,000 Cash received 118,000 Instructions (a) Assuming that this exchange is considered to have commercial substance, prepare the journal entries on the books of (1) Marshall Construction and (2) Brigham Manufacturing. (b) Assuming that this exchange lacks commercial substance for Marshall, prepare the journal entries on the books of Marshall Construction. (c) Assuming the same facts as those in (a), except that the fair value of the old crane is $98,000 and the cash paid is $102,000, prepare the journal entries on the books of (1) Marshall Construction and (2) Brigham Manufacturing. (d) Assuming the same facts as those in (b), except that the fair value of the old crane is $97,000 and the cash paid $103,000, prepare the journal entries on the books of (1) Marshall Construction and (2) Brigham Manufacturing.

Name the items, in addition to the amount paid to the former owner or contractor, that may properly be included as part of the acquisition cost of the following plant assets. (a) Land. (b) Machinery and equipment. (c) Buildings.

What is meant by the term antidilution? Give an example.

On April 1, 2014, Rasheed Company assigns $400,000 of its accounts receivable to the Third National Bank as collateral for a $200,000 loan due July 1, 2014. The assignment agreement calls for Rasheed Company to continue to collect the receivables. Third National Bank assesses a finance charge of 2% of the accounts receivable, and interest on the loan is 10% (a realistic rate of interest for a note of this type). Instructions (a) Prepare the April 1, 2014, journal entry for Rasheed Company. (b) Prepare the journal entry for Rasheed’s collection of $350,000 of the accounts receivable during the period from April 1, 2014, through June 30, 2014. (c) On July 1, 2014, Rasheed paid Third National all that was due from the loan it secured on April 1, 2014. Prepare the journal entry to record this payment.

Dos Passos Company sells televisions at an average price of $900 and also offers to each customer a separate 3-year warranty contract for $90 that requires the company to perform periodic services and to replace defective parts. During 2014, the company sold 300 televisions and 270 warranty contracts for cash. It estimates the 3-year warranty costs as $20 for parts and $40 for labor, and accounts for warranties separately. Assume sales occurred on December 31, 2014, and straight-line recognition of warranty revenues occurs. Instructions (a) Record any necessary journal entries in 2014. (b) What liability relative to these transactions would appear on the December 31, 2014, balance sheet and how would it be classified? In 2015, Dos Passos Company incurred actual costs relative to 2014 television warranty sales of $2,000 for parts and $4,000 for labor. (c) Record any necessary journal entries in 2015 relative to 2014 television warranties. (d) What amounts relative to the 2014 television warranties would appear on the December 31, 2015, balance sheet and how would they be classified?

Using the IRS Web site (https://www.irs.gov/pub/irs-pdf/p5869.pdf), how large is the current estimated “tax gap” (i.e., the amount of tax underpaid by taxpayers annually) for years 2020-2021? What group of taxpayers represents the largest “contributors” to the tax gap?

} Last year, JL Corporation’s tax liability was $900,000. For the current year, JL Corporation reported the following taxable income at the end of its first, second, and third quarters (see table below). What are JL’s minimum required first, second, third, and fourth quarter estimated tax payments (ignoring the actual current-year tax safe harbor)?      Quarter-End Cumulative taxable income First $500,000 Second $1,250,000 Third $2,250,000

Hawthorn Corporation’s adjusted trial balance contained the following accounts at December 31, 2014: Retained Earnings $120,000; Common Stock $750,000; Bonds Payable $100,000; Paid-in Capital in Excess of Par—Common Stock $200,000; Goodwill $55,000; Accumulated Other Comprehensive Loss $150,000; Noncontrolling Interest $35,000. Prepare the stockholders’ equity section of the balance sheet.

Define federal funds, the federal funds market, and the federal funds rate. Who sets the target federal funds rate? (LO2)

Go through each of the above reasons for shifts in the demand for and supply of sterling and consider what would cause an appreciation of the pound.

The overall balance of payments must always balance. If this is the case, why might a deficit on one part of the balance of payments be seen as a problem?