Question & Answer

On March 1, 2014, Sealy Company sold its 5-year, $1,000 face value, 9% bonds dated March 1, 2014, at an effective annual interest rate (yield) of 11%. Interest is payable semiannually, and the first interest payment date is September 1, 2014. Sealy uses the effective-interest method of amortization. Bond issue costs were incurred in preparing and selling the bond issue. The bonds can be called by Sealy at 101 at any time on or after March 1, 2015. Instructions (a) (1) How would the selling price of the bond be determined? (2) Specify how all items related to the bonds would be presented in a balance sheet prepared immediately after the bond issue was sold. (b) What items related to the bond issue would be included in Sealy’s 2014 income statement, and how would each be determined? (c) Would the amount of bond discount amortization using the effective-interest method of amortization be lower in the second or third year of the life of the bond issue? Why? (d) Assuming that the bonds were called in and redeemed on March 1, 2015, how should Sealy report the redemption of the bonds on the 2015 income statement?

Tim is a plumber who joined a barter club. This year Tim exchanges plumbing services for a new roof. The roof is properly valued at $2,500, but Tim would have billed only $2,200 for the plumbing services. What amount of income should Tim recognize on the exchange of his services for a roof? Would your answer change if Tim would have normally billed $3,000 for his services?

For various reasons a corporation may issue warrants to purchase shares of its common stock at specified prices that, depending on the circumstances, may be less than, equal to, or greater than the current market price. For example, warrants may be issued: 1. To existing stockholders on a pro rata basis. 2. To certain key employees under an incentive stock-option plan. 3. To purchasers of the corporation’s bonds. Instructions For each of the three examples of how stock warrants are used: (a) Explain why they are used. (b) Discuss the significance of the price (or prices) at which the warrants are issued (or granted) in relation to (1) the current market price of the company’s stock, and (2) the length of time over which they can be exercised. (c) Describe the information that should be disclosed in financial statements, or notes thereto, that are prepared when stock warrants are outstanding in the hands of the three groups listed above.

Discuss the underlying concern to tax policy makers in distributions in which a partner receives more or less than their share of the partnership’s hot assets.

What is springback in sheet-metal bending?

What are the relative advantages and disadvantages to a developing country of rescheduling its debts compared with simply defaulting on them (either temporarily or permanently)?

What was the growth rate in manufacturing output from (a) 2005 to 2006; (b) 2008 to 2009; 2019 to 2020?

Petrenko Corporation has outstanding 2,000 $1,000 bonds, each convertible into 50 shares of $10 par value common stock. The bonds are converted on December 31, 2014, when the unamortized discount is $30,000 and the market price of the stock is $21 per share. Record the conversion using the book value approach.

What are some of the important design functions of IC packaging?

On a diagram similar to Figure 19.19, trace through the effects of (a) a fall in investment and (b) a fall in the money supply. On what does the size of the fall in national income depend?

Under what circumstances would you expect the after-tax return from an investment in a capital asset to approach that of tax-exempt assets assuming equal before-tax rates of return?

The foreman in the pressworking section comes to you with the problem of a blanking operation that is producing parts with excessive burrs. (a) What are the possible reasons for the burrs, and (b) what can be done to correct the condition?

How does a turret lathe differ from an engine lathe?

Illustrate the impact on the IS curve of a general increase in interest-rate differentials following a credit market disruption like that experienced during the financial crisis of the late 2000s.

{Planning} Rick, who is single, has been offered a position as a city landscape consultant.The position pays $125,000 in cash wages.Assume Rick files single and is entitled to one personal exemption.Rick deducts the standard deduction instead of itemized deductions a.What is the amount of Rick’s after-tax compensation (ignore payroll taxes)?

Design the nominal sizes of a GO/NO-GO snap gage to inspect the diameter of a shaft that is 30.00 ± 0.18 mm. A wear allowance of 3% of the entire tolerance band is applied to the GO side. Determine (a) the nominal size of the GO gage including the wear allowance and (b) the nominal size of the NO-GO gage

The following stress and strain values were measured in the plastic region during a tensile test carried out on a new experimental metal: (1) true stress = 43,608 lb/in2 and true strain = 0.27 in/in, and (2) true stress = 52,048 lb/in2 and true strain = 0.85 in/in. Based on these data points, determine the strength coefficient and strain-hardening exponent.

What controversy relates to the accounting for net operating loss carryforwards?

If expectations were formed rationally with no time lags, what would be the implications for short-run DAS curves and for the response to a rise in aggregate demand?

1. How much would be the total tax revenue for the government? 2. Will the individual producers gain from the export tax?

The chairman of the FASB at one time noted that “the flowof standards can only be slowed if (1) producers focus lesson quarterly earnings per share and tax benefits and moreon quality products, and (2) accountants and lawyers relyless on rules and law and more on professional judgmentand conduct.” Explain his comment.

On January 1, 2014, Botosan Company issued a $1,200,000, 5-year, zerointerest- bearing note to National Organization Bank. The note was issued to yield 8% annual interest. Unfortunately, during 2015 Botosan fell into financial trouble due to increased competition. After reviewing all available evidence on December 31, 2015, National Organization Bank decided that the loan was impaired. Botosan will probably pay back only $800,000 of the principal at maturity. Instructions (a) Prepare journal entries for both Botosan Company and National Organization Bank to record the issuance of the note on January 1, 2014. (Round to the nearest $10.) (b) Assuming that both Botosan Company and National Organization Bank use the effective-interest method to amortize the discount, prepare the amortization schedule for the note. (c) Under what circumstances can National Organization Bank consider Botosan’s note to be impaired? (d) Compute the loss National Organization Bank will suffer from Botosan’s financial distress on December 31, 2015. What journal entries should be made to record this loss?

Stephanie is 12 years old and often assists neighbors on weekends by babysitting their children. Calculate the 2024 standard deduction Stephanie will claim under the following independent circumstances (assume that Stephanie’s parents will claim her as a dependent). a. Stephanie reported $950 of earnings from her babysitting. b. Stephanie reported $1,500 of earnings from her babysitting. c. Stephanie reported $18,000 of earnings from her babysitting.

Sycamore Candy Company offers an MP3 download (seven-single medley) as a premium for every five candy bar wrappers presented by customers together with $2.50. The candy bars are sold by the company to distributors for 30 cents each. The purchase price of each download code to the company is $2.25. In addition, it costs 50 cents to distribute each code. The results of the premium plan for the years 2014 and 2015 are as follows. (All purchases and sales are for cash.) 2014 2015 MP3 codes purchased 250,000 330,000 Candy bars sold 2,895,400 2,743,600 Wrappers redeemed 1,200,000 1,500,000 2014 wrappers expected to be redeemed in 2015 290,000 2015 wrappers expected to be redeemed in 2016 350,000 Instructions (a) Prepare the journal entries that should be made in 2014 and 2015 to record the transactions related to the premium plan of the Sycamore Candy Company. (b) Indicate the account names, amounts, and classifications of the items related to the premium plan that would appear on the balance sheet and the income statement at the end of 2014 and 2015.

Explain how the Financial Reform Act of 2010 attempted to prevent biased ratings of mortgage-backed securities by credit rating agencies. (LO5)