Question & Answer

What is a hybrid composite?

A pin made of alloy steel is press-fitted into a hole machined in the base of a large machine. The hole has a diameter of 2.497 in. The pin has a diameter of 2.500 in. The base of the machine is 4 ft x 8 ft. The base and pin have a modulus of elasticity of 30 x 106 lb/in2, a yield strength of 85,000 lb/in2, and a tensile strength of 120,000 lb/in2. Determine (a) the radial pressure between the pin and the base and (b) the maximum effective stress in the interface

Campbell’s tax return was audited because she failed to report interest she earned on her tax return.  What IRS audit selection method identified her tax return?

Shonen Knife Corporation has elected to use the fair value option for one of its notes payable. The note was issued at an effective rate of 11% and has a carrying value of $16,000. At year-end, Shonen Knife’s borrowing rate has declined; the fair value of the note payable is now $17,500. (a) Determine the unrealized holding gain or loss on the note. (b) Prepare the entry to record any unrealized holding gain or loss.

Explain how the accounting method applied to mortgage-backed securities made it more difficult for banks to satisfy capital requirements during the credit crisis of 2008–2009. (LO2)

At the end of its first year of operations, the trial balance of Alonzo Company shows Equipment $30,000 and zero balances in Accumulated Depreciation—Equipment and Depreciation Expense. Depreciation for the year is estimated to be $2,000. Prepare the adjusting entry for depreciation at December 31, and indicate the balance sheet presentation for the equipment at December 31.

The financial statements of ConAgra Foods, Inc.’s 2012 annual report disclose the following information. (in millions) May 27, 2012 May 29, 2011 May 30, 2010 Inventories $1,870 $1,803 $1,598 Fiscal Year 2012 2011 Net sales $13,263 $12,303 Cost of goods sold 10,436 9,390 Net income 474 818 Instructions Compute ConAgra’s (a) inventory turnover and (b) the average days to sell inventory for 2012 and 2011.

Brazil Group purchases a vehicle at a cost of $50,000 on January 2, 2014. Individual components of the vehicle and useful lives are as follows. Cost Useful Lives Tires $ 6,000 2 years Transmission 10,000 5 years Trucks 34,000 10 years Instructions (Assume no residual (salvage) value.) (a) Compute depreciation expense for 2014, assuming Brazil depreciates the vehicle as a single unit. (b) Compute depreciation expense for 2014, assuming Brazil uses component depreciation. (c) Why might a company want to use component depreciation to depreciate its assets?

What determines the shape and position of the IS curve?

In a wire EDM operation performed on 7-mm-thick C1080 steel using a tungsten wire electrode whose diameter = 0.125 mm, past experience suggests that the overcut will be 0.02 mm, so that the kerf width will be 0.165 mm. Using a discharge current = 10 amps, what is the allowable feed rate that can be used in the operation? Estimate the melting temperature of 0.80% carbon steel from the phase diagram of Figure 6.4.

Data for Pat Metheny Company are presented in E23-11. Instructions Prepare a statement of cash flows using the direct method. (Do not prepare a reconciliation schedule.)

How do thermoplastic elastomers differ from conventional rubbers?

Boodeesh is contemplating running a consulting business out of her home. She has a large garage apartment in her backyard that would be perfect for her business. Given that the garage apartment is separate from her house (about 30 feet behind her house), would the office be considered part of her home for purposes of the home office rules?

Joey is a 25 percent owner of Loopy LLC. He no longer wants to be involved in the business. What options does Joey have to exit the business?

Will economic growth always involve a parallel outward shift of the production possibility curve?

Reed Pentak, a finance major, has been following globalization and made the following observation concerning accounting convergence: “I do not see many obstacles concerning development of a single accounting standard for inventories.” Prepare a response to Reed to explain the main obstacle to achieving convergence in the area of inventory accounting.

On January 1, 2014, Acker Inc. had the following balance sheet. ACKER INC. BALANCE SHEET AS OF JANUARY 1, 2014 Assets Equity Cash $ 50,000 Common stock $260,000 Equity investments (available-for-sale) 240,000 Accumulated other comprehensive income 30,000 Total $290,000 Total $290,000 The accumulated other comprehensive income related to unrealized holding gains on available-for-sale securities. The fair value of Acker Inc.’s available-for-sale securities at December 31, 2014, was $190,000; its cost was $140,000. No securities were purchased during the year. Acker Inc.’s income statement for 2014 was as follows. (Ignore income taxes.) ACKER INC. INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2014 Dividend revenue $ 5,000 Gain on sale of investments 30,000 Net income $35,000 Instructions (Assume all transactions during the year were for cash.) (a) Prepare the journal entry to record the sale of the available-for-sale securities in 2014. (b) Prepare a statement of comprehensive income for 2014. (c) Prepare a balance sheet as of December 31, 2014.

Bill Novak is working on an audit of an IFRS client. In his review of the client’s interim reports, he notes that the reports are prepared on a discrete basis. That is, each interim report is viewed as a distinct period. Is this acceptable under IFRS? If so, explain how that treatment could affect comparisons to a GAAP company.

There are 18 correct answers in the following multiple choice questions (some questions have more than one correct answer). To achieve a perfect score on the quiz, all correct answers must be given. Each correct answer is worth 1 point. Each omitted answer or wrong answer reduces the total score by 1 point, and each additional answer beyond the correct number of answers reduces the score by 1 point. The percentage score on the quiz is based on the total number of correct answers. 38.1 Nanotechnology refers to the fabrication and application of entities whose feature sizes are in which of the following ranges (one best answer): (a) 0.1 nm-10 nm, (b) 1 nm-100 nm, or (c) 100 nm-1000 nm? 38.2 One nanometer is equivalent to which of the following (two correct answers): (a) 1 x 10-3 μm, (b) 1 x 10-6 m, (c) 1 x 10-9 m, and (d) 1 x 106 mm. 38.3 NNI stands for which one of the following: (a) Nanoscience Naval Institute, (b) Nanoscience Nonsense and Ignorance, (c) National Nanotechnology Initiative, or (d) Nanotechnology News Identification? 38.4 The surface-to-volume ratio of a cube that is 1 x 10-6 m on each edge is significantly greater than the surface-to-volume ratio of a cube that is 1 m on each edge: (a) true or (b) false? 38.5 The proportion of surface molecules relative to internal molecules is significantly greater for a cube that is 1 x 10-6 m on each edge than for a cube that is 1 m on each edge: (a) true or (b) false? 38.6 Which one of the following microscopes can achieve the greatest magnification: (a) electron microscope, (b) optical microscope, or (c) scanning tunneling microscope? 38.7 Which of the following are correct statements about a buckyball (three best answers): (a) it contains 60 atoms, (b) it contains 100 atoms, (c) it contains 600 atoms, (d) it is a carbon atom, (e) it is a carbon molecule, (f) it is shaped like a basketball, (g) it is shaped like a tube, and (h) it is shaped like a volleyball? 38.8 Which of the following are considered techniques that fall within the category called top-down approaches to nanofabrication (three best answers): (a) biological evolution, (b) electron-beam  lithography, (c) micro-imprint lithography, (d) scanning probe techniques, (e) self-assembly, and (f) X-ray lithography? 38.9 Which of the following are considered techniques that fall within the category called bottom-up approaches to nanofabrication (three best answers): (a) electron beam lithography, (b) extreme ultraviolet lithography, (c) chemical vapor deposition to produce carbon nanotubes, (d) nanoimprint lithography, (e) scanning probe techniques, (f) self-assembly, and (g) X-ray lithography? 38.10 Dip-pen nanolithography uses which one of the following techniques and/or devices: (a) atomic force microscope, (b) chemical vapor deposition, (c) electron beam lithography, (d) nano-imprint lithography, or (e) self-assembly? 38.11 A self-assembled monolayer has a thickness that is which one of the following: (a) one micrometer, (b) one millimeter, (c) one molecule, or (d) one nanometer?

Bella Partnership is an equal partnership in which each of the partners has a basis in their partnership interest of $10,000. Bella reports the following balance sheet: Assets: Tax Basis FMV Inventory $ 20,000 $ 30,000 Land 10,000 15,000    Totals $ 30,000 $ 45,000 Liabilities and capital: Capital- Toby 10,000 - Kaelin 10,000 - Andrew 10,000   Totals $ 30,000 a. Identify the hot assets if Toby decides to sell his partnership interest. Are these assets “hot” for purposes of distributions? b. If Bella distributes the land to Toby in complete liquidation of his partnership interest, what tax issues should be considered?

Sandy and John Ferguson got married eight years ago and have a seven-year-old daughter, Samantha.  In 2024, Sandy worked as a computer technician at a local university earning a salary of $152,000, and John worked part time as a receptionist for a law firm earning a salary of $29,000.  Sandy also does some Web design work on the side and reported revenues of $4,000 and associated expenses of $750.  The Fergusons received $800 in qualified dividends and a $200 refund of their state income taxes.  The Fergusons always itemize their deductions, get the full benefit of deducting the entire amount of state income taxes paid, and their itemized deductions were well over the standard deduction amount last year.

Matt Ryan Corporation is interested in building its own soda can manufacturing plant adjacent to its existing plant in Partyville, Kansas. The objective would be to ensure a steady supply of cans at a stable price and to minimize transportation costs. However, the company has been experiencing some financial problems and has been reluctant to borrow any additional cash to fund the project. The company is not concerned with the cash flow problems of making payments, but rather with the impact of adding additional long-term debt to its balance sheet. The president of Ryan, Andy Newlin, approached the president of the Aluminum Can Company (ACC), its major supplier, to see if some agreement could be reached. ACC was anxious to work out an arrangement, since it seemed inevitable that Ryan would begin its own can production. The Aluminum Can Company could not afford to lose the account. After some discussion, a two-part plan was worked out. First, ACC was to construct the plant on Ryan’s land adjacent to the existing plant. Second, Ryan would sign a 20-year purchase agreement. Under the purchase agreement, Ryan would express its intention to buy all of its cans from ACC, paying a unit price which at normal capacity would cover labor and material, an operating management fee, and the debt service requirements on the plant. The expected unit price, if transportation costs are taken into consideration, is lower than current market. If Ryan did not take enough production in any one year and if the excess cans could not be sold at a high enough price on the open market, Ryan agrees to make up any cash shortfall so that ACC could make the payments on its debt. The bank will be willing to make a 20-year loan for the plant, taking the plant and the purchase agreement as collateral. At the end of 20 years, the plant is to become the property of Ryan. Instructions (a) What are project financing arrangements using special-purpose entities? (b) What are take-or-pay contracts? (c) Should Ryan record the plant as an asset together with the related obligation? (d) If not, should Ryan record an asset relating to the future commitment? (e) What is meant by off-balance-sheet financing?

Based on what you know about repurchase agreements, would you expect them to have a lower or higher annualized yield than commercial paper? Why? (LO1)

Reese, 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. Reese can pay the $20,000 bill any time before January 30 of next year without penalty. Assume Reese’s marginal tax rate is 32 percent this year and will be 37 percent 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?

Metro Corp. traded building A for building B. Metro originally purchased building A for $50,000, and building A’s adjusted basis was $25,000 at the time of the exchange. What is Metro’s realized gain or loss, recognized gain or loss, and adjusted basis in building B in each of the following alternative scenarios?  a.  The fair market value of building A and of building B is $40,000 at the time of the exchange. The exchange does not qualify as a like-kind exchange. b.  The fair market value of building A and of building B is $40,000. The exchange qualifies as a like-kind exchange c. The fair market value of building A is $35,000, and building B is valued at $40,000. Metro exchanges building A and $5,000 cash for building B. building A and building B are like-kind property. d. The fair market value of building A is $45,000, and Metro trades building A for building B valued at $40,000 and $5,000 cash. Building A and building B are like-kind property.