Question & Answer

Presented below is abbreviated testimony from Troy Normand in the WorldCom case. He was a manager in the corporate reporting department and is one of five individuals who pleaded guilty. He is testifying in hopes of receiving no prison time when he is ultimately sentenced. Q. Mr. Normand, if you could just describe for the jury how the meeting started and what was said during the meeting? A. I can’t recall exactly who initiated the discussion, but right away Scott Sullivan acknowledged that he was aware we had problems with the entries, David Myers had informed him, and we were considering resigning. He said that he respected our concerns but that we weren’t being asked to do anything that he believed was wrong. He mentioned that he acknowledged that the company had lost focus quite a bit due to the preparations for the Sprint merger, and that he was putting plans in place and projects in place to try to determine where the problems were, why the costs were so high. He did say he believed that the initial statements that we produced, that the line costs in those statements could not have been as high as they were, that he believed something was wrong and there was no way that the costs were that high. I informed him that I didn’t believe the entry we were being asked to do was right, that I was scared, and I didn’t want to put myself in a position of going to jail for him or the company. He responded that he didn’t believe anything was wrong, nobody was going to be going to jail, but that if it later was found to be wrong, that he would be the person going to jail, not me. He asked that I stay, don’t jump off the plane, let him land it softly, that’s basically how he put it. And he mentioned that he had a discussion with Bernie Ebbers, asking Bernie to reduce projections going forward and that Bernie had refused. Q. Mr. Normand, you said that Mr. Sullivan said something about don’t jump out of the plane. What did you understand him to mean when he said that? A. Not to quit. Q. During this meeting, did Mr. Sullivan say anything about whether you would be asked to make entries like this in the future? A. Yes, he made a comment that from that point going forward we wouldn’t be asked to record any entries, high-level late adjustments, that the numbers would be the numbers. Q. What did you understand that to be mean, the numbers would be the numbers? A. That after the preliminary statements were issued, with the exception of any normal transaction, valid transaction, we wouldn’t be asked to be recording any more late entries. Q. I believe you testified that Mr. Sullivan said something about the line cost numbers not being accurate. Did he ask you to conduct any analysis to determine whether the line cost numbers were accurate? A. No, he did not. A. No. Q. Did you ever conduct any such analysis? A. No, I didn’t. Q. During this meeting, did Mr. Sullivan ever provide any accounting justification for the entry you were asked to make? A. No, he did not. Q. Did anything else happen during the meeting? A. I don’t recall anything else. Q. How did you feel after this meeting? A. Not much better actually. I left his office not convinced in any way that what we were asked to do was right. However, I did question myself to some degree after talking with him wondering whether I was making something more out of what was really there. Instructions Answer the following questions. (a) What appears to be the ethical issue involved in this case? (b) Is Troy Normand acting improperly or immorally?Q. Did anyone ever ask you to do that? (c) What would you do if you were Troy Normand? (d) Who are the major stakeholders in this case?

Use the loanable funds framework to explain how European economic conditions might affect U.S. interest rates. (LO1, LO2)

: Explain the dividends of a diverse workforce and how the definition of diversity has grown to recognize a broad spectrum of differences among employees.

How are business credits similar to personal credits?  How are they dissimilar?

Satchel Inc. purchases 10,000 shares of its own previously issued $10 par common stock for $290,000. Assuming the shares are held in the treasury with intent to reissue, what effect does this transaction have on (a) net income, (b) total assets, (c) total paid-in capital, and (d) total stockholders’ equity?

Markell’s basis in the Markit Partnership is $58,000. In a proportionate liquidating distribution, Markell receives the following assets: Tax BasisFMV Cash $8,000 $8,000 Land A 20,000 45,000 Land B 20,000 25,000 a. How much gain or loss will Markell recognize on the distribution? What is the character of any recognized gain or loss? b. What is Markell’s basis in the distributed assets?

Bart is the favorite nephew of his aunt Thelma. Thelma transferred several items of value to Bart. For each of the following transactions, determine the effect on Bart’s gross income:

On June 1, 2012, Andre Company and Agassi Company merged to form Lancaster Inc. A total of 800,000 shares were issued to complete the merger. The new corporation reports on a calendar-year basis. On April 1, 2014, the company issued an additional 400,000 shares of stock for cash. All 1,200,000 shares were outstanding on December 31, 2014. Lancaster Inc. also issued $600,000 of 20-year, 8% convertible bonds at par on July 1, 2014. Each $1,000 bond converts to 40 shares of common at any interest date. None of the bonds have been converted to date. Lancaster Inc. is preparing its annual report for the fiscal year ending December 31, 2014. The annual report will show earnings per share figures based upon a reported after-tax net income of $1,540,000. (The tax rate is 40%.) Instructions Determine the following for 2014. (a) The number of shares to be used for calculating: (1) Basic earnings per share. (2) Diluted earnings per share. (b) The earnings figures to be used for calculating: (1) Basic earnings per share. (2) Diluted earnings per share.

1.      : Do the clinical trials in Albania, and if the drug is approved, use part of the profits to set up a compassionate use program in Albania, even though setting up a distribution system and training doctors to administer the drug, monitor patients for adverse effects, and track results will entail considerable expense.

1.      : Recommend to the president that a meeting be arranged with the sales representatives entitled to a bonus and tell them that their checks were going to be delayed until Tacoma’s financial picture clarified. The sales reps would be told that the company had a legal right to delay payment and that it may not be able to pay the bonuses if its financial situation continues to deteriorate.

Boey Company reported net income of $25,000 in 2015. It had the following amounts related to its pension plan in 2015: Actuarial liability gain $10,000; Unexpected asset loss $14,000; Accumulated other comprehensive income (G/L) (beginning balance), zero. Determine for 2015 (a) Boey’s other comprehensive income, and (b) comprehensive income.

(Looking at the Maths) How long would it take an economy, like China, growing at an annual rate of close to 10 per cent to (a) double in size; (b) triple in size?

1. If V is constant, will (a) a £10 million rise in M give a £10 million rise in MV; (b) a 10 per cent rise in M give a 10 per cent rise in MV ? (Test your answer by fitting some numbers to the terms.) 2. If both V and Y are constant, will (a) a £10 million rise in M lead to a £10 million rise in P; (b) a 10 per cent rise in M lead to a 10 per cent rise in P? (Again, try fitting some numbers to the terms.)

Koch Corporation’s adjusted trial balance contained the following asset accounts at December 31, 2014: Cash $7,000; Land $40,000; Patents $12,500; Accounts Receivable $90,000; Prepaid Insurance $5,200; Inventory $30,000; Allowance for Doubtful Accounts $4,000; Equity Investments (trading) $11,000. Prepare the current assets section of the balance sheet, listing the accounts in proper sequence.

Krauss Company’s income statement for the year ended December 31, 2014, contained the following condensed information. Service revenue $840,000 Operating expenses (excluding depreciation) $624,000 Depreciation expense 60,000 Loss on sale of equipment 26,000 710,000 Income before income taxes 130,000 Income tax expense 40,000 Net income $ 90,000 Krauss’s balance sheet contained the following comparative data at December 31. 2014 2013 Accounts receivable $37,000 $54,000 Accounts payable 41,000 31,000 Income taxes payable 4,000 8,500 (Accounts payable pertains to operating expenses.) Instructions Prepare the operating activities section of the statement of cash flows using the direct method.

If the higher consumer expenditure and higher wages subsequently led to higher prices, what would happen to: (a) real wages; (b) unemployment (assuming no further response from unions)?

What are the carryover and carryback periods for a net operating loss? Does a corporation have the option to choose the years to which it carries back a NOL? Explain.

You assemble the following information for Seneca Department Store, which computes its inventory under the dollar-value LIFO method. Cost Retail Inventory on January 1, 2014 $216,000 $300,000 Purchases 364,800 480,000 Increase in price level for year 9% Instructions Compute the cost of the inventory on December 31, 2014, assuming that the inventory at retail is (a) $294,300 and (b) $365,150.

Name some of the principal bonding materials used in grinding wheels

Why is silicon a desirable work material in microsystem technology?

Gingrich Importers provides the following pension plan information. Fair value of pension plan assets, January 1, 2014 $2,400,000 Fair value of pension plan assets, December 31, 2014 2,725,000 Contributions to the plan in 2014 280,000 Benefi ts paid retirees in 2014 350,000 Instructions From the data above, compute the actual return on the plan assets for 2014.

What are some of the key obstacles for the FASB and IASB within their accounting guidance in the area of cash flow reporting? Explain.

The voltage in an EBW operation is 45 kV. The beam current is 60 milliamp. The electron beam is focused on a circular area that is 0.25 mm in diameter. The heat transfer factor is 0.87. Calculate the average power density in the area in watt/mm2

Assume that in addition to renting the condo for 100 days, Alexa uses the condo for 8 days of personal use. Also assume that Alexa receives $30,000 of gross rental receipts, her itemized deductions exceed the standard deduction before considering expenses associated with the condo, and that her itemized deduction for non-home business taxes is less than $10,000 by more than the real property taxes allocated to rental use of the home.

Using the facts in problem 62, could Adam and Tom lower their payroll tax exposure if they operated their business as a partnership?  Why or why not?