Question & Answer

The surface finish specification in a turning job is 0.8 µm. The work material is cast iron. Cutting speed = 75 m/min, feed = 0.3 mm/rev, and depth of cut = 4.0 mm. The nose radius of the cutting tool must be selected. Determine the minimum nose radius that will obtain the specified finish in this operation.

To help pay for the city’s new stadium, the city of Birmingham recently enacted a 1 percent surcharge on hotel rooms. Is this a tax?  Why or why not?

McIntyre Corporation issued 2,000 $1,000 bonds at 101. Each bond was issued with one detachable stock warrant. After issuance, the bonds were selling separately at 98. The market price of the warrants without the bonds cannot be determined. Use the incremental method to record the issuance of the bonds and warrants.

Tempe Corporation is a calendar-year corporation.  At the beginning of 2024, its election to be taxed as an S corporation became effective.  Tempe Corp.’s balance sheet at the end of 2023 reflected the following assets (it did not have any earnings and profits from its prior years as a C corporation): Asset Adjusted basis FMV Cash $20,000 $20,000 Accounts receivable 40,000 40,000 Inventory 160,000 200,000 Land 150,000 120,000   Totals $370,000 $380,000 Tempe Corp.’s business income for the year was $40,000 (this would have been its taxable income if it were a C corporation).  During 2024, Tempe Corp. sold all of the inventory it owned at the beginning of the year for $210,000.   a. What is its built-in gains tax in 2024?

Presented below are selected transactions on the books of Simonson Corporation. May 1, 2014 Bonds payable with a par value of $900,000, which are dated January 1, 2014, are sold at 106 plus accrued interest. They are coupon bonds, bear interest at 12% (payable annually at January 1), and mature January 1, 2024. (Use interest expense account for accrued interest.) Dec. 31 Adjusting entries are made to record the accrued interest on the bonds, and the amortization of the proper amount of premium. (Use straight-line amortization.) Jan. 1, 2015 Interest on the bonds is paid. April 1 Bonds with par value of $360,000 are called at 102 plus accrued interest, and redeemed. (Bond premium is to be amortized only at the end of each year.) Dec. 31 Adjusting entries are made to record the accrued interest on the bonds, and the proper amount of premium amortized.

In year 0, Longworth Partnership purchased a machine for $40,000 to use in its business. In year 3, Longworth sold the machine for $35,000. Between the date of the purchase and the date of the sale, Longworth depreciated the machine by $22,000.  a. What are the amount and character of the gain or loss Longworth will recognize on the sale?  b. What are the amount and character of the gain or loss Longworth will recognize on the sale if the sale proceeds are increased to $45,000?  c. What are the amount and character of the gain or loss Longworth will recognize on the sale if the sale proceeds are decreased to $15,000?

A disk 40 cm in diameter and 5 cm thick is to be cast of pure aluminum in an open mold casting operation. The melting temperature of aluminum = 660°C, and the pouring temperature will be 800°C. Assume that the amount of aluminum heated will be 5% more than what is needed to fill the mold cavity. Compute the amount of heat that must be added to the metal to heat it to the pouring temperature, starting from a room temperature of 25°C. The heat of fusion of aluminum = 389.3 J/g. Other properties can be obtained from Tables 4.1 and 4.2 in the text. Assume the specific heat has the same value for solid and molten aluminum

A laser triangulation system has the laser mounted at a 35° angle from the vertical. The distance between the worktable and the photodetector is 24.0000 in. Determine (a) the distance between the laser and the photodetector when no part is present and (b) the height of a part when the distance between the laser and photo-detector is 12.0250 in.

What can we say about the slope of the TR and TC curves at the maximum profit point? What does this tell us about marginal revenue and marginal cost?

List two types of transactions that would receive different accounting treatment using (a) strict cash-basis accounting, and (b) a modified cash basis.

A 125.0-mm-diameter shaft rotates inside a stationary bushing whose inside diameter = 125.6 mm and length = 50.0 mm. In the clearance between the shaft and the bushing is a lubricating oil whose viscosity = 0.14 Pa-s. The shaft rotates at a velocity of 400 rev/min; this speed and the action of the oil are sufficient to keep the shaft centered inside the bushing. Determine the magnitude of the torque due to viscosity that acts to resist the rotation of the shaft.

Presented below is a list of items that may or may not be reported as inventory in a company’s December 31 balance sheet. 1. Goods out on consignment at another company’s store. 2. Goods sold on an installment basis (bad debts can be reasonably estimated). 3. Goods purchased f.o.b. shipping point that are in transit at December 31. 4. Goods purchased f.o.b. destination that are in transit at December 31. 5. Goods sold to another company, for which our company has signed an agreement to repurchase at a set price that covers all costs related to the inventory. 6. Goods sold where large returns are predictable. 7. Goods sold f.o.b. shipping point that are in transit at December 31. 8. Freight charges on goods purchased. 9. Interest costs incurred for inventories that are routinely manufactured. 10. Costs incurred to advertise goods held for resale. 11. Materials on hand not yet placed into production by a manufacturing firm. 12. Office supplies. 13. Raw materials on which a manufacturing firm has started production but which are not completely processed. 14. Factory supplies. 15. Goods held on consignment from another company. 16. Costs identified with units completed by a manufacturing firm but not yet sold. 17. Goods sold f.o.b. destination that are in transit at December 31. 18. Short-term investments in stocks and bonds that will be resold in the near future. Instructions Indicate which of these items would typically be reported as inventory in the financial statements. If an item should not be reported as inventory, indicate how it should be reported in the financial statements.

Marathon Inc. (a C corporation) reported $1,000,000 of taxable income in the current year. During the year, it distributed $100,000 as dividends to its shareholders as follows: • $5,000 to Guy, a 5 percent individual shareholder. • $15,000 to Little Rock Corp., a 15 percent shareholder (C corporation).  • $80,000 to other shareholders. a. How much of the dividend payment did Marathon deduct in determining its taxable income? b. Assuming Guy’s marginal ordinary tax rate is 37 percent, how much tax will he pay on the $5,000 dividend he received from Marathon Inc. (including the net investment income tax)?  c. What amount of tax will Little Rock Corp. pay on the $15,000 dividend it received from Marathon Inc. (50 percent dividends-received deduction)? d. Complete Form 1120 Schedule C for Little Rock Corp. to reflect its dividends-received deduction (use the most recent Form 1120 Schedule C available). e. On what line on page 1 of Little Rock Corp.’s Form 1120 is the dividend from Marathon Inc. reported, and on what line of Little Rock Corp.’s Form 1120 is its dividends-received deduction reported?

A laser triangulation system is used to determine the height of a steel block. The system has a photosensitive detector that is located 750.000 mm above the working surface and the laser is mounted at a 30.00° angle from the vertical. With no part on the worktable, the position of the laser reflection on the photo sensor is recorded. After a part is placed on the worktable, the laser reflection shifts 70.000 mm toward the laser. Determine the height of the object.

Instructions Go to the book’s companion website or the company websites and use information found there to answer the following questions related to UAL, Inc. and Southwest Airlines. (a) What types of leases are used by Southwest and on what assets are these leases primarily used? (b) How long-term are some of Southwest’s leases? What are some of the characteristics or provisions of Southwest’s (as lessee) leases? (c) What did Southwest report in 2011 as its future minimum annual rental commitments under noncancelable leases? (d) At year-end 2011, what was the present value of the minimum rental payments under Southwest’s capital leases? How much imputed interest was deducted from the future minimum annual rental commitments to arrive at the present value? (e) What were the amounts and details reported by Southwest for rental expense in 2011, 2010, and 2009? (f) How does UAL’s use of leases compare with Southwest’s?

Daniel Barenboim sells and erects shell houses, that is, frame structures that are completely finished on the outside but are unfinished on the inside except for flooring, partition studding, and ceiling joists. Shell houses are sold chiefly to customers who are handy with tools and who have time to do the interior wiring, plumbing, wall completion and finishing, and other work necessary to make the shell houses livable dwellings. Barenboim buys shell houses from a manufacturer in unassembled packages consisting of all lumber, roofing, doors, windows, and similar materials necessary to complete a shell house. Upon commencing operations in a new area, Barenboim buys or leases land as a site for its local warehouse, field office, and display houses. Sample display houses are erected at a total cost of $30,000 to $44,000 including the cost of the unassembled packages. The chief element of cost of the display houses is the unassembled packages, inasmuch as erection is a short, low-cost operation. Old sample models are torn down or altered into new models every 3 to 7 years. Sample display houses have little salvage value because dismantling and moving costs amount to nearly as much as the cost of an unassembled package. Instructions (a) A choice must be made between (1) expensing the costs of sample display houses in the periods in which the expenditure is made and (2) spreading the costs over more than one period. Discuss the advantages of each method. (b) Would it be preferable to amortize the cost of display houses on the basis of (1) the passage of time or (2) the number of shell houses sold? Explain.

Software Galore sells gaming software that is downloaded to the customer’s device on purchase. The owner, Fred, was talking with a friend who sang the praises of flexible budgeting in his manufacturing business. Fred was wondering whether a flexible budget would benefit his business decision making. Comment.

How is materiality (or immateriality) related to the proper presentation of financial statements? What factors and mea-sures should be considered in assessing the materiality of a misstatement in the presentation of a financial statement?

Kelly Clarkson Corporation operates a retail computer store. To improve delivery services to customers, the company purchases four new trucks on April 1, 2014. The terms of acquisition for each truck are described below. 1. Truck #1 has a list price of $15,000 and is acquired for a cash payment of $13,900. 2. Truck #2 has a list price of $16,000 and is acquired for a down payment of $2,000 cash and a zerointerest- bearing note with a face amount of $14,000. The note is due April 1, 2015. Clarkson would normally have to pay interest at a rate of 10% for such a borrowing, and the dealership has an incremental borrowing rate of 8%. 3. Truck #3 has a list price of $16,000. It is acquired in exchange for a computer system that Clarkson carries in inventory. The computer system cost $12,000 and is normally sold by Clarkson for $15,200. Clarkson uses a perpetual inventory system. 4. Truck #4 has a list price of $14,000. It is acquired in exchange for 1,000 shares of common stock in Clarkson Corporation. The stock has a par value per share of $10 and a market price of $13 per share. Instructions Prepare the appropriate journal entries for the above transactions for Clarkson Corporation.

Assume that inflation is expected to decline in the near future. How could this affect future bond prices? Would you recommend that financial institutions increase or decrease their concentration in long-term bonds based on this expectation? Explain. (LO2)

Using the facts in the previous problem, what are some ways that Bendetta could shift some of the rental income to Jenine? What are the disadvantages associated with these income-shifting strategies?

Strategy; balanced scorecard measures and process Refer to the information in problem 19.25. Dyggur Equipment wants to offer weekend servicing of heavy equipment. None of its competitors offer this service, and management believes this service will bring in new business and help retain current customers.   Required (a)     List several advantages and disadvantages of this strategy. (b)     List one financial and two non-financial performance measures that could be used to monitor the success of this plan. (c)     Suppose the managers decide to launch this new service. At the end of the first year of operating weekend service, performance is evaluated by gathering and analysing measures such as those identified in part (b). How can this information be used to improve performance for the next period? (d)     Given that Dyggur management are now exploring new strategies, outline how senior management could use the balanced scorecard interactively.

Because of calamitous earthquake losses, Bernstein Company, one of your client’s oldest and largest customers, suddenly and unexpectedly became bankrupt. Approximately 30% of your client’s total sales have been made to Bernstein Company during each of the past several years. The amount due from Bernstein Company—none of which is collectible—equals 22% of total accounts receivable, an amount that is considerably in excess of what was determined to be an adequate provision for doubtful accounts at the close of the preceding year. How would your client record the write-off of the Bernstein Company receivable if it is using the allowance method of accounting for bad debts? Justify your suggested treatment.

Jack Kelly Company has grown rapidly since its founding in 2004. To instill loyalty in its employees, Kelly is contemplating establishment of a defined benefit plan. Kelly knows that lenders and potential investors will pay close attention to the impact of the pension plan on the company’s financial statements, particularly any gains or losses that develop in the plan. Kelly has asked you to conduct some research on the accounting for gains and losses in a defined benefit plan. Instructions Access the IFRS authoritative literature at the IASB website (http://eifrs.iasb.org/). (Click on the IFRS tab and then register for free eIFRS access if necessary.) When you have accessed the documents, you can use the search tool in your Internet browser to respond to the following questions. (Provide paragraph citations.) (a) Briefly describe how pension gains and losses are accounted for. (b) Explain the rationale behind the accounting method described in part (a). (c) What is the related pension asset or liability that may show up on the statement of financial position? When will each of these situations occur?

What are some of the general considerations that product designers must keep in mind when designing components out of plastics?