Question & Answer

Hyundai is considering opening a plant in two neighboring states. One state has a corporate tax rate of 10 percent. If operated in this state, the plant is expected to generate $1,000,000 pretax profit. The other state has a corporate tax rate of 2 percent. If operated in this state, the plant is expected to generate $930,000 of pretax profit. Which state should Hyundai choose? Why do you think the plant in the state with a lower tax rate would produce a lower before-tax income?

Harriet and Harry Combs (both 37 years old) are married and both want to contribute to a Roth IRA. In the current year, their AGI before any IRA contribution deductions is $50,000. Harriet earned $46,000 and Harry earned $4,000. a. How much can Harriet contribute to her Roth IRA if they file a joint return? b. How much can Harriet contribute if she files a separate return? c. How much can Harry contribute to his Roth IRA if they file separately?

Why is the oxyacetylene welding process favored over the other oxyfuel welding processes?

Three years ago, Adrian purchased 100 shares of stock in X Corp. for $10,000. On December 30 of year 4, Adrian sells the 100 shares for $6,000.

Define a “compensating balance.” How should a compensating balance be reported?

Assume that Switzerland has a very strong economy, putting upward pressure on both its inflation and interest rates. Explain how these conditions could place pressure on the value of the Swiss franc, and determine whether the franc’s value will rise or fall. (LO2)

The management of Petro Garcia Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence. This equipment has a cost of $900,000 with depreciation to date of $400,000 as of December 31, 2014. On December 31, 2014, management projected its future net cash flows from this equipment to be $300,000 and its fair value to be $230,000. The company intends to use this equipment in the future. Instructions (a) Prepare the journal entry (if any) to record the impairment at December 31, 2014. (b) Where should the gain or loss (if any) on the write-down be reported in the income statement? (c) At December 31, 2015, the equipment’s fair value increased to $260,000. Prepare the journal entry (if any) to record this increase in fair value. (d) What accounting issues did management face in accounting for this impairment?

Explain the value chain and list ways that value chain analysis benefits organisations.

Emily and Toni are recently married college students. Can Emily qualify as her parents’ dependent? Explain.

Morgan Freeman is investing $16,380 at the end of each year in a fund that earns 10% interest. In how many years will the fund be at $100,000?

Kreter Co. provides the following information about its postretirement benefit plan for the year 2014. Service cost $ 45,000 Contribution to the plan 10,000 Actual and expected return on plan assets 11,000 Benefi ts paid 20,000 Plan assets at January 1, 2014 110,000 Accumulated postretirement benefi t obligation at January 1, 2014 330,000 Discount rate 8% Instructions Compute the postretirement benefit expense for 2014.

The Samsons are trying to determine whether they can claim their 22-year-old adopted son, Jason, as a dependent. Jason is currently a full-time student at an out-of-state university. Jason lived in his parents’ home for three months of the year, and he was away at school for the rest of the year. He received $9,500 in scholarships this year for his outstanding academic performance and earned $4,800 of income working a part-time job during the year. The Samsons paid a total of $5,000 to support Jason while he was away at college. Jason used the scholarship, the earnings from the part-time job, and the money from the Samsons as his only sources of support. Can the Samsons claim Jason as their dependent?

Direct and indirect costs; and cost driver selection         LO2,3 Venture Buses operates throughout the south-eastern suburbs of Melbourne, with its depot located in Cheltenham. Every day, fuel is delivered and stored in tanks located in the depot. This fuel is used by all the buses and administration vehicles. The accountant has been requested to develop a system to assign the cost to the different vehicles in the depot. He has asked your assistance in coming up with a way to identify the fuel costs. Required (a) From the perspective of the depot, is the cost of fuel a direct or indirect cost? (b) From the perspective of the vehicles attached to the depot, can the cost be classified as either direct or indirect?  Briefly explain. (c) What system would be required to have the cost classified as direct?  (d) If the accountant decided to go with an indirect cost classification, how could the cost be allocated? (e) Identify some factors that would determine which method would be the best for the assignment of fuel costs to the vehicles.

What is the basis for distinguishing between operating and nonoperating items?

Earnings per share” (EPS) is the most featured, single financial statistic about modern corporations. Daily published quotations of stock prices have recently been expanded to include for many securities a “times earnings” figure that is based on EPS. Stock analysts often focus their discussions on the EPS of the corporations they study. Instructions (a) Explain how dividends or dividend requirements on any class of preferred stock that may be outstanding affect the computation of EPS. (b) One of the technical procedures applicable in EPS computations is the “treasury-stock method.” Briefly describe the circumstances under which it might be appropriate to apply the treasury-stock method. (c) Convertible debentures are considered potentially dilutive common shares. Explain how convertible debentures are handled for purposes of EPS computations.

Describe reinforced reaction injection molding (RRIM)

Alan Jackson invests $20,000 at 8% annual interest, leaving the money invested without withdrawing any of the interest for 8 years. At the end of the 8 years, Alan withdraws the accumulated amount of money. Instructions (a) Compute the amount Alan would withdraw assuming the investment earns simple interest. (b) Compute the amount Alan would withdraw assuming the investment earns interest compounded annually. (c) Compute the amount Alan would withdraw assuming the investment earns interest compounded semiannually.

The orthogonal cutting operation described in previous Problem 21.7 involves a work material whose shear strength is 40,000 lb/in2 . Based on your answers to the previous problem, compute (a) the shear force, (b) cutting force, (c) thrust force, and (d) friction force.

What are four major sources of funds for banks? Which alternatives does a bank have if it needs temporary funds? What is the most common reason that banks issue bonds? (LO2)

Describe the circumstances in which a taxpayer acquires a home and rents it out and is not allowed to deduct a portion of the interest expense on the loan the taxpayer used to acquire the home.

What is glazing, as applied to ceramics?

Ehlo Company is a multiproduct firm. Presented below is information concerning one of its products, the Hawkeye. Date Transaction Quantity Price/Cost 1/1 Beginning inventory 1,000 $12 2/4 Purchase 2,000 18 2/20 Sale 2,500 30 4/2 Purchase 3,000 23 11/4 Sale 2,200 33 Instructions Compute cost of goods sold, assuming Ehlo uses: (a) Periodic system, FIFO cost flow. (d) Perpetual system, LIFO cost flow. (b) Perpetual system, FIFO cost flow. (e) Periodic system, weighted-average cost flow. (c) Periodic system, LIFO cost flow. (f) Perpetual system, moving-average cost flow.

Stanislaw Timber Company owns 9,000 acres of timberland purchased in 2003 at a cost of $1,400 per acre. At the time of purchase, the land without the timber was valued at $400 per acre. In 2004, Stanislaw built fire lanes and roads, with a life of 30 years, at a cost of $84,000. Every year, Stanislaw sprays to prevent disease at a cost of $3,000 per year and spends $7,000 to maintain the fire lanes and roads. During 2005, Stanislaw selectively logged and sold 700,000 board feet of timber, of the estimated 3,500,000 board feet. In 2006, Stanislaw planted new seedlings to replace the trees cut at a cost of $100,000. Instructions (a) Determine the depreciation expense and the cost of timber sold related to depletion for 2005. (b) Stanislaw has not logged since 2005. If Stanislaw logged and sold 900,000 board feet of timber in 2016, when the timber cruise (appraiser) estimated 5,000,000 board feet, determine the cost of timber sold related to depletion for 2016.

Distinguish between generating and forming when machining workpart geometries.

Jackson is 18 years old and has a dog-sitting business. Calculate the 2024 standard deduction Jackson will claim under the following independent circumstances. a. Jackson reported $2,000 of earnings from his dog sitting and $300 in interest income from his savings account. Jackson’s parents claim him as a dependent. b. Jackson reported $500 of earnings from his dog sitting and $2,000 in interest income from his savings account. Jackson’s parents claim him as a dependent. c. Jackson reported $8,000 of earnings from his dog sitting and $3,000 in interest income. Jackson’s parents do not claim him as a dependent.