Question & Answer

Why do you think it is difficult for investors to assess the financial condition of a financial institution that has purchased a large amount of mortgage-backed securities? (LO5)

What are the desirable properties of a metal that would provide good weldability for resistance welding?

Explain the dilemma faced by banks when determining the optimal amount of capital to hold. A bank’s capital is less than 10 percent of its assets. How do you think this percentage would compare to that of manufacturing corporations? How would you explain this difference? (LO3)

Explain how shareholder protection varies among countries. Explain how enforcement of securities laws varies among countries. Why do these characteristics affect the valuations of stocks? (LO7)

What are the three general factors that determine the properties of a composite material?

Explain how savings institutions could use interest rate swaps to reduce interest rate risk. Will SIs that use swaps perform better or worse than those that were unhedged during a period of declining interest rates? Explain. (LO4)

What is the difference between vacuum permanent-mold casting and vacuum molding?

Explain the concept of bond price elasticity. Would bond price elasticity suggest a higher price sensitivity for zero-coupon bonds or high-coupon bonds that are offering the same yield to maturity? Why? What does this suggest about the market value volatility of mutual funds containing zero-coupon Treasury bonds versus high-coupon Treasury bonds? (LO1, LO3)

What are some of the additives that are combined with rubber during compounding?

What is a clean room and explain the classification system by which clean rooms are rated?

Presented below is summarized information for Johnston Co., which sells merchandise on the installment basis. 2014 2015 2016 Sales (on installment plan) $250,000 $260,000 $280,000 Cost of sales 155,000 163,800 182,000 Gross profi t $ 95,000 $ 96,200 $ 98,000 Collections from customers on: 2014 installment sales $ 75,000 $100,000 $ 50,000 2015 installment sales 100,000 120,000 2016 installment sales 100,000 Instructions (a) Compute the realized gross profit for each of the years 2014, 2015, and 2016. (b) Prepare all entries required in 2016, applying the installment-sales method of accounting. (Ignore interest charges.)

On January 1, 2014, Bonanza Wholesalers Inc. adopted the dollar-value LIFO inventory method for income tax and external financial reporting purposes. However, Bonanza continued to use the FIFO inventory method for internal accounting and management purposes. In applying the LIFO method, Bonanza uses internal conversion price indexes and the multiple pools approach under which substantially identical inventory items are grouped into LIFO inventory pools. The following data were available for inventory pool no. 1, which comprises products A and B, for the 2 years following the adoption of LIFO. FIFO Basis per Records Unit Total Units Cost Cost Inventory, 1/1/14 Product A 10,000 $30 $300,000 Product B 9,000 25 225,000 $525,000 Inventory, 12/31/14 Product A 17,000 36 $612,000 Product B 9,000 26 234,000 $846,000 Inventory, 12/31/15 Product A 13,000 40 $520,000 Product B 10,000 32 320,000 $840,000 Instructions (a) Prepare a schedule to compute the internal conversion price indexes for 2014 and 2015. Round indexes to two decimal places. (b) Prepare a schedule to compute the inventory amounts at December 31, 2014 and 2015, using the dollar-value LIFO inventory method.

How are small and medium-sized finance companies able to issue commercial paper? Why do some well-known finance companies directly place their commercial paper? (LO2)

A cylindrical riser is to be designed for a sand casting mold. The length of the cylinder is to be 1.25 times its diameter. The casting is a square plate, each side = 10 in and thickness = 0.75 in. If the metal is cast iron, and the mold constant = 16.0 min/in2 in Chvorinov's rule, determine the dimensions of the riser so that it will take 30% longer for the riser to solidify.

The differences between the book basis and tax basis of the assets and liabilities of Castle Corporation at the end of 2013 are presented below. Book Basis Tax Basis Accounts receivable $50,000 $–0– Litigation liability 30,000 –0– It is estimated that the litigation liability will be settled in 2014. The difference in accounts receivable will result in taxable amounts of $30,000 in 2014 and $20,000 in 2015. The company has taxable income of $350,000 in 2013 and is expected to have taxable income in each of the following 2 years. Its enacted tax rate is 34% for all years. This is the company’s first year of operations. The operating cycle of the business is 2 years. Instructions (a) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2013. (b) Indicate how deferred income taxes will be reported on the balance sheet at the end of 2013.

What is an end effector?

A screen with 10 mesh count has wires with a diameter of 0.0213 in. Determine (a) the maximum particle size that will pass through the wire mesh and (b) the proportion of open space in the screen.

Assume that your publicly traded company attempts to be completely transparent about its financial condition, and provides thorough information about its debt, sales, and earnings every quarter. Explain why there still may be much uncertainty surrounding your company’s stock price. (LO3)

What is viewed as a major criticism of GAAP as regards revenue recognition?

Bonnie and Clyde were married this year. Bonnie has a steady job that will pay her about $37,000, while Clyde does odd jobs that will produce about $28,000 of income. They also have a joint savings account that will pay about $400 of interest. If Bonnie and Clyde reside in a community property state and file married-separate tax returns, how much gross income will they each report? Is there any difference if they reside in a common-law state? Explain.

The pension fund manager of Utterback (a U.S. firm) purchased German 20-year Treasury bonds instead of U.S. 20-year Treasury bonds. The coupon rate was 2 percentage points lower on the German bonds. Assume that the manager sold the bonds after five years. The yield over the five-year period was substantially more than the yield the manager would have received on the U.S. bonds over the same five-year period. Explain how the German bonds could have generated a higher yield than the U.S. bonds for the manager, even if the exchange rate was stable over this five-year period. (Assume that the price of either bond was initially equal to its respective par value). Be specific. (LO2, LO5)

List the most common methods for forming the pressed parts in powder metallurgy according to the powder metallurgy video.

How did the Financial Reform Act of 2010 change the reserve requirements of the FDIC’s Deposit Insurance Fund? (LO7)

How does the initial rate on adjustable-rate mortgages (ARMs) differ from the rate on fixed-rate mortgages? Why? Explain how caps on ARMs can affect a financial institution’s exposure to interest rate risk. (LO2)

Betty joined Jin in forming DBJ Corp. Betty contributed appreciated land for 90 percent of the stock in DBJ. Jin received 10 percent of the DBJ stock valued at $15,000.  Determine Jin's tax consequences in each of the following alternative scenarios.  a. Jin received the stock in exchange for providing computer-related services for the corporation. What amount of income or gain does Jin recognize on the exchange?  What is Jin's basis in the stock he received in the exchange?  b. Jin contributed the rights to a patent he owned to DBJ in exchange for the DBJ stock. The patent was worth $15,000 and Jin's basis in the patent was $8,000. How much gain does Jin recognize on the exchange?  What is Jin's basis in the DBJ stock?