Question & Answer

Sabonis Cosmetics Co. purchased machinery on December 31, 2013, paying $50,000 down and agreeing to pay the balance in four equal installments of $40,000 payable each December 31. An assumed interest of 8% is implicit in the purchase price. Instructions Prepare the journal entries that would be recorded for the purchase and for the payments and interest on the following dates. (Round answers to the nearest cent.) (a) December 31, 2013. (d) December 31, 2016. (b) December 31, 2014. (e) December 31, 2017. (c) December 31, 2015.

Alladin Company purchased Machine #201 on May 1, 2014. The following information relating to Machine #201 was gathered at the end of May. Price $85,000 Credit terms 2/10, n/30 Freight-in $ 800 Preparation and installation costs $ 3,800 Labor costs during regular production operations $10,500 It is expected that the machine could be used for 10 years, after which the salvage value would be zero. Alladin intends to use the machine for only 8 years, however, after which it expects to be able to sell it for $1,500. The invoice for Machine #201 was paid May 5, 2014. Alladin uses the calendar year as the basis for the preparation of financial statements. Instructions (a) Compute the depreciation expense for the years indicated using the following methods. (Round to thenearest dollar.) (1) Straight-line method for 2014. (2) Sum-of-the-years’-digits method for 2015. (3) Double-declining-balance method for 2014. (b) Suppose Kate Crow, the president of Alladin, tells you that because the company is a new organization, she expects it will be several years before production and sales reach optimum levels. She asks you to recommend a depreciation method that will allocate less of the company’s depreciation expense to the early years and more to later years of the assets’ lives. What method would you recommend?

1.    : Surveys reveal shifts in social attitudes among younger people related to issues such as same-sex marriage and citizenship for illegal immigrants. How do you think these changing attitudes might affect the manager’s job over the next few years?

Whittier Construction Co. had followed the practice of expensing all materials assigned to a construction job without recognizing any salvage inventory. On December 31, 2014, it was determined that salvage inventory should be valued at $52,000. Of this amount, $29,000 arose during the current year. How does this information affect the financial statements to be prepared at the end of 2014?

What is the most important engineering property of copper that determines most of its applications?

Briefly describe the convergence efforts related to financial statement presentation.

1.    : How has Ken Byers shaped the sales culture at Hull Engineering? Do you consider this culture to be at a preconventional, conventional, or postconventional level of ethical development? Why?

Cameron purchases stock in Corporation X and in Corporation Y. Neither corporation pays dividends. The stocks both earn an identical before-tax rate of return. Cameron sells the stock in Corporation X after three years, and he sells the stock in Corporation Y after five years. Which investment likely earned a greater after-tax return? Why?

What is the connection between the concepts of 'hysteresis’ and ‘propagation mechanisms’?

45. Shauna Coleman is single. She is employed as an architectural designer for Streamline Design (SD). Shauna wanted to determine her taxable income. She correctly calculated her AGI. However, she wasn’t sure how to compute the rest of her taxable income. She provided the following information with hopes that you could use it to determine her taxable income for 2024.

Jamareo has found a “favorable” authority directly on point for his tax question.  If the authority is an administrative authority, which specific type of authority would he prefer to answer his question?  Which administrative authority would he least prefer to answer his question?

Tiffany is unmarried and has a 15-year-old qualifying child. Tiffany has determined her tax liability to be $3,525, and her employer has withheld $1,000 of federal taxes from her paycheck. Tiffany is allowed to claim a $2,000 child tax credit for her qualifying child. What amount of taxes will Tiffany owe (or what amount will she receive as a refund) when she files her tax return?

What is the danger of issuing too much stock? What is the role of the securities firm that serves as the underwriter, and how can it ensure that the firm does not issue too much stock? (LO2, LO4)

The following facts apply to the pension plan of Boudreau Inc. for the year 2014. Plan assets, January 1, 2014 $490,000 Projected benefi t obligation, January 1, 2014 490,000 Settlement rate 8% Service cost 40,000 Contributions (funding) 25,000 Actual and expected return on plan assets 49,700 Benefi ts paid to retirees 33,400 Instructions  Using the preceding data, compute pension expense for the year 2014. As part of your solution, prepare a pension worksheet that shows the journal entry for pension expense for 2014 and the year-end balances in the related pension accounts.

How do corporations account for capital gains and losses for tax purposes?  How is this different from the way individuals account for capital gains and losses?

What is a binary vision system?

An L-shaped structural section is direct extruded from an aluminum billet in which Lo = 500 mm and Do = 100 mm. Dimensions of the cross section are given in Figure P19.29. Die angle = 90°. Determine (a) extrusion ratio, (b) shape factor, and (c) length of the extruded section if the butt remaining in the container at the end of the ram stroke is 25 mm.

You are the independent auditor engaged to audit Millay Corporation’s December 31, 2014, financial statements. Millay manufactures household appliances. During the course of your audit, you discovered the following contingent liabilities. 1. Millay began production of a new dishwasher in June 2014 and, by December 31, 2014, sold 120,000 to various retailers for $500 each. Each dishwasher is under a one-year warranty. The company estimates that its warranty expense per dishwasher will amount to $25. At year-end, the company had already paid out $1,000,000 in warranty expenses. Millay’s income statement shows warranty expenses of $1,000,000 for 2014. Millay accounts for warranty costs on the accrual basis. 2. In response to your attorney’s letter, Morgan Sondgeroth, Esq., has informed you that Millay has been cited for dumping toxic waste into the Kishwaukee River. Clean-up costs and fines amount to $2,750,000. Although the case is still being contested, Sondgeroth is certain that Millay will most probably have to pay the fine and clean-up costs. No disclosure of this situation was found in the financial statements. 3. Millay is the defendant in a patent infringement lawsuit by Megan Drabek over Millay’s use of a hydraulic compressor in several of its products. Sondgeroth claims that, if the suit goes against Millay, the loss may be as much as $5,000,000. However, Sondgeroth believes the loss of this suit to be only reasonably possible. Again, no mention of this suit is made in the financial statements. As presented, these contingencies are not reported in accordance with GAAP, which may create problems in issuing a favorable audit report. You feel the need to note these problems in the work papers. Instructions Heading each page with the name of the company, balance sheet date, and a brief description of the problem, write a brief narrative for each of the above issues in the form of a memorandum to be incorporated in the audit work papers. Explain what led to the discovery of each problem, what the problem really is, and what you advised your client to do (along with any appropriate journal entries) in order to bring thesecontingencies in accordance with GAAP.

What are the basic problems that occur in the valuation of accounts receivable?

Shauna and Danielle decided to liquidate their jointly owned corporation, Woodward Fashions Inc. (WFI).  After liquidating its remaining inventory and paying off its remaining liabilities, WFI had the following tax accounting balance sheet.     FMV        Tax basisAppreciation Cash$  200,000$     200,000 Building      50,000         10,000        40,000 Land    150,000         90,000        60,000 Total$  400,000$     300,000$    100,000

Hamderson Inc. reports the following pretax income (loss) for both financial reporting purposes and tax purposes. (Assume the carryback provision is used for a net operating loss.) Year Pretax Income (Loss) Tax Rate 2012 $120,000 34% 2013 90,000 34% 2014 (280,000) 38% 2015 220,000 38% The tax rates listed were all enacted by the beginning of 2012. Instructions (a) Prepare the journal entries for the years 2012–2015 to record income tax expense (benefit) and income taxes payable (refundable) and the tax effects of the loss carryback and carryforward, assuming that at the end of 2014 the benefits of the loss carryforward are judged more likely than not to be realized in the future. (b) Using the assumption in (a), prepare the income tax section of the 2014 income statement beginning with the line “Operating loss before income taxes.” (c) Prepare the journal entries for 2014 and 2015, assuming that based on the weight of available evidence, it is more likely than not that one-fourth of the benefits of the loss carryforward will not be realized. (d) Using the assumption in (c), prepare the income tax section of the 2014 income statement beginning with the line “Operating loss before income taxes.”

Thinken Technology recently merged with College Electronix (CE), a computer graphics manufacturing firm. In performing a comprehensive audit of CE’s accounting system, Gerald Ott, internal audit manager for Thinken Technology, discovered that the new subsidiary did not record pension assets and liabilities, subject to GAAP. The net present value of CE’s pension assets was $15.5 million, the vested benefit obligation was $12.9 million, and the projected benefit obligation was $17.4 million. Ott reported this audit finding to Julie Habbe, the newly appointed controller of CE. A few days later, Habbe called Ott for his advice on what to do. Habbe started her conversation by asking, “Can’t we eliminate the negative income effect of our pension dilemma simply by terminating the employment of nonvested employees before the end of our fiscal year?” Instructions How should Ott respond to Habbe’s remark about firing nonvested employees?

Haruki and Bob have owned and operated SOA as a C corporation for a number of years. When they formed the entity, Haruki and Bob each contributed $100,000 to SOA. Each has a current basis of $100,000 in his SOA ownership interest. Information on SOA’s assets at the end of year 5 is as follows (SOA does not have any liabilities):    Assets FMV Adjusted Basis Built-in Gain Cash $200,000 $200,000 $0 Inventory 80,000 40,000 40,000 Land and building 220,000 170,000 50,000  Total$500,000   At the end of year 5, SOA liquidated and distributed half of the land and building, half of the inventory, and half of the cash remaining after paying taxes (if any) to each owner. Assume that, excluding the effects of the liquidating distribution, SOA’s taxable income for year 5 is $0.  a. What are the amount and character of gain or loss SOA will recognize on the liquidating distribution? b. What are the amount and character of gain or loss Haruki will recognize when he receives the liquidating distribution of cash and property? Recall that his stock basis is $100,000 and he is treated as having sold his stock for the liquidation proceeds.

Using the facts in problem 43, what interest rate does Surething Inc. need to offer to make Hugh indifferent between investing in the two bonds?

An extruder has barrel diameter and length of 100 mm and 2.8 m, respectively. The screw rotational speed = 50 rev/min, channel depth = 7.5 mm, and flight angle = 17°. The plastic melt has a shear viscosity = 175 Pa-s. Determine: (a) the extruder characteristic, (b) the shape factor Ks for a circular die opening with diameter = 3.0 mm and length = 12.0 mm, and (c) the operating point (Q and p).