Question & Answer

This year, Darrel’s distributive share from Alcove Partnership includes $6,000 of interest income, $3,000 of dividend income, and $70,000 ordinary business income. a. Assume that Darrel materially participates in the partnership. How much of his distributive share from Alcove Partnership is potentially subject to the net investment income tax? b. Assume that Darrel does not materially participate in the partnership. How much of his distributive share from Alcove Partnership is potentially subject to the net investment income tax?

What is a buckyball?

A 4.50-in-thick slab that is 9 in wide and 24 in long is to be reduced in a single pass in a two-high rolling mill to a thickness of 3.87 in. The roll rotates at a speed of 5.50 rev/min and has a radius of 17.0 in. The work material has a strength coefficient = 30,000 lb/in2 and a strain hardening exponent = 0.15. Determine (a) roll force, (b) roll torque, and (c) power required to accomplish this operation.

Participative strategic planning process and benefits, manager behavior (This problem assumes knowledge from management classes) Quantum Computers produces and sells laptop computers. The entity is currently deciding whether to continue concentrating on the laptop computer market or to expand by entering the highly competitive computer desktop workstation market.   Most of the management staff has been with Quantum for a long time. Michael Mitchem, Quantum’s president, wants his management staff to assist him in Quantum’s strategic planning process. Mitchem has scheduled a three-day offsite meeting for the management staff to join together for the entity’s strategic planning process.   Required (a)     What functional areas should be discussed during the strategic planning process? (b)     Identify at least six factors to be considered in a thorough strategic planning process that will move a company such as Quantum to another level of product development. (c)     Identify at least three benefits that Quantum can derive from a participatory strategic planning process. (d)     Discuss the expected behavior of the managers at Quantum who participate in the three-day offsite strategic planning meeting.

Explain why, if the firm can practise first-degree price discrimination by selling every unit at the maximum price each consumer is prepared to pay, its revenue from selling 200 units will be the sum of both the shaded areas in Figure 8.13.

Employees at your company disagree about the accounting for sales returns. The sales manager believes that granting more generous return provisions and allowing customers to order items on a bill and hold basis can give the company a competitive edge and increase sales revenue. The controller cautions that, depending on the terms granted, loose return or bill and hold provisions might lead to non-IFRS revenue recognition. The company CFO would like you to research the issue to provide an authoritative answer. 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) What is the authoritative literature addressing revenue recognition when right of return exists? (b) What is meant by “right of return”? “Bill and hold”? (c) When there is a right of return, what conditions must the company meet to recognize the revenue at the time of sale? (d) What factors may impair the ability to make a reasonable estimate of future returns? (e) When goods are sold on a bill and hold basis, what conditions must be met to recognize revenue upon receipt

A 75 mm diameter tube is bent into a rather complex shape with a series of simple tube bending operations. The wall thickness on the tube = 4.75 mm. The tubes will be used to deliver fluids in a chemical plant. In one of the bends where the bend radius is 125 mm, the walls of the tube are flattening badly. What can be done to correct the condition?

In the previous problem, suppose an industrial robot cell were installed to replace the welder. The cell consists of the robot (using GMAW instead of SMAW or FCAW), two welding fixtures, and the fitter who loads and unloads the parts. With two fixtures, fitter and robot work simultaneously, the robot welding at one fixture while the fitter unloads and loads at the other. At the end of each work cycle, they switch places. The electrode wire spool must be changed every five workparts, which task requires 5.0 minutes and is accomplished by the fitter. Determine (a) arc time and (b) production rate for this work cell.

A cemented carbide tool is used to turn a part with a length of 14.0 in and diameter = 4.0 in. The parameters in the Taylor equation are: n = 0.25 and C = 1000 (ft/min). The rate for the operator and machine tool = $45.00/hr, and the tooling cost per cutting edge = $2.50. It takes 2.5 min to load and unload the workpart and 1.50 min to change tools. The feed = 0.015 in/rev. Determine (a) cutting speed for maximum production rate, (b) tool life in min of cutting, and (c) cycle time and cost per unit of product.

Presented below are two different situations related to Mckee Corporation’s debt obligations. Mckee’s next financial reporting date is December 31, 2014. The financial statements are authorized for issuance on March 1, 2015. 1. Mckee has a long-term obligation of $400,000, which is maturing over 4 years in the amount of $100,000 per year. The obligation is dated November 1, 2014, and the first maturity date is November 1, 2015. 2. Mckee has a short-term obligation due February 15, 2015. Its lender agrees to extend the maturity date of this loan to February 15, 2017. The agreement for extension is signed on January 15, 2015.

What are the different bases for stock valuation when assets other than cash are received for issued shares of stock?

What is extrusion?

Izzy Inc. purchased a patent for $350,000 which has an estimated useful life of 10 years. Its pattern of use or consumption cannot be reliably determined. Prepare the entry to record the amortization of the patent in its first year of use.

On July 1 of year 1, Riverside Corp. (RC), a calendar-year taxpayer, acquired the assets of another business in a taxable acquisition. When the purchase price was allocated to the assets purchased, RC determined it had purchased $1,200,000 of goodwill for both book and tax purposes.  At the end of year 1, the auditors for RC determined that the goodwill had not been impaired during the year.  In year 2, however, the auditors concluded that $200,000 of the goodwill had been impaired, and they required RC to write down the goodwill by $200,000 for book purposes.

On June 30, 2006, County Company issued 12% bonds with a par value of $800,000 due in 20 years. They were issued at 98 and were callable at 104 at any date after June 30, 2014. Because of lower interest rates and a significant change in the company’s credit rating, it was decided to call the entire issue on June 30, 2015, and to issue new bonds. New 10% bonds were sold in the amount of $1,000,000 at 102; they mature in 20 years. County Company uses straight-line amortization. Interest payment dates are December 31 and June 30. Instructions (a) Prepare journal entries to record the redemption of the old issue and the sale of the new issue on June 30, 2015. (b) Prepare the entry required on December 31, 2015, to record the payment of the first 6 months’ interest and the amortization of premium on the bonds.

Hagar Corporation has municipal bonds classified as availablefor- sale at December 31, 2013. These bonds have a par value of $800,000, an amortized cost of $800,000, and a fair value of $720,000. The unrealized loss of $80,000 previously recognized as other comprehensive income and as a separate component of stockholders’ equity is now determined to be other than temporary. That is, the company believes that impairment accounting is now appropriate for these bonds. Instructions (a) Prepare the journal entry to recognize the impairment. No entry is needed to adjust accumulated other comprehensive income. (b) What is the new cost basis of the municipal bonds? Given that the maturity value of the bonds is $800,000, should Hagar Corporation amortize the difference between the carrying amount and the maturity value over the life of the bonds? (c) At December 31, 2014, the fair value of the municipal bonds is $760,000. Prepare the entry (if any) to record this information.

Explain how investors’ preferences for commercial paper change during a recession. How would this reaction affect the difference between commercial paper rates and T-bill rates during recessionary periods? (LO1)

Troopers Medical Labs, Inc., began operations 5 years ago producing stetrics, a new type of instrument it hoped to sell to doctors, dentists, and hospitals. The demand for stetrics far exceeded initial expectations, and the company was unable to produce enough stetrics to meet demand. The company was manufacturing its product on equipment that it built at the start of its operations. To meet demand, more efficient equipment was needed. The company decided to design and build the equipment, because the equipment currently available on the market was unsuitable for producing stetrics. In 2014, a section of the plant was devoted to development of the new equipment and a special staff was hired. Within 6 months, a machine developed at a cost of $714,000 increased production dramatically and reduced labor costs substantially. Elated by the success of the new machine, the company built three more machines of the same type at a cost of $441,000 each. Instructions (a) In general, what costs should be capitalized for self-constructed equipment? (b) Discuss the propriety of including in the capitalized cost of self-constructed assets: (1) The increase in overhead caused by the self-construction of fixed assets. (2) A proportionate share of overhead on the same basis as that applied to goods manufactured for sale. (c) Discuss the proper accounting treatment of the $273,000 ($714,000 2 $441,000) by which the cost of the first machine exceeded the cost of the subsequent machines. This additional cost should not be considered research and development costs.

Solve Problem 21.25 except that the feed = 0.0075 in/rev and the work material is stainless steel (Brinell Hardness = 240 HB)

Draw a similar diagram to Figure 25.9 showing how an appreciation of the exchange rate would similarly be reduced by stabilising speculation.

Explain how legal business entities differ in terms of the liability protection they provide their owners.

The actuary for the pension plan of Gustafson Inc. calculated the following net gains and losses. Incurred during the Year (Gain) or Loss 2014 $300,000 2015 480,000 2016 (210,000) 2017 (290,000) Other information about the company’s pension obligation and plan assets is as follows. Projected Benefi t Plan Assets As of January 1, Obligation (market-related asset value) 2014 $4,000,000 $2,400,000 2015 4,520,000 2,200,000 2016 5,000,000 2,600,000 2017 4,240,000 3,040,000 Gustafson Inc. has a stable labor force of 400 employees who are expected to receive benefits under the plan. The total service-years for all participating employees is 5,600. The beginning balance of accumulated OCI (G/L) is zero on January 1, 2014. The market-related value and the fair value of plan assets are the same for the 4-year period. Use the average remaining service life per employee as the basis for amortization. Instructions (Round to the nearest dollar.) Prepare a schedule which reflects the minimum amount of accumulated OCI (G/L) amortized as a component of net periodic pension expense for each of the years 2014, 2015, 2016, and 2017. Apply the “corridor” approach in determining the amount to be amortized each year.

Tim Mattke Company began operations in 2012 and for simplicity reasons, adopted weighted-average pricing for inventory. In 2014, in accordance with other companies in its industry, Mattke changed its inventory pricing to FIFO. The pretax income data is reported below. Weighted- Year Average FIFO 2012 $370,000 $395,000 2013 390,000 430,000 2014 410,000 450,000 Instructions (a) What is Mattke’s net income in 2014? Assume a 35% tax rate in all years. (b) Compute the cumulative effect of the change in accounting principle from weighted-average to FIFO inventory pricing. (c) Show comparative income statements for Tim Mattke Company, beginning with income before income tax, as presented on the 2014 income statement.

The accountant of Latifa Shoe Co. has compiled the following information from the company’s records as a basis for an income statement for the year ended December 31, 2014. Rent revenue $ 29,000 Interest expense 18,000 Market appreciation on land above cost 31,000 Salaries and wages expense (selling) 114,800 Supplies (selling) 17,600 Income tax 37,400 Salaries and wages expense (administrative) 135,90 5Other administrative expenses $ 51,700 Cost of goods sold 496,000 Net sales 980,000 Depreciation on plant assets (70% selling, 30% administrative) 65,000 Cash dividends declared 16,000 There were 20,000 shares of common stock outstanding during the year. Instructions (a) Prepare a multiple-step income statement. (b) Prepare a single-step income statement. (c) Which format do you prefer? Discuss.

} Assume Ellina earns a 10 percent after-tax rate of return, and that she owes a friend $1,200.  Would she prefer to pay the friend $1,200 today or $1,750 in four years?