Question & Answer

Consider current conditions that could affect interest rates, including inflation (including oil prices), the economy, the budget deficit, and the Fed’s monetary policy. t Based on the prevailing conditions, do you think the values of mortgages that are sold in the secondary market will increase or decrease during this semester? Offer some logic to support your answer. Which factor do you think will have the biggest impact on the values of existing mortgages? (LO4)

What is the difference between an open mold and a closed mold?

What is the required method of amortizing discount and premium on bonds payable? Explain the procedures.

What cost concepts are there other than those based on opportunity cost? Would the use of these concepts be likely to lead to an output greater or less than the profit-maximising one?

Compare and contrast realization of income with recognition of income.

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)

Normal and abnormal spoilage Franklin Fabrication produces custom-made security doors and gates. Currently two jobs are in process, 359 and 360. During production of Job 359, the supervisor was on holidays and the employees made several errors in cutting the metal pieces for the two doors in the order. The spoiled metal pieces cost $20 each and had zero scrap value. In addition, an order of five gates that had been manufactured for Job 360 required a fine wire mesh that sometimes tore as it was being mounted. Because a similar wire could be used that was much easier to install, the customer had been warned that costs could run over the bid if any difficulty was encountered in installing the wire. One of the gates was spoiled during the process of installing the wire. The cost of the materials and direct labour for the gate was $150. The gate and metal were hauled to the dump and discarded.   Required (a)          Should the spoilage for Job 359 be categorised as normal or abnormal spoilage? Explain. (b)          Should the spoilage for Job 360 be categorised as normal or abnormal spoilage? Explain. (c)           Prepare spoilage journal entries for both jobs.

1.      In which quarter of Exhibit 3.7 would you place Cam? What are some steps that you would recommend Cam consider to better connect with the employees who report to him?

The following defined pension data of Rydell Corp. apply to the year 2014. Projected benefi t obligation, 1/1/14 (before amendment) $560,000 Plan assets, 1/1/14 546,200 Pension liability 13,800 On January 1, 2014, Rydell Corp., through plan amendment, grants prior service benefi ts having a present value of 120,000 Settlement rate 9% Service cost 58,000 Contributions (funding) 65,000 Actual (expected) return on plan assets 52,280 Benefi ts paid to retirees 40,000 Prior service cost amortization for 2014 17,000 Instructions For 2014, prepare a pension worksheet for Rydell Corp. that shows the journal entry for pension expense and the year-end balances in the related pension accounts.

A metal has a flow curve with strength coefficient = 850 MPa and strain-hardening exponent = 0.30. A tensile specimen of the metal with gage length = 100 mm is stretched to a length = 157 mm. Determine the flow stress at the new length and the average flow stress that the metal has been subjected to during the deformation.

Describe the mechanical limitation on the deduction for interest on qualified educational loans.

George Hincapie Inc. manufactures cycling equipment. Recently, the vice president of operations of the company has requested construction of a new plant to meet the increasing demand for the company’s bikes. After a careful evaluation of the request, the board of directorshas decided to raise funds for the new plant by issuing $2,000,000 of 11% term corporate bonds on March 1, 2014, due on March 1, 2029, with interest payable each March 1 and September 1. At the time of issuance, the market interest rate for similar financial instruments is 10%. Instructions As the controller of the company, determine the selling price of the bonds.

Use the information from BE23-4 for Bloom Corporation. Prepare the cash flows from operating activities section of Bloom’s 2014 statement of cash flows using the indirect method.

If the bonds in Question 8 are classified as available-forsale and they have a fair value at December 31, 2014, of $3,604,000, prepare the journal entry (if any) at December 31, 2014, to record this transaction.

Button Company has the following two temporary differences between its income tax expense and income taxes payable. 2014 2015 2016 Pretax fi nancial income $840,000 $910,000 $945,000 Excess depreciation expense on tax return (30,000) (40,000) (10,000) Excess warranty expense in fi nancial income 20,000 10,000 8,000 Taxable income $830,000 $880,000 $943,000 The income tax rate for all years is 40%. Instructions (a) Assuming there were no temporary differences prior to 2014, prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2014, 2015, and 2016. (b) Indicate how deferred taxes will be reported on the 2016 balance sheet. Button’s product warranty is for 12 months. (c) Prepare the income tax expense section of the income statement for 2016, beginning with the line “Pretax financial income.”

Twinbrook Corporation needed to upgrade to a larger manufacturing facility. Twinbrook first acquired a new manufacturing facility for $2,100,000 cash and then transferred the facility it was using (building and land) to White Flint Corporation for $2,000,000 three months later. Does the exchange qualify for like-kind exchange treatment? (Hint: Examine Revenue Procedures 2000-37 and 2004-51.)  If not, can you propose a change in the transaction that will allow it to qualify?

The following facts pertain to a noncancelable lease agreement between Faldo Leasing Company and Vance Company, a lessee. Inception date January 1, 2014 Annual lease payment due at the beginning of each year, beginning with January 1, 2014 $124,798 Residual value of equipment at end of lease term, guaranteed by the lessee $50,000 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at January 1, 2014 $600,000 Lessor’s implicit rate 12% Lessee’s incremental borrowing rate 12%The lessee assumes responsibility for all executory costs, which are expected to amount to $5,000 per year. The asset will revert to the lessor at the end of the lease term. The lessee has guaranteed the lessor a residual value of $50,000. The lessee uses the straight-line depreciation method for all equipment. Instructions (a) Prepare an amortization schedule that would be suitable for the lessee for the lease term. (b) Prepare all of the journal entries for the lessee for 2014 and 2015 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessee’s annual accounting period ends on December 31 and reversing entries are used when appropriate.

1.       : As algorithmic control becomes more common in organizations, how might it affect the roles of managers and employees? Can you think of ways algorithmic tools might be used to decentralize control? Explain.

Explain the mechanisms whereby the DAD and IS curves will shift by the same amount as the DAS and MP curves in the long run.

Carla incorporated her sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation’s stock. The property transferred to the corporation had the following fair market values and adjusted tax bases.     FMV    Adjusted Tax Basis Inventory$    20,000$        10,000 Building    150,000        100,000 Land    250,000        300,000 Total$  420,000$      410,000

What is the difference between open and closed facts?  How is this distinction important in conducting taxresearch?

A heat source can transfer 3500 J/sec to a metal part surface. The heated area is circular, and the heat intensity decreases as the radius increases, as follows: 70% of the heat is concentrated in a circular area that is 3.75 mm in diameter. Is the resulting power density enough to melt metal?

How would you attempt to value time that you yourself save (a) getting to work; (b) going on holiday; (c) going out in the evening?

Selane Eatery operates a catering service specializing in business luncheons for large corporations. Selane requires customers to place their orders 2 weeks in advance of the scheduled events. Selane bills its customers on the tenth day of the month following the date of service and requires that payment be made within 30 days of the billing date. Conceptually, when should Selane recognize revenue related to its catering service?

What book-tax differences in year 1 and year 2 associated with its capital gains and losses would DEF Inc. report in the following alternative scenarios?  Identify each book-tax difference as favorable or unfavorable and as permanent or temporary.   a.  In year 1, DEF recognized a loss of $15,000 on land that it had held for investment.  In year 1, it also recognized a $30,000 gain on equipment it had purchased a few years ago. The equipment sold for $50,000 and had an adjusted basis of $20,000.  DEF had deducted $40,000 of tax depreciation on the equipment. In year 2, DEF recognized a capital loss of $2,000.