Question & Answer

Distinguish between ratio analysis and percentage analysis relative to the interpretation of financial statements. What is the value of these two types of analyses?

What does the term advanced composites mean?

Discuss some of the difficulties regulators face when attempting to provide regulatory oversight over fintech. (LO5)

Anwer owns a rental home and is involved in maintaining it and approving renters. During the year he has a net loss of $8,000 from renting the home. His other sources of income during the year are a salary of $111,000 and $34,000 of long-term capital gains. How much of Anwer’s $8,000 rental loss can he deduct currently if he has no sources of passive income?

Why does the required rate of return for a particular bond change over time? (LO2)

Suppose you asked your favorite AI query tool “How is a partnership interest received for services provided treated for income tax purposes?” and the AI tool responded as follows:

From the information for a firm given in the table below, construct a table like Table 6.10.

At the end of the year, before distributions, Bombay (an S corporation) has an accumulated adjustments account balance of $15,000 and accumulated E&P of $20,000 from a previous year as a C corporation. During the year, Nicolette (a 40 percent shareholder) received a $20,000 distribution (the remaining shareholders received $30,000 in distributions).  What are the amount and character of income or gain Nicolette must recognize from the distribution? What is her basis in her Bombay stock at the end of the year?  (Assume her stock basis is $40,000 after considering her share of Bombay’s income for the year but before considering the effects of the distribution.)

How does the ultrasonic machining process work?

Tina Bailey, a student of intermediate accounting, was heard to remark after a class discussion on segment reporting, “All this is very confusing to me. First we are told that there is merit in presenting the consolidated results, and now we are told that it is better to show segmental results. I wish they would make up their minds.” Evaluate this comment.

Give an example of a noncontact inspection technique.

Nitai, who is single and has no dependents, was planning on spending the weekend repairing his car. On Friday, Nitai’s employer called and offered him $500 in overtime pay if he would agree to work over the weekend. Nitai could get his car repaired over the weekend at Autofix for $400. If Nitai works over the weekend, he will have to pay the $400 to have his car repaired, but he will earn $500. Assume Nitai’s marginal tax rate is 12 percent.

Use the information for Navajo Corporation from BE10-8. Prepare the journal entry to record the exchange, assuming the exchange lacks commercial substance.

Which way will the supply curve shift if the wage rates in alternative jobs rise?

Illustrate on two separate indifference diagrams the income and substitution effects of the following: (a)    A decrease in the price of good X (and no change in the price of good Y). (b)    An increase in the price of good Y (and no change in the price of good X)

Each of the following items must be considered in preparing a statement of cash flows. Indicate where each item is to be reported in the statement, if at all. Assume that net income is reported as $90,000. (a) Accounts receivable increased from $34,000 to $39,000 from the beginning to the end of the year. (b) During the year, 10,000 shares of preferred stock with a par value of $100 per share were issued at $115 per share. (c) Depreciation expense amounted to $14,000, and bond premium amortization amounted to $5,000. (d) Land increased from $10,000 to $30,000.

Presented below is information related to Carver Inc.   Instructions (a) Compute the following ratios or relationships of Carver Inc. Assume that the ending account balances are representative unless the information provided indicates differently. (1) Current ratio. (2) Inventory turnover. (3) Accounts receivable turnover. (4) Earnings per share. (5) Profit margin on sales. (6) Return on assets on December 31, 2014. (b) Indicate for each of the following transactions whether the transaction would improve, weaken, or have no effect on the current ratio of Carver Inc. at December 31, 2014. (1) Write off an uncollectible account receivable, $2,200. (2) Purchase additional capital stock for cash. (3) Pay $40,000 on notes payable (short-term). (4) Collect $23,000 on accounts receivable. (5) Buy equipment on account. (6) Give an existing creditor a short-term note in settlement of account.

Performance evaluation and sustainability balanced scorecard Brewster House is a not-for-profit shelter for the homeless. Lately funding has decreased, but the demand for overnight shelter has increased. In cold weather, clients are turned away because the shelter is full. The director believes that the current capacity could be used more efficiently. No one has taken time to analyse the physical layout of the shelter and current use of space. Several rooms are used for storage that could probably be used for temporary housing. The stored boxes need to be sorted and moved. Volunteers currently assign beds and manage overnight housing, because the director is busy with fundraising. Volunteers work just a few shifts each week, so no one has taken responsibility for coordinating improvements in the services offered. The director is considering whether to implement a balanced scorecard to focus the attention of all volunteers on areas that need improvement.   Brewster receives funds from several sources, including a set annual budget from the local council and direct donations from supporters. The director develops a budget each year based on expected funding but she cannot precisely predict donations. The budget is used primarily to justify funding requests submitted to the council.   The director has asked a group of accounting students from the local university to evaluate operations and recommend whether the entity should develop a balanced scorecard. She cannot give bonuses based on the measures, but she wonders whether developing and monitoring performance measures would encourage the volunteers to increase the use of capacity. She also wonders whether some information from the balanced scorecard could be used to show donors the effectiveness of the operations in achieving social goals.   Required (a) Describe how the balanced scorecard could be developed to help demonstrate the social sustainability goals. (b) Provide details of sustainability-related measures for each scorecard perspective you have designed for Brewster House. (c) What issues would Brewster House management have to overcome to ensure a change in practice? (LO4 and 5)

What are some of the most common civil penalties imposed on taxpayers?

A headline in the Wall Street Journal stated, “Firms Increasingly Tap Their Pension Funds to Use Excess Assets.” What is the accounting issue related to the use of these “excess assets” by companies?

Presented below is information taken from a bond investment amortization schedule with related fair values provided. These bonds are classified as available-for-sale. 12/31/14 12/31/15 12/31/16 Amortized cost $491,150 $519,442 $550,000 Fair value $497,000 $509,000 $550,000 Instructions (a) Indicate whether the bonds were purchased at a discount or at a premium. (b) Prepare the adjusting entry to record the bonds at fair value at December 31, 2014. The Fair Value Adjustment account has a debit balance of $1,000 prior to adjustment. (c) Prepare the adjusting entry to record the bonds at fair value at December 31, 2015.

Describe the procedures used in job costing.

On September 30, 2013, Rolen Machinery Co. sold a machine and accepted the customer’s zero-interest-bearing note. Rolen normally makes sales on a cash basis. Since the machine was unique, its sales price was not determinable using Rolen’s normal pricing practices. After receiving the first of two equal annual installments on September 30, 2014, Rolen immediately sold the note with recourse. On October 9, 2015, Rolen received notice that the note was dishonored, and it paid all amounts due. At all times prior to default, the note was reasonably expected to be paid in full. Instructions (a) (1) How should Rolen determine the sales price of the machine? (2) How should Rolen report the effects of the zero-interest-bearing note on its income statement for the year ended December 31, 2013? Why is this accounting presentation appropriate? (b) What are the effects of the sale of the note receivable with recourse on Rolen’s income statement for the year ended December 31, 2014, and its balance sheet at December 31, 2014? (c) How should Rolen account for the effects of the note being dishonored?

Should management be upset if all variances for the period are unfavourable?

On separate demand and supply diagrams for bread, sketch the effects of the following: (a) a rise in the price of wheat; (b) a rise in the price of butter and margarine; (c) a rise in the price of rice, pasta and potatoes. In each case, state your assumptions.