Question & Answer

You have been engaged by Buhl Construction Company to advise it concerning the proper accounting for a series of long-term contracts. Buhl commenced doing business on January 1, 2014. Construction activities for the first year of operations are shown below. All contract costs are with different customers, and any work remaining at December 31, 2014, is expected to be completed in 2015. Cash Contract Estimated Total Billings Collections Costs Incurred Additional Contract Through Through Through Costs to Project Price 12/31/14 12/31/14 12/31/14 Complete A $ 300,000 $200,000 $180,000 $248,000 $ 72,000 B 350,000 110,000 105,000 67,800 271,200 C 280,000 280,000 255,000 186,000 –0– D 200,000 35,000 25,000 118,000 87,000 E 240,000 205,000 200,000 190,000 10,000 $1,370,000 $830,000 $765,000 $809,800 $440,200 Instructions (a) Prepare a schedule to compute gross profit (loss) to be reported, unbilled contract costs and recognized profit, and billings in excess of costs and recognized profit using the percentage-of-completion method. (b) Prepare a partial income statement and balance sheet to indicate how the information would be reported for financial statement purposes. (c) Repeat the requirements for part (a), assuming Buhl uses the completed-contract method. (d) Using the responses above for illustrative purposes, prepare a brief report comparing the conceptual merits (both positive and negative) of the two revenue recognition approaches.

Maria has been operating Mansfield Park as a C corporation and decides she would like to make an S election. What is the earliest the election will become effective under each of these alternative scenarios? a. Maria is on top of things and makes the election on January 1, 2024. Effective Jan. 1, 2024 b. Maria is mostly on top of things and makes the election on January 15, 2024. Effective Jan. 1, 2024 c. Maria makes the election on February 10, 2024. She needed a little time to convince a C corporate shareholder to sell its stock to a qualifying shareholder. That process took all

A leadscrew coupled directly to a dc servomotor is used to drive one of the table axes of an NC milling machine. The leadscrew has 5 threads/in. The optical encoder attached to the leadscrew emits 100 pulses/rev of the leadscrew. The motor rotates at a maximum speed of 800 rev/min. Determine (a) the control resolution of the system, expressed in linear travel distance of the table axis; (b) the frequency of the pulse train emitted by the optical encoder when the servomotor operates at maximum speed; and (c) the travel speed of the table at the maximum rpm of the motor.

In examining financial statements, financial analysts often write off goodwill immediately. Comment on this procedure.

1.      : Are Connie and her staff on the right track to avoid manager mishaps by defining a new set of leader rules and core values and imposing it by fiat, from the top down?

Presented below is information related to James Garfield Corp. July 1 James Garfi eld Corp. sold to Warren Harding Co. merchandise having a sales price of $8,000 with terms 2/10, net/60. Garfi eld records its sales and receivables net. 5 Accounts receivable of $9,000 (gross) are factored with Andrew Jackson Credit Corp. without recourse at a fi nancing charge of 9%. Cash is received for the proceeds; collections are handled by the fi nance company. (These accounts were all past the discount period.) 9 Specifi c accounts receivable of $9,000 (gross) are pledged to Alf Landon Credit Corp. as security for a loan of $6,000 at a fi nance charge of 6% of the amount of the loan. The fi nance company will make the collections. (All the accounts receivable are past the discount period.) Dec. 29 Warren Harding Co. notifi es Garfi eld that it is bankrupt and will pay only 10% of its account. Give the entry to write off the uncollectible balance using the allowance method. (Note: First record the increase in the receivable on July 11 when the discount period passed.) Instructions Prepare all necessary entries in general journal form for Garfield Corp.

Carlton Company is involved in four separate industries. The following information is available for each of the four industries. Operating Segment Total Revenue Operating Profi t (Loss) Identifi able Assets W $ 60,000 $15,000 $167,000 X 10,000 3,000 83,000 Y 23,000 (2,000) 21,000 Z 9,000 1,000 19,000 $102,000 $17,000 $290,000 Instructions Determine which of the operating segments are reportable based on the: (a) Revenue test. (b) Operating profit (loss) test. (c) Identifiable assets test.

In the previous problem, if the foundry desired to improve its quality performance to the 5.0 sigma level in all three measures of DPM, how many defects and defective units would they produce in an annual production quantity of 15,000 castings? Assume the same eight features are used to assess quality.

Money that individual and institutional investors previously invested in stocks is now being invested in private equity funds. Explain why this should result in improved business conditions. (LO5)

Under what circumstances would (a) contractionary and (b) expansionary policies cause no conflict between internal and external objectives?

You are asked to travel to Milwaukee to observe and verify the inventory of the Milwaukee branch of one of your clients. You arrive on Thursday, December 30, and find that the inventory procedures have just been started. You spot a railway car on the sidetrack at the unloading door and ask the warehouse superintendent, Buck Rogers, how he plans to inventory the contents of the car. He responds, “We are not going to include the contents in the inventory.” Later in the day, you ask the bookkeeper for the invoice on the carload and the related freight bill. The invoice lists the various items, prices, and extensions of the goods in the car. You note that the carload was shipped December 24 from Albuquerque, f.o.b. Albuquerque, and that the total invoice price of the goods in the car was $35,300. The freight bill called for a payment of $1,500. Terms were net 30 days. The bookkeeper affirms the fact that this invoice is to be held for recording in January. Instructions (a) Does your client have a liability that should be recorded at December 31? Discuss. (b) Prepare a journal entry(ies), if required, to reflect any accounting adjustment required. Assume a perpetual inventory system is used by your client. (c) For what possible reason(s) might your client wish to postpone recording the transaction?

Mike Crane is an audit senior of a large public accounting firm who has just been assigned to the Frost Corporation’s annual audit engagement. Frost has been a client of Crane’s firm for many years. Frost is a fast-growing business in the commercial construction industry. In reviewing the fixed asset ledger, Crane discovered a series of unusual accounting changes, in which the useful lives of assets, depreciated using the straight-line method, were substantially lowered near the midpoint of the original estimate. For example, the useful life of one dump truck was changed from 10 to 6 years during its fifth year of service. Upon further investigation, Mike was told by Kevin James, Frost’s accounting manager, “I don’t really  your problem. After all, it’s perfectly legal to change an accounting estimate. Besides, our CEO likes to see big earnings!” Instructions Answer the following questions. (a) What are the ethical issues concerning Frost’s practice of changing the useful lives of fixed assets? (b) Who could be harmed by Frost’s unusual accounting changes? (c) What should Crane do in this situation?

Explain why securities firms from the United States have expanded into foreign markets. (LO1)

Markell’s basis in the Markit Partnership is $58,000. In a proportionate liquidating distribution, Markell receives the following assets: Tax BasisFMV Cash $8,000 $8,000 Land A 20,000 45,000 Land B 20,000 25,000 a. How much gain or loss will Markell recognize on the distribution? What is the character of any recognized gain or loss? b. What is Markell’s basis in the distributed assets?

: Ignore the problem. Pate’s contributions to new product development are too valuable to risk losing him, and the problems over the past ten years have1.      always worked themselves out anyway. There’s no sense starting something that could make you look bad.

1.       : Experts say that organizations are becoming increasingly decentralized, with authority, decision-making responsibility, and accountability being pushed further down into the organization. How will this trend affect what will be asked of you as a manager?

Refer to the data for Barwood Corporation in BE16-6. Repeat the requirements assuming that instead of options, Barwood granted 2,000 shares of restricted stock.

How could we model a credit market disruption and its impact on interest-rate differentials using the Keynesian cross (Keynesian 45° line) diagram?

A critic recently claimed that hedge funds increase market volatility when they publicize (and document) that a public corporation exaggerated its earnings. The critic argued that hedge funds should not be allowed to make such public statements and should not be allowed to take short positions that bet against the firm that is being criticized. Write a short essay that supports or refutes this opinion.

Bridgewater Corp. offered holders of its 1,000 convertible bonds a premium of $160 per bond to induce conversion into shares of its common stock. Upon conversion of all the bonds, Bridgewater Corp. recorded the $160,000 premium as a reduction of paid-in capital. Comment on Bridgewater’s treatment of the $160,000 “sweetener.”

1.    You are a middle manager helping to implement a new corporate cost-cutting strategy, and you’re meeting skepticism, resistance, and, in some cases, outright hostility from your subordinates. In what ways might you or the company have been able to avoid this situation? Where do you go from here?

] Meg O’Brien received a gift of some small-scale jewelry manufacturing equipment that her father had used for personal purposes for many years. Her father originally purchased the equipment for $1,500. Because the equipment is out of production and no longer available, the property is currently worth $4,000. Meg has decided to begin a new jewelry manufacturing trade or business. What is her depreciable basis for depreciating the equipment?

1.       : What is the difference between ethnocentrism and unconscious bias? Might the two concepts also appear to be the same within some people? Explain.

1.    : Suggest two personal traits that you would admire in a business leader today. Might these traits be more valuable in some situations than in others? Explain.

1.      : What should Clarke do now to try to recover from the negative impact of his e-mails? Suggest specific steps.