Question & Answer

Presented below is an amortization schedule related to Spangler Company’s 5-year, $100,000 bond with a 7% interest rate and a 5% yield, purchased on December 31, 2012, for $108,660. Cash Interest Bond Premium Carrying Amount Date Received Revenue Amortization of Bonds 12/31/12 $108,660 12/31/13 $7,000 $5,433 $1,567 107,093 12/31/14 7,000 5,354 1,646 105,447 12/31/15 7,000 5,272 1,728 103,719 12/31/16 7,000 5,186 1,814 101,905 12/31/17 7,000 5,095 1,905 100,000 The following schedule presents a comparison of the amortized cost and fair value of the bonds at year-end. 12/31/13 12/31/14 12/31/15 12/31/16 12/31/17 Amortized cost $107,093 $105,447 $103,719 $101,905 $100,000 Fair value $106,500 $107,500 $105,650 $103,000 $100,000 Instructions (a) Prepare the journal entry to record the purchase of these bonds on December 31, 2012, assuming the bonds are classified as held-to-maturity securities. (b) Prepare the journal entry(ies) related to the held-to-maturity bonds for 2013. (c) Prepare the journal entry(ies) related to the held-to-maturity bonds for 2015. (d) Prepare the journal entry(ies) to record the purchase of these bonds, assuming they are classified as available-for-sale. (e) Prepare the journal entry(ies) related to the available-for-sale bonds for 2013. (f) Prepare the journal entry(ies) related to the available-for-sale bonds for 2015.

Go through the above arguments and give a reply to the criticisms made of government intervention.

How does the initial rate on adjustable-rate mortgages (ARMs) differ from the rate on fixed-rate mortgages? Why? Explain how caps on ARMs can affect a financial institution’s exposure to interest rate risk. (LO2)

What are hot assets, and why are they important in the sale of a partnership interest?

A two-spindle drill simultaneously drills a ½ in hole and a ¾ in hole through a workpiece that is 1.0 inch thick. Both drills are twist drills with point angles of 118°. Cutting speed for the material is 230 ft/min. The rotational speed of each spindle can be set individually. The feed rate for both holes must be set to the same value because the 2 spindles lower at the same rate. The feed rate is set so the total metal removal rate does not exceed 1.50 in3 /min. Determine (a) the maximum feed rate (in/min) that can be used, (b) the individual feeds (in/rev) that result for each hole, and (c) the time required to drill the holes.

Explain the conditions under which a speculator would like to invest in a foreign currency today even when the speculator has no use for that currency in the future. (LO2, LO3)

Balanced scorecard; strategy map and implementation Terence Smythe, a veterinariant, decided to join a small group of vets so that he no longer has to be on call every night. Practice members share the responsibility of emergencies with other members of the group. In the past, Terrence differentiated his practice by specialising in the treatment of large farm. None of the other vets specialise in large farm animals, but all of them treat some farm animals. Terrences’s son just finished an accounting degree and recommended that the vets group consider implementing a balanced scorecard as they develop the policies and practices for the new group.                                           Required (a)     Explain what each of the four perspectives of the balanced scorecard mean in the context of a vets group. (b)     Recommend several methods the group could use to assess a performance objective of patient satisfaction. (c)     Recommend two measures for each of the four perspectives for the vets group. Explain your recommendations. (d)     Construct a strategy map to reflect the links between the measures selected. Briefly discuss the links.

Identify the four generic perspectives for a balanced scorecard and         explain how they are related.

1.       : What are some specific tips that you would give a new manager for building trust with subordinates? With other managers?

Melissa, Nicole, and Miguel are equal partners in the Opto Partnership (calendar-year-end entity). Melissa decides she wants to exit the partnership and receives a proportionate distribution to liquidate her partnership interest on January 1. The partnership has no liabilities and holds the following assets as of January 1: Tax BasisFMV Cash $ 18,000 $ 18,000 Accounts receivable -0- 24,000 Stock investment 7,500 12,000 Land 30,000 36,000    Totals $ 55,500 $ 90,000 Melissa receives one-third of each of the partnership assets. She has a basis in her partnership interest of $25,000. a. What are the amount and character of any recognized gain or loss to Melissa? b. What is Melissa’s basis in the distributed assets? c. What are the tax implications (amount and character of gain or loss and basis of assets) to Melissa if her outside basis is $11,000 rather than $25,000? d. What are the amount and character of any recognized gain or loss from the distribution

Would it be possible for firms to calculate their maximum-profit output if they did not use marginal cost and marginal revenue concepts?

Define epitaxial deposition.

Tim is a plumber who joined a barter club.  This year Tim exchanges plumbing services for a new roof.  The roof is properly valued at $2,500, but Tim would have only billed $2,200 for the plumbing services.  What amount of income should Tim recognize on the exchange of his services for a roof?  Would your answer change if Tim would have normally billed $3,000 for his services?

Assume the same facts as in the previous problem, and that Nancy would like to have Alfonzo stay on as a consultant after all of his shares are redeemed. She would pay him a modest amount of $500 per month. Nancy wants to know if there is any de minimis rule such that Alfonso would not be treated as having retained a prohibited interest in the company because he is receiving such a small amount of money. Consult Lynch v. Comm’r, 801 F.2d 1176 (9th Cir. 1986), reversing 83 TC 597 (1984); Seda v. Comm’r, 82 TC 484 (1984); and Cerone v. Comm’r, 87 TC 1 (1986).

Compare the relative merits of banning certain types of market structure with banning certain types of market behaviour.

1.       : Why is benchmarking an important component of TQM programs? Do you believe a company could have a successful TQM program without using benchmarking? Explain.

Presented below are three unrelated situations. (a) Dwayne Wade Company recently signed a lease for a new office building, for a lease period of 10 years. Under the lease agreement, a security deposit of $12,000 is made, with the deposit to be returned at the expiration of the lease, with interest compounded at 10% per year. What amount will the company receive at the time the lease expires? (b) Serena Williams Corporation, having recently issued a $20 million, 15-year bond issue, is committed to make annual sinking fund deposits of $600,000. The deposits are made on the last day of each year and yield a return of 10%. Will the fund at the end of 15 years be sufficient to retire the bonds? If not, what will the deficiency be? (c) Under the terms of his salary agreement, president Rex Walters has an option of receiving either an immediate bonus of $40,000, or a deferred bonus of $70,000 payable in 10 years. Ignoring tax considerations and assuming a relevant interest rate of 8%, which form of settlement should Walters accept?

Under what circumstances is it appropriate to record goodwill in the accounts? How should goodwill, properly recorded on the books, be written off in order to conform with generally accepted accounting principles?

How would you interpret a large increase in the CBOE volatility index (VIX)? Explain why the VIX increased substantially during the Covid-19 pandemic in 2020. (LO5)

Kleckner Company started operations in 2010. Although it has grown steadily, the company reported accumulated operating losses of $450,000 in its first four years in business. In the most recent year (2014), Kleckner appears to have turned the corner and reported modest taxable income of $30,000. In addition to a deferred tax asset related to its net operating loss, Kleckner has recorded a deferred tax asset related to product warranties and a deferred tax liability related to accelerated depreciation. Given its past operating results, Kleckner has established a full valuation allowance for its deferred tax assets. However, given its improved performance, Kleckner management wonders whether the company can now reduce or eliminate the valuation allowance. They would like you to conduct some research on the accounting for its valuation allowance. Instructions If your school has a subscription to the FASB Codification, go to http://aaahq.org/ascLogin.cfm to log in and prepare responses to the following. Provide Codification references for your responses. (a) Briefly explain to Kleckner management the importance of future taxable income as it relates to the valuation allowance for deferred tax assets. (b) What are the sources of income that may be relied upon to remove the need for a valuation allowance? (c) What are tax-planning strategies? From the information provided, does it appear that Kleckner could employ a tax-planning strategy to support reducing its valuation allowance?

Kenoly Corporation owns a patent that has a carrying amount of $300,000. Kenoly expects future net cash flows from this patent to total $210,000. The fair value of the patent is $110,000. Prepare Kenoly’s journal entry, if necessary, to record the loss on impairment.

1. Would it be possible for an economy to function without a central bank? 2. What effect would a substantial increase in the sale of government bonds and Treasury bills have on interest rates?

What is a trimming operation in the context of impression die forging?

Randy deducted a high level of itemized deductions two years ago relative to his income level.  He recently received an IRS notice requesting documentation for his itemized deductions.  What audit procedure likely identified his tax return for audit?

Briefly describe the origin of the Federal Reserve System. Describe the functions of the Fed district banks. (LO1)