Question & Answer

1. If monopoly power existed in an industry, would production be above or below the socially efficient level (assuming no externalities)? Which would be greater, MSB or P? 2. Assuming perfect competition and no externalities, social efficiency will also be achieved in factor markets. Demonstrate that this will be where:                     MSBf = MRPf = Pf = MDUf = MSCf (where MRP is the marginal product of a factor, MDU is the marginal disutility of supplying it and f is any factor – see section 10.1).

Conceptually, when taxpayers receive annuity payments, how do they determine the amount of the payment they must include in gross income?

What is a partnership’s ordinary business income (loss), and how is it calculated?

What is stare decisis, and how does it relate to the Golsen rule?

“The federal income tax scores very high on the economy criterion because the current IRS budget is relatively low compared to the costs of a typical collection agency.”  Explain why this statement may be considered wrong.

List two purposes of dressing a grinding wheel.

Under what circumstances would business income from an accounting practice qualify for the deduction for qualified business income?

For what reasons might a corporation purchase its own stock?

Why would a company wish to reduce its bond indebtedness before its bonds reach maturity? Indicate how this can be done and the correct accounting treatment for such a transaction.

Why does the exchange-rate transmission mechanism strengthen the interest-rate transmission mechanism?

Name and briefly describe the four types of chips that occur in metal cutting

Provide examples of assets that do not qualify for interest capitalization.

How does the expense warranty approach differ from the sales warranty approach?

On December 21, 2013, Bucky Katt Company provided you with the following information regarding its trading securities. December 31, 2013 Investments (Trading) Cost Fair Value Unrealized Gain (Loss) Clemson Corp. stock $20,000 $19,000 $(1,000) Colorado Co. stock 10,000 9,000 (1,000) Buffaloes Co. stock 20,000 20,600 600 Total of portfolio $50,000 $48,600 (1,400) Previous fair value adjustment balance –0– Fair value adjustment—Cr. $(1,400) During 2014, Colorado Company stock was sold for $9,400. The fair value of the stock on December 31, 2014, was Clemson Corp. stock—$19,100; Buffaloes Co. stock—$20,500. Instructions (a) Prepare the adjusting journal entry needed on December 31, 2013. (b) Prepare the journal entry to record the sale of the Colorado Company stock during 2014. (c) Prepare the adjusting journal entry needed on December 31, 2014.

What dangers are there in maturity transformation for (a) financial institutions; (b) society generally?

What purpose do property and casualty insurance companies serve? Explain how the characteristics of PC insurance and life insurance differ. (LO4)

The unit melting energy for a certain sheet metal is 9.5 J/mm3. The thickness of each of the two sheets to be spot welded is 3.5 mm. To achieve required strength, it is desired to form a weld nugget that is 5.5 mm in diameter and 5.0 mm thick. The weld duration will be set at 0.3 sec. If it is assumed that the electrical resistance between the surfaces is 140 micro-ohms, and that only one-third of the electrical energy generated will be used to form the weld nugget (the rest being dissipated), determine the minimum current level required in this operation.

3. Why will marginal social benefit not equal marginal social costs in the labour market if there exists (a) union monopoly power and/or (b) firms with monopsony power?

Are variable-rate bonds attractive to investors who expect interest rates to decrease? Explain. Would a firm that needs to borrow funds consider issuing variable-rate bonds if it expects interest rates to decrease in the future? Explain. (LO2)

Explain group plan life insurance. (LO3)

Name the three principal types of printed circuit board.

Explain why the rescue of Fannie Mae and Freddie Mac during the credit crisis improved the ability of mortgage companies to originate mortgages. (LO5)

Padma needs a new truck to help her expand Padma’s Plumbing Palace. Business has been booming, and Padma would like to accelerate her tax deductions as much as possible (ignore §179 expense and bonus depreciation for this problem). On April 1, Padma purchased a new delivery van for $25,000. It is now September 26 and Padma, already in need of another vehicle, has found a deal on buying a truck for $22,000 (all fees included). The dealer tells her if she doesn’t buy the truck (Option 1), it will be gone tomorrow. There is an auction (Option 2) scheduled for October 5 where Padma believes she can get a similar truck for $21,500, but there is also a $500 auction fee. Padma makes no other asset acquisitions during the year.  a. Which option allows Padma to generate more depreciation deductions this year (the vehicles are not considered to be luxury autos)? b. Assume the original facts, except that the delivery van was placed in service one day earlier on March 31 rather than April 1. Which option generates more depreciation deduction?

In rolling of steel, what are the differences between a bloom, a slab, and a billet?

A 12-station transfer line was designed to operate with an ideal production rate = 50 parts/hour. However, the line does not achieve this rate, since the line efficiency = 0.60. It costs $75/hour to operate the line, exclusive of materials. The line operates 4000 hours per year. A computer monitoring system has been proposed that will cost $25,000 (installed) and will reduce downtime on the line by 25%. If the value added per unit produced = $4.00, will the computer system pay for itself within one year of operation? Use expected increase in revenues resulting from the computer system as the criterion. Ignore material costs in your calculations.