Question & Answer

The information below pertains to Barkley Company for 2015. Net income for the year $1,200,000 7% convertible bonds issued at par ($1,000 per bond); each bond is convertible into 30 shares of common stock 2,000,000 6% convertible, cumulative preferred stock, $100 par value; each share is convertible into 3 shares of common stock 4,000,000 Common stock, $10 par value 6,000,000 Tax rate for 2015 40% Average market price of common stock $25 per share There were no changes during 2015 in the number of common shares, preferred shares, or convertible bonds outstanding. There is no treasury stock. The company also has common stock options (granted in a prior year) to purchase 75,000 shares of common stock at $20 per share. Instructions (a) Compute basic earnings per share for 2015. (b) Compute diluted earnings per share for 2015.

Frank paid $3,700 in fees for an accountant to tabulate business information (Frank operates as a self-employed contractor and files a Schedule C). The accountant also spent time tabulating Frank’s income from his investments and determining Frank’s personal itemized deductions. Explain to Frank whether or not he can deduct the $3,700 as a business expense or as an itemized deduction, and provide a citation to an authority that supports your conclusion.

The designer of a polar configuration robot is considering a portion of the manipulator consisting of a rotational joint connected to its output link. The output link is 25 in long and the rotational joint has a range of 75°. The accuracy of the joint-link combination, expressed as a linear measure at the end of the link which results from rotating the joint, is specified as 0.030 in. The mechanical inaccuracies of the joint result in a repeatability error = ±0.030° of rotation. It is assumed that the link is perfectly rigid, so there are no additional errors due to deflection. (a) Show that the specified accuracy can be achieved, given the repeatability error. (b) Determine the minimum number of bits required in the binary register of the robot's control memory to achieve the specified accuracy.

Leon Wight, a newly hired loan analyst, is examining the current liabilities of a corporate loan applicant. He observes that unearned revenues have declined in the current year compared to the prior year. Is this a positive indicator about the client’s liquidity? Explain.

Offer an argument for why the terrorist attack on the United States on September 11, 2001, could have placed downward pressure on U.S. interest rates. Offer an argument for why those attacks could have placed upward pressure on U.S. interest rates. (LO1, LO2)

Discuss why many financial institutions have expanded internationally in recent years. What advantages can be obtained through an international merger of financial institutions? (LO3)

Listed below are various types of accounting changes and errors. ______ 1. Change in a plant asset’s salvage value. ______ 2. Change due to overstatement of inventory. ______ 3. Change from sum-of-the-years’-digits to straight-line method of depreciation. ______ 4. Change from presenting unconsolidated to consolidated financial statements. ______ 5. Change from LIFO to FIFO inventory method. ______ 6. Change in the rate used to compute warranty costs. ______ 7. Change from an unacceptable accounting principle to an acceptable accounting principle. ______ 8. Change in a patent’s amortization period. ______ 9. Change from completed-contract to percentage-of-completion method on construction contracts. ______ 10. Change from FIFO to average-cost inventory method. Instructions For each change or error, indicate how it would be accounted for using the following code letters: (a) Accounted for prospectively. (b) Accounted for retrospectively. (c) Neither of the above.

If countries are so keen to reduce the barriers to trade, why do many countries frequently attempt to erect barriers?

Two or more items are omitted in each of the following tabulations of income statement data. Fill in the amounts that are missing. 2013 2014 2015 Sales revenue $290,000 $ ? $410,000 Sales returns and allowances 11,000 13,000 ? Net sales ? 347,000 ? Beginning inventory 20,000 32,000 ? Ending inventory ? ? ? Purchases ? 260,000 298,000 Purchase returns and allowances 5,000 8,000 10,000 Freight-in 8,000 9,000 12,000 Cost of goods sold 233,000 ? 293,000 Gross profi t on sales 46,000 91,000 97,000

The records of Ellen’s Boutique report the following data for the month of April. Sales revenue $99,000 Purchases (at cost) $48,000 Sales returns 2,000 Purchases (at sales price) 88,000 Markups 10,000 Purchase returns (at cost) 2,000 Markup cancellations 1,500 Purchase returns (at sales price) 3,000 Markdowns 9,300 Beginning inventory (at cost) 30,000 Markdown cancellations 2,800 Beginning inventory (at sales price) 46,500 Freight on purchases 2,400 Instructions Compute the ending inventory by the conventional retail inventory method.

Consider the arguments from the perspective of an advanced country for and against protecting its industries from imports of manufactures from developing countries.

Explain why paying dividends is not an effective way to shift income from a corporation to its owners.

What is meant by super-hysteresis? What mechanisms might explain how this phenomenon occurs?

What are some of the design recommendations for glass parts?

What is meant by “accounting symmetry” between the entries recorded by the debtor and creditor in a troubleddebt restructuring involving a modification of terms? In what ways is the accounting for troubled-debt restructurings non-symmetrical?

Name the three main types of electrochemical machining.

Write a short essay on the future of thrift operations. Should savings institutions be merged into the banking industry, or should they remain distinctly different from commercial banks?

Describe the three different tax rates discussed in the chapter and how taxpayers might use them.

Hayes Company sold 10,000 shares of Kenyon Co. common stock for $27.50 per share, incurring $1,770 in brokerage commissions. These securities were classified as trading and originally cost $260,000. Prepare the entry to record the sale of these securities.

What are some design recommendations for ceramic parts?

The president recently vetoed a tax act passed by the House and Senate.  Is the tax act dead?  If not, what will it take for the act to be passed?

Dividends are sometimes said to have been paid “out of retained earnings.” What is the error, if any, in that statement?

What book-tax differences in year 1 and year 2 associated with its capital gains and losses would ABD Inc. report in the following alternative scenarios? Identify each book-tax difference as favorable or unfavorable and as permanent or temporary.

The qualitative characteristics that make accounting information useful for decision-making purposes are as follows. Relevance Neutrality Verifi ability Faithful representation Completeness Understandability Predictive value Timeliness Comparability Confi rmatory value Materiality Free from error Instructions Identify the appropriate qualitative characteristic(s) to be used given the information provided below. (a) Qualitative characteristic being employed when companies in the same industry are using the same accounting principles. (b) Quality of information that confirms users’ earlier expectations. (c) Imperative for providing comparisons of a company from period to period. (d) Ignores the economic consequences of a standard or rule. (e) Requires a high degree of consensus among individuals on a given measurement. (f) Predictive value is an ingredient of this fundamental quality of information. (g) Four qualitative characteristics that are related to both relevance and faithful representation. (h) An item is not recorded because its effect on income would not change a decision. (i) Neutrality is an ingredient of this fundamental quality of accounting information. (j) Two fundamental qualities that make accounting information useful for decision-making purposes. (k) Issuance of interim reports is an example of what enhancing quality of relevance?

Danner Inc. has a $395,000 capital loss carryover that will expire at the end of the current tax year if it is not used. Also, Danner Inc. has been a general partner in the Talisman Partnership for three years and plans to end its involvement with the partnership by receiving a liquidating distribution. Initially, all parties agreed that Danner Inc.’s liquidating distribution would include $50,000 in cash and land with a fair market value of $400,000 (tax basis of $120,000). Immediately before the distribution, Danner’s basis in its partnership interest is $150,000, which includes its $100,000 share of partnership debt.  Talisman Partnership does not hold any hot assets. a. What are the amount and character of any gain or loss to Danner Inc.? b. What is Danner Inc.’s basis in the land? c. Can you suggest a course of action that would help Danner Inc. avoid the expiration of its capital loss carryover?