Question & Answer

On December 31, 2014, Oakbrook Inc. rendered services to Beghun Corporation at an agreed price of $102,049, accepting $40,000 down and agreeing to accept the balance in four equal installments of $20,000 receivable each December 31. An assumed interest rate of 11% is imputed. Instructions Prepare the entries that would be recorded by Oakbrook Inc. for the sale and for the receipts and interest on the following dates. (Assume that the effective-interest method is used for amortization purposes.) (a) December 31, 2014. (c) December 31, 2016. (e) December 31, 2018. (b) December 31, 2015. (d) December 31, 2017.

Clancey Inc. issues $2,000,000 of 7% bonds due in 10 years with interest payable at year-end. The current market rate of interest for bonds of similar risk is 8%. What amount will Clancey receive when it issues the bonds?

Explain the meaning of surplus units and deficit units. Provide an example of each. Which types of financial institutions do you deal with? Explain whether you are acting as a surplus unit or a deficit unit in your relationship with each financial institution. (LO1)

When salaries and wages expense for the year is computed, why are beginning accrued salaries and wages subtracted from, and ending accrued salaries and wages added to, salaries and wages paid during the year?

1.      : With respect to competitive strategy, identify and evaluate Casper’s target customers, its core competence, and how it builds synergy and delivers value.

In a turning operation on an aluminum alloy workpiece, the feed = 0.020 in/rev, and depth of cut = 0.250 in. The motor horsepower of the lathe is 20 hp and it has a mechanical efficiency = 92%. The unit horsepower value = 0.25 hp/(in3 /min) for this aluminum grade. What is the maximum cutting speed that can be used on this job?

Describe in general how the cash method of accounting differs from the accrual method.

1.    What do you think the ideal ranking would be of the three skills for an effective manager?

At two levels of activity within the relevant range, average costs are $192 and $188, respectively. Assuming the cost function is linear, what can be said about the existence of fixed and variable costs?

1.    : Both China and India are rising economic powers. How might your approach to doing business with China, a communist country, differ from your approach to doing business with India, the world’s most populous democracy? In which country would you expect to encounter the most rules? The most bureaucracy? Why?

Discuss the basic differences between annotated and topical tax services.  How are these services used in tax research?

What is meant by the term faying surface?

Pierre Company has a 12% note payable with a carrying value of $20,000. Pierre applies the fair value option to this note. Given an increase in market interest rates, the fair value of the note is $22,600. Prepare the entry to record the fair value option for this note.

Based on the definition of gross income in §61, related regulations, and judicial rulings, what are the three criteria for recognizing taxable income?

When should a debt security be classified as held-tomaturity?

Cemented carbides are what class of composites?

Part of a contract between a union and a company guarantees that all manufacturing employees earn five hours of overtime each week. In the company’s job costing system, should overtime be treated as a direct or indirect cost?

Using examples, discuss the conflicts between using the environment as productive resource and as a dump?

Examine the case for public ownership of an industry where a natural monopoly exists.

What is the difference between a refundable and nonrefundable tax credit?

In an examination of Arenes Corporation as of December 31, 2014, you have learned that the following situations exist. No entries have been made in the accounting records for these items. 1. The corporation erected its present factory building in 1999. Depreciation was calculated by the straight-line method, using an estimated life of 35 years. Early in 2014, the board of directors conducted a careful survey and estimated that the factory building had a remaining useful life of 25 years as of January 1, 2014. 2. An additional assessment of 2013 income taxes was levied and paid in 2014. 3. When calculating the accrual for officers’ salaries at December 31, 2014, it was discovered that the accrual for officers’ salaries for December 31, 2013, had been overstated. 4. On December 15, 2014, Arenes Corporation declared a cash dividend on its common stock outstanding, payable February 1, 2015, to the common stockholders of record December 31, 2014. Instructions Describe fully how each of the items above should be reported in the financial statements of Arenes Corporation for the year 2014.

Are C corporations or flow-through entities (S corporations and entities taxed as partnerships) more flexible in terms of selecting a tax year-end? Why are the tax rules in this area different for C corporations and flow-through business entities?

Use the same information as in E14-22 above except that American Bank reduced the principal to $1,900,000 rather than $2,400,000. On January 1, 2018, Barkley pays $1,900,000 in cash to American Bank for the principal. Instructions (a) Can Barkley Company record a gain under this term modification? If yes, compute the gain for Barkley Company. (b) Prepare the journal entries to record the gain on Barkley’s books. (c) What interest rate should Barkley use to compute its interest expense in future periods? Will your answer be the same as in E14-22 above? Why or why not? (d) Prepare the interest payment schedule of the note for Barkley Company after the debt restructuring. (e) Prepare the interest payment entries for Barkley Company on December 31, of 2015, 2016, and 2017. (f) What entry should Barkley make on January 1, 2018?

Figure 19.5 shows a steep investment demand curve. If the real rate of interest falls from r1 to r2, there is only a small rise in investment from I1 to I2. Now draw a much more elastic I curve passing through point a. Assume that this is the true I curve. Show how the rate of interest could still fall to r2 and investment still only rise to I2 if this curve were to shift.

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?