Question & Answer

A tensile test uses a test specimen that has a gage length of 50 mm and an area = 200 mm2 . During the test the specimen yields under a load of 98,000 N. The corresponding gage length = 50.23 mm. This is the 0.2 percent yield point. The maximum load of 168,000 N is reached at a gage length = 64.2 mm. Determine (a) yield strength, (b) modulus of elasticity, and (c) tensile strength. (d) If fracture occurs at a gage length of 67.3 mm, determine the percent elongation. (e) If the specimen necked to an area = 92 mm2 , determine the percent reduction in area.

Industry and organisational value chain With reference to Marino Designs in Self-study problem 2, at the start of this chapter, differentiate between an industry value chain and an organisational value chain.

Gordon Company sponsors a defined benefit pension plan. The following information related to the pension plan is available for 2014 and 2015. 2014 2015 Plan assets (fair value), December 31 $699,000 $849,000 Projected benefi t obligation, January 1 700,000 800,000 Pension asset/liability, January 1 140,000 Cr. ? Prior service cost, January 1 250,000 240,000 Service cost 60,000 90,000 Actual and expected return on plan assets 24,000 30,000 Amortization of prior service cost 10,000 12,000 Contributions (funding) 115,000 120,000 Accumulated benefi t obligation, December 31 500,000 550,000 Interest/settlement rate 9% 9% Instructions (a) Compute pension expense for 2014 and 2015. (b) Prepare the journal entries to record the pension expense and the company’s funding of the pension plan for both years.

When a taxpayer receives a nonqualified distribution from a Roth IRA, is the entire amount of the distribution treated as taxable income? Explain.

Norma Smith is the controller of Baylor Corporation and is responsible for the preparation of the year-end financial statements. The following transactions occurred during the year. (a) On December 20, 2014, a former employee filed a legal action against Baylor for $100,000 for wrongful dismissal. Management believes the action to be frivolous and without merit. The likelihood of payment to the employee is remote. (b) Bonuses to key employees based on net income for 2014 are estimated to be $150,000. (c) On December 1, 2014, the company borrowed $600,000 at 8% per year. Interest is paid quarterly. (d) Credit sales for the year amounted to $10,000,000. Baylor’s expense provision for doubtful accounts is estimated to be 3% of credit sales. (e) On December 15, 2014, the company declared a $2.00 per share dividend on the 40,000 shares of common stock outstanding, to be paid on January 5, 2015. (f) During the year, customer advances of $160,000 were received; $50,000 of this amount was earned by December 31, 2014. Instructions For each item above, indicate the dollar amount to be reported as a current liability. If a liability is not reported, explain why.

Explain how the amount of cash payments to suppliers is computed under the direct method.

What are the basic differences between regulations, revenue rulings, and private letter rulings?

Assume that there are 200 consumers in the market. Of these, 100 have schedules like Kate’s and 100 have schedules like Simon’s. What would be the total market demand schedule for potatoes now?                                Price(pence per kg) Total market demand(kg)             20             40             60             80           100                 4400                 2600                 1400                   800                   600 1. How much would be demanded at a price of 30p per kilogram? 2. Assuming that demand does not change from month to month, plot the annual market demand for potatoes.

Explain the difference between calculating a loss deduction for a business asset that was partially damaged in an accident and calculating a loss deduction for a business asset that was stolen or completely destroyed in an accident.

Shlee Corporation issued a 4-year, $60,000, zero-interest-bearing note to Garcia Company on January 1, 2014, and received cash of $60,000. In addition, Shlee agreed to sell merchandise to Garcia at an amount less than regular selling price over the 4-year period. The market rate of interest for similar notes is 12%. Prepare Shlee Corporation’s January 1 journal entry.

What depreciation methods are available for tangible personal property? Explain the characteristics of a business likely to adopt each method.

1.       : What opportunities and potential problems are posed by the formation of more than one coalition within an organization, each one advocating a different direction or alternative? What steps can you take as a manager to make sure that dueling coalitions result in constructive discussion rather than dissension?

Why, under oligopoly, might a particular industry be collusive at one time and yet highly price competitive at another?

If the sufferers had no property rights, show how it would still be in their interests to ‘bribe’ the firm to produce the socially efficient level of output.

Keyser’s Fleece Inc. holds a drove of sheep. Keyser shears the sheep on a semiannual basis and then sells the harvested wool into the specialty knitting market. Keyser has the following information related to the shearing sheep at January 1, 2014, and during the first six months of 2014 Shearing Sheep Carrying value (equal to net realizable value), January 1, 2014 $74,000 Change in fair value due to growth and price changes 4,700 Change in fair value due to harvest (575) Wool harvested during the fi rst 6 months (at NRV) 9,000 Prepare the journal entry(ies) for Keyser’s biological asset (shearing sheep) for the first six months of 2014.

Below is the comparative balance sheet for Stevie Wonder Corporation. Dec. 31, Dec. 31, 2014 2013 Cash $ 16,500 $ 21,000 Short-term investments 25,000 19,000 Accounts receivable 43,000 45,000 Allowance for doubtful accounts (1,800) (2,000) Prepaid expenses 4,200 2,500 Inventory 81,500 65,000 Land 50,000 50,000 Buildings 125,000 73,500 Accumulated depreciation—buildings (30,000) (23,000) Equipment 53,000 46,000 Accumulated depreciation—equipment (19,000) (15,500) Delivery equipment 39,000 39,000 Accumulated depreciation—delivery equipment (22,000) (20,500) Patents 15,000 202 $379,400 $300,000 Dec. 31, Dec. 31, 2014 2013 Accounts payable $ 26,000 $ 16,000 Short-term notes payable (trade) 4,000 6,000 Accrued payables 3,000 4,600 Mortgage payable 73,000 53,400 Bonds payable 50,000 62,500 Capital stock 140,000 102,000 Paid-in capital in excess of par 10,000 4,000 Retained earnings 73,400 51,500 $379,400 $300,000 Dividends in the amount of $15,000 were declared and paid in 2014. Instructions From this information, prepare a worksheet for a statement of cash flows. Make reasonable assumptions as appropriate. The short-term investments are considered available-for-sale and no unrealized gains or losses have occurred on these securities.

George Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period of 10 years. The normal selling price of the equipment is $278,072, and its unguaranteed residual value at the end of the lease term is estimated to be $20,000. National will pay annual payments of $40,000 at the beginning of each year and all maintenance, insurance, and taxes. George incurred costs of $180,000 in manufacturing the equipment and $4,000 in negotiating and closing the lease. George has determined that the collectibility of the lease payments is reasonably predictable, that no additional costs will be incurred, and that the implicit interest rate is 10%. Instructions (a) Discuss the nature of this lease in relation to the lessor and compute the amount of each of the following items. (1) Lease receivable. (2) Sales price. (3) Cost of sales. (b) Prepare a 10-year lease amortization schedule. (c) Prepare all of the lessor’s journal entries for the first year.

Laserwords Inc. is a book distributor that had been operating in its original facility since 1987. The increase in certification programs and continuing education requirements in several professions has contributed to an annual growth rate of 15% for Laserwords since 2009. Laserwords’ original facility became obsolete by early 2014 because of the increased sales volume and the fact that Laserwords now carries CDs in addition to books. On June 1, 2014, Laserwords contracted with Black Construction to have a new building constructed for $4,000,000 on land owned by Laserwords. The payments made by Laserwords to Black Construction are shown in the schedule below. Date Amount July 30, 2014 $ 900,000 January 30, 2015 1,500,000 May 30, 2015 1,600,000 Total payments $4,000,000 Construction was completed and the building was ready for occupancy on May 27, 2015. Laserwords had no new borrowings directly associated with the new building but had the following debt outstanding at May 31, 2015, the end of its fiscal year. 10%, 5-year note payable of $2,000,000, dated April 1, 2011, with interest payable annually on April 1. 12%, 10-year bond issue of $3,000,000 sold at par on June 30, 2007, with interest payable annually on June 30. Instructions For each of the four independent situations, prepare the journal entries to record the exchange on the booksof each company.

John Adams Company’s record of transactions for the month of April was as follows. Purchases Sales April 1 (balance on hand) 600 @ $ 6.00 April 3 500 @ $10.00 4 1,500 @ 6.08 9 1,400 @ 10.00 8 800 @ 6.40 11 600 @ 11.00 13 1,200 @ 6.50 23 1,200 @ 11.00 21 700 @ 6.60 27 900 @ 12.00 29 500 @ 6.79 4,600 5,300 Instructions (a) Assuming that periodic inventory records are kept in units only, compute the inventory at April 30 using (1) LIFO and (2) average-cost. (b) Assuming that perpetual inventory records are kept in dollars, determine the inventory using (1) FIFO and (2) LIFO. (c) Compute cost of goods sold assuming periodic inventory procedures and inventory priced at FIFO. (d) In an inflationary period, which inventory method—FIFO, LIFO, average-cost—will show the highest net income?

Helen Keller Company began operations on January 1, 2013, adopting the conventional retail inventory system. None of the company’s merchandise was marked down in 2013 and, because there was no beginning inventory, its ending inventory for 2013 of $38,100 would have been the same under either the conventional retail system or the LIFO retail system. On December 31, 2014, the store management considers adopting the LIFO retail system and desires to know how the December 31, 2014, inventory would appear under both systems. All pertinent data regarding purchases, sales, markups, and markdowns are shown below. There has been no change in the price level. Cost Retail Inventory, Jan. 1, 2014 $ 38,100 $ 60,000 Markdowns (net) 13,000 Markups (net) 22,000 Purchases (net) 130,900 178,000 Sales (net) 167,000 Instructions Determine the cost of the 2014 ending inventory under both (a) the conventional retail method and (b) the LIFO retail method.

Stock market conditions serve as a leading economic indicator. Assuming the U.S. economy is in a recession, what are the implications of this indicator? Why might this indicator be inaccurate? (LO1)

What are some of the benefits usually cited for NC compared to using manual alternative methods?

If the volume of merchandise exports falls by less than their value what can be infer about what has happened to the prices of merchandise exports’?

Gheorghe Moresan Lumber Company handles three principal lines of merchandise with these varying rates of gross profit on cost. Lumber 25% Millwork 30% Hardware and fi ttings 40% On August 18, a fire destroyed the office, lumber shed, and a considerable portion of the lumber stacked in the yard. To file a report of loss for insurance purposes, the company must know what the inventories were immediately preceding the fire. No detail or perpetual inventory records of any kind were maintained. The only pertinent information you are able to obtain are the following facts from the general ledger, which was kept in a fireproof vault and thus escaped destruction. Lumber Millwork Hardware Inventory, Jan. 1, 2014 $ 250,000 $ 90,000 $ 45,000 Purchases to Aug. 18, 2014 1,500,000 375,000 160,000 Sales revenue to Aug. 18, 2014 2,080,000 533,000 210,000 Instructions Submit your estimate of the inventory amounts immediately preceding the fire.

How does the tax treatment of employee fringe benefits reflect the hybrid nature of the S corporation?