Question & Answer

There are several ways of shaping plate or sheet glass. Name and briefly describe one of them

Aminata is a tax expert, whereas Rob is a tax novice.  Explain how their process in identifying tax issues may differ.

What implicit and explicit costs would a firm avoid if it decided not to expand production?

Describe the melting characteristics of a noncrystalline material such as glass.

As part of the year-end accounting process and review of operating policies, Cullen Co. is considering a change in the accounting for its equipment from the straight-line method to an accelerated method. Your supervisor wonders how the company will report this change in principle. He read in a newspaper article that the FASB has issued a standard in this area and has changed GAAP for a “change in estimate that is effected by a change in accounting principle.” (Thus, the accounting may be different from what he learned in intermediate accounting.) Your supervisor wants you to research the authoritative guidance on a change in accounting principle related to depreciation methods. 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) What are the accounting and reporting guidelines for a change in accounting principle related to depreciation methods? (b) What are the conditions that justify a change in depreciation method, as contemplated by Cullen Co.? (c) What guidance does the SEC provide concerning the impact that recently issued accounting standards will have on the financial statements in a future period?

What is the indirect effect of a change in accounting policy? Briefly describe the approach to reporting the indirect effects of a change in accounting policy under IFRS.

Petoskey Stone Quarry Inc. (PSQ), a calendar-year, accrual-method C corporation, provides landscaping supplies to local builders in northern Michigan. PSQ has always been a family-owned business and has a single class of voting common stock outstanding.  The 500 outstanding shares are owned as follows:  Number of shares Nick Adams 150 Amy Adams (Sandler’s sister) 150 Abigail Adams (Nick’s daughter) 50 Charlie Adams (Nick’s son) 50 Sandler Adams (Nick’s father) 100    Total shares 500   Nick Adams serves as president of PSQ, and his father Sandler serves as chair of the board. Amy is the company’s CFO, and Abigail and Charlie work as employees of the company.  Sandler would like to retire and sell his shares back to the company. The fair market value of the shares is $500,000. Sandler’s tax basis in his PSQ shares is $10,000.  The redemption is tentatively scheduled to take place on December 31 of this year.  At the beginning of the year, PSQ had accumulated earnings and profits of $2,500,000.  The company projects current E&P of $200,000.  The company intends to pay a pro rata cash distribution of $300 per share to its shareholders on December 1 of this year.

For what types of parts are VTLs (vertical turret lathes) used?

Included in Adams Company’s December 31, 2014, trial balance are the following accounts: Accounts Payable $220,000; Pension Liability $375,000; Discount on Bonds Payable $29,000; Unearned Rent Revenue $41,000; Bonds Payable $400,000; Salaries and Wages Payable $27,000; Interest Payable $12,000; Income Taxes Payable $29,000. Prepare the current liabilities section of the balance sheet.

How is the distinction between nominal and real relevant to misperceptions theory?

What are compensated absences?

Under what circumstances would making a product illegal (a) cause a fall in its price; (b) cause the quantity sold to fall to zero?

Discuss the appropriate treatment in the income statement for the following items: (a) Loss on discontinued operations. (b) Noncontrolling interest allocation. (c) Earnings per share. (d) Gain on sale of equipment.

The Colson Company issued $300,000 of 10% bonds on January 1, 2014. The bonds are due January 1, 2020, with interest payable each July 1 and January 1. The bonds are issued at face value. Prepare Colson’s journal entries for (a) the January issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry.

ROI, EVA, residual income Senior management at Harriot Industries, an Italian-based fashion house and cosmetics company, have been engaged in a debate around the best key financial measure relevant to evaluate the performance of senior executives and divisional managers. Currently, the performance of senior managers and divisional managers is based on return on investment (ROI), which forms the basis of the bonus payments, provided ROI increases are achieved each year.   The main source of tension seems to be that some of the accounting staff are pushing for the use of economic value added (EVA) or, at the very least, residual income (RI) to be used at both the senior executive and divisional levels.   You have been asked to contribute some views. On a recent visit to the head office of Harriot Industries you were able to access details on a printout from a digital whiteboard that represented a discussion about performance measures and a potential investment project in the Logistics Division. Some of this material is provided below.                                                   Required Using the information provided in the table, demonstrate (perhaps including calculations) the key arguments that might be put forward to support the view that the sole use of return on investment (ROI) may be inappropriate, particularly at the divisional level.

Mohave Inc. purchased land, building, and equipment from Laguna Corporation for a cash payment of $315,000. The estimated fair values of the assets are land $60,000, building $220,000, and equipment $80,000. At what amounts should each of the three assets be recorded?

What does the term refractory mean?

What type of disclosure or accounting do you believe is necessary for the following items? (a) Because of a general increase in the number of labor disputes and strikes, both within and outside the industry, there is an increased likelihood that a company will suffer a costly strike in the near future. (b) A company reports an extraordinary item (net of tax) correctly on the income statement. No other mention is made of this item in the annual report. (c) A company expects to recover a substantial amount in connection with a pending refund claim for a prior year’s taxes. Although the claim is being contested, counsel for the company has confirmed the client’s expectation of recovery.

Describe the accounting for the issuance for cash of nopar value common stock at a price in excess of the stated value of the common stock.

What is a solder paste?

A single crystal boule of silicon is grown by the Czochralski process to an average diameter of 320 mm with length = 1500 mm. The seed and tang ends are removed, which reduces the length to 1150 mm. The diameter is ground to 300 mm. A 90-mm-wide flat is ground on the surface which extends from one end to the other. The ingot is then sliced into wafers of thickness = 0.50 mm, using an abrasive saw blade whose thickness = 0.33 mm. Assuming that the seed and tang portions cut off the ends of the starting boule were conical in shape, determine (a) the original volume of the boule, mm3; (b) how many wafers are cut from it, assuming the entire 1150 mm length can be sliced; and (c) the volumetric proportion of silicon in the starting boule that is wasted during processing.

Capulet Company establishes a stock-appreciation rights program that entitles its new president Ben Davis to receive cash for the difference between the market price of the stock and a pre-established price of $30 (also market price) on December 31, 2010, on 30,000 SARs. The date of grant is December 31, 2010, and the required employment (service) period is 4 years. President Davis exercises all of the SARs in 2016. The fair value of the SARs is estimated to be $6 per SAR on December 31, 2011; $9 on December 31, 2012; $15 on December 31, 2013; $6 on December 31, 2014; and $18 on December 31, 2015. Instructions (a) Prepare a 5-year (2011–2015) schedule of compensation expense pertaining to the 30,000 SARs granted president Davis. (b) Prepare the journal entry for compensation expense in 2011, 2014, and 2015 relative to the 30,000 SARs.

Denton Company plans to engage in an IPO and will issue 4 million shares of stock. It is hoping to sell the shares for an offer price of $14. It hires a securities firm, which suggests that the offer price for the stock be $12 per share to ensure that all the shares can be easily sold. Explain the dilemma here for Denton Company. What is the advantage of following the securities firm’s advice? What is the disadvantage? Is the securities firm’s incentive to place the shares aligned with that of Denton Company? (LO3)

Describe the pultrusion process

On August 15, 2013, Outkast Co. invested idle cash by purchasing a call option on Counting Crows Inc. common shares for $360. The notional value of the call option is 400 shares, and the option price is $40. The option expires on January 31, 2014. The following data are available with respect to the call option. Market Price of Counting Time Value of Call Date Crows Shares Option September 30, 2013 $48 per share $180 December 31, 2013 $46 per share 65 January 15, 2014 $47 per share 30 Instructions Prepare the journal entries for Outkast for the following dates. (a) Investment in call option on Counting Crows shares on August 15, 2013. (b) September 30, 2013—Outkast prepares financial statements. (c) December 31, 2013—Outkast prepares financial statements. (d) January 15, 2014—Outkast settles the call option on the Counting Crows shares.