Question & Answer

In a certain grinding operation, the grade of the grinding wheel should be “M” (medium), but the only available wheel is grade “T” (hard). It is desired to make the wheel appear softer by making changes in cutting conditions. What changes would you recommend?

Explain the role of the Emerging Issues Task Force inestablishing generally accepted accounting principles.

What is the difference between absolute positioning and incremental positioning?

Crane Corporation has the following accounts included in its December 31, 2014, trial balance: Equity Investments (trading) $21,000; Goodwill $150,000; Prepaid Insurance $12,000; Patents $220,000; Franchises $130,000. Prepare the intangible assets section of the balance sheet.

How is compensation expense computed using the fair value approach?

Use the information provided in BE12-1. Assume that at January 1, 2016, the carrying amount of the patent on Celine Dion’s books is $43,200. In January, Celine Dion spends $24,000 successfully defending a patent suit. Celine Dion still feels the patent will be useful until the end of 2023. Prepare the journal entries to record the $24,000 expenditure and 2016 amortization.

The Fed attempts to use monetary policy to control the level of inflation and economic growth in the United States. Write a short essay on how the government’s fiscal policy can make the Fed’s role more difficult. Specifically, assume that the administration plans to implement a new program that will expand the government benefits provided to most people in the country. The new program will likely increase the budget deficit. Discuss the impact of this policy on interest rates and explain how this makes the Fed’s role more challenging.

On January 1, 2014, Richards Inc. had cash and common stock of $60,000. At that date, the company had no other asset, liability, or equity balances. On January 2, 2014, it purchased for cash $20,000 of equity securities that it classified as available-for-sale. It received cash dividends of $3,000 during the year on these securities. In addition, it has an unrealized holding gain on these securities of $4,000 net of tax. Determine the following amounts for 2014: (a) net income, (b) comprehensive income, (c) other comprehensive income, and (d) accumulated other comprehensive income (end of 2014).

A part is produced using six conventional machine tools consisting of three milling machines and three drill presses. The machine cycle times on these machines are 4.7 min, 2.3 min, 0.8 min, 0.9 min, 3.4 min, and 0.5 min. The average load/unload time for each of these operations is 1.25 min. The corresponding setup times for the six machines are 1.55 hr, 2.82 hr, 57 min, 45 min, 3.15 hr, and 36 min, respectively. The total material handling time to carry one part between the machines is 20 min (consisting of five moves between six machines). A CNC machining center has been installed, and all six operations will be performed on it to produce the part. The setup time for the machining center for this job is 1.0 hr. In addition, the machine must be programmed for this part (called “part programming”), which takes 3.0 hr. The machine cycle time is the sum of the machine cycle times for the six machines. Load/unload time is 1.25 min. (a) What is the total time to produce one of these parts using the six conventional machines if the total consists of all setups, machine cycle times, load/unload times, and part transfer times between machines? (b) What is the total time to produce one of these parts using the CNC machining center if the total consists of the setup time, programming time, machine cycle time, and load/unload time, and what are the percent savings in total time compared to your answer in (a)? (c) If the same part is produced in a batch of 20 pieces, what is the total time to produce them under the same conditions as in (a) except that the total material handling time to carry the 20 parts in one unit load between the machines is 40 min? (d) If the part is produced in a batch of 20 pieces on the CNC machining center, what is the total time to produce them under the same conditions as in part (b), and what are the percent savings in total time compared to your answer in (c)? (e) In future orders of 20 pieces of the same part, the programming time will not be included in the total time because the part program has already been prepared and saved. In this case, how long does it take to produce the 20 parts using the machining center, and what are the percent savings in total time compared to your answer in (c)?

Distinguish between the following values relative to bonds payable: (a) Maturity value. (c) Market (fair) value. (b) Face value. (d) Par value.

Based on the analysis in Figure 21.15 what would the impulse response functions look like for output, unemployment, inflation and real and nominal interest rates?

Swarten Corporation issued 600 shares of no-par common stock for $8,200. Prepare Swarten’s journal entry if (a) the stock has no stated value, and (b) the stock has a stated value of $2 per share.

Many traditional shops have closed in recent years as more people have shopped online – a trend hastened by the forced closure of non-essential shops in the lockdowns during the COVID-19 pandemic. How is this likely to have affected the balance of employment and unemployment of women and men?

Foley Corporation has seven industry segments with total revenues as follows. Penley $600 Cheng $225 Konami 650 Takuhi 200 KSC 250 Molina 700 Red Moon 275 Based only on the revenues test, which industry segments are reportable?

Which of the following unions find themselves in a weak bargaining position for the above reasons? (a)  The shopworkers’ union (USDAW). (b)  The tube and train drivers’ union (ASLEF). (c)  The farm workers’ union (part of Unite).

An 8-in diameter grinding wheel, 1.0 in wide, is used in a surface grinding job performed on a flat piece of heat-treated 4340 steel. The wheel rotates to achieve a surface speed of 5000 ft/min, with a depth of cut (infeed) = 0.002 in per pass and a crossfeed = 0.15 in. The reciprocating speed of the work is 20 ft/min, and the operation is performed dry. (a) What is the length of contact between the wheel and the work? (b) What is the volume rate of metal removed? (c) If there are 300 active grits/in2 of wheel surface, estimate the number of chips formed per unit time. (d) What is the average volume per chip? (e) If the tangential cutting force on the workpiece = 7.3 lbs, what is the specific energy calculated for this job?

Presented below is the adjusted trial balance of Kelly Corporation at December 31, 2014. Additional information: 1. Net loss for the year was $2,500. 2. No dividends were declared during 2014. Instructions Prepare a classified balance sheet as of December 31, 2014. Debit Credit Cash $ ? Supplies 1,200 Prepaid Insurance 1,000 Equipment 48,000 Accumulated Depreciation—Equipment $ 4,000 Trademarks 950 Accounts Payable 10,000 Salaries and Wages Payable 500 Unearned Service Revenue 2,000 Bonds Payable (due 2021) 9,000 Common Stock 10,000 Retained Earnings 25,000 Service Revenue 10,000 Salaries and Wages Expense 9,000 Insurance Expense 1,400 Rent Expense 1,200 Interest Expense 900 Total $ ? $ ?

Taveras Co. decides at the beginning of 2014 to adopt the FIFO method of inventory valuation. Taveras had used the LIFO method for financial reporting since its inception on January 1, 2012, and had maintained records adequate to apply the FIFO method retrospectively. Taveras concluded that FIFO is the preferable inventory method because it reflects the current cost of inventory on the balance sheet. The following table presents the effects of the change in accounting principles on inventory and cost of goods sold. Inventory Determined by Cost of Goods Sold Determined by Date LIFO Method FIFO Method LIFO Method FIFO Method January 1, 2012 $ 0 $ 0 $ 0 $ 0 December 31, 2012 100 80 800 820 December 31, 2013 200 240 1,000 940 December 31, 2014 320 390 1,130 1,100 Other information: 1. For each year presented, sales are $3,000 and operating expenses are $1,000. 2. Taveras provides two years of financial statements. Earnings per share information is not required. Instructions (a) Prepare income statements under LIFO and FIFO for 2012, 2013, and 2014. (b) Prepare income statements reflecting the retrospective application of the accounting change from the LIFO method to the FIFO method for 2014 and 2013. (c) Prepare the note to the financial statements describing the change in method of inventory valuation. In the note, indicate the income statement line items for 2014 and 2013 that were affected by the change in accounting principle. (d) Prepare comparative retained earnings statements for 2013 and 2014 under FIFO. Retained earnings reported under LIFO are as follows:

Many business organizations have been concerned with providing for the retirement of employees since the late 1800s. During recent decades, a marked increase in this concern has resulted in the establishment of private pension plans in most large companies and in many medium- and small-sized ones. The substantial growth of these plans, both in numbers of employees covered and in amounts of retirement benefits, has increased the significance of pension costs in relation to the financial position, results of operations, and cash flows of many companies. In examining the costs of pension plans, a CPA encounters certain terms. The components of pension costs that the terms represent must be dealt with appropriately if generally accepted accounting principles are to be reflected in the financial statements of entities with pension plans. Instructions (a) Define a private pension plan. How does a contributory pension plan differ from a noncontributory plan? (b) Differentiate between “accounting for the employer” and “accounting for the pension fund.” (c) Explain the terms “funded” and “pension liability” as they relate to: (1) The pension fund. (2) The employer. (d) (1) Discuss the theoretical justification for accrual recognition of pension costs. (2) Discuss the relative objectivity of the measurement process of accrual versus cash (pay-as-you-go) accounting for annual pension costs. (e) Distinguish among the following as they relate to pension plans. (1) Service cost. (2) Prior service costs. (3) Vested benefits.

AJ is a 30 percent partner in the Trane Partnership, a calendar-year-end entity. On January 1, AJ has an outside basis in his interest in Trane of $73,000, which includes his share of the $50,000 of partnership liabilities. Trane generates $42,000 of income during the year and does not make any changes to its liabilities. On December 31, Trane makes a proportionate distribution of the following assets to AJ to terminate his partnership interest: Tax BasisFMV Inventory $ 55,000 $ 65,000 Land 30,000 25,000    Totals $ 85,000 $90,000 a. What are the tax consequences (gain or loss, basis adjustments) of the distribution to Trane? b. What are the amount and character of any recognized gain or loss to AJ? c. What is AJ’s basis in the distributed assets? d. If AJ sells the inventory four years after the distribution for $70,000, what are the amount and character of his recognized gain or loss?

Describe the circumstances in which it would be more favorable for a taxpayer to contribute to a traditional IRA rather than a Roth IRA, and vice-versa.

Fairbanks Corporation purchased 400 ordinary shares of Sherman Inc. as a trading investment for $13,200. During the year, Sherman paid a cash dividend of $3.25 per share. At year-end, Sherman shares were selling for $34.50 per share. Prepare Fairbanks’ journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment.

Tall Tree LLC was recently formed with the following members: Name Tax Year-End Capital/Profits % Eddie Robinson December 31 40% Pitcher Lenders LLC June 30 25% Perry Homes Inc. October 31 35% What is the required taxable year-end for Tall Tree LLC?

During 2014, Williamson Company changed from FIFO to weighted-average inventory pricing. Pretax income in 2013 and 2012 (Williamson’s first year of operations) under FIFO was $160,000 and $180,000, respectively. Pretax income using weighted-average pricing in the prior years would have been $145,000 in 2013 and $170,000 in 2012. In 2014, Williamson Company reported pretax income (using weighted-average pricing) of $180,000. Show comparative income statements for Williamson Company, beginning with “Income before income tax,” as presented on the 2014 income statement. (The tax rate in all years is 30%.)

Describe the reporting of pension plans for a company with multiple plans, some of which are underfunded and some of which are overfunded.