Question & Answer

1. Could isoquants ever cross? 2. Could they ever slope upward to the right? Explain your answers.

How are deferred tax assets and deferred tax liabilities reported on the balance sheet?

Describe a lockup provision and explain why it might be required by the lead underwriter. (LO3)

What is the due date for the corporation tax return Form 1120?  Is it possible to extend the due date?  Explain.

Distinguish between counterbalancing and noncounterbalancing errors. Give an example of each.

How do different cost structures affect the breakeven point and operating leverage?

How should the amount of interest capitalized be disclosed in the notes to the financial statements? How should interest revenue from temporarily invested excess funds borrowed to finance the construction of assets be accounted for?

What is the basic difference in the solidification (or melting) process between crystalline and noncrystalline structures?

Bobek Inc. has recently reported steadily increasing income. The company reported income of $20,000 in 2011, $25,000 in 2012, and $30,000 in 2013. A number of market analysts have recommended that investors buy the stock because they expect the steady growth in income to continue. Bobek is approaching the end of its fiscal year in 2014, and it again appears to be a good year. However, it has not yet recorded warranty expense. Based on prior experience, this year’s warranty expense should be around $5,000, but some managers have approached the controller to suggest a larger, more conservative warranty expense should be recorded this year. Income before warranty expense is $43,000. Specifically, by recording a $7,000 warranty accrual this year, Bobek could report an increase in income for this year and still be in a position to cover its warranty costs in future years. Instructions (a) What is earnings management? (b) Assume income before warranty expense is $43,000 for both 2014 and 2015 and that total warranty expense over the 2-year period is $10,000. What is the effect of the proposed accounting in 2014? In 2015? (c) What is the appropriate accounting in this situation?

Hawkins Construction Co. has a $60 million contract to construct a highway overpass and cloverleaf. The total estimated cost for the project is $50 million. Costs incurred in the first year of the project are $8 million. Hawkins Construction Co. appropriately uses the percentageof- completion method. How much revenue and gross profit should Hawkins recognize in the first year of the project?

How would the political business cycle be affected if governments were able to choose when to hold elections?

Performance evaluation and sustainability balanced scorecard Brewster House is a not-for-profit shelter for the homeless. Lately funding has decreased, but the demand for overnight shelter has increased. In cold weather, clients are turned away because the shelter is full. The director believes that the current capacity could be used more efficiently. No one has taken time to analyse the physical layout of the shelter and current use of space. Several rooms are used for storage that could probably be used for temporary housing. The stored boxes need to be sorted and moved. Volunteers currently assign beds and manage overnight housing, because the director is busy with fundraising. Volunteers work just a few shifts each week, so no one has taken responsibility for coordinating improvements in the services offered. The director is considering whether to implement a balanced scorecard to focus the attention of all volunteers on areas that need improvement.   Brewster receives funds from several sources, including a set annual budget from the local council and direct donations from supporters. The director develops a budget each year based on expected funding but she cannot precisely predict donations. The budget is used primarily to justify funding requests submitted to the council.   The director has asked a group of accounting students from the local university to evaluate operations and recommend whether the entity should develop a balanced scorecard. She cannot give bonuses based on the measures, but she wonders whether developing and monitoring performance measures would encourage the volunteers to increase the use of capacity. She also wonders whether some information from the balanced scorecard could be used to show donors the effectiveness of the operations in achieving social goals.   Required (a) Describe how the balanced scorecard could be developed to help demonstrate the social sustainability goals. (b) Provide details of sustainability-related measures for each scorecard perspective you have designed for Brewster House. (c) What issues would Brewster House management have to overcome to ensure a change in practice? (LO4 and 5)

Presented below is information related to Carver Inc.   Instructions (a) Compute the following ratios or relationships of Carver Inc. Assume that the ending account balances are representative unless the information provided indicates differently. (1) Current ratio. (2) Inventory turnover. (3) Accounts receivable turnover. (4) Earnings per share. (5) Profit margin on sales. (6) Return on assets on December 31, 2014. (b) Indicate for each of the following transactions whether the transaction would improve, weaken, or have no effect on the current ratio of Carver Inc. at December 31, 2014. (1) Write off an uncollectible account receivable, $2,200. (2) Purchase additional capital stock for cash. (3) Pay $40,000 on notes payable (short-term). (4) Collect $23,000 on accounts receivable. (5) Buy equipment on account. (6) Give an existing creditor a short-term note in settlement of account.

Identify the inputs to the MRP processor in material requirements planning.

This year, Paula and Simon (married filing jointly) estimate that their tax liability will be $200,000.  Last year, their total tax liability was $170,000.  They estimate that their tax withholding from their employers will be $175,000.  Are Paula and Simon required to increase their withholdings or make estimated tax payments this year to avoid the underpayment penalty?  If so, how much?

Ellison Inc., a manufacturer of steel school lockers, plans to purchase a new punch press for use in its manufacturing process. After contacting the appropriate vendors, the purchasing department received differing terms and options from each vendor. The Engineering Department has determined that each vendor’s punch press is substantially identical and each has a useful life of 20 years. In addition, Engineering has estimated that required year-end maintenance costs will be $1,000 per year for the first 5 years, $2,000 per year for the next 10 years, and $3,000 per year for the last 5 years. Following is each vendor’s sale package. Vendor A: $55,000 cash at time of delivery and 10 year-end payments of $18,000 each. Vendor A offers all its customers the right to purchase at the time of sale a separate 20-year maintenance service contract, under which Vendor A will perform all year-end maintenance at a one-time initial cost of $10,000. Vendor B: Forty semiannual payments of $9,500 each, with the first installment due upon delivery. Vendor B will perform all year-end maintenance for the next 20 years at no extra charge. Vendor C: Full cash price of $150,000 will be due upon delivery. Instructions Assuming that both Vendors A and B will be able to perform the required year-end maintenance, that Ellison’s cost of funds is 10%, and the machine will be purchased on January 1, from which vendor should the press be purchased?

Using the facts in problem 36, if Campbell earns an additional $15,000 of taxable income, what is her marginal tax rate on this income?  What is her marginal rate if, instead, she had $15,000 of additional deductions?

Using the facts from problem 50, what will happen to the government’s tax revenues if Song chooses to spend more time pursuing her other passions besides work in response to the tax rate change and earns only $75,000 in taxable income?  What is the term that describes this type of reaction to a tax rate increase?  What types of taxpayers are likely to respond in this manner?

A batch of 40 identical parts is to be chrome plated using racks. Each part has a surface are = 22.7 cm2. If it is desired to plate an average thickness = 0.010 mm on the surface of each part, how long should the plating operation be allowed to run at a current = 80 amps?

1.       : Can you think of a bad decision from your own school or work experience, or from recent business or political news stories, that was made in an effort to correct or justify a past decision? As a new manager, how might you resist the urge to choose a decision alternative based on the idea that it might correct or validate a previous decision?

Ashley Company is a young and growing producer of electronic measuring instruments and technical equipment. You have been retained by Ashley to advise it in the preparation of a statement of cash flows using the indirect method. For the fiscal year ended October 31, 2014, you have obtained the following information concerning certain events and transactions of Ashley. 1. The amount of reported earnings for the fiscal year was $700,000, which included a deduction for an extraordinary loss of $110,000 (see item 5 below). 2. Depreciation expense of $315,000 was included in the income statement. 3. Uncollectible accounts receivable of $40,000 were written off against the allowance for doubtful accounts. Also, $51,000 of bad debt expense was included in determining income for the fiscal year, and the same amount was added to the allowance for doubtful accounts. 4. A gain of $6,000 was realized on the sale of a machine. It originally cost $75,000, of which $30,000 was undepreciated on the date of sale. 5. On April 1, 2014, lightning caused an uninsured building loss of $110,000 ($180,000 loss, less reduction in income taxes of $70,000). This extraordinary loss was included in determining income as indicated in item 1 above. 6. On July 3, 2014, building and land were purchased for $700,000. Ashley gave in payment $75,000 cash, $200,000 market price of its unissued common stock, and signed a $425,000 mortgage note payable. 7. On August 3, 2014, $800,000 face value of Ashley’s 10% convertible debentures was converted into $150,000 par value of its common stock. The bonds were originally issued at face value. Instructions Explain whether each of the seven numbered items above is a cash inflow or outflow, and explain how it should be disclosed in Ashley’s statement of cash flows for the fiscal year ended October 31, 2014. If any item is neither an inflow nor an outflow of cash, explain why it is not, and indicate the disclosure, if any, that should be made of the item in Ashley’s statement of cash flows for the fiscal year ended October 31, 2014.

Why is the liabilities section of the balance sheet of primary significance to bankers?

What is the distinguishing feature of a radial drill press?

Make out a case from a deep green perspective for rejecting the ‘social efficiency’ approach to the environment.

Describe the circumstances in which an S election may be involuntarily terminated.