Question & Answer

If the government is running a budget deficit, does this mean that national income will increase?

A flux-cored arc-welding operation is performed to butt weld two austenitic stainless steel plates together. The welding voltage is 21 volts and the current is 185 amps. The cross-sectional area of the weld seam = 75 mm2 and the melting factor of the stainless steel is assumed to be 0.60. Using tabular data and equations given in this and the preceding chapter, determine the likely value for travel speed v in the operation.

What conditions must exist for the retail inventory method to provide valid results?

1.       : Some critics argue that Six Sigma is a collection of superficial changes that often results in doing a superb job of building the wrong product or offering the wrong service. Do you agree or disagree? Explain.

Suppose the percent completion of ending WIP is overestimated at the end of year 1. How does this measurement error affect the process costing results in year 1 and year 2?

Learning and growth perspective Markman Ltd, a large pharmaceutical company, is concerned about the ability of its research and development department to develop profitable new prescription drugs. Once a drug has been developed and patented, it takes 9 to 12 years to meet all of the regulatory requirements. The company can then market the drug for about 11.5 years, on average, before the patent expires. Then competitors produce generic drugs. Employees currently participate in profit-sharing plans, but the company wants to give additional bonuses to improve performance. Markman decided to implement a balanced scorecard approach.   Required (a)     Explain why monitoring and rewarding non-financial performance might be particularly important for Markman. (b)     List one objective for Markman’s learning and growth perspective. (c)     List two performance measures for the objective you picked in part (B).

Mortonson Company has not yet prepared a formal statement of cash flows for the 2014 fiscal year. Comparative balance sheets as of December 31, 2013 and 2014, and a statement of income and retained earnings for the year ended December 31, 2014, are presented as follows. MORTONSON COMPANY STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE YEAR ENDED DECEMBER 31, 2014 ($000 OMITTED) Sales revenue $3,800 Expenses Cost of goods sold $1,200 Salaries and benefi ts 725 Heat, light, and power 75 Depreciation 80 Property taxes 19 Patent amortization 25 Miscellaneous expenses 10 Interest 30 2,164 MORTONSON COMPANY STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE YEAR ENDED DECEMBER 31, 2014 (CONTINUED) Income before income taxes 1,636 Income taxes 818 Net income 818 Retained earnings—Jan. 1, 2014 310 1,128 Stock dividend declared and issued 600 Retained earnings—Dec. 31, 2014 $ 528 MORTONSON COMPANY COMPARATIVE BALANCE SHEETS AS OF DECEMBER 31 ($000 OMITTED) Assets 2014 2013 Current assets Cash $ 333 $ 100 U.S. Treasury notes (available-for-sale) 10 50 Accounts receivable 780 500 Inventory 720 560 Total current assets 1,843 1,210 Long-term assets Land 150 70 Buildings and equipment 910 600 Accumulated depreciation—buildings and equipment (200) (120) Patents (less amortization) 105 130 Total long-term assets 965 680 Total assets $2,808 $1,890 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 420 $ 330 Income taxes payable 40 30 Notes payable 320 320 Total current liabilities 780 680 Long-term notes payable—due 2016 200 200 Total liabilities 980 880 Stockholders’ equity Common stock 1,300 700 Retained earnings 528 310 Total stockholders’ equity 1,828 1,010 Total liabilities and stockholders’ equity $2,808 $1,890 Instructions Prepare a statement of cash flows using the direct method. Changes in accounts receivable and accounts payable relate to sales and cost of goods sold. Do not prepare a reconciliation schedule.

1.    Do you think it is realistic that BOP business practices can have a positive effect on poverty and other social problems in developing countries? Discuss how those effects might occur.

What are the components of an interest rate? Why is it important for accountants to understand these components?

Indicate whether each of the following items is a real or nominal account and whether it appears in the balance sheet or the income statement. (a) Prepaid Rent. (b) Salaries and Wages Payable. (c) Inventory. (d) Accumulated Depreciation—Equipment. (e) Equipment. (f) Service Revenue. (g) Salaries and Wages Expense. (h) Supplies.

The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://annualreport.marksandspencer.com/_assets/downloads/ Marks-and-Spencer-Annual-report-and-financial-statements-2012.pdf. Instructions Refer to M&S’s financial statements and the accompanying notes to answer the following questions. (a) What was M&S’s 2012 short-term debt and related weighted-average interest rate on this debt? (b) What was M&S’s 2012 working capital, acid-test ratio, and current ratio? Comment on M&S’s liquidity. (c) What types of commitments and contingencies has M&S reported in its financial statements?

Each of the following gross profit percentages is expressed in terms of cost. 1. 20%. 3. 331/3%. 2. 25%. 4. 50%. Instructions Indicate the gross profit percentage in terms of sales for each of the above.

Melton Corporation is preparing the comparative financial statements for the annual report to its shareholders for fiscal years ended May 31, 2014, and May 31, 2015. The income from operations for each year was $1,800,000 and $2,500,000, respectively. In both years, the company incurred a 10% interest expense on $2,400,000 of debt, an obligation that requires interest-only payments for 5 years. The company experienced a loss of $600,000 from a fire in its Scotsland facility in February 2015, which was determined to be an extraordinary loss. The company uses a 40% effective tax rate for income taxes. The capital structure of Melton Corporation on June 1, 2013, consisted of 1 million shares of common stock outstanding and 20,000 shares of $50 par value, 6%, cumulative preferred stock. There were no preferred dividends in arrears, and the company had not issued any convertible securities, options, or warrants. On October 1, 2013, Melton sold an additional 500,000 shares of the common stock at $20 per share. Melton distributed a 20% stock dividend on the common shares outstanding on January 1, 2014. On December 1, 2014, Melton was able to sell an additional 800,000 shares of the common stock at $22 per share. These were the only common stock transactions that occurred during the two fiscal years. Instructions (a) Identify whether the capital structure at Melton Corporation is a simple or complex capital structure, and explain why. (b) Determine the weighted-average number of shares that Melton Corporation would use in calculating earnings per share for the fiscal year ended: (1) May 31, 2014. (2) May 31, 2015. (c) Prepare, in good form, a comparative income statement, beginning with income from operations, for Melton Corporation for the fiscal years ended May 31, 2014, and May 31, 2015. This statement will be included in Melton’s annual report and should display the appropriate earnings per share presentations.

Yong’s tax return was audited because he calculated his tax liability incorrectly.  What IRS audit procedure identified his tax return for audit?

Compare the recognition lag and the implementation lag. (LO2)

Explain why Fannie Mae and Freddie Mac experienced mortgage problems during the credit crisis. (LO5)

What is a capital good? Provide an example.

What is the proper accounting for volume discounts on sales of products?

1.       : Describe how diversity of thought boosts creativity and innovation in the workplace. Why do managers consider diversity of thought to be a competitive advantage?

What are two methods of recording accounts receivable transactions when a cash discount situation is involved? Which is more theoretically correct? Which is used in practice more of the time? Why?

Sarah is a cash-method, calendar-year taxpayer, and she is considering making the following cash payments related to her business. Calculate the after-tax cost of each payment assuming she has a 37 percent marginal tax rate.

What was the Committee on Accounting Procedure, andwhat were its accomplishments and failings?

Using the facts in problem 48, what minimum tax would need to be assessed on Shameika to make the tax progressive with respect to effective tax rates?

Stallman Company took a physical inventory on December 31 and determined that goods costing $200,000 were on hand. Not included in the physical count were $25,000 of goods purchased from Pelzer Corporation, f.o.b. shipping point, and $22,000 of goods sold to Alvarez Company for $30,000, f.o.b. destination. Both the Pelzer purchase and the Alvarez sale were in transit at year-end. What amount should Stallman report as its December 31 inventory?c

How are the interest rate, the required rate of return on a stock, and the valuation of a stock related? (LO3)