Question & Answer

Explain how convertible securities are determined to be potentially dilutive common shares and how those convertible securities that are not considered to be potentially dilutive common shares enter into the determination of earnings per share data.

Give some examples of beggar-my-neighbour policies.

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

A headline in the Wall Street Journal stated, “Firms Increasingly Tap Their Pension Funds to Use Excess Assets.” What is the accounting issue related to the use of these “excess assets” by companies?

List the most common methods for forming the pressed parts in powder metallurgy according to the powder metallurgy video.

At a recent meeting of the accounting staff in your company, the controller raised the issue of using present value techniques to conduct impairment tests for some of the company’s fixed assets. Some of the more senior members of the staff admitted having little knowledge of present value concepts in this context, but they had heard about a FASB Concepts Statement that may be relevant. As the junior staff in the department, you have been asked to conduct some research of the authoritative literature on this topic and report back at the staff meeting next week. Instructions If your school has a subscription to the FASB Codification, go to http://aaahq.org/asclogin.cfm to log in and access the FASB Statements of Financial Accounting Concepts. When you have accessed the documents, you can use the search tool in your Internet browser to respond to the following items. (Provide paragraph citations.) (a) Identify the recent concept statement that addresses present value measurement in accounting. (b) What are some of the contexts in which present value concepts are applied in accounting measurement? (c) Provide definitions for the following terms: (1) Best estimate. (2) Estimated cash flow (contrasted to expected cash flow). (3) Fresh-start measurement. (4) Interest methods of allocation.

A parison is extruded from a die with outside diameter = 11.5 mm and inside diameter = 7.5 mm. The observed die swell is 1.25. The parison is used to blow mold a beverage container whose outside diameter = 112 mm (a standard size 2-liter soda bottle). (a) What is the corresponding wall thickness of the container? (b) Obtain an empty 2-liter plastic soda bottle and (carefully) cut it across the diameter. Using a micrometer, measure the wall thickness to compare with your answer in (a)

1. Why are insurance companies unwilling to provide insurance against losses arising from war or ‘civil insurrection’? 2. Name some other events where it would be impossible to obtain insurance. 3. Explain why an insurance company could not pool the risk of flooding in a particular part of a country. Does your answer imply insurance against flooding is unobtainable?

How does electroless plating differ from electrochemical plating?

Komiko Tanaka invests $12,000 in LymaBean, Inc. LymaBean does not pay any dividends.  Komiko projects that her investment will generate a 10 percent before-tax rate of return.  She plans to invest for the long term.   a.   How much cash will Komiko retain, after-taxes, if she holds the investment for 5 years and then she sells it when the long-term capital gains rate is 15 percent? b.   What is Komiko’s after-tax rate of return on her investment in part (a)? c.   How much cash will Komiko retain, after-taxes, if she holds the investment for 5 years and then sells when the long-term capital gains rate is 25 percent? d.   What is Komiko’s after-tax rate of return on her investment in part (c)? e.   How much cash will Komiko retain, aftertaxes, if she holds the investment for 15 years and then she sells when the long-term capital gains rate is 15 percent? f.    What is Komiko’s after-tax rate of return on her investment in part (e)?

Assume that (1) investors and borrowers expect that the economy will weaken and that inflation will decline, (2) investors require a small liquidity premium, and (3) markets are partially segmented and the Treasury currently has a preference for borrowing in shortterm markets. Explain how each of these forces would affect the term structure, holding other factors constant. Then explain the effect on the term structure overall. (LO3)

Why are held-to-maturity investments applicable only to debt securities?

Where, if at all, should the following items be classified on a balance sheet? (a) Goods out on approval to customers. (b) Goods in transit that were recently purchased f.o.b. destination. (c) Land held by a realty firm for sale. (d) Raw materials. (e) Goods received on consignment. (f) Manufacturing supplies.

Andrea Torbert purchased a computer for $8,000 on July 1, 2014. She intends to depreciate it over 4 years using the double-declining-balance method. Salvage value is $1,000. Compute depreciation for 2015.

Is the cross-price elasticity of demand for road space with respect to the price of cars likely to be high or low?

Shown below is the liabilities and stockholders’ equity section of the balance sheet for Jana Kingston Company and Mary Ann Benson Company. Each has assets totaling $4,200,000. Jana Kingston Co. Mary Ann Benson Co. Current liabilities $ 300,000 Current liabilities $ 600,000 Long-term debt, 10% 1,200,000 Common stock ($20 par) 2,900,000 Common stock ($20 par) 2,000,000 Retained earnings (Cash Retained earnings (Cash dividends, $328,000) 700,000 dividends, $220,000) 700,000 $4,200,000 $4,200,000 For the year, each company has earned the same income before interest and taxes. Jana Kingston Co. Mary Ann Benson Co. Income before interest and taxes $1,200,000 $1,200,000 Interest expense 120,000 –0– 1,080,000 1,200,000 Income taxes (45%) 486,000 540,000 Net income $ 594,000 $ 660,000 At year end, the market price of Kingston’s stock was $101 per share, and Benson’s was $63.50. Instructions (a) Which company is more profitable in terms of return on total assets? (b) Which company is more profitable in terms of return on common stock equity? (c) Which company has the greater net income per share of stock? Neither company issued or reacquired shares during the year. (d) From the point of view of net income, is it advantageous to the stockholders of Jana Kingston Co. to have the long-term debt outstanding? Why? (e) What is the book value per share for each company?

What is a composite material?

This year, Bobcat Corporation reports a deficit in current E&P of ($300,000) that accrued evenly throughout the year. At the beginning of the year, Bobcat’s accumulated E&P was $200,000. Bobcat distributed $200,000 to its sole shareholder, Melanie, on June 30 of this year. Melanie’s tax basis in her Bobcat stock before the distribution was $75,000.

Using the facts from the previous problem, when should Reese pay the bill if she expects her marginal tax rate to be 35 percent next year? 24 percent next year?

Solve Problem 16.5, except that the diameter of the particles is 0.004 in. Assume the same packing factor.

How do securities firms facilitate leveraged buyouts? Why are securities firms that are better able to raise funds in the capital markets preferred by corporations that need advice on proposed acquisitions? (LO1)

Identify which itemized deductions are subject to floor limitations, ceiling limitations, or some combination of these limits.

List some of the products produced on a rolling mill.

Solve the previous problem except that the metal to be welded is high carbon steel, the cross-sectional area of the weld = 25.0 mm2, and the melting factor = 0.6.

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.