Question & Answer

What are the reporting issues in a sale and buyback agreement?

Dillons Corporation made credit sales of $30,000 which are subject to 6% sales tax. The corporation also made cash sales which totaled $20,670 including the 6% sales tax. (a) Prepare the entry to record Dillons’ credit sales. (b) Prepare the entry to record Dillons’ cash sales.

Instructions Go to the book’s companion website and use information found there to answer the following questions related to The Coca-Cola Company and PepsiCo, Inc. (a) Based on the information contained in these financial statements, determine each of the following for each company. (1) Cash used in (for) investing activities during 2011 (from the statement of cash flows). (2) Cash used for acquisitions and investments in unconsolidated affiliates (or principally bottling companies) during 2011. (3) Total investment in unconsolidated affiliates (or investments and other assets) at the end of 2011. (b) (1) Briefly identify from Coca-Cola’s December 31, 2011, balance sheet the investments it reported as being accounted for under the equity method. (2) What is the amount of investments that Coca-Cola reported in its 2011 balance sheet as “cost method investments,” and what is the nature of these investments? (c) In its Note 2 on Investments, what total amounts did Coca-Cola report at December 31, 2011, as: (1) trading securities, (2) available-for-sale securities, and (3) held-to-maturity securities?

Explain why, if the firm can practise first-degree price discrimination by selling every unit at the maximum price each consumer is prepared to pay, its revenue from selling 200 units will be the sum of both the shaded areas in Figure 8.13.

Provide examples of the four types of corporate culture.

How do partners determine whether they are passive participants in partnerships when applying the passive activity loss limitation rules?

Presented below are the comparative income and retained earnings statements for Denise Habbe Inc. for the years 2014 and 2015. LIFO Basis FIFO Basis 2014 2013 2014 2013 Sales $3,000 $3,000 $3,000 $3,000 Cost of goods sold 1,130 1,000 1,100 940 Operating expenses 1,000 1,000 1,000 1,000 Income before profi t-sharing 870 1,000 900 1,060 Profi t-sharing expense 87 100 96 100 Net income $ 783 $ 900 $ 804 $ 960 2015 2014 Sales $340,000 $270,000 Cost of sales 200,000 142,000 Gross profi t 140,000 128,000 Expenses 88,000 50,000 Net income $ 52,000 $ 78,000 Retained earnings (Jan. 1) $125,000 $ 72,000 Net income 52,000 78,000 Dividends (30,000) (25,000) Retained earnings (Dec. 31) $147,000 $125,000 The following additional information is provided: 1. In 2015, Denise Habbe Inc. decided to switch its depreciation method from sum-of-the-years’-digits to the straight-line method. The assets were purchased at the beginning of 2014 for $100,000 with an estimated useful life of 4 years and no salvage value. (The 2015 income statement contains depreciation expense of $30,000 on the assets purchased at the beginning of 2014.) 2. In 2015, the company discovered that the ending inventory for 2014 was overstated by $24,000; ending inventory for 2015 is correctly stated. Instructions Prepare the revised retained earnings statement for 2014 and 2015, assuming comparative statements. (Ignore income taxes.)

The Buildings account of Postera Inc. includes the following items that were used in determining the basis for depreciating the cost of a building. (a) Organization and promotion expenses. (b) Architect’s fees. (c) Interest and taxes during construction. (d) Interest revenue on investments held to fund construction of a building. Do you agree with these charges? If not, how would you deal with each of the items above in the corporation’s books and in its annual financial statements?

What are some of the simple measures used to assess the feasibility of a proposed cup-drawing operation?

What is the distinction between comparability and consistency?

The outstanding capital stock of Edna Millay Corporation consists of 2,000 shares of $100 par value, 8% preferred, and 5,000 shares of $50 par value common. Instructions Assuming that the company has retained earnings of $90,000, all of which is to be paid out in dividends, and that preferred dividends were not paid during the 2 years preceding the current year, state how much each class of stock should receive under each of the following conditions. (a) The preferred stock is noncumulative and nonparticipating. (b) The preferred stock is cumulative and nonparticipating. (c) The preferred stock is cumulative and participating. (Round dividend rate percentages to four decimal places.)

1.       : Have you experienced any of the five contributions of teams shown in Exhibit 18.2 with a team in which you have participated? Describe your experience and why you think the team was able to make that specific contribution.

1.15     Cost reduction; value chain analysis Budget Cupboards produces kitchen and bathroom cupboards that incorporate unusual functions, such as specialty drawers for knives and kitchen tools, and kitchen appliance holders that pop up from under the counter top. Competition in this industry has recently increased. Budget’s management wants to cut costs for its basic cupboard models and then cut prices using the structure of the table as shown.   Required (a)          The following table lists potential areas for cost reduction. Two potential cost reductions are provided for the first area listed (design phase). For each of the remaining areas, identify two potential ways that Budget Cupboard’s management could reduce costs. (b)     Budget does not currently use value chain analysis. Describe several advantages of using value chain analysis.

What is off-balance-sheet financing? Why might a company be interested in using off-balance-sheet financing?

List the key statutory requirements that must be met before a corporate formation is tax-deferred under §351.

Is it in the interest only of workers (i.e. and not employers) to resist falls in real wage rates?

Using the lead-tin phase diagram in Figure 6.3, determine the liquid and solid phase compositions for a nominal composition of 90% Sn and 10% Pb at 204°C (400°F).

What is the profession’s recommendation in regard to the use of the term “surplus”? Explain.

Indicate how unrealized holding gains and losses should be reported for investments classified as trading and held for-collection.

Determine the helix angle A such that the screw pitch p is equal to the screw diameter D. This is called the \"square\" angle in plastics extrusion - the angle that provides a flight advance equal to one diameter for each rotation of the screw.

What are some steps taken by both the FASB and IASB to move to fair value measurement for financial instruments? In what ways have some of the approaches differed?

What does the term devitrification mean?

Davis Corporation is a medium-sized manufacturer of paperboard containers and boxes. The corporation sponsors a noncontributory, defined benefit pension plan that covers its 250 employees. Sid Cole has recently been hired as president of Davis Corporation. While reviewing last year’s financial statements with Carol Dilbeck, controller, Cole expressed confusion about several of the items in the footnote to the financial statements relating to the pension plan. In part, the footnote reads as follows. Note J. The company has a defined benefit pension plan covering substantially all of its employees. The benefits are based on years of service and the employee’s compensation during the last four years of employment. The company’s funding policy is to contribute annually the maximum amount allowed under the federal tax code. Contributions are intended to provide for benefits expected to be earned in the future as well as those earned to date. The net periodic pension expense on Davis Corporation’s comparative income statement was $72,000 in 2014 and $57,680 in 2013. The following are selected figures from the plan’s funded status and amounts recognized in the Davis Corporation’s Statement of Financial Position at December 31, 2014 ($000 omitted). Actuarial present value of benefi t obligations: Accumulated benefi t obligation (including vested benefi ts of $636) $ (870) Projected benefi t obligation $(1,200) Plan assets at fair value 1,050 Projected benefi t obligation in excess of plan assets $ (150) Given that Davis Corporation’s work force has been stable for the last 6 years, Cole could not understand the increase in the net periodic pension expense. Dilbeck explained that the net periodic pension expense consists of several elements, some of which may increase or decrease the net expense. Instructions (a) The determination of the net periodic pension expense is a function of five elements. List and briefly describe each of the elements. (b) Describe the major difference and the major similarity between the accumulated benefit obligation and the projected benefit obligation. (c) (1) Explain why pension gains and losses are not recognized on the income statement in the period in which they arise. (2) Briefly describe how pension gains and losses are recognized.

Presented below is selected information related to the financial instruments of Dawson Company at December 31, 2014. This is Dawson Company’s first year of operations. Carrying Fair Value Amount (at December 31) Investment in debt securities (intent is to hold to maturity) $ 40,000 $ 41,000 Investment in Chen Company stock 800,000 910,000 Bonds payable 220,000 195,000 Instructions (a) Dawson elects to use the fair value option whenever possible. Assuming that Dawson’s net income is $100,000 in 2014 before reporting any securities gains or losses, determine Dawson’s net income for 2014. (b) Record the journal entry, if any, necessary at December 31, 2014, to record the fair value option for the bonds payable.

1.    : What, specifically, would the experience of studying in another country contribute to your skills and effectiveness as a future manager in your own country?