Question & Answer

Cosmo contributed land with a fair market value of $400,000 and a tax basis of $90,000 to the Y Mountain partnership in exchange for a 25 percent profits and capital interest in the partnership. The land is secured by a $120,000 nonrecourse liability. Other than this nonrecourse liability, Y Mountain partnership does not have any liability. a. How much gain will Cosmo recognize from the contribution? b. What is Cosmo’s tax basis in his partnership interest?

The before-tax income for Lonnie Holdiman Co. for 2014 was $101,000 and $77,400 for 2015. However, the accountant noted that the following errors had been made: 1. Sales for 2014 included amounts of $38,200 which had been received in cash during 2014, but for which the related products were delivered in 2015. Title did not pass to the purchaser until 2015. 2. The inventory on December 31, 2014, was understated by $8,640. 3. The bookkeeper in recording interest expense for both 2014 and 2015 on bonds payable made the following entry on an annual basis. Interest Expense 15,000 Cash 15,000 The bonds have a face value of $250,000 and pay a stated interest rate of 6%. They were issued at a discount of $15,000 on January 1, 2014, to yield an effective-interest rate of 7%. (Assume that the effective-yield method should be used.) 4. Ordinary repairs to equipment had been erroneously charged to the Equipment account during 2014 and 2015. Repairs in the amount of $8,500 in 2014 and $9,400 in 2015 were so charged. The company applies a rate of 10% to the balance in the Equipment account at the end of the year in its determination of depreciation charges. Instructions Prepare a schedule showing the determination of corrected income before taxes for 2014 and 2015.

The specified dimension = 225.00 mm for a certain injection molded part made of ABS. Compute the corresponding dimension to which the mold cavity should be machined, using the value of shrinkage given in Table 13.1

Draw the isoquant corresponding to the following table, which shows the alternative combinations of labour and capital required to produce 100 units of output per day of good X. K  16  20  262/3 40 60 80 100 L 200 160 120 80 531/3 40  32 (a)  Assuming that capital costs are £20 per day and the wage rate is £10 per day, what is the least-cost method of producing 100 units? What will the daily total cost be? (Draw in a series of isocosts.) (b)  Now assume that the wage rate rises to £20 per day. Draw a new set of isocosts. What will be the least-cost method of producing 100 units now? How much labour and capital will be used?

The bookkeeper for Geronimo Company has prepared the following balance sheet as of July 31, 2014.   The following additional information is provided. 1. Cash includes $1,200 in a petty cash fund and $15,000 in a bond sinking fund. 2. The net accounts receivable balance is comprised of the following two items: (a) accounts receivable $44,000 and (b) allowance for doubtful accounts $3,500. 3. Inventory costing $5,300 was shipped out on consignment on July 31, 2014. The ending inventory balance does not include the consigned goods. Receivables in the amount of $5,300 were recognized on these consigned goods. 4. Equipment had a cost of $112,000 and an accumulated depreciation balance of $28,000. 5. Income taxes payable of $6,000 were accrued on July 31. Geronimo Company, however, had set up a cash fund to meet this obligation. This cash fund was not included in the cash balance but was offset against the income taxes payable amount. Instructions Prepare a corrected classified balance sheet as of July 31, 2014, from the available information, adjusting the account balances using the additional information.

1. Draw a similar diagram to Figure 24.9, only this time assume that the two goods are good a measured on the vertical axis and good b measured on the horizontal axis. Assume that the country has a comparative advantage in good a. (Note that the world price ratio this time will be shallower than the domestic pre-trade price ratio.) Mark the level of exports of a and imports of b. 2. Is it possible to gain from trade if competition is not perfect?

Wayne Rogers Corp. maintains its financial records on the cash basis of accounting. Interested in securing a long-term loan from its regular bank, Wayne Rogers Corp. requests you as its independent CPA to convert its cash-basis income statement data to the accrual basis. You are provided with the following summarized data covering 2013, 2014, and 2015.   Instructions (a) Using the data above, prepare abbreviated income statements for the years 2013 and 2014 on the cash basis. (b) Using the data above, prepare abbreviated income statements for the years 2013 and 2014 on the accrual basis.

The yield of good chips during a certain step in silicon processing of integrated circuits averages 91%. The number of chips per wafer is 200. Determine the center, LCL, and UCL for the p chart that might be used for this process.

Shared bonus pool Sarah Tesar is the lead partner of a medium-sized accounting firm. The eight partners share in an annual bonus pool. The characteristics of the bonus pool system include: • The bonus pool size each year is calculated as 40 per cent of annual profit. • The bonus pool is allocated on the basis of bonus units awarded according to the partners’ performance against target fees generated from new clients. This is meant to reinforce the firm’s strategy of growth through new client acquisition. If the fees target is met, one bonus unit is awarded; if the fees target is exceeded by 10 per cent, two bonus units are awarded; if the fees target is exceeded by 20 per cent, four bonus units are awarded; and if the fees target is exceeded by more than 20 per cent, six bonus units are awarded.   This year the annual profit was $2.2 million and the partner performance according to their fees from new client target was as follows: three partners achieved 10 per cent above target; three other partners achieved 20 per cent above target; and two partners exceeded the target by more than 20 per cent.   Required (a) Calculate: (i) the value of the bonus pool to be shared (ii) the value of one bonus unit (iii) the value of the bonus each manager would receive for the year.   One of the partners, Russell Morris, has sought a meeting with Sarah to discuss the shared bonus pool system. He wrote in an email to Sarah ‘I spend a lot of my time providing our in-house training programs . . . I can’t be out chasing new clients at the same time! Why do we only have one measure for the bonus system?’   (b) How important is the selection of the bonus allocation formula and the measure(s) to be used? (c) In the light of Russell’s email, would you advise Sarah to make any changes to the current system? Explain. (LO4)

What are the three basic categories of material removal processes?

How does the change in cross-sectional area of a test specimen in a compression test differ from its counterpart in a tensile test specimen?

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/Marksand- 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 investments does M&S report in 2012, and where are these investments reported in its financial statements? (b) How are M&S’s investments valued? How does M&S determine fair value? (c) How does M&S use derivative financial instruments?

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

As a newly enrolled accounting major, you are anxious to better understand accounting institutions and sources of accounting literature. As a first step, you decide to explore the FASB Conceptual Framework. Instructions Go to the FASB website, http://www.fasb.org, to access the FASB Concepts Statements. 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) What is the objective of financial reporting? (b) What other means are there of communicating information, besides financial statements? (c) Indicate some of the users and the information they are most directly concerned with in economic decision-making.

Under what conditions may a seller who is exposed to continued risks of a high rate of return of the product sold recognize sales transactions as current revenue?

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?

One of the mandrel types in electroforming is a solid mandrel. How is the part removed from a solid mandrel?

The following three situations involve the capitalization of interest. Situation I: On January 1, 2014, Oksana Baiul, Inc. signed a fixed-price contract to have Builder Associates construct a major plant facility at a cost of $4,000,000. It was estimated that it would take 3 years to complete the project. Also on January 1, 2014, to finance the construction cost, Oksana Baiul borrowed $4,000,000 payable in 10 annual installments of $400,000, plus interest at the rate of 10%. During 2014, Oksana Baiul made deposit and progress payments totaling $1,500,000 under the contract; the weightedaverage amount of accumulated expenditures was $800,000 for the year. The excess borrowed funds were invested in short-term securities, from which Oksana Baiul realized investment income of $250,000. Instructions What amount should Oksana Baiul report as capitalized interest at December 31, 2014? Situation II: During 2014, Midori Ito Corporation constructed and manufactured certain assets and incurred the following interest costs in connection with those activities. Interest Costs Incurred Warehouse constructed for Ito’s own use $30,000 Special-order machine for sale to unrelated customer, produced according to customer’s specifi cations 9,000 Inventories routinely manufactured, produced on a repetitive basis 8,000 All of these assets required an extended period of time for completion. Instructions Assuming the effect of interest capitalization is material, what is the total amount of interest costs to be capitalized? Situation III: Peggy Fleming, Inc. has a fiscal year ending April 30. On May 1, 2014, Peggy Fleming borrowed $10,000,000 at 11% to finance construction of its own building. Repayments of the loan are to commence the month following completion of the building. During the year ended April 30, 2015, expenditures for the partially completed structure totaled $7,000,000. These expenditures were incurred evenly throughout the year. Interest earned on the unexpended portion of the loan amounted to $650,000 for the year. Instructions How much should be shown as capitalized interest on Peggy Fleming’s financial statements at April 30, 2015?

Harriet, Herm, and Ronde formed an S corporation called Innovet. Harriet and Herm both contributed cash of $25,000 to get things started. Ronde was a bit short on cash but had a parcel of land valued at $60,000 (basis of $50,000) that he decided to contribute.  The land was encumbered by a $35,000 mortgage. What tax bases will each of the three have in their stock of Innovet?

Explain how the value-at-risk (VaR) method can be used to determine whether a bank has adequate capital. (LO3)

An open side planer is to be used to plane the top surface of a rectangular workpart, 20.0 in by 45.0 in. The cutting speed is 30 ft/min, the feed is 0.015 in/pass, and the depth of cut is 0.250 in. The length of the stroke across the work must be set up so that 10 in are allowed at both the beginning and end of the stroke for approach and overtravel. The return stroke, including an allowance for acceleration and deceleration, takes 60% of the time for the forward stroke. The workpart is made of carbon steel with a tensile strength of 50,000 lb/in2 and a Brinell hardness of 110 HB. How long will it take to complete the job, assuming that the part is oriented in such a way as to minimize the time?

Identify and explain the different types of classifications for investments in equity securities.

Provide examples of the four types of corporate culture.

What is a contact input interface?

What is the function of gates in injection molds?