Question & Answer

How does a turret lathe differ from an engine lathe?

Recall from Chapter 13 that Hincapie Co. (a specialty bike-accessory manufacturer) is expecting growth in sales of some products targeted to the low-price market. Hincapie is contemplating a preferred stock issue to help finance this expansion in operations. The company is leaning toward participating preferred stock because ownership will not be diluted, but the investors will get an extra dividend if the company does well. The company management wants to be certain that its reporting of this transaction is transparent to its current shareholders and wants you to research the disclosure requirements related to its capital structure. Instructions If your school has a subscription to the FASB Codification, go to http://aaahq.org/ascLogin.cfm to log in and prepare responses to the following. Provide Codification references for your responses. (a) Identify the authoritative literature that addresses disclosure of information about capital structure. (b) Find definitions of the following: (1) Securities. (2) Participation rights. (3) Preferred stock. (c) What information about securities must companies disclose? Discuss how Hincapie should report the proposed preferred stock issue.

Assume the same information as in E17-19 for Lilly Company. In addition, assume that the investment in the Woods Inc. stock was sold during 2015 for $195,000. At December 31, 2015, the following information relates to its two remaining investments of common  stock. Cost Fair Value (at purchase date) (at December 31) Investment in Arroyo Company stock $100,000 $140,000 Investment in Lee Corporation stock 250,000 310,000 Total $350,000 $450,000 Net income before any security gains and losses for 2015 was $905,000. Instructions (a) Compute the amount of net income or net loss that Lilly should report for 2015, taking into consideration Lilly’s security transactions for 2015. (b) Prepare the journal entry to record unrealized gain or loss related to the investment in Arroyo Company stock at December 31, 2015.

Define and sketch a fillet weld.

Define thermal diffusivity.

The yield strength of a certain metal = 50,000 lb/in2 and its modulus of elasticity = 22 x 106 lb/in2. It is to be used for the outer ring of a press-fit assembly with a mating shaft made of the same metal. The nominal inside diameter of the ring is 1.000 in and its outside diameter = 2.500 in. Using a safety factor = 2.0, determine the maximum interference that should be used with this assembly.

Listed below are the transactions of Yasunari Kawabata, D.D.S., for the month of September. Sept. 1 Kawabata begins practice as a dentist and invests $20,000 cash. 2 Purchases dental equipment on account from Green Jacket Co. for $17,280. 4 Pays rent for office space, $680 for the month. 4 Employs a receptionist, Michael Bradley. 5 Purchases dental supplies for cash, $942. 8 Receives cash of $1,690 from patients for services performed. 10 Pays miscellaneous office expenses, $430. 14 Bills patients $5,820 for services performed. 18 Pays Green Jacket Co. on account, $3,600. 19 Withdraws $3,000 cash from the business for personal use. 20 Receives $980 from patients on account. 25 Bills patients $2,110 for services performed. 30 Pays the following expenses in cash: Salaries and wages $1,800; miscellaneous office expenses $85. 30 Dental supplies used during September, $330. Instructions (a) Enter the transactions shown above in appropriate general ledger accounts (use T-accounts). Use the following ledger accounts: Cash, Accounts Receivable, Supplies, Equipment, Accumulated Depreciation—Equipment, Accounts Payable, Owner’s Capital, Service Revenue, Rent Expense, Office Expense, Salaries and Wages Expense, Supplies Expense, Depreciation Expense, and Income Summary. Allow 10 lines for the Cash and Income Summary accounts, and 5 lines for each of the other accounts needed. Record depreciation using a 5-year life on the equipment, the straight-line method, and no salvage value. Do not use a drawing account. (b) Prepare a trial balance. (c) Prepare an income statement, a statement of owner’s equity, and an unclassified balance sheet. (d) Close the ledger. (e) Prepare a post-closing trial balance.

1.   Call the local environmental advocacy group and get the group to stage a protest of the company.

Samuels Co. appropriately uses the installment-sales method of accounting. On December 31, 2016, the books show balances as follows. Installment Receivables Deferred Gross Profit Gross Profit on Sales 2014 $12,000 2014 $ 7,000 2014 35% 2015 40,000 2015 26,000 2015 33% 2016 80,000 2016 95,000 2016 32% Instructions (a) Prepare the adjusting entry or entries required on December 31, 2016 to recognize 2016 realized gross profit. (Installment receivables have already been credited for cash receipts during 2016.) (b) Compute the amount of cash collected in 2016 on accounts receivable from each year.

What are some ways that a parent could effectively shift income to a child? What are some of the disadvantages of these methods?

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.

: Explain the processes of team cohesiveness, team norms, and the general stages of team development.

On November 3, 2014, Sprinkle Co. invested $200,000 in 4,000 shares of the common stock of Pratt Co. Sprinkle classified this investment as available-for-sale. Sprinkle Co. is considering making a more significant investment in Pratt Co. at some point in the future but has decided to wait and see how the stock does over the next several quarters. Date Market Price of Pratt Shares Time Value of Put Option December 31, 2014 $50 per share $375 March 31, 2015 45 per share 175 June 30, 2015 43 per share 40 Instructions (a) Prepare the journal entries for Sprinkle Co. for the following dates. (1) November 3, 2014—Investment in Pratt stock and the put option on Pratt shares. (2) December 31, 2014—Sprinkle Co. prepares financial statements. (3) March 31, 2015—Sprinkle prepares financial statements. (4) June 30, 2015—Sprinkle prepares financial statements. (5) July 1, 2015—Sprinkle settles the put option and sells the Pratt shares for $43 per share. (b) Indicate the amount(s) reported on the balance sheet and income statement related to the Pratt investment and the put option on December 31, 2014. (c) Indicate the amount(s) reported on the balance sheet and income statement related to the Pratt investment and the put option on June 30, 2015.

Oil Products Company purchases an oil tanker depot on January 1, 2014, at a cost of $600,000. Oil Products expects to operate the depot for 10 years, at which time it is legally required to dismantle the depot and remove the underground storage tanks. It is estimated that it will cost $75,000 to dismantle the depot and remove the tanks at the end of the depot’s useful life. Instructions (a) Prepare the journal entries to record the depot and the asset retirement obligation for the depot on January 1, 2014. Based on an effective-interest rate of 6%, the present value of the asset retirement obligation on January 1, 2014, is $41,879. (b) Prepare any journal entries required for the depot and the asset retirement obligation at December 31, 2014. Oil Products uses straight-line depreciation; the estimated salvage value for the depot is zero. (c) On December 31, 2023, Oil Products pays a demolition firm to dismantle the depot and remove the tanks at a price of $80,000. Prepare the journal entry for the settlement of the asset retirement obligation.

Is the value of a money market fund or a bond fund more susceptible to rising interest rates? Explain. (LO3)

Give two examples of positive statements about the economy, and two examples of normative ones. Now give two examples that are seemingly positive, but which have normative implications or undertones.

Under what circumstances would the IRS issue an acquiescence? A nonacquiescence? An action on decision?

Refer to the accounting change by Wertz Construction Company in BE22-1. Wertz has a profitsharing plan, which pays all employees a bonus at year-end based on 1% of pretax income. Compute the indirect effect of Wertz’s change in accounting principle that will be reported in the 2014 income statement, assuming that the profit-sharing contract explicitly requires adjustment for changes in income numbers.

Discuss the reasons why individuals generally prefer capital gains over ordinary gains. Explain why corporate taxpayers might prefer capital gains over ordinary gains.

Consider situations where you might consider swapping items with someone. Why are such situations relatively rare? Can you think of circumstances in which this might be more common?

In what sense is it true to say that the Phillips curve is horizontal today?

Hayes Company sold 10,000 shares of Kenyon Co. common stock for $27.50 per share, incurring $1,770 in brokerage commissions. These securities were classified as trading and originally cost $260,000. Prepare the entry to record the sale of these securities.

Once they’ve computed their taxable income, how do taxpayers determine their regular tax liability?  What additional steps must taxpayers take to compute their tax liability when they have preferentially taxed income?

A large steel sand casting shows the characteristic signs of penetration defect: a surface consisting of a mixture of sand and metal. (a) What steps can be taken to correct the defect? (b) What other possible defects might result from taking each of these steps?

Do you agree that, if some people gain and if no one loses, then this will be an ‘improvement’ in the well-being of society? Does it depend on who gains? Would it be possible for there to be an improvement in the well-being of society without there being a Pareto improvement?