Question & Answer

How easy do you think it would be for a firm to split customers into different groups based on their incomes?

For what purposes did the AICPA in 1959 create theAccounting Principles Board?

Mike Macinski Leasing Company leases a new machine that has a cost and fair value of $95,000 to Sharrer Corporation on a 3-year noncancelable contract. Sharrer Corporation agrees to assume all risks of normal ownership including such costs as insurance, taxes, and maintenance. The machine has a 3-year useful life and no residual value. The lease was signed on January 1, 2014. Mike Macinski Leasing Company expects to earn a 9% return on its investment. The annual rentals are payable on each December 31. Instructions (a) Discuss the nature of the lease arrangement and the accounting method that each party to the lease should apply. (b) Prepare an amortization schedule that would be suitable for both the lessor and the lessee and that covers all the years involved.

What is the benefit of a single set of high-quality accounting standards?

The trend line developed using regression analysis provides a more accurate representation of a mixed cost function than the two-point or high-low methods. Explain why.

(i) Will the rate of actual growth have any effect on the rate of potential growth? (ii) For what possible reasons may one country experience a persistently faster rate of economic growth than another?

Presented below are selected account balances for Homer Winslow Co. as of December 31, 2014. Inventory 12/31/14 $ 60,000 Cost of Goods Sold $225,700 Common Stock 75,000 Selling Expenses 16,000 Retained Earnings 45,000 Administrative Expenses 38,000 Dividends 18,000 Income Tax Expense 30,000 Sales Returns and Allowances 12,000 Sales Discounts 15,000 Sales Revenue 410,000 Instructions Prepare closing entries for Homer Winslow Co. on December 31, 2014. (Omit explanations.)

: Explain how the balanced scorecard addresses the four steps in the control process.

What elements are traditionally alloyed with copper to form (a) bronze and (b) brass?

Name the two basic categories of casting processes.

What is one of the important applications of titanium nitride, as mentioned in the text?

A vertical boring mill is used to bore the inside diameter of a large batch of tube-shaped parts. The diameter = 28.0 in and the length of the bore = 14.0 in. Current cutting conditions are: speed = 200 ft/min, feed = 0.015 in/rev, and depth = 0.125 in. The parameters of the Taylor equation for the cutting tool in the operation are: n = 0.23 and C = 850 (ft/min). Tool change time = 3.0 min, and tooling cost = $3.50 per cutting edge. The time required to load and unload the parts = 12.0 min, and the cost of machine time on this boring mill = $42.00/hr. Management has decreed that the production rate must be increased by 25%. Is that possible? Assume that feed must remain unchanged in order to achieve the required surface finish. What is the current production rate and the maximum possible production rate for this job?

Corrs Wholesalers Co. sells industrial equipment for a standard 3-year note receivable. Revenue is recognized at time of sale. Each note is secured by a lien on the equipment and has a face amount equal to the equipment’s list price. Each note’s stated interest rate is below the customer’s market rate at date of sale. All notes are to be collected in three equal annual installments beginning one year after sale. Some of the notes are subsequently sold to a bank with recourse, some are subsequently sold without recourse, and some are retained by Corrs. At year end, Corrs evaluates all outstanding notes receivable and provides for estimated losses arising from defaults. Instructions (a) What is the appropriate valuation basis for Corrs’s notes receivable at the date it sells equipment? (b) How should Corrs account for the sale, without recourse, of a February 1, 2014, note receivable sold on May 1, 2014? Why is it appropriate to account for it in this way? (c) At December 31, 2014, how should Corrs measure and account for the impact of estimated losses resulting from notes receivable that it (1) Retained and did not sell? (2) Sold to bank with recourse?

Based on equations in the text, derive an equation to compute the average volume per chip formed in the grinding process

Explain why investor sentiment can affect stock prices. (LO3)

Define cellular manufacturing.

If there were a gradual increase in the saving rate over time, would this lead to sustained economic growth?

What are the requirements to contribute to a health savings account? What limits are imposed on the contributions and deductions?

Volker Inc. issued $2,500,000 of convertible 10-year bonds on July 1, 2014. The bonds provide for 12% interest payable semiannually on January 1 and July 1. The discount in connection with the issue was $54,000, which is being amortized monthly on a straight-line basis. The bonds are convertible after one year into 8 shares of Volker Inc.’s $100 par value common stock for each $1,000 of bonds. On August 1, 2015, $250,000 of bonds were turned in for conversion into common stock. Interest has been accrued monthly and paid as due. At the time of conversion, any accrued interest on bonds being converted is paid in cash. Instructions Prepare the journal entries to record the conversion, amortization, and interest in connection with the bonds as of the following dates. (Round to the nearest dollar.) (a) August 1, 2015. (Assume the book value method is used.) (b) August 31, 2015. (c) December 31, 2015, including closing entries for end-of-year.

Name three common types of income shifting.

An NC machine tool table is powered by a servomotor, leadscrew, and optical encoder. The leadscrew has a pitch = 5.0 mm and is connected to the motor shaft with a gear ratio of 16:1 (16 turns of the motor for each turn of the leadscrew). The optical encoder is connected directly to the leadscrew and generates 200 pulses/rev of the leadscrew. The table must move a distance = 100 mm at a feed rate = 500 mm/min. Determine (a) the pulse count received by the control system to verify that the table has moved exactly 100 mm; and (b) the pulse rate and (c) motor speed that correspond to the feed rate of 500 mm/min.

What are the two most common titanium compounds that are coated onto cutting tools by chemical vapor deposition?

If the Bank of England issues £1 million of extra bonds and buys back £1 million of Treasury bills, will there automatically be a reduction in credit by a set multiple of £1 million?

Klamath Company, a manufacturer of ballet shoes, is experiencing a period of sustained growth. In an effort to expand its production capacity to meet the increased demand for its product, the company recently made several acquisitions of plant and equipment. Rob Joffrey, newly hired in the position of fixed-asset accountant, requested that Danny Nolte, Klamath’s controller, review the following transactions. Transaction 1: On June 1, 2014, Klamath Company purchased equipment from Wyandot Corporation. Klamath issued a $28,000, 4-year, zero-interest-bearing note to Wyandot for the new equipment. Klamath will pay off the note in four equal installments due at the end of each of the next 4 years. At the date of the transaction, the prevailing market rate of interest for obligations of this nature was 10%. Freight costs of $425 and installation costs of $500 were incurred in completing this transaction. The appropriate factors forthe time value of money at a 10% rate of interest are given below. Future value of $1 for 4 periods 1.46 Future value of an ordinary annuity for 4 periods 4.64 Present value of $1 for 4 periods 0.68 Present value of an ordinary annuity for 4 periods 3.17 Transaction 2: On December 1, 2014, Klamath Company purchased several assets of Yakima Shoes Inc., a small shoe manufacturer whose owner was retiring. The purchase amounted to $220,000 and included the assets listed below. Klamath Company engaged the services of Tennyson Appraisal Inc., an independent appraiser, to determine the fair values of the assets which are also presented below. During its fiscal year ended May 31, 2015, Klamath incurred $8,000 for interest expense in connection with the financing of these assets. Transaction 3: On March 1, 2015, Klamath Company exchanged a number of used trucks plus cash for vacant land adjacent to its plant site. (The exchange has commercial substance.) Klamath intends to usthe land for a parking lot. The trucks had a combined book value of $35,000, as Klamath had recorded $20,000 Marshall Const. Brigham Mfg. Co. Fair value of old crane $ 82,000 Fair value of new crane $200,000 Cash paid 118,000 Cash received 118,000 Yakima Book Value Fair Value Inventory $ 60,000 $ 50,000 Land 40,000 80,000 Buildings 70,000 120,000$170,000 $250,000 of accumulated depreciation against these assets. Klamath’s purchasing agent, who has had previous dealings in the secondhand market, indicated that the trucks had a fair value of $46,000 at the time of the transaction. In addition to the trucks, Klamath Company paid $19,000 cash for the land. Instructions (a) Plant assets such as land, buildings, and equipment receive special accounting treatment. Describe the major characteristics of these assets that differentiate them from other types of assets. (b) For each of the three transactions described above, determine the value at which Klamath Company should record the acquired assets. Support your calculations with an explanation of the underlying rationale. (c) The books of Klamath Company show the following additional transactions for the fiscal year ended May 31, 2015. (1) Acquisition of a building for speculative purposes. (2) Purchase of a 2-year insurance policy covering plant equipment. (3) Purchase of the rights for the exclusive use of a process used in the manufacture of ballet shoes. For each of these transactions, indicate whether the asset should be classified as a plant asset. If it is a plant asset, explain why it is. If it is not a plant asset, explain why not, and identify the proper classification.

On January 3, 2013, Martin Company purchased for $500,000 cash a 10% interest in Renner Corp. On that date, the net assets of Renner had a book value of $3,700,000. The excess of cost over the underlying equity in net assets is attributable to undervalued depreciable assets having a remaining life of 10 years from the date of Martin’s purchase. The fair value of Martin’s investment in Renner securities is as follows: December 31, 2013, $560,000, and December 31, 2014, $515,000. On January 2, 2015, Martin purchased an additional 30% of Renner’s stock for $1,545,000 cash when the book value of Renner’s net assets was $4,150,000. The excess was attributable to depreciable assets having a remaining life of 8 years. During 2013, 2014, and 2015, the following occurred. Renner Dividends Paid by Net Income Renner to Martin 2013 $350,000 $15,000 2014 450,000 20,000 2015 550,000 70,000 Instructions On the books of Martin Company, prepare all journal entries in 2013, 2014, and 2015 that relate to its investment in Renner Corp., reflecting the data above and a change from the fair value method to the equity method.