Question & Answer

Neither depreciation on replacement cost nor depreciation adjusted for changes in the purchasing power of the dollar has been recognized as generally accepted accounting principles for inclusion in the primary financial statements. Briefly present the accounting treatment that might be used to assist in the maintenance of the ability of a company to replace its productive capacity.

: Describe the major components of the classical perspective and current uses of the management science approach

Bloom Corporation had the following 2014 income statement. Sales revenue $200,000 Cost of goods sold 120,000 Gross profi t 80,000 Operating expenses (includes depreciation of $21,000) 50,000 Net income $ 30,000 The following accounts increased during 2014: Accounts Receivable $12,000; Inventory $11,000; Accounts Payable $13,000. Prepare the cash flows from operating activities section of Bloom’s 2014 statement of cash flows using the direct method.

Derive an expression for the reduction r in drawing as a function of drawing ratio DR.

Briefly describe the structure and role of the Securities and Exchange Commission. (LO4)

: Summarize how SWOT analysis can be used to evaluate a company’s strengths, weaknesses, opportunities, and threats.

The financial statements of P&G are presented in Appendix 5B. The company’s complete annual report, including the notes to the financial statements, can be accessed at the book’s companion website, www. wiley.com/college/kieso. Instructions Refer to P&G’s financial statements and the accompanying notes to answer the following questions. (a) What kind of pension plan does P&G provide its employees in the United States? (b) What was P&G’s pension expense for 2011, 2010, and 2009 for the United States? (c) What is the impact of P&G’s pension plans for 2011 on its financial statements? (d) What information does P&G provide on the target allocation of its pension assets? (Compare the asset allocation for “Pensions and Other Retiree Benefits.”) How do the allocations relate to the expected returns on these assets?

Founded in the early 1980s, the Vermont Teddy Bear Co. designs and manufactures American-made teddy bears and markets them primarily as gifts called Bear-Grams or Teddy Bear-Grams. Bear-Grams are personalized teddy bears delivered directly to the recipient for special occasions such as birthdays and anniversaries. The Shelburne, Vermont, company’s primary markets are New York, Boston, and Chicago. Sales have jumped dramatically in recent years. Such dramatic growth has significant implications for cash flows. Provided below are the cash flow statements for two recent years for the company. Current Year Prior Year Cash fl ows from operating activities: Net income $ 17,523 $ 838,955 Adjustments to reconcile net income to net cash provided by operating activities Deferred income taxes (69,524) (146,590) Depreciation and amortization 316,416 181,348 Changes in assets and liabilities: Accounts receivable, trade (38,267) (25,947) Inventories (1,599,014) (1,289,293) Prepaid and other current assets (444,794) (113,205) Deposits and other assets (24,240) (83,044) Accounts payable 2,017,059 (284,567) Accrued expenses 61,321 170,755 Accrued interest payable, debentures — (58,219) Other — (8,960) Income taxes payable — 117,810 Net cash provided by (used for) operating activities 236,480 (700,957) Net cash used for investing activities (2,102,892) (4,422,953) Net cash (used for) provided by fi nancing activities (315,353) 9,685,435 Net change in cash and cash equivalents (2,181,765) 4,561,525 Other information: Current liabilities $ 4,055,465 $ 1,995,600 Total liabilities 4,620,085 2,184,386 Net sales 20,560,566 17,025,856 Instructions (a) Note that net income in the current year was only $17,523 compared to prior-year income of $838,955, but net cash flow from operating activities was $236,480 in the current year and a negative $700,957 in the prior year. Explain the causes of this apparent paradox. (b) Evaluate Vermont Teddy Bear’s liquidity, solvency, and profitability for the current year using cash flow-based ratios.

Could each of these types of resources be increased in quantity or quality? Is there a time dimension to your answer?

What is service cost, and what is the basis of its measurement?

What is a whisker?

In 2013, Grishell Trucking Company negotiated and closed a long-term lease contract for newly constructed truck terminals and freight storage facilities. The buildings were erected to the company’s specifications on land owned by the company. On January 1, 2014, Grishell Trucking Company took possession of the lease properties. On January 1, 2014 and 2015, the company made cash payments of $948,000 that were recorded as rental expenses. Although the terminals have a composite useful life of 40 years, the noncancelable lease runs for 20 years from January 1, 2014, with a bargain-purchase option available upon expiration of the lease. The 20-year lease is effective for the period January 1, 2014, through December 31, 2033. Advance rental payments of $800,000 are payable to the lessor on January 1 of each of the first 10 years of the lease term. Advance rental payments of $320,000 are due on January 1 for each of the last 10 years of the lease. The company has an option to purchase all of these leased facilities for $1 on December 31, 2033. It also must make annual payments to the lessor of $125,000 for property taxes and $23,000 for insurance. The lease was negotiated to assure the lessor a 6% rate of return. Instructions (a) Prepare a schedule to compute for Grishell Trucking Company the present value of the terminal facilities and related obligation at January 1, 2014. (b) Assuming that the present value of terminal facilities and related obligation at January 1, 2014, was $7,600,000, prepare journal entries for Grishell Trucking Company to record the: (1) Cash payment to the lessor on January 1, 2016. (2) Amortization of the cost of the leased properties for 2016 using the straight-line method and assuming a zero salvage value. (3) Accrual of interest expense at December 31, 2016. Selected present value factors are as follows. For an Ordinary Periods Annuity of $1 at 6% For $1 at 6% 1 .943396 .943396 2 1.833393 .889996 8 6.209794 .627412 9 6.801692 .591898 10 7.360087 .558395 19 11.158117 .330513 20 11.469921 .311805

What are some of the design guidelines for weldments that are fabricated by arc welding?

How might a savings and loan association use Treasury bond futures to hedge its fixed-rate mortgage portfolio (assuming that its main source of funds is short-term deposits)? Explain how prepayments on mortgages can limit the effectiveness of the hedge. (LO2)

Theory Assume an expectation of lower interest rates in the future arises quite suddenly. What would be the effect on the shape of the yield curve? Explain. (LO3)

The net income for Letterman Company for 2014 was $320,000. During 2014, depreciation on plant assets was $124,000, amortization of patent was $40,000, and the company incurred a loss on sale of plant assets of $21,000. Compute net cash flow from operating activities.

] Describe the type of medical expenditures that qualify for the medical expense deduction. Does the cost of meals consumed while hospitalized qualify for the deduction? Do over-the-counter drugs and medicines qualify for the deduction?

1.    : Over the past 20 years, entrepreneurship has been the fastest-growing course of study on campuses throughout the United States. Do you think it is possible to teach someone to be an entrepreneur? Why or why not?

A gear made of aluminum (modulus of elasticity = 69,000 MPa) is press fitted onto an aluminum shaft. The gear has a diameter of 55 mm at the base of its teeth. The nominal internal diameter of the gear = 30 mm and the interference = 0.10 mm. Compute: (a) the radial pressure between the shaft and the gear, and (b) the maximum effective stress in the gear at its inside diameter.

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/   -and-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 kind of pension plan does M&S provide its employees? (b) What was M&S’s pension expense for 2012 and 2011? (c) What is the impact of M&S’s pension plans for 2012 on its financial statements? (d) What information does M&S provide on the target allocation of its pension assets? How do the allocations relate to the expected returns on these assets?

Mickelson Inc. owns land that it purchased on January 1, 2000, for $450,000. At December 31, 2014, its current value is $770,000 as determined by appraisal. At what amount should Mickelson report this asset on its December 31, 2014, balance sheet? Explain.

1.       : If you were the leader of a special-purpose team developing a new computer game and conflicts arose related to power and status differences among team members, what would you do? Of the conflict-handling styles described in this chapter, which do you think might be most effective? Explain your answer.

1.       : Suppose that you manage an employee who is spending too much time using personal social media at work. As a consequence, he has missed three important deadlines in one week. You are planning a face-to-face conversation to address this performance problem and your goal is to communicate with candor. Using “I” statements as described in this chapter, how would you begin this conversation?

Sustainability and job costing in a service sector Green and Greener Co., a law firm specialising in environmental litigation, had the following costs last year:       The following costs were included in overhead:         The entity recently improved its ability to document and trace costs to individual cases. Revised bookkeeping procedures now allow it to trace fringe benefit costs for direct professional labour, paralegal costs, telephone charges, computer time, and photocopying costs to each case individually. The managing partner needs to decide whether more costs than just direct professional labour should be traced directly to jobs to allow the entity to better justify billings to clients. During the last year, more costs were traced to client engagements. Two of the case records showed the following:         Three methods are being considered for allocating overhead this year: ·           Method 1: Allocate overhead based on direct professional labour cost. Calculate the allocation rate using last year’s direct professional labour costs of $15 million and overhead costs of $21 million. ·           Method 2: Allocate overhead based on direct professional labour cost. Calculate the allocation rate using last year’s direct professional labour costs of $15 million and overhead costs of $10 million ($21 million less $11 million in direct costs that are traced this year). ·           Method 3: Allocate the $10 million overhead based on total direct costs. Calculate the allocation rate using last year’s direct costs (professional labour of $15 million plus other direct costs of $11 million).   Required (a)     Calculate the overhead allocation rate for method 1. (b)     Calculate the overhead allocation rate for method 2. (c)     Calculate the overhead allocation rate for method 3. (d)     Using each of the three rates calculated in parts (a), (b) and (c), calculate the total costs of cases 875 and 876. (e)     Explain why the total costs allocated to cases 875 and 876 are not the same under the three methods. (f)      Explain why method 1 would be inappropriate. (g)     Would method 2 or method 3 be better? Explain. (h)     Explain how professional service firms, like law firms might engage in sustainability practices. (LO1 and 4)

Solve Problem 20.26 except that the height = 60 mm