Question & Answer

Two economists disagree over the best way of tackling the problem of unemployment. For what types of reasons might they disagree? Are these reasons positive or normative?

Dingel Corporation has contracted with you to prepare a statement of cash flows. The controller has provided the following information. December 31 2014 2013 Buildings $ –0– $29,750 Equipment 45,000 20,000 Patents 5,000 6,250 Investments –0– 3,000 Inventory 12,000 9,000 Accounts receivable 12,250 10,000 Cash 33,500 13,000 $107,750 $91,000 Share capital—ordinary $ 43,000 $33,000 Retained earnings 20,750 6,000 Allowance for doubtful accounts 3,000 4,500 Accumulated depreciation on equipment 2,000 4,500 Accumulated depreciation on buildings –0– 6,000 Accounts payable 5,000 3,000 Dividends payable –0– 5,000 Long-term notes payable 31,000 25,000 Notes payable, short-term (non-trade) 3,000 4,000 $107,750 $91,000 Additional data related to 2014 are as follows. 1. Equipment that had cost $11,000 and was 40% depreciated at time of disposal was sold for $2,500. 2. $10,000 of the long-term notes payable was paid by issuing ordinary shares. 3. Cash dividends paid were $5,000. 4. On January 1, 2014, the building was completely destroyed by a flood. Insurance proceeds on the building were $32,000. 5. Equity investments (non-trading) were sold at $1,700 above their cost. 6. Cash was paid for the acquisition of equipment. 7. A long-term note for $16,000 was issued for the acquisition of equipment. 8. Interest of $2,000 and income taxes of $6,500 were paid in cash. Instructions Prepare a statement of cash flows using the indirect method.

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) Which method of computing net cash provided by operating activities does M&S use? What were the amounts of net cash provided by operating activities for the years 2011 and 2012? Which two items were most responsible for the increase in net cash provided by operating activities in 2012? (b) What was the most significant item in the cash flows used for investing activities section in 2012? What was the most significant item in the cash flows used for financing activities section in 2012? (c) Where is “deferred income taxes” reported in M&S’s statement of cash flows? Why does it appear in that section of the statement of cash flows? (d) Where is depreciation reported in M&S’s statement of cash flows? Why is depreciation added to net income in the statement of cash flows?

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) What method of computing net cash provided by operating activities does Coca-Cola use? What method does PepsiCo use? What were the amounts of cash provided by operating activities reported by Coca-Cola and PepsiCo in 2011? (b) What was the most significant item reported by Coca-Cola and PepsiCo in 2011 in their investing activities sections? What is the most significant item reported by Coca-Cola and PepsiCo in 2011 in their financing activities sections? (c) What were these two companies’ trends in net cash provided by operating activities over the period 2009 to 2011? (d) Where is “depreciation and amortization” reported by Coca-Cola and PepsiCo in their statements of cash flows? What is the amount and why does it appear in that section of the statement of cash flows? (e) Based on the information contained in Coca-Cola’s and PepsiCo’s financial statements, compute the following 2011 ratios for each company. These ratios require the use of statement of cash flows data. (These ratios were covered in Chapter 5.) (1) Current cash debt coverage. (2) Cash debt coverage. (f) What conclusions concerning the management of cash can be drawn from the ratios computed in (e)?

When a taxpayer works as an employee and as a self-employed independent contractor during the year, how does the taxpayer determine their employment and self-employment taxes payable?

1.    : What do you see as the primary advantage of using big data analytics—understanding the environment or influencing the environment? Why?

Indicate how well the percentage-of-sales method and the aging method accomplish the objectives of the allowance method of accounting for bad debts.

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.

Explain why percentage depletion has been referred to as a government subsidy.

Design the nominal sizes of a GO/NO-GO snap gage to inspect the diameter of a shaft that is 1.500 ± 0.030. A wear allowance of 2% of the entire tolerance band is applied to the GO side. Determine (a) the nominal size of the GO gage including the wear allowance and (b) the nominal size of the NO-GO gage

Plant-wide versus production cost pools Flexible Manufacturers produces small batches of customised products. The accounting system is set up to allocate plant overhead to each job using the following production cost pools and overhead allocation rates       Actual resources used for job 75:       The manufacturing accountant wants to simplify the cost accounting system and use a plant wide rate. If the preceding costs are grouped into a single cost pool and allocated based on labour hours, the rate would be $35 per direct labour hour.   Required (a)          What cost should be allocated to job 75 using the plant-wide overhead rate? (b)          What cost should be allocated to job 75 using the production cost pool overhead rates? (c)           Why do the allocated amounts in parts (a) and (b) differ? (d)          Which method would you recommend? Explain your choice.

Michael Bolton Company follows the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis. Item No. Quantity Cost per Unit Cost to Replace Estimated Selling Price Cost of Completion and Disposal Normal Profi t 1320 1,200 $3.20 $3.00 $4.50 $0.35 $1.25 1333 900 2.70 2.30 3.50 0.50 0.50 1426 800 4.50 3.70 5.00 0.40 1.00 1437 1,000 3.60 3.10 3.20 0.25 0.90 1510 700 2.25 2.00 3.25 0.80 0.60 1522 500 3.00 2.70 3.80 0.40 0.50 1573 3,000 1.80 1.60 2.50 0.75 0.50 1626 1,000 4.70 5.20 6.00 0.50 1.00 Instructions From the information above, determine the amount of Bolton Company inventory.

Name the four basic categories of processes used to shape rubber

Why do Keynesians argue that, even in the long run, demand-side policies will be still be required if faster growth in aggregate supply is to be achieved?

It has been suggested that tax policy favors deductions for AGI compared to itemized deductions. Describe two ways in which deductions for AGI are treated more favorably than itemized deductions.

What are some of the advantages of using electrical power in an automated system?

Mr. Kyle owns stock in a local publicly traded company. Although the stock price has declined since he purchased it two years ago, he likes the long-term prospects for the company. If Kyle sells the stock to his sister because he needs some cash for a down payment on a new home, is the loss deductible? If Kyle is right and the stock price increases in the future, how is his sister’s gain computed if she sells the stock?

1.    : One of the benefits of a strategy map is that it clearly communicates goals and how they are linked to everyone in the organization. Does a minimum-wage maintenance worker in a hospital really need to understand any goals beyond keeping the place clean? Discuss.

Will there be any cost to the UK economy from a decline in the demand for exports resulting from a world recession?

Why should turbulent flow of molten metal into the mold be avoided?

Use the information for Lockard Company given in BE11-2. (a) Compute 2014 depreciation expense using the sum-of-the-years’-digits method. (b) Compute 2014 depreciation expense using the sum-of-the-years’-digits method, assuming the machinery was purchased on April 1, 2014

Mechanical surface treatments are often performed for reasons other than or in addition to cleaning. What are the reasons?

Identify the four major types of ingredients in organic coatings.

Distinguish among Accounting Research Bulletins, Opinionsof the Accounting Principles Board, and Statementsof the Financial Accounting Standards Board.

In an exchange of services, income has been received in the amount of the value of services received (gross income includes the receipt of services as well as money and goods).  Hence, Jim is taxed on the $275 of car repair services.  b.       The issue is whether the \"credit\" represents a valuable right.  Because the right could be redeemed for property worth $150, then under constructive receipt Jim should recognize income of $150.  c.       If a barter credit can only be redeemed for future services, then the taxpayer could argue that no realization has yet occurred.  But, it would be included in his gross income next year when the credit becomes a valuable right.   In an exchange of services, income has been received in the amount of the value of services received (gross income includes the receipt of services as well as money and goods).  Hence, Jim is taxed on the $275 of car repair services.  b.       The issue is whether the \"credit\" represents a valuable right.  Because the right could be redeemed for property worth $150, then under constructive receipt Jim should recognize income of $150.  c.       If a barter credit can only be redeemed for future services, then the taxpayer could argue that no realization has yet occurred.  But, it would be included in his gross income next year when the credit becomes a valuable right.