Question & Answer

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.

Demand for oil might be relatively elastic over the longer term, and yet it could still be observed that over time people consume more oil (or only very slightly less) despite rising oil prices. How can this apparent contradiction be explained?

Darby Sporting Goods Inc. has been experiencing growth in the demand for its products over the last several years. The last two Olympic Games greatly increased the popularity of basketball around the world. As a result, a European sports retailing consortium entered into an agreement with Darby’s Roundball Division to purchase basketballs and other accessories on an increasing basis over the next 5 years. To be able to meet the quantity commitments of this agreement, Darby had to obtain additional manufacturing capacity. A real estate firm located an available factory in close proximity to Darby’s Roundball manufacturing facility, and Darby agreed to purchase the factory and used machinery from Encino Athletic Equipment Company on October 1, 2013. Renovations were necessary to convert the factory for Darby’s manufacturing use. The terms of the agreement required Darby to pay Encino $50,000 when renovations started on January 1, 2014, with the balance to be paid as renovations were completed. The overall purchase price for the factory and machinery was $400,000. The building renovations were contracted to Malone Construction at $100,000. The payments made, as renovations progressed during 2014, are shown below. The factory was placed in service on January 1, 2015. 1/1 4/1 10/1 12/31 Encino $50,000 $90,000 $110,000 $150,000 Malone 30,000 30,000 40,000 On January 1, 2014, Darby secured a $500,000 line-of-credit with a 12% interest rate to finance the purchase cost of the factory and machinery, and the renovation costs. Darby drew down on the line-of-credit to meet the payment schedule shown above; this was Darby’s only outstanding loan during 2014. Bob Sprague, Darby’s controller, will capitalize the maximum allowable interest costs for this project. Darby’s policy regarding purchases of this nature is to use the appraisal value of the land for book purposes and prorate the balance of the purchase price over the remaining items. The building had originally cost Encino $300,000 and had a net book value of $50,000, while the machinery originally cost $125,000 and had a net book value of $40,000 on the date of sale. The land was recorded on Encino’s books at $40,000. An appraisal, conducted by independent appraisers at the time of acquisition, valued the land at $290,000, the building at $105,000, and the machinery at $45,000. Angie Justice, chief engineer, estimated that the renovated plant would be used for 15 years, with an estimated salvage value of $30,000. Justice estimated that the productive machinery would have a remaining useful life of 5 years and a salvage value of $3,000. Darby’s depreciation policy specifies the 200% declining-balance method for machinery and the 150% declining-balance method for the plant. One-half year’s depreciation is taken in the year the plant is placed in service, and one-half year is allowed when the property is disposed of or retired. Darby uses a 360-day year for calculating interest costs. Instructions (a) Determine the amounts to be recorded on the books of Darby Sporting Goods Inc. as of December 31, 2014, for each of the following properties acquired from Encino Athletic Equipment Company. (1) Land. (2) Buildings. (3) Machinery. (b) Calculate Darby Sporting Goods Inc.’s 2015 depreciation expense, for book purposes, for each of the properties acquired from Encino Athletic Equipment Company. (c) Discuss the arguments for and against the capitalization of interest costs. Angie Justice, chief engineer, estimated that the renovated plant would be used for 15 years, with an estimated salvage value of $30,000. Justice estimated that the productive machinery would have a remaining useful life of 5 years and a salvage value of $3,000. Darby’s depreciation policy specifies the 200% declining-balance method for machinery and the 150% declining-balance method for the plant. One-half year’s depreciation is taken in the year the plant is placed in service, and one-half year is allowed when the property is disposed of or retired. Darby uses a 360-day year for calculating interest costs. Instructions (a) Determine the amounts to be recorded on the books of Darby Sporting Goods Inc. as of December 31, 2014, for each of the following properties acquired from Encino Athletic Equipment Company. (1) Land. (2) Buildings. (3) Machinery. (b) Calculate Darby Sporting Goods Inc.’s 2015 depreciation expense, for book purposes, for each of the properties acquired from Encino Athletic Equipment Company. (c) Discuss the arguments for and against the capitalization of interest costs.

Augustana received $100,000 of qualified dividends this year.  Under what circumstances might the entire $100,000 of income not be taxed at the same rate?

Discuss some of the defects that can occur in plastic injection molding

Name the three basic categories of materials

Sketch a person’s indifference map for two goods X and Y. Mark the optimum consumption point. Now illustrate the following (you might need to draw a separate diagram for each): (a)  A rise in the price of good X, but no change in the price of good Y. (b)  A shift in the person’s tastes from good Y to good X. (c)  A fall in the person’s income and a fall in the price of good Y, with the result that the consumption of Y remains constant (but that of X falls).

A deep drawing operation is to be performed on a sheet-metal blank that is 1/8 in thick. The height (inside dimension) of the cup = 3.8 in and the diameter (inside dimension) = 5.0 in. Assuming the punch radius = 0, compute the starting diameter of the blank to complete the operation with no material left in the flange. Is the operation feasible (ignoring the fact that the punch radius is too small)?

A 1/2-13 screw is to be preloaded to a tension force = 1000 lb. Torque coefficient = 0.22. Determine the torque that should be used to tighten the bolt.

Presented below is the comparative balance sheet for Gilmour Company.   Instructions  (Round to two decimal places.) (a) Prepare a comparative balance sheet of Gilmour Company showing the percent each item is of the total assets or total liabilities and stockholders’ equity. (b) Prepare a comparative balance sheet of Gilmour Company showing the dollar change and the percent change for each item. (c) Of what value is the additional information provided in part (a)? (d) Of what value is the additional information provided in part (b)?

If the government borrows but does not spend the proceeds, what effect will this have on the money supply if it borrows from (a) the banking sector; (b) the non-bank private sector?

Kase, an individual, purchased some property in Potomac, Maryland, for $150,000 approximately 10 years ago. Kase is approached by a real estate agent representing a client who would like to exchange a parcel of land in North Carolina for Kase’s Maryland property. Kase agrees to the exchange. What is Kase’s realized gain or loss, recognized gain or loss, and basis in the North Carolina property in each of the following alternative scenarios?   a. The transaction qualifies as a like-kind exchange, and the fair market value of each property is $675,000. b. The transaction qualifies as a like-kind exchange, and the fair market value of

In a chemical blanking operation, stock thickness of the aluminum sheet is 0.015 in. The pattern to be cut out of the sheet is a hole pattern, consisting of a matrix of 0.100 in diameter holes. If photochemical machining is used to cut these holes, and contact printing is used to make the resist (maskant) pattern, determine the diameter of the holes that should be used in the pattern.

Locate the IRS Web site at www.irs.gov/ .  For every $100 the IRS collected, how much was spent on the IRS collection efforts?  What tax system criterion does this information help you to evaluate with respect to the current U.S. tax system?

If the regulator imposed such rules, would they cause the firm to make a loss if it faced a downward-sloping LRMSC curve? (Clues: Where would the LRAC curve be relative to the LRMC curve? What would be the effect of externalities and the addition of the Z factor on the price?)

Are taxpayers required to include all realized income in gross income? Explain.

A fillet weld is used to join 2 medium carbon steel plates each having a thickness of 5.0 mm. The plates are joined at a 90° angle using an inside fillet corner joint. The velocity of the welding head is 6 mm/sec. Assume the cross section of the weld bead approximates a right isosceles triangle with a leg length of 4.5 mm, the heat transfer factor is 0.80, and the melting factor is 0.58. Determine the rate of heat generation required at the welding source to accomplish the weld.

What are the major types of subsequent events? Indicate how each of the following “subsequent events” would be reported. (a) Collection of a note written off in a prior period. (b) Issuance of a large preference share offering. (c) Acquisition of a company in a different industry. (d) Destruction of a major plant in a flood. (e) Death of the company’s chief executive officer (CEO). (f) Additional wage costs associated with settlement of a four-week strike. (g) Settlement of an income tax case at considerably more tax than anticipated at year-end. (h) Change in the product mix from consumer goods to industrial goods.

Morlan Corporation is preparing its December 31, 2014, financial statements. Two events that occurred between December 31, 2014, and March 10, 2015, when the statements were authorized for issue, are described below. 1. A liability, estimated at $160,000 at December 31, 2014, was settled on February 26, 2015, at $170,000. 2. A flood loss of $80,000 occurred on March 1, 2015. Instructions What effect do these subsequent events have on 2014 net income?

A wire EDM operation is used to cut out punch-and-die components from 25-mm-thick tool steel plates. However, in preliminary cuts, the surface finish on the cut edge is poor. What changes in discharge current and frequency of discharges should be made to improve the finish?

What are interim reports? Why are balance sheets often anot provided with interim data?

As part of the year-end audit, you are discussing the disclosure checklist with your client. The checklist identifies the items that must be disclosed in a set of IFRS financial statements. The client is surprised by the disclosure item related to accounting policies. Specifically, since the audit report will attest to the statements being prepared in accordance with IFRS, the client questions the accounting policy checklist item. The client has asked you to conduct some research to verify the accounting policy disclosures. Instructions Access the IFRS authoritative literature at the IASB website (http://eifrs.iasb.org/). (Click on the IFRS tab and then register for free eIFRS access if necessary.) When you have accessed the documents, you can use the search tool in your Internet browser to respond to the following questions. (Provide paragraph citations.) (a) In general, what should disclosures of accounting policies encompass? (b) List some examples of the most commonly required disclosures.

Part A: This year, Gumowski Company has each of the following items in its income statement. 1. Gross profits on installment sales. 2. Revenues on long-term construction contracts. 3. Estimated costs of product warranty contracts. 4. Premiums on officers’ life insurance policies with Gumowski as beneficiary. Instructions (a) Under what conditions would deferred income taxes need to be reported in the financial statements? (b) Specify when deferred income taxes would need to be recognized for each of the items above, and indicate the rationale for such recognition. Part B: Gumowski Company’s president has heard that deferred income taxes can be classified in different ways in the balance sheet. Instructions Identify the conditions under which deferred income taxes would be classified as a noncurrent item in the balance sheet. What justification exists for such classification?