Question & Answer

Busytown Corporation, which manufactures shoes, hired a recent college graduate to work in its accounting department. On the first day of work, the accountant was assigned to total a batch of invoices with the use of an adding machine. Before long, the accountant, who had never before seen such a machine, managed to break the machine. Busytown Corporation gave the machine plus $340 to Dick Tracy Business Machine Company (dealer) in exchange for a new machine. Assume the following information about the machines. Busytown Corp. Dick Tracy Co. (Old Machine) (New Machine) Machine cost $290 $270 Accumulated depreciation 140 –0– Fair value 85 425 Instructions For each company, prepare the necessary journal entry to record the exchange. (The exchange has commercial substance.)

What are the arguments for and against relying entirely on discretionary regional and urban policy?

1.    : By the time an online or mobile business starts noticeably losing customers, it is often too late to turn things around. If you were the creator of a successful game app, such as Fortnite Battle Royale or League of Legends, how might you know when it was time to pivot so as to keep thriving?

Demonstrate with a supply and demand curve diagram the incidence of a subsidy when demand is price elastic and supply is price inelastic.

Answer each of these unrelated questions. (a) On January 1, 2014, Fishbone Corporation sold a building that cost $250,000 and that had accumulated depreciation of $100,000 on the date of sale. Fishbone received as consideration a $240,000 non-interest-bearing note due on January 1, 2017. There was no established exchange price for the building, and the note had no ready market. The prevailing rate of interest for a note of this type on January 1, 2014, was 9%. At what amount should the gain from the sale of the building be reported? (b) On January 1, 2014, Fishbone Corporation purchased 300 of the $1,000 face value, 9%, 10-year bonds of Walters Inc. The bonds mature on January 1, 2024, and pay interest annually beginning January 1  2015. Fishbone purchased the bonds to yield 11%. How much did Fishbone pay for the bonds? (c) Fishbone Corporation bought a new machine and agreed to pay for it in equal annual installments of $4,000 at the end of each of the next 10 years. Assuming that a prevailing interest rate of 8% applies to this contract, how much should Fishbone record as the cost of the machine? (d) Fishbone Corporation purchased a special tractor on December 31, 2014. The purchase agreement stipulated that Fishbone should pay $20,000 at the time of purchase and $5,000 at the end of each of the next 8 years. The tractor should be recorded on December 31, 2014, at what amount, assuming an appropriate interest rate of 12%? (e) Fishbone Corporation wants to withdraw $120,000 (including principal) from an investment fund at the end of each year for 9 years. What should be the required initial investment at the beginning of the first year if the fund earns 11%?

Of what use is the statement of cash flows?

The top surface of a rectangular workpart is machined using a peripheral milling operation. The workpart is 735 mm long by 50 mm wide by 95 mm thick. The milling cutter, which is 60 mm in diameter and has five teeth, overhangs the width of the part equally on both sides. Cutting speed = 80 m/min, chip load = 0.30 mm/tooth, and depth of cut = 7.5 mm. (a) Determine the time required to make one pass across the surface, given that the setup and machine settings provide an approach distance of 5 mm before actual cutting begins and an overtravel distance of 25 mm after actual cutting has finished. (b) What is the maximum material removal rate during the cut?

Is trade diversion more likely or less likely in the following cases? (a)  European producers gain monopoly power in world trade. (b)  Modern developments in technology and communications reduce the differences in production costs associated with different locations. (c)  The development of the internal market produces substantial economies of scale in many industries.

According to the die casting video, what materials are most common for die-casting dies?

Chandra was the sole shareholder of Pet Emporium, which was originally formed as an S corporation.  When Pet Emporium terminated its S election on August 31, 2023, Chandra had a stock basis and an at-risk amount of $0.  Chandra also had a suspended loss from Pet Emporium of $9,000. What amount of the suspended loss is Chandra allowed to deduct, and what is her basis in her Pet Emporium stock at the end of the post-termination transition period under the following alternative scenarios (assume Pet Emporium files for an extension to file its tax returns)?   a. Chandra makes capital contributions of $7,000 on August 30, 2024, and $4,000 on September 14, 2024.

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.

What are the advantages and disadvantages of having an individual’s   remuneration linked to performance outcomes?             (LO4 and 5)

Structuring a compensation plan   Required Describe the factors that need to be considered when structuring a compensation plan for executives. (LO2 and 4)

Ford Motor Co. is considering alternate methods of accounting for the cash discounts it takes when paying suppliers promptly. One method suggested was to report these discounts as financial income when payments are made. Comment on the propriety of this approach.

What adverse internal effects may follow from (a) a depreciation of the exchange rate; (b) an appreciation of the exchange rate?

Presented below is information related to Cramer, Inc. Instructions Comment on the appropriateness of the accounting procedures followed by Cramer, Inc. (a) Depreciation expense on the building for the year was $60,000. Because the building was increasing in value during the year, the controller decided to charge the depreciation expense to retained earnings instead of to net income. The following entry is recorded. Retained Earnings 60,000 Accumulated Depreciation—Buildings 60,000 (b) Materials were purchased on January 1, 2014, for $120,000 and this amount was entered in the Materials account. On December 31, 2014, the materials would have cost $141,000, so the following entry is made. Inventory 21,000 Gain on Inventories 21,000 (c) During the year, the company purchased equipment through the issuance of common stock. The stock had a par value of $135,000 and a fair value of $450,000. The fair value of the equipment was not easily determinable. The company recorded this transaction as follows. Equipment 135,000 Common Stock 135,000 (d) During the year, the company sold certain equipment for $285,000, recognizing a gain of $69,000. Because the controller believed that new equipment would be needed in the near future, she decided to defer the gain and amortize it over the life of any new equipment purchased. (e) An order for $61,500 has been received from a customer for products on hand. This order was shipped on January 9, 2015. The company made the following entry in 2014. Accounts Receivable 61,500 Sales Revenue 61,500

A bearing for the output shaft of a 200 hp motor is to be heated to expand it enough to press on the shaft. At 70°F the bearing has an inside diameter of 4.000 in and an outside diameter of 7.000 in. The shaft has an outside diameter of 4.004 in. The modulus of elasticity for the shaft and bearing is 30 x 106 lb/in2 and the coefficient of thermal expansion is 6.7 x 10-6 in/in per °F. (a) At what temperature will the bearing have 0.005 of clearance to fit over the shaft? (b) After it is assembled and cooled, what is the radial pressure between the bearing and shaft? (c) Determine the maximum effective stress in the bearing.

How do partners determine whether they are passive participants in partnerships when applying the passive activity loss limitation rules?

4 A disk-shaped part is to be cast out of aluminum. The diameter of the disk = 500 mm and its thickness = 20 mm. If the mold constant = 2.0 sec/mm2 in Chvorinov's rule, how long will it take the casting to solidify?

J.C. has been a professional gambler for many years.  He loves this line of work and believes the incomis tax-free.  a.  Use an available tax research service to determine whether J.C.’s thinking is correct.  Is the answer to this question found in the Internal Revenue Code?  If not, what type of authority answers this question? b.  Write a short memo communicating the results of your research.

Flagstad Inc. presented the following data. Net income $2,500,000 Preferred stock: 50,000 shares outstanding, $100 par, 8% cumulative, not convertible 5,000,000 Common stock: Shares outstanding 1/1 750,000 Issued for cash, 5/1 300,000 Acquired treasury stock for cash, 8/1 150,000 2-for-1 stock split, 10/1 Instructions Compute earnings per share.

Aston Corporation performs year-end planning in November of each year before its calendar year ends in December. The preliminary estimated net income is $3 million. The CFO, Rita Warren, meets with the company president, J. B. Aston, to review the projected numbers. She presents the following projected information. Pretax Income Percentage-of-Completion Completed-Contract Prior to 2014 $150,000 $105,000 2014 60,000 20,000 ASTON CORPORATION PROJECTED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2014 Sales $29,000,000 Cost of goods sold $14,000,000 Depreciation 2,600,000 Operating expenses 6,400,000 23,000,000 Income before income tax 6,000,000 Income tax 3,000,000 Net income $ 3,000,000 ASTON CORPORATION SELECTED BALANCE SHEET INFORMATION AT DECEMBER 31, 2014 Estimated cash balance $ 5,000,000 Available-for-sale securities (at cost) 10,000,000 Fair value adjustment (1/1/14) —0— Estimated fair value at December 31, 2014: Security Cost Estimated Fair Value A $ 2,000,000 $ 2,200,000 B 4,000,000 3,900,000 C 3,000,000 3,100,000 D 1,000,000 1,800,000 Total $10,000,000 $11,000,000 Other information at December 31, 2014: Equipment $3,000,000 Accumulated depreciation (5-year SL) 1,200,000 New robotic equipment (purchased 1/1/14) 5,000,000 Accumulated depreciation (5-year DDB) 2,000,000 The corporation has never used robotic equipment before, and Warren assumed an accelerated method because of the rapidly changing technology in robotic equipment. The company normally uses straightline depreciation for production equipment. Aston explains to Warren that it is important for the corporation to show a $7,000,000 income before taxes because Aston receives a $1,000,000 bonus if the income before taxes and bonus reaches $7,000,000. Aston also does not want the company to pay more than $3,000,000 in income taxes to the government. Instructions (a) What can Warren do within GAAP to accommodate the president’s wishes to achieve $7,000,000 in income before taxes and bonus? Present the revised income statement based on your decision. (b) Are the actions ethical? Who are the stakeholders in this decision, and what effect do Warren’s actions have on their interests?

Soundgarden Company sold 200 color laser copiers in 2014 for $4,000 apiece, together with a one-year warranty. Maintenance on each copier during the warranty period averages $330. Instructions (a) Prepare entries to record the sale of the copiers and the related warranty costs, assuming that the accrual method is used. Actual warranty costs incurred in 2014 were $17,000. (b) On the basis of the data above, prepare the appropriate entries, assuming that the cash-basis method is used.

Identify why RPE would be used t the company level.

What factors will determine whether a country’s joining a customs union will lead to trade creation or trade diversion?