Question & Answer

For each of the following subsequent (post-balance-sheet) events, indicate whether a company should (a) adjust the financial statements, (b) disclose in notes to the financial statements, or (c) neither adjust nor disclose. ______ 1. Settlement of federal tax case at a cost considerably in excess of the amount expected at year-end. ______ 2. Introduction of a new product line. ______ 3. Loss of assembly plant due to fire. ______ 4. Sale of a significant portion of the company’s assets. ______ 5. Retirement of the company president. ______ 6. Prolonged employee strike. ______ 7. Loss of a significant customer. ______ 8. Issuance of a significant number of shares of common stock. ______ 9. Material loss on a year-end receivable because of a customer’s bankruptcy. ______ 10. Hiring of a new president. ______ 11. Settlement of prior year’s litigation against the company (no loss was accrued). ______ 12. Merger with another company of comparable size.

Explain how income could fall even though the unit sales level rises.

What might explain the fact that different accounting standard-setters have developed accounting standards that are sometimes quite different in nature?

Why does the required rate of return for a particular bond change over time? (LO2)

1.      Order the following primary value chain activities in the correct sequence. a.       Marketing and sales activities b.      Service activities c.       Operations d.      Outbound logistics   e.       Inbound logistics

Using the Internet, find a comparison of income tax rates across states.  What state currently has the highest income tax rate?  In considering individual tax burdens across states, what other taxes should you consider?

Apply the term structure of interest rate theories that were discussed in Chapter 3 to explain the shape of the existing commercial paper yield curve. (LO1)

The price of Garner stock is $40. There is also a call option on Garner stock that is at the money, with a premium of $2.00. There is also a put option on Garner stock that is at the money, with a premium of $1.80. Why would investors consider writing this call option and this put option? Why would some investors consider buying this call option and this put option?

Why might efforts to address the issue of global warming be hampered by a lack of understanding of probability amongst the general public?

Jackson Company adopts acceptable accounting for its defined benefit pension plan on January 1, 2013, with the following beginning balances: plan assets $200,000; projected benefit obligation $250,000. Other data relating to 3 years’ operation of the plan are as follows. 2013 2014 2015 Annual service cost $16,000 $ 19,000 $ 26,000 Settlement rate and expected rate of return 10% 10% 10% Actual return on plan assets 18,000 22,000 24,000 Annual funding (contributions) 16,000 40,000 48,000 Benefi ts paid 14,000 16,400 21,000 Prior service cost (plan amended, 1/1/14) 160,000 Amortization of prior service cost 54,400 41,600 Change in actuarial assumptions establishes a December 31, 2015, projected benefi t obligation of: 520,000 Instructions (a) Prepare a pension worksheet presenting all 3 years’ pension balances and activities. (b) Prepare the journal entries (from the worksheet) to reflect all pension plan transactions and events at December 31 of each year. (c) Indicate the pension-related amounts reported in the financial statements for 2015.

Draw a diagram with MC and MR curves. Mark the output (a) at which profits are maximised; (b) at which sales revenue is maximised.

Differentiate between a defined contribution pension plan and a defined benefit pension plan. Explain how the employer’s obligation differs between the two types of plans.

What are the parameters that have the greatest influence in determining the ideal surface roughness Ri in a turning operation?

Extrusion is a fundamental shaping process. Describe it

Outline the accounting procedures involved in applying the capital lease method by a lessee.

What is the name given to the furnace used to fire ceramic ware?

Suppose you asked your favorite AI query tool “Is multijurisdictional tax-motivated income shifting an example of the conversion strategy?” and the AI tool responded as follows: Is the AI response correct? Explain.

When might a shareholder have to rely on the “not essentially equivalent to a dividend” test in arguing that a stock redemption should be treated as an exchange for tax purposes?

What is the difference between a shrink fit and expansion fit in assembly?

Distinguish between minimum rental payments and minimum lease payments, and indicate what is included in minimum lease payments.

Some economists argue that recessions generate unemployment ‘scarring’ (i.e. various negative outcomes for the people unemployed and possibly broader society too). What might these scarring effects be and what is likely to be their longer-term impact?

1.    : How might Cody Sexton’s decision differ if he based it on the utilitarian approach versus individualism approach versus practical approach to ethical decision making? Which approach does he appear to be using?

Why might a company choose not to use revaluation accounting?

Glass is classified as a ceramic material; yet glass is different from the traditional and new ceramics. What is the difference?

Behavioural issues associated with reward systems Fitness Forever International sells personal exercise equipment both within Australia and internationally. One division of Fitness Forever produces a product called Absaway, which is a specialised piece of equipment that focuses on exercising the abdominal region. The Absaway is manufactured with both internally sourced and purchased-in components.   The divisional performance report shows that the division made sales of 20 000 units at a price of $100 each. The variable costs were $60 per unit. Fixed costs were $200 000.   Fitness Forever calculates mangers’ bonuses based on profit. The manager of the Absaway division wants to maximize his bonus. To ensure that the divisional margin is reported at its highest possible level, the manager has been producing more units of the Absaway than required based on sales forecasts. Producing more units has the effect of increasing the ending inventory, which, in the income statement, reduces the cost of goods sold (also called cost of sales). This, in turn increases the divisional margin. The extra production of Absaway units has to be stored, thus increasing the need for warehouse space.   Required (a) Comment on the strategy of the manager to produce more units of product than are needed in order boost divisional profits. Is it in the best interest of Fitness Forever? (b) You have been asked to comment on the current reward system at the next board meeting and make recommendations about any changes you think are necessary. What will you say? (LO3, 4 and 5)