Question & Answer

The part shown in Figure P16.13 is to be pressed of iron powders using a compaction pressure of 75,000 lb/in2 . Dimensions are inches. Determine (a) the most appropriate pressing direction, (b) the required press tonnage to perform this operation, and (c) the final weight of the part if the porosity is 10%. Assume shrinkage during sintering can be neglected.

reported the following data in its annual report. Feb. 27, Feb. 26, Feb. 25, 2010 2011 2012 Total revenues $40,597 $37,534 $36,100 Cost of sales (using LIFO) 31,444 29,124 28,010 Year-end inventories using FIFO 2,606 2,552 2,492 Year-end inventories using LIFO 2,342 2,270 2,150 (a) Compute SUPERVALU’s inventory turnovers for 2011 and 2012, using: (1) Cost of sales and LIFO inventory. (2) Cost of sales and FIFO inventory. (b) Some firms calculate inventory turnover using sales rather than cost of goods sold in the numerator. Calculate SUPERVALU’s 2011 and 2012 turnover, using: (1) Sales and LIFO inventory. (2) Sales and FIFO inventory. (c) Describe the method that SUPERVALU’s appears to use. (d) State which method you would choose to evaluate SUPERVALU’s performance. Justify your choice.

] Paul Vote purchased the following assets this year (ignore §179 expensing and bonus depreciation when answering the questions below): Asset Purchase Date Basis Machinery May 12 $23,500  Computers August 13 $20,000  Warehouse December 13 $180,000  a. What is Paul’s allowable MACRS depreciation for the property? b. What is Paul’s allowable alternative minimum tax (AMT) depreciation for the property? You will need to find the AMT depreciation tables to compute the depreciation.

What are the differences between primary, secondary, and tertiary industries? Give an example of each category.

Presented below is selected information for Alatorre Company. 1. Alatorre purchased a patent from Vania Co. for $1,000,000 on January 1, 2012. The patent is being amortized over its remaining legal life of 10 years, expiring on January 1, 2022. During 2014, Alatorre determined that the economic benefits of the patent would not last longer than 6 years from the date of acquisition. What amount should be reported in the balance sheet for the patent, net of accumulated amortization, at December 31, 2014? 2. Alatorre bought a franchise from Alexander Co. on January 1, 2013, for $400,000. The carrying amount of the franchise on Alexander’s books on January 1, 2013, was $500,000. The franchise agreement had an estimated useful life of 30 years. Because Alatorre must enter a competitive bidding at the end of 2015, it is unlikely that the franchise will be retained beyond 2022. What amountshould be amortized for the year ended December 31, 2014? 3. On January 1, 2014, Alatorre incurred organization costs of $275,000. What amount of organization expense should be reported in 2014? 4. Alatorre purchased the license for distribution of a popular consumer product on January 1, 2014, for $150,000. It is expected that this product will generate cash flows for an indefinite period of time. The license has an initial term of 5 years but by paying a nominal fee, Alatorre can renew the license indefinitely for successive 5-year terms. What amount should be amortized for the year ended December 31, 2014? Instructions Answer the questions asked about each of the factual situations.

Recently, a group of university students decided to incorporate for the purposes of selling a process to recycle the waste product from manufacturing cheese. Some of the initial costs involved were legal fees and office expenses incurred in starting the business, state incorporation fees, and stamp taxes. One student wishes to charge these costs against revenue in the current period. Another wishes to defer these costs and amortize them in the future. Which student is correct?

How does an “asset gain or loss” develop in pension accounting? How does a “liability gain or loss” develop in pension accounting?

1.      : Don’t require Rukman “connectors” to reveal their affiliation with the corporate word-of-mouth marketing campaign. They don’t have to recommend a product they don’t believe in.

Connie recently provided legal services to the Winterhaven LLC and received a 5 percent interest in the LLC as compensation. Winterhaven currently has $50,000 of accounts payable and no other liabilities. The current fair market value of Winterhaven’s capital is $200,000. a. If Connie receives a 5 percent capital interest only, how much income must she report, and what is her tax basis in the LLC interest? b. If Connie receives a 5 percent profits interest only, how much income must she report, and what is her tax basis in the LLC interest? c. If Connie receives a 5 percent capital and profits interest, how much income must she report, and what is her tax basis in the LLC interest?

What major types of items are reported in the retained earnings statement?

Tyrone recently read a regulation that Congress specifically requested the IRS to issue.  What type of regulation is this?  How does this regulation’s authoritative weight compare to other regulations?

The Kellys are planning for a retirement home. They estimate they will need $200,000 4 years from now to purchase this home. Assuming an interest rate of 10%, what amount must be deposited at the end of each of the 4 years to fund the home price? (Round to two decimal places.)

Chuck, a single taxpayer, earns $75,000 in taxable income and $10,000 in interest from an investment in City of Heflin bonds.  Using the U.S. tax rate schedule (see Appendix C), how much federal tax will he owe?  What is his average tax rate?  What is his effective tax rate?  What is his current marginal tax rate?

In what ways is a monopolistically competitive firm likely to be less efficient than one under perfect competition?

Discuss the appropriate treatment in the income statement for the following items: (a) Loss on discontinued operations. (b) Noncontrolling interest allocation. (c) Earnings per share. (d) Gain on sale of equipment.

How might we go about assessing whether quantitative easing actually worked?

1.       : Can intuition and evidence-based decision making coexist as valid approaches within an organization? How might managers combine their intuition with a rational, data-driven, evidence-based approach?

A steel collar is press fitted onto a steel shaft. The modulus of elasticity of steel is 30 x 106 lb/in2. The collar has an internal diameter of 2.498 in and the shaft has an outside diameter = 2.500 in. The outside diameter of the collar is 4.000 in. Determine the radial (interference) pressure on the assembly, and (b) the maximum effective stress in the collar at its inside diameter

Fixed, variable, and mixed costs Spencer and Church is a CPA entity engaged in local practice. Some selected items from its chart of accounts are listed here.   Required For each account, indicate whether the account represents a fixed, variable, or mixed cost for the operations of the local practice office. If mixed, indicate whether it is predominantly fixed or variable. Explain your answers.   (a) Staff wages (f) Office supplies (b) Clerical wages (g) Professional dues (c) Rent (h) Professinal subscriptions (d) Licences (i) Property taxes (e) Insurance (j) Advertising   (LO2)   [Note about problem complexity: These are difficult questions because students will need to first visualise the costs (with very little information) and then apply chapter concepts. The Step 2 questions (A, B, and F) are the ones requiring significant assumptions to generate an answer.]

Jimmy has fallen on hard times recently.  Last year he borrowed $250,000 and added an additional $50,000 of his own funds to purchase $300,000 of undeveloped real estate.  This year the value of the real estate dropped dramatically and Jimmy’s lender agreed to reduce the loan amount to $230,000.  For each of the following independent situations, indicate the amount Jimmy must include in gross income and explain your answer: a.       The real estate is worth $175,000 and Jimmy has no other assets or liabilities. b.       The real estate is worth $235,000 and Jimmy has no other assets or liabilities. c.       The real estate is worth $200,000 and Jimmy has $45,000 in other assets but no other liabilities.

Compare and contrast the recovery periods used by MACRS and those used under generally accepted accounting principles (GAAP).

Despite being a publicly traded company only since 1987, Northland Cranberries of Wisconsin Rapids, Wisconsin, is one of the world’s largest cranberry growers. During its short life as a publicly traded corporation, it has engaged in an aggressive growth strategy. As a consequence, the company has taken on significant amounts of both short-term and long-term debt. The following information is taken from recent annual reports of the company.   Instructions (a) Evaluate the company’s liquidity by calculating and analyzing working capital and the current ratio. (b) The discussion of the company’s liquidity, shown below, was provided by the company in the Management Discussion and Analysis section of the company’s annual report. Comment on whether you agree with management’s statements, and what might be done to remedy the situation.

Rex loves to work with his hands and is very good at making small figurines. Three years ago, Rex opened Bronze Age Miniatures (BAM) for business as a sole proprietorship. BAM produces miniature characters ranging from sci-fi characters (his favorite) to historical characters like George Washington (the most popular). Business has been going very well for him, and he has provided the following information relating to his business. Calculate the business taxable income for BAM assuming that BAM elects to account for their inventory of miniatures.  a) Rex received approval from the IRS to switch from the cash method of accounting to the accrual method of accounting effective January 1 of this year. At the end of last year, BAM reported accounts receivable that had not been included in income under the accrual method of $14,000 and accounts payable that had not been deducted under the accrual method of $5,000. b) In March, BAM sold 5,000 miniature historical figures to History R Us Inc. (HRU), a retailer of historical artifacts and figurines, for $75,000. c) HRU was so impressed with the figurines that it purchased in March that it wanted to contract with BAM to continue to produce the figurines for them for the next three years. HRU paid BAM $216,000 ($12 per figurine) on October 30 of this year to produce 500 figurines per month for 36 months beginning on November 1 of this year. BAM delivered 500 figurines on November 30 and again on December 30. Rex elects to use the deferral method to account for the transaction.  d) Though the sci-fi figurines were not quite as popular, BAM sold 400 figurines at a sci-fi convention in April. Rex accepted cash only and received $11,000 for these sales. e) In January, BAM determined that it would not be able to collect on $2,000 of its beginning-of-the-year receivables, so it wrote off $2,000 of specific receivables. This year BAM sold 100,000 other figurines on credit for $120,000. BAM estimates that it will be unable to collect 5 percent of the sales revenue from these sales, but it has not been able to specifically identify any accounts to write off.  f) Assume that BAM correctly determined that its cost of goods sold using an appropriate inventory method is $54,000 this year.  g) The sci-fi convention in April was held in Chicago, Illinois. Rex attended the convention because he felt it was a good opportunity to gain new customers and to get new ideas for figurines. He paid $350 round-trip airfare, $100 for entrance to the convention, $210 for lodging, $65 for cab fare, and $110 for meals during the trip. He was busy with business activities the entire trip. h) On August 1, BAM purchased a 12-month insurance policy that covers its business property for accidents and casualties through July 31 of next year. The policy cost BAM $3,600. i) BAM reported depreciation expense of $8,200 for this year. j) Rex had previously operated his business out of his garage, but in January he decided to rent a larger space. He entered into a lease agreement on February 1 and paid $14,400 ($1,200 per month) to possess the space for the next 12 months (February of this year through January of next year). k) Before he opened his doors for business, Rex spent $30,000 investigating and otherwise getting ready to do business. He expensed $5,000 immediately and is amortizing the remainder using the straight-line method over 180 months. l) In December, BAM agreed to a 12-month, $8,000 contract with Advertise-With-Us (AWU) to produce a radio ad campaign. BAM paid $3,000 up front (in December of this year), and AWU agreed that BAM would owe the remaining $5,000 only if BAM’s sales increased by 15 percent over the 9-month period after the contract was signed.  m) In November of this year, BAM paid $2,500 in business property taxes (based on asset values) covering the period December 1 through November 30 of next year. In November of last year, BAM paid $1,500 for business property taxes (based on asset values) covering the period December 1 of last year through November 30 of this year. BAM’s business income is $134,053 computed as gross income of $166,250 less deductible business expenses of $32,197 as follows:

How do banks resolve illiquidity problems? (LO2)

ELS, an S corporation, reported a business loss of $1,000,000. Ethan, ELS’s sole shareholder, is involved in ELS’s daily business activities, and he reports $1,200,000 of taxable income from sources other than ELS. What must you know in order to determine how much, if any, of the $1,000,000 loss Ethan may deduct in the current year? Explain.