Question & Answer

1.    : What personal skills do you need to keep your financial backers feeling confident in your new business? Which skills are most useful when you’re dealing with more informal financial sources, such as family and friends, versus receiving funds from stockholders, a bank, or a venture capital firm? Would these considerations affect your financing strategy?

Why is it reasonable to believe that microsystem products would be available at lower costs than products of larger, more conventional size?

Charles Austin of the controller’s office of Thompson Corporation was given the assignment of determining the basic and diluted earnings per share values for the year ending December 31, 2015. Austin has compiled the information listed below. 1. The company is authorized to issue 8,000,000 shares of $10 par value common stock. As of December 31, 2014, 2,000,000 shares had been issued and were outstanding. 2. The per share market prices of the common stock on selected dates were as follows. Price per Share July 1, 2014 $20.00 January 1, 2015 21.00 April 1, 2015 25.00 July 1, 2015 11.00 August 1, 2015 10.50 November 1, 2015 9.00 December 31, 2015 10.00 3. A total of 700,000 shares of an authorized 1,200,000 shares of convertible preferred stock had beenissued on July 1, 2014. The stock was issued at its par value of $25, and it has a cumulative dividendof $3 per share. The stock is convertible into common stock at the rate of one share of convertible preferred for one share of common. The rate of conversion is to be automatically adjusted for stock splits and stock dividends. Dividends are paid quarterly on September 30, December 31, March 31, and June 30. 4. Thompson Corporation is subject to a 40% income tax rate. 5. The after-tax net income for the year ended December 31, 2015, was $11,550,000. The following specific activities took place during 2015. 1. January 1—A 5% common stock dividend was issued. The dividend had been declared on December 1, 2014, to all stockholders of record on December 29, 2014. 2. April 1—A total of 400,000 shares of the $3 convertible preferred stock was converted into common stock. The company issued new common stock and retired the preferred stock. This was the only conversion of the preferred stock during 2015. 3. July 1—A 2-for-1 split of the common stock became effective on this date. The board of directors had authorized the split on June 1. 4. August 1—A total of 300,000 shares of common stock were issued to acquire a factory building. 5. November 1—A total of 24,000 shares of common stock were purchased on the open market at $9 per share. These shares were to be held as treasury stock and were still in the treasury as of December 31, 2015. 6. Common stock cash dividends—Cash dividends to common stockholders were declared and paid as follows. April 15—$0.30 per share October 15—$0.20 per share 7. Preferred stock cash dividends—Cash dividends to preferred stockholders were declared and paid as scheduled. Instructions (a) Determine the number of shares used to compute basic earnings per share for the year ended December 31, 2015. (b) Determine the number of shares used to compute diluted earnings per share for the year ended December 31, 2015. (c) Compute the adjusted net income to be used as the numerator in the basic earnings per share calculation for the year ended December 31, 2015.

Does this mean that the value of manufacturing output in 2007 was 1.3 per cent higher than 2018 in money terms?

A manual assembly line is being designed for a product with annual demand = 100,000 units. The line will operate 50 wks/year, 5 shifts/wk, and 7.5 hr/shift. Work units will be attached to a continuously moving conveyor. Work content time = 42.0 min. Assume line efficiency = 0.97, balancing efficiency = 0.92, and repositioning time = 6 sec. Determine (a) hourly production rate to meet demand, (b) number of workers required, and (c) the number of workstations required if the estimated manning level is 1.4.

How do speculators use call options? Describe the conditions under which their strategy would backfire. What is the maximum loss that could occur for a purchaser of a call option? (LO3)

Generally, a selling partner’s capital account carries over to the purchaser of the partnership interest. Under what circumstances will this not be the case?

Melindainvests $200,000 in a City of Heflin bond that pays 6 percent interest.  Alternatively, Melindacould have invested the $200,000 in a bond recently issued by Surething Inc. that pays 8 percent interest with similar risk and othernontax characteristics to the City of Heflin bond.  Assume Melinda’s marginal tax rate is 25 percent.

Jurassic Park Co. prepares monthly financial statements from a worksheet. Selected portions of the January worksheet showed the following data.   During February, no events occurred that affected these accounts. But at the end of February, the following information was available. (a) Supplies on hand $715 (b) Monthly depreciation $257 (c) Accrued interest $ 50

Hiram Co. uses the equity method to account for investments in common stock. What accounting should be made for dividends received from these investments subsequent to the date of investment?

Mel and Cindy Gibson’s 12-year-old daughter Rachel was abducted on her way home from school on March 15, 2024. Police reports indicated that a stranger had physically dragged Rachel into a waiting car and sped away. Everyone hoped that the kidnapper and Rachel would be located quickly. However, as of the end of the year, Rachel was still missing. The police were still pursuing several promising leads and had every reason to believe that Rachel was still alive. In 2025, Rachel was returned safely to her parents. a. Are the Gibsons allowed to claim Rachel as a dependent in 2024 even though she only lived in the Gibson’s home for two-and-one-half months? Explain and cite your authority.

High-speed machining (HSM) is being considered to produce the aluminum part in Problem 22.15. All cutting conditions remain the same except for the cutting speed and the type of insert used in the cutter. Assume the cutting speed will be at the limit given in Table 22.1. Determine (a) the new time to machine the part and (b) the new metal removal rate. (c) Is this part a good candidate for high-speed machining? Explain.

Describe structural-foam molding.

Dan Aykroyd Corp. was a 30% owner of Steve Martin Company, holding 210,000 shares of Martin’s common stock on December 31, 2013. The investment account had the following entries. Investment in Martin 1/1/12 Cost $3,180,000 12/6/12 Dividend received $150,000 12/31/12 Share of income 390,000 12/5/13 Dividend received 240,000 12/31/13 Share of income 510,000 On January 2, 2014, Aykroyd sold 126,000 shares of Martin for $3,440,000, thereby losing its significant influence. During the year 2014, Martin experienced the following results of operations and paid the following dividends to Aykroyd. Martin Dividends Paid Income (Loss) to Aykroyd 2014 $300,000 $50,400 At December 31, 2014, the fair value of Martin shares held by Aykroyd is $1,570,000. This is the first reporting date since the January 2 sale. Instructions (a) What effect does the January 2, 2014, transaction have upon Aykroyd’s accounting treatment for its investment in Martin? (b) Compute the carrying amount of the investment in Martin as of December 31, 2014 (prior to any fair value adjustment). (c) Prepare the adjusting entry on December 31, 2014, applying the fair value method to Aykroyd’s long-term investment in Martin Company securities.

Why does the accounting profession make a distinction between internally created intangibles and purchased intangibles?

Santo Design Agency was founded by Thomas Grant in January 2008. Presented below is the adjusted trial balance as of December 31, 2014.   Instructions (a) Prepare an income statement and a statement of retained earnings for the year ending December 31, 2014, and an unclassified balance sheet at December 31. (b) Answer the following questions. (1) If the note has been outstanding 6 months, what is the annual interest rate on that note? (2) If the company paid $17,500 in salaries in 2014, what was the balance in Salaries and Wages Payable on December 31, 2013?

Determine the amount of the late filing and late payment penalties that apply for the following taxpayers.

George (age 42 at year-end) has been contributing to a traditional IRA for years (all deductible contributions), and his IRA is now worth $25,000. He is planning on converting the entire balance to a Roth IRA account. George’s marginal tax rate is 24 percent. a. What are the tax consequences to George if he takes $25,000 out of the traditional IRA and contributes the entire amount into a Roth IRA one week after receiving the distribution? b. What are the tax consequences to George if he takes $25,000 out of the traditional IRA, pays the taxes due from the traditional IRA distribution, and contributes the what’s left from the distribution to the Roth IRA one week after receiving the distribution? c. What are the tax consequences to George if he takes $25,000 out of the traditional IRA, keeps $10,000 to pay taxes and to make a down payment on a new car, and contributes what’s left from the distribution to the Roth IRA one week after receiving the distribution?

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

Jay Hawk, maintenance supervisor for Boston Insurance Co., has purchased a riding lawnmower and accessories to be used in maintaining the grounds around corporate headquarters. He has sent the following information to the accounting department. Cost of mower and Date purchased 7/1/14 accessories $4,000 Monthly salary of Estimated useful life 5 yrs groundskeeper $1,100 Salvage value $0 Estimated annual fuel cost $150 Compute the amount of depreciation expense (related to the mower and accessories) that should be reported on Boston’s December 31, 2014, income statement. Assume straight-line depreciation.

A sand core located inside a mold cavity has a volume of 157.0 in3 . It is used in the casting of a cast iron pump housing. Determine the buoyancy force that will tend to lift the core during pouring.

Brooks Corp. is a medium-sized corporation specializing in quarrying stone for building construction. The company has long dominated the market, at one time achieving a 70% market penetration. During prosperous years, the company’s profits, coupled with a conservative dividend policy, resulted in funds available for outside investment. Over the years, Brooks has had a policy of investing idle cash in equity securities. In particular, Brooks has made periodic investments in the company’s principal supplier, Norton Industries. Although the firm currently owns 12% of the outstanding common stock of Norton Industries, Brooks does not have significant influence over the operations of Norton Industries. Cheryl Thomas has recently joined Brooks as assistant controller, and her first assignment is to prepare the 2014 year-end adjusting entries for the accounts that are valued by the “fair value” rule for financial reporting purposes. Thomas has gathered the following information about Brooks’ pertinent accounts. 1. Brooks has trading securities related to Delaney Motors and Patrick Electric. During this fiscal year, Brooks purchased 100,000 shares of Delaney Motors for $1,400,000; these shares currently have a fair value of $1,600,000. Brooks’ investment in Patrick Electric has not been profitable; the company acquired 50,000 shares of Patrick in April 2014 at $20 per share, a purchase that currently has a value of $720,000. 2. Prior to 2014, Brooks invested $22,500,000 in Norton Industries and has not changed its holdings this year. This investment in Norton Industries was valued at $21,500,000 on December 31, 2013. Brooks’ 12% ownership of Norton Industries has a current fair value of $22,225,000. Instructions (a) Prepare the appropriate adjusting entries for Brooks as of December 31, 2014, to reflect the application of the “fair value” rule for both classes of securities described above. (b) For both classes of securities presented above, describe how the results of the valuation adjustments made in (a) would be reflected in the body of and notes to Brooks’ 2014 financial statements. (c) Prepare the entries for the Norton investment, assuming that Brooks owns 25% of Norton’s shares. Norton reported income of $500,000 in 2014 and paid cash dividends of $100,000.

Maher Inc. reported income from continuing operations before taxes during 2014 of $790,000. Additional transactions occurring in 2014 but not considered in the $790,000 are as follows. 1. The corporation experienced an uninsured flood loss (extraordinary) in the amount of $90,000 during the year. The tax rate on this item is 46%. 2. At the beginning of 2012, the corporation purchased a machine for $54,000 (salvage value of $9,000) that had a useful life of 6 years. The bookkeeper used straight-line depreciation for 2012, 2013, and 2014 but failed to deduct the salvage value in computing the depreciation base. 3. Sale of securities held as a part of its portfolio resulted in a loss of $57,000 (pretax). 4. When its president died, the corporation realized $150,000 from an insurance policy. The cash surrender value of this policy had been carried on the books as an investment in the amount of $46,000 (the gain is nontaxable). 5. The corporation disposed of its recreational division at a loss of $115,000 before taxes. Assume that this transaction meets the criteria for discontinued operations. 6. The corporation decided to change its method of inventory pricing from average-cost to the FIFO method. The effect of this change on prior years is to increase 2012 income by $60,000 and decrease 2013 income by $20,000 before taxes. The FIFO method has been used for 2014. The tax rate on these items is 40%. Instructions Prepare an income statement for the year 2014 starting with income from continuing operations before taxes. Compute earnings per share as it should be shown on the face of the income statement. Common shares outstanding for the year are 120,000 shares. (Assume a tax rate of 30% on all items, unless indicated otherwise.)

Why may an expansion of the money supply have a relatively small effect on national income? Why may any effect be hard to predict?

A part is designed to be hot forged in an impression die. The projected area of the part, including flash, is 16 in2 . After trimming, the part has a projected area of 10 in2 . Part geometry is complex. As heated the work material yields at 10,000 lb/in2 , and has no tendency to strain harden. At room temperature, the material yields at 25,000 lb/in2 Determine the maximum force required to perform the forging operation