Question & Answer

Who regulates credit unions? What are the regulators’ powers? Where do CUs obtain deposit insurance? (LO7)

There are 21 correct answers in the following multiple choice questions (some questions have multiple answers that are correct). To attain a perfect score on the quiz, all correct answers must be given. Each correct answer is worth 1 point. Each omitted answer or wrong answer reduces the score by 1 point, and each additional answer beyond the correct number of answers reduces the score by 1 point. Percentage score on the quiz is based on the total number of correct answers. 20.1 Most sheet metalworking operations are performed as which one of the following: (a) cold working, (b) hot working, or (c) warm working? 20.2 In a sheet-metal-cutting operation used to produce a flat part with a hole in the center, the part itself is called a blank, and the scrap piece that was cut out to make the hole is called a slug: (a) true or (b) false? 20.3 As sheet-metal stock hardness increases in a blanking operation, the clearance between punch and die should be (a) decreased, (b) increased, or (c) remain the same? 20.4 A circular sheet-metal slug produced in a hole punching operation will have the same diameter as (a) the die opening or (b) the punch? 20.5 The cutting force in a sheet-metal blanking operation depends on which mechanical property of the metal (one correct answer): (a) compressive strength, (b) modulus of elasticity, (c) shear strength, (d) strain rate, (e) tensile strength, or (f) yield strength? 20.6 Which of the following descriptions applies to a V-bending operation as compared to an edgebending operation (two best answers): (a) costly tooling, (b) inexpensive tooling, (c) limited to 90° bends or less, (d) used for high production, (e) used for low production, and (f) uses a pressure pad to hold down the sheet metal? 20.7 Sheet-metal bending involves which of the following stresses and strains (two correct answers): (a) compressive, (b) shear, and (c) tensile? 20.8 Which one of the following is the best definition of bend allowance: (a) amount by which the die is larger than the punch, (b) amount of elastic recovery experienced by the metal after bending, (c) safety factor used in calculating bending force, or (d) length before bending of the straight sheetmetal section to be bent? 20.9 Springback in a sheet-metal-bending operation is the result of which one of the following: (a) elastic modulus of the metal, (b) elastic recovery of the metal, (c) overbending, (d) overstraining, or (e) yield strength of the metal? 20.10 Which of the following are variations of sheet-metal-bending operations (two best answers): (a) coining, (b) flanging, (c) hemming, (d) ironing, (e) notching, (f) shear spinning, (g) trimming, and (h) tube bending? 20.10 Which of the following are variations of sheet-metal-bending operations (two best answers): (a) coining, (b) flanging, (c) hemming, (d) ironing, (e) notching, (f) shear spinning, (g) trimming, and (h) tube bending? 20.12 The holding force in drawing is most likely to be (a) greater than, (b) equal to, or (c) less than the maximum drawing force? 20.13 Which one of the following stamping dies is the most complicated: (a) blanking die, (b) combination die, (c) compound die, (d) edge-bending die, (e) progressive die, or (f) V-bending die? 20.14 Which one of the following press types is usually associated with the highest production rates in sheet-metal-stamping operations: (a) adjustable bed, (b) open back inclinable, (c) press brake, (d) solid gap, or (e) straight-sided? 20.15 Which of the following processes are classified as high-energy-rate forming processes (two best answers): (a) electrochemical machining, (b) electromagnetic forming, (c) electron beam cutting, (d) explosive forming, (e) Guerin process, (f) hydroforming, (g) redrawing, and (h) shear spinning

Explain why the failure of Lehman Brothers caused prices on credit default swap contracts to increase. (LO7)

A 7-station transfer line has been observed over a 40-hour period. The process times at each station are as follows: station 1, 0.80 min; station 2, 1.10 min; station 3, 1.15 min; station 4, 0.95 min; station 5, 1.06 min; station 6, 0.92 min; and station 7, 0.80 min. The transfer time between stations = 6 sec. The number of downtime occurrences = 110, and hours of downtime = 14.5 hours. Determine (a) the number of parts produced during the week, (b) the average actual production rate in parts/hour, and (c) the line efficiency. (d) If the balancing efficiency were computed for this line, what would its value be?

: What is the virtual network approach to structure? Is the use of authority different compared to other forms of departmentalization? Explain.

Balanced scorecard measures for four perspectives Part of the process for developing a balanced scorecard is to identify one or more measures for each perspective.   Required Categorise each of the following potential balanced scorecard measures according to the following perspectives:   F     Financial C    Customer I      Internal business process L     Learning and growth (a)       Percentage of customer orders delivered on time (b)       Ratio of research and development cost to number of new products developed (c)        Economic value added (EVA) (d)       Number of hours of employee training (e)        Direct labour price variance (f)        Market share (g)       Percentage of customer orders delivered without error (h)       Days in accounts receivables (i)        Throughput time (j)        Direct materials efficiency variance (k)       Asset turnover (l)        Employee retention rate (m)      Percentage of bad debts collected (n)       Customer satisfaction ratings (o)       Number of degrees and certificates held per employee or department (p)       Percentage of purchase orders that are error free

Evaluate the following statement: “When dividends and long-term capital gains are taxed at the same rate, the overall tax rate on corporate income is the same whether the corporation distributes its after-tax earnings as a dividend or whether it reinvests the after-tax earnings to increase the value of the corporation.”

What is meant by solvency? What information in the balance sheet can be used to assess a company’s solvency?

How can the use of absorption costing lead managers to make dysfunctional decisions for the entity?

Sue’s Construction is in its fourth year of business. Sue performs long-term construction projects and accounts for them using the completed-contract method. Sue built an apartment building at a price of $1,100,000. The costs and billings for this contract for the first three years are as follows. 2014 2015 2016 Costs incurred to date $240,000 $600,000 $ 790,000 Estimated costs yet to be incurred 560,000 200,000 –0– Customer billings to date 150,000 410,000 1,100,000 Collection of billings to date 120,000 340,000 950,000 Sue has contacted you, a certified public accountant, about the following concern. She would like to attract some investors, but she believes that in order to recognize revenue she must first “deliver” the product. Therefore, on her balance sheet, she did not recognize any gross profits from the above contract until 2016, when she recognized the entire $310,000. That looked good for 2016, but the preceding years looked grim by comparison. She wants to know about an alternative to this completed-contract revenue recognition. Instructions Draft a letter to Sue, telling her about the percentage-of-completion method of recognizing revenue. Compare it to the completed-contract method. Explain the idea behind the percentage-of-completion method. In addition, illustrate how much revenue she could have recognized in 2014, 2015, and 2016 if she had used this method.

Explain how multiple-deliverable arrangements are measured and reported.

Write a short essay on the future of finance company operations. Should finance companies be merged into the banking industry, or should they remain distinctly different from commercial banks?

SFAC No. 8 identifies the qualitative characteristics that make accounting information useful. Presented below are a number of questions related to these qualitative characteristics and underlying constraint. (a) What is the quality of information that enables users to confirm or correct prior expectations? (b) Identify the pervasive constraint developed in the conceptual framework. (c) The chairman of the SEC at one time noted, “If it becomes accepted or expected that accounting principles are determined or modified in order to secure purposes other than economic measurement, we assume a grave risk that confidence in the credibility of our financial information systemwill be undermined.” Which qualitative characteristic of accounting information should ensure that such a situation will not occur? (Do not use faithful representation.) (d) Muruyama Corp. switches from FIFO to average-cost to FIFO over a 2-year period. Which qualitative characteristic of accounting information is not followed? (e) Assume that the profession permits the savings and loan industry to defer losses on investments it sells because immediate recognition of the loss may have adverse economic consequences on the industry. Which qualitative characteristic of accounting information is not followed? (Do not use relevance or faithful representation.) (f) What are the two fundamental qualities that make accounting information useful for decisionmaking? (g) Watteau Inc. does not issue its first-quarter report until after the second quarter’s results are reported. Which qualitative characteristic of accounting is not followed? (Do not use relevance.) (h) Predictive value is an ingredient of which of the two fundamental qualities that make accounting information useful for decision-making purposes? (i) Duggan, Inc. is the only company in its industry to depreciate its plant assets on a straight-line basis. Which qualitative characteristic of accounting information may not be followed? (j) Roddick Company has attempted to determine the replacement cost of its inventory. Three different appraisers arrive at substantially different amounts for this value. The president, nevertheless, decides to report the middle value for external reporting purposes. Which qualitative characteristic of information is lacking in these data? (Do not use relevance or faithful representation.)

One common argument for imposing so-called sin taxes is the social goal of reducing demand for such products.  Using cigarettes as an example, is there a segment of the population that might be sensitive to price and for whom high taxes might discourage purchases?

Will underapplied and overapplied overhead arise under both actual and normal costing? Explain your answer.

Why are government bonds which still have 11 months to run regarded as liquid, whereas overdrafts granted for a few weeks are not?

Gottschalk Company sponsors a defined benefit plan for its 100 employees. On January 1, 2014, the company’s actuary provided the following information. Accumulated other comprehensive loss (PSC) $150,000 Pension plan assets (fair value and market-related asset value) 200,000 Accumulated benefi t obligation 260,000 Projected benefi t obligation 380,000 The average remaining service period for the participating employees is 10 years. All employees are expected to receive benefits under the plan. On December 31, 2014, the actuary calculated that the present value of future benefits earned for employee services rendered in the current year amounted to $52,000; the projected benefit obligation was $490,000; fair value of pension assets was $276,000; the accumulated benefit obligation amounted to $365,000. The expected return on plan assets and the discount rate on the projected benefit obligation were both 10%. The actual return on plan assets is $11,000. The company’s current year’s contribution to the pension plan amounted to $65,000. No benefits were paid during the year. Instructions (a) Determine the components of pension expense that the company would recognize in 2014. (With only one year involved, you need not prepare a worksheet.) (b) Prepare the journal entry to record the pension expense and the company’s funding of the pension plan in 2014. (c) Compute the amount of the 2014 increase/decrease in gains or losses and the amount to be amortized in 2014 and 2015. (d) Indicate the pension amounts reported in the financial statement as of December 31, 2014.

Maria Alvarez is investing $300,000 in a fund that earns 8% interest compounded annually. What equal amounts can Maria withdraw at the end of each of the next 20 years?

For what reasons may the natural rate of unemployment increase?

Agustina, Bobby, and Claudia are equal owners in Lafter, an S corporation that was a C corporation several years ago. While Agustina and Bobby actively participate in running the company, Claudia has a separate day job and is a passive owner. Consider the following information for 2024:    • As of January 1, 2024, Agustina, Bobby, and Claudia each have a basis in Lafter stock of $15,000 and a debt basis of $0.  On January 1, the stock basis is also the at-risk amount for each shareholder. • Bobby and Claudia also are passive owners in Aggressive LLC, which allocated business income of $14,000 to each of them in 2024. Neither has any other source of passive income (besides Lafter, for Claudia).  • On March 31, 2024, Agustina lends $5,000 of her own money to Lafter. • Anticipating the need for basis to deduct a loss, on April 4, 2024, Bobby takes out a $10,000 loan to make a $10,000 capital contribution to Lafter. Bobby uses his automobile ($12,000 fair market value) as the sole collateral for his loan (nonrecourse).  • Lafter has an accumulated adjustments account balance of $45,000 as of January 1, 2024. • Lafter has C corporation earnings and profits of $15,000 as of January 1, 2024. • During 2024, Lafter reports a business loss of $75,000, computed as follows: Sales revenue $90,000 Cost of goods sold (85,000) Salary to Agustina (40,000) Salary to Bobby (40,000) Business (loss)($75,000) • Lafter also reported $12,000 of tax-exempt interest income.     a. What amount of Lafter’s 2024 business loss of $75,000 are Agustina, Bobby, and Claudia allowed to deduct on their individual tax returns?  What are each owner’s stock basis and debt basis (if applicable) and each owner’s at-risk amount with respect to the investment in Lafter at the end of 2024?

Limited Brands recently repurchased 68,965,000 of its shares, paying $29 per share. The total number of shares outstanding before the redemption was 473,223,066. The total number of shares outstanding after the redemption was 404,258,066. Assume your client owned 20,000 shares of stock in Limited Brands. What is the minimum number of shares your client must tender to receive exchange treatment under the “substantially disproportionate with respect to the shareholder” change-in-ownership rules?

Presented below are a number of business transactions that occurred during the current year for Gonzales, Inc. Instructions In each of the situations, discuss the appropriateness of the journal entries in terms of generally accepted accounting principles. (a) The president of Gonzales, Inc. used his expense account to purchase a new Suburban solely for personal use. The following journal entry was made. Miscellaneous Expense 29,000 Cash 29,000 (b) Merchandise inventory that cost $620,000 is reported on the balance sheet at $690,000, the expected selling price less estimated selling costs. The following entry was made to record this increase in value. Inventory 70,000 Sales Revenue 70,000 (c) The company is being sued for $500,000 by a customer who claims damages for personal injury apparently caused by a defective product. Company attorneys feel extremely confident that the company will have no liability for damages resulting from the situation. Nevertheless, the company decides to make the following entry. Loss from Lawsuit 500,000 Liability for Lawsuit 500,000 (d) Because the general level of prices increased during the current year, Gonzales, Inc. determined that there was a $16,000 understatement of depreciation expense on its equipment and decided to record it in its accounts. The following entry was made. Depreciation Expense 16,000 Accumulated Depreciation—Equipment 16,000 (e) Gonzales, Inc. has been concerned about whether intangible assets could generate cash in case of liquidation. As a consequence, goodwill arising from a purchase transaction during the current year and recorded at $800,000 was written off as follows. Retained Earnings 800,000 Goodwill 800,000 (f) Because of a “fire sale,” equipment obviously worth $200,000 was acquired at a cost of $155,000. The following entry was made. Equipment 200,000 Cash 155,000 Sales Revenue 45,000

Listed below are the transactions of Yasunari Kawabata, D.D.S., for the month of September. Sept. 1 Kawabata begins practice as a dentist and invests $20,000 cash. 2 Purchases dental equipment on account from Green Jacket Co. for $17,280. 4 Pays rent for office space, $680 for the month. 4 Employs a receptionist, Michael Bradley. 5 Purchases dental supplies for cash, $942. 8 Receives cash of $1,690 from patients for services performed. 10 Pays miscellaneous office expenses, $430. 14 Bills patients $5,820 for services performed. 18 Pays Green Jacket Co. on account, $3,600. 19 Withdraws $3,000 cash from the business for personal use. 20 Receives $980 from patients on account. 25 Bills patients $2,110 for services performed. 30 Pays the following expenses in cash: Salaries and wages $1,800; miscellaneous office expenses $85. 30 Dental supplies used during September, $330. Instructions (a) Enter the transactions shown above in appropriate general ledger accounts (use T-accounts). Use the following ledger accounts: Cash, Accounts Receivable, Supplies, Equipment, Accumulated Depreciation—Equipment, Accounts Payable, Owner’s Capital, Service Revenue, Rent Expense, Office Expense, Salaries and Wages Expense, Supplies Expense, Depreciation Expense, and Income Summary. Allow 10 lines for the Cash and Income Summary accounts, and 5 lines for each of the other accounts needed. Record depreciation using a 5-year life on the equipment, the straight-line method, and no salvage value. Do not use a drawing account. (b) Prepare a trial balance. (c) Prepare an income statement, a statement of owner’s equity, and an unclassified balance sheet. (d) Close the ledger. (e) Prepare a post-closing trial balance.

Roxanne Carter Corporation reported the following for 2014: net sales $1,200,000; cost of goods sold $750,000; selling and administrative expenses $320,000; and an unrealized holding gain on available-for-sale securities $18,000. Instructions Prepare a statement of comprehensive income, using (a) the one statement format, and (b) the two statement format. (Ignore income taxes and earnings per share.)

Angela Lansbury Company deposits all receipts and makes all payments by check. The following information is available from the cash records.   Instructions (a) Prepare a bank reconciliation going from balance per bank and balance per book to correct cash balance. (b) Prepare the general journal entry or entries to correct the Cash account.