Question & Answer

Explain how you would derive a figure for households’ disposable income if you were starting from a figure for GDP?

Compare the management of a closed-end fund with that of an open-end fund. Given the differences in the funds’ characteristics, explain why the management of liquidity is different in the open-end fund as compared with the closed-end fund. Assume that the funds are the same size and have the same goal to invest in stocks and to earn a very high return. Which portfolio manager do you think will achieve a larger increase in the fund’s net asset value? Explain. (LO1, LO5)

Accounting information provides useful information about business transactions and events. Those who provide and use financial reports must often select and evaluate accounting alternatives. The FASB statement on qualitative characteristics of accounting information examines the characteristics of accounting information that make it useful for decision-making. It also points out that various limitations inherent in the measurement and reporting process may necessitate trade-offs or sacrifices among the characteristics of useful information. Instructions (a) Describe briefly the following characteristics of useful accounting information. (1) Relevance. (4) Comparability. (2) Faithful representation. (5) Consistency. (3) Understandability. (b) For each of the following pairs of information characteristics, give an example of a situation in which one of the characteristics may be sacrificed in return for a gain in the other. (1) Relevance and faithful representation. (3) Comparability and consistency. (2) Relevance and consistency. (4) Relevance and understandability. (c) What criterion should be used to evaluate trade-offs between information characteristics?

Sustainability disclosures; management accounting tools Search the newspapers/web to find examples of Australian companies disclosing their sustainability practices using management accounting information or tools such as the balanced scorecard. Provide a report on your findings.             (LO 1 and 4)

Using the appropriate interest table, compute the present values of the following periodic amounts due at the end of the designated periods. (a) $30,000 receivable at the end of each period for 8 periods compounded at 12%. (b) $30,000 payments to be made at the end of each period for 16 periods at 9%. (c) $30,000 payable at the end of the seventh, eighth, ninth, and tenth periods at 12%.

This year, Amy purchased $2,000 of equipment for use in her business. However, the machine was damaged in a traffic accident while Amy was transporting the equipment to her business. Note that because Amy did not place the equipment into service during the year, she does not claim any depreciation or cost recovery expense for the equipment.

Assume a financial institution has more rate-sensitive assets than rate-sensitive liabilities. Would it be more likely to be adversely affected by an increase or decrease in interest rates? Should it purchase or sell interest rate futures contracts in order to hedge its exposure? (LO2)

1.    : Why do some organizations seem to have a new CEO every two or three years, whereas others have top leaders who stay with the company for many years (e.g., Warren Buffett’s 50 years at Berkshire Hathaway)? What factors about the manager or about the company might account for this difference?

The U.S. Treasury attempted to resolve the credit crisis by establishing a plan to buy mortgage-backed securities held by financial institutions. Explain how the plan could improve the situation for MBS. (LO5)

An 8-in diameter grinding wheel, 1.0 in wide, is used in a surface grinding job performed on a flat piece of heat-treated 4340 steel. The wheel rotates to achieve a surface speed of 5000 ft/min, with a depth of cut (infeed) = 0.002 in per pass and a crossfeed = 0.15 in. The reciprocating speed of the work is 20 ft/min, and the operation is performed dry. (a) What is the length of contact between the wheel and the work? (b) What is the volume rate of metal removed? (c) If there are 300 active grits/in2 of wheel surface, estimate the number of chips formed per unit time. (d) What is the average volume per chip? (e) If the tangential cutting force on the workpiece = 7.3 lbs, what is the specific energy calculated for this job?

What are the similarities and differences between the tax benefit rule and depreciation recapture?

1. If the number unemployed exceeded the total annual outflow, what could we conclude about the average duration of unemployment? 2. Make a list of the various inflows to and outflows from employment from and to (a) unemployment; (b) outside the workforce.

Describe the advantages and disadvantages of equity rewards.             (LO3)

What are the tax practitioner’s standards to avoid a penalty for recommending a tax return position?

A U-groove weld is used to butt weld 2 pieces of 7.0-mm-thick titanium plate. The U-groove is prepared using a milling cutter so the radius of the groove is 3.0 mm. During welding, the penetration of the weld causes an additional 1.5 mm of material to be melted. The final crosssectional area of the weld can be approximated by a semicircle with a radius of 4.5 mm. The length of the weld is 200 mm. The melting factor of the setup is 0.57 and the heat transfer factor is 0.86. (a) What is the quantity of heat (in Joules) required to melt the volume of metal in this weld (filler metal plus base metal)? Assume the resulting top surface of the weld bead is flush with the top surface of the plates. (b) What is the required heat generated at the welding source?

1. Why may inflows of short-term deposits create a problem? 2. Where would interest payments on short-term foreign deposits in UK banks be entered on the balance of payments account?

With reference to the above, provide an assessment of the UK balance of payments in 2020.

Fixed, variable, and mixed costs Bridges and Roads is an entity engaged in road construction. Some selected items from its chart of accounts are listed below.   Required For each account, indicate whether the account represents a fixed, variable, or mixed cost for the operation of road construction activity. 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.]

Until the end of year 0, Magic Carpets (MC) was a C corporation with a calendar year-end.  At the beginning of year 1, it elected to be taxed as an S corporation.  MC uses the LIFO method to value its inventory.  At the end of year 0, under the LIFO method, its inventory of rugs was valued at $150,000. Under the FIFO method, the rugs would have been valued at $170,000.  How much LIFO recapture tax must MC pay, and what is the due date of the first payment under the following alternative scenarios?

Ethical Decision-Making — Wasted Soup83 While she was watching operations at a food processing plant, a consultant noticed a large amount of soup on the floor under a filling machine. An operator washed this soup away each day. When asked about the loss of soup, the production manager replied that no losses occurred. In this manager’s view, no problem existed because the production line operating costs were below budgeted costs. Later, a productivity team analysed the amount of soup wasted over a given time period. The team estimated the cost of the leak to be $750 000 a year. To correct the problem, the company installed a set of valves costing $50 000. The new valves eliminated the loss of soup.   Instead of measuring performance against expected budget levels, managers could compare actual profits to ideal profits that could be earned if operations were to run at their true potential. By focusing on the gap between ideal and actual profits, managers are encouraged to identify lost profit potential and to reconsider critical processes. Once gaps are identified, managers rank them according to their value to the organisation and correct them in priority order.   Required (a)     Is it an ethical problem when employees observe inefficiencies in the workplace, such as the loss of soup in this case? Why? (b)     Why is it common for employees to do nothing when they observe inefficiencies? Compare the responsibility of operation workers to the responsibility of the operating manager with respect to identifying and correcting inefficiencies. In what ways are the responsibilities the same? In what ways are they different? (c)     Is it ethical for employees to ignore inefficiencies? Why? What values did you use to arrive at the conclusion? (d)     People do not always seek to achieve their best performance. For example, students sometimes apply minimum effort to achieve a targeted grade. What does it mean for individuals to seek continuous improvement? (LO2)

What is the definition of fair value?

1.       : Discuss some of the potential positive and negative aspects of sending digital nudges to managers via e-mail or text messages. What do you see as the most important ways for managers to use this technology?

If a retailer buys a product from a wholesaler for £80 and sells it to a consumer for £100, then the £20 of value that has been added will go partly in wages, partly in rent and partly in profits. Thus £20 of income has been generated at the retail stage. But the good actually contributes a total of £100 to GDP. Where then is the remaining £80 worth of income recorded?

What policy prescriptions could be recommended for an economy experiencing a balance sheet recession?

1.      : Ignore the test. Cheryl has proved herself via work experience and deserves the job.