Question & Answer

What is an ad valorem tax?  Name an example of this type of tax.

Which factors influence the shape of the yield curve? Describe how financial market participants use the yield curve. (LO3)

Identify the principal objective in just-in-time production.

Bedard Corporation reported net income of $300,000 in 2014 and had 200,000 shares of common stock outstanding throughout the year. Also outstanding all year were 45,000 options to purchase common stock at $10 per share. The average market price of the stock during the year was $15. Compute diluted earnings per share.

1. Why do the prices of fresh vegetables fall when they are in season? Could an individual farmer prevent the price falling? 2. If you were the manager of a supermarket, how would you set about deciding what prices to charge for food approaching its sell-by date? 3. Demand for downloaded music has grown rapidly, yet the prices of downloads have fallen. Why?

In general, what effect does an operating distribution have on the partnership?

Explain how the present value of an ordinary annuity interest table is converted to the present value of an annuity due interest table.

Who pays the second level of tax on a C corporation’s income? What is the tax rate applicable to the second level of tax, and when is it levied?

What is pocket milling?

What is the difference between engineering stress and true stress in a tensile test?

Billups, a physician and cash-method taxpayer, is new to the concept of tax planning and recently learned of the timing strategy. To implement the timing strategy, Billups plans to establish a new policy that allows all his clients to wait two years to pay their co-pays. Assume that Billups does not expect his marginal tax rates to change. What is wrong with his strategy?

Use the information presented for Ottawa Corporation in BE10-14, but assume the machinery is sold for $5,200 instead of $10,500. Prepare journal entries to (a) update depreciation for 2015 and (b) record the sale.

Using the facts in Problem 51, what is the minimum tax that Pedro should pay to make the tax structure vertically equitable with respect to the amount of tax paid?  This would result in what type of tax rate structure?

For the following independent cases, determine whether economic income is present and, if so, whether it must be included in gross income. Identify a tax authority that supports your analysis.

Bell, Inc. buys 1,000 computer game CDs from a distributor who is discontinuing those games. The purchase price for the lot is $8,000. Bell will group the CDs into three price categories for resale, as indicated below.1 2 Group No. of CDs Price per CD 1 100 $ 5 2 800 10 3 100 15 Determine the cost per CD for each group, using the relative sales value method.

Explain why the market for auction-rate securities suffered in 2008. (LO4)

Explain how the liquidity position of finance companies differs from that of depository institutions such as commercial banks. (LO5)

The two-bin approach is used to control inventory for a particular low-cost component. Each bin holds 1200 units. The annual usage of the component is 45,000 units. Cost to order the component is around $70. (a) What is the imputed holding cost per unit for this data? (b) If the actual annual holding cost per unit is only 7 cents, what lot size should be ordered? (c) How much more is the current two-bin approach costing the company annually, compared to the economic order quantity?

Accounting for scrap You are helping a friend, Jonah, set up a new accounting system for a small start-up construction company. He specialises in custom, energy efficient homes that are built on a cost-plus basis. Cost-plus means that his customers pay a fixed percentage above the sum of direct and overhead costs.   As he goes through the accounts, Jonah asks why you set up a separate account for scrap. He does not believe that scrap should be recorded anywhere in his accounting system because it is worth little, and theft is no problem. He makes weekly trips to a recycling plant where he receives a small sum for the scrap. Most of the time Jonah is working on only one house and the scrap is only for that house. However, once in a while he is working on several houses, and the scrap for all of the houses is recycled at once.   Required (a)     Explain the two ways that scrap can be recorded in a job costing system. (b)     Choose the appropriate method for Jonah and explain your choice. (c)      Suppose you are a prospective homeowner. Explain to Jonah why you believe the revenue from scrap associated with your home should be recorded as a reduction in your costs rather than his overall costs. (d)     Write a brief (and diplomatic) paragraph to convince Jonah that he needs to account for the revenues from scrap.

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

Solve Problem 20.27 except that the corner radius on the punch = 10 mm.

Your client, Cascade Company, is planning to invest some of its excess cash in 5-year revenue bonds issued by the county and in the shares of one of its suppliers, Teton Co. Teton’s shares trade on the over-the-counter market. Cascade plans to classify these investments as trading. They would like you to conduct some research on the accounting for these investments. Instructions Access the IFRS authoritative literature at the IASB website (http://eifrs.iasb.org/). (Click on the IFRS tab and then register for free eIFRS access if necessary.) When you have accessed the documents, you can use the search tool in your Internet browser to respond to the following questions. (Provide paragraph citations.) (a) Since the Teton shares do not trade on one of the large securities exchanges, Cascade argues that the fair value of this investment is not readily available. According to the authoritative literature, when is the fair value of a security “readily determinable”? (b) How is an impairment of a debt investment accounted for? (c) To avoid volatility in their financial statements due to fair value adjustments, Cascade debated whether the bond investment could be classified as held-for-collection; Cascade is pretty sure it will hold the bonds for 5 years. What criteria must be met for Cascade to classify it as held-for-collection?

Suppose you asked your favorite AI query tool the following question: “Is total income on Form 1040 the same thing as gross income?”  The AI tool provided the following response:   Is the AI response to the question correct?  Explain.

What is a gang-drilling machine?

Hawkins Construction Co. has a $60 million contract to construct a highway overpass and cloverleaf. The total estimated cost for the project is $50 million. Costs incurred in the first year of the project are $8 million. Hawkins Construction Co. appropriately uses the percentageof- completion method. How much revenue and gross profit should Hawkins recognize in the first year of the project?