Question & Answer

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?

The drive unit for a positioning table is driven by a leadscrew directly coupled to the output shaft of a stepping motor. The pitch of the leadscrew = 0.18 in. The table must have a linear speed = 35 in/min, and a positioning accuracy = 0.001 in. Mechanical errors in the motor, leadscrew, and table connection are characterized by a normal distribution with standard deviation = 0.0002 in. Determine (a) the minimum number of step angles in the stepping motor to achieve the accuracy, (b) the associated step angle, and (c) the frequency of the pulse train required to drive the table at the desired speed.

Beaver Corporation reported taxable income of $500,000 from operations this year. In addition, Beaver distributed land to its sole shareholder, Eugenia. The land’s fair market value was $20,000 and its income tax and E&P basis to Beaver was $50,000. Eugenia assumed a mortgage on the land of $25,000. Beaver Corporation had accumulated E&P of $1,500,000 at the beginning of the year.

The plant manager of a manufacturing firm suggested in a conference of the company’s executives that accountants should speed up depreciation on the machinery in the finishing department because improvements were rapidly making those machines obsolete, and a depreciation fund big enough to cover their replacement is needed. Discuss the accounting concept of depreciation and the effect on a business concern of the depreciation recorded for plant assets, paying particular attention to the issues raised by the plant manager.

P.1 If a bank paid its depositors 3 per cent interest and inflation was 5 per cent, what would be the real rate of interest? P.2 Has your real income gone up or down this last year?

The inventory of 3T Company on December 31, 2014, consists of the following items. Part No. Quantity Cost per Unit Cost to Replace per Unit 110 600 $ 90 $100 111 1,000 60 52 112 500 80 76 113 200 170 180 120 400 205 208 121a 1,600 16 14 122 300 240 235 aPart No. 121 is obsolete and has a realizable value of $0.20 each as scrap. Instructions (a) Determine the inventory as of December 31, 2014, by the lower-of-cost-or-market method, applying this method directly to each item. (b) Determine the inventory by the lower-of-cost-or-market method, applying the method to the total of the inventory.

Should regulators of utilities that have been privatised into several separate companies allow (a) horizontal mergers (within the industry); (b) vertical mergers; (c) mergers with firms in other industries?

Presented below are selected transactions on the books of Simonson Corporation. May 1, 2014 Bonds payable with a par value of $900,000, which are dated January 1, 2014, are sold at 106 plus accrued interest. They are coupon bonds, bear interest at 12% (payable annually at January 1), and mature January 1, 2024. (Use interest expense account for accrued interest.) Dec. 31 Adjusting entries are made to record the accrued interest on the bonds, and the amortization of the proper amount of premium. (Use straight-line amortization.) Jan. 1, 2015 Interest on the bonds is paid. April 1 Bonds with par value of $360,000 are called at 102 plus accrued interest, and redeemed. (Bond premium is to be amortized only at the end of each year.) Dec. 31 Adjusting entries are made to record the accrued interest on the bonds, and the proper amount of premium amortized.

1.    : A college professor told her students, “The purpose of a management course is to teach students about management, not to teach them to be managers.” Do you agree or disagree with this statement? Discuss.

What is the chemical formula of ethylene, the monomer for polyethylene?

A particular metal has a flow curve with strength coefficient = 35,000 lb/in2 and strain-hardening exponent = 0.26. A tensile specimen of the metal with gage length = 2.0 in is stretched to a length = 3.3 in. Determine the flow stress at this new length and the average flow stress that the metal has been subjected to during deformation.

What are the implications of treating losses as passive?

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.)

Offer an argument for why a political regime that favors a large government will cause interest rates to be higher. Offer at least one example of why a political regime that favors a large government will cause interest rates to be lower. (Hint: Recognize that the government intervention in the economy can influence other factors that affect interest rates.) (LO2)

Select a European country other than the UK and compare its regional and urban policy with that of the UK.

Cost of sales schedule Rebecca Ltd is a manufacturer of machines made to customer specifications. All production costs are accumulated by means of a job order costing system. The following information is available at the beginning of the month of October.       A review of the job order cost sheets revealed the composition of the work in process inventory on October 1 as follows:         Activity during the month of October was as follows:       On 31 October, inventories consisted of the following:       Required Prepare a detailed schedule showing the cost of goods manufactured for October.

When is an S corporation required to pay a built-in gains tax?

Determine the bending force required in Problem 20.11 if the bend is to be performed in a V-die with a die opening width dimension = 1.25 in. The material has a tensile strength = 70,000 lb/in2 .

Sarah is a cash-method, calendar-year taxpayer, and she is considering making the following cash payments related to her business. Calculate the after-tax cost of each payment assuming she has a 37 percent marginal tax rate.

Explain why percentage depletion has been referred to as a government subsidy.

Bryan followed in his father’s footsteps and entered the carpet business. He owns and operates I Do Carpet (IDC). Bryan prefers to install carpet only, but in order to earn additional revenue, he also cleans carpets and sells carpet cleaning supplies. Compute his taxable income for the current year considering the following items:  a) IDC contracted with a homebuilder in December of last year to install carpet in 10 new homes being built. The contract price of $80,000 includes $50,000 for materials (carpet). The remaining $30,000 is for IDC’s service of installing the carpet. The contract also stated that all money was to be paid up front. The homebuilder paid IDC in full on December 28 of last year. The contract required IDC to complete the work by January 31 of this year. Bryan purchased the necessary carpet on January 2 and began working on the first home January 4. He completed the last home on January 27 of this year.  b) IDC finalized several other contracts this year and completed the work before year-end. The work cost $130,000 in materials, and IDC elects to immediately deduct supplies. Bryan billed out $240,000 but only collected $220,000 by year-end. Of the $20,000 still owed to him, Bryan wrote off $3,000 he didn’t expect to collect as a bad debt from a customer experiencing extreme financial difficulties. c) IDC agreed to a three-year contract to clean the carpets of an office building. The contract specified that IDC would clean the carpets monthly from July 1 of this year through June 30 three years hence. IDC received payment in full of $8,640 ($240 a month for 36 months) on June 30 of this year.  d) IDC sold 100 bottles of carpet stain remover this year for $5 per bottle (it collected $500). IDC sold 40 bottles on June 1 and 60 bottles on November 2. IDC had the following carpet-cleaning supplies on hand for this year, and IDC has elected to use the LIFO method of accounting for inventory under a perpetual inventory system: Purchase Date Bottles Total Cost November last year 40 $120 February this year 35 $112 July this year 25 $85 August this year 40 $140 Totals 140 $457   e) On August 1 of this year, IDC needed more room for storage and paid $900 to rent a garage for 12 months.  f) On November 30 of this year, Bryan decided it was time to get his logo on the sides of his work van. IDC hired We Paint Anything Inc. (WPA) to do the job. It paid $500 down and agreed to pay the remaining $1,500 upon completion of the job. WPA indicated it would not be able to begin the job until January 15 of next year, but the job would only take one week to complete. Due to circumstances beyond its control, WPA was unable to complete the job until April 1 of next year, at which time IDC paid the remaining $1,500. g) In December, Bryan’s son, Aiden, helped him finish some carpeting jobs. IDC owed Aiden $600 (reasonable) compensation for his work. However, Aiden did not receive the payment until January of next year.  h) IDC also paid $1,000 for interest on a short-term bank loan relating to the period from November 1 of this year through March 31 of next year.

Braddock Inc. had the following long-term receivable account balances at December 31, 2013. Note receivable from sale of division $1,500,000 Note receivable from offi cer 400,000 Transactions during 2014 and other information relating to Braddock’s long-term receivables were as follows. 1. The $1,500,000 note receivable is dated May 1, 2013, bears interest at 9%, and represents the balance of the consideration received from the sale of Braddock’s electronics division to New York Company. Principal payments of $500,000 plus appropriate interest are due on May 1, 2014, 2015, and 2016. The first principal and interest payment was made on May 1, 2014. Collection of the note installments is reasonably assured. 2. The $400,000 note receivable is dated December 31, 2013, bears interest at 8%, and is due on December 31, 2016. The note is due from Sean May, president of Braddock Inc. and is collateralized by 10,000 shares of Braddock’s common stock. Interest is payable annually on December 31, and all interest payments were paid on their due dates through December 31, 2014. The quoted market price of Braddock’s common stock was $45 per share on December 31, 2014. 3. On April 1, 2014, Braddock sold a patent to Pennsylvania Company in exchange for a $100,000 zerointerest- bearing note due on April 1, 2016. There was no established exchange price for the patent, and the note had no ready market. The prevailing rate of interest for a note of this type at April 1, 2014, was 12%. The present value of $1 for two periods at 12% is 0.797 (use this factor). The patent had a carrying value of $40,000 at January 1, 2014, and the amortization for the year ended December 31, 2014, would have been $8,000. The collection of the note receivable from Pennsylvania is reasonably assured. 4. On July 1, 2014, Braddock sold a parcel of land to Splinter Company for $200,000 under an installment sale contract. Splinter made a $60,000 cash down payment on July 1, 2014, and signed a 4-year 11% note for the $140,000 balance. The equal annual payments of principal and interest on the note will be $45,125 payable on July 1, 2015, through July 1, 2018. The land could have been sold at an established cash price of $200,000. The cost of the land to Braddock was $150,000. Circumstances are such that the collection of the installments on the note is reasonably assured. Instructions (a) Prepare the long-term receivables section of Braddock’s balance sheet at December 31, 2014. (b) Prepare a schedule showing the current portion of the long-term receivables and accrued interest receivable that would appear in Braddock’s balance sheet at December 31, 2014. (c) Prepare a schedule showing interest revenue from the long-term receivables that would appear on Braddock’s income statement for the year ended December 31, 2014.

As of January 1, 2014, Aristotle Inc. installed the retail method of accounting for its merchandise inventory. To prepare the store’s financial statements at June 30, 2014, you obtain the following data. Cost Selling Price Inventory, January 1 $ 30,000 $ 43,000 Markdowns 10,500 Markups 9,200 Markdown cancellations 6,500 Markup cancellations 3,200 Purchases 104,800 155,000 Sales revenue 154,000 Purchase returns 2,800 4,000 Sales returns and allowances 8,000 Instructions (a) Prepare a schedule to compute Aristotle’s June 30, 2014, inventory under the conventional retail method of accounting for inventories. (b) Without prejudice to your solution to part (a), assume that you computed the June 30, 2014, inventory to be $59,400 at retail and the ratio of cost to retail to be 70%. The general price level has increased from 100 at January 1, 2014, to 108 at June 30, 2014. Prepare a schedule to compute the June 30, 2014, inventory at the June 30 price level under the dollar-value LIFO retail method.

How is a prepreg different from a molding compound?

Karen Weller, D.D.S., opened a dental practice on January 1, 2014. During the first month of operations, the following transactions occurred. 1. Performed services for patients who had dental plan insurance. At January 31, $750 of such services was performed but not yet billed to the insurance companies. 2. Utility expenses incurred but not paid prior to January 31 totaled $520. 3. Purchased dental equipment on January 1 for $80,000, paying $20,000 in cash and signing a $60,000, 3-year note payable. The equipment depreciates $400 per month. Interest is $500 per month. 4. Purchased a one-year malpractice insurance policy on January 1 for $12,000. 5. Purchased $1,600 of dental supplies. On January 31, determined that $500 of supplies were on hand. Instructions Prepare the adjusting entries on January 31. (Omit explanations.) Account titles are Accumulated Depreciation—Equipment, Depreciation Expense, Service Revenue, Accounts Receivable, Insurance Expense, Interest Expense, Interest Payable, Prepaid Insurance, Supplies, Supplies Expense, Utilities Expense, and Accounts Payable.