Question & Answer

1.    : Using Porter’s competitive strategies, how would you describe the strategies of Walmart and T.J. Maxx?

What is a flexible manufacturing system?

An adhesive must cure in order to bond. What is meant by the term curing?

Jackson and Ashley Turner (both 45 years old) are married and want to contribute to a Roth IRA for Ashley. For the current year, their AGI is $235,000. Jackson and Ashley each earned half of the income. a. How much can Ashley contribute to her Roth IRA if they file a joint return? b. How much can Ashley contribute if she files a separate return? c. Assume that Ashley earned all of the couple’s income and that she contributed the maximum amount she is allowed to contribute to a Roth IRA. What amount can be contributed to Jackson’s Roth IRA?

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.

Why may the newer members of the Union have possibly the most to gain from the single market, but also the most to lose?

1.      : What should Clarke do now to try to recover from the negative impact of his e-mails? Suggest specific steps.

For each of the following subsequent (post-balance-sheet) events, indicate whether a company should (a) adjust the financial statements, (b) disclose in notes to the financial statements, or (c) neither adjust nor disclose. ______ 1. Settlement of federal tax case at a cost considerably in excess of the amount expected at year-end. ______ 2. Introduction of a new product line. ______ 3. Loss of assembly plant due to fire. ______ 4. Sale of a significant portion of the company’s assets. ______ 5. Retirement of the company president. ______ 6. Prolonged employee strike. ______ 7. Loss of a significant customer. ______ 8. Issuance of a significant number of shares of common stock. ______ 9. Material loss on a year-end receivable because of a customer’s bankruptcy. ______ 10. Hiring of a new president. ______ 11. Settlement of prior year’s litigation against the company (no loss was accrued). ______ 12. Merger with another company of comparable size.

Kellogg Company is the world’s leading producer of ready-to-eat cereal products. In recent years, the company has taken numerous steps aimed at improving its profitability and earnings per share. Presented below are some basic facts for Kellogg.   Instructions (a) What are some of the reasons that management purchases its own stock? (b) Explain how earnings per share might be affected by treasury stock transactions. (c) Calculate the ratio of debt to assets for 2010 and 2011, and discuss the implications of the change.

1.              : Go ahead and close the deal, but come clean later. Explain that the controller had been on an extended leave of absence and because you had been on the job for only a few days, you had not had time to analyze the numbers yourself.

Compare and contrast the recovery periods used by MACRS and those used under generally accepted accounting principles (GAAP).

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.

How is a prepreg different from a molding compound?

1.    Do you think it is realistic that BOP business practices can have a positive effect on poverty and other social problems in developing countries? Discuss how those effects might occur.

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.

What potential problems could arise if the balanced scorecard was developed without a strategy map being available? (LO2)

Assume a free-floating exchange rate. Draw a diagram like Figure 25.6, only this time show an initial equilibrium national income with a balance of payments surplus.          (a)  Mark the size of the surplus.          (b)  Show the resulting shifts in the (X–M) and the E curves.          (c)  Mark the eventual equilibrium.          (d)  Show the size of the income and substitution effects (of the change in the exchange rate).          (e)  Under what circumstances will the income effect be (i) ‘desirable’; (ii) ‘undesirable’?          (f)   Could the income effect of the change in the exchange rate ever be larger than the substitution effect?

The interest rate on a one-year loan can be decomposed into a one-year risk-free (free from default risk) component and a risk premium that reflects the potential for default on the loan in that year. A change in economic conditions can affect the risk-free rate and the risk premium. The risk-free rate is usually affected by changing economic conditions to a greater degree than the risk premium. Explain how a weaker economy will likely affect the risk-free component, the risk premium, and the overall cost of a one-year loan obtained by (1) the Treasury, and (2) a corporation. Will the change in the cost of borrowing be more pronounced for the Treasury or for the corporation? Why? (LO2)

Which casting process is the most important commercially?

Agassi Corporation is preparing the comparative financial statements to be included in the annual report to stockholders. Agassi employs a fiscal year ending May 31. Income from operations before income taxes for Agassi was $1,400,000 and $660,000, respectively, for fiscal years ended May 31, 2015 and 2014. Agassi experienced an extraordinary loss of $400,000 because of an earthquake on March 3, 2015. A 40% combined income tax rate pertains to any and all of Agassi Corporation’s profits, gains, and losses. Agassi’s capital structure consists of preferred stock and common stock. The company has not issued any convertible securities or warrants and there are no outstanding stock options. Agassi issued 40,000 shares of $100 par value, 6% cumulative preferred stock in 2011. All of this stock is outstanding, and no preferred dividends are in arrears. There were 1,000,000 shares of $1 par common stock outstanding on June 1, 2013. On September 1, 2013, Agassi sold an additional 400,000 shares of the common stock at $17 per share. Agassi distributed a 20% stock dividend on the common shares outstanding on December 1, 2014. These were the only common stock transactions during the past 2 fiscal years. Instructions (a) Determine the weighted-average number of common shares that would be used in computing earnings per share on the current comparative income statement for: (1) The year ended May 31, 2014. (2) The year ended May 31, 2015. (b) Starting with income from operations before income taxes, prepare a comparative income statement for the years ended May 31, 2015 and 2014. The statement will be part of Agassi Corporation’s annual report to stockholders and should include appropriate earnings per share presentation. (c) The capital structure of a corporation is the result of its past financing decisions. Furthermore, the earnings per share data presented on a corporation’s financial statements is dependent upon the capital structure. (1) Explain why Agassi Corporation is considered to have a simple capital structure. (2) Describe how earnings per share data would be presented for a corporation that has a complex capital structure.

What are some of the advantages of chemical vapor deposition?

Name two departments that are typically classified as manufacturing support departments

What accounting assumption, principle, or constraint would Target Corporation use in each of the situations below? (a) Target was involved in litigation over the last year. This litigation is disclosed in the financial statements. (b) Target allocates the cost of its depreciable assets over the life it expects to receive revenue from these assets. (c) Target records the purchase of a new Dell PC at its cash equivalent price.

Discuss the similarities and the differences between convertible debt and debt issued with stock warrants.

Should management be upset if all variances for the period are unfavourable?