Question & Answer

How would the EAPCs and the LRPC be affected by an increase in the natural rate of unemployment?

Picasso Company is a wholesale distributor of professional equipment and supplies. The company’s sales have averaged about $900,000 annually for the 3-year period 2012–2014. The firm’s total assets at the end of 2014 amounted to $850,000. The president of Picasso Company has asked the controller to prepare a report that summarizes the financial aspects of the company’s operations for the past 3 years. This report will be presented to the board of directors at their next meeting. In addition to comparative financial statements, the controller has decided to present a number of relevant financial ratios which can assist in the identification and interpretation of trends. At the request of the controller, the accounting staff has calculated the following ratios for the 3-year period 2012–2014. 2012 2013 2014 Current ratio 1.80 1.89 1.96 Acid-test (quick) ratio 1.04 0.99 0.87 Accounts receivable turnover 8.75 7.71 6.42 Inventory turnover 4.91 4.32 3.42 Debt to assets 51.0% 46.0% 41.0% Long-term debt to assets 31.0% 27.0% 24.0% Sales to fi xed assets (fi xed asset turnover) 1.58 1.69 1.79 Sales as a percent of 2012 sales 1.00 1.03 1.07 Gross margin percentage 36.0% 35.1% 34.6% Net income to sales 6.9% 7.0% 7.2% Return on assets 7.7% 7.7% 7.8% Return on common stock equity 13.6% 13.1% 12.7% In preparation of the report, the controller has decided first to examine the financial ratios independent of any other data to determine if the ratios themselves reveal any significant trends over the 3-year period. Instructions (a) The current ratio is increasing while the acid-test (quick) ratio is decreasing. Using the ratios provided, identify and explain the contributing factor(s) for this apparently divergent trend. (b) In terms of the ratios provided, what conclusion(s) can be drawn regarding the company’s use of financial leverage during the 2012–2014 period? (c) Using the ratios provided, what conclusion(s) can be drawn regarding the company’s net investment in plant and equipment?

Is business income allocated from a flow-through business entity to its owners self-employment income? Explain.

Consider the following independent situations. (a) Mike Finley wishes to become a millionaire. His money market fund has a balance of $92,296 and has a guaranteed interest rate of 10%. How many years must Mike leave that balance in the fund in order to get his desired $1,000,000? (b) Assume that Sally Williams desires to accumulate $1 million in 15 years using her money market fund balance of $182,696. At what interest rate must Sally’s investment compound annually?

During a recent management meeting at Sunset Consulting Services, a team member questioned why the costing system had multiple indirect cost pools given it would be easier just to have one.  Provide a brief response to explain why the business has adopted multiple indirect costs pools.

Illustrate the effect of a fall in demand for an imperfectly competitive firm (a) in the presence of menu costs and (b) in the absence of menu costs?

Identify the main categories of plastics shaping processes, as classified by the resulting product geometry.

Flagstad Inc. presented the following data. Net income $2,500,000 Preferred stock: 50,000 shares outstanding, $100 par, 8% cumulative, not convertible 5,000,000 Common stock: Shares outstanding 1/1 750,000 Issued for cash, 5/1 300,000 Acquired treasury stock for cash, 8/1 150,000 2-for-1 stock split, 10/1 Instructions Compute earnings per share.

Differentiate between operating activities, investing activities, and financing activities.

Flexible budget and variances Black Industries has a static budget based on production and sales of 24 000 units. Sales revenue is expected to be $96 000, variable costs $36 000 and fixed costs $32 000. Actual production and sales were 30 000 units with a profit of $50 000.   Required (a) Calculate the amount of profit in the flexible budget. (b) Calculate the overall variance between the flexible budget and actual results.

Why are different hardness tests and scales required?

1.       : Describe the elements of the communication model in Exhibit 17.2. Give an example of each part of the model as it exists in the classroom during communication between teacher and students.

Each of the following items must be considered in preparing a statement of cash flows (indirect method) for Turbulent Indigo Inc. for the year ended December 31, 2014. (a) Plant assets that had cost $20,000 6 years before and were being depreciated on a straight-line basis over 10 years with no estimated scrap value were sold for $5,300. (b) During the year, 10,000 shares of common stock with a stated value of $10 a share were issued for $43 a share. (c) Uncollectible accounts receivable in the amount of $27,000 were written off against Allowance for Doubtful Accounts. (d) The company sustained a net loss for the year of $50,000. Depreciation amounted to $22,000, and a gain of $9,000 was realized on the sale of land for $39,000 cash. (e) A 3-month U.S. Treasury bill was purchased for $100,000. The company uses a cash and cash equivalent basis for its cash flow statement. (f) Patent amortization for the year was $20,000. (g) The company exchanged common stock for a 70% interest in Tabasco Co. for $900,000. (h) During the year, treasury stock costing $47,000 was purchased. Instructions State where each item is to be shown in the statement of cash flows, if at all.

Indicate whether the following statements about the conceptual framework are true or false. If false, provide a brief explanation supporting your position. (a) Accounting rule-making that relies on a body of concepts will result in useful and consistent pronouncements. (b) General-purpose financial reports are most useful to company insiders in making strategic business decisions. (c) Accounting standards based on individual conceptual frameworks generally will result in consistent and comparable accounting reports. (d) Capital providers are the only users who benefit from general-purpose financial reporting. (e) Accounting reports should be developed so that users without knowledge of economics and business can become informed about the financial results of a company. (f) The objective of financial reporting is the foundation from which the other aspects of the framework logically result.

Imagine that two countries, Richland and Poorland, can produce just two goods, computers and coal. Assume that for a given amount of land and capital, the output of these two products requires the following constant amounts of labour:                                 Richland Poorland 1 computer 2 4 100 tonnes of coal 4 5          Assume that each country has 20 million workers. (a)  Draw the production possibility curves for the two countries (on two separate diagrams). (b)  If there is no trade, and in each country 12 million workers produce computers and 8 million workers produce coal, how many computers and tonnes of coal much will each country produce? What will be the total production of each product? (c)  What is the opportunity cost of a computer in (i) Richland; (ii) Poorland? (d)  What is the opportunity cost of 100 tonnes of coal in (i) Richland; (ii) Poorland? (e)  Which country has a comparative advantage in which product? (f)   Assuming that price equals marginal cost, which of the following would represent possible exchange ratios? (i) 1 computer for 40 tonnes of coal; (ii) 2 computers for 140 tonnes of coal; (iii) 1 computer for 100 tonnes of coal; (iv) 1 computer for 60 tonnes of coal; (v) 4 computers for 360 tonnes of coal. (g)  Assume that trade now takes place and that 1 computer exchanges for 65 tonnes of coal. Both countries specialise completely in the product in which they have a comparative advantage. How much does each country produce of its respective product? (h)  The country producing computers sells 6 million domestically. How many does it export to the other country? (i)   How much coal does the other country consume? (j)   Construct a table like Table 24.4 to show the no-trade and with-trade positions of each country?

ROI; residual income; breakeven point; contribution margin Mirror Industries laminating division, BrightShine, incurred the following costs and expenses in the last period.       During the period, BrightShine produced 300 000 units of industrial photo prints, which were sold for $2 each. Mirrors’s investment in BrightShine was $500 000 and $700 000 at the beginning and ending of the year, respectively. BrightShine’s weighted average cost of capital is 15 per cent.   Required (a)        Determine BrightShine’s return on investment for the year. (b)        Compute BrightShine’s residual income (loss) for the year. (c)        How many industrial photo print units did BrightShine have to sell during the year to break even? (d)        What was BrightShine’s contribution margin for the year?

Use the information for IBM from BE21-6. Assume the direct-financing lease was recorded at a present value of $150,000. Prepare IBM’s December 31, 2014, entry to record interest.

What are some of the possible defects in drawn sheet-metal parts?

Balanced scorecard at individual level; strategy map; boundary systems Required (a) Reflect on the management accounting case and the balanced scorecards used by Qantas and Virgin Australia as part of their incentive plans. How might they use a strategy map in the process of developing their scorecards? (b) With reference to the management accounting case, explain how the airlines might be able to use the balanced scorecard as a form of boundary system.

A welding operation on an aluminum alloy makes a groove weld. The cross-sectional area of the weld is 30.0 mm2. The welding velocity is 4.0 mm/sec. The heat transfer factor is 0.92 and the melting factor is 0.48. The melting temperature of the aluminum alloy is 650°C. Determine the rate of heat generation required at the welding source to accomplish this weld.

A 1/2-13 screw is to be preloaded to a tension force = 1000 lb. Torque coefficient = 0.22. Determine the torque that should be used to tighten the bolt.

1. What determines the slope of the E function? 2. How does the slope of the E function affect the size of the multiplier? (Try drawing diagrams with E functions of different slopes and see what happens when they shift.)

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?

Martin Buber Co. purchased land as a factory site for $400,000. The process of tearing down two old buildings on the site and constructing the factory required 6 months. The company paid $42,000 to raze the old buildings and sold salvaged lumber and brick for $6,300. Legal fees of $1,850 were paid for title investigation and drawing the purchase contract. Martin Buber paid $2,200 to an engineering firm for a land survey, and $68,000 for drawing the factory plans. The land survey had to be made before definitive plans could be drawn. Title insurance on the property cost $1,500, and a liability insurance premium paid during construction was $900. The contractor’s charge for construction was $2,740,000. The company paid the contractor in two installments: $1,200,000 at the end of 3 months and $1,540,000 upon completion. Interest costs of $170,000 were incurred to finance the construction. Instructions Determine the cost of the land and the cost of the building as they should be recorded on the books of Martin Buber Co. Assume that the land survey was for the building.

The following table shows a selection of exchange rate indices (effective exchange rates) for the years 2011 to 2020, based on 2011 = 100.   2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Australian $ 100.0 102.92 98.18 92.39 85.21 84.03 86.31 82.54 78.82 77.43 US $ 100.0 103.33 106.20 109.11 125.17 125.97 124.84 121.94 126.12 124.89 Japanese yen 100.0 102.54 83.08 76.60 72.43 81.74 78.12 77.94 81.31 82.30 Sterling 100.0 104.38 101.83 108.00 115.04 102.05 95.67 96.12 95.70 94.77 Euro 100.0 93.97 99.03 99.26 89.19 91.08 93.65 96.77 94.08 94.79 S Korean won 100.0 100.53 108.53 115.72 118.84 114.17 116.96 118.01 113.58 110.79           Source: Based on data from Monthly Effective Exchange Rate Indices (narrow) (Bank for International Settlements, April 2021).. (a) Explain what is meant by an exchange rate index or an effective exchange rate. (b) Calculate the annual rate of appreciation or depreciation for each currency for each year from 2011. It is suggested that you use an Excel spreadsheet. (c) Calculate the percentage appreciation or depreciation of each currency when comparing 2020 with 2010.