Question & Answer

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.

What are the components of an interest rate? Why is it important for accountants to understand these components?

Fred Moss, owner of Moss Interiors, is negotiating for the purchase of Zweifel Galleries. The balance sheet of Zweifel is given in an abbreviated form below.   Moss and Zweifel agree that: 1. Land is undervalued by $30,000. 2. Equipment is overvalued by $5,000. Zweifel agrees to sell the gallery to Moss for $350,000. Instructions Prepare the entry to record the purchase of Zweifel Galleries on Moss’s books.

Kano and his wife, Hoshi, have been married for 10 years and have two children under the age of 12. The couple has been living apart for the last two years and both children live with Kano. Kano has provided all the means necessary to support himself and his children. Kano and Hoshi do not file a joint return.

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

Discuss why many financial institutions have expanded internationally in recent years. What advantages can be obtained through an international merger of financial institutions? (LO3)

Bo Newman will invest $10,000 today in a fund that earns 5% annual interest. How many years will it take for the fund to grow to $17,100?

In 1987, Herman Moore Company completed the construction of a building at a cost of $2,000,000 and first occupied it in January 1988. It was estimated that the building will have a useful life of 40 years and a salvage value of $60,000 at the end of that time. Early in 1998, an addition to the building was constructed at a cost of $500,000. At that time, it was estimated that the remaining life of the building would be, as originally estimated, an additional 30 years, and that the addition would have a life of 30 years and a salvage value of $20,000. In 2016, it is determined that the probable life of the building and addition will extend to the end of 2047, or 20 years beyond the original estimate. Instructions (a) Using the straight-line method, compute the annual depreciation that would have been charged from 1988 through 1997. (b) Compute the annual depreciation that would have been charged from 1998 through 2015. (c) Prepare the entry, if necessary, to adjust the account balances because of the revision of the estimated life in 2016. (d) Compute the annual depreciation to be charged, beginning with 2016.

What are some of the techniques of disclosure for the balance sheet?

A cylindrical workpart 200 mm in diameter and 700 mm long is to be turned in an engine lathe. Cutting speed = 2.30 m/s, feed = 0.32 mm/rev, and depth of cut = 1.80 mm. Determine (a) cutting time, and (b) metal removal rate.

Discuss the entrance of savings institutions into the market for consumer and commercial lending. What are the potential risks and rewards of this strategy? Discuss the conflict between diversification and specialization of SIs. (LO2)

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)

Why and how did the Fed intervene in the commercial paper market during the 2008 credit crisis? (LO3)

What are some of the noteworthy properties of magnesium?

: Describe the manager’s role in using social media and personal networks to improve organizational communication.

Under what conditions will a partner recognize gain in a liquidating distribution?

Solve Problem 33.1 except that the layer thickness = 0.40 mm.

What is the general rule for how many authorities a research memo should discuss?

Penn Company is in the process of adjusting and correcting its books at the end of 2014. In reviewing its records, the following information is compiled. 1. Penn has failed to accrue sales commissions payable at the end of each of the last 2 years, as follows. December 31, 2013 $3,500 December 31, 2014 $2,500 2. In reviewing the December 31, 2014, inventory, Penn discovered errors in its inventory-taking procedures that have caused inventories for the last 3 years to be incorrect, as follows. December 31, 2012 Understated $16,000 December 31, 2013 Understated $19,000 December 31, 2014 Overstated $ 6,700 Penn has already made an entry that established the incorrect December 31, 2014, inventory amount. 3. At December 31, 2014, Penn decided to change the depreciation method on its office equipment from double-declining-balance to straight-line. The equipment had an original cost of $100,000 when purchased on January 1, 2012. It has a 10-year useful life and no salvage value. Depreciation expense recorded prior to 2014 under the double-declining-balance method was $36,000. Penn has already recorded 2014 depreciation expense of $12,800 using the double-declining-balance method. 4. Before 2014, Penn accounted for its income from long-term construction contracts on the completedcontract basis. Early in 2014, Penn changed to the percentage-of-completion basis for accounting purposes. It continues to use the completed-contract method for tax purposes. Income for 2014 has been recorded using the percentage-of-completion method. The following information is available. Pretax Income Percentage-of-Completion Completed-Contract Prior to 2014 $150,000 $105,000 2014 60,000 20,000 Instructions Prepare the journal entries necessary at December 31, 2014, to record the above corrections and changes. The books are still open for 2014. The income tax rate is 40%. Penn has not yet recorded its 2014 income tax expense and payable amounts so current-year tax effects may be ignored. Prior-year tax effects must be considered in item 4.

In which country in Figure 11.5 would you expect to find the highest proportion of poor people? Describe how income is distributed in the two cases.

: Describe how ethical behavior relates to behavior governed by law or free choice.

What is the difference between a positive mold and a negative mold in thermoforming?

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?

: What is the virtual network approach to structure? Is the use of authority different compared to other forms of departmentalization? Explain.

In general, what causes a stock distribution to be taxable to the recipient?