Question & Answer

} Marc and Michelle are married and earned salaries this year of $64,000 and $12,000, respectively. In addition to their salaries, they received interest of $350 from municipal bonds and $500 from corporate bonds.Marc and Michelle also paid $2,500 of qualifying moving expenses, and Marc paid alimony to a prior spouse in the amount of $1,500.Marc and Michelle have a 10-year-old son, Matthew, who lived with them throughout the entire year.Thus, Marc and Michelle are allowed to claim a $1,000 child tax credit for Matthew.Marc and Michelle paid $6,000 of expenditures that qualify as itemized deductions and they had a total of $5,500 in federal income taxes withheld from their paychecks during the course of the year. a.       What is Marc and Michelle’s gross income?

Bronson Paper Products purchased 10,000 acres of forested timberland in March 2014. The company paid $1,700 per acre for this land, which was above the $800 per acre most farmers were paying for cleared land. During April, May, June, and July 2014, Bronson cut enough timber to build roads using moveable equipment purchased on April 1, 2014. The cost of the roads was $250,000, and the cost of the equipment was $225,000; this equipment was expected to have a $9,000 salvage value and would be used for the next 15 years. Bronson selected the straight-line method of depreciation for the moveable equipment. Bronson began actively harvesting timber in August and by December had harvested and sold 540,000 board feet of timber of the estimated 6,750,000 board feet available for cutting. In March 2015, Bronson planted new seedlings in the area harvested during the winter. Cost of planting these seedlings was $120,000. In addition, Bronson spent $8,000 in road maintenance and $6,000 for pest spraying during calendar-year 2015. The road maintenance and spraying are annual costs. During 2015, Bronson harvested and sold 774,000 board feet of timber of the estimated 6,450,000 board feet available for cutting. In March 2016, Bronson again planted new seedlings at a cost of $150,000, and also spent $15,000 on road maintenance and pest spraying. During 2016, the company harvested and sold 650,000 board feet of timber of the estimated 6,500,000 board feet available for cutting. Instructions Compute the amount of depreciation and depletion expense for each of the 3 years (2014, 2015, and 2016). Assume that the roads are usable only for logging and therefore are included in the depletion base.

Relevant information; uncertainties; information for decision-making Janet Baker is deciding where to live during her second year of university. During her first year, she lived in the university residence college. Recently her friend Rachel asked her to share an off-campus flat for the upcoming school year. Janet likes the idea of living in a flat, but she is concerned about how much it will cost.   To help her decide what to do, Janet collected information about costs. She would pay $400 per month in rent. The minimum lease term on the apartment is six months. Janet estimates that her share of the utility bills will be $75 per month. She also estimates that groceries will cost $200 per month. Janet spent $350 on a new couch over the summer. If she lives in the university residence college, she will put the couch in storage at a cost of $35 per month. Janet expects to spend $7500 on university fees and $450 on books each semester. Room and board on campus would cost Janet $2,900 per semester (four months). This amount includes a food plan of 20 meals per week. This cost is non-refundable if the meals are not eaten.   Required (a)     Use only the cost information collected by Janet for the following tasks. (i)    List all of the costs for each option. Note: Some costs may be listed under both options. (ii)   Review your lists and cross out the costs that are irrelevant to Janet’s decision. Explain why these costs are irrelevant. (iii)  Calculate and compare the total relevant costs of each option. (iv)  Given the cost comparison, which living arrangement is the better choice for Janet? Explain. (b)     Identify uncertainties in the cost information collected by Janet. (i)    Determine whether each cost is likely to be (1) known for sure, (2) estimated with little uncertainty, or (3) estimated with moderate or high uncertainty. (ii)   For each cost that is known for sure, explain where Janet would obtain the information. (iii)  For each cost that must be estimated, explain why the cost cannot be known. (c)     List additional information that might be relevant to Janet’s decision (list as many items as you can). (i)    Costs not identified by Janet (ii)   Factors other than costs (d)     Explain why conducting a cost comparison is useful to Janet, even if factors other than costs are important to her decision. (e)     Consider your own preferences for this problem. Do you expect Janet’s preferences to be the same as yours? How can you control for your biases as you give Janet advice? (f)      Think about what Janet’s priorities might be for choosing a housing arrangement. How might different priorities lead to different choices? (g)     Describe how information that Janet gains over this next year might affect her future housing arrangements. Suppose Janet asks for your advice. (h)     Use the information you learned from the preceding analyses to write a memo to Janet with your recommendation and a discussion of its risks. Refer in your memo to the information that would be useful to Janet.

An orthogonal cutting operation is performed on a certain metal whose volumetric specific heat = 110 in-lb/in3 -F, and thermal diffusivity = 0.140 in2 /sec. The cutting speed = 350 ft/min, chip thickness before the cut = 0.008 in, and width of cut = 0.100 in. The cutting force is measured at 200 lb. Using Cook's equation, determine the cutting temperature if the ambient temperature = 70°F.

Describe the slip casting process in traditional ceramics processing

1.       : Experts advise that most catastrophes in organizations result from a series of small problems or mistakes. As a new, entry-level manager, how might you apply this understanding to help your organization avoid making major mistakes?

On June 30, 2014, your client, Ferry Company, was granted two patents covering plastic cartons that it had been producing and marketing profitably for the past 3 years. One patent covers the manufacturing process, and the other covers the related products. Ferry executives tell you that these patents represent the most significant breakthrough in the industry in the past 30 years. The products have been marketed under the registered trademarks Evertight, Duratainer, and Sealrite. Licenses under the patents have already been granted by your client to other manufacturers in the United States and abroad, and are producing substantial royalties. On July 1, Ferry commenced patent infringement actions against several companies whose names you recognize as those of substantial and prominent competitors. Ferry’s management is optimistic that these suits will result in a permanent injunction against the manufacture and sale of the infringing products as well as collection of damages for loss of profits caused by the alleged infringement. The financial vice president has suggested that the patents be recorded at the discounted value of expected net royalty receipts. Instructions (a) What is the meaning of “discounted value of expected net receipts”? Explain. (b) How would such a value be calculated for net royalty receipts? (c) What basis of valuation for Ferry’s patents would be generally accepted in accounting? Give supporting reasons for this basis. (d) Assuming no practical problems of implementation, and ignoring generally accepted accounting principles, what is the preferable basis of valuation for patents? Explain. (e) What would be the preferable theoretical basis of amortization? Explain. (f) What recognition, if any, should be made of the infringement litigation in the financial statements for the year ending September 30, 2014? Discuss.

What is an intermediate phase in the context of alloys?

The transactions listed below relate to Wainwright Inc. You are to assume that on the date on which each of the transactions occurred, the corporation’s accounts showed only common stock ($100 par) outstanding, a current ratio of 2.7:1, and a substantial net income for the year to date (before giving effect to the transaction concerned). On that date, the book value per share of stock was $151.53. Each numbered transaction is to be considered completely independent of the others, and its related answer should be based on the effect(s) of that transaction alone. Assume that all numbered transactions occurred during 2015 and that the amount involved in each case is sufficiently material to distort reported net income if improperly included in the determination of net income. Assume further that each transaction was recorded in accordance with generally accepted accounting principles and, where applicable, in conformity with the all-inclusive concept of the income statement. For each of the numbered transactions you are to decide whether it: (a) Increased the corporation’s 2015 net income. (b) Decreased the corporation’s 2015 net income. (c) Increased the corporation’s total retained earnings directly (i.e., not via net income). (d) Decreased the corporation’s total retained earnings directly. (e) Increased the corporation’s current ratio. (f) Decreased the corporation’s current ratio. (g) Increased each stockholder’s proportionate share of total stockholders’ equity. (h) Decreased each stockholder’s proportionate share of total stockholders’ equity. (i) Increased each stockholder’s equity per share of stock (book value). (j) Decreased each stockholder’s equity per share of stock (book value). (k) Had none of the foregoing effects. Instructions List the numbers 1 through 9. Select as many letters as you deem appropriate to reflect the effect(s) of each transaction as of the date of the transaction by printing beside the transaction number the letter(s) that identifies that transaction’s effect(s). Transactions _____ 1. In January, the board directed the write-off of certain patent rights that had suddenly and unexpectedly become worthless. _____ 2. The corporation sold at a profit land and a building that had been idle for some time. Under the terms of the sale, the corporation received a portion of the sales price in cash immediately, the balance maturing at 6-month intervals. _____ 3. Treasury stock originally repurchased and carried at $127 per share was sold for cash at $153 per share. _____ 4. The corporation wrote off all of the unamortized discount and issue expense applicable to bonds that it refinanced in 2015. _____ 5. The corporation called in all its outstanding shares of stock and exchanged them for new shares on a 2-for-1 basis, reducing the par value at the same time to $50 per share. _____ 6. The corporation paid a cash dividend that had been recorded in the accounts at time of declaration. _____ 7. Litigation involving Wainwright Inc. as defendant was settled in the corporation’s favor, with the plaintiff paying all court costs and legal fees. In 2012, the corporation had appropriately established a special contingency for this court action. (Indicate the effect of reversing the contingency only.) _____ 8. The corporation received a check for the proceeds of an insurance policy from the company with which it is insured against theft of trucks. No entries concerning the theft had been made previously, and the proceeds reduce but do not cover completely the loss. _____ 9. Treasury stock, which had been repurchased at and carried at $127 per share, was issued as a stock dividend. In connection with this distribution, the board of directors of Wainwright Inc. had authorized a transfer from retained earnings to permanent capital of an amount equal to the aggregate market value ($153 per share) of the shares issued. No entries relating to this dividend had been made previously.

What are the advantages and disadvantages to a firm that issues low- or zero-coupon bonds? (LO2)

Selected accounts of Urdu Company are shown below.   Instructions From an analysis of the T-accounts, reconstruct (a) the October transaction entries, and (b) the adjusting journal entries that were made on October 31, 2014. Prepare explanations for each journal entry.

In what case does the strength coefficient have the same value as the yield strength?

} Reese, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship.  In late December she received a $20,000 bill from her accountant for consulting services related to her small business.  Reese can pay the $20,000 bill any time before January 30 of next year without penalty.  Assume Reese’s marginal tax rate is 30 percent this year and will be 40 percent next year, and that she can earn an after-tax rate of return of 12 percent on her investments.  When should she pay the $20,000 bill—this year or next?

] Rebecca is a calendar-year taxpayer who operates a business. She made the following business-related expenditures in December of this year. Indicate the amount of these payments that she may deduct this year under both the cash method of accounting and the accrual method of accounting.  a) $2,000 for an accountant to evaluate the accounting system of Rebecca’s business. The accountant spent three weeks in January of next year working on the evaluation. b) $2,500 for new office furniture. The furniture was delivered on January 15 of next year.  c) $3,000 for property taxes on her factory.  d) $1,500 for interest on a short-term bank loan relating to the period from November 1 of this year through March 31 of next year.

John and Tara Smith are married and have lived in the same home for over 20 years. John’s uncle Tim, who is 64 years old, has lived with the Smiths since March of this year. Tim is searching for employment but has been unable to find any—his gross income for the year is $2,000. Tim used all $2,000 toward his own support. The Smiths provided the rest of Tim’s support by providing him with lodging valued at $5,000 and food valued at $2,200.  a. Are the Smiths able to claim Tim as a dependent?

1.       : In response to security threats in today’s world, the U.S. government has federalized airport security workers. Many argued that simply making screeners federal workers would not solve the root problem: Bored, low-paid, and poorly trained security workers have little motivation to be vigilant. How might these employees be motivated to provide the security that travel threats now demand?

Give some other examples of changes in one injection or withdrawal that can affect others.

The FASB requires a reconciliation between the effective tax rate and the federal government’s statutory rate. Of what benefit is such a disclosure requirement?

What was the level of unemployment mid-way between quarter 2 and quarter 3 of 2020?

Assume Tamar uses the Tax Court method of allocating expenses to rental use of the property.

The maximum maturity of commercial paper is 270 days. Why would a firm issue commercial paper instead of longerterm securities, even if it needs funds for a long period of time? (LO1)

At December 31, 2014, Appaloosa Corporation had a deferred tax liability of $25,000. At December 31, 2015, the deferred tax liability is $42,000. The corporation’s 2015 current tax expense is $48,000. What amount should Appaloosa report as total 2015 income tax expense?

Hugh has the choice between investing in a City of Heflin bond at 6 percent or investing in a Surething Inc. bond at 9 percent.  Assuming that both bonds have the same nontax characteristics and that Hugh has a 40 percent marginal tax rate, in which bond should he invest?

An annual report of Ford Motor Corporation states, “Net income a share is computed based upon the average number of shares of capital stock of all classes outstanding. Additional shares of common stock may be issued or delivered in the future on conversion of outstanding convertible debentures, exercise of outstanding employee stock options, and for payment of defined supplemental compensation. Had such additional shares been outstanding, net income a share would have been reduced by 10¢ in the current year and 3¢ in the previous year. . . . As a result of capital stock transactions by the company during the current year (primarily the purchase of Class A Stock from Ford Foundation), net income a share was increased by 6¢.” What information is provided by this note?

Illustrate on a diagram similar to Figure 7.4 what would happen in the long run if price were initially below PL.