Question & Answer

Assessing rewards based on accounting profit Stevan is the divisional manager with the Liberty Property Development Group. His performance report shows a positive divisional margin but a loss for the year. Stevan has complained to the CEO about the common costs that have been charged to his division, and questions the method of charging. If they were not charged or were allocated in a different way, he would have a favourable profit figure and would be awarded his bonus.   Required Should Stevan’s bonus be awarded based on the profit or loss figure? Why? (LO2 and 4)

Allocating support costs to units A local hospital is required to account for the total cost of patient care, including support costs. Patients are assigned all direct costs. Support costs are $240 000 per month plus $90 per patient day. This 120-bed hospital averages 80 per cent occupancy.   Required (a)   Calculate the average daily charge per patient for support costs, assuming 30 days in a month. (b)   Briefly comment on potential problems in using only one indirect cost pool for support costs given that individual patients receive a range of different treatments while an inpatient.

Match the qualitative characteristics below with the following statements. 1. Timeliness 5. Faithful representation 2. Completeness 6. Relevance 3. Free from error 7. Neutrality 4. Understandability 8. Confirmatory value (a) Quality of information that assures users that information represents the economic phenomena that it purports to represent. (b) Information about an economic phenomenon that corrects past or present expectations based on previous evaluations. (c) The extent to which information is accurate in representing the economic substance of a transaction. (d) Includes all the information that is necessary for a faithful representation of the economic phenomena that it purports to represent. (e) Quality of information that allows users to comprehend its meaning.

Keystone Corporation’s financial statements for the year ended December 31, 2014, were authorized for issue on March 10, 2015. The following events took place early in 2015. (a) On January 10, 10,000 ordinary shares of $5 par value were issued at $66 per share. (b) On March 1, Keystone determined after negotiations with the taxing authorities that income taxes payable for 2014 should be $1,320,000. At December 31, 2014, income taxes payable were recorded at $1,100,000. Instructions Discuss how the preceding subsequent events should be reflected in the 2014 financial statements.

What are the principal polymers used in fiber-reinforced polymers?

How does anodizing differ from other conversion coatings?

Walkin Inc. is considering the write-down of its long-term plant because of a lack of profitability. Explain to the management of Walkin how to determine whether a write-down is permitted.

Scatter plots, cost function using regression, two potential cost drivers Suppose we need to predict the cost of maintenance for Brush Valley High School for the upcoming school year. From the school district records we gather weekly data about costs and volumes for two potential cost drivers: labour hours used in the maintenance department and number of enrolled students.   Required (a)          Identify and explain two potential cost drivers for total maintenance cost, in addition to number of students and maintenance hours worked. (b)          Create a scatter plot, first for maintenance cost against hours worked and then maintenance cost against students. (c)           Would you eliminate either cost driver based on the plots? Explain. (d)          Perform regression analysis using each cost driver. Use your judgement to determine the most appropriate cost driver and write out the cost function for maintenance cost. (e)           Can we know for certain that the cost driver chosen in part (d) is the best cost driver? Why?

Baker Corporation owned a building located in Kansas. Baker used the building for its business operations. Last year, a tornado hit the property and completely destroyed it. This year, Baker received an insurance settlement. Baker had originally purchased the building for $350,000 and had claimed a total of $100,000 of depreciation deductions against the property. What are Baker’s realized and recognized gain or (loss) on this transaction and what is its basis in the new building in the following alternative scenarios? a. Baker received $450,000 in insurance proceeds and spent $450,000 rebuilding the building during the current year. b. Baker received $450,000 in insurance proceeds and spent $500,000 rebuilding the building during the current year. c. Baker received $450,000 in insurance proceeds and spent $400,000 rebuilding the building during the current year. d. Baker received $450,000 in insurance proceeds and spent $450,000 rebuilding the building during the next three years.

The accountant of Latifa Shoe Co. has compiled the following information from the company’s records as a basis for an income statement for the year ended December 31, 2014. Rent revenue $ 29,000 Interest expense 18,000 Market appreciation on land above cost 31,000 Salaries and wages expense (selling) 114,800 Supplies (selling) 17,600 Income tax 37,400 Salaries and wages expense (administrative) 135,90 5Other administrative expenses $ 51,700 Cost of goods sold 496,000 Net sales 980,000 Depreciation on plant assets (70% selling, 30% administrative) 65,000 Cash dividends declared 16,000 There were 20,000 shares of common stock outstanding during the year. Instructions (a) Prepare a multiple-step income statement. (b) Prepare a single-step income statement. (c) Which format do you prefer? Discuss.

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

: Explain how empowerment and engagement approaches can be used to heighten employee motivation.

What is the complicating factor that occurs in a compression test?

What is etching used for in PCB fabrication?

Why do ratings agencies assign ratings to commercial paper? (LO1)

Do you think that the Fed should have bailed out large financial institutions during the credit crisis? (LO3)

WAR (We Are Rich) has been in business since 1991. WAR is an accrual-method sole proprietorship that deals in the manufacturing and wholesaling of various types of golf equipment. Hack & Hack CPAs has filed accurate tax returns for WAR’s owner since WAR opened its doors. The managing partner of Hack & Hack (Jack) has gotten along very well with the owner of WAR – Mr. Someday Woods (single). However, in early 2024, Jack Hack and Someday Woods played a round of golf, and Jack, for the first time ever, beat Mr. Woods. Mr. Woods was so upset that he fired Hack & Hack and has hired you to compute his 2024 taxable income. Mr. Woods was able to provide you with the following information from prior tax returns. The taxable income numbers reflect the results from all of Mr. Woods’ activities except for the items separately stated. You will need to consider how to handle the separately stated items for tax purposes. Also, note that the 2019–2023 numbers do not reflect capital loss carryovers.

What types of business entities are taxed as flow-through entities?

1.    : How does starting an online business differ from starting a small business such as a local auto repair shop or delicatessen? Is it really possible for businesses that operate totally in cyberspace to build close customer relationships? Discuss.

If the Bank of England issues £1 million of extra bonds and buys back £1 million of Treasury bills, will there automatically be a reduction in credit by a set multiple of £1 million?

How would the radical right reply to these arguments?

What is a ceramic?

What is the deciding factor in determining whether a capital gain is a short-term or long-term capital gain?

1.      : Do you think Vinson’s desire for changes in culture are related to changes in the external environment? Explain.

What are the major lessor groups in the United States? What advantage does a captive have in a leasing arrangement?