Question & Answer

In blanking of a circular sheet-metal part, is the clearance applied to the punch diameter or the die diameter?

How does high credit risk affect the yield offered on securities? (LO1)

(Corrected Trial Balance) The trial balance of Watteau Co. (shown on the next page) does not balance.   Each of the listed accounts should have a normal balance per the general ledger. An examination of the ledger and journal reveals the following errors. 1. Cash received from a customer on account was debited for $570, and Accounts Receivable was credited for the same amount. The actual collection was for $750. 2. The purchase of a computer printer on account for $500 was recorded as a debit to Supplies for $500 and a credit to Accounts Payable for $500. 3. Services were performed on account for a client for $890. Accounts Receivable was debited for $890 and Service Revenue was credited for $89. 4. A payment of $65 for telephone charges was recorded as a debit to Office Expense for $65 and a debit to Cash for $65. 5. When the Unearned Service Revenue account was reviewed, it was found that service revenue amounting to $325 was performed prior to June 30 (related to Unearned Service Revenue). 6. A debit posting to Salaries and Wages Expense of $670 was omitted. 7. A payment on account for $206 was credited to Cash for $206 and credited to Accounts Payable for $260. 8. A dividend of $575 was debited to Salaries and Wages Expense for $575 and credited to Cash for $575. Instructions Prepare a correct trial balance. (Note: It may be necessary to add one or more accounts to the trial balance.)

: Contrast the hierarchical and decentralized methods of control.

Why are trading halts sometimes imposed on particular stocks? (LO4)

Briefly describe some of the similarities and differences between GAAP and IFRS with respect to statement of financial position (balance sheet) reporting.

What are closing entries and why are they necessary?

Is voluntary unemployment the same as frictional unemployment?

What is a conceptual framework? Why is a conceptual framework necessary in financial accounting?

Theory Explain the preferred habitat theory. (LO3)

List two examples of non-linear cost functions and describe a method of developing a cost function for each one.

A machinability rating is to be determined for a new work material. For the base material (B1112), test data resulted in a Taylor equation with parameters n = 0.29 and C = 490. For the new material, the Taylor parameters were n = 0.23 and C = 430. Units in both cases are: speed in m/min and tool life in min. These results were obtained using cemented carbide tooling. (a) Compute a machinability rating for the new material using cutting speed for a 30-min tool life as the basis of comparison. (b) If the machinability criterion were tool life for a cutting speed of 150 m/min, what is the machinability rating for the new material?

What is the policy directive, and who carries it out? (LO2)

Book What is the Beige book, and why is it important to the FOMC? (LO2)

The following defined pension data of Rydell Corp. apply to the year 2014. Projected benefi t obligation, 1/1/14 (before amendment) $560,000 Plan assets, 1/1/14 546,200 Pension liability 13,800 On January 1, 2014, Rydell Corp., through plan amendment, grants prior service benefi ts having a present value of 120,000 Settlement rate 9% Service cost 58,000 Contributions (funding) 65,000 Actual (expected) return on plan assets 52,280 Benefi ts paid to retirees 40,000 Prior service cost amortization for 2014 17,000 Instructions For 2014, prepare a pension worksheet for Rydell Corp. that shows the journal entry for pension expense and the year-end balances in the related pension accounts.

'Transfer pricing is a waste of an entity’s resources; it all gets eliminated          on consolidation'. Discuss

If a bond’s coupon rate is greater than the investor’s required rate of return on the bond, would the bond’s price be greater than or less than its par value? Explain. (LO1)

Can we incorporate trade effects into endogenous growth models?

Chapman Company, a major retailer of bicycles and accessories, operates several stores and is a publicly traded company. The comparative balance sheet and income statement for Chapman as of May 31, 2014, are as follows. The company is preparing its statement of cash flows. CHAPMAN COMPANY COMPARATIVE BALANCE SHEET AS OF MAY 31 2014 2013 Current assets Cash $ 28,250 $ 20,000 Accounts receivable 75,000 58,000 Inventory 220,000 250,000 Prepaid expenses 9,000 7,000 Total current assets 332,250 335,000 Plant assets Plant assets 600,000 502,000 Less: Accumulated depreciation—plant assets 150,000 125,000 Net plant assets 450,000 377,000 Total assets $782,250 $712,000 Current liabilities Accounts payable $123,000 $115,000 Salaries and wages payable 47,250 72,000 Interest payable 27,000 25,000 Total current liabilities 197,250 212,000 Long-term debt Bonds payable 70,000 100,000 Total liabilities 267,250 312,000 Stockholders’ equity Common stock, $10 par 370,000 280,000 Retained earnings 145,000 120,000 Total stockholders’ equity 515,000 400,000 Total liabilities and stockholders’ equity $782,250 $712,000 CHAPMAN COMPANY INCOME STATEMENT FOR THE YEAR ENDED MAY 31, 2014 Sales revenue $1,255,250 Cost of goods sold 722,000 Gross profi t 533,250 Expenses Salaries and wages expense 252,100 Interest expense 75,000 Depreciation expense 25,000 Other expenses 8,150 Total expenses 360,250 Operating income 173,000 Income tax expense 43,000 Net income $ 130,000 The following is additional information concerning Chapman’s transactions during the year ended May 31, 2014. 1. All sales during the year were made on account. 2. All merchandise was purchased on account, comprising the total accounts payable account. 3. Plant assets costing $98,000 were purchased by paying $28,000 in cash and issuing 7,000 shares of stock. 4. The “other expenses” are related to prepaid items. 5. All income taxes incurred during the year were paid during the year. 6. In order to supplement its cash, Chapman issued 2,000 shares of common stock at par value. 7. Cash dividends of $105,000 were declared and paid at the end of the fiscal year. Instructions (a) Compare and contrast the direct method and the indirect method for reporting cash flows from operating activities. (b) Prepare a statement of cash flows for Chapman Company for the year ended May 31, 2014, using the direct method. Be sure to support the statement with appropriate calculations. (A reconciliation of net income to net cash provided is not required.) (c) Using the indirect method, calculate only the net cash flow from operating activities for Chapman Company for the year ended May 31, 2014.

Although process costing appears to use precise measurements, it requires several estimates. Discuss where judgement is needed in collecting information for process costing.

What is the meaning of the forward rate in the context of the term structure of interest rates? Why might forward rates consistently overestimate future interest rates? How could such a bias be avoided? (LO3)

What are some of the reasons why plastic shaping processes are important?

What is continuity testing, and when is it performed in the PCB fabrication sequence?

Explain how state and local governments benefit from the provisions that allow taxpayers to exclude interest on state and local bonds from their gross income.

Explain why taxpayers are allowed to exclude gifts and inheritances from gross income even though these payments are realized and clearly provide taxpayers with the wherewithal to pay