Question & Answer

King Donovan Resources Group has been in its plant facility for 15 years. Although the plant is quite functional, numerous repair costs are incurred to maintain it in sound working order. The company’s plant asset book value is currently $800,000, as indicated below. Original cost $1,200,000 Accumulated depreciation 400,000 Book value $ 800,000 During the current year, the following expenditures were made to the plant facility. (a) Because of increased demands for its product, the company increased its plant capacity by building a new addition at a cost of $270,000. (b) The entire plant was repainted at a cost of $23,000. (c) The roof was an asbestos cement slate. For safety purposes, it was removed and replaced with a wood shingle roof at a cost of $61,000. Book value of the old roof was $41,000. (d) The electrical system was completely updated at a cost of $22,000. The cost of the old electrical system was not known. It is estimated that the useful life of the building will not change as a result of this updating. (e) A series of major repairs were made at a cost of $47,000, because parts of the wood structure were rotting. The cost of the old wood structure was not known. These extensive repairs are estimated to increase the useful life of the building. Instructions Indicate how each of these transactions would be recorded in the accounting records.

What is the difference between point-to-point and continuous path in a motion control system?

Solve Problem 20.13 except that the operation is performed using a wiping die with die opening dimension = 28 mm.

Use the information from BE18-7, but assume Turner uses the completed-contract method. Prepare the company’s 2014 journal entries.

Employees at your company disagree about the accounting for sales returns. The sales manager believes that granting more generous return provisions can give the company a competitive edge and increase sales revenue. The controller cautions that, depending on the terms granted, loose return provisions might lead to non-GAAP revenue recognition. The company CFO would like you to research the issue to provide an authoritative answer. Instructions If your school has a subscription to the FASB Codification, go to http://aaa.hq.org/asclogin.cfm to log in and prepare responses to the following. Provide Codification references for your responses. (a) What is the authoritative literature addressing revenue recognition when right of return exists? (b) What is meant by “right of return”? (c) When there is a right of return, what conditions must the company meet to recognize the revenue at the time of sale? (d) What factors may impair the ability to make a reasonable estimate of future returns?

Under what circumstances is a closed-loop positioning system preferable to an open-loop system?

On December 31, 2014, Travis Tritt Inc. has a machine with a book value of $940,000. The original cost and related accumulated depreciation at this date are as follows. Machine $1,300,000 Less: Accumulated depreciation 360,000 Book value $ 940,000 Depreciation is computed at $60,000 per year on a straight-line basis. Instructions Presented below is a set of independent situations. For each independent situation, indicate the journal entry to be made to record the transaction. Make sure that depreciation entries are made to update the book value of the machine prior to its disposal. (a) A fire completely destroys the machine on August 31, 2015. An insurance settlement of $430,000 was received for this casualty. Assume the settlement was received immediately. (b) On April 1, 2015, Tritt sold the machine for $1,040,000 to Dwight Yoakam Company. (c) On July 31, 2015, the company donated this machine to the Mountain King City Council. The fair value of the machine at the time of the donation was estimated to be $1,100,000.

Explain the difference between load and no-load mutual funds. (LO1)

Why do you think some banks suffered larger losses than other banks during the credit crisis? (LO1)

Consider the prevailing conditions that could affect the demand for stocks, including inflation, the economy, the budget deficit, the Fed’s monetary policy, political conditions, and the general mood of investors. Based on the current conditions, recommend a specific type of stock mutual fund that you think would perform well. Offer some logic to support your recommendation. (LO2)

The extrusion die for a polyethylene parison used in blow molding has a mean diameter of 18.0 mm. The size of the ring opening in the die is 2.0 mm. The mean diameter of the parison is observed to swell to a size of 21.5 mm after exiting the die orifice. If the diameter of the blow molded container is to be 150 mm, determine (a) the corresponding wall thickness of the container and (b) the wall thickness of the parison.

Distinguish between common and preferred stock.

Why might a company choose not to use revaluation accounting?

What are the limitations on the number and type of shareholders an S corporation may have?  How are these limitations different from restrictions on the number and type of shareholders C corporations or partnerships may have?

Coffin Corporation appropriately uses the installment-sales method of accounting to recognize income in its financial statements. The following information is available for 2014 and 2015. 2014 2015 Installment sales $900,000 $1,000,000 Cost of installment sales 594,000 680,000 Cash collections on 2014 sales 370,000 350,000 Cash collections on 2015 sales –0– 450,000 Instructions (a) Compute the amount of realized gross profit recognized in each year. (b) Prepare all journal entries required in 2015.

Marjorie sold her condominium for $500,000 on September 14, 2014; she had paid $330,000 for it in 2006. Marjorie collected the selling price as follows: 2014, $80,000; 2015, $320,000; and 2016, $100,000. Marjorie appropriately uses the installment-sales method. Prepare a schedule to determine the gross profit for 2014, 2015, and 2016 from the installment sale.

The cash method of accounting is generally preferred by taxpayers. Describe two types of businesses that are not allowed to use the cash method.

A carbon steel bar with 7.64 in diameter has a tensile strength of 65,000 lb/in2 and a shear strength of 45,000 lb/in2 . The diameter is reduced using a turning operation at a cutting speed of 400 ft/min. The feed is 0.011 in/rev and the depth of cut is 0.120 in. The rake angle on the tool in the direction of chip flow is 13°. The cutting conditions result in a chip ratio of 0.52. Using the orthogonal model as an approximation of turning, determine (a) the shear plane angle, (b) shear force, (c) cutting force and feed force, and (d) coefficient of friction between the tool and chip.

Summarise the relative benefits to consumers of (a) privatising a nationalised industry; (b) keeping it in the public sector but introducing competition.

Reynolds Custom Builders (RCB) was established in 1987 by Avery Conway and initially built high-quality customized homes under contract with specific buyers. In 2002, Conway’s two sons joined the company and expanded RCB’s activities into the high-rise apartment and industrial plant markets. Upon the retirement of RCB’s long-time financial manager, Conway’s sons recently hired Ed Borke as controller for RCB. Borke, a former college friend of Conway’s sons, has been associated with a public accounting firm for the last 6 years. Upon reviewing RCB’s accounting practices, Borke observed that RCB followed the completedcontract method of revenue recognition, a carryover from the years when individual home building was the majority of RCB’s operations. Several years ago, the predominant portion of RCB’s activities shifted to the high-rise and industrial building areas. From land acquisition to the completion of construction, most building contracts cover several years. Under the circumstances, Borke believes that RCB should follow the percentage-of-completion method of accounting. From a typical building contract, Borke developed the  BLUESTEM TRACTOR PLANT Contract price: $8,000,000 2014 2015 2016 Estimated costs $1,600,000 $2,880,000 $1,920,000 Progress billings 1,000,000 2,500,000 4,500,000 Cash collections 800,000 2,300,000 4,900,000 Instructions (a) Explain the difference between completed-contract revenue recognition and percentage-of-completion revenue recognition. (b) Using the data provided for the Bluestem Tractor Plant and assuming the percentage-of-completion method of revenue recognition is used, calculate RCB’s revenue and gross profit for 2014, 2015, and 2016, under each of the following circumstances. (1) Assume that all costs are incurred, all billings to customers are made, and all collections from customers are received within 30 days of billing, as planned. (2) Further assume that, as a result of unforeseen local ordinances and the fact that the building site was in a wetlands area, RCB experienced cost overruns of $800,000 in 2014 to bring the site into compliance with the ordinances and to overcome wetlands barriers to construction. (3) Further assume that, in addition to the cost overruns of $800,000 for this contract incurred under part (b)(2), inflationary factors over and above those anticipated in the development of the original contract cost have caused an additional cost overrun of $850,000 in 2015. It is not anticipated that any cost overruns will occur in 2016.

Clemson Company had the following stockholders’ equity as of January 1, 2014. Common stock, $5 par value, 20,000 shares issued $100,000 Paid-in capital in excess of par—common stock 300,000 Retained earnings 320,000 Total stockholders’ equity $720,000 During 2014, the following transactions occurred. Feb. 1 Clemson repurchased 2,000 shares of treasury stock at a price of $19 per share. Mar. 1 800 shares of treasury stock repurchased above were reissued at $17 per share. Mar. 18 500 shares of treasury stock repurchased above were reissued at $14 per share. Apr. 22 600 shares of treasury stock repurchased above were reissued at $20 per share. Instructions (a) Prepare the journal entries to record the treasury stock transactions in 2014, assuming Clemson uses the cost method. (b) Prepare the stockholders’ equity section as of April 30, 2014. Net income for the first 4 months of 2014 was $130,000.

The following are some costs incurred by a sports footwear manufacturer. Assume the manufacturer wants to increase output over a relatively short time period: i.e. in the economic short-run. Decide whether each one of the following is a fixed cost or a variable cost of expanding output in the short run or has some element of both. Clearly explain any assumptions you have made. (a) The cost of synthetic leather and mesh materials. (b) The fee paid to an advertising agency. (c) Wear and tear on machinery. (d) Business rates on the factory. (e) Electricity for heating and lighting. (f) Electricity for running the machines. (g) Basic minimum wages agreed with the union. (h) Overtime pay. (i) Depreciation of machines as a result purely of their age (irrespective of their condition).

According to the video on sheet-metal bending, what are the principal terms used to describe bending on a press brake?

Describe a put option on interest rate futures. How does it differ from selling a futures contract? (LO6)

How do insurance companies finance the real estate market? (LO3)