Question & Answer

Describe, in general terms, why Congress implemented the AMT.

How do IPOs perform over the long run? (LO3)

Van Hatten Industries has three operating divisions—Depp Construction Division, DeMent Publishing Division, and Ankiel Securities Division. Each division maintains its own accounting system and method of revenue recognition. Depp Construction Division During the fiscal year ended November 30, 2014, Depp Construction Division had one construction project in process. A $30,000,000 contract for construction of a civic center was granted on June 19, 2014, and construction began on August 1, 2014. Estimated costs of completion at the contract date were $25,000,000 over a 2-year time period from the date of the contract. On November 30, 2014, construction costs of $7,200,000 had been incurred and progress billings of $9,500,000 had been made. The construction costs to complete the remainder of the project were reviewed on November 30, 2014, and were estimated to amount to only $16,800,000 because of an expected decline in raw materials costs. Revenue recognition is based upon a percentage-of-completion method. DeMent Publishing Division The DeMent Publishing Division sells large volumes of novels to a few book distributors, which in turn sell to several national chains of bookstores. DeMent allows distributors to return up to 30% of sales, and distributors give the same terms to bookstores. While returns from individual titles fluctuate greatly, the returns from distributors have averaged 20% in each of the past 5 years. A total of $7,000,000 of paperback novel sales were made to distributors during fiscal 2014. On November 30, 2014 (the end of the fiscal year), $1,500,000 of fiscal 2014 sales were still subject to return privileges over the next 6 months. The remaining $5,500,000 of fiscal 2014 sales had actual returns of 21%. Sales from fiscal 2013 totaling $2,000,000 were collected in fiscal 2014 less 18% returns. This division records revenue according to the method referred to as revenue recognition when the right of return exists. Ankiel Securities Division Ankiel Securities Division works through manufacturers’ agents in various cities. Orders for alarm systems and down payments are forwarded from agents, and the division ships the goods f.o.b. factory directly to customers (usually police departments and security guard companies). Customers are billed directly for the balance due plus actual shipping costs. The company received orders for $6,000,000 of goods during the fiscal year ended November 30, 2014. Down payments of $600,000 were received, and $5,200,000 of goods were billed and shipped. Actual freight costs of $100,000 were also billed. Commissions of 10% on product price are paid to manufacturing agents after goods are shipped to customers. Such goods are warranted for 90 days after shipment, and warranty returns have been about 1% of sales. Revenue is recognized at the point of sale by this division. Instructions (a) There are a variety of methods of revenue recognition. Define and describe each of the following methods of revenue recognition, and indicate whether each is in accordance with generally accepted accounting principles. (1) Point of sale. (2) Completion-of-production. (3) Percentage-of-completion. (4) Installment-sales. (b) Compute the revenue to be recognized in fiscal year 2014 for each of the three operating divisions of Van Hatten Industries in accordance with generally accepted accounting principles.

Why are second mortgages offered by some home sellers? (LO2)

1.      : What should Clarke do now to try to recover from the negative impact of his e-mails? Suggest specific steps.

Shanahan Construction Company has entered into a contract beginning January 1, 2014, to build a parking complex. It has been estimated that the complex will cost $600,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $900,000. The following data pertain to the construction period. 2014 2015 2016 Costs to date $270,000 $450,000 $610,000 Estimated costs to complete 330,000 150,000 –0– Progress billings to date 270,000 550,000 900,000 Cash collected to date 240,000 500,000 900,000 Instructions (a) Using the percentage-of-completion method, compute the estimated gross profit that would be recognized during each year of the construction period. (b) Using the completed-contract method, compute the estimated gross profit that would be recognized during each year of the construction period.

Obtain a large common nail (flat head). Measure the head diameter and thickness, as well as the diameter of the nail shank. (a) What stock length must project out of the die in order to provide sufficient material to produce the nail? (b) Using appropriate values for strength coefficient and strain hardening exponent for the metal out of which the nail is made (Table 3.4), compute the maximum force in the heading operation to form the head.

Solve Problem 20.15 except that the operation is performed using a wiping die with die opening dimension = 0.75 in.

Although the workpiece in a wire drawing operation is obviously subjected to tensile stresses, how do compressive stresses also play a role in the process?

How is a business activity distinguished from an investment activity?  Why is this distinction important for the purpose of calculating federal income taxes?

In what section of the balance sheet should the following items appear, and what balance sheet terminology would you use? (a) Treasury stock (recorded at cost). (b) Checking account at bank. (c) Land (held as an investment). (d) Sinking fund. (e) Unamortized premium on bonds payable. (f) Copyrights. (g) Pension fund assets. (h) Premium on capital stock. (i) Long-term investments (pledged against bank loans payable).

Describe the Danner process.

Explain why Congress allows self-employed taxpayers to deduct the employer portion of their self-employment tax.

Explain why Congress allows taxpayers to deduct interest forfeited as a penalty on the premature withdrawal from a certificate of deposit.

What are the three basic steps in the glassworking sequence?

Design the nominal sizes of a GO/NO-GO plug gage to inspect a 1.500 ± 0.030 in diameter hole. There is a wear allowance applied only to the GO side of the gage. The wear allowance is 2% of the entire tolerance band for the inspected feature. Determine (a) the nominal size of the GO gage including the wear allowance and (b) the nominal size of the NO-GO gage

Describe the type of medical expenditures that qualify for the medical expense deduction.  Does the cost of meals consumed while hospitalized qualify for the deduction?  Do over-the-counter drugs and medicines qualify for the deduction?

On July 1, 2014, Torvill Construction Company Inc. contracted to build an office building for Gumbel Corp. for a total contract price of $1,900,000. On July 1, Torvill estimated that it would take between 2 and 3 years to complete the building. On December 31, 2016, the building was deemed substantially completed. Following are accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Gumbel for 2014, 2015, and 2016. At At At 12/31/14 12/31/15 12/31/16 Contract costs incurred to date $ 300,000 $1,200,000 $2,100,000 Estimated costs to complete the contract 1,200,000 800,000 –0– Billings to Gumbel 300,000 1,100,000 1,850,000 Instructions (a) Using the percentage-of-completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2014, 2015, and 2016. (Ignore income taxes.) (b) Using the completed-contract method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2014, 2015, and 2016. (Ignore income taxes.)

What types of taxes qualify to be deducted as itemized deductions?  Would a vehicle registration fee qualify as a deductible tax?

Explain the argument that the deductions for charitable contributions and home mortgage interest represent indirect subsidies for these activities.

Describe the conditions in which a donation of property to a charity will result in a charitable contribution deduction of fair market value and when it will result in a deduction of the tax basis of the property.

What is meant by the term “underlying” as it relates to derivative financial instruments?

What does the centerburst defect in extrusion have in common with the roll piercing process?

Describe the possible roles of securities firms in the swap market. (LO1)

What are some of the operations required in sand casting after the casting is removed from the mold?