Question & Answer

Rolanda Marshall Company, organized in 2013, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2014. 1/2/14 Purchased patent (8-year life) $ 350,000 4/1/14 Purchase goodwill (indefi nite life) 360,000 7/1/14 Purchased franchise with 10-year life; expiration date 7/1/24 450,000 8/1/14 Payment of copyright (5-year life) 156,000 9/1/14 Research and development costs 215,000 $1,531,000 Instructions Prepare the necessary entries to clear the Intangible Assets account and to set up separate accounts for distinct types of intangibles. Make the entries as of December 31, 2014, recording any necessary amortization and reflecting all balances accurately as of that date. (Use straight-line amortization.)

Explain why the moral hazard problem received so much attention during the credit crisis. (LO2)

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

Shannon, Inc., changed from the LIFO cost flow assumption to the FIFO cost flow assumption in 2014. The increase in the prior year’s income before taxes is $1,200,000. The tax rate is 40%. Prepare Shannon’s 2014 journal entry to record the change in accounting principle.

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

: Compare the ideal, rational model of decision making to the political model of decision making.

One financial accounting issue encountered when a company constructs its own plant is whether the interest cost on funds borrowed to finance construction should be capitalized and then amortized over the life of the assets constructed. What is the justification for capitalizing such interest?

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)

Orthogonal cutting is performed on a metal whose mass specific heat = 1.0 J/g-C, density = 2.9 g/cm3 , and thermal diffusivity = 0.8 cm2 /s. The cutting speed is 4.5 m/s, uncut chip thickness is 0.25 mm, and width of cut is 2.2 mm. The cutting force is measured at 1170 N. Using Cook's equation, determine the cutting temperature if the ambient temperature = 22°C.

] Describe the two methods that taxpayers use to prepay their taxes.

During the credit crisis in the 2008–2009 period, banks were criticized for restricting their credit. Write a short essay to explain why you think banks should or should not be allowed to restrict their credit during a credit crisis.

Appliance Center is an experienced home appliance dealer. Appliance Center also offers a number of services together with the home appliances that it sells. Assume that Appliance Center sells ovens on a standalone basis. Appliance Center also sells installation services and maintenance services for ovens. However, Appliance Center does not offer installation or maintenance services to customers who buy ovens from other vendors. Pricing for ovens is as follows. Oven only $ 800 Oven with installation service 850 Oven with maintenance services 975 Oven with installation and maintenance services 1,000 In each instance in which maintenance services are provided, the maintenance service is separately priced within the arrangement at $175. Additionally, the incremental amount charged by Appliance Center for installation approximates the amount charged by independent third parties. Ovens are sold subject to a general right of return. If a customer purchases an oven with installation and/or maintenance services, in the event Appliance Center does not complete the service satisfactorily, the customer is only entitled to a refund of the portion of the fee that exceeds $800. Instructions (a) Assume that a customer purchases an oven with both installation and maintenance services for $1,000. Based on its experience, Appliance Center believes that it is probable that the installation of the equipment will be performed satisfactorily to the customer. Assume that the maintenance services are priced separately. Explain whether the conditions for a multiple-deliverable arrangement exist in this situation. (b) Indicate the amount of revenues that should be allocated to the oven, the installation, and to the maintenance contract.

Potlatch Corporation has issued various types of bonds such as term bonds, income bonds, and debentures. Differentiate between term bonds, mortgage bonds, debenture bonds, income bonds, callable bonds, registered bonds, bearer or coupon bonds, convertible bonds, commodity-backed bonds, and deep discount bonds.

Compare actual and normal cost systems. Discuss the ways in which they are similar and the ways they differ.

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

Indicate some of the limitations of using surface roughness as a measure of surface texture

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.

How can target measures be used to promote either short-term or long-            term performance?

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).

Describe liquid phase sintering

How do insurance companies manage credit risk and liquidity risk? (LO5)

What effects will the following have on the equilibrium rate of interest? (You should consider which way the demand and/or supply curves of money shift.)          (a)  Banks find that they have a higher liquidity ratio than they need.          (b)  A rise in incomes.          (c)  A growing belief that interest rates will rise from their current level.

Identify some of the present and future products associated with nanotechnology.

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

What is a policy loan? When are policy loans popular? Why? (LO3)