Question & Answer

What is meant by ‘the poverty trap’? What design of benefit system would offer the best solution to the problem of the poverty trap?

: Describe Michael Porter’s competitive forces and strategies.

Refer to the Partridge Insurance Illustration in the chapter. Explain how         the support departments can be classified as both cost objects and cost        pools in the costing system.

Five Satins Company purchased a piece of equipment at the beginning of 2011. The equipment cost $430,000. It has an estimated service life of 8 years and an expected salvage value of $70,000. The sum-of-the-years’-digits method of depreciation is being used. Someone has already correctly prepared a depreciation schedule for this asset. This schedule shows that $60,000 will be depreciated for a particular calendar year. Instructions Show calculations to determine for what particular year the depreciation amount for this asset will be $60,000.

: Compare and contrast the globalization, multidomestic, and glocalization strategies for global business.

: Describe how managers can use the organizational mission and other techniques to manage goal conflict.

The following are a number of values taken from compound interest tables involving the same number of periods and the same rate of interest. Indicate what each of these four values represents.

Assume that the Fed adopts an inflation-targeting strategy. Describe how the Fed’s monetary policy would be affected by an abrupt 15 percent rise in oil prices in response to an oil shortage. Do you think an inflation targeting strategy would be more or less effective in this situation than a strategy of balancing inflation concerns with unemployment concerns? Explain. (LO3)

Brad Dolan, a stockholder of Rhode Corporation, has asked you, the firm’s accountant, to explain why his stock warrants were not included in diluted EPS. In order to explain this situation, you must briefly explain what dilutive securities are, why they are included in the EPS calculation, and why some securities are antidilutive and thus not included in this calculation. Rhode Corporation earned $228,000 during the period, when it had an average of 100,000 shares of common stock outstanding. The common stock sold at an average market price of $25 per share during the period. Also outstanding were 30,000 warrants that could be exercised to purchase one share of common stock at $30 per warrant. Instructions Write Mr. Dolan a 1–1.5-page letter explaining why the warrants are not included in the calculation.

What are stock rights? How does the issuing company account for them?

How does abrasive belt grinding differ from a conventional surface grinding operation?

(FASB and Standard-Setting) Presented below are four statements which you are to identify as true or false. If false, explain why the statement is false. 1. GAAP is the term used to indicate the whole body of FASB authoritative literature. 2. Any company claiming compliance with GAAP must comply with most standards and interpretations but does not have to follow the disclosure requirements. 3. The primary governmental body that has influence over the FASB is the SEC. 4. The FASB has a government mandate and therefore does not have to follow due process in issuing a standard

Super Corp. was organized under the laws of the state of Montana.  It issued common voting stock and common nonvoting stock to its two shareholders.  Is Super Corp. eligible to elect S corporation status?  Why or why not?

Imagine that the banking system receives additional deposits of £100 million and that all the individual banks wish to retain their current liquidity ratio of 20 per cent. (a)  How much will banks choose to lend out initially? (b)  What will happen to banks’ liabilities when the money that is lent out is spent and the recipients of it deposit it in their bank accounts? (c)  How much of these latest deposits will be lent out by the banks? (d)  By how much will total deposits (liabilities) eventually have risen, assuming that none of the additional liquidity is held outside the banking sector? (e)  How much of these are matched by (i) liquid assets; (ii) illiquid assets? (f)   What is the size of the bank deposits multiplier? (g)  If one-half of any additional liquidity is held outside the banking sector, by how much less will deposits have risen compared with (d) above?

Augustana received $100,000 of qualified dividends this year.  Under what circumstances might the entire $100,000 of income not be taxed at the same rate?

Do you think that the U.S. financial system will be able to avoid another credit crisis in the future? (LO5)

: Explain the strategic management process.

A small company uses a band saw to cut through 2-inch metal bar stock. A material supplier is pushing a new material that is supposed to be more machinable while providing similar mechanical properties. The company does not have access to sophisticated measuring devices, but they do have a stopwatch. They have acquired a sample of the new material and cut both the present material and the new material with the same band saw settings. In the process, they measured how long it took to cut through each material. To cut through the present material, it took an average of 2 minutes, 20 seconds. To cut through the new material, it took an average of 2 minutes, 6 seconds. (a) Develop a machinability rating system based on time to cut through the 2.0-inch bar stock, using the present material as the base material. (b) Using your rating system, determine the machinability rating for the new material.

: Identify the biases that frequently cause managers to make bad decisions.

On January 1, 2015, Wilke Corp. had 480,000 shares of common stock outstanding. During 2015, it had the following transactions that affected the common stock account. February 1 Issued 120,000 shares March 1 Issued a 10% stock dividend May 1 Acquired 100,000 shares of treasury stock June 1 Issued a 3-for-1 stock split October 1 Reissued 60,000 shares of treasury stock Instructions (a) Determine the weighted-average number of shares outstanding as of December 31, 2015. (b) Assume that Wilke Corp. earned net income of $3,456,000 during 2015. In addition, it had 100,000 shares of 9%, $100 par nonconvertible, noncumulative preferred stock outstanding for the entire year. Because of liquidity considerations, however, the company did not declare and pay a preferred dividend in 2015. Compute earnings per share for 2015, using the weighted-average number of shares determined in part (a). (c) Assume the same facts as in part (b), except that the preferred stock was cumulative. Compute earnings per share for 2015. (d) Assume the same facts as in part (b), except that net income included an extraordinary gain of $864,000 and a loss from discontinued operations of $432,000. Both items are net of applicable income taxes. Compute earnings per share for 2015.

Alan inherited $100,000 with the stipulation that he “invest it to financially benefit his family.”  Alan and Alice decided they would invest the inheritance to help them accomplish two financial goals: purchasing a Park City vacation home and saving for their son Cooper’s education.     Vacation Home Cooper’s Education Initial Investment $50,000 $50,000 Investment Horizon 5 years 18 years   Alan and Alice have a marginal income tax rate of 32 percent (capital gains rate of 15 percent) and have decided to investigate the following investment opportunities.     5 Years Annual After-Tax Rate of Return 18 Years Annual After-Tax Rate of Return Corporate bonds (ordinary interest taxed annually) 5.75%   4.75%   Dividend-paying stock (no appreciation and dividends are taxed at 15%)   3.50%     3.50%   Growth stock Future Value is $65,000   Future Value is $140,000   Municipal bond (tax-exempt) 3.20%   3.10%     Complete the two Annual After-Tax Rate of Return columns for each investment and provide investment recommendations for Alan and Alice.

How do earnings surprises affect valuations of stocks? (LO3)

: Explain innovative techniques for decision making, including brainstorming, evidence-based management, and after-action reviews.

] In July of this year, Stephen started a proprietorship called ECR (which stands for electric car repair). ECR uses the cash method of accounting and Stephen has produced the following financial information for this year:

A resistance spot-welding operation is performed on two pieces of 0.040 in thick sheet steel (low carbon). The unit melting energy for steel = 150 Btu/in3. Process parameters are: current = 9500 A and time duration = 0.17 sec. This results in a weld nugget of diameter = 0.19 in and thickness = 0.060 in. Assume the resistance = 100 micro-ohms. Determine (a) the average power density in the interface area defined by the weld nugget, and (b) the proportion of energy generated that went into formation of the weld nugget.