Question & Answer

] Fergie has the choice between investing in a State of New York bond at 5 percent and a Surething Inc. bond at 8 percent.  Assuming that both bonds have the same nontax characteristics and that Fergie has a 30 percent marginal tax rate, in which bond should she invest?

Is a current-year net operating loss of a C corporation available to offset income from the corporation in other years? Explain.

Under what conditions should a provision be recorded?

Knowshon, sole owner of Moreno Inc., is contemplating electing S status for the corporation (Moreno Inc. is currently taxed as a C corporation). Provide recommendations related to Knowshon’s election under the following alternative scenarios: a. At the end of the current year, Moreno Inc. has a net operating loss of $800,000 carryover from 2023.  Beginning next year, the company expects to return to profitability.  Knowshon projects that Moreno will report profits of $400,000, $500,000, and $600,000 over the next three years.  What suggestions do you have regarding the timing of the S election?  Explain.

If there have been clear benefits from the single market programme, why do individual member governments still try to erect barriers, such as new technical standards

The residual value is the estimated fair value of the leased property at the end of the lease term. (a) Of what significance is (1) an unguaranteed and (2) a guaranteed residual value in the lessee’s accounting for a capitalized-lease transaction? (b) Of what significance is (1) an unguaranteed and (2) a guaranteed residual value in the lessor’s accounting for a direct-financing lease transaction?

Describe the factors that affect mortgage prices. (LO3)

Explain the mechanisms whereby the DAD and IS curves will shift by the same amount as the DAS and MP curves in the long run.

You have been asked by a client to review the records of Roberts Company, a small manufacturer of precision tools and machines. Your client is interested in buying the business, and arrangements have been made for you to review the accounting records. Your examination reveals the following information. 1. Roberts Company commenced business on April 1, 2012, and has been reporting on a fiscal year ending March 31. The company has never been audited, but the annual statements prepared by the bookkeeper reflect the following income before closing and before deducting income taxes. Year Ended Income March 31 Before Taxes 2013 $ 71,600 2014 111,400 2015 103,580 2. A relatively small number of machines have been shipped on consignment. These transactions have been recorded as ordinary sales and billed as such. On March 31 of each year, machines billed and in the hands of consignees amounted to: 2013 $6,500 2014 none 2015 5,590 Sales price was determined by adding 25% to cost. Assume that the consigned machines are sold the following year. 3. On March 30, 2014, two machines were shipped to a customer on a C.O.D. basis. The sale was not entered until April 5, 2014, when cash was received for $6,100. The machines were not included in the inventory at March 31, 2014. (Title passed on March 30, 2014.) 4. All machines are sold subject to a 5-year warranty. It is estimated that the expense ultimately to be incurred in connection with the warranty will amount to 1⁄2 of 1% of sales. The company has charged an expense account for warranty costs incurred. Sales per books and warranty costs were as follows. Warranty Expense Year Ended for Sales Made in March 31 Sales 2013 2014 2015 Total 2013 $ 940,000 $760 $ 760 2014 1,010,000 360 $1,310 1,670 2015 1,795,000 320 1,620 $1,910 3,850 5. Bad debts have been recorded on a direct write-off basis. Experience of similar enterprises indicates that losses will approximate 1⁄4 of 1% of sales. Bad debts written off were: Bad Debts Incurred on Sales Made in 2013 2014 2015 Total 2013 $750 $ 750 2014 800 $ 520 1,320 2015 350 1,800 $1,700 3,850 6. The bank deducts 6% on all contracts financed. Of this amount, 1⁄2% is placed in a reserve to the credit of Roberts Company that is refunded to Roberts as finance contracts are paid in full. (Thus, Roberts should have a receivable for these payments and should record revenue when the net balance is remitted each year.) The reserve established by the bank has not been reflected in the books of Roberts. The excess of credits over debits (net increase) to the reserve account with Roberts on the books of the bank for each fiscal year were as follows. 2013 $ 3,000 2014 3,900 2015 5,100 $12,000 7. Commissions on sales have been entered when paid. Commissions payable on March 31 of each year were as follows. 2013 $1,400 2014 900 2015 1,120 8. A review of the corporate minutes reveals the manager is entitled to a bonus of 1% of the income before deducting income taxes and the bonus. The bonuses have never been recorded or paid. Instructions (a) Present a schedule showing the revised income before income taxes for each of the years ended March 31, 2013, 2014, and 2015. (Make computations to the nearest whole dollar.) (b) Prepare the journal entry or entries you would give the bookkeeper to correct the books. Assume the books have not yet been closed for the fiscal year ended March 31, 2015. Disregard correction of income taxes.

Assume that Sivart Corporation has 2024 taxable income of $1,750,000 for purposes of computing the §179 expense and acquired several assets during the year. Assume the delivery truck does not qualify for bonus depreciation.

Explain the process by which the price of houses would rise if there were a shortage.

Solve Problem 20.24 except use a punch radius = 0.375 in

Explain why the medical expense and casualty loss provisions are sometimes referred to as “wherewithal” deductions and how this rationale is reflected in the limits on these deductions.

Bradburn Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one of the organizers of Bradburn and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, 2014, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two $35,000 notes, which are due on June 30, 2015, and September 30, 2015. Another note of $6,000 is due on March 31, 2016, but he expects no difficulty in paying this note on its due date. Brown explained that Bradburn’s cash flow problems are due primarily to the company’s desire to finance a $300,000 plant expansion over the next 2 fiscal years through internally generated funds. The commercial loan officer of Topeka National Bank requested the following financial reports for the last 2 fiscal years.   Instructions (a) Compute the following items for Bradburn Corporation. (1) Current ratio for fiscal years 2014 and 2015. (2) Acid-test (quick) ratio for fiscal years 2014 and 2015. (3) Inventory turnover for fiscal year 2015. (4) Return on assets for fiscal years 2014 and 2015. (Assume total assets were $1,688,500 at 3/31/13.) (5) Percentage change in sales, cost of goods sold, gross margin, and net income after taxes from fiscal year 2014 to 2015. (b) Identify and explain what other financial reports and/or financial analyses might be helpful to the commercial loan officer of Topeka National Bank in evaluating Daniel Brown’s request for a time extension on Bradburn’s notes. (c) Assume that the percentage changes experienced in fiscal year 2015 as compared with fiscal year 2014 for sales and cost of goods sold will be repeated in each of the next 2 years. Is Bradburn’s desire to finance the plant expansion from internally generated funds realistic? Discuss. (d) Should Topeka National Bank grant the extension on Bradburn’s notes considering Daniel Brown’s statement about financing the plant expansion through internally generated funds? Discuss.

Do the IASB and FASB conceptual frameworks differ in terms of the role of financial reporting? Explain.

Which of the above assumptions do you think would be correct in each of the following cases?                (a)  Supermarket checkout operators.                (b)  Agricultural workers.                (c)  Crane operators.                (d)  Economics teachers.                (e)  Call-centre workers.                (f)   Professional footballers.                (g)  Bar workers.

Andrea Pafko, a fellow student, contends that the doubleentry system means that each transaction must be recorded twice. Is Andrea correct? Explain.

Evaluating a proposal for measuring performance Benerux Industries has been in business for 30 years. The entity’s major product is a control unit for elevators. The entity has a reputation for manufacturing products of exceptionally high quality, resulting in higher prices for its units than competitors charge. Higher prices, in turn, have meant that the entity has been comfortably profitable. A major reason for the high product quality is a loyal and conscientious workforce. Production employees have been with the entity for an average of 18 years.   Recently the entity hired a cost accountant from the local university. After a few months at the entity, the new accountant proposed a performance measurement report consisting of two parts. The first part will report the actual number of units started during each month, the target number of units that should have been started, and a variance. The second part will calculate an actual cost per good unit completed during each month, the target cost per unit, and a variance.   The new accountant provided the following additional information concerning the performance report: The first part of the report concentrates on units started because many units are scrapped in the manufacturing process (to maintain high quality). Therefore, the best measure of effort expended is the number of units on which work was begun. The target number of units to be begun in a month is the number of units started in the corresponding month last year plus 5 per cent. In the second part of the report, actual costs per unit will be calculated by dividing total production cost incurred during the month by the number of good units completed during the month. The target cost per unit is the average cost for manufacturing this kind of product as determined from industry newsletters.   The proposal concluded with the following comments: ‘This report should be prepared and distributed quarterly. For maximum benefit I suggest that a bonus be awarded whenever units started exceeds target and costs are below target. This system will result in substantially improved profits for the entity. It should be implemented immediately.’   Required (a)     Is it possible to develop a perfect system for monitoring and motivating worker performance? Why? (b)     Explain what the managers might learn by monitoring each of the variances in the proposed performance measurement system. (c)     Discuss possible reasons why the entity did not previously use a variance system to monitor and motivate worker performance. (d)     Describe weaknesses in the proposed performance measurement system. (e)     If you were the CFO of Benerux Industries, how would you respond to the new cost accountant’s proposal? Discuss whether you agree with the proposal and explain how you would communicate your response.

Jack and Jill are owners of UpAHill, an S corporation. They own 25 and 75 percent, respectively.  a. What amount of ordinary income and separately stated items are allocated to them for years 1 and 2 based on the information above?  Assume that UpAHill Corporation has $100,000 of qualified property (unadjusted basis) in both years.

Explain how the value of the dollar affects stock valuations. (LO3)

1. Trace through the effects in both factor and goods markets of the following:                (a) An increase in the productivity of a particular type of labour.                (b) An increase in the supply of a particular factor. 2. Show in each case how initially social efficiency will be destroyed and then how market adjustments will restore social efficiency.

Explain how you would derive a figure for households’ disposable income if you were starting from a figure for GDP?

Neither depreciation on replacement cost nor depreciation adjusted for changes in the purchasing power of the dollar has been recognized as generally accepted accounting principles for inclusion in the primary financial statements. Briefly present the accounting treatment that might be used to assist in the maintenance of the ability of a company to replace its productive capacity.

Illiad Inc. has decided to raise additional capital by issuing $170,000 face value of bonds with a coupon rate of 10%. In discussions with investment bankers, it was determined that to help the sale of the bonds, detachable stock warrants should be issued at the rate of  ne warrant for each $100 bond sold. The value of the bonds without the warrants is considered to be $136,000, and the value of the warrants in the market is $24,000. The bonds sold in the market at issuance for $152,000. Instructions (a) What entry should be made at the time of the issuance of the bonds and warrants? (b) If the warrants were nondetachable, would the entries be different? Discuss.

A blanking operation is to be performed on 2.0 mm thick cold-rolled steel (half hard). The part is circular with diameter = 75.0 mm. Determine the appropriate punch and die sizes for this operation