Question & Answer

What is the danger of issuing too much stock? What is the role of the securities firm that serves as the underwriter, and how can it ensure that the firm does not issue too much stock? (LO2, LO4)

Is the number of working days lost through disputes a good indication of (a) union power; (b) union militancy?

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.

The comparative balance sheets of ConstantineCavamanlis Inc. at the beginning and the end of the year 2014 are as follows.   Net income of $44,000 was reported, and dividends of $23,000 were paid in 2014. New equipment was purchased and none was sold. Instructions Prepare a statement of cash flows for the year 2014.

‘Executives should only be compensated based upon the achievement of           targets.  They should not receive a fixed salary component’. Discuss.             (LO4 and 5)

Question: Below are transactions related to Duffner Company. (a) The City of Pebble Beach gives the company 5 acres of land as a plant site. The fair value of this land is determined to be $81,000. (b) 13,000 shares of common stock with a par value of $50 per share are issued in exchange for land and buildings. The property has been appraised at a fair value of $810,000, of which $180,000 has been allocated to land and $630,000 to buildings. The stock of Duffner Company is not listed on any exchange, but a block of 100 shares was sold by a stockholder 12 months ago at $65 per share, and a block of 200 shares was sold by another stockholder 18 months ago at $58 per share. (c) No entry has been made to remove from the accounts for Materials, Direct Labor, and Overhead the amounts properly chargeable to plant asset accounts for machinery constructed during the year. The following information is given relative to costs of the machinery constructed. Materials used $12,500 Factory supplies used 900 Direct labor incurred 15,000 Additional overhead (over regular) caused by construction 2,700 of machinery, excluding factory supplies used Fixed overhead rate applied to regular manufacturing operations 60% of direct labor cost Cost of similar machinery if it had been purchased from outside suppliers 44,000 Instructions Prepare journal entries on the books of Duffner Company to record these transactions.

Explain the difference between efficiency and effectiveness, as well as their importance for organizational performance.

Explain why an employee should be concerned about whether their employer reimburses business expenses using an “accountable” plan.

Grant Wood Corporation’s balance sheet at the end of 2013 included the following items. Current assets $235,000 Current liabilities $150,000 Land 30,000 Bonds payable 100,000 Buildings 120,000 Common stock 180,000 Equipment 90,000 Retained earnings 44,000 Accum. depr.—buildings (30,000) Total $474,000 Accum. depr.—equipment (11,000) Patents 40,000 Total $474,000 The following information is available for 2014. 1. Net income was $55,000. 2. Equipment (cost $20,000 and accumulated depreciation $8,000) was sold for $10,000. 3. Depreciation expense was $4,000 on the building and $9,000 on equipment. 4. Patent amortization was $2,500. 5. Current assets other than cash increased by $29,000. Current liabilities increased by $13,000. 6. An addition to the building was completed at a cost of $27,000. 7. A long-term investment in stock was purchased for $16,000. 8. Bonds payable of $50,000 were issued. 9. Cash dividends of $30,000 were declared and paid. 10. Treasury stock was purchased at a cost of $11,000. Instructions (Show only totals for current assets and current liabilities.) (a) Prepare a statement of cash flows for 2014. (b) Prepare a balance sheet at December 31, 2014.

Describe the related-person limitation on accrued deductions. What tax savings strategy is this limitation designed to thwart?

Below is the net income of Anita Ferreri Instrument Co., a private corporation, computed under the three inventory methods using a periodisystem. FIFO Average-Cost LIFO 2012 $26,000 $24,000 $20,000 2013 30,000 25,000 21,000 2014 28,000 27,000 24,000 2015 34,000 30,000 26,000 Instructions (Ignore tax considerations.) (a) Assume that in 2015 Ferreri decided to change from the FIFO method to the average-cost method of pricing inventories. Prepare the journal entry necessary for the change that took place during 2015, and show net income reported for 2012, 2013, 2014, and 2015. (b) Assume that in 2015 Ferreri, which had been using the LIFO method since incorporation in 2012, changed to the FIFO method of pricing inventories. Prepare the journal entry necessary to record the change in 2015 and show net income reported for 2012, 2013, 2014, and 2015.

: Outline the factors managers should consider that will influence work team effectiveness.

What is “imputed interest”? In what situations is it necessary to impute an interest rate for notes receivable? What are the considerations in imputing an appropriate interest rate?

Turner, Inc. began work on a $7,000,000 contract in 2014 to construct an office building. During 2014, Turner, Inc. incurred costs of $1,700,000, billed its customers for $1,200,000, and collected $960,000. At December 31, 2014, the estimated future costs to complete the project total $3,300,000. Prepare Turner’s 2014 journal entries using the percentage-of-completion method.

An integrated circuit used in a microprocessor will contain 1000 logic gates. Use Rent's rule with C = 3.8 and m = 0.6 to determine the approximate number of input/output pins required in the package.

Grant Company has had a record-breaking year in terms of growth in sales and profitability. However, market research indicates that it will experience operating losses in two of its major businesses next year. The controller has proposed that the company record a provision for these future losses this year, since it can afford to take the charge and still show good results. Advise the controller on the appropriateness of this charge.

What are the two principal aspects of product quality?

Buying something like a car is at the other end of the spectrum from holding cash. A car is highly illiquid, but yields a high return to the owner. In what form is this ‘return’?

Describe the factors that affect mortgage prices. (LO3)

What factors increase the benefits of accelerating deductions or deferring income?

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.

What is the difference between primary and secondary bonding in the structure of materials?

Distinguish among depreciation, depletion, and amortization.

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.