Question & Answer

A critic recently claimed that hedge funds increase market volatility when they publicize (and document) that a public corporation exaggerated its earnings. The critic argued that hedge funds should not be allowed to make such public statements and should not be allowed to take short positions that bet against the firm that is being criticized. Write a short essay that supports or refutes this opinion.

Holt Company purchased a computer for $8,000 on January 1, 2013. Straight-line depreciation is used, based on a 5-year life and a $1,000 salvage value. In 2015, the estimates are revised. Holt now feels the computer will be used until December 31, 2016, when it can be sold for $500. Compute the 2015 depreciation.

Under which of the following circumstances is there likely to be a net gain from trade diversion (refer to Figure 24.14): (a) a small difference between the EU price and the Russian pre-tariff price, and a large difference between the EU price and the Russian price with the tariff, or vice versa; (b) Elastic or inelastic Polish demand and supply curves; (c) The Polish demand and supply curves close together or far apart?

During 2012, Robin Wright Tool Company purchased a building site for its proposed research and development laboratory at a cost of $60,000. Construction of the building was started in 2012. The building was completed on December 31, 2013, at a cost of $320,000 and was placed in service on January 2, 2014. The estimated useful life of the building for depreciation purposes was 20 years. The straight-line method of depreciation was to be employed, and there was no estimated residual value. Management estimates that about 50% of the projects of the research and development group will result in long-term benefits (i.e., at least 10 years) to the corporation. The remaining projects either benefit the current period or are abandoned before completion. A summary of the number of projects and the direct costs incurred in conjunction with the research and development activities for 2014 appears below. Salaries and Other Expenses Number Employee (excluding Building of Projects Benefits Depreciation Charges) Completed projects with long-term benefits 15 $ 90,000 $50,000 Abandoned projects or projects that benefit the current period 10 65,000 15,000 Projects in process—results indeterminate 5 40,000 12,000 Total 30 $195,000 $77,000 Upon recommendation of the research and development group, Robin Wright Tool Company acquired a patent for manufacturing rights at a cost of $88,000. The patent was acquired on April 1, 2013, and has an economic life of 10 years. Instructions If generally accepted accounting principles were followed, how would the items above relating to research and development activities be reported on the following financial statements? (a) The company’s income statement for 2014. (b) The company’s balance sheet as of December 31, 2014. Be sure to give account titles and amounts, and briefly justify your presentation.

Explain how each of the following would use banker’s acceptances: (a) exporting firms, (b) importing firms, (c) commercial banks, and (d) investors. (LO1)

1.      : Launch a full-scale investigation of employee complaints about Pate and make Pate aware that his documented history over the past ten years has put him on thin ice.

Is a corporation’s choice of its tax year independent from its year-end for financial accounting purposes?

What are the major differences between postretirement healthcare benefits and pension benefits?

What are the types of situations that result in troubled debt?

Evergreen Corporation (calendar-year-end) acquired the following assets during the current year:

Describe the appeal and the difficulties of investing in a franchise as a route to small business ownership.

1.      : What type of team does the new CIO have? What do you see as the key problem with the team?

Compare disposable and regrindable tooling. The same grade of cemented carbide tooling is available in two forms for turning operations in a certain machine shop: disposable inserts and brazed inserts. The parameters in the Taylor equation for this grade are: n = 0.25 and C = 300 (m/min) under the cutting conditions considered here. For the disposable inserts, price of each insert = $6.00, there are four cutting edges per insert, and the tool change time = 1.0 min (this is an average of the time to index the insert and the time to replace it when all edges have been used). For the brazed insert, the price of the tool = $30.00 and it is estimated that it can be used a total of 15 times before it must be scrapped. The tool change time for the regrindable tooling = 3.0 min. The standard time to grind or regrind the cutting edge is 5.0 min, and the grinder is paid at a rate = $20.00/hr. Machine time on the lathe costs $24.00/hr. The workpart to be used in the comparison is 375 mm long and 62.5 mm in diameter, and it takes 2.0 min to load and unload the work. The feed = 0.30 mm/rev. For the two tooling cases, compare (a) cutting speeds for minimum cost, (b) tool lives, (c) cycle time and cost per unit of production. Which tool would you recommend?

A face milling operation is not yielding the required surface finish on the work. The cutter is a four-tooth insert type face milling cutter. The machine shop foreman thinks the problem is that the work material is too ductile for the job, but this property tests well within the ductility range for the material specified by the designer. Without knowing any more about the job, what changes in (a) cutting conditions and (b) tooling would you suggest to improve the surface finish?

What is the range of carbon percentages which defines an iron-carbon alloy as cast iron?

Explain the causes and types of conflict within and among teams, and describe ways to reduce conflict.

Shimmer Inc. is a calendar-year-end, accrual-method corporation. This year, it sells the following long-term assets:

At the end of 2014, Aramis Company has accounts receivable of $800,000 and an allowance for doubtful accounts of $40,000. On January 16, 2015, Aramis Company determined that its receivable from Ramirez Company of $6,000 will not be collected, and management authorized its write-off. Instructions (a) Prepare the journal entry for Aramis Company to write off the Ramirez receivable. (b) What is the net realizable value of Aramis Company’s accounts receivable before the write-off of the Ramirez receivable? (c) What is the net realizable value of Aramis Company’s accounts receivable after the write-off of the Ramirez receivable?

Douglas Corporation had 120,000 shares of stock outstanding on January 1, 2014. On May 1, 2014, Douglas issued 60,000 shares. On July 1, Douglas purchased 10,000 treasury shares, which were reissued on October 1. Compute Douglas’s weighted-average number of shares outstanding for 2014.

At December 31, 2013, certain accounts included in the property, plant, and equipment section of Reagan Company’s balance sheet had the following balances. Land $230,000 Buildings 890,000 Leasehold improvements 660,000 Equipment 875,000 During 2014, the following transactions occurred. 1. Land site number 621 was acquired for $850,000. In addition, to acquire the land Reagan paid a $51,000 commission to a real estate agent. Costs of $35,000 were incurred to clear the land. During the course of clearing the land, timber and gravel were recovered and sold for $13,000. 2. A second tract of land (site number 622) with a building was acquired for $420,000. The closing statement indicated that the land value was $300,000 and the building value was $120,000. Shortly after acquisition, the building was demolished at a cost of $41,000. A new building was constructed for $330,000 plus the following costs. Excavation fees $38,000 Architectural design fees 11,000 Building permit fee 2,500 Imputed interest on funds used during construction (stock fi nancing) 8,500 The building was completed and occupied on September 30, 2014. 3. A third tract of land (site number 623) was acquired for $650,000 and was put on the market for resale. 4. During December 2014, costs of $89,000 were incurred to improve leased office space. The related lease will terminate on December 31, 2016, and is not expected to be renewed. (Hint: Leasehold improvements should be handled in the same manner as land improvements.) 5. A group of new machines was purchased under a royalty agreement that provides for payment of royalties based on units of production for the machines. The invoice price of the machines was $87,000, freight costs were $3,300, installation costs were $2,400, and royalty payments for 2014 were $17,500. Instructions (a) Prepare a detailed analysis of the changes in each of the following balance sheet accounts for 2014. Land Leasehold Improvements Buildings Equipment Disregard the related accumulated depreciation accounts. (b) List the items in the situation that were not used to determine the answer to (a) above, and indicate where, or if, these items should be included in Reagan’s financial statements.

Where are gains and losses related to cash flow hedges involving anticipated transactions reported?

Assume you asked your favorite AI learning tool “What accounting method choices are linked to the gross receipts test?” and the AI tool responded as follows: Is the AI answer to the question correct?  Explain.

Dumars Corporation reports in the current liability section of its balance sheet at December 31, 2014 (its year-end), short-term obligations of $15,000,000, which includes the current portion of 12% long-term debt in the amount of $10,000,000 (matures in March 2015). Management has stated its intention to refinance the 12% debt whereby no portion of it will mature during 2015. The date of issuance of the financial statements is March 25, 2015. Instructions (a) Is management’s intent enough to support long-term classification of the obligation in this situation? (b) Assume that Dumars Corporation issues $13,000,000 of 10-year debentures to the public in January2015 and that management intends to use the proceeds to liquidate the $10,000,000 debt maturing in March 2015. Furthermore, assume that the debt maturing in March 2015 is paid from these proceeds prior to the issuance of the financial statements. Will this have any impact on the balance sheet classification at December 31, 2014? Explain your answer. (c) Assume that Dumars Corporation issues common stock to the public in January and that management intends to entirely liquidate the $10,000,000 debt maturing in March 2015 with the proceeds of this equity securities issue. In light of these events, should the $10,000,000 debt maturing in March 2015 be included in current liabilities at December 31, 2014? (d) Assume that Dumars Corporation, on February 15, 2015, entered into a financing agreement with a commercial bank that permits Dumars Corporation to borrow at any time through 2016 up to $15,000,000 at the bank’s prime rate of interest. Borrowings under the financing agreement mature three years after the date of the loan. The agreement is not cancelable except for violation of a provision with which compliance is objectively determinable. No violation of any provision exists at the date of issuance of the financial statements. Assume further that the current portion of long-term debt does not mature until August 2015. In addition, management intends to refinance the $10,000,000 obligation under the terms of the financial agreement with the bank, which is expected to be financially capable of honoring the agreement. (1) Given these facts, should the $10,000,000 be classified as current on the balance sheet at December 31, 2014? (2) Is disclosure of the refinancing method required?

Compare the recognition lag and the implementation lag. (LO2)

Calculation of budget variances The accountant for Moon Industries has taken unexpected leave and has not completed the end-ofperiod budget analysis. The following incomplete budget analysis was found on her desk.   Additional information: Required (a) Complete the variance analysis report. (b) Provide a brief report to management of any issues highlighted from your analysis in (a).