Question & Answer

Navajo Corporation traded a used truck (cost $20,000, accumulated depreciation $18,000) for a small computer worth $3,300. Navajo also paid $500 in the transaction. Prepare the journal entry to record the exchange. (The exchange has commercial substance.)

Would the adoption of improved working conditions necessarily lead to higher labour costs per unit of output?

The following is a summary of all relevant transactions of Vicario Corporation since it was organized in 2014. In 2014, 15,000 shares were authorized and 7,000 shares of common stock ($50 par value) were issued at a price of $57. In 2015, 1,000 shares were issued as a stock dividend when the stock was selling for $60. Three hundred shares of common stock were bought in 2016 at a cost of $64 per share. These 300 shares are still in the company treasury. In 2015, 10,000 preferred shares were authorized and the company issued 5,000 of them ($100 par value) at $113. Some of the preferred stock was reacquired by the company and later reissued for $4,700 more than it cost the company. The corporation has earned a total of $610,000 in net income after income taxes and paid out a total of $312,600 in cash dividends since incorporation. Instructions Prepare the stockholders’ equity section of the balance sheet in proper form for Vicario Corporation as of December 31, 2016. Account for treasury stock using the cost method.

What are the four basic assumptions that underlie the financial accounting structure?

Name the three basic categories of materials

When does the Fed use a stimulative monetary policy, and when does it use a restrictive monetary policy? What is a criticism of a stimulative monetary policy? What is the risk of using a monetary policy that is too restrictive? (LO2; LO3)

Describe how the new purpose of a corporation as defined by the Business Roundtable differs from the previously defined corporate purpose.

: Explain the organizational dimensions that managers use to execute strategy.

Merrito Inc. is a large U.S. firm that issued bonds several years ago. Its bond ratings declined over time and, about a year ago, the bonds were rated in the junk bond classification. Nevertheless, investors continued to buy the bonds in the secondary market because of the attractive yield they offered. Last week, Merrito defaulted on its bonds, and the prices of most other junk bonds declined abruptly on the same day. Explain why news of Meritto’s financial problems could cause the prices of junk bonds issued by other firms to decrease, even when those firms had no business relationships with Merrito. Explain why the prices of those junk bonds with less liquidity declined more than those with a high degree of liquidity. (LO2)

An electron-beam welding operation is to be accomplished to butt weld two sheet-metal parts that are 3.0 mm thick. The unit melting energy = 5.0 J/mm3. The weld joint is to be 0.35 mm wide, so that the cross section of the fused metal is 0.35 mm by 3.0 mm. If accelerating voltage = 25 kV, beam current = 30 milliamp, heat transfer factor f1 = 0.85, and melting factor f2 = 0.75, determine the travel speed at which this weld can be made along the seam

When might a new partner have an upward basis adjustment following the acquisition of a partnership interest?

Laura Davis is a member in a limited liability company that has historically been profitable but is expecting to generate losses in the near future because of a weak local economy. In addition to the hours she works as an employee of a local business, she currently spends approximately 150 hours per year helping to manage the LLC. Other LLC members each work approximately 175 hours per year each in the LLC, and the time Laura and other members spend managing the LLC has remained constant since she joined the company three years ago. Laura’s tax basis and amount at-risk are large compared to her share of projected losses; however, she is concerned that her ability to deduct her share of the projected losses will be limited by the passive activity loss rules. a. As an LLC member, will Laura’s share of losses be presumed to be passive as they are for limited partners? Why or why not? [Hint: See §469(h)(2); Garnett v. Comm’r, 132 TC 368 (2009); and Prop. Reg. § 1.469-5(e)(3)(i).] b. Assuming Laura’s losses are not presumed to be passive, is she devoting sufficient time to the LLC to be considered a material participant? Why or why not? c. What would you recommend to Laura to help her achieve a more favorable tax outcome?

Franklin, Jefferson, and Washington formed the Independence Partnership (a calendar-year-end entity) by contributing cash 10 years ago. Each partner owns an equal interest in the partnership and has an outside basis in their partnership interest of $104,000. On January 1 of the current year, Franklin sells their partnership interest to Adams for a cash payment of $122,000. The partnership has the following assets and no liabilities as of the sale date: Tax Basis Fair Market Value Cash $ 18,000 $ 18,000 Accounts receivable -0- 12,000 Inventory 69,000 81,000 Equipment 180,000 225,000 Stock investment 45,000 30,000    Totals $ 312,000 $ 366,000 The equipment was purchased for $240,000, and the partnership has taken $60,000 of depreciation. The stock was purchased seven years ago. a. What is Franklin’s overall gain or loss on the sale of their partnership interest? b. What is the character of Franklin’s gain or loss?

What conditions must exist for the retail inventory method to provide valid results?

What kinds of deductions are prohibited as a matter of public policy? Why might Congress deem it important to disallow deductions for expenditures that are against public policy?

Explain how EVA differs from residual income.

What is meant by the term design for life cycle?

At the end of the year, before distributions, Bombay (an S corporation) has an accumulated adjustments account balance of $15,000 and accumulated E&P of $20,000 from a previous year as a C corporation. During the year, Nicolette (a 40 percent shareholder) received a $20,000 distribution (the remaining shareholders received $30,000 in distributions).  What are the amount and character of income or gain Nicolette must recognize from the distribution? What is her basis in her Bombay stock at the end of the year?  (Assume her stock basis is $40,000 after considering her share of Bombay’s income for the year but before considering the effects of the distribution.)

There are 10 correct answers in the following multiple choice questions (some questions have multiple answers that are correct). To attain a perfect score on the quiz, all correct answers must be given. Each correct answer is worth 1 point. Each omitted answer or wrong answer reduces the score by 1 point, and each additional answer beyond the correct number of answers reduces the score by 1 point. Percentage score on the quiz is based on the total number of correct answers. 12.1 Which one of the following terms refers to the glassy state of a material: (a) crystalline, (b) devitrified, (c) polycrystalline, (d) vitiated, or (e) vitreous? 12.2 Besides helping to preserve the environment, the use of recycled glass as an ingredient of the starting material in glassmaking serves what other useful purpose (one answer): (a) adds coloring variations to the glass for aesthetic value, (b) makes the glass easier to melt, (c) makes the glass stronger, or (d) reduces odors in the plant 12.3 The charge in glassworking is which one of the following: (a) the duration of the melting cycle, (b) the electric energy required to melt the glass, (c) the name given to the melting furnace, or (d) the starting materials in melting? 12.4 Typical glass melting temperatures are in which of the following ranges: (a) 400°C to 500°C, (b) 900°C to 1000°C, (c) 1500°C to 1600°C, or (d) 2000°C to 2200°C? 12.5 Casting is a glassworking process used for (a) high production, (b) low production, or (c) medium production? 12.6 Which one of the following processes or processing steps is not applicable in glassworking: (a) annealing, (b) pressing, (c) quenching, (d) sintering, and (e) spinning? 12.7 The press-and-blow process is best suited to the production of (narrow-necked) beverage bottles, while the blow-and-blow process is more appropriate for producing (wide-mouthed) jars: (a) true, or (b) false 12.8 Which one of the following processes is used to produce glass tubing: (a) Danner process, (b) pressing, (c) rolling, or (d) spinning? 12.9 If a glass part with a wall thickness of 5 mm (0.20 in) takes 10 minutes to anneal, how much time would a glass part of similar geometry but with a wall thickness of 7.5 mm (0.30 in) take to anneal (choose the one closest answer): (a) 10 minutes, (b) 15 minutes, (c) 20 minutes, or (c) 30 minutes? 12.10 A lehr is which of the following: (a) a lion's den, (b) a melting furnace, (c) a sintering furnace, (d) an annealing furnace, or (e) none of the above?

List at least three possible allocation bases that could be used to allocate accounting department costs to other departments. Give one advantage and one disadvantage of using each allocation base.

1.      Have you heard of Casper, purchased a Casper mattress, or visited a Casper store? What is your impression? What do you value most and what do you want to avoid when buying a mattress?

What determines the shape and position of the MP curve?

The following balances were taken from the books of Maria Conchita Alonzo Corp. on December 31, 2014. Interest revenue $ 86,000 Accumulated depreciation—equipment $ 40,000 Cash 51,000 Accumulated depreciation—buildings 28,000 Sales revenue 1,380,000 Notes receivable 155,000 Accounts receivable 150,000 Selling expenses 194,000 Prepaid insurance 20,000 Accounts payable 170,000 Sales returns and allowances 150,000 Bonds payable 100,000 Allowance for doubtful accounts 7,000 Administrative and general expenses 97,000 Sales discounts 45,000 Accrued liabilities 32,000 Land 100,000 Interest expense 60,000 Equipment 200,000 Notes payable 100,000 Buildings 140,000 Loss from earthquake damage Cost of goods sold 621,000 (extraordinary item) 150,000 Common stock 500,000 Retained earnings 21,000 Assume the total effective tax rate on all items is 34%. Instructions Prepare a multiple-step income statement; 100,000 shares of common stock were outstanding during the year.

Bill Haley is learning about pension accounting. He is convinced that in years when companies record liability gains and losses, total comprehensive income will not be affected. Is Bill correct? Explain.

Explain the problems that arise in valuing mortgage-backed securities. (LO4)