Question & Answer

The following amortization and interest schedule reflects the issuance of 10-year bonds by Capulet Corporation on January 1, 2008, and the subsequent interest payments and charges. The company’s year-end is December 31, and financial statements are prepared once yearly.BLEMS Amortization Schedule Amount Carrying Year Cash Interest Unamortized Value 1/1/2008 $5,651 $ 94,349 2008 $11,000 $11,322 5,329 94,671 2009 11,000 11,361 4,968 95,032 2010 11,000 11,404 4,564 95,436 2011 11,000 11,452 4,112 95,888 2012 11,000 11,507 3,605 96,395 2013 11,000 11,567 3,038 96,962 2014 11,000 11,635 2,403 97,597 2015 11,000 11,712 1,691 98,309 2016 11,000 11,797 894 99,106 2017 11,000 11,894 100,000 Instructions (a) Indicate whether the bonds were issued at a premium or a discount and how you can determine this fact from the schedule. (b) Indicate whether the amortization schedule is based on the straight-line method or the effectiveinterest method, and how you can determine which method is used. (c) Determine the stated interest rate and the effective-interest rate. (d) On the basis of the schedule above, prepare the journal entry to record the issuance of the bonds on January 1, 2008. (e) On the basis of the schedule above, prepare the journal entry or entries to reflect the bond transactions and accruals for 2008. (Interest is paid January 1.) (f) On the basis of the schedule above, prepare the journal entry or entries to reflect the bond transactions and accruals for 2015. Capulet Corporation does not use reversing entries.

Suppose you asked your favorite AI query tool the following question: “How do the tax laws treat family members for purposes of limiting the number of owners an S corporation may have?”  The AI tool provided the following response:

At December 31, 2014, Ashley Co. has outstanding purchase commitments for 150,000 gallons, at $6.20 per gallon, of a raw material to be used in its manufacturing process. The company prices its raw material inventory at cost or market, whichever is lower. Assuming that the market price as of December 31, 2014, is $5.90, how would you treat this situation in the accounts?

Describe an active monetary policy. (LO2; LO3)

Karane Enterprises, a calendar-year manufacturer based in College Station, Texas, began business in 2023. In the process of setting up the business, Karane has acquired various types of assets. Below is a list of assets acquired during 2023:

The barrel and screw of an extruder are generally divided into three sections; identify the sections.

The following information is available for Remmers Corporation for 2014. 1. Depreciation reported on the tax return exceeded depreciation reported on the income statement by $120,000. This difference will reverse in equal amounts of $30,000 over the years 2015–2018. 2. Interest received on municipal bonds was $10,000. 3. Rent collected in advance on January 1, 2014, totaled $60,000 for a 3-year period. Of this amount, $40,000 was reported as unearned at December 31, 2014, for book purposes. 4. The tax rates are 40% for 2014 and 35% for 2015 and subsequent years. 5. Income taxes of $320,000 are due per the tax return for 2014. 6. No deferred taxes existed at the beginning of 2014. Instructions (a) Compute taxable income for 2014. (b) Compute pretax financial income for 2014. (c) Prepare the journal entries to record income tax expense, deferred income taxes, and income taxes   for 2014 and 2015. Assume taxable income was $980,000 in 2015. (d) Prepare the income tax expense section of the income statement for 2014, beginning with “Income before income taxes.

Define an organizational ecosystem and show how the general and task environments affect an organization’s ability to thrive.

Explain how the Fed’s monetary policy affects the unemployment level. (LO2)

Midwest Health Club (MHC) offers one-year memberships. Membership fees are due in full at the beginning of the individual membership period. As an incentive to new customers, MHC advertised that any customers not satisfied for any reason could receive a refund of the remaining portion of unused membership fees. As a result of this policy, Richard Nies, corporate controller, recognized revenue ratably over the life of the membership. MHC is in the process of preparing its year-end financial statements. Rachel Avery, MHC’s treasurer, is concerned about the company’s lackluster performance this year. She reviews the financial statements Nies prepared and tells Nies to recognize membership revenue when the fees are received. Instructions Answer the following questions. (a) What are the ethical issues involved? (b) What should Nies do?

On January 1, 2024, Janna has a tax basis of $15,000 in her Mimikaki stock (Mimikaki has been an S corporation since inception). In 2024, Janna was allocated $20,000 of ordinary income from Mimikaki. What are the amount and character of gain she recognizes from end-of-the-year distributions in each of the following alternative scenarios, and what is her stock basis following each distribution?

Judds Company purchased a new plant asset on April 1, 2014, at a cost of $711,000. It was estimated to have a service life of 20 years and a salvage value of $60,000. Judds’ accounting period is the calendar year. Instructions (a) Compute the depreciation for this asset for 2014 and 2015 using the sum-of-the-years’-digits method. (b) Compute the depreciation for this asset for 2014 and 2015 using the double-declining-balance method.

Briefly describe some of the similarities and differences between GAAP and IFRS with respect to the accounting for inventories.

For each of the following subsequent events, indicate whether a company should (a) adjust the financial statements, (b) disclose in notes to the financial statements, or (c) neither adjust nor disclose. ________ 1. Settlement of a tax case at a cost considerably in excess of the amount expected at year-end. ________ 2. Introduction of a new product line. ________ 3. Loss of assembly plant due to fire. ________ 4. Sale of a significant portion of the company’s assets. ________ 5. Retirement of the company president. ________ 6. Issuance of a significant number of ordinary shares. ________ 7. Loss of a significant customer. ________ 8. Prolonged employee strike. ________ 9. Material loss on a year-end receivable because of a customer’s bankruptcy. _______ 10. Hiring of a new president. _______ 11. Settlement of prior year’s litigation against the company (no loss was accrued). _______ 12. Merger with another company of comparable size.

Lotoya Davis Corporation has 10 million shares of common stock issued and outstanding. On June 1, the board of directors voted an 80 cents per share cash dividend to stockholders of record as of June 14, payable June 30. Instructions (a) Prepare the journal entry for each of the dates above assuming the dividend represents a distribution of earnings. (b) How would the entry differ if the dividend were a liquidating dividend?

Spoilage journal entries Jones Company manufactures custom doors. When job 186 (a batch of 14 custom doors) was being processed in the machining department, one of the wood panels on a door split. This problem occurs periodically and is considered normal spoilage. Direct materials and labour for the door, to the point of spoilage, were $35. In addition, a storm caused a surge in electricity, and a routing machine punctured the wood for job 238. This incident occurred at the beginning of production, so spoilage amounted to only the cost of wood, at $200.   Required (a)     Prepare the journal entries for normal and abnormal spoilage. (b)     Now suppose that the wood from abnormal spoilage can be sold for $25. Record the journal entries for the disposal value. (c)      Jones Company is considering hiring someone to inspect all wood after it arrives at the plant, but prior to production. Discuss the pros and cons of hiring an inspector.

Shauna and Danielle decided to liquidate their jointly owned corporation, Woodward Fashions Inc. (WFI).  After liquidating its remaining inventory and paying off its remaining liabilities, WFI had the following tax accounting balance sheet.     FMV        Tax basisAppreciation Cash$  200,000$     200,000 Building      50,000         10,000        40,000 Land    150,000         90,000        60,000 Total$  400,000$     300,000$    100,000

Describe the major uses of funds by finance companies. (LO2)

Matlock Company uses a perpetual inventory system. Its beginning inventory consists of 50 units that cost $34 each. During June, the company purchased 150 units at $34 each, returned 6 units for credit, and sold 125 units at $50 each. Journalize the June transactions.

Assume that Mexico suddenly experiences high and unexpected inflation. How could this affect the value of the Mexican peso according to purchasing power parity (PPP) theory? (LO2)

On March 1, 2014, Pechstein Construction Company contracted to construct a factory building for Fabrik Manufacturing Inc. for a total contract price of $8,400,000. The building was completed by October 31, 2016. The annual contract costs incurred, estimated costs to complete the contract, and accumulated billings to Fabrik for 2014, 2015, and 2016 are given below. 2014 2015 2016 Contract costs incurred during the year $2,880,000 $2,230,000 $2,190,000 Estimated costs to complete the contract at 12/31 3,520,000 2,190,000 –0– Billings to Fabrik during the year 3,200,000 3,500,000 1,700,000 Instructions (a) Using the percentage-of-completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2014, 2015, and 2016. (Ignore income taxes.) (b) Using the completed-contract method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2014, 2015, and 2016. (Ignore incomes taxes.)

Wayne Rogers, an administrator at a major university, recently said, “I’ve got some CDs in my IRA, which I set up to beat the IRS.” As elsewhere, in the world of accounting and finance, it often helps to be fluent in abbreviations and acronyms. Instructions Presented below is a list of common accounting acronyms. Identify the term for which each acronym stands, and provide a brief definition of each term. (a) AICPA (e) FAF (i) CPA (b) CAP (f) FASAC (j) FASB (c) ARB (g) SOP (k) SEC (d) APB (h) GAAP (l) IASB

Homer Winslow and Jane Alexander are discussing various aspects of the FASB’s concepts statement on the objective of financial reporting. Homer indicates that this pronouncement provides little, if any, guidance to the practicing professional in resolving accounting controversies. He believes that the statement provides such broad guidelines that it would be impossible toapply the objective to present-day reporting problems. Jane concedes this point but indicates that the objective is still needed to provide a starting point for the FASB in helping to improve financial reporting. Instructions (a) Indicate the basic objective established in the conceptual framework. (b) What do you think is the meaning of Jane’s statement that the FASB needs a starting point to resolve accounting controversies?

What approaches may be employed in applying the lower-of-cost-or-market procedure? Which approach is normally used and why?

Explain how the Fed increases the money supply through the ample reserves framework. (LO2)