Question & Answer

Under what circumstances will a partner recognize a loss from an operating distribution?

If a developing country has a comparative advantage in primary products, should the government allow market forces to dictate the pattern of trade?

A certain piece of production equipment is used to produce various components for an assembled product. To keep in-process inventories low, it is desired to produce the components in batch sizes of 150 units. Demand for each product is 2500 units per year. Production downtime costs an estimated $200/hr. All of the components made on the equipment are of approximately equal unit cost, which is $9.00. Holding cost rate = 30%/yr. In how many minutes must the changeover between batches be completed in order for 150 units to be the economic order quantity?

Twenty-five thousand shares reacquired by Elixir Corporation for $53 per share were exchanged for undeveloped land that has an appraised value of $1,700,000. At the time of the exchange, the common stock was trading at $62 per share on an organized exchange. Instructions (a) Prepare the journal entry to record the acquisition of land assuming that the purchase of the stock was originally recorded using the cost method. (b) Briefly identify the possible alternatives (including those that are totally unacceptable) for quantifying the cost of the land and briefly support your choice.

Do you think that this provides a moral argument for redistributing income from the rich to the poor? Does it prove that income should be so redistributed?

Nareh began the year with a tax basis of $45,000 in her partnership interest. Her share of partnership liabilities consists of $6,000 of recourse liabilities and $10,000 of nonrecourse liabilities at the beginning of the year and $6,000 of recourse liabilities and $13,000 of nonrecourse liabilities at the end of the year. During the year, she was allocated $65,000 of partnership ordinary business loss. Nareh does not materially participate in this partnership, and she has $4,000 of passive income from other sources. a. How much of Nareh’s loss is limited by her tax basis? b. How much of Nareh’s loss is limited by her at-risk amount? c. How much of Nareh’s loss is limited by the passive activity loss rules? Nareh began the year with a tax basis of $45,000 in her partnership interest. Her share of partnership liabilities consists of $6,000 of recourse liabilities and $10,000 of nonrecourse liabilities at the beginning of the year and $6,000 of recourse liabilities and $13,000 of nonrecourse liabilities at the end of the year. During the year, she was allocated $65,000 of partnership ordinary business loss. Nareh does not materially participate in this partnership, and she has $4,000 of passive income from other sources. a. How much of Nareh’s loss is limited by her tax basis? b. How much of Nareh’s loss is limited by her at-risk amount? c. How much of Nareh’s loss is limited by the passive activity loss rules?

This question is concerned with the supply of oil for central heating. In each case consider whether there is a movement along the supply curve (and in which direction) or a shift in it (and whether left or right). (a) New oil fields start up in production. (b) The demand for central heating rises. (c) The price of gas falls. (d) Oil companies anticipate an upsurge in demand for centralheating oil. (e) The demand for petrol rises. (f) New technology decreases the costs of oil refining. (g) All oil products become more expensive.

Explain why participating in the eurozone causes a country to give up its independent monetary policy and control over its domestic interest rates. (LO4)

John and Tara Smith are married and have lived in the same home for over 20 years.John’s uncle Tim, who is 64 years old, has lived with the Smiths since March of this year. Tim is searching for employment but has been unable to find any—his gross income for the year is $2,000.Tim used all $2,000 toward his own support.The Smiths provided the rest of Tim’s support by providing him with lodging valued at $5,000 and food valued at $2,200. a. Are the Smiths able to claim a dependency exemption for Tim?

What are the advantages and disadvantages of sand casting over investment casting?

What is a cupola?

Explain how the Fed influences the monthly mortgage payments on homes. How might the Fed indirectly influence the total demand for homes by consumers? (LO2)

Palmer Co. is evaluating the appropriate accounting for the following items. 1. Management has decided to switch from the FIFO inventory valuation method to the LIFO inventory valuation method for all inventories. 2. When the year-end physical inventory adjustment was made for the current year, the controller discovered that the prior year’s physical inventory sheets for an entire warehouse were mislaid and excluded from last year’s count. 3. Palmer’s Custom Division manufactures large-scale, custom-designed machinery on a contract basis. Management decided to switch from the completed-contract method to the percentage-ofcompletion method of accounting for long-term contracts. Identify and explain whether each of the above items is a change in accounting principle, a change in estimate, or an error.

Give three examples of oligopolistic industries. In what ways do the firms in each of these industries compete? Why do they choose to compete in the way that they do?

What is the meaning of the forward rate in the context of the term structure of interest rates? Why might forward rates consistently overestimate future interest rates? How could such a bias be avoided? (LO3)

Assume that there is a fall in aggregate demand (for goods). Trace through the short-run and long-run effect on employment.

1.       : A Gallup survey showed that highly educated workers are significantly less likely to be engaged than are those with a high school diploma or less. What might be some reasons for this lower level of engagement among more-educated employees?

How does a weak dollar affect U.S. inflation? Explain. (LO2)

Martin Corporation is planning to issue 3,000 shares of its own $10 par value common stock for two acres of land to be used as a building site. Instructions (a) What general rule should be applied to determine the amount at which the land should be recorded? (b) Under what circumstances should this transaction be recorded at the fair value of the land? (c) Under what circumstances should this transaction be recorded at the fair value of the stock issued? (d) Assume Martin intentionally records this transaction at an amount greater than the fair value of the land and the stock. Discuss this situation.

How do the requirements for accruing expenses under financial accounting rules differ from the requirements for accruing deductions under tax accounting rules?

Statements of Financial Accounting Concepts set forth financial accounting and reporting objectives and fundamentals that will be used by the Financial Accounting Standards Board in developing standards. Concepts Statement No. 6 defines various elements of financial statements. Instructions Answer the following questions based on SFAC No. 6. (a) Define and discuss the term “equity.” (b) What transactions or events change owners’ equity? (c) Define “investments by owners” and provide examples of this type of transaction. What financial statement element other than equity is typically affected by owner investments? (d) Define “distributions to owners” and provide examples of this type of transaction. What financial statement element other than equity is typically affected by distributions? (e) What are examples of changes within owners’ equity that do not change the total amount of owners’ equity?

What are some of the arguments in favor of using the indirect (reconciliation) method as opposed to the direct method for reporting a statement of cash flows?

Explain the characteristics of effective goals.

What are the five steps used to determine the proper time to recognize revenue?

Why might a corporation issue a stock distribution to its shareholders?