Question & Answer

Explain how sellers of financial futures contracts can offset their position. How is their gain or loss determined? (LO1)

In your own words, explain the path to higher-quality decisions.

A true centrifugal casting operation is to be performed in a horizontal configuration to make cast iron pipe sections. The sections will have a length = 42.0 in, outside diameter = 8.0 in, and wall thickness = 0.50 in. If the rotational speed of the pipe = 500 rev/min, determine the G-factor. Is the operation likely to be successful?

Celine Dion Company issued $600,000 of 10%, 20-year bonds on January 1, 2014, at 102. Interest is payable semiannually on July 1 and January 1. Dion Company uses the straight-line method of amortization for bond premium or discount. Instructions Prepare the journal entries to record the following. (a) The issuance of the bonds. (b) The payment of interest and the related amortization on July 1, 2014. (c) The accrual of interest and the related amortization on December 31, 2014.

What is the difference between postmolding and premolding in plastic IC chip packaging?

Explain how shareholder protection varies among countries. Explain how enforcement of securities laws varies among countries. Why do these characteristics affect the valuations of stocks? (LO7)

Below is the Retained Earnings account for the year 2014 for Acadian Corp. Retained earnings, January 1, 2014 $257,600 Add: Gain on sale of investments (net of tax) $41,200 Net income 84,500 Refund on litigation with government, related to the year 2011 (net of tax) 21,600 Recognition of income earned in 2013, but omitted from income statement in that year (net of tax) 25,400 172,700 430,300 Deduct: Loss on discontinued operations (net of tax) 35,000 Write-off of goodwill (net of tax) 60,000 Cumulative effect on income of prior years in changing from LIFO to FIFO inventory valuation in 2014 (net of tax) 23,200 Cash dividends declared 32,000 150,200 Retained earnings, December 31, 2014 $280,100 Instructions (a) Prepare a corrected retained earnings statement. Acadian Corp. normally sells investments of the type mentioned above. FIFO inventory was used in 2014 to compute net income. (b) State where the items that do not appear in the corrected retained earnings statement should be shown.

Explain how the credit crisis that began in 2008 affected the default rates of junk bonds and the risk premiums offered on newly issued junk bonds. (LO2)

Compare the relative merits of using GNY statistics with those of various basic needs indicators when assessing both the level and the rate of a country’s economic development.

: Explain disruptive innovation and the ambidextrous approach as possible responses to the forces that drive innovation and change in today’s organizations.

In 2010 the number of air passengers using UK airports fell by 3.4 per cent compared with 2009. In 2015, passengers were 5.5 per cent up compared with 2014. Can we deduce anything about people’s attitude to the environment and their behaviour from these data?

Assuming the same facts as those in E6-18 except that the payments must begin now and be made on the first day of each of the 15 years, what payment method would you recommend?

What determines the rate of depreciation of capital? What would happen if the rate of depreciation fell?

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)

Supply tends to be more elastic in the long run than in the short run. Assume that a tax is imposed on a good that was previously untaxed. How will the incidence of this tax change as time passes? How will the incidence be affected if demand too becomes more elastic over time?

What are some of the advantages of the closed mold processes for PMCs relative to open mold processes?

Fixed, variable, and mixed costs Spencer and Church is a CPA entity engaged in local practice. Some selected items from its chart of accounts are listed here.   Required For each account, indicate whether the account represents a fixed, variable, or mixed cost for the operations of the local practice office. If mixed, indicate whether it is predominantly fixed or variable. Explain your answers.   (a) Staff wages (f) Office supplies (b) Clerical wages (g) Professional dues (c) Rent (h) Professinal subscriptions (d) Licences (i) Property taxes (e) Insurance (j) Advertising   (LO2)   [Note about problem complexity: These are difficult questions because students will need to first visualise the costs (with very little information) and then apply chapter concepts. The Step 2 questions (A, B, and F) are the ones requiring significant assumptions to generate an answer.]

The price of Garner stock is $40. There is also a call option on Garner stock that is at the money, with a premium of $2.00. There is also a put option on Garner stock that is at the money, with a premium of $1.80. Why would investors consider writing this call option and this put option? Why would some investors consider buying this call option and this put option?

Brecker Inc., a greeting card company, had the following statements prepared as of December 31, 2014. BRECKER INC. COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2014 AND 2013 12/31/14 12/31/13 Cash $ 6,000 $ 7,000 Accounts receivable 62,000 51,000 Short-term investments (available-for-sale) 35,000 18,000 Inventory 40,000 60,000 Prepaid rent 5,000 4,000 Equipment 154,000 130,000 Accumulated depreciation—equipment (35,000) (25,000) Copyrights 46,000 50,000 Total assets $313,000 $295,000 Accounts payable $ 46,000 $ 40,000 Income taxes payable 4,000 6,000 Salaries and wages payable 8,000 4,000 Short-term loans payable 8,000 10,000 Long-term loans payable 60,000 69,000 Common stock, $10 par 100,000 100,000 Contributed capital, common stock 30,000 30,000 Retained earnings 57,000 36,000 Total liabilities and stockholders’ equity $313,000 $295,000 BRECKER INC. INCOME STATEMENT FOR THE YEAR ENDING DECEMBER 31, 2014 Sales revenue $338,150 Cost of goods sold 175,000 Gross profi t 163,150 Operating expenses 120,000 Operating income 43,150 Interest expense $11,400 Gain on sale of equipment 2,000 9,400 Income before tax 33,750 Income tax expense 6,750 Net income $ 27,000 Additional information: 1. Dividends in the amount of $6,000 were declared and paid during 2014. 2. Depreciation expense and amortization expense are included in operating expenses. 3. No unrealized gains or losses have occurred on the investments during the year. 4. Equipment that had a cost of $20,000 and was 70% depreciated was sold during 2014. Instructions Prepare a statement of cash flows using the direct method. (Do not prepare a reconciliation schedule.)

Assume you asked your favorite AI learning tool “Does someone who is married have the option to file using the head of household filing status?” and the AI tool responded as follows:

Magilke Industries acquired equipment this year to be used in its operations. The equipment was delivered by the suppliers, installed by Magilke, and placed into operation. Some of it was purchased for cash with discounts available for prompt payment. Some of it was purchased under longterm payment plans for which the interest charges approximated prevailing rates. What costs should Magilke capitalize for the new equipment purchased this year? Explain.

Why can convertible bonds be issued by firms at a higher price than other bonds? (LO2)

1.       : This chapter suggested that structure should be designed to fit strategy. Some theorists argue that strategy should be designed to fit the organization’s structure. With which theory do you agree? Explain.

Why can expectations of an acquisition affect the value of the target’s stock? (LO3)

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.