Question & Answer

Explain the dilemma of stock analysts who work for securities firms and assign ratings to large corporations. Why might they prefer not to assign low ratings to weak but large corporations? (LO6)

Name the four forming processes listed in the video clip on sheet-metal stamping dies and processes

Solve Problem 34.5, only use a wafer size of 12.0 in whose processable area has a diameter = 11.75 in. What is the percent increase in (a) processable area on the wafer and (b) number of chips on the wafer compared to the 200% increase in wafer diameter?

Explain why systemic risk is a source of concern in the bond and other debt markets. Also explain how the Financial Reform Act of 2010 was intended to reduce systemic risk. (LO2)

Cost allocation has no impact on the transfer price set.  Discuss.

Explain the use of the price-earnings ratio for valuing a stock. Why might investors derive different valuations for a stock when using the PE method? Why might investors derive an inaccurate valuation of a firm when using the PE method? (LO1)

Dierdorf Inc., a closely held corporation, has decided to go public. The controller, Ed Floyd, is concerned with presenting interim data when a LIFO inventory valuation is used. What problems are encountered with LIFO inventories when quarterly data are presented?

Daniel Perkins is the sole shareholder of Perkins Inc., which is currently under protection of the U.S. bankruptcy court. As a “debtor in possession,” he has negotiated the following revised loan agreement with United Bank. Perkins Inc.’s $600,000, 12%, 10-year note was refinanced with a $600,000, 5%, 10-year note. Instructions (a) What is the accounting nature of this transaction? (b) Prepare the journal entry to record this refinancing: (1) On the books of Perkins Inc. (2) On the books of United Bank. (c) Discuss whether generally accepted accounting principles provide the proper information useful to managers and investors in this situation.

The volume of manufacturing in a period has an effect on income calculated using absorption costing but has no effect on income calculated using variable costing. Explain.

1. Does the benefit principle conflict with either vertical or horizontal equity? 2. Would this be a good principle to apply in the case of health care?

Explain why, if the firm can practise first-degree price discrimination by selling every unit at the maximum price each consumer is prepared to pay, its revenue from selling 200 units will be the sum of both the shaded areas in Figure 8.13.

The positioning table for a component insertion machine uses a stepping motor and leadscrew mechanism. The design specifications require a table speed of 40 in/min and an accuracy = 0.0008 in. The pitch of the leadscrew = 0.2 in, and the gear ratio = 2:1 (2 turns of the motor for each turn of the leadscrew). The mechanical errors in the motor, gear box, leadscrew, and table connection are characterized by a normal distribution with standard deviation = 0.0001 in. Determine (a) the minimum number of step angles in the stepping motor, and (b) the frequency of the pulse train required to drive the table at the desired maximum speed.

Los Lobos Corp. uses the direct method to prepare its statement of cash flows. Los Lobos’s trial balances at December 31, 2014 and 2013, are as follows.December 31 2014 2013 Debits Cash $ 35,000 $ 32,000 Accounts receivable 33,000 30,000 Inventory 31,000 47,000 Property, plant, and equipment 100,000 95,000 Unamortized bond discount 4,500 5,000 Cost of goods sold 250,000 380,000 Selling expenses 141,500 172,000 General and administrative expenses 137,000 151,300 Interest expense 4,300 2,600 Income tax expense 20,400 61,200 $756,700 $976,100 Credits Allowance for doubtful accounts $ 1,300 $ 1,100 Accumulated depreciation—plant assets 16,500 15,000 Accounts payable 25,000 15,500 Income taxes payable 21,000 29,100 Deferred tax liability 5,300 4,600 8% callable bonds payable 45,000 20,000 Common stock 50,000 40,000 Paid-in capital in excess of par 9,100 7,500 Retained earnings 44,700 64,600 Sales revenue 538,800 778,700 $756,700 $976,100 Additional information: 1. Los Lobos purchased $5,000 in equipment during 2014. 2. Los Lobos allocated one-third of its depreciation expense to selling expenses and the remainder to general and administrative expenses. 3. Bad debt expense for 2014 was $5,000, and write-offs of uncollectible accounts totaled $4,800. Instructions Determine what amounts Los Lobos should report in its statement of cash flows for the year ended December 31, 2014, for the following items. (a) Cash collected from customers. (d) Cash paid for income taxes. (b) Cash paid to suppliers. (e) Cash paid for selling expenses. (c) Cash paid for interest.

Qualls Corporation reported 2014 earnings per share of $7.21. In 2015, Qualls reported earnings per share as follows. On income before extraordinary item $6.40 On extraordinary item 1.88 On net income $8.28Is the increase in earnings per share from $7.21 to $8.28 a favorable trend?

Use of prior year costs; quality of information Software Solutions is a family-owned business that has been in operation for more than 15 years. The board of directors is comprised of mainly family members, plus a few professionals such as an accountant and lawyer. Regina is a staff accountant who has been working on the budget for the last several weeks. The chief financial officer (CFO) needs to present the budget at the next board meeting and wants a preliminary copy in two days. Regina is certain that she will not be able to finish the budget within two days. Several department heads have not turned in their preliminary figures, and two departments have budgeted large increases in fixed costs for replacing computer equipment. Regina knows she should have alerted the CFO about these budgeted increases, but she has not had time.   One of her co-workers knows that Regina is behind and suggests that she use last year’s budgets for those departments that have not provided information and also for the departments that increased their budgets by large amounts. The co-worker says that the budget can be straightened out later because the board does not pay attention to the details.   Required (a)          Is this an ethical dilemma for Regina? Why? (b)          Why might it be important for the board of directors to have as much updated information as possible about the budget? (c)           What should Regina do, given that not enough time is available to gather high-quality information? Explain your thinking.

In what way will the nature of aggregate supply influence the effect of a change in aggregate demand on prices and real national income?

How good are you at making probabilistic judgements? Here is an interesting example. Suppose that one out of every hundred people in the population has a genetic medical condition. There is a test for this medical condition that is 99 per cent accurate. This means that if a person has the condition, the test returns a positive result with a 99 per cent probability; and if a person does not have the condition, it returns a negative result with 99 per cent probability. If a person’s test comes back positive (and you know nothing else about that person), what is the probability that s/he has the medical condition?

For each of the following, determine the expected cash flows. Cash Flow Probability Estimate Assessment (a) $ 4,800 20% 6,300 50% 7,500 30% (b) $ 5,400 30% 7,200 50% 8,400 20% (c) $(1,000) 10% 3,000 80% 5,000 10%

According to the injection molding video, name the four types of mold design most common in industry.

If a firm faces a shortage of workers with very specific skills, it may decide to undertake the necessary training itself. If on the other hand it faces a shortage of unskilled workers it may well offer a small wage increase in order to obtain the extra labour. In the first case it is responding to an increase in demand for labour by attempting to shift the supply curve. In the second case it is merely allowing a movement along the supply curve. Use a demand and supply diagram to illustrate each case. Given that elasticity of supply is different in each case, do you think that these are the best policies for the firm to follow? What would happen to wages and economic rent if it used the second policy in the first case?

Give some examples of beggar-my-neighbour policies.

Suppose you asked your favorite AI learning tool “For purposes of §351, what constitutes property?” and the AI tool responded as follows: Is the AI response correct?  Explain.

Using the facts in problem 48, what minimum tax would need to be assessed on Shameika to make the tax progressive with respect to effective tax rates?

If both demand and supply change, and if we know which direction they have shifted but not how much, why is it that we will be able to predict the direction in which either price or quantity will change, but not both? (Clue: consider the four possible combinations and sketch them if necessary: (a) D left, S left; (b) D right, S right; (c) D left, S right (d) D right, S left.)

Value chain in the public sector Traditionally, government organisations have tended to operate in silos, focusing on their own objectives and managing and protecting their own budgets. Recently, however, faced with seemingly intractable economic, social and environmental problems, many government organisations have sought to develop new ways of working. In particular, they have sought to explore how their objectives overlap and depend on other organisations and how they might share information and resources. One example is provided by attempts to reduce crime and enhance public safety in the criminal justice sector.   In New Zealand the Ministry of Justice is the lead agency in the justice sector. The sector includes the New Zealand Police, the Serious Fraud Office, Child Youth and Family, the Department of Corrections and the Crown Law Office.   The organisations in the criminal justice system can be thought of as being involved in a ‘pipeline’ that begins with crime prevention and the investigation of crime and proceeds all the way through to rehabilitation (see the figure below). Looking at the sector as a pipeline, we can see that policies and actions in any part of the system will affect other parts of the system. By working as a coordinated ‘justice sector’, changes can be made that result in the best outcomes for the sector as a whole.   Within this pipeline, the operations within one agency, Public Prisons, can be further analysed to show the links between its key activities and between the department and other organisations in the sector.   Key activities follow this path: • offenders are convicted in the courts • offenders are sentenced and sent to prison • prisoners undergo an initial assessment • the serving of the sentence is planned • the offender’s sentence is managed, including provision of relevant rehabilitation programs • the offender’s release is planned and managed.   Required (a) With reference to the information provided, distinguish between the structural and executional cost drivers in this value chain. (b) Is there an ability for governments to outsource any of these value chain activities?