Question & Answer

What method(s) might be used in the accounts to record a loss due to a price decline in the inventories? Discuss.

Go through the above arguments and give a reply to the criticisms made of government intervention.

How should changes in the estimated unguaranteed residual value be handled by the lessor?

Explain why the credit crisis caused concerns about systemic risk. (LO5)

Would increasing the money supply growth place upward or downward pressure on interest rates? (LO1, LO2)

Explain the use of a sinking-fund provision. How can it reduce the investor’s risk? (LO2)

In an orthogonal cutting operation, the 0.250 in wide tool has a rake angle of 5°. The lathe is set so the chip thickness before the cut is 0.010 in. After the cut, the deformed chip thickness is measured to be 0.027 in. Calculate (a) the shear plane angle and (b) the shear strain for the operation.

What is meant by the term antidilution? Give an example.

Define the following terms. (a) Basic earnings per share. (b) Potentially dilutive security. (c) Diluted earnings per share. (d) Complex capital structure. (e) Potential common stock.

Discuss the appropriate treatment in the financial statements of each of the following. (a) An amount of $113,000 realized in excess of the cash surrender value of an insurance policy on the life of one of the founders of the company who died during the year. (b) A profit-sharing bonus to employees computed as a percentage of net income. (c) Additional depreciation on factory machinery because of an error in computing depreciation for the previous year. (d) Rent received from subletting a portion of the office space. (e) A patent infringement suit, brought 2 years ago against the company by another company, was settled this year by a cash payment of $725,000. (f) A reduction in the Allowance for Doubtful Accounts balance because the account appears to be considerably in excess of the probable loss from uncollectible receivables.

} Last year, JL Corporation’s tax liability was $900,000. For the current year, JL Corporation reported the following taxable income at the end of its first, second, and third quarters (see table below). What are JL’s minimum required first, second, third, and fourth quarter estimated tax payments (ignoring the actual current-year tax safe harbor)?      Quarter-End Cumulative taxable income First $500,000 Second $1,250,000 Third $2,250,000

On January 1, 2014, Crocker Company issued 10-year, $2,000,000 face value, 6% bonds, at par. Each $1,000 bond is convertible into 15 shares of Crocker common stock. Crocker’s net income in 2014 was $300,000, and its tax rate was 40%. The company had 100,000 shares of common stock outstanding throughout 2014. None of the bonds were converted in 2014. Instructions (a) Compute diluted earnings per share for 2014. (b) Compute diluted earnings per share for 2014, assuming the same facts as above, except that $1,000,000 of 6% convertible preferred stock was issued instead of the bonds. Each $100 preferred share is convertible into 5 shares of Crocker common stock.

Are there any goods or services where consumers do not experience diminishing marginal utility?

What are the three types of tax credits? Explain why it is important to distinguish between the different types of tax credits.

Sarah was contemplating making a contribution to her traditional individual retirement account for the current year. She determined that she would contribute $6,000 to her IRA, and she deducted $6,000 for the contribution when she completed and filed her current year tax return on February 15 of the following year. Two months later, on April 15, Sarah realized that she had not yet actually contributed the funds to her IRA. On April 15, she went to the post office and mailed a $6,000 check to the bank holding her IRA. The bank received the payment on April 19. In which year is Sarah’s $6,000 contribution deductible?

Steve Madison needs $250,000 in 10 years. How much must he invest at the end of each year, at 11% interest, to meet his needs?

What are some of the more common reasons why a bank may experience a low ROA? (LO3)

1.       : One small business owner said that he had to teach his young employees what a “dial tone” was. Do you have phone aversion? Do you think it is possible to build a solid business relationship with customers using only text messaging, e-mail, and social media?

Explain how the Financial Reform Act of 2010 attempted to prevent biased ratings of mortgage-backed securities by credit rating agencies. (LO5)

Evaluating a proposal for measuring performance Benerux Industries has been in business for 30 years. The entity’s major product is a control unit for elevators. The entity has a reputation for manufacturing products of exceptionally high quality, resulting in higher prices for its units than competitors charge. Higher prices, in turn, have meant that the entity has been comfortably profitable. A major reason for the high product quality is a loyal and conscientious workforce. Production employees have been with the entity for an average of 18 years.   Recently the entity hired a cost accountant from the local university. After a few months at the entity, the new accountant proposed a performance measurement report consisting of two parts. The first part will report the actual number of units started during each month, the target number of units that should have been started, and a variance. The second part will calculate an actual cost per good unit completed during each month, the target cost per unit, and a variance.   The new accountant provided the following additional information concerning the performance report: The first part of the report concentrates on units started because many units are scrapped in the manufacturing process (to maintain high quality). Therefore, the best measure of effort expended is the number of units on which work was begun. The target number of units to be begun in a month is the number of units started in the corresponding month last year plus 5 per cent. In the second part of the report, actual costs per unit will be calculated by dividing total production cost incurred during the month by the number of good units completed during the month. The target cost per unit is the average cost for manufacturing this kind of product as determined from industry newsletters.   The proposal concluded with the following comments: ‘This report should be prepared and distributed quarterly. For maximum benefit I suggest that a bonus be awarded whenever units started exceeds target and costs are below target. This system will result in substantially improved profits for the entity. It should be implemented immediately.’   Required (a)     Is it possible to develop a perfect system for monitoring and motivating worker performance? Why? (b)     Explain what the managers might learn by monitoring each of the variances in the proposed performance measurement system. (c)     Discuss possible reasons why the entity did not previously use a variance system to monitor and motivate worker performance. (d)     Describe weaknesses in the proposed performance measurement system. (e)     If you were the CFO of Benerux Industries, how would you respond to the new cost accountant’s proposal? Discuss whether you agree with the proposal and explain how you would communicate your response.

An 8-in diameter grinding wheel, 1.0 in wide, is used in a surface grinding job performed on a flat piece of heat-treated 4340 steel. The wheel rotates to achieve a surface speed of 5000 ft/min, with a depth of cut (infeed) = 0.002 in per pass and a crossfeed = 0.15 in. The reciprocating speed of the work is 20 ft/min, and the operation is performed dry. (a) What is the length of contact between the wheel and the work? (b) What is the volume rate of metal removed? (c) If there are 300 active grits/in2 of wheel surface, estimate the number of chips formed per unit time. (d) What is the average volume per chip? (e) If the tangential cutting force on the workpiece = 7.3 lbs, what is the specific energy calculated for this job?

Verify that the derivative of Eq. (24.6) results in Eq. (24.7)

Explain how the prices of bonds were affected by a change in the risk-free rate during the Covid-19 pandemic that began in 2020. Explain how bond prices were affected by a change in the credit risk premium during this period. (LO2)

What disclosures are required relative to long-term debt and sinking fund requirements?

Identify some advantages of CUs. Identify disadvantages of CUs that relate to their common bond requirement. (LO7)