Question & Answer

Compare and contrast the aggregate and entity approaches for a sale of a partnership interest.

In 2013, Austin Powers Corporation developed a new product that will be marketed in 2014. In connection with the development of this product, the following costs were incurred in 2013: research and development costs $400,000; materials and supplies consumed $60,000; and compensation paid to research consultants $125,000. It is anticipated that these costs will be recovered in 2016. What is the amount of research and development costs that Austin Powers should record in 2013 as a charge to expense?

What are the three basic steps in the manufacture of a pneumatic tire?

In 2024, Janet and Ray are married filing jointly. They have five dependent children under 18 years of age. Janet and Ray’s taxable income (all ordinary) is $2,400,000 and they itemize their deductions as follows: state income taxes of $10,000 and mortgage interest expense of $25,000 (acquisition debt of $300,000).  What is Janet and Ray’s AMT? Complete Form 6251 for Janet and Ray.

Horizon Outfitters Company includes in its trial balance for December 31 an item for Accounts Receivable $789,000. This balance consists of the following items: Due from regular customers $523,000 Refund receivable on prior year’s income taxes (an established claim) 15,500 Travel advance to employees 22,000 Loan to wholly owned subsidiary 45,500 Advances to creditors for goods ordered 61,000 Accounts receivable assigned as security for loans payable 75,000 Notes receivable past due plus interest on these notes 47,000 Total $789,000 Illustrate how these items should be shown in the balance sheet as of December 31.

Joni Hyde Inc. has the following amounts reported in its general ledger at the end of the current year. Organization costs $24,000 Trademarks 15,000 Discount on bonds payable 35,000 Deposits with advertising agency for ads to promote goodwill of company 10,000 Excess of cost over fair value of net identifi able assets of acquired subsidiary 75,000 Cost of equipment acquired for research and development projects; the equipment has an alternative future use 90,000 Costs of developing a secret formula for a product that is expected to be marketed for at least 20 years 80,000 Instructions (a) On the basis of the information above, compute the total amount to be reported by Hyde for intangible assets on its balance sheet at year-end. (b) If an item is not to be included in intangible assets, explain its proper treatment for reporting purposes.

For Problem 21.12, the lathe has a mechanical efficiency = 0.83. Determine (a) the horsepower consumed by the turning operation; (b) horsepower that must be generated by the lathe; (c) unit horsepower and specific energy for the work material in this operation

There are 10 correct answers in the following multiple choice questions (some questions have multiple answers that are correct). To attain a perfect score on the quiz, all correct answers must be given. Each correct answer is worth 1 point. Each omitted answer or wrong answer reduces the score by 1 point, and each additional answer beyond the correct number of answers reduces the score by 1 point. Percentage score on the quiz is based on the total number of correct answers. 12.1 Which one of the following terms refers to the glassy state of a material: (a) crystalline, (b) devitrified, (c) polycrystalline, (d) vitiated, or (e) vitreous? 12.2 Besides helping to preserve the environment, the use of recycled glass as an ingredient of the starting material in glassmaking serves what other useful purpose (one answer): (a) adds coloring variations to the glass for aesthetic value, (b) makes the glass easier to melt, (c) makes the glass stronger, or (d) reduces odors in the plant 12.3 The charge in glassworking is which one of the following: (a) the duration of the melting cycle, (b) the electric energy required to melt the glass, (c) the name given to the melting furnace, or (d) the starting materials in melting? 12.4 Typical glass melting temperatures are in which of the following ranges: (a) 400°C to 500°C, (b) 900°C to 1000°C, (c) 1500°C to 1600°C, or (d) 2000°C to 2200°C? 12.5 Casting is a glassworking process used for (a) high production, (b) low production, or (c) medium production? 12.6 Which one of the following processes or processing steps is not applicable in glassworking: (a) annealing, (b) pressing, (c) quenching, (d) sintering, and (e) spinning? 12.7 The press-and-blow process is best suited to the production of (narrow-necked) beverage bottles, while the blow-and-blow process is more appropriate for producing (wide-mouthed) jars: (a) true, or (b) false 12.8 Which one of the following processes is used to produce glass tubing: (a) Danner process, (b) pressing, (c) rolling, or (d) spinning? 12.9 If a glass part with a wall thickness of 5 mm (0.20 in) takes 10 minutes to anneal, how much time would a glass part of similar geometry but with a wall thickness of 7.5 mm (0.30 in) take to anneal (choose the one closest answer): (a) 10 minutes, (b) 15 minutes, (c) 20 minutes, or (c) 30 minutes? 12.10 A lehr is which of the following: (a) a lion's den, (b) a melting furnace, (c) a sintering furnace, (d) an annealing furnace, or (e) none of the above?

Distinguish between a capital interest and a profits interest, and explain how partners and partnerships treat each when exchanging them for services provided.

You are evaluating Woodlawn Racetrack for a potential loan. An examination of the notes to the financial statements indicates restricted cash at year-end amounts to $100,000. Explain how you would use this information in evaluating Woodlawn’s liquidity.

In its December 31, 2014, balance sheet Oakley Corporation reported as an asset, “Net notes and accounts receivable, $7,100,000.” What other disclosures are necessary?

Parnevik Company has the following securities in its investment portfolio on December 31, 2014 (all securities were purchased in 2014): (1) 3,000 shares of Anderson Co. common stock which cost $58,500, (2) 10,000 shares of Munter Ltd. common stock which cost $580,000, and (3) 6,000 shares of King Company preferred stock which cost $255,000. The Fair Value Adjustment account shows a credit of $10,100 at the end of 2014. In 2015, Parnevik completed the following securities transactions. 1. On January 15, sold 3,000 shares of Anderson’s common stock at $22 per share less fees of $2,150. 2. On April 17, purchased 1,000 shares of Castle’s common stock at $33.50 per share plus fees of $1,980. On December 31, 2015, the market prices per share of these securities were Munter $61, King $40, and Castle $29. In addition, the accounting supervisor of Parnevik told you that, even though all these securities have readily determinable fair values, Parnevik will not actively trade these securities because the top management intends to hold them for more than one year. Instructions (a) Prepare the entry for the security sale on January 15, 2015. (b) Prepare the journal entry to record the security purchase on April 17, 2015. (c) Compute the unrealized gains or losses and prepare the adjusting entry for Parnevik on December 31, 2015. (d) How should the unrealized gains or losses be reported on Parnevik’s balance sheet?

A continuous weld is to be made around the circumference of a round steel tube of diameter = 6.0 ft, using a submerged arc welding operation under automatic control at a voltage of 25 volts and current of 300 amps. The tube is slowly rotated under a stationary welding head. The heat transfer factor for SAW is = 0.95 and the assumed melting factor = 0.7. The cross-sectional area of the weld bead is 0.12 in2. If the unit melting energy for the steel = 150 Btu/in3, determine (a) the rotational speed of the tube and (b) the time required to complete the weld.

Jerry is a 30 percent partner in the JJM Partnership when he sells his entire interest to Lucia for $56,000 cash. At the time of the sale, Jerry’s basis in JJM is $32,000. JJM does not have any debt or hot assets. What is Jerry’s gain or loss on the sale of his interest?

How is the public-sector debt-to-GDP ratio likely to be affected by the state of the economy?

At a recent management meeting at Skyward Industries, the Transport Division manager was heard to say “this transfer pricing is a waste of time – at the end of the year all the internal transactions are eliminated on consolidation in the financial reports”.  Comment on this statement.

XYZ declared a $1 per share dividend on August 15. The date of record for the dividend was September 1 (the stock began selling ex-dividend on September 2). The dividend was paid on September 10. Ellis is a cash-method taxpayer. Determine the economic income and the amount he must include in gross income under the following independent circumstances.

On June 30, 2014, Mischa Auer Company issued $4,000,000 face value of 13%, 20-year bonds at $4,300,920, a yield of 12%. Auer uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31. Instructions (Round answers to the nearest cent.) (a) Prepare the journal entries to record the following transactions. (1) The issuance of the bonds on June 30, 2014. (2) The payment of interest and the amortization of the premium on December 31, 2014. (3) The payment of interest and the amortization of the premium on June 30, 2015. (4) The payment of interest and the amortization of the premium on December 31, 2015. (b) Show the proper balance sheet presentation for the liability for bonds payable on the December 31, 2015, balance sheet. (c) Provide the answers to the following questions. (1) What amount of interest expense is reported for 2015? (2) Will the bond interest expense reported in 2015 be the same as, greater than, or less than the amount that would be reported if the straight-line method of amortization were used? (3) Determine the total cost of borrowing over the life of the bond. (4) Will the total bond interest expense for the life of the bond be greater than, the same as, or less than the total interest expense if the straight-line method of amortization were used?

Can taxes be used to relieve poverty?

Explain how the current account of the balance of payments is likely to vary with the course of the business cycle.

Cathy, Heathcliff, and Isabelle are equal shareholders in Wuthering Heights (WH), an S corporation. Heathcliff has decided he would like to terminate the S election. In the following alternative scenarios, indicate whether the termination will occur and indicate the date if applicable (assume no alternative termination dates are selected).

Distinguish between primary and secondary markets. Distinguish between money and capital markets. (LO2)

1. Why may inflows of short-term deposits create a problem? 2. Where would interest payments on short-term foreign deposits in UK banks be entered on the balance of payments account?

A drilling operation is to be performed with a 12.7 mm diameter twist drill in a steel workpart. The hole is a blind hole at a depth of 60 mm and the point angle is 118°. The cutting speed is 25 m/min and the feed is 0.30 mm/rev. Determine (a) the cutting time to complete the drilling operation, and (b) metal removal rate during the operation, after the drill bit reaches full diameter.

Explain why some futures contracts may be more suitable than others for hedging exposure to interest rate risk. (LO2)