Question & Answer

Identify the three basic forms of sawing operation?

Zoop Corporation purchased for $300,000 a 30% interest in Murphy, Inc. This investment enables Zoop to exert significant influence over Murphy. During the year, Murphy earned net income of $180,000 and paid dividends of $60,000. Prepare Zoop’s journal entries related to this investment.

What is a buckyball?

To what extent do Keynesians and new classicists agree about the role of fixed exchange rates?

Indicate which of the following costs should be expensed when incurred. (a) $13,000 paid to rearrange and reinstall machinery. (b) $200,000 paid for addition to building. (c) $200 paid for tune-up and oil change on delivery truck. (d) $7,000 paid to replace a wooden floor with a concrete floor. (e) $2,000 paid for a major overhaul on a truck, which extends the useful life.

Indicate whether the following statements about the conceptual framework are true or false. If false, provide a brief explanation supporting your position. (a) The fundamental qualitative characteristics that make accounting information useful are relevance and verifiability. (b) Relevant information only has predictive value, confirmatory value, or both. (c) Information that is a faithful representation is characterized as having predictive or confirmatory value. (d) Comparability pertains only to the reporting of information in a similar manner for different companies. (e) Verifiability is solely an enhancing characteristic for faithful representation. (f) In preparing financial reports, it is assumed that users of the reports have reasonable knowledge of business and economic activities.

Cost function using multiple regression (appendix 2A) Refer to the data and requirements of Problem 2.23.   Required (a)          Perform multiple regression using all three cost drivers. Compare the adjusted R-squares and cost functions for the multiple regression with the results of simple regressions for each potential cost driver. (b)          Which cost drivers do the best job of explaining manufacturing overhead costs? Explain. (c)           Select only the cost drivers that do the best job of explaining manufacturing overhead costs. Perform multiple regression analysis for those cost drivers and write the cost function. (d)          Explain why more than one cost driver is plausible for manufacturing overhead costs. (a)     Multiple regression with all three potential cost drivers:   Regression Statistics Multiple R 0.9092294 R Square 0.8266982 Adjusted R Square 0.8067018 Standard Error 4832.5558 Observations 30     Coefficients Standard Error t Stat P-value Intercept 60988.489 10361.2349 5.886218 3.3E-06 Labour Hours -0.1959303 3.333162437 -0.05878 0.953575 Machine Hours 48.778501 5.291558412 9.218173 1.12E-09 Raw Materials 82.976635 10.10654585 8.210187 1.08E-08   Comparison of simple and multiple regression results: (b)     Labour hours does not appear to be a cost driver when using either simple regression or multiple regression; its coefficient is not significantly different from zero in either regression. Also, its coefficient is negative rather than positive in the multiple regression. Thus, labour hours can be eliminated as a potential cost driver.   Both machine hours and raw materials are positive and significantly different from zero when using simple regression and also when using multiple regression. The adjusted R-Square is far higher in the multiple regression (0.806) than in either of the simple regressions (0.352 and 0.226) for these two cost drivers. A combination of cost drivers does a much better job of explaining the variation in manufacturing overhead costs than either cost driver alone.   (c)     Multiple regression using machine hours and raw materials as cost drivers:   Regression Statistics Multiple R 0.90921678 R Square 0.82667515 Adjusted R Square 0.81383627 Standard Error 4742.5348 Observations 30     Coefficients Standard Error t Stat P-value Intercept 60677.5902 8743.664851 6.939606 1.86E-07 Machine Hours 48.7422519 5.157604083 9.450561 4.71E-10 Raw Materials 82.925842 9.881964042 8.391636 5.29E-09   The cost function is: TC = $60 678 + $48.74×Machine hours + $82.93×Raw materials   (d)    Manufacturing can be a complex activity requiring a number of different tasks. Each task includes different activities. Costs for these activities are likely related to specific cost drivers. In this example, machine hours and raw materials explain different activity costs, such as machining work on units, and materials handling for the units. A better understanding of the manufacturing process improves the ability to determine the types and number of cost drivers that can be used in a more complete cost function.

How do brazing and soldering differ from the solid-state welding processes?

The executive officers of Rouse Corporation have a performance-based compensation plan. The performance criteria of this plan is linked to growth in earnings per share. When annual EPS growth is 12%, the Rouse executives earn 100% of the shares; if growth is 16%, they earn 125%. If EPS growth is lower than 8%, the executives receive no additional compensation. In 2014, Joan Devers, the controller of Rouse, reviews year-end estimates of bad debt expense and warranty expense. She calculates the EPS growth at 15%. Kurt Adkins, a member of the executive group, remarks over lunch one day that the estimate of bad debt expense might be decreased, increasing EPS growth to 16.1%. Devers is not sure she should do this because she believes that the current estimate of bad debts is sound. On the other hand, she recognizes that a great deal of subjectivity is involved in the computation. Instructions Answer the following questions. (a) What, if any, is the ethical dilemma for Devers? (b) Should Devers’s knowledge of the compensation plan be a factor that influences her estimate? (c) How should Devers respond to Adkins’s request?

Under what conditions should a contingent liability be recorded?

What are hybrid securities? Give an example of a hybrid security.

Name the four basic bulk deformation processes.

What is a two-high rolling mill?

The following article appeared in the Wall Street Journal. Bond Markets Giant Commonwealth Edison Issue Hits Resale Market With $70 Million Left Over new york—Commonwealth Edison Co.’s slow-selling new 9¼% bonds were tossed onto the resale market at a reduced price with about $70 million still available from the $200 million offered Thursday, dealers said. The Chicago utility’s bonds, rated double-A by Moody’s and double-A-minus by Standard & Poor’s, originally had been priced at 99.803, to yield 9.3% in 5 years. They were marked down yesterday the equivalent of about $5.50 for each $1,000 face amount, to about 99.25, where their yield jumped to 9.45%. Instructions (a) How will the development above affect the accounting for Commonwealth Edison’s bond issue? (b) Provide several possible explanations for the markdown and the slow sale of Commonwealth Edison’s bonds.

As a newly enrolled accounting major, you are anxious to better understand accounting institutions and sources of accounting literature. As a first step, you decide to explore the IASB’s Framework for the Preparation and Presentation of Financial Statements. Instructions Access the IASB Framework at the IASB website (http://eifrs.iasb.org/ ). (Click on the IFRS tab and then register for free eIFRS access if necessary.) When you have accessed the documents, you can use the search tool in your Internet browser to respond to the following items. (Provide paragraph citations.) (a) What is the objective of financial reporting? (b) What other means are there of communicating information, besides financial statements? (c) Indicate some of the users and the information they are most directly concerned with in economic decision-making.

Red Hot Chili Peppers Co. had the following activity in its most recent year of operations. (a) Purchase of equipment. (g) Amortization of intangible assets. (b) Redemption of bonds payable. (h) Purchase of treasury stock. (c) Sale of building. (i) Issuance of bonds for land. (d) Depreciation. (j) Payment of dividends. (e) Exchange of equipment for furniture. (k) Increase in interest receivable on notes receivable. (f) Issuance of capital stock. (l) Pension expense exceeds amount funded. Instructions Classify the items as (1) operating—add to net income; (2) operating—deduct from net income; (3) investing; (4) financing; or (5) significant non-cash investing and financing activities. Use the indirect method.

Identify the three basic types of sheet metalworking operations.

What is wave soldering?

Briefly describe the types of information concerning financial position, income, and cash flows that might be provided (a) within the main body of the financial statements, (b) in the notes to the financial statements, or (c) as supplementary information.

What is the theoretical justification of the allowance method as contrasted with the direct write-off method of accounting for bad debts?

] Describe how the underpayment penalty is calculated.

Solve Problem 33.1 except that the layer thickness = 0.40 mm.

Crowe Company purchased a heavy-duty truck on July 1, 2011, for $30,000. It was estimated that it would have a useful life of 10 years and then would have a trade-in value of $6,000. The company uses the straight-line method. It was traded on August 1, 2015, for a similar truck costing $42,000; $16,000 was allowed as trade-in value (also fair value) on the old truck and $26,000 was paid in cash. A comparison of expected cash flows for the trucks indicates the exchange lacks commercial substance. What is the entry to record the trade-in?

Wilton, Inc. had net sales in 2014 of $1,400,000. At December 31, 2014, before adjusting entries, the balances in selected accounts were: Accounts Receivable $250,000 debit, and Allowance for Doubtful Accounts $2,400 credit. If Wilton estimates that 2% of its net sales will prove to be uncollectible, prepare the December 31, 2014, journal entry to record bad debt expense.

Explain the importance of entrepreneurship to the global economy.