Question & Answer

When the UK joined the ERM in 1990, it was hoped that this would make speculation pointless. As it turned out, speculation forced the UK to leave the ERM in 1992. Can you reconcile this with the argument that fixed rates discourage speculation?

How do changing tax rates affect the timing strategy? What information do you need to determine the appropriate timing strategy when tax rates change?

Give two examples of positive statements about the economy, and two examples of normative ones. Now give two examples that are seemingly positive, but which have normative implications or undertones.

Explain how some mortgage operations by some commercial banks (along with other financial institutions) played a major role in instigating the credit crisis that began in 2008. (LO3)

Why does this argument make GNY a better indicator of development than GDP? (See the Appendix to Chapter 15.)

Solve Problem 33.3, except using the following additional information. It is known that the diameter of the filament fed into the extruder workhead is 1.25 mm, and the filament is fed into the workhead from its spool at a rate of 30.6 mm of length per second while the workhead is depositing material. Between layers, the feed rate from the spool is zero.

Assume that the demand for a product is given by the following function                QD = 1000 – 50P + 2P2 + 10PS + PS2 where QD is the quantity demanded, P is the price of the good and PS  is the price of a substitute good. What is the partial derivative of this demand function with respect to (a) the price of the good; (b) the price of the substitute good? Interpret the meaning of each partial derivative.

Describe the doctor-blade process.

In 2014, Ghostbusters Corp. spent $420,000 for “goodwill” visits by sales personnel to key customers. The purpose of these visits was to build a solid, friendly relationship for the future and to gain insight into the problems and needs of the companies served. How should this expenditure be reported?

1. Trace through the effects of a squeeze on the monetary base from an initial reduction in cash, to banks’ liquidity being restored by the rediscounting of bills. Will this restoration of liquidity by the Bank of England totally nullify the initial effect of reducing the supply of cash? (Clue: what is likely to happen to the rate of interest?) 2. Given the difficulties of monetary base control, would you expect cash in circulation and broader measures of the money supply, such as M4, to rise and fall by the same percentage as each other?

What is meant by inflation bias? What factors affect the potential magnitude of inflation bias?

A cylindrical riser with diameter-to-length ratio = 1.0 is to be designed for a sand casting mold. The casting geometry is illustrated in Figure P10.25, in which the units are inches. If the mold constant in Chvorinov's rule = 19.5 min/in2 , determine the dimensions of the riser so that the riser will take 0.5 min longer to freeze than the casting itself.

The following facts apply to the pension plan of Boudreau Inc. for the year 2014. Plan assets, January 1, 2014 $490,000 Projected benefi t obligation, January 1, 2014 490,000 Settlement rate 8% Service cost 40,000 Contributions (funding) 25,000 Actual and expected return on plan assets 49,700 Benefi ts paid to retirees 33,400 Instructions  Using the preceding data, compute pension expense for the year 2014. As part of your solution, prepare a pension worksheet that shows the journal entry for pension expense for 2014 and the year-end balances in the related pension accounts.

Since advertising increases a firm’s costs, will prices necessarily be lower with sales revenue maximisation than with profit maximisation?

For what reasons do countries experience very different long-run rates of economic growth from each other?

Assume a free-floating exchange rate. Draw a diagram like Figure 25.6, only this time show an initial equilibrium national income with a balance of payments surplus.          (a)  Mark the size of the surplus.          (b)  Show the resulting shifts in the (X–M) and the E curves.          (c)  Mark the eventual equilibrium.          (d)  Show the size of the income and substitution effects (of the change in the exchange rate).          (e)  Under what circumstances will the income effect be (i) ‘desirable’; (ii) ‘undesirable’?          (f)   Could the income effect of the change in the exchange rate ever be larger than the substitution effect?

Indicate whether each of the following items is a real or nominal account and whether it appears in the balance sheet or the income statement. (a) Prepaid Rent. (b) Salaries and Wages Payable. (c) Inventory. (d) Accumulated Depreciation—Equipment. (e) Equipment. (f) Service Revenue. (g) Salaries and Wages Expense. (h) Supplies.

Compare and contrast different ways in which a taxpayer triggers a realization event by disposing of an asset.

Arnold and Lilly have recently had a heated discussion about whether a sales tax is a proportional tax or a regressive tax.  Arnoldargues that a sales tax is regressive.  Lillycounters that the sales tax is a flat tax.  Who is correct?

It has been suggested that plant and equipment could be replaced more quickly if depreciation rates for income tax and accounting purposes were substantially increased. As a result, business operations would receive the benefit of more modern and more efficient plant facilities. Discuss the merits of this proposition.

Consider the prevailing conditions for inflation (including oil prices), the economy, the budget deficit, and other conditions that could affect the values of futures contracts. Based on these conditions, would you prefer to buy or sell Treasury bond futures at this time? Would you prefer to buy or sell stock index futures at this time? Assume that you would close out your position at the end of this semester. Offer some logic to support your answers. Which factor is most influential for your decision regarding Treasury bond futures and for your decision regarding stock index futures? (LO2, LO3)

An entity uses variable costing for internal reports. It must convert the variable costing results to absorption costing results for external reports. How can this conversion be accomplished?

On January 1, 2014, Gottlieb Corporation issued $4,000,000 of 10-year, 8% convertible debentures at 102. Interest is to be paid semiannually on June 30 and December 31. Each $1,000 debenture can be converted into eight shares of Gottlieb Corporation $100 par value common stock after December 31, 2015. On January 1, 2016, $400,000 of debentures are converted into common stock, which is then selling at $110. An additional $400,000 of debentures are converted on March 31, 2016. The market price of the common stock is then $115. Accrued interest at March 31 will be paid on the next interest date. Bond premium is amortized on a straight-line basis. Instructions Make the necessary journal entries for: (a) December 31, 2015. (c) March 31, 2016. (b) January 1, 2016. (d) June 30, 2016. Record the conversions using the book value method.

{Research}  Using the Internal Revenue Code, describe two deductions for AGI that are not discussed in this chapter.

Why does the accounting profession make a distinction between internally created intangibles and purchased intangibles?