Question & Answer

Businesses valued at less than $50 million or so rarely go public. Explain the limitations to such businesses if they did go public. (LO3)

What was the purpose of the Securities Act of 1933? What was the purpose of the Securities Exchange Act of 1934? Do these laws prevent investors from making poor investment decisions? Explain. (LO2)

Explain the primary use of funds by commercial banks versus savings institutions. (LO3)

What is the key factor in shifting income from a business to its owners? What are some methods of shifting income in this context?

Wally is employed as an executive with Pay More Incorporated. To entice Wally to work for Pay More, the corporation loaned him $20,000 at the beginning of the year at a simple interest rate of 1 percent. Wally would have paid interest of $2,400 this year if the interest rate on the loan had been set at the prevailing federal interest rate.

A 20-in-long sheet-metal workpiece is stretched in a stretch forming operation to the dimensions shown in Figure P20.31. The thickness of the beginning stock is 3/16 in and the width is 8.5 in. The metal has a flow curve defined by a strength coefficient of 75,000 lb/in2 and a strain hardening exponent of 0.20. The yield strength of the material is 30,000 lb/in2 . (a) Find the stretching force F required near the beginning of the operation when yielding first occurs. Determine (b) true strain experienced by the metal, (c) stretching force F, and (d) die force Fdie at the very end when the part is formed as indicated in Figure P20.31(b).

Identify the two basic methods of making electrical connections.

How might the reimbursement of a portion of an employee expense influence the deductibility of the expense for the employee?

Instructions Complete the following statements by filling in the blanks. (a) In a period in which a taxable temporary difference reverses, the reversal will cause taxable income to be _______ (less than, greater than) pretax financial income. (b) If a $76,000 balance in Deferred Tax Asset was computed by use of a 40% rate, the underlying cumulative temporary difference amounts to $_______. (c) Deferred taxes ________ (are, are not) recorded to account for permanent differences. (d) If a taxable temporary difference originates in 2014, it will cause taxable income for 2014 to be ________ (less than, greater than) pretax financial income for 2014. (e) If total tax expense is $50,000 and deferred tax expense is $65,000, then the current portion of the expense computation is referred to as current tax _______ (expense, benefit) of $_______. (f) If a corporation’s tax return shows taxable income of $100,000 for Year 2 and a tax rate of 40%, how much will appear on the December 31, Year 2, balance sheet for “Income taxes payable” if the company has made estimated tax payments of $36,500 for Year 2? $________. (g) An increase in the Deferred Tax Liability account on the balance sheet is recorded by a _______ (debit, credit) to the Income Tax Expense account. (h) An income statement that reports current tax expense of $82,000 and deferred tax benefit of $23,000 will report total income tax expense of $________. (i) A valuation account is needed whenever it is judged to be _______ that a portion of a deferred tax asset _______ (will be, will not be) realized. (j) If the tax return shows total taxes due for the period of $75,000 but the income statement shows total income tax expense of $55,000, the difference of $20,000 is referred to as deferred tax _______ (expense, benefit).

In 2014, Wild Corporation reported a net loss of $70,000. Wild’s only net income adjustments were depreciation expense $81,000, and increase in accounts receivable $8,100. Compute Wild’s net cash provided (used) by operating activities.

What is a hybrid composite?

Campbell’s tax return was audited because she failed to report interest she earned on her tax return.  What IRS audit selection method identified her tax return?

One of the mandrel types in electroforming is a solid mandrel. How is the part removed from a solid mandrel?

Shonen Knife Corporation has elected to use the fair value option for one of its notes payable. The note was issued at an effective rate of 11% and has a carrying value of $16,000. At year-end, Shonen Knife’s borrowing rate has declined; the fair value of the note payable is now $17,500. (a) Determine the unrealized holding gain or loss on the note. (b) Prepare the entry to record any unrealized holding gain or loss.

When an employer makes a below-market loan to an employee, what are tax consequences to the employer and employee?

At the end of its first year of operations, the trial balance of Alonzo Company shows Equipment $30,000 and zero balances in Accumulated Depreciation—Equipment and Depreciation Expense. Depreciation for the year is estimated to be $2,000. Prepare the adjusting entry for depreciation at December 31, and indicate the balance sheet presentation for the equipment at December 31.

Explain how the accounting method applied to mortgage-backed securities made it more difficult for banks to satisfy capital requirements during the credit crisis of 2008–2009. (LO2)

Why should the electromechanical system rather than the controller storage register be the limiting factor in control resolution?

The financial statements of ConAgra Foods, Inc.’s 2012 annual report disclose the following information. (in millions) May 27, 2012 May 29, 2011 May 30, 2010 Inventories $1,870 $1,803 $1,598 Fiscal Year 2012 2011 Net sales $13,263 $12,303 Cost of goods sold 10,436 9,390 Net income 474 818 Instructions Compute ConAgra’s (a) inventory turnover and (b) the average days to sell inventory for 2012 and 2011.

Under what circumstances would a rise in income tax act as (a) a disincentive and (b) an incentive to effort?

Data for Pat Metheny Company are presented in E23-11. Instructions Prepare a statement of cash flows using the direct method. (Do not prepare a reconciliation schedule.)

Will economic growth always involve a parallel outward shift of the production possibility curve?

Joey is a 25 percent owner of Loopy LLC. He no longer wants to be involved in the business. What options does Joey have to exit the business?

How do thermoplastic elastomers differ from conventional rubbers?

Explain how the Financial Reform Act is intended to prevent some problems that contributed to the credit crisis. (LO7)