Question & Answer

What disclosures should be made by lessees and lessors related to future lease payments?

Using the facts from problem 50, what will happen to the government’s tax revenues if Song chooses to spend more time pursuing her other passions besides work in response to the tax rate change and earns only $75,000 in taxable income?  What is the term that describes this type of reaction to a tax rate increase?  What types of taxpayers are likely to respond in this manner?

Current setup time on a certain machine is 3.0 hr. Cost of downtime on this machine is estimated at $200/hr. Annual holding cost per part made on the equipment, Ch = $1.00. Annual demand for the part is 15,000 units. Determine (a) EOQ and (b) total inventory costs for this data. Also, determine (c) EOQ and (d) total inventory costs, if the changeover time could be reduced to six minutes.

On July 1, 2014, Roberts Corporation issued $3,000,000 of 9% bonds payable in 20 years. The bonds include detachable warrants giving the bondholder the right to purchase for $30 one share of $1 par value common stock at any time during the next 10 years. The bonds were sold for $3,000,000. The value of the warrants at the time of issuance was $100,000. Prepare the journal entry to record this transaction.

How can adaptive expectations of inflation result in clockwise Phillips loops? Why would these loops not be completely regular?

What is the role of an actuary relative to pension plans? What are actuarial assumptions?

Lemke Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the years 2014 and 2015. 2014 2015 Projected benefi t obligation, January 1 $600,000 Plan assets (fair value and market-related value), January 1 410,000 Pension asset/liability, January 1 190,000 Cr. Prior service cost, January 1 160,000 Service cost 40,000 $ 59,000 Settlement rate 10% 10% Expected rate of return 10% 10% Actual return on plan assets 36,000 61,000 Amortization of prior service cost 70,000 50,000 Annual contributions 97,000 81,000 Benefi ts paid retirees 31,500 54,000 Increase in projected benefi t obligation due to changes in actuarial assumptions 87,000 –0– Accumulated benefi t obligation at December 31 721,800 789,000 Average service life of all employees 20 years Vested benefi t obligation at December 31 464,000 Instructions (a) Prepare a pension worksheet presenting both years 2014 and 2015 and accompanying computations and amortization of the loss (2015) using the corridor approach. (b) Prepare the journal entries (from the worksheet) to reflect all pension plan transactions and events at December 31 of each year. (c) For 2015, indicate the pension amounts reported in the financial statements.

A 6.0-in wafer has a processable area with a 5.85-in diameter. How many square IC chips can be fabricated within this area, if each chip is 0.50 in on a side? Assume the cut lines (streets) between chips are of negligible width.

Why is the Normal statistical table used in a Six Sigma program different from the standard normal tables found in textbooks on probability and statistics?

Two processes for forming glass fibers are discussed in the text. Name and briefly describe one of them

Hagar Corporation has municipal bonds classified as availablefor- sale at December 31, 2013. These bonds have a par value of $800,000, an amortized cost of $800,000, and a fair value of $720,000. The unrealized loss of $80,000 previously recognized as other comprehensive income and as a separate component of stockholders’ equity is now determined to be other than temporary. That is, the company believes that impairment accounting is now appropriate for these bonds. Instructions (a) Prepare the journal entry to recognize the impairment. No entry is needed to adjust accumulated other comprehensive income. (b) What is the new cost basis of the municipal bonds? Given that the maturity value of the bonds is $800,000, should Hagar Corporation amortize the difference between the carrying amount and the maturity value over the life of the bonds? (c) At December 31, 2014, the fair value of the municipal bonds is $760,000. Prepare the entry (if any) to record this information.

Name the three most common machining processes.

Cross-linking (curing) of thermosetting plastics is accomplished by one of three ways. Name the three ways

Hobbs Co. has the following defined benefit pension plan balances on January 1, 2014. Projected benefi t obligation $4,600,000 Fair value of plan assets 4,600,000 The interest (settlement) rate applicable to the plan is 10%. On January 1, 2015, the company amends its  agreement so that prior service costs of $600,000 are created. Other data related to the pension plan are: 2014 2015 Service cost $150,000 $170,000 Prior service cost amortization –0– 90,000 Contributions (funding) to the plan 200,000 184,658 Benefi ts paid 220,000 280,000 Actual return on plan assets 252,000 350,000 Expected rate of return on assets 6% 8% Instructions (a) Prepare a pension worksheet for the pension plan in 2014. (b) Prepare any journal entries related to the pension plan that would be needed at December 31, 2014. (c) Prepare a pension worksheet for 2015 and any journal entries related to the pension plan as of December 31, 2015. (d) Indicate the pension-related amounts reported in the 2015 financial statements.

An automatic turning process is set up to produce parts with a mean diameter = 6.255 cm. The process is in statistical control and the output is normally distributed with a standard deviation = 0.004 cm. Determine the process capability.

Mr. Kyle owns stock in a local publicly traded company. Although the stock price has declined since he purchased it two years ago, he likes the long-term prospects for the company. If Kyle sells the stock to his sister because he needs some cash for a down payment on a new home, is the loss deductible? If Kyle is right and the stock price increases in the future, how is his sister’s gain computed if she sells the stock?

Using the facts in problem 38, if Jorge and Anita earn an additional $100,000 of taxable income, what is their marginal tax rate on this income?  What is their marginal rate if, instead, they reported an additional $100,000 in deductions?

Briefly discuss how a transfer of securities from the available- for-sale category to the trading category affects stockholders’ equity and income.

Explain the differences between general and specific knowledge. Give an example of an industry where knowledge is quite general and an example of an industry that requires specific knowledge.

Estimate the real interest rate over the last year. If financial market participants overestimate inflation in a particular period, will real interest rates be relatively high or low? Explain. (LO2)

Using the facts in problem 40, if Scot and Vidia earn an additional $80,000 of taxable income, what is their marginal tax rate on this income?  How would your answer differ if they, instead, had $80,000 of additional deductions?

On January 2, 2014, Jones Company purchases a call option for $300 on Merchant common stock. The call option gives Jones the option to buy 1,000 shares of Merchant at a strike price of $50 per share. The market price of a Merchant share is $50 on January 2, 2014 (the intrinsic value is therefore $0). On March 31, 2014, the market price for Merchant stock is $53 per share, and the time value of the option is $200. Instructions (a) Prepare the journal entry to record the purchase of the call option on January 2, 2014. (b) Prepare the journal entry(ies) to recognize the change in the fair value of the call option as of March 31, 2014. (c) What was the effect on net income of entering into the derivative transaction for the period January 2 to March 31, 2014?

Identify some of the important applications of zinc.

Using the facts in Problem 45, what interest rate does the State of New York bond need to offer to make Fergie indifferent between investing in the two bonds?

Imagine that a public project yields a return of 13 per cent (after taking into account all social costs and benefits), whereas a 15 per cent private return could typically be earned in the private sector. How would you justify diverting resources from the private sector to this project?