Question & Answer

Jackie has just opened her copy of the Code for the first time.  She looks at the table of contents and wonders why it is organized the way it is.  She questions whether it makes sense to try and understand the Code’s organization.  What are some reasons why understanding the organization of the Internal Revenue Code may prove useful?

What is concurrent engineering and what are its important components?

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

Winsor Inc. recently purchased Holiday Corp., a large midwestern home painting corporation. One of the terms of the merger was that if Holiday’s income for 2014 was $110,000 or more, 10,000 additional shares would be issued to Holiday’s stockholders in 2015. Holiday’s income for 2013 was $120,000. Instructions (a) Would the contingent shares have to be considered in Winsor’s 2013 earnings per share computations? (b) Assume the same facts, except that the 10,000 shares are contingent on Holiday’s achieving a net income of $130,000 in 2014. Would the contingent shares have to be considered in Winsor’s earnings per share computations for 2013?

According to the video, what are four possible functions of the electrodes in resistance spot welding?

1.    : What strategic plans could the college or university at which you are taking this management course adopt to compete for students in the marketplace? Would these plans depend on the school’s goals?

Chippewas Inc. has decided to purchase equipment from Central Michigan Industries on January 2, 2014, to expand its production capacity to meet customers’ demand for its product. Chippewas issues an $800,000, 5-year, zero-interest-bearing note to Central Michigan for the new equipment when the prevailing market rate of interest for obligations of this nature is 12%. The company will pay off the note in five $160,000 installments due at the end of each year over the life of the note. Instructions (Round to nearest dollar in all computations.) (a) Prepare the journal entry(ies) at the date of purchase. (b) Prepare the journal entry(ies) at the end of the first year to record the payment and interest, assuming that the company employs the effective-interest method. (c) Prepare the journal entry(ies) at the end of the second year to record the payment and interest. (d) Assuming that the equipment had a 10-year life and no salvage value, prepare the journal entry necessary to record depreciation in the first year. (Straight-line depreciation is employed.)

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.

Explain how an underfunded public pension fund can affect the debt rating of a city or state. (LO4)

1. Will the shape of the long-run AS curve here depend on just how the ‘long’ run is defined? 2. If a shift in the aggregate demand curve from AD to AD1 in Figure 20.17 causes a movement from point a to point d in the long run, would a shift in aggregate demand from AD1 to AD cause a movement from point d back to point a in the long run?

What are the noteworthy properties of titanium?

Where can authoritative IFRS be found related to dilutive securities, stock-based compensation, and earnings per share?

Cost function using high-low and regression; quality of cost estimates Following are sales and administrative cost data for Big Jack Burgers for four months:  Administrative cost is a mixed cost, and sales is a potential cost driver.   Required (a)          Using the high-low method, create a cost function for administrative costs. (b)          In your own words, explain why the high-low method might not be a good method for estimating the cost function. (c)           Create a scatter plot and add a trend line. After examining the plot, use your judgement to determine whether the cost is fixed, variable, or mixed. (d)          Perform regression analysis to create a cost function for administrative costs. (e)           Can we know for certain that the cost function from part (d) provides a good estimate for next month’s administrative costs? Why or why not? (f)           Discuss whether sales are an economically plausible driver for administration costs for Big Jack Burgers.(a)     Total revenue (TR) instead of quantity (Q) in the cost function because sales is a potential cost driver. Under the high-low method, the cost function is calculated using the highest and lowest values of the cost driver. First, the variable cost is calculated: ($68 333 – $43 333)/($1 132 100 – $632 100) = $25 000/$500 000 = 0.05  or 5% of sales   The fixed cost is determined by substituting the variable cost into one of the high-low data points: $68 333 = F + 5%×$1 132 100 F = $68 333 – $56 605 = $11 728   Thus, the total cost function is: TC = $11 728 + 5%×Sales   (b)        The high-low method uses the most extreme cost driver values, which could be outliers, that is, not represent the cost most of the time. That means that the cost function might not represent the actual cost, on average. Therefore, this cost function might provide poor estimates of future costs. (c)     Chart of data with trend line added by Excel; trend line extended to Y-axis (dashed line) using Word: It appears that the cost is most likely mixed. There is a general downward slope     (variable cost) that appears to meet the intercept enough above zero to suggest a    fixed cost. The upward slope of the line indicates that there are variable costs.   (d)     Following is the regression output. A t-statistic greater than 2 is often interpreted as meaning that the coefficient is significantly different from zero. Notice that the t-statistic for the intercept coefficient is 2.172, but the p-value is greater than 10% at 0.162. Based on the p-value, there is a 16% probability that the intercept (fixed cost) is not different from zero. Because this regression has few observations, the p-value result for the t-statistic is atypical. Additional judgement is required to decide whether it is appropriate to include a fixed cost in the cost function.             Analysis at the account level can be used to increase the understanding of this cost. If this cost pool includes items such as salaries and other fixed costs (insurance, etc.), the regression intercept can be used as an estimate of the fixed costs. Then, the cost function would be TC = $16 800 + 4.5% × sales. Alternatively, analysis at the account level might indicate that there are few fixed costs. In that case, fixed costs are likely to be zero and would be excluded from the cost function. Then, the cost function would be: TC = 4.5% × sales   (e)     Because of unforeseen changes in cost behaviour, a cost function may not provide a good estimate for the next month’s costs. The past costs used for estimation might not be representative, especially because so few observations were used in the estimation. Sales might not be the activity that drives administrative costs. There might be a change in business operations or in the economy that would cause future costs to be different than in the past. There might be a large discretionary component in administrative costs, causing fluctuations in cost that are unrelated to any cost driver.                     (f)      The cons of the high-low method as an estimation technique were discussed in Part B above. If there are only two or three data points, however, the high-low method may be the best option available. This method can be used in cases where there is not enough data to perform regression, and it can be further improved by adopting more representative data points than the highest and lowest values of the cost driver. If there are more data points, regression analysis incorporates all of the observations into the analysis. Therefore, the results rely on more complete information and provide a better estimate, on average. Both methods assume that the cost function is linear and that all data points come from a single relevant range. If these assumptions do not hold, then both methods may be unsuitable for estimating future costs. In addition, both of these methods assume that the data points are representative of future costs. Unusual cost items are assumed to continue in the future, and possible changes in costs such as those described in Part E are ignored.

Your roommate is puzzled. During the last year, the company in which she is a stockholder reported a net loss of $675,000, yet its cash increased $321,000 during the same period of time. Explain to your roommate how this situation could occur.

Various types of accounting changes can affect the financial statements of a business enterprise differently. Assume that the following list describes changes that have a material effect on the financial statements for the current year of your business enterprise. 1. A change from the completed-contract method to the percentage-of-completion method of accounting for long-term construction-type contracts. 2. A change in the estimated useful life of previously recorded fixed assets as a result of newly acquired information. 3. A change from deferring and amortizing preproduction costs to recording such costs as an expense when incurred because future benefits of the costs have become doubtful. The new accounting method was adopted in recognition of the change in estimated future benefits. 4. A change from including the employer share of FICA taxes with payroll tax expenses to including it with “Retirement benefits” on the income statement. 5. Correction of a mathematical error in inventory pricing made in a prior period. 6. A change from presentation of statements of individual companies to presentation of consolidated statements. 7. A change in the method of accounting for leases for tax purposes to conform with the financial accounting method. As a result, both deferred and current taxes payable changed substantially. 8. A change from the FIFO method of inventory pricing to the LIFO method of inventory pricing. Instructions Identify the type of change that is described in each item above and indicate whether the prior year’s financial statements should be recast when presented in comparative form with the current year’s financial statements.

What is a precedence constraint in process planning?

Calvin reviewed his canceled checks and receipts this year (2024) for charitable contributions, which included an antique painting and IBM stock. He has owned the IBM stock and the painting since 2005. Calculate Calvin’s charitable contribution deduction and carryover (if any) under the following circumstances. Donee Item Cost FMV Hobbs Medical Center IBM stock $ 5,000 $ 22,000 State Museum antique painting 5,000 3,000 A needy family food and clothes 400 250 United Way Cash 8,000 8,000 a.              Calvin’s AGI is $100,000. b.             Calvin’s AGI is $100,000, but the State Museum told Calvin that it plans to sell the painting. c.              Calvin’s AGI is $50,000. d.             Calvin’s AGI is $100,000 and Hobbs is a nonoperating private foundation. e.              Calvin’s AGI is $100,000, but the painting is worth $10,000.

Which type of entities would be suited to the use of a standard cost  system?

Can the margin of safety ever be negative? Explain your answer.

Apply the term structure of interest rate theories that were discussed in Chapter 3 to explain the shape of the existing commercial paper yield curve. (LO1)

If banks operated a rigid 5 per cent cash ratio and the government reduced the supply of cash by £1 million, how much must credit contract? What is the bank deposits multiplier?

Why is silicon a desirable work material in microsystem technology?

The specified dimension = 225.00 mm for a certain injection molded part made of ABS. Compute the corresponding dimension to which the mold cavity should be machined, using the value of shrinkage given in Table 13.1

Lane and Cal each own 50 percent of the profits and capital of HighYield LLC. HighYield owns a portfolio of taxable bonds and municipal bonds, and

Journal entries for job costing At the beginning of the accounting period, the accountant for ABC Industries estimated that total overhead would be $80 000. Overhead is allocated to jobs on the basis of direct labour cost. Direct labour was budgeted to cost $200 000 this period. During the period only three jobs were worked on. The following summarises the direct materials and labour costs for each:       Job 1231 was finished and sold; job 1232 was finished but is waiting to be sold; and job 1233 is still in process. Actual overhead for the period was $82 000.   Required Prepare the following journal entries. (a)          Cost recorded during production (b)          Cost of jobs completed (c)           Cost of sales (d)          Allocation of overapplied or underapplied overhead allocated on a pro rata basis to the ending balances in work in process, finished goods, and cost of sales