Question & Answer

How does the viscosity of a polymer melt differ from most fluids that are Newtonian.

Jurassic Company owns equipment that cost $900,000 and has accumulated depreciation of $380,000. The expected future net cash flows from the use of the asset are expected to be $500,000. The fair value of the equipment is $400,000. Prepare the journal entry, if any, to record the impairment loss.

Design the nominal sizes of a GO/NO-GO plug gage to inspect a 30.00 ± 0.18 mm diameter hole. There is a wear allowance applied only to the GO side of the gage. The wear allowance is 3% of the entire tolerance band for the inspected feature. Determine (a) the nominal size of the GO gage including the wear allowance and (b) the nominal size of the NO-GO gage

What is the difference between horizontal and vertical equity?  How do tax preferences affect people’s view of horizontal equity?

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

Manny, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship.  In late December he performed $20,000 of legal services for a client.  Manny typically requires his clients to pay his bills immediately upon receipt.  Assume Manny’s marginal tax rate is 40 percent this year and next year, and that he can earn an after-tax rate of return of 12 percent on his investments.  Should Manny send his client the bill in December or January?

What is meant by the term aspect ratio for a metallic particle?

} Devon owns 1,000 shares of stock worth $10,000. This year he received 200 additional shares of this stock from a stock dividend. His 1,200 shares are now worth $12,500. Must Devon include the dividend paid in stock in income?

The gage length of a tensile test specimen = 150 mm. It is subjected to a tensile test in which the grips holding the end of the test specimen are moved with a relative velocity = 0.1 m/s. Construct a plot of the strain rate as a function of length as the specimen is pulled to a length = 200 mm.

Petoskey Stone Quarry Inc. (PSQ), a calendar-year, accrual-method C corporation, provides landscaping supplies to local builders in northern Michigan. PSQ has always been a family-owned business and has a single class of voting common stock outstanding.  The 500 outstanding shares are owned as follows:  Number of shares Nick Adams 150 Amy Adams (Sandler’s sister) 150 Abigail Adams (Nick’s daughter) 50 Charlie Adams (Nick’s son) 50 Sandler Adams (Nick’s father) 100    Total shares 500   Nick Adams serves as president of PSQ, and his father Sandler serves as chair of the board. Amy is the company’s CFO, and Abigail and Charlie work as employees of the company.  Sandler would like to retire and sell his shares back to the company. The fair market value of the shares is $500,000. Sandler’s tax basis in his PSQ shares is $10,000.  The redemption is tentatively scheduled to take place on December 31 of this year.  At the beginning of the year, PSQ had accumulated earnings and profits of $2,500,000.  The company projects current E&P of $200,000.  The company intends to pay a pro rata cash distribution of $300 per share to its shareholders on December 1 of this year.

Marlon and Latoya recently started building a house.  They had to pay $300 to the county government for a building permit.  Is the $300 payment a tax?  Why or why not?

LNS Corporation reports book income of $2,000,000. Included in the $2,000,000 is $15,000 of tax-exempt interest income. LNS reports $1,345,000 in ordinary and necessary business expenses.  What is LNS Corporation’s taxable income for the year?

An internal cylindrical grinding operation is used to finish an internal bore from an initial diameter of 250.00 mm to a final diameter of 252.5 mm. The bore is 125 mm long. A grinding wheel with an initial diameter of 150.00 mm and a width of 20.00 mm is used. After the operation, the diameter of the grinding wheel has been reduced to 149.75 mm. Determine the grinding ratio in this operation.

As a cost accountant for San Francisco Cannery, you have been approached by Phil Perriman, canning room supervisor, about the 2014 costs charged to his department. In particular, he is concerned about the line item “depreciation.” Perriman is very proud of the excellent condition of his canning room equipment. He has always been vigilant about keeping all equipment serviced and well oiled. He is sure that the huge charge to depreciation is a mistake; it does not at all reflect the cost of minimal wear and tear that the machines have experienced over the last year. He believes that the charge should be considerably lower. The machines being depreciated are six automatic canning machines. All were put into use on January 1, 2014. Each cost $625,000, having a salvage value of $55,000 and a useful life of 12 years. San Francisco depreciates this and similar assets using double-declining-balance depreciation. Perriman has also pointed out that if you used straight-line depreciation, the charge to his department would not be so great. Instructions Write a memo to Phil Perriman to clear up his misunderstanding of the term “depreciation.” Also, calculate year-1 depreciation on all machines using both methods. Explain the theoretical justification for doubledeclining- balance and why, in the long run, the aggregate charge to depreciation will be the same under both methods.

Lowell Company’s December 31, 2014, trial balance includes the following accounts: Inventory $120,000; Buildings $207,000; Accumulated Depreciation—Equipment $19,000; Equipment $190,000; Land (held for investment) $46,000; Accumulated Depreciation—Buildings $45,000; Land $71,000; Timberland $70,000. Prepare the property, plant, and equipment section of the balance sheet.

Under what conditions would speculators sell a call option? What is the risk to speculators who sell put options? (LO3)

Explain the use of a balloon-payment mortgage. Why might a financial institution prefer to offer this type of mortgage? (LO2)

Why are some deductions called “above the line” deductions and others called “below the line” deductions? What is the “line”?

As part of the year-end accounting process and review of operating policies, Cullen Co. is considering a change in the accounting for its equipment from the straight-line method to an accelerated method. Your supervisor wonders how the company will report this change in principle. He read in a newspaper article that the FASB has issued a standard in this area and has changed GAAP for a “change in estimate that is effected by a change in accounting principle.” (Thus, the accounting may be different from what he learned in intermediate accounting.) Your supervisor wants you to research the authoritative guidance on a change in accounting principle related to depreciation methods. Instructions If your school has a subscription to the FASB Codification, go to http://aaahq.org/ascLogin.cfm to log in and prepare responses to the following. Provide Codification references for your responses. (a) What are the accounting and reporting guidelines for a change in accounting principle related to depreciation methods? (b) What are the conditions that justify a change in depreciation method, as contemplated by Cullen Co.? (c) What guidance does the SEC provide concerning the impact that recently issued accounting standards will have on the financial statements in a future period?

Explain how the interest rate risk of finance companies differs from that of savings institutions. (LO5)

Lenexa State Bank has followed the practice of capitalizing certain marketing costs and amortizing these costs over their expected life. In the current year, the bank determined that the future benefits from these costs were doubtful.Consequently, the bank adopted the policy of expensing these costs as incurred. How should the bank report this accounting change in the comparative financial statements?

Kiyara (single) is a 50 percent shareholder of Guardian Corporation (an S Corporation). Kiyara does not do any work for Guardian Corp. Guardian Corp. reported $300,000 of business income for the year. Before considering her business income allocation from Guardian Corp. and the self-employment tax deduction (if any), Kiyara’s adjusted gross income was $250,000 (all employee salary). Kiyara has $40,000 in itemized deductions. Answer the following questions for Kiyara. a. What is Kiyara’s self-employment tax liability? b. Assuming the income allocated to Kiyara is qualified business income, what is Kiyara’s deduction for qualified business income? Assume Kiyara’s share of wages paid by Guardian Corp. is $50,000 and her share in the unadjusted basis of qualified property used by Guardian was $200,000.  c. What is Kiyara’s net investment income tax liability (assume no investment expenses)? d. What is Kiyara’s additional Medicare tax liability (include all earned income in computing the tax)?

Why may the newer members of the Union have possibly the most to gain from the single market, but also the most to lose?

What is a TPE?

Explain the strategy of high-frequency trading firms. Describe the typical time horizon of an investment that is relevant to highfrequency traders and explain how it varies from the time horizons of other institutional investors. (LO3)