Question & Answer

Assume a financial institution has more rate-sensitive liabilities than rate-sensitive assets. Would it be more likely to be adversely affected by an increase or a decrease in interest rates? Should it purchase or sell interest rate futures contracts so as to hedge its exposure? (LO2)

Solve Problem 41.9 except that the following is known in addition to the information given: scheduled receipts of M5 are 250 units in period (week) 3 and 50 units in period (week) 4.

Accounting information provides useful information about business transactions and events. Those who provide and use financial reports must often select and evaluate accounting alternatives. The FASB statement on qualitative characteristics of accounting information examines the characteristics of accounting information that make it useful for decision-making. It also points out that various limitations inherent in the measurement and reporting process may necessitate trade-offs or sacrifices among the characteristics of useful information. Instructions (a) Describe briefly the following characteristics of useful accounting information. (1) Relevance. (4) Comparability. (2) Faithful representation. (5) Consistency. (3) Understandability. (b) For each of the following pairs of information characteristics, give an example of a situation in which one of the characteristics may be sacrificed in return for a gain in the other. (1) Relevance and faithful representation. (3) Comparability and consistency. (2) Relevance and consistency. (4) Relevance and understandability. (c) What criterion should be used to evaluate trade-offs between information characteristics?

How does a confidence shock differ from the idea of confidence as an amplifier?

The foreman in the injection molding department says that a polyethylene part produced in one of the operations has greater shrinkage than the calculations indicate it should have. The important dimension of the part is specified as 112.5 ±0.25 mm. However, the actual molded part measures 112.02 mm. (a) As a first step, the corresponding mold cavity dimension should be checked. Compute the correct value of the mold dimension, given that the shrinkage value for polyethylene is 0.025 (from Table 13.1). (b) What adjustments in process parameters could be made to reduce the amount of shrinkage?

A Wall Street Journal article discussed a $1.8 billion charge to income made by General Electric for postretirement benefit costs. It was attributed to previously unrecognized healthcare and life insurance cost. As financial vice president and controller for Peake, Inc., you found this article interesting because the president recently expressed interest in adopting a postemployment benefit program for Peake’s employees, to complement the company’s existing defined benefit plan. The president, Martha Beyerlein, wants to know  the expense on the new plan will be determined and what impact the accounting for the plan will have on Peake’s financial statements. Instructions (a) As financial vice president and controller of Peake, Inc., explain the calculation of postemployment benefit expense under GAAP, and indicate how the accounting for the plan will affect Peake’s financial statements. (b) Discuss the similarities and differences in the accounting for the other postemployment benefit plan relative to the accounting for the defined benefit plan.

Assume that inflation is expected to decline in the near future. How could this affect future bond prices? Would you recommend that financial institutions increase or decrease their concentration in long-term bonds based on this expectation? Explain. (LO2)

How is materiality (or immateriality) related to the proper presentation of financial statements? What factors and mea-sures should be considered in assessing the materiality of a misstatement in the presentation of a financial statement?

Two accountants for the firm of Elwes and Wright are arguing about the merits of presenting an income statement in a multiple-step versus a single-step format. The discussion involves the following 2014 information related to P. Bride Company ($000 omitted). Administrative expense Offi cers’ salaries $ 4,900 Depreciation of offi ce furniture and equipment 3,960 Cost of goods sold 60,570 Rent revenue 17,230 Selling expense Delivery expense 2,690 Sales commissions 7,980 Depreciation of sales equipment 6,480 Sales revenue 96,500 Income tax 9,070 Interest expense 1,860 Instructions (a) Prepare an income statement for the year 2014 using the multiple-step form. Common shares outstanding for 2014 total 40,550 (000 omitted). (b) Prepare an income statement for the year 2014 using the single-step form. (c) Which one do you prefer? Discuss.

1.   Call the local environmental advocacy group and get the group to stage a protest of the company.

A vertical true centrifugal casting process is used to produce bushings that are 200 mm long and 200 mm in outside diameter. If the rotational speed during solidification is 500 rev/min, determine the inside diameter at the top of the bushing if the inside diameter at the bottom is 150 mm.

What are some of the general considerations that product designers must keep in mind when designing components out of plastics?

The FASB requires a reconciliation between the effective tax rate and the federal government’s statutory rate. Of what benefit is such a disclosure requirement?

The extrusion die for a polyethylene parison used in blow molding has a mean diameter of 18.0 mm. The size of the ring opening in the die is 2.0 mm. The mean diameter of the parison is observed to swell to a size of 21.5 mm after exiting the die orifice. If the diameter of the blow molded container is to be 150 mm, determine (a) the corresponding wall thickness of the container and (b) the wall thickness of the parison.

What is an industrial robot?

A product is made to stock. Annual demand is 86,000 units. Each unit costs $9.50 and the annual holding cost rate is 22%. Setup cost to produce this product is $800. Determine (a) economic order quantity and (b) total inventory costs for this situation.

A turning operation is to be performed on C1010 steel, which is a ductile grade. It is desired to achieve a surface finish of 64 µ-in, while at the same time maximizing the metal removal rate. It has been decided that the speed should be in the range 200 ft/min to 400 ft/min, and that the depth of cut will be 0.080 in. The tool nose radius = 3/64 in. Determine the speed and feed combination that meets these criteria.

Explain what it means to say that a married couple filing a joint tax return has joint and several liability for the taxes associated with the return?

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)

A turning operation is to be performed on a 20 hp lathe that has an 87% efficiency rating. The roughing cut is made on alloy steel whose hardness is in the range 325 to 335 HB. The cutting speed is 375 ft/min, feed is 0.030 in/rev, and depth of cut is 0.150 in. Based on these values, can the job be performed on the 20 hp lathe? Use Table 21.2 to obtain the appropriate unit horsepower value

Briefly describe the provisions of the SarbanesOxley Act. Discuss how this act affects the monitoring performed by shareholders. (LO6)

Bar stock of initial diameter = 90 mm is drawn with a draft = 15 mm. The draw die has an entrance angle = 18°, and the coefficient of friction at the work-die interface = 0.08. The metal behaves as a perfectly plastic material with yield stress = 105 MPa. Determine (a) area reduction, (b) draw stress, (c) draw force required for the operation, and (d) power to perform the operation if exit velocity = 1.0 m/min

Lazaro Inc. sells goods on the installment basis and uses the installment-sales method. Due to a customer default, Lazaro repossessed merchandise that was originally sold for $800, resulting in a gross profit rate of 40%. At the time of repossession, the uncollected balance is $520, and the fair value of the repossessed merchandise is $275. Prepare Lazaro’s entry to record the repossession.

Classify the types of financial institutions mentioned in this chapter as either depository or nondepository. Explain the general difference between depository and nondepository institutions as sources of funds. It is often said that all types of financial institutions have begun to offer services that were previously offered only by certain types. Consequently, the operations of many financial institutions are becoming more similar. Nevertheless, performance levels still differ significantly among types of financial institutions. Why? (LO3)

Briefly describe some of the similarities and differences between GAAP and IFRS with respect to the accounting for intangible assets.