Question & Answer

Cardinal Paz Corp. carries an account in its general ledger called Investments, which contained debits for investment purchases, and no credits, with the following descriptions. Feb. 1, 2014 Sharapova Company common stock, $100 par, 200 shares $ 37,400 April 1 U.S. government bonds, 11%, due April 1, 2024, interest payable April 1 and October 1, 110 bonds of $1,000 par each 110,000 July 1 McGrath Company 12% bonds, par $50,000, dated March 1, 2014, purchased at 104 plus accrued interest, interest payable annually on March 1, due March 1, 2034 54,000 Instructions (Round all computations to the nearest dollar.) (a) Prepare entries necessary to classify the amounts into proper accounts, assuming that all the securities are classified as available-for-sale. (b) Prepare the entry to record the accrued interest and the amortization of premium on December 31, 2014, using the straight-line method. (c) The fair values of the investments on December 31, 2014, were: Sharapova Company common stock $ 31,800 U.S. government bonds 124,700 McGrath Company bonds 58,600 What entry or entries, if any, would you recommend be made? (d) The U.S. government bonds were sold on July 1, 2015, for $119,200 plus accrued interest. Give the proper entry.

Monat Construction Company, Inc., entered into a firm fixed-price contract with Hyatt Clinic on July 1, 2014, to construct a four-story office building. At that time, Monat estimated that it would take between 2 and 3 years to complete the project. The total contract price for construction of the building is $4,400,000. Monat appropriately accounts for this contract under the completedcontract method in its financial statements and for income tax reporting. The building was deemed substantially completed on December 31, 2016. Estimated percentage of completion, accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to the Hyatt Clinic under the contract are shown below. At At At December December December 31, 2014 31, 2015 31, 2016 Percentage of completion 30% 70% 100% Contract costs incurred $1,140,000 $3,290,000 $4,800,000 Estimated costs to complete the contract $2,660,000 $1,410,000 –0– Billings to Hyatt Clinic $1,400,000 $2,500,000 $4,300,000 Instructions (a) Prepare schedules to compute the amount to be shown as “Cost in excess of billings” or “Billings in excess of costs” at December 31, 2014, 2015, and 2016. (Ignore income taxes.) Show supporting computations in good form. (b) Prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2014, 2015, and 2016. (Ignore income taxes.) Show supporting computations in good form.

On July 1, 2014, Crowe Co. pays $15,000 to Zubin Insurance Co. for a 3-year insurance policy. Both companies have fiscal years ending December 31. For Crowe Co., journalize the entry on July 1 and the adjusting entry on December 31.

What are some of the differences in elements in the IASB and FASB conceptual frameworks?

An entity has one machine through which is drawn a standard type of wire to make nails. With minor adjustments, different sized nails are produced with different sized wire. Would you recommend that the entity employ job or process costing methods?

Briefly describe some of the similarities and differences between GAAP and IFRS with respect to cash flow reporting.

Under what circumstances would the market demand for renting a type of capital equipment be (a) elastic; (b) inelastic?

What is the difference between vacuum permanent-mold casting and vacuum molding?

Define the difference between elastic and plastic deformation in terms of the effect on the crystal lattice structure

What are the three basic steps in the conventional powder metallurgy shaping process?

Consider how economic conditions affect the credit risk premium. Do you think the credit risk premium will likely increase or decrease during this semester? How do you think the yield curve will change during this semester? Offer some logic to support your answers. (LO1, LO3)

This year, Justin B.’s share of S corporation income includes $4,000 of interest income, $5,000 of dividend income, and $40,000 of net income from the corporation’s professional service business activity.  a) Assume that Justin B. materially participates in the S corporation. How much of his S corporation income is potentially subject to the net investment income tax?

How should discount on bonds payable be reported on the financial statements? Premium on bonds payable?

Metheny Corporation’s lease arrangements qualify as sales-type leases at the time of entering into the transactions. How should the corporation recognize revenues and costs in these situations?

According to the video on forming, what is the primary factor that makes the mechanical performance of forged parts better than cast parts in many situations?

1.    : Consider the leadership position of a senior partner in a law firm. What task, subordinate, and organizational factors might serve as substitutes for leadership in this situation?

After several profitable years running her business, Ingrid decided to acquire the assets of a small competing business. On May 1 of year 1, Ingrid acquired the competing business for $300,000. Ingrid allocated $50,000 of the purchase price to goodwill. Ingrid’s business reports its taxable income on a calendar-year basis.  a. How much amortization expense on the goodwill can Ingrid deduct in year 1, year 2, and year 3? b. In lieu of the original facts, assume that Ingrid purchased only a phone list with a useful life of 5 years for $10,000. How much amortization expense on the phone list can Ingrid deduct in year 1, year 2, and year 3?

What is the relationship known as Chvorinov's rule in casting?

1.    : Suggest two personal traits that you would admire in a business leader today. Might these traits be more valuable in some situations than in others? Explain.

Describe why the IRS might be skeptical of permitting requests for changes in accounting method without a good business purpose.

Presented below is selected information related to Martin Burke Inc. at year-end. All these accounts have debit balances. Cable television franchises Film contract rights Music copyrights Customer lists Research and development costs Prepaid expenses Goodwill Covenants not to compete Cash Brand names Discount on notes payable Notes receivable Accounts receivable Investments in affi liated companies Property, plant, and equipment Organization costs Internet domain name Land Instructions Identify which items should be classified as an intangible asset. For those items not classified as an intangible asset, indicate where they would be reported in the financial statements.

How are deferred tax assets and deferred tax liabilities reported on the statement of financial position under IFRS?

Geiberger Corporation manufactures replicators. On January 1, 2014, it leased to Althaus Company a replicator that had cost $110,000 to manufacture. The lease agreement covers the 5-year useful life of the replicator and requires 5 equal annual rentals of $40,800 payable each January 1, beginning January 1, 2014. An interest rate of 12% is implicit in the lease agreement. Collectibility of the rentals is reasonably assured, and there are no important uncertainties concerning costs. Prepare Geiberger’s January 1, 2014, journal entries.

What are the possible treatments for tax purposes of a net operating loss? What are the circumstances that determine the option to be applied? What is the proper treatment of a net operating loss for financial reporting purposes?

Suppose the cutting speed in Problems 21.7 and 21.8 is 200 ft/min. From your answers to those problems, find (a) the horsepower consumed in the operation, (b) metal removal rate in in3 /min, (c) unit horsepower (hp-min/in3 ), and (d) the specific energy (in-lb/in3 )