Question & Answer

Define (a) a contingency and (b) a contingent liability.

Distinguish among: cash dividends, property dividends, liquidating dividends, and stock dividends.

Archer Inc. issued $4,000,000 par value, 7% convertible bonds at 99 for cash. If the bonds had not included the conversion feature, they would have sold for 95. Prepare the journal entry to record the issuance of the bonds.

Komissarov Company has a debt investment in the bonds issued by Keune Inc. The bonds were purchased at par for $400,000 and, at the end of 2014, have a remaining life of 3 years with annual interest payments at 10%, paid at the end of each year. This debt investment is classified as held-for-collection. Keune is facing a tough economic environment and informs all of its investors that it will be unable to make all payments according to the contractual terms. The controller of Komissarov has prepared the following revised expected cash flow forecast for this bond investment. Dec. 31 Expected Cash Flows 2015 $ 35,000 2016 35,000 2017 385,000 Total cash flows $455,000 Instructions (a) Determine the impairment loss for Komissarov at December 31, 2014. (b) Prepare the entry to record the impairment loss for Komissarov at December 31, 2014. (c) On January 15, 2015, Keune receives a major capital infusion from a private equity investor. It informs Komissarov that the bonds now will be paid according to the contractual terms. Briefly describe how Komissarov would account for the bond investment in light of this new information.

Ragatz, Inc., a drug company, reported the following information. The company prepares its financial statements in accordance with GAAP. 2014 (,000) Current liabilities $ 554,114 Convertible subordinated debt 648,020 Total liabilities 1,228,313 Stockholders’ equity 176,413 Net income 58,333 Analysts attempting to compare Ragatz to drug companies that issue debt with detachable warrants may face a challenge due to differences in accounting for convertible debt. Instructions (a) Compute the following ratios for Ragatz, Inc. (Assume that year-end balances approximate annual averages.) (1) Return on assets. (2) Return on common stock equity. (3) Debt to assets ratio. (b) Briefly discuss the operating performance and financial position of Ragatz. Industry averages for these ratios in 2014 were ROA 3.5%; return on equity 16%; and debt to assets 75%. Based on this analysis, would you make an investment in the company’s 5% convertible bonds? Explain. (c) Assume you want to compare Ragatz to an IFRS company like Merck (which issues nonconvertible debt with detachable warrants). Assuming that the fair value of the equity component of Ragatz’s convertible bonds is $150,000, how would you adjust the analysis above to make valid comparisons between Ragatz and Merck?

1.      : What is the underlying communication mistake in this case? Why do you think Howard Clarke sent those e-mails?

In a certain chemical blanking operation, a sulfuric acid etchant is used to remove material from a sheet of magnesium alloy. The sheet is 0.25 mm thick. The screen resist method of masking was used to permit high production rates to be achieved. As it turns out, the process is producing a large proportion of scrap. Specified tolerances of ±0.025 mm are not being achieved. The foreman in the CHM department complains that there must be something wrong with the sulfuric acid. \"Perhaps the concentration is incorrect,\" he suggests. Analyze the problem and recommend a solution.

1.    : Imagine yourself in a situation of being encouraged by colleagues to inflate your expense account. What factors do you think would influence your decision? Explain.

What approaches have been suggested to overcome the seasonality problem related to interim reporting?

Match the qualitative characteristics below with the following statements. 1. Relevance 5. Comparability 2. Faithful representation 6. Completeness 3. Predictive value 7. Neutrality 4. Confirmatory value 8. Timeliness (a) Quality of information that permits users to identify similarities in and differences between two sets of economic phenomena. (b) Having information available to users before it loses its capacity to influence decisions. (c) Information about an economic phenomenon that has value as an input to the processes used by capital providers to form their own expectations about the future. (d) Information that is capable of making a difference in the decisions of users in their capacity ascapital providers. (e) Absence of bias intended to attain a predetermined result or to induce a particular behavior.

On December 21, 2014, Zurich Company provided you with the following information regarding its trading investments. December 31, 2014 Investments (Trading) Cost Fair Value Unrealized Gain (Loss) Stargate Corp. shares $20,000 $19,000 $(1,000) Carolina Co. shares 10,000 9,000 (1,000) Vectorman Co. shares 20,000 20,600 600 Total of portfolio $50,000 $48,600 $(1,400) Previous fair value adjustment balance –0– Fair value adjustment—Cr. $ (1,400) During 2015, Carolina Company shares were sold for $9,500. The fair value of the shares on December 31, 2015, was Stargate Corp. shares—$19,300; Vectorman Co. shares—$20,500. Instructions (a) Prepare the adjusting journal entry needed on December 31, 2014. (b) Prepare the journal entry to record the sale of the Carolina Company shares during 2015. (c) Prepare the adjusting journal entry needed on December 31, 2015.

For what reasons is the median hourly wage rate of women some 16 per cent lower than that of men in the UK, and the average gross weekly pay, including overtime, more than 21 per cent less?

Oasis Company has used the dollar-value LIFO method for inventory cost determination for many years. The following data were extracted from Oasis’ records. Price Ending Inventory Ending Inventory Date Index at Base Prices at Dollar-Value LIFO December 31, 2014 105 $92,000 $92,600 December 31, 2015 ? 97,000 98,350 Instructions Calculate the index used for 2015 that yielded the above results.

provides products and services to oil and natural gas exploration, production, transmission, and processing companies. The following is taken from a recent income statement. (Dollaramounts are in millions.) Sales revenue $2,697.0 Service revenue 1,933.9 Share of earnings of unconsolidated affi liates 92.4 Total revenues 4,723.3 Cost of sales 1,722.7 Cost of services 1,799.9 Total costs of sales and services 3,522.6 Gross earnings $1,200.7 Selling, engineering, administrative and general expenses (919.8) Special charges (70.0) Other income (deductions) Interest expense (47.4) Interest earned 19.1 Other, net 4.8 Earnings before income taxes and other items below 187.4 Income taxes (79.4) Noncontrolling interest (10.3) Earnings from continuing operations 97.7 Discontinued operations (35.3) Earnings before extraordinary items 62.4 Extraordinary items (6.3) Net earnings $ 56.1 Instructions Assume that 177,636,000 shares of stock were issued and outstanding. Prepare the per share portion of the income statement. Remember to begin with “Earnings from continuing operations.”

Indicate how the hardenability alloying elements in steel affect the TTT curve.

Kraft Enterprises owns the following assets at December 31, 2014. Cash in bank—savings account 68,000 Checking account balance 17,000 Cash on hand 9,300 Postdated checks 750 Cash refund due from IRS 31,400 Certifi cates of deposit (180-day) 90,000 What amount should be reported as cash?

1.      : Recommend to the president that a meeting be arranged with the sales representatives entitled to a bonus and tell them that their checks were going to be delayed until Tacoma’s financial picture clarified. The sales reps would be told that the company had a legal right to delay payment and that it may not be able to pay the bonuses if its financial situation continues to deteriorate.

Whiteside Corporation issues $500,000 of 9% bonds, due in 10 years, with interest payable semiannually. At the time of issue, the market rate for such bonds is 10%. Compute the issue price of the bonds.

How do brazing and soldering differ from the solid-state welding processes?

What properties determine the quality of a sand mold for sand casting?

What are some of the reasons and defects that make rework an integral step in the PCB fabrication sequence?

During the Covid-19 pandemic, U.S. interest rates were extremely low. Explain how the low interest rates affected businesses’ and households’ behavior to borrow. (LO2)

A part made of sheet steel is to be nickel plated. The part is a rectangular flat plate that is 0.075 cm thick and whose face dimensions are 14 cm by 19 cm. The plating operation is carried out in an acid sulfate electrolyte, using a current = 20 amps for a duration = 30 min. Determine the average thickness of the plated metal resulting from this operation.

1.              Give Owens a month’s notice and terminate him. He’s known as a good consultant, so he probably won’t have any trouble finding a new job, and you’ll avoid any further problems associated with his emotional difficulties and his possible alcohol problem.

This year Luke has calculated his gross tax liability at $1,800.  Luke is entitled to a $2,400 nonrefundable personal tax credit, a $1,500 business tax credit, and a $600 refundable personal tax credit.  In addition, Luke has had $2,300 of income taxes withheld from his salary.  What is Luke’s net tax due or refund?