Question & Answer

How would you attempt to value time that you yourself save (a) getting to work; (b) going on holiday; (c) going out in the evening?

What book-tax differences in year 1 and year 2 associated with its capital gains and losses would DEF Inc. report in the following alternative scenarios?  Identify each book-tax difference as favorable or unfavorable and as permanent or temporary.   a.  In year 1, DEF recognized a loss of $15,000 on land that it had held for investment.  In year 1, it also recognized a $30,000 gain on equipment it had purchased a few years ago. The equipment sold for $50,000 and had an adjusted basis of $20,000.  DEF had deducted $40,000 of tax depreciation on the equipment. In year 2, DEF recognized a capital loss of $2,000.

Selane Eatery operates a catering service specializing in business luncheons for large corporations. Selane requires customers to place their orders 2 weeks in advance of the scheduled events. Selane bills its customers on the tenth day of the month following the date of service and requires that payment be made within 30 days of the billing date. Conceptually, when should Selane recognize revenue related to its catering service?

For a recent 2-year period, the balance sheet of Santana Dotson Company showed the following stockholders’ equity data at December 31 (in millions). 2014 2013 Additional paid-in capital $ 931 $ 817 Common stock 545 540 Retained earnings 7,167 5,226 Treasury stock 1,564 918 Total stockholders’ equity $7,079 $5,665 Common stock shares issued 218 216 Common stock shares authorized 500 500 Treasury stock shares 34 27 Instructions (a) Answer the following questions. (1) What is the par value of the common stock? (2) What is the cost per share of treasury stock at December 31, 2014, and at December 31, 2013? (b) Prepare the stockholders’ equity section at December 31, 2014.

{Planning}Through November, Tex has received gross income of $120,000.For December, Tex is considering whether to accept one more work engagement for the year.Engagement 1 will generate $7,000 of revenue at a cost of $4,000, which is deductible for AGI.In contrast, engagement 2 will generate $7,000 of revenue at a costof $3,000,which is deductible as an itemized deduction.Tex files as a single taxpayer.

1.      : Would you rate Casper’s competitive strategy as pursuing differentiation, cost leadership, focus, or a combination of these? Explain. Do you think Casper will grow successfully and turn a profit? Why?

Discuss the behavioural issues that need to be considered when establishing a standard cost.

1.              : Say nothing about the false numbers. Of course, the company will miss the projections and have to come up with a good explanation, but, after all, isn’t that par for the course among fledgling high-tech companies? Chances are the whole thing will blow over without a problem.

1.    You are a middle manager helping to implement a new corporate cost-cutting strategy, and you’re meeting skepticism, resistance, and, in some cases, outright hostility from your subordinates. In what ways might you or the company have been able to avoid this situation? Where do you go from here?

Teton Corporation issued $600,000 of 7% bonds on November 1, 2014, for $644,636. The bonds were dated November 1, 2014, and mature in 10 years, with interest payable each May 1 and November 1. Teton uses the effective-interest method with an effective rate of 6%. Prepare Teton’s December 31, 2014, adjusting entry.

Parent Co. invested $1,000,000 in Sub Co. for 25% of its outstanding stock. Sub Co. pays out 40% of net income in dividends each year. Instructions Use the information in the following T-account for the investment in Sub to answer the following questions. Investment in Sub Co. 1,000,000 110,000 44,000 (a) How much was Parent Co.’s share of Sub Co.’s net income for the year? (b) How much was Parent Co.’s share of Sub Co.’s dividends for the year? (c) What was Sub Co.’s total net income for the year? (d) What was Sub Co.’s total dividends for the year?

1.    : Harley-Davidson, which once boasted that it made “big toys for big boys,” is trying to lure more women to the brand to make up for declining sales in a slow economy. How do you think this move will complement or confound the company’s differentiation strategy, which has long been based on a macho image?

1. If a person earning £10 000 per year pays £1000 in a given tax and a person earning £20 000 per year pays £1600, is the tax progressive or regressive? 2. A proportional tax will leave the distribution of income unaffected. Why should this be so, given that a rich person will pay a larger absolute amount than a poor person?

Explain why demand might increase for relevant and useful information in the future. What professional skills will help you meet that need?

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

How are operating expenses (not included in cost of goods sold) handled under the installment-sales method of accounting? What is the justification for such treatment?

What is the difference between a cutoff operation and a parting operation?

What are the major sources of cash (inflows) in a statement of cash flows? What are the major uses (outflows) of cash?

What is the difference between a process layout and a product layout in a production facility?

Lee is 30 years old and single. Lee paid all the costs of maintaining his household for the entire year. Determine Lee’s filing status in each of the following alternative situations: a. Lee is Ashton’s uncle. Ashton is 15 years old and has gross income of $6,000. Ashton lived in Lee’s home from April 1 through the end of the year. b. Lee is Ashton’s uncle. Ashton is 20 years old, is not a full-time student, and has gross income of $7,000. Ashton lived in Lee’s home from April 1 through the end of the year. c. Lee is Ashton’s uncle. Ashton is 22 years old and was a full-time student from January through April. Ashton’s gross income was $6,000. Ashton lived in Lee’s home from April 1 through the end of the year. d. Lee is Ashton’s cousin. Ashton is 18 years old, has gross income of $3,000, and is not a full-time student. Ashton lived in Lee’s home from April 1 through the end of the year. e. Lee and Ashton are cousins. Ashton is 18 years old, has gross income of $3,000, and is not a full-time student. Ashton lived in Lee’s home for the entire year.

Schmitt Company must make computations and adjusting entries for the following independent situations at December 31, 2015. 1. Its line of amplifiers carries a 3-year warranty against defects. On the basis of past experience the estimated warranty costs related to dollar sales are first year after sale—2% of sales revenue; second year after sale—3% of sales revenue; and third year after sale—5% of sales revenue. Sales and actual warranty expenditures for the first 3 years of business were: Sales Warranty Revenue Expenditures 2013 $ 800,000 $ 6,500 2014 1,100,000 17,200 2015 1,200,000 62,000 Instructions Compute the amount that Schmitt Company should report as a liability in its December 31, 2015, balance sheet. Assume that all sales are made evenly throughout each year with warranty expenses also evenly spaced relative to the rates above. 2. With some of its products, Schmitt Company includes coupons that are redeemable in merchandise. The coupons have no expiration date and, in the company’s experience, 40% of them are redeemed. The liability for unredeemed coupons at December 31, 2014, was $9,000. During 2015, coupons worth $30,000 were issued, and merchandise worth $8,000 was distributed in exchange for coupons redeemed. Instructions Compute the amount of the liability that should appear on the December 31, 2015, balance sheet.

Recently, Glenda Estes was interested in purchasing a Honda Acura. The salesperson indicated that the price of the car was either $27,600 cash or $6,900 at the end of each of 5 years. Compute the effective-interest rate to the nearest percent that Glenda would pay if she chooses to make the five annual payments.

Give some other examples of choices that governments had to make during the pandemic. To what extent were they economic choices?

Which way is the L2 curve likely to shift in the following cases? (a) The balance of trade moves into deficit. (b) People anticipate that foreign interest rates are likely to rise relative to domestic ones. (c) The domestic rate of inflation falls below that of other major trading countries. (d) People believe that the pound is about to depreciate.

On January 1, 2014, Evans Company entered into a noncancelable lease for a machine to be used in its manufacturing operations. The lease transfers ownership of the machine to Evans by the end of the lease term. The term of the lease is 8 years. The minimum lease payment made by Evans on January 1, 2014, was one of eight equal annual payments. At the inception of the lease, the criteria established for classification as a capital lease by the lessee were met. Instructions (a) What is the theoretical basis for the accounting standard that requires certain long-term leases to be capitalized by the lessee? Do not discuss the specific criteria for classifying a specific lease as a capital lease. (b) How should Evans account for this lease at its inception and determine the amount to be recorded? (c) What expenses related to this lease will Evans incur during the first year of the lease, and how will they be determined? (d) How should Evans report the lease transaction on its December 31, 2014, balance sheet?