Question & Answer

The accounts below appear in the ledger of Anita Baker Company. Retained Earnings Dr. Cr. Bal. Jan. 1, 2014 Credit Balance $ 42,000 Aug. 15 Dividends (cash) $15,000 27,000 Dec. 31 Net Income for 2014 $40,000 67,000 Equipment Dr. Cr. Bal. Jan. 1, 2014 Debit Balance $140,000 Aug. 3 Purchase of Equipment $62,000 202,000 Sept. 10 Cost of Equipment Constructed 48,000 250,000 Nov. 15 Equipment Sold $56,000 194,000 Accumulated Depreciation— Equipment Dr. Cr. Bal. Jan. 1, 2014 Credit Balance $ 84,000 Apr. 8 Extraordinary Repairs $21,000 63,000 Nov. 15 Accum. Depreciation on Equipment Sold 25,200 37,800 Dec. 31 Depreciation for 2014 $16,800 54,600 Instructions From the postings in the accounts above, indicate how the information is reported on a statement of cash flows by preparing a partial statement of cash flows using the indirect method. The loss on sale of equipment (November 15) was $5,800.

Distinguish between the following interest rates for bonds payable: (a) Yield rate. (d) Market rate. (b) Nominal rate. (e) Effective rate. (c) Stated rate.

Describe the kinds of insurance premiums an employer can pay on behalf of an employee without triggering includible compensation to the employee.

Describe a defined-benefit pension plan. Describe a defined-contribution plan and explain how it differs from a defined-benefit plan. (LO1)

In the previous problem, if the foundry desired to improve its quality performance to the 5.0 sigma level in all three measures of DPM, how many defects and defective units would they produce in an annual production quantity of 15,000 castings? Assume the same eight features are used to assess quality.

Redraw the three diagrams of Figure 19.2 with a steeper L curve. Show how an increase in money supply will have a greater effect on national income.

3. Under what circumstances would the production possibility curve be (a) a straight line; (b) bowed in toward the origin? Are these circumstances ever likely?

1.    : Some people say an organization could never be “prepared” for a disaster such as the shooting at a Walmart in El Paso, Texas; the Japan nuclear disaster; or the huge BP oil spill in the Gulf of Mexico. Discuss the potential value of crisis planning in situations like these, even if the situations are difficult to plan for.

Walker Company is a manufacturer and lessor of computer equipment. What should be the nature of its lease arrangements with lessees if the company wishes to account for its lease transactions as sales-type leases?

What is thermal conductivity as a material property?

Pistons Inc. recently hired a new accountant with extensive experience in accounting for partnerships. Because of the pressure of the new job, the accountant was unable to review what he had learned earlier about corporation accounting. During the first month, he made the following entries for the corporation’s capital stock. May 2 Cash 192,000 Capital Stock 192,000 (Issued 12,000 shares of $5 par value common stock at $16 per share) 10 Cash 600,000 Capital Stock 600,000 (Issued 10,000 shares of $30 par value preferred stock at $60 per share) May 15 Capital Stock 15,000 Cash 15,000 (Purchased 1,000 shares of common stock for the treasury at $15 per share) 31 Cash 8,500 Capital Stock 5,000 Gain on Sale of Stock 3,500 (Sold 500 shares of treasury stock at $17 per share) Instructions On the basis of the explanation for each entry, prepare the entries that should have been made for the capital stock transactions.

Costing for a hospital Mercy Hospital uses a costing system for all patients who have surgery. The hospital uses a budgeted overhead rate for allocating overhead to patient stays. In March, the operating room had a budgeted allocation base of 1000 operating hours. The budgeted operating room overhead costs were $66 000.   Patient Dwight Schuller was in the operating room four hours during March. Other costs related to Schuller’s four-hour surgery include:       Physician cost is not included because physicians bill patients separately from the hospital billing system.   Required (a)          Determine the budgeted (i.e., estimated) overhead rate for the operating room. (b)          Determine the total costs of Schuller’s four-hour surgery.

Norton Co. had the following amounts related to its pension plan in 2014. Actuarial liability loss for 2014 $28,000 Unexpected asset gain for 2014 18,000 Accumulated other comprehensive income (G/L) (beginning balance) 7,000 Cr. Determine for 2014: (a) Norton’s other comprehensive income (loss), and (b)N comprehensive income. Net income for 2014 is $26,000; no amortization of gain or loss is necessary in 2014.

Claude purchased raw land three years ago for $1,500,000 to develop into lots and sell to individuals planning to build their dream homes. Claude intended to treat this property as inventory, like his other development properties. Before completing the development of the property, however, he decided to contribute it to South Peak Investors LLC when it was worth $2,500,000, in exchange for a 10 percent capital and profits interest. South Peak’s strategy is to hold land for investment purposes only and then sell it later at a gain. a. If South Peak sells the property for $3,000,000 four years after Claude’s contribution, how much gain or loss is recognized and what is its character? [Hint: See §724.] b. If South Peak sells the property for $3,000,000 five and one-half years after Claude’s contribution, how much gain or loss is recognized, and what is its character?

The chairman of the board of directors of the company for which you are chief accountant has told you that he has little use for accounting figures based on historical cost. He believes that replacement values are of far more significance to the board of directors than “out-of-date costs.” Present some arguments to convince him that accounting data should still be based on historical cost.

How will competition between growth-maximising firms benefit the consumer?

Target in 2012 reported net income of $2.9 billion, net sales of $69.8 billion, and average total assets of $45.2 billion. What is Target’s asset turnover? What is Target’s return on assets?

Compare the relative benefits of subsidies and high minimum prices to (a) the consumer; (b) the producer.

Explain the difference between equity REITs and mortgage REITs. Which type would likely be a better hedge against high inflation? Why? (LO5)

Milner Family Importers sold goods to Tung Decorators for $30,000 on November 1, 2014, accepting Tung’s $30,000, 6-month, 6% note. Prepare Milner’s November 1 entry, December 31 annual adjusting entry, and May 1 entry for the collection of the note and interest.

Data for the Vince Gill Company are presented in E23-3. Instructions Prepare the operating activities section of the statement of cash flows using the direct method.

Explain the operation of an optical encoder.

Explain how some high-frequency traders use a form of front running to capitalize on faster access to specific markets. (LO3)

Suppose you asked your favorite AI learning tool “Do stock redemptions have an impact on a corporation's earnings and profits?” and the AI tool provided the following response:

The housing for a certain machinery product is made of two components, both aluminum castings. The larger component has the shape of a dish sink, and the second component is a flat cover that is attached to the first component to create an enclosed space for the machinery parts. Sand casting is used to produce the two castings, both of which are plagued by defects in the form of misruns and cold shuts. The foreman complains that the parts are too thin, and that is the reason for the defects. However, it is known that the same components are cast successfully in other foundries. What other explanation can be given for the defects?