Question & Answer

What is the purpose of a statement of cash flows? How does it differ from a balance sheet and an income statement?

Vertovec Inc., a large local consulting firm in Utah, hired several new consultants from out of state last year to help service their expanding list of clients. To aid in relocating the consultants, Vertovec Inc. purchased the consultants’ homes in their prior location if the consultants were unable to sell their homes within 30 days of listing them for sale. Vertovec Inc. bought the homes from the consultants for 5 percent less than the list price and then continued to list the homes for sale. Each home Vertovec Inc. purchased was sold at a loss. By the end of last year, Vertovec had suffered a loss totaling $250,000 from the homes. How should Vertovec treat the loss for tax purposes?  Write a memo to Vertovec Inc. explaining your findings and any planning suggestions that you may have if Vertovec Inc. continues to offer this type of relocation benefit to newly hired consultants.

The financial statements of ConAgra Foods, Inc.’s 2012 annual report disclose the following information. (in millions) May 27, 2012 May 29, 2011 May 30, 2010 Inventories $1,870 $1,803 $1,598 Fiscal Year 2012 2011 Net sales $13,263 $12,303 Cost of goods sold 10,436 9,390 Net income 474 818 Instructions Compute ConAgra’s (a) inventory turnover and (b) the average days to sell inventory for 2012 and 2011.

Define nominal surface.

What determines if a taxpayer is required to file a tax return?  If a taxpayer is not required to file a tax return, does this mean that the taxpayer should not file a tax return?

Would redistributing incomes from the rich to the poor reduce the overall problem of scarcity?

Erickson Company sponsors a defined benefit pension plan. The corporation’s actuary provides the following information about the plan. January 1, December 31, 2014 2014 Vested benefi t obligation $1,500 $1,900 Accumulated benefi t obligation 1,900 2,730 Projected benefi t obligation 2,500 3,300 Plan assets (fair value) 1,700 2,620 Settlement rate and expected rate of return 10% Pension asset/liability 800 ? Service cost for the year 2014 400 Contributions (funding in 2014) 700 Benefi ts paid in 2014 200 Instructions (a) Compute the actual return on the plan assets in 2014. (b) Compute the amount of the other comprehensive income (G/L) as of December 31, 2014. (Assume the January 1, 2014, balance was zero.) (c) Compute the amount of net gain or loss amortization for 2014 (corridor approach). (d) Compute pension expense for 2014.

Using IS/LM/BP analysis, trace through the effect of (a) a deflationary fiscal policy and (b) a deflationary monetary policy under (i) a fixed exchange rate; (ii) a free-floating exchange rate.

There are 19 correct answers in the following multiple choice questions (some questions have multiple answers that are correct). To attain a perfect score on the quiz, all correct answers must be given. Eachcorrect answer is worth 1 point. Each omitted answer or wrong answer reduces the score by 1 point, and each additional answer beyond the correct number of answers reduces the score by 1 point. Percentage score on the quiz is based on the total number of correct answers. 5.1 A tolerance is which one of the following: (a) clearance between a shaft and a mating hole, (b) measurement error, (c) total permissible variation from a specified dimension, or (d) variation in manufacturing? 5.2 Which of the following two geometric terms have the same meaning: (a) circularity, (b) concentricity, (c) cylindricity, and (d) roundness? 5.3 A surface plate is most typically made of which one of the following materials: (a) aluminum oxide ceramic, (b) cast iron, (c) granite, (d) hard polymers, or (e) stainless steel? 5.4 An outside micrometer would be appropriate for measuring which of the following (two correct answers): (a) hole depth, (b) hole diameter, (c) part length, (d) shaft diameter, and (e) surface roughness? 5.5 In a GO/NO-GO gage, which one of the following best describes the function of the GO gage: (a) checks limit of maximum tolerance, (b) checks maximum material condition, (c) checks maximum size, (d) checks minimum material condition, or (e) checks minimum size? 5.6 Which of the following are likely to be GO/NO-GO gages (three correct answers): (a) gage blocks, (b) limit gage, (c) master gage, (d) plug gage, and (e) snap gage? 5.7 Surface texture includes which of the following characteristics of a surface (three correct answers): (a) deviations from the nominal surface, (b) feed marks of the tool that produced the surface, (c) hardness variations, (d) oil films, and (e) surface cracks? 5.8 Surface texture is included within the scope of surface integrity: (a) true or (b) false? 5.9 Thermal energy is normally associated with which of the following changes in the altered layer (three best answers): (a) cracks, (b) hardness variations, (c) heat affected zone, (d) plastic deformation, (e) recrystallization, or (f) voids? 5.10 Which one of the following manufacturing processes will likely result in the best surface finish: (a) arc welding, (b) grinding, (c) machining, (d) sand casting, or (e) sawing? 5.11 Which one of the following manufacturing processes will likely result in the worst surface finish: (a) cold rolling, (b) grinding, (c) machining, (d) sand casting, or (e) sawing?

Monat Company has grown rapidly since its founding in 2004. To instill loyalty in its employees, Monat is contemplating establishment of a defined benefit plan. Monat knows that lenders and potential investors will pay close attention to the impact of the pension plan on the company’s financial statements, particularly any gains or losses that develop in the plan. Monat has asked you to conduct some research on the accounting for gains and losses in a defined benefit plan. Instructions If your school has a subscription to the FASB Codification, go to http://aaahq.org/ascLogin.cfm to log in and prepare responses to the following. Provide Codification references for your responses. (a) Briefly describe how pension gains and losses are accounted for. (b) Explain the rationale behind the accounting method described in part (a). (c) What is the related pension asset or liability that will show up on the balance sheet? When will each of these situations occur?

How do money market funds differ from other types of mutual funds in terms of how they use the money invested by shareholders? Which securities do MMFs invest in most often? How can an MMF accommodate shareholders who wish to sell their shares when the amount of proceeds received from selling new shares is less than the amount needed to cover the withdrawals? (LO3)

Why is the price inelasticity of demand for private car transport a problem when formulating a policy for the reduction of traffic congestion? What could be done to change the price elasticity of demand in a desirable direction?

What layer material is produced by thermal oxidation in IC fabrication?

0 A riser in the shape of a sphere is to be designed for a sand casting mold. The casting is a rectangular plate, with length = 200 mm, width = 100 mm, and thickness = 18 mm. If the total solidification time of the casting itself is known to be 3.5 min, determine the diameter of the riser so that it will take 25% longer for the riser to solidify

How are tax credits and tax deductions similar?  How are they dissimilar?

For each of the following subsequent (post-balance-sheet) events, indicate whether a company should (a) adjust the financial statements, (b) disclose in notes to the financial statements, or (c) neither adjust nor disclose. ______ 1. Settlement of federal tax case at a cost considerably in excess of the amount expected at year-end. ______ 2. Introduction of a new product line. ______ 3. Loss of assembly plant due to fire. ______ 4. Sale of a significant portion of the company’s assets. ______ 5. Retirement of the company president. ______ 6. Prolonged employee strike. ______ 7. Loss of a significant customer. ______ 8. Issuance of a significant number of shares of common stock. ______ 9. Material loss on a year-end receivable because of a customer’s bankruptcy. ______ 10. Hiring of a new president. ______ 11. Settlement of prior year’s litigation against the company (no loss was accrued). ______ 12. Merger with another company of comparable size.

Can cryptocurrencies become a mainstream asset class similar to stocks and bonds? What characteristics, in your opinion, would draw investors to cryptocurrencies as an asset class? What aspects of them would be unattractive? (LO3)

When a U.S. taxpayer pays income taxes to a foreign government, what options does the taxpayer have when determining how to treat the expenditure on their U.S. individual income tax return?

The Volcker Rule is intended to prevent banks from engaging in proprietary trading. Write a short essay offering your opinion on whether banks should be allowed to engage in proprietary trading.

1. Draw Kate’s and Simon’s demand curves for potatoes on one diagram. Note that you will use the same vertical scale as in Figure 2.1, but you will need a quite different horizontal scale. 2. At what price is their demand the same? 3. What explanations could there be for the quite different shapes of their two demand curves? 4. Assume that Kate and Simon are the only two consumers in the market. Show how the market demand curve can be derived from their individual demand curves.

Explain the circumstances under which an increase in pensions and child benefit would (a) increase national income; (b) leave national income unaffected; (c) decrease national income.

How are gains and losses from extinguishment of a debt classified in the income statement? What disclosures are required of such transactions?

Compare and contrast computing the depreciation deduction for tangible personal property versus computing the depreciation deduction for real property under both the regular tax and alternative tax systems.

{Research} Last year Acme paid Ralph $15,000 to install a new air-conditioning unit at its headquarters building.  The air conditioner did not function properly, and this year Acme requested that Ralph return the payment.  Because Ralph could not repair one critical part in the unit, he refunded the cost of the repair, $5,000, to Acme. a.       Is Ralph required to include the $15,000 payment he received last year in his gross income from last year? b.       What are the tax implications of the repayment if Ralph was in the 35 percent tax bracket when he received the $15,000 payment from Acme, but was in the 28 percent tax bracket when he refunded $5,000 to Acme? c.       How would you answer part b. if Ralph refunded $2,500 to Acme and not $5,000?

How would raising interest rates in this way affect the balance between the current and financial accounts of the balance of payments?