Question & Answer

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.

Identify the main categories of plastics shaping processes, as classified by the resulting product geometry.

Falcetto Company acquired equipment on January 1, 2013, for $12,000. Falcetto elects to value this class of equipment using revaluation accounting. This equipment is being depreciated on a straightline basis over its 6-year useful life. There is no residual value at the end of the 6-year period. The appraised value of the equipment approximates the carrying amount at December 31, 2013 and 2015. On December 31, 2014, the fair value of the equipment is determined to be $7,000. Instructions (a) Prepare the journal entries for 2013 related to the equipment. (b) Prepare the journal entries for 2014 related to the equipment. (c) Determine the amount of depreciation expense that Falcetto will record on the equipment in 2015.

{Research} For the following independent cases, determine whether economic income is present and, if so, whether it must be included in gross income.  Identify a tax authority that supports your analysis. Hermione discovered a gold nugget (valued at $10,000) on her land.  b.       Jay embezzled $20,000 from his employer and has not yet been apprehended. c.       Keisha found $1,000 inside an old dresser.  She purchased the dresser at a discount furniture store at the end of last year and found the money after the beginning of the new year.  No one has claimed the money.

Describe a wheel ring test.

What happens to an elastomer when it is below its glass transition temperature?

The dollar-value LIFO method was adopted by Enya Corp. on January 1, 2014. Its inventory on that date was $160,000. On December 31, 2014, the inventory at prices existing on that date amounted to $140,000. The price level at January 1, 2014, was 100, and the price level at December 31, 2014, was 112. Instructions (a) Compute the amount of the inventory at December 31, 2014, under the dollar-value LIFO method. (b) On December 31, 2015, the inventory at prices existing on that date was $172,500, and the price level was 115. Compute the inventory on that date under the dollar-value LIFO method.

Cost drivers; value chain; strategy; organisational structure Australian fashion designer Sean Ashby commenced his men’s swimwear and clothing business aussieBum in 2001. A keen swimmer and surfer, he was unable to find a good pair of men’s cossies and used his life savings of $20 000 to make a series of prototypes, buy materials and commence manufacturing in Australia. Despite rejection from local retailers who did not see the potential for aussieBum to compete with international brands, Ashby has proven critics wrong. He had no choice but to take his business online, with instant exposure to the international market. It now takes thousands of orders a day.   Since the company’s inception, Ashby says that aussieBum has ‘taken on its own little cult revolution’, with celebrities such as Ewan McGregor, Billy Connolly and David Beckham fans of the aussieBum brand. Even Kylie Minogue’s male dancers wore aussieBum cossies in the film clip for her song ‘Slow’. The marketing thrust behind Ashby’s aussieBum is to live the dream — ‘the dream to be independent and present our gear in a way that gets noticed. We don’t apologise for pushing the boundaries . . . We have a saying at aussieBum — If you doubt yourself, wear something else’.   The company doubled in size every year in its first five years and continued to grow by 20 per cent every quarter. By 2005, aussieBum earned more than $5 million in sales and carried no debt. The aussieBum brand now takes pride of place in stores such as Selfridges in the UK; Brown Thomas in Ireland; La Maison Stores in Canada; Alpha Male in Melrose Drive, Los Angeles; KaDeWa in Germany; as well as others in Spain, The Netherlands, Sweden, Poland and Russia. As well as direct department store sales, aussieBum’s internet retail orders are booming, with aussieBum being distributed to more than 70 countries. It now has over 200 000 consumers ordering direct via its custom built e-commerce site.   Most of the raw materials are sourced from Italy and China. By manufacturing in Australia, aussieBum hopes to promote Australia’s culture and relaxed lifestyle as well as eliminate restrictions that might come with outsourcing production to other countries. Moreover, producing locally (through independent manufacturers) provides flexibility and a reduced timeframe in getting new products to market. With a heavy emphasis on innovative product design, aussieBum pays close attention to the design phase of the product process.   Two recent examples of aussieBum’s flexibility and innovative approach to product development and marketing are worthy of note. First, it was able to capitalise on the consumer backlash against competitor Bonds when that company transferred more of its manufacturing offshore. Ashby estimates that aussieBum’s sales grew by at least 40 per cent as a result. Second, aussieBum was able to achieve continued growth during the global financial crisis. The company continues to avoid debt and own all its assets outright.       Required (a) With reference to the information provided, distinguish between structural and executional cost drivers. (b) Illustrate and describe the industry and organisational value chain in which aussieBum operates. (c) Classify aussieBum’s likely strategy as low cost or product differentiation. Explain. (d) Classify aussieBum’s organisational structure as centralised or decentralised. Explain. (e) With reference to disruptive innovation, do you consider aussieBum to be a disruptor to the traditional garment industry value chain? Discuss why or why not.

Are variable-rate bonds attractive to investors who expect interest rates to decrease? Explain. Would a firm that needs to borrow funds consider issuing variable-rate bonds if it expects interest rates to decrease in the future? Explain. (LO2)

Explain how manufacturing overhead cost pools and cost allocation are related.

Compare and contrast when taxpayers are allowed to deduct the cost of warranties provided by others to the taxpayer (i.e., purchased by the taxpayer) and when taxpayers are allowed to deduct the costs associated with warranties they provide (sell) to others.

1.    : How has Ken Byers shaped the sales culture at Hull Engineering? Do you consider this culture to be at a preconventional, conventional, or postconventional level of ethical development? Why?

Who are the owners of credit unions? Explain the tax status of CUs and the reason for that status. Why are CUs typically smaller than commercial banks or savings institutions? (LO7)

Aaron, Deanne, and Keon formed the Blue Bell General Partnership at the beginning of the current year. Aaron and Deanne each contributed $110,000 and Keon transferred an acre of undeveloped land to the partnership. The land had a tax basis of $70,000 and was appraised at $180,000. The land was also encumbered with a $70,000 nonrecourse mortgage for which no one was personally liable. All three partners agreed to split profits and losses equally. At the end of the first year, Blue Bell made a $7,000 principal payment on the mortgage. For the first year of operations, the partnership records disclosed the following information: Sales revenue $470,000 Cost of goods sold $410,000 Operating expenses $70,000 Long-term capital gains $2,400 §1231 gains $900 Charitable contributions $300 Municipal bond interest $300 Salary paid as a guaranteed payment to Deanne (not included in expenses) $3,000 a. Compute the adjusted basis of each partner’s interest in the partnership immediately after the formation of the partnership. b. List the separate items of partnership income, gains, losses, and deductions that the partners must show on their individual income tax returns that include the results of the partnership’s first year of operations. c. Using the information generated in answering parts (a) and (b), prepare Blue Bells’ page 1 and Schedule K to be included with its Form 1065 for its first year of operations along with Schedule K-1 for Deanne. d. What are the partners’ adjusted bases in their partnership interests at the end of the first year of operations?

The power source in a particular welding operation generates 125 Btu/min, which is transferred to the work surface with heat transfer factor = 0.8. The melting point for the metal to be welded = 1800°F and its melting factor = 0.5. A continuous fillet weld is to be made with a cross-sectional area = 0.04 in2. Determine the travel speed at which the welding operation can be accomplished.

The unit cost in a machining operation is the sum of four cost terms. The first three terms are: (1) part load/unload cost, (2) cost of time the tool is actually cutting the work, and (3) cost of the time to change the tool. What is the fourth term?

Hayes Company sold 10,000 shares of Kenyon Co. common stock for $27.50 per share, incurring $1,770 in brokerage commissions. These securities were classified as trading and originally cost $260,000. Prepare the entry to record the sale of these securities.

The outstanding capital stock of Edna Millay Corporation consists of 2,000 shares of $100 par value, 8% preferred, and 5,000 shares of $50 par value common. Instructions Assuming that the company has retained earnings of $90,000, all of which is to be paid out in dividends, and that preferred dividends were not paid during the 2 years preceding the current year, state how much each class of stock should receive under each of the following conditions. (a) The preferred stock is noncumulative and nonparticipating. (b) The preferred stock is cumulative and nonparticipating. (c) The preferred stock is cumulative and participating. (Round dividend rate percentages to four decimal places.)

Suppose that a travel agency decided it would no longer compensate employees with sales commissions, but instead pay a salary with a bonus for high customer satisfaction ratings. What problems would you foresee from the agency’s financial perspective?

Linda Day George Company had bonds outstanding with a maturity value of $300,000. On April 30, 2014, when these bonds had an unamortized discount of $10,000, they were called in at 104. To pay for these bonds, George had issued other bonds a month earlier bearing a lower interest rate. The newly issued bonds had a life of 10 years. The new bonds were issued at 103 (face value $300,000). Issue costs related to the new bonds were $3,000. Instructions Ignoring interest, compute the gain or loss and record this refunding transaction.

Value-added and non-value-added activities Some activities add value to an organisation, while others do not.   Required Determine whether each of the following activities is likely to be value-added or non-value-added and explain your choice. (a)          Inspection activities (b)          Moving materials to work stations (c)           Manufacturing extra inventory to keep employees busy (d)          Packing to fill a customer order (e)           Product design initiatives

What is net interest? Identify the elements of net interest and explain how they are computed.

Explain how some government defined-benefit plans have become underfunded as a result of overestimating their rate of return on investment. (LO4)

The financial statements of P&G are presented in Appendix 5B. The company’s complete annual report, including the notes to the financial statements, can be accessed at the book’s companion website, www. wiley.com/college/kieso. Instructions Refer to P&G’s financial statements and the accompanying notes to answer the following questions. (a) What is the par or stated value of P&G’s preferred stock? (b) What is the par or stated value of P&G’s common stock? (c) What percentage of P&G’s authorized common stock was issued at June 30, 2011? (d) How many shares of common stock were outstanding at June 30, 2011, and June 30, 2010? (e) What was the dollar amount effect of the cash dividends on P&G’s stockholders’ equity? (f) What is P&G’s return on common stock equity for 2011 and 2010? (g) What is P&G’s payout ratio for 2011 and 2010? (h) What was the market price range (high/low) of P&G’s common stock during the quarter ended June 30, 2011?

Why is photolithography based on visible light not used in nanotechnology?