Question & Answer

Describe a call option on interest rate futures. How does it differ from purchasing a futures contract? (LO6)

Other than corporations, are there other legal business entities that offer liability protection? Are any of them taxed as flow-through entities? Explain.

Presented below is information related to Gonzales Corporation for the month of January 2014. Cost of goods sold $208,000 Salaries and wages expense $ 61,000 Delivery expense 7,000 Sales discounts 8,000 Insurance expense 12,000 Sales returns and allowances 13,000 Rent expense 20,000 Sales revenue 350,000 Instructions Prepare the necessary closing entries.

Answer the following questions. (a) On May 1, 2014, Goldberg Company sold some machinery to Newlin Company on an installment contract basis. The contract required five equal annual payments, with the first payment due on May 1, 2014. What present value concept is appropriate for this situation? (b) On June 1, 2014, Seymour Inc. purchased a new machine that it does not have to pay for until May 1, 2016. The total payment on May 1, 2016, will include both principal and interest. Assuming interest at a 12% rate, the cost of the machine would be the total payment multiplied by what time value of money concept? (c) Costner Inc. wishes to know how much money it will have available in 5 years if five equal amounts of $35,000 are invested, with the first amount invested immediately. What interest table is appropriate for this situation? (d) Megan Hoffman invests in a “jumbo” $200,000, 3-year certificate of deposit at First Wisconsin Bank. What table would be used to determine the amount accumulated at the end of 3 years?

Why do you think partnerships, rather than the individual partners, are responsible for making most of the tax elections related to the operation of the partnership?

Determine the shear strain that is experienced by the material that is shear spun in Problem 20.33

Explain how the credit crisis of 2008–2009 encouraged some securities firms to convert to a bank holding company (BHC) structure. Why might the expected return on equity be lower for securities firms that convert to this structure? (LO5)

Why are aluminum and copper alloys unsuitable for use in hot chamber die casting?

: Think about the highly publicized safety grounding of Boeing’s 737 MAX jetliner. One observer said that the goal of profit had taken precedence over the goal of safety within the company. Do you think managers can succeed at both profit and safety simultaneously? DOrganizational effectiveness is the degree to which the organization achieves a stated goal or succeeds in accomplishing what it tries to do. Organizational efficiency refers to the amount of resources used to achieve an organizational goal. It is based on how much raw materials, money, and people are necessary for producing a given volume of output. The ultimate responsibility of managers is to achieve high performance, which is the organization’s ability to attain its goals by using resources in an efficient and effective manner. Although efficiency and effectiveness are both important for performance, most people would probably say that effectiveness is the more important concept. The reason is that internal efficiency has no value if it does not enable the organization to achieve its goals and respond to the external environment. On the other hand, an organization that is effective does achieve its goals, by definition. One of these goals should involve continuously increasing efficiency. Managers can and should improve both efficiency and effectiveness simultaneously. As noted above, one of any organization’s primary goals should be to continuously improve efficiency. To the extent that the organization increases its success in achieving this goal, along with others, its effectiveness also improves.

What is the difference between crystalline and noncrystalline structures in materials?

How does information from the balance sheet help users of the financial statements?

Terry Hutchison worked as a self-employed lawyer until two years ago, when he retired.  He used the cash method of accounting in his business for tax purposes.  Five years ago, Terry represented his client ABC Corporation in an antitrust lawsuit against XYZ Corporation.  During that year, Terry paid self-employment taxes on all of his income.  ABC won the lawsuit, but Terry and ABC could not agree on the amount of his earnings.  Finally, this year, the issue got resolved and ABC paid Terry $90,000 for the services he provided five years ago.  Terry plans to include the payment in his gross income, but because he spends most of his time playing golf and absolutely no time working on legal matters, he does not intend to pay self-employment taxes on the income.  Is Terry subject to self-employment taxes on this income?

Using the facts from the previous problem, when should Reese pay the bill if she expects her marginal tax rate to be 33 percent next year? 25 percent next year?

See if you can identify two companies that are vertically integrated and what advantages they have from such integration.

Identify and explain the three types of classifications for investments in debt securities.

Juanita paid $50,000 of interest on a mortgage on her home (loan of $1,000,000 at 5% interest rate to buy the residence in 2018; $1,200,000 original purchase price and value at purchase) and $6,500 of interest on a $100,000 home-equity loan on her home (loan proceeds were used to buy furniture). Juanita’s AGI is $600,000. How much interest expense can Juanita deduct as an itemized deduction?

Presented below are income statements prepared on a LIFO and FIFO basis for Kenseth Company, which started operations on January 1, 2013. The company presently uses the LIFO method of pricing its inventory and has decided to switch to the FIFO method in 2014. The FIFO income statement is computed in accordance with the requirements of GAAP. Kenseth’s profit-sharing agreement with its employees indicates that the company will pay employees 10% of income before profit-sharing. Income taxes are ignored. LIFO Basis FIFO Basis 2014 2013 2014 2013 Sales $3,000 $3,000 $3,000 $3,000 Cost of goods sold 1,130 1,000 1,100 940 Operating expenses 1,000 1,000 1,000 1,000 Income before profi t-sharing 870 1,000 900 1,060 Profi t-sharing expense 87 100 96 100 Net income $ 783 $ 900 $ 804 $ 960 Instructions Answer the following questions. (a) If comparative income statements are prepared, what net income should Kenseth report in 2013 and 2014? (b) Explain why, under the FIFO basis, Kenseth reports $100 in 2013 and $96 in 2014 for its profit-sharing expense. (c) Assume that Kenseth has a beginning balance of retained earnings at January 1, 2014, of $8,000 using the LIFO method. The company declared and paid dividends of $500 in 2014. Prepare the retained earnings statement for 2014, assuming that Kenseth has switched to the FIFO method.

Shumway Oil uses successful-efforts accounting and also provides full-cost results as well. Under full-cost, Shumway Oil would have reported retained earnings of $42 million and net income of $4 million. Under successfulefforts, retained earnings were $29 million, and net income was $3 million. Explain the difference between full-costing and successful-efforts accounting.

Waterworld Company leased equipment from Costner Company. The lease term is 4 years and requires equal rental payments of $43,019 at the beginning of each year. The equipment has a fair value at the inception of the lease of $150,000, an estimated useful life of 4 years, and no salvage value. Waterworld pays all executory costs directly to third parties. The appropriate interest rate is 10%. Prepare Waterworld’s January 1, 2014, journal entries at the inception of the lease.

Explain how financial crowding out can reduce the effectiveness of fiscal policy. What determines the magnitude of crowding out?

How does Level 5 leadership differ from the concept of servant leadership? Do you believe that anyone has the potential to become a Level 5 leader? Discuss.

What is an installment sale?  How do the tax laws ensure that taxpayers recognize all the gain they realize on an installment sale?  How is depreciation recapture treated in an installment sale?  Explain the gross profit ratio and how it relates to gains recognized under installment method sales.

Solve Problem 34.3, only use a wafer size of 257 mm whose processable area has a diameter = 250 mm. What is the percent increase in (a) wafer diameter, (b) processable wafer area, and (c) number of chips, compared to the values in the previous problem?

In what way is the provision of information a public good? Do all the examples above come into the category of public goods? Give some other examples of information which is a public good. (Clue: refer back to the characteristics of public goods in section 12.2 and do not confuse a public good with something merely provided by the government, which could also be provided by the private sector.)

Briefly discuss the implications of the financial statement presentation project for the reporting of stockholders’ equity.