Question & Answer

Myers Company provides you with the following condensed balance sheet information. Assets Liabilities and Stockholders’ Equity Current assets $ 40,000 Current and long-term liabilities $100,000 Equity investments (trading) 60,000 Stockholders’ equity Equipment (net) 250,000 Common stock ($5 par) $ 20,000 Intangibles 60,000 Paid-in capital in excess of par 110,000 Total assets $410,000 Retained earnings 180,000 310,000 Total liabilities and stockholders’ equity $410,000 Instructions For each transaction below, indicate the dollar impact (if any) on the following five items: (1) total assets, (2) common stock, (3) paid-in capital in excess of par, (4) retained earnings, and (5) stockholders’ equity. (Each situation is independent.) (a) Myers declares and pays a $0.50 per share cash dividend. (b) Myers declares and issues a 10% stock dividend when the market price of the stock is $14 per share. (c) Myers declares and issues a 30% stock dividend when the market price of the stock is $15 per share. (d) Myers declares and distributes a property dividend. Myers gives one share of its equity investment (ABC stock) for every two shares of Myers Company stock held. Myers owns 10,000 shares of ABC. ABC is selling for $10 per share on the date the property dividend is declared. (e) Myers declares a 2-for-1 stock split and issues new shares.

Andy Roddick is the new owner of Ace Computer Services. At the end of August 2014, his first month of ownership, Roddick is trying to prepare monthly financial statements. Below is some information related to unrecorded expenses that the business incurred during August. 1. At August 31, Roddick owed his employees $1,900 in wages that will be paid on September 1. 2. At the end of the month, he had not yet received the month’s utility bill. Based on past experience, he estimated the bill would be approximately $600. 3. On August 1, Roddick borrowed $30,000 from a local bank on a 15-year mortgage. The annual interest rate is 8%. 4. A telephone bill in the amount of $117 covering August charges is unpaid at August 31. Instructions Prepare the adjusting journal entries as of August 31, 2014, suggested by the information above.

If market interest rates are expected to decline over time, will a savings institution with rate-sensitive liabilities and a large amount of fixed-rate mortgages perform best by (a) using an interest rate swap, (b) selling financial futures, or (c) remaining unhedged? Explain. (LO4)

Why is the orthogonal cutting model useful in the analysis of metal machining?

Leon Wight, a newly hired loan analyst, is examining the current liabilities of a corporate loan applicant. He observes that unearned revenues have declined in the current year compared to the prior year. Is this a positive indicator about the client’s liquidity? Explain.

Name some of the abrasive operations available to achieve very good surface finishes

Assume that breaking news causes bond portfolio managers to suddenly expect much higher economic growth. How might bond prices be affected by this expectation? Explain. Now assume that breaking news causes bond portfolio managers to suddenly anticipate a recession. How might bond prices be affected? Explain. (LO2)

What is the purpose of the statement of cash flows? What information does it provide?

Heartland Company’s budgeted sales and budgeted cost of goods sold for the coming year are $144,000,000 and $99,000,000, respectively. Short-term interest rates are expected to average 10%. If Heartland can increase inventory turnover from its present level of 9 times a year to a level of 12 times per year, compute its expected cost savings for the coming year.

What are some of the important reasons why manufactured parts must be cleaned?

Compare the secondary market activity for mortgages to the activity for other capital market instruments (such as stocks and bonds). Provide a general explanation for the difference in the activity level. (LO4)

Describe the differences between mass production and custom production of goods and services. Explain how these differences influence the costing method.

Derive an expression for the reduction r in drawing as a function of drawing ratio DR.

An orthogonal cutting operation is performed on a certain metal whose volumetric specific heat = 110 in-lb/in3 -F, and thermal diffusivity = 0.140 in2 /sec. The cutting speed = 350 ft/min, chip thickness before the cut = 0.008 in, and width of cut = 0.100 in. The cutting force is measured at 200 lb. Using Cook's equation, determine the cutting temperature if the ambient temperature = 70°F.

Congress would like to increase tax revenues by 10 percent.  Assume that the average taxpayer in the United States earns $65,000 and pays an average tax rate of 15 percent.  If the income effect is in effect for all taxpayers, what average tax rate will result in a 10 percent increase in tax revenues?  This is an example of what type of forecasting?

The information below pertains to Barkley Company for 2015. Net income for the year $1,200,000 7% convertible bonds issued at par ($1,000 per bond); each bond is convertible into 30 shares of common stock 2,000,000 6% convertible, cumulative preferred stock, $100 par value; each share is convertible into 3 shares of common stock 4,000,000 Common stock, $10 par value 6,000,000 Tax rate for 2015 40% Average market price of common stock $25 per share There were no changes during 2015 in the number of common shares, preferred shares, or convertible bonds outstanding. There is no treasury stock. The company also has common stock options (granted in a prior year) to purchase 75,000 shares of common stock at $20 per share. Instructions (a) Compute basic earnings per share for 2015. (b) Compute diluted earnings per share for 2015.

Frank paid $3,700 in fees for an accountant to tabulate business information (Frank operates as a self-employed contractor and files a Schedule C). The accountant also spent time tabulating Frank’s income from his investments and determining Frank’s personal itemized deductions. Explain to Frank whether or not he can deduct the $3,700 as a business expense or as an itemized deduction, and provide a citation to an authority that supports your conclusion.

Offer an argument for why the terrorist attack on the United States on September 11, 2001, could have placed downward pressure on U.S. interest rates. Offer an argument for why those attacks could have placed upward pressure on U.S. interest rates. (LO1, LO2)

(i) What do you understand by the term financialisaton? (ii) How might we assess the financial well-being of households?

} Rashaun (62 years old) retired and planned on immediately receiving distributions (making withdrawals) from his traditional IRA account. The balance of his IRA account is $160,000 (before reducing it for withdrawals ∕ distributions described below). Over the years, Rashaun has contributed $40,000 to the IRA. Of his $40,000 contributions, $30,000 was nondeductible and $10,000 was deductible. Assume Rashaun did not make any contributions to the account during the year. a. If Rashaun currently withdraws $20,000 from the IRA, how much tax will he be required to pay on the withdrawal if his marginal tax rate is 24 percent? b. If Rashaun currently withdraws $70,000 from the IRA, how much tax will he be required to pay on the withdrawal if his marginal tax rate is 28 percent? c. Using the information provided in part (b), complete Form 8606, part I, to report the taxable portion of the $70,000 distribution (withdrawal). Use the most current form available.

Listed below are various types of accounting changes and errors. ______ 1. Change in a plant asset’s salvage value. ______ 2. Change due to overstatement of inventory. ______ 3. Change from sum-of-the-years’-digits to straight-line method of depreciation. ______ 4. Change from presenting unconsolidated to consolidated financial statements. ______ 5. Change from LIFO to FIFO inventory method. ______ 6. Change in the rate used to compute warranty costs. ______ 7. Change from an unacceptable accounting principle to an acceptable accounting principle. ______ 8. Change in a patent’s amortization period. ______ 9. Change from completed-contract to percentage-of-completion method on construction contracts. ______ 10. Change from FIFO to average-cost inventory method. Instructions For each change or error, indicate how it would be accounted for using the following code letters: (a) Accounted for prospectively. (b) Accounted for retrospectively. (c) Neither of the above.

How is the public-sector debt-to-GDP ratio likely to be affected by the state of the economy?

Mask Company has 30,000 shares of $10 par value common stock authorized and 20,000 shares issued and outstanding. On August 15, 2014, Mask purchased 1,000 shares of treasury stock for $18 per share. Mask uses the cost method to account for treasury stock. On September 14, 2014, Mask sold 500 shares of the treasury stock for $20 per share. In October 2014, Mask declared and distributed 1,950 shares as a stock dividend from unissued shares when the market price of the common stock was $21 per share. On December 20, 2014, Mask declared a $1 per share cash dividend, payable on January 10, 2015, to shareholders of record on December 31, 2014. Instructions (a) How should Mask account for the purchase and sale of the treasury stock, and how should the treasury stock be presented in the balance sheet at December 31, 2014? (b) How should Mask account for the stock dividend, and how would it affect the stockholders’ equity at December 31, 2014? Why? (c) How should Mask account for the cash dividend, and how would it affect the balance sheet at December 31, 2014? Why?

Define drawing in the context of sheet metalworking

What basic questions must be answered before the amount of the depreciation charge can be computed?