Question & Answer

What effects will the following have on the equilibrium rate of interest? (You should consider which way the demand and/or supply curves of money shift.)          (a)  Banks find that they have a higher liquidity ratio than they need.          (b)  A rise in incomes.          (c)  A growing belief that interest rates will rise from their current level.

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) Using the notes to the consolidated financial statements, determine P&G’s revenue recognitionmpolicies. Discuss the impact of trade promotions on P&G’s financial statements. (b) Give two examples of where historical cost information is reported in P&G’s financial statements and related notes. Give two examples of the use of fair value information reported in either the financial statements or related notes. (c) How can we determine that the accounting principles used by P&G are prepared on a basis consistent with those of last year? (d) What is P&G’s accounting policy related to advertising? What accounting principle does P&G follow regarding accounting for advertising? Where are advertising expenses reported in the financialstatements?

In January, Prahbu purchased for $90,000 a new machine for use in an existing production line of his manufacturing business. Assume that the machine is a unit of property and is not a material or supply. Prahbu pays $2,500 to install the machine, and after the machine is installed, he pays $1,300 to perform a critical test on the machine to ensure that it will operate in accordance with quality standards. On November 1, the critical test is complete, and Prahbu places the machine in service on the production line. On December 3, Prahbu pays another $3,300 to perform periodic quality control testing after the machine is placed in service. How much will Prahbu be required to capitalize as the cost of the machine?

What are the basic differences between regulations, revenue rulings, and private letter rulings?

Direct costs in flexible budget Paper Bright Industries uses flexible budgeting to assess budgeted expectations against actual performance. Last month Paper Bright produced 12 000 units and incurred direct materials cost of $150 000. Its static budget for the year has a direct materials cost of $200 000 for 150 000 units.                                    Required (a) Calculate the direct materials cost in the flexible budget. (b) Calculate the direct materials flexible budget variance.

Assume that there are 200 consumers in the market. Of these, 100 have schedules like Kate’s and 100 have schedules like Simon’s. What would be the total market demand schedule for potatoes now?                                Price(pence per kg) Total market demand(kg)             20             40             60             80           100                 4400                 2600                 1400                   800                   600 1. How much would be demanded at a price of 30p per kilogram? 2. Assuming that demand does not change from month to month, plot the annual market demand for potatoes.

Explain the difference between calculating a loss deduction for a business asset that was partially damaged in an accident and calculating a loss deduction for a business asset that was stolen or completely destroyed in an accident.

Shlee Corporation issued a 4-year, $60,000, zero-interest-bearing note to Garcia Company on January 1, 2014, and received cash of $60,000. In addition, Shlee agreed to sell merchandise to Garcia at an amount less than regular selling price over the 4-year period. The market rate of interest for similar notes is 12%. Prepare Shlee Corporation’s January 1 journal entry.

Keyser’s Fleece Inc. holds a drove of sheep. Keyser shears the sheep on a semiannual basis and then sells the harvested wool into the specialty knitting market. Keyser has the following information related to the shearing sheep at January 1, 2014, and during the first six months of 2014 Shearing Sheep Carrying value (equal to net realizable value), January 1, 2014 $74,000 Change in fair value due to growth and price changes 4,700 Change in fair value due to harvest (575) Wool harvested during the fi rst 6 months (at NRV) 9,000 Prepare the journal entry(ies) for Keyser’s biological asset (shearing sheep) for the first six months of 2014.

Describe the gross receipts test and identify how this test relates to the business interest deduction.

(LO1)

Under what circumstances is it possible for partners to recognize gain when contributing property to partnerships?

Assume that the yield curve for Treasury bonds has a slight upward slope, starting at 6 percent for a 10- year maturity and slowly rising to 8 percent for a 30-year maturity. Create a yield curve that you believe would exist for A-rated bonds, and a corresponding yield curve for B-rated bonds. (LO1, LO3)

Dewey is a lawyer who uses the cash method of accounting.  Last year Dewey provided a client with legal services worth $55,000, but the client could not pay the fee.  This year Dewey requested that in lieu of paying Dewey $55,000 for the services, the client could make a $45,000 gift to Dewey’s daughter.  Dewey’s daughter received the check for $45,000 and deposited it in her bank account.  How much of this income is taxed, if any, to Dewey?  Explain.

1.      : Give the job to the candidate with the highest score. You don’t need to make enemies on the Civil Service Board, and, although it is a bureaucratic procedure, the test is an objective way to select a permanent placement.

How does the tax treatment of employee fringe benefits reflect the hybrid nature of the S corporation?

Aminata is a tax expert, whereas Rob is a tax novice.  Explain how their process in identifying tax issues may differ.

Describe the melting characteristics of a noncrystalline material such as glass.

The Black Knights Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its market share in the Sunbelt. In order to do so, Black Knights has decided to locate a new factory in the Panama City area. Black Knights will either buy or lease a site depending upon which is more advantageous. The site location committee has narrowed down the available sites to the following three buildings. Building A: Purchase for a cash price of $600,000, useful life 25 years. Building B: Lease for 25 years with annual lease payments of $69,000 being made at the beginning of the year. Building C: Purchase for $650,000 cash. This building is larger than needed; however, the excess space can be sublet for 25 years at a net annual rental of $7,000. Rental payments will be received at the end of each year. The Black Knights Inc. has no aversion to being a landlord. Instructions In which building would you recommend that The Black Knights Inc. locate, assuming a 12% cost of funds?

Petoskey Stone Quarry Inc. (PSQ), a calendar-year, accrual-method C corporation, provides landscaping supplies to local builders in northern Michigan. PSQ has always been a family-owned business and has a single class of voting common stock outstanding.  The 500 outstanding shares are owned as follows:  Number of shares Nick Adams 150 Amy Adams (Sandler’s sister) 150 Abigail Adams (Nick’s daughter) 50 Charlie Adams (Nick’s son) 50 Sandler Adams (Nick’s father) 100    Total shares 500   Nick Adams serves as president of PSQ, and his father Sandler serves as chair of the board. Amy is the company’s CFO, and Abigail and Charlie work as employees of the company.  Sandler would like to retire and sell his shares back to the company. The fair market value of the shares is $500,000. Sandler’s tax basis in his PSQ shares is $10,000.  The redemption is tentatively scheduled to take place on December 31 of this year.  At the beginning of the year, PSQ had accumulated earnings and profits of $2,500,000.  The company projects current E&P of $200,000.  The company intends to pay a pro rata cash distribution of $300 per share to its shareholders on December 1 of this year.

Seven samples of 5 parts each have been collected from an extrusion process that is in statistical control, and the diameter of the extrudate has been measured for each part. The calculated values of x for each sample are (inch) 1.002, 0.999, 0.995, 1.004, 0.996, 0.998, and 1.006. The values of R are (inch) 0.010, 0.011, 0.014, 0.020, 0.008, 0.013, and 0.017, respectively. (a) Determine the values of the center, LCL, and UCL for x and R charts. (b) Construct the control charts and plot the sample data on the charts.

1. Explain the shape of the LRMC curve in diagram (d) in Figure 6.12. 2. What would the LRMC curve look like if the LRAC curve were ‘flat bottomed’ as in Figure 6.11?

How is the distinction between nominal and real relevant to misperceptions theory?

Assembly of a product requires that a component part be ordered and stocked. Demand for the product is constant throughout the year at 7800 units annually. The cost to place an order is $95. The cost of the part is $56 and the holding cost rate is 22%. When units are ordered, they take two weeks to arrive. Determine (a) the economic order quantity and (b) the reorder point. (c) The parts are prepackaged in multiples of 100. It saves the supplier unpacking and repackaging time if they can ship in multiples of 100. The supplier has offered to reduce the price by $1 per unit if even multiples of 100 are purchased. How much would be saved (if anything) by taking this offer?

Referring to Problem 38.1, the mechanical inaccuracies in the open-loop positioning system can be described by a normal distribution whose standard deviation = 0.005 mm. The range of the worktable axis is 500 mm, and there are 12 bits in the binary register used by the digital controller to store the programmed position. For the positioning system, determine (a) control resolution, (b) accuracy, and (c) repeatability. (d) What is the minimum number of bits that the binary register should have so that the mechanical drive system becomes the limiting component on control resolution?