Question & Answer

What is the relationship of the asset turnover to the return on assets?

What would happen to price and quantity if the demand curve shifted to the left? Draw a diagram to illustrate your answer.

Foreman Company issued $800,000 of 10%, 20-year bonds on January 1, 2014, at 119.792 to yield 8%. Interest is payable semiannually on July 1 and January 1. Prepare the journal entries to record (a) the issuance of the bonds, (b) the payment of interest and the related amortization on July 1, 2014, and (c) the accrual of interest and the related amortization on December 31, 2014. (Round to the nearest dollar.)

Vande Velde Company made three investments during 2014. (1) It purchased 1,000 shares of Sastre Company, a start-up company. Vande Velde made the investment based on valuation estimates from an internally developed model. (2) It purchased 2,000 shares of GE stock, which trades on the NYSE. (3) It invested $10,000 in local development authority bonds. Although these bonds do not trade on an active market, their value closely tracks movements in U.S. Treasury bonds. Where will Vande Velde report these investments in the fair value hierarchy?

List the types of environments that can be present during the sintering process according to the powder metallurgy video.

Illustrate on two separate indifference diagrams the income and substitution effects of the following: (a)    A decrease in the price of good X (and no change in the price of good Y). (b)    An increase in the price of good Y (and no change in the price of good X)

The starting diameter of a shaft is 25.00 mm. This shaft is to be inserted into a hole in an expansion fit assembly operation. To be readily inserted, the shaft must be reduced in diameter by cooling. Determine the temperature to which the shaft must be reduced from room temperature (20°C) in order to reduce its diameter to 24.98 mm. Refer to Table 4.1.

Rainmaker Company prepares its financial statements in accordance with IFRS. In 2014, Rainmaker recorded the following revaluation adjustments related to its buildings and land: The company’s building increased in value by $200,000; its land declined by $35,000. How will these revaluation adjustments affect Rainmaker’s balance sheet? Will the reporting differ under GAAP? Explain.

Juanita, a Texas resident (5th Circuit), is researching a tax question and finds a 5th Circuit case ruling that is favorable and a 9th Circuit case that is unfavorable.  Which circuit case has more “authoritative weight” and why?  How would your answer change if Juanita were a Kentucky resident (6th Circuit)?

Beyoncé Corporation factors $175,000 of accounts receivable with Kathleen Battle Financing, Inc. on a with recourse basis. Kathleen Battle Financing will collect the receivables. The receivables records are transferred to Kathleen Battle Financing on August 15, 2014. Kathleen Battle Financing assesses a finance charge of 2% of the amount of accounts receivable and also reserves an amount equal to 4% of accounts receivable to cover probable adjustments. Instructions (a) What conditions must be met for a transfer of receivables with recourse to be accounted for as a sale? (b) Assume the conditions from part (a) are met. Prepare the journal entry on August 15, 2014, for Beyoncé to record the sale of receivables, assuming the recourse obligation has a fair value of $2,000.

A deep drawing operation is to be performed on a sheet-metal blank that is 1/8 in thick. The height (inside dimension) of the cup = 3.8 in and the diameter (inside dimension) = 5.0 in. Assuming the punch radius = 0, compute the starting diameter of the blank to complete the operation with no material left in the flange. Is the operation feasible (ignoring the fact that the punch radius is too small)?

On January 1, 2014, Lombard Co. sells property for which it had paid $690,000 to Sargent Company, receiving in return Sargent’s zero-interest-bearing note for $1,000,000 payable in 5 years. What entry would Lombard make to record the sale, assuming that Lombard frequently sells similar items of property for a cash sales price of $640,000?

In recent years, the Wall Street Journal has indicated that many companies have changed their accounting principles. What are the major reasons why companies change accounting methods?

Dierdorf Inc., a closely held corporation, has decided to go public. The controller, Ed Floyd, is concerned with presenting interim data when a LIFO inventory valuation is used. What problems are encountered with LIFO inventories when quarterly data are presented?

Cleveland Inc. leased a new crane to Abriendo Construction under a 5-year noncancelable contract starting January 1, 2014. Terms of the lease require payments of $33,000 each January 1, starting January 1, 2014. Cleveland will pay insurance, taxes, and maintenance charges on the crane, which has an estimated life of 12 years, a fair value of $240,000, and a cost to Cleveland of $240,000. The estimated fair value of the crane is expected to be $45,000 at the end of the lease term. No bargain-purchase or renewal options are included in the contract. Both Cleveland and Abriendo adjust and close books annually at December 31. Collectibility of the lease payments is reasonably certain, and no uncertainties exist relative to unreimbursable lessor costs. Abriendo’s incremental borrowing rate is 10%,and Cleveland’s implicit interest rate of 9% is known to Abriendo. Instructions (a) Identify the type of lease involved and give reasons for your classification. Discuss the accounting treatment that should be applied by both the lessee and the lessor. (b) Prepare all the entries related to the lease contract and leased asset for the year 2014 for the lessee and lessor, assuming the following amounts. (1) Insurance $500. (2) Taxes $2,000. (3) Maintenance $650. (4) Straight-line depreciation and salvage value $15,000. (c) Discuss what should be presented in the balance sheet, the income statement, and the related notes of both the lessee and the lessor at December 31, 2014.

Mishima, Inc. indicated in a recent annual report that approximately $19 million of merchandise was received on consignment. Should Mishima, Inc. report this amount on its balance sheet? Explain.

John and Tara Smith are married and have lived in the same home for over 20 years.John’s uncle Tim, who is 64 years old, has lived with the Smiths since March of this year. Tim is searching for employment but has been unable to find any—his gross income for the year is $2,000.Tim used all $2,000 toward his own support.The Smiths provided the rest of Tim’s support by providing him with lodging valued at $5,000 and food valued at $2,200. a. Are the Smiths able to claim a dependency exemption for Tim?

What are the two basic categories of cutting tools in machining? Give two examples of machining operations that use each of the tooling types

Julia Baker died, leaving to her husband Brent an insurance policy contract that provides that the beneficiary (Brent) can choose any one of the following four options. (a  $55,000 immediate cash. (b  $4,000 every 3 months payable at the end of each quarter for 5 years. (c) $18,00  immediate cash and $1,800 every 3 months for 10 years, payable at the beginning of each 3-month period. (d) $4,000 every 3 months for 3 years and $1,500 each quarter for the following 25 quarters, all paymentspayable at the end of each quarter. Instructions If money is worth 2½% per quarter, compounded quarterly, which option would you recommend that Brent exercise?

Although the workpiece in a wire drawing operation is obviously subjected to tensile stresses, how do compressive stresses also play a role in the process?