Question & Answer

The net income for Letterman Company for 2014 was $320,000. During 2014, depreciation on plant assets was $124,000, amortization of patent was $40,000, and the company incurred a loss on sale of plant assets of $21,000. Compute net cash flow from operating activities.

A plate that is 250 mm wide and 25 mm thick is to be reduced in a single pass in a two-high rolling mill to a thickness of 20 mm. The roll has a radius = 500 mm, and its speed = 30 m/min. The work material has a strength coefficient = 240 MPa and a strain hardening exponent = 0.2. Determine (a) roll force, (b) roll torque, and (c) power required to accomplish this operation.

1.    : Do you believe that it is ethical for organizational managers to try to get access to and scrutinize the Facebook pages of employees or job applicants? Discuss.

In choosing a trial-level court, how should a court’s previous rulings influence the choice?  How should circuit court rulings influence the taxpayer’s choice of a trial-level court?

Tesha works for a company that pays a year-end bonus in January of each year (instead of December of the preceding year) to allow employees to defer the bonus income. Assume Congress recently passed tax legislation that decreases individual tax rates as of next year. Does this increase or decrease the benefits of the bonus deferral this year? What if Congress passed legislation that increased tax rates next year? Should Tesha ask the company to change its policy this year? What additional information do you need to answer this question?

1. Give other examples of each of the four types of externality. 2. Redraw Figure 12.4, only this time assume there is only one producer, which is thus a monopoly. How does the existence of power affect the relationship between the private and the social optimum positions? 3. Redraw Figure 12.4, only this time assume that at low levels of production the good generates no external costs. Only once a certain outcome is reached (Qx) does the production of additional units generate rising external costs.

Mustafa, Mickayla, and Taylor are starting a new business (MMT). To get the business started, Mustafa is contributing $200,000 for a 40 percent ownership interest, Mickayla is contributing a building with a value of $200,000 and a tax basis of $150,000 for a 40 percent ownership interest, and Taylor is contributing legal services for a 20 percent ownership interest. What amount of gain or income is each owner required to recognize under each of the following alterative situations? [Hint: Look at §§351 and 721.] a. MMT is formed as a C corporation. b. MMT is formed as an S corporation. c. MMT is formed as an LLC (taxed as a partnership).

A composite has a matrix of polyester with Kevlar-29 fibers. The volume fractions of polyester and Kevlar are 60% and 40%, respectively. The Kevlar fibers have a modulus of elasticity of 60 GPa in the longitudinal direction and 3 GPa in the transverse direction. The polyester matrix has a modulus of elasticity of 5.6 GPa in both directions. (a) Determine the modulus of elasticity for the composite in the longitudinal direction. (b) Determine the modulus of elasticity in the transverse direction

Danica Patrick, Inc. includes the following account among its trade receivables.   Instructions Age the balance and specify any items that apparently require particular attention at year-end.

Adani Inc. sells goods to Geo Company for $11,000 on January 2, 2014, with payment due in 12 months. The fair value of the goods at the date of sale is $10,000. Prepare the journal entry to record this transaction on January 2, 2014. How much total revenue should be recognized on this sale in 2014?

Tedesco Company changed depreciation methods in 2014 from double-declining-balance to straight-line. Depreciation prior to 2014 under double-declining-balance was $90,000, whereas straight-line depreciation prior to 2014 would have been $50,000. Tedesco’s depreciable assets had a cost of $250,000 with a $40,000 salvage value, and an 8-year remaining useful life at the beginning of 2014. Prepare the 2014 journal entries, if any, related to Tedesco’s depreciable assets.

Identify some of the important factors that should enter into the make or buy decision.

On November 24, 2014, 26 passengers on Windsor Airlines Flight No. 901 were injured upon landing when the plane skidded off the runway. Personal injury suits for damages totaling $9,000,000 were filed on January 11, 2015, against the airline by 18 injured passengers. The airline carries no insurance. Legal counsel has studied each suit and advised Windsor that it can reasonably expect to pay 60% of the damages claimed. The financial statements for the year ended December 31, 2014, were issued February 27, 2015. Instructions (a) Prepare any disclosures and journal entries required by the airline in preparation of the December 31, 2014, financial statements. (b) Ignoring the November 24, 2014, accident, what liability due to the risk of loss from lack of insurance coverage should Windsor Airlines record or disclose? During the past decade, the company has experienced at least one accident per year and incurred average damages of $3,200,000. Discuss fully.

On July 1, 2014, Agincourt Inc. made two sales. 1. It sold land having a fair value of $700,000 in exchange for a 4-year zero-interest-bearing promissory note in the face amount of $1,101,460. The land is carried on Agincourt’s books at a cost of $590,000. 2. It rendered services in exchange for a 3%, 8-year promissory note having a face value of $400,000 (interest payable annually). Agincourt Inc. recently had to pay 8% interest for money that it borrowed from British National Bank. The customers in these two transactions have credit ratings that require them to borrow money at 12% interest. Instructions Record the two journal entries that should be recorded by Agincourt Inc. for the sales transactions above that took place on July 1, 2014.

Otis Thorpe Corporation has 10,000 shares of $100 par value, 8%, preferred stock and 50,000 shares of $10 par value common stock outstanding at December 31, 2014. Instructions Answer the questions in each of the following independent situations. (a) If the preferred stock is cumulative and dividends were last paid on the preferred stock on December 31, 2011, what are the dividends in arrears that should be reported on the December 31, 2014, balance sheet? How should these dividends be reported? (b) If the preferred stock is convertible into seven shares of $10 par value common stock and 4,000 shares are converted, what entry is required for the conversion assuming the preferred stock was issued at par value? (c) If the preferred stock was issued at $107 per share, how should the preferred stock be reported in the stockholders’ equity section?

How does a confidence shock differ from the idea of confidence as an amplifier?

What are some common point defects in a crystal lattice structure?

A Wall Street Journal article discussed a $1.8 billion charge to income made by General Electric for postretirement benefit costs. It was attributed to previously unrecognized healthcare and life insurance cost. As financial vice president and controller for Peake, Inc., you found this article interesting because the president recently expressed interest in adopting a postemployment benefit program for Peake’s employees, to complement the company’s existing defined benefit plan. The president, Martha Beyerlein, wants to know  the expense on the new plan will be determined and what impact the accounting for the plan will have on Peake’s financial statements. Instructions (a) As financial vice president and controller of Peake, Inc., explain the calculation of postemployment benefit expense under GAAP, and indicate how the accounting for the plan will affect Peake’s financial statements. (b) Discuss the similarities and differences in the accounting for the other postemployment benefit plan relative to the accounting for the defined benefit plan.

Solve Problem 20.15 except that the operation is performed using a wiping die with die opening dimension = 0.75 in.

On December 31, 2012, Ed Abbey Co. performed environmental consulting services for Hayduke Co. Hayduke was short of cash, and Abbey Co. agreed to accept a $200,000 zero-interest-bearing note due December 31, 2014, as payment in full. Hayduke is somewhat of a credit risk and typically borrows funds at a rate of 10%. Abbey is much more creditworthy and has various lines of credit at 6%. Instructions (a) Prepare the journal entry to record the transaction of December 31, 2012, for the Ed Abbey Co. (b) Assuming Ed Abbey Co.’s fiscal year-end is December 31, prepare the journal entry for December 31, 2013. (c) Assuming Ed Abbey Co.’s fiscal year-end is December 31, prepare the journal entry for December 31, 2014.

Dana Ashbrook Inc. has negotiated the purchase of a new piece of automatic equipment at a price of $8,000 plus trade-in, f.o.b. factory. Dana Ashbrook Inc. paid $8,000 cash and traded in used equipment. The used equipment had originally cost $62,000; it had a book value of $42,000 and a secondhand fair value of $47,800, as indicated by recent transactions involving similar equipment. Freight and installation charges for the new equipment required a cash payment of $1,100. Instructions (a) Prepare the general journal entry to record this transaction, assuming that the exchange has commercial substance. (b) Assuming the same facts as in (a) except that fair value information for the assets exchanged is not determinable, prepare the general journal entry to record this transaction.

Explain the dilemma of stock analysts who work for securities firms and assign ratings to large corporations. Why might they prefer not to assign low ratings to weak but large corporations? (LO6)

Compare and contrast the IRS method and the Tax Court method for allocating expenses between personal use and rental use for vacation homes. Include the Tax Court’s justification for departing from the IRS method in your answer.

Margaret Avery Company from time to time embarks on a research program when a special project seems to offer possibilities. In 2012, the company expends $325,000 on a research project, but by the end of 2012, it is impossible to determine whether any benefit will be derived from it. (a) What account should be charged for the $325,000, and how should it be shown in the financial statements? (b) The project is completed in 2013, and a successful patent is obtained. The R&D costs to complete the project are $130,000 ($36,000 of these costs were incurred after achieving economic viability). The administrative and legal expenses incurred in obtaining patent number 472-1001-84 in 2013 total $24,000. The patent has an expected useful life of 5 years. Record these costs in journal entry form. Also,record patent amortization (full year) in 2013. (c) In 2014, the company successfully defends the patent in extended litigation at a cost of $47,200, thereby extending the patent life to December 31, 2021. What is the proper way to account for thiscost?Also, record patent amortization (full year) in 2014. (d) Additional engineering and consulting costs incurred in 2014 required to advance the design of a new version of the product to the manufacturing stage total $60,000. These costs enhance the design of the product considerably, but it is highly uncertain if there will be a market for the new version of the product. Discuss the proper accounting treatment for this cost.

Your aunt recently received the annual report for a company in which she has invested. The report notes that the statements have been prepared in accordance with IFRS. She has also heard that certain terms have special meanings in accounting relative to everyday use. She would like you to explain the meaning of terms she has come across related to accounting. Instructions Access the IASB Framework at the IASB website (http://eifrs.iasb.org/ ). (Click on the IFRS tab and then register for free eIFRS access if necessary.) When you have accessed the documents, you can use the search tool in your Internet browser to prepare responses to the following items. (Provide paragraph citations.) (a) How is “materiality” defined in the framework? (b) Briefly discuss how materiality relates to (1) the relevance of financial information, and (2) completeness. (c) Your aunt observes that under IFRS, the financial statements are prepared on the accrual basis. According to the framework, what does “accrual basis” mean?