Question & Answer

Ashlee, Hiroki, Kate, and Albee LLC each own a 25 percent interest in Tally Industries LLC, which generates annual gross receipts of over $10 million. Ashlee, Hiroki, and Kate manage the business, but Albee LLC is a nonmanaging member. Although Tally Industries has historically been profitable, for the last three years losses have been allocated to the members. Given these facts, the members want to know whether Tally Industries can use the cash method of accounting. Why or why not? [Hint: See §448(b)(3).]

A single-pass rolling operation reduces a 20 mm thick plate to 18 mm. The starting plate is 200 mm wide. Roll radius = 250 mm and rotational speed = 12 rev/min. The work material has a strength coefficient = 600 MPa and a strength coefficient = 0.22. Determine (a) roll force, (b) roll torque, and (c) power required for this operation.

Perez Company reported an increase in inventories in the past year. Discuss the effect of this change on the current ratio (current assets 4 current liabilities). What does this tell a statement user about Perez Company’s liquidity?

1. (a) What discount factor is used to weight benefits that occur in three months’ time for a person with a per-monthly discount factor of 0.9? (b) What does this make the present value of £20 of benefits received in three months’ time? 2. Assume that the good costs £10, which has to be paid today. How long would the maximum delay in (whole) months before receiving the £20 of benefits have to be before a person with a monthly discount of 0.9 would no longer purchase the good.

Karen is the sole shareholder of a calendar-year-end C corporation she formed last year. If she elects S corporation status this year on February 20, when will the election become effective and why?  What if she had made the election on March 20?

Distinguish between redrawing and reverse drawing.

The adjusted trial balance of Eastwood Company and other related information for the year 2014 are presented as follows.   Additional information: 1. The LIFO method of inventory value is used. 2. The cost and fair value of the long-term investments that consist of stocks and bonds is the same. 3. The amount of the Construction in Progress account represents the costs expended to date on a building in the process of construction. (The company rents factory space at the present time.) The land on which the building is being constructed cost $85,000, as shown in the trial balance. 4. The patents were purchased by the company at a cost of $40,000 and are being amortized on a straight-line basis. 5. Of the discount on bonds payable, $2,000 will be amortized in 2015. 6. The notes payable represent bank loans that are secured by long-term investments carried at $120,000. These bank loans are due in 2015. 7. The bonds payable bear interest at 8% payable every December 31, and are due January 1, 2025. 8. 600,000 shares of common stock of a par value of $1 were authorized, of which 500,000 shares were issued and outstanding. Instructions Prepare a balance sheet as of December 31, 2014, so that all important information is fully disclosed.

Assume a calendar-year corporation has positive current E&P of $120 and a deficit in accumulated E&P of ($200). Under this circumstance, a cash distribution of $100 to the corporation’s sole shareholder at year-end will not be treated as a dividend because total E&P is negative. True or false? Explain.

What are the two types of losses that can become evident in accounting for long-term contracts? What is the nature of each type of loss? How is each type accounted for?

Bill Novak is working on an audit of an IFRS client. In his review of the client’s interim reports, he notes that the reports are prepared on a discrete basis. That is, each interim report is viewed as a distinct period. Is this acceptable under IFRS? If so, explain how that treatment could affect comparisons to a GAAP company.

Presented below is the balance sheet of Sargent Corporation for the current year, 2014.   The following information is presented. 1. The current assets section includes cash $150,000, accounts receivable $170,000 less $10,000 for allowance for doubtful accounts, inventories $180,000, and unearned rent revenue $5,000. Inventoy is stated on the lower-of-FIFO-cost-or-market. 2. The investments section includes the cash surrender value of a life insurance contract $40,000; investments in common stock, short-term (trading) $80,000 and long-term (available-for-sale) $270,000; and bond sinking fund $250,000. The cost and fair value of investments in common stock are the same. 3. Property, plant, and equipment includes buildings $1,040,000 less accumulated depreciation $360,000; equipment $450,000 less accumulated depreciation $180,000; land $500,000; and land held for future use $270,000. 4. Intangible assets include a franchise $165,000; goodwill $100,000; and discount on bonds payable $40,000. 5. Current liabilities include accounts payable $140,000; notes payable—short-term $80,000 and longterm $120,000; and income taxes payable $40,000. 6. Long-term liabilities are composed solely of 7% bonds payable due 2022. 7. Stockholders’ equity has preferred stock, no par value, authorized 200,000 shares, issued 70,000 shares for $450,000; and common stock, $1.00 par value, authorized 400,000 shares, issued 100,000 shares at an average price of $10. In addition, the corporation has retained earnings of $320,000. Instructions Prepare a balance sheet in good form, adjusting the amounts in each balance sheet classification as affected by the information given above.

Arnold and Lilly recently had a discussion about whether a sales tax is a proportional tax or a regressive tax.  Arnold argued that a sales tax is regressive.  Lilly countered that the sales tax is a flat tax.  Who was correct?

The power source in a particular welding operation generates 125 Btu/min, which is transferred to the work surface with heat transfer factor = 0.8. The melting point for the metal to be welded = 1800°F and its melting factor = 0.5. A continuous fillet weld is to be made with a cross-sectional area = 0.04 in2. Determine the travel speed at which the welding operation can be accomplished.

Assume Tamar uses the IRS method of allocating expenses to rental use of the property.

What expenses are deductible when a taxpayer combines both business and personal activities on a trip? How do the rules for international travel differ from the rules for domestic travel?

Name the four subsystems in a wire EDM process.

Identify three situations in which accounting measures are based on present values. Do these present value applications involve single sums or annuities, or both single sums and annuities? Explain.

Identify the three basic types of sheet metalworking operations.

1. What does this analysis assume about the price elasticity of demand for the new entrant (a) above PL; (b) below PL? 2. Can you think of any limitations with the limit price model?

Describe the purpose of a pension plan’s vesting schedule and explain how it works. (LO3)

How has the opening up of trade and investment between eastern and western Europe likely to have affected the location of industries within Europe that have (a) substantial economies of scale; (b) little or no economies of scale?

Assume that in a household one parent currently works full time and the other stays at home to look after the family. How would you set about identifying and calculating the opportunity costs of the second parent now taking a full-time job? How would such calculations be relevant in deciding whether it is worth taking that job?

What are the potential implications for future aggregate living standards of ‘super-hysteresis’ compared with ‘hysteresis’ following the COVID-19 pandemic?

How does accounting help the capital allocation process?

Orthogonal cutting is performed on a metal whose mass specific heat = 1.0 J/g-C, density = 2.9 g/cm3 , and thermal diffusivity = 0.8 cm2 /s. The cutting speed is 4.5 m/s, uncut chip thickness is 0.25 mm, and width of cut is 2.2 mm. The cutting force is measured at 1170 N. Using Cook's equation, determine the cutting temperature if the ambient temperature = 22°C.