Question & Answer

How do the requirements for accruing expenses under financial accounting rules differ from the requirements for accruing deductions under tax accounting rules?

At the end of the current year, Joshua Co. has a defined benefit obligation of $335,000 and pension plan assets with a fair value of $345,000. The amount of the vested benefits for the plan is $225,000. Joshua has a liability gain of $8,300 (beginning accumulated OCI is zero). What amount and account(s) related to its pension plan will be reported on the company’s statement of financial position?

Jane Geddes Engineering Corporation purchased conveyor equipment with a list price of $10,000. Presented below are three independent cases related to the equipment. (Round to the nearest dollar.) (a) Geddes paid cash for the equipment 8 days after the purchase. The vendor’s credit terms are 2/10, n/30. Assume that equipment purchases are initially recorded gross. (b) Geddes traded in equipment with a book value of $2,000 (initial cost $8,000), and paid $9,500 in cash one month after the purchase. The old equipment could have been sold for $400 at the date of trade. (The exchange has commercial substance.) (c) Geddes gave the vendor a $10,800 zero-interest-bearing note for the equipment on the date of purchase. The note was due in one year and was paid on time. Assume that the effective-interest rate in the market was 9%. Instructions Prepare the general journal entries required to record the acquisition and payment in each of the independent cases above.

Explain how EVA differs from residual income.

Aubrey Inc. issued $4,000,000 of 10%, 10-year convertible bonds on June 1, 2014, at 98 plus accrued interest. The bonds were dated April 1, 2014, with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basis. On April 1, 2015, $1,500,000 of these bonds were converted into 30,000 shares of $20 par value common stock. Accrued interest was paid in cash at the time of conversion. Instructions (a) Prepare the entry to record the interest expense at October 1, 2014. Assume that accrued interest payable was credited when the bonds were issued. (Round to nearest dollar.) (b) Prepare the entry(ies) to record the conversion on April 1, 2015. (Book value method is used.) Assume that the entry to record amortization of the bond discount and interest payment has been made.

Explain how the accounting method applied to mortgage-backed securities made it more difficult for banks to satisfy capital requirements during the credit crisis of 2008–2009. (LO2)

What is work hardening?

Describe three uses for CVP analysis.

Prior Company’s condensed financial statements provide the following information.   Instructions (a) Determine the following for 2014. (1) Current ratio at December 31. (2) Acid-test ratio at December 31. (3) Accounts receivable turnover. (4) Inventory turnover. (5) Return on assets. (6) Profit margin on sales. (b) Prepare a brief evaluation of the financial condition of Prior Company and of the adequacy of its profits.

Should regulators of utilities that have been privatised into several separate companies allow (a) horizontal mergers (within the industry); (b) vertical mergers; (c) mergers with firms in other industries?

Plant acquisitions for selected companies are as follows. 1. Belanna Industries Inc. acquired land, buildings, and equipment from a bankrupt company, Torres Co.,for a lump-sum price of $700,000. At the time of purchase, Torres’s assets had the following book and appraisal values. Book Values Appraisal Values Land $200,000 $150,000 Buildings 250,000 350,000 Equipment 300,000 300,000 To be conservative, the company decided to take the lower of the two values for each asset acquired. The following entry was made. Land 150,000 Buildings 250,000 Equipment 300,000 Cash 700,000 2. Harry Enterprises purchased store equipment by making a $2,000 cash down payment and signing a 1-year, $23,000, 10% note payable. The purchase was recorded as follows. Equipment 27,300 Cash 2,000 Notes Payable 23,000 Interest Payable 2,300 3. Kim Company purchased office equipment for $20,000, terms 2/10, n/30. Because the company intended to take the discount, it made no entry until it paid for the acquisition. The entry was: Equipment 20,000 Cash 19,600 Purchase Discounts 400 4. Kaisson Inc. recently received at zero cost land from the Village of Cardassia as an inducement to locate its business in the Village. The appraised value of the land is $27,000. The company made no entry to record the land because it had no cost basis. 5. Zimmerman Company built a warehouse for $600,000. It could have purchased the building for $740,000. The controller made the following entry. Buildings 740,000 Cash 600,000 Profit on Construction 140,000 Instructions Prepare the entry that should have been made at the date of each acquisition.

What is resistance-projection welding?

Where can authoritative IFRS guidance related to intangible assets be found?

Refer to the data for Barwood Corporation in BE16-6. Repeat the requirements assuming that instead of options, Barwood granted 2,000 shares of restricted stock.

] Discuss why Congress has instructed taxpayers to depreciate real property using the mid-month convention as opposed to the half-year convention used for tangible personal property.

Summarize the factors that affect women’s opportunities, including the first rung of the management ladder and the female advantage.

Jim was injured in an accident and his surgeon botched the medical procedure.  Jim recovered $5,000 from the doctors for pain and suffering and $2,000 for emotional distress.  Determine the taxability of these payments and briefly explain to Jim the apparent rationale for including or excluding these payments from gross income.

Estimate the real interest rate over the last year. If financial market participants overestimate inflation in a particular period, will real interest rates be relatively high or low? Explain. (LO2)

What Are Your Social Values?

Ogala Corporation purchased a significant amount of raw materials inventory for a new product that it is manufacturing. Ogala uses the lower-of-cost-or-market rule for these raw materials. The replacement cost of the raw materials is above the net realizable value, and both are below the original cost. Ogala uses the average-cost inventory method for these raw materials. In the last 2 years, each purchase has been at a lower price than the previous purchase, and the ending inventory quantity for each period has been higher than the beginning inventory quantity for that period. Instructions (a) (1) At which amount should Ogala’s raw materials inventory be reported on the balance sheet? Why? (2) In general, why is the lower-of-cost-or-market rule used to report inventory? (b) What would have been the effect on ending inventory and cost of goods sold had Ogala used the LIFO inventory method instead of the average-cost inventory method for the raw materials? Why?

Norman’s Televisions produces television sets in three categories: portable, midsize, and flat-screen. On January 1, 2014, Norman adopted dollar-value LIFO and decided to use a single inventory pool. The company’s January 1 inventory consists of: Category Quantity Cost per Unit Total Cost Portable 6,000 $100 $ 600,000 Midsize 8,000 250 2,000,000 Flat-screen 3,000 400 1,200,000 17,000 $3,800,000 During 2014, the company had the following purchases and sales. Quantity Quantity Selling Price Category Purchased Cost per Unit Sold per Unit Portable 15,000 $110 14,000 $150 Midsize 20,000 300 24,000 405 Flat-screen 10,000 500 6,000 600 45,000 44,000 Instructions (Round to four decimals.) (a) Compute ending inventory, cost of goods sold, and gross profit. (b) Assume the company uses three inventory pools instead of one. Repeat instruction (a).

The trend line developed using regression analysis provides a more accurate representation of a mixed cost function than the two-point or high-low methods. Explain why.

A turning operation is carried out on aluminum (100 BHN). Cutting speed = 5.6 m/s, feed = 0.25 mm/rev, and depth of cut = 2.0 mm. The lathe has a mechanical efficiency = 0.85. Based on the specific energy values in Table 21.2, determine (a) the cutting power and (b) gross power in the turning operation, in Watts.

Why might a bank retain some excess earnings rather than distribute those funds as dividends? (LO1)

: Describe how diversity initiatives such as sponsor relationships, employee resource groups, and coaching programs help create an inclusive climate that values diversity.