Question & Answer

Tim’s parents plan to provide him with $50,000 to support him while he establishes a new landscaping business. In exchange for the support, Tim will maintain the landscape at his father’s business. Under what conditions will the transfer of $50,000 be included in Tim’s gross income? Explain. Do you have a recommendation for Tim and his parents?

During periods when investors suddenly become fearful that stocks are overvalued, they dump their stocks, and the stock market experiences a major decline. During these periods, interest rates also tend to decline. Use the loanable funds framework discussed in this chapter to explain how a massive selloff of stocks leads to lower interest rates. (LO1)

What are the primary characteristics of an annuity?Differentiate between an “ordinary annuity” and an “annuity due.”

What is meant by hysteresis when applied to unemployment? How do you account for this phenomenon in the 1980s?

Draw a supply and demand diagram with the price of labour (the wage rate) on the vertical axis and the quantity of labour (the number of workers) on the horizontal axis. What will happen to employment if the government raises wages from the equilibrium to some minimum wage above the equilibrium?

Question: Where can authoritative IFRS guidance related to stockholders’ equity be found?

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.

On April 1, 2014, Seminole Company sold 15,000 of its 11%, 15-year, $1,000 face value bonds at 97. Interest payment dates are April 1 and October 1, and the company uses the straight-line method of bond discount amortization. On March 1, 2015, Seminole took advantage of favorable prices of its stock to extinguish 6,000 of the bonds by issuing 200,000 shares of its $10 par value common stock. At this time, the accrued interest was paid in cash. The company’s stock was selling for $31 per share on March 1, 2015. Instructions Prepare the journal entries needed on the books of Seminole Company to record the following. (a) April 1, 2014: issuance of the bonds. (b) October 1, 2014: payment of semiannual interest. (c) December 31, 2014: accrual of interest expense. (d) March 1, 2015: extinguishment of 6,000 bonds. (No reversing entries made.)

What is a §197 intangible? How do taxpayers recover the costs of these intangibles? How do taxpayers recover the cost of a §197 intangible that expires (such as a covenant not to compete)?

In addition to surface cleaning, what is the main function performed by shot peening?

Variance analysis is only useful for organisations using a standard costing system. Discuss.

For flow-through business entities with individual owners, how many times is flow-through entity income taxed, who pays the tax, and what is the tax rate?

Identify some of the general principles and guidelines for design for assembly.

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 2011 financial statements and the accompanying notes to answer the following questions. (a) What cash outflow obligations related to the repayment of long-term debt does P&G have over the next 5 years? (b) P&G indicates that it believes that it has the ability to meet business requirements in the foreseeable future. Prepare an assessment of its liquidity, solvency, and financial flexibility using ratio analysis.

The transactions below took place during the year 2014. 1. Convertible bonds payable with a par value of $300,000 were exchanged for unissued common stock with a par value of $300,000. The market price of both types of securities was par. 2. The net income for the year was $410,000. 3. Depreciation expense for the building was $90,000. 4. Some old office equipment was traded in on the purchase of some dissimilar office equipment, and the following entry was made. Equipment 50,000 Accum. Depreciation—Equipment 30,000 Equipment 40,000 Cash 34,000 Gain on Disposal of Plant Assets 6,000 The Gain on Disposal of Plant Assets was credited to current operations as ordinary income. 5. Dividends in the amount of $123,000 were declared. They are payable in January of next year. Instructions Show by journal entries the adjustments that would be made on a worksheet for a statement of cash flows.

The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://annualreport.marksandspencer.com/_assets/downloads/Marksand- Spencer-Annual-report-and-financial-statements-2012.pdf. Instructions Refer to M&S’s financial statements and the accompanying notes to answer the following questions. (a) What cash outflow obligations related to the repayment of long-term debt does M&S have over the next 5 years? (b) M&S indicates that it believes that it has the ability to meet business requirements in the foreseeable future. Prepare an assessment of its liquidity, solvency, and financial flexibility using ratio analysis.

Instructions Go to the book’s companion website and use information found there to answer the following questions related to The Coca-Cola Company and PepsiCo, Inc. (a) Compute the debt to assets and the times interest earned ratios for these two companies. Comment on the quality of these two ratios for both Coca-Cola and PepsiCo. (b) What is the difference between the fair value and the historical cost (carrying amount) of each company’s debt at year-end 2011? Why might a difference exist in these two amounts? (c) Both companies have debt issued in foreign countries. Speculate as to why these companies may use foreign debt to finance their operations. What risks are involved in this strategy, and how might they adjust for this risk?

The designer of a polar configuration robot is considering a portion of the manipulator consisting of a rotational joint connected to its output link. The output link is 25 in long and the rotational joint has a range of 75°. The accuracy of the joint-link combination, expressed as a linear measure at the end of the link which results from rotating the joint, is specified as 0.030 in. The mechanical inaccuracies of the joint result in a repeatability error = ±0.030° of rotation. It is assumed that the link is perfectly rigid, so there are no additional errors due to deflection. (a) Show that the specified accuracy can be achieved, given the repeatability error. (b) Determine the minimum number of bits required in the binary register of the robot's control memory to achieve the specified accuracy.

Allocating overhead; over- and underapplied overhead; spoilage The Futons for You Company sells batches of custom-made futons to customers and uses predetermined rates for fixed overhead, based on machine hours. The following data are available for last year:     Required (a)          Calculate the estimated overhead allocation rate to be used for the year. (b)          Determine the overhead to be allocated to job 21. (c)           Determine total overapplied or underapplied overhead at the end of the year. (d)          Should cost of sales be increased or decreased at the end of the year? Why? (e)           If the amount of overapplied or underapplied overhead is material, how is it assigned? (f)           Suppose Job 21 required a special fabric cover for the futon pads. This type of fabric dulls the blades of the cutting machine, and a number of fabric covers were unusable. Should this spoilage be recorded for Job 21 or for all jobs processed this period? Explain your answer.

Define what an electrical arc is.

The foreman in the drawing section of the shop brings to you several samples of parts that have been drawn in the shop. The samples have various defects. One has ears, another has wrinkles, and still a third has torn sections at its base. What are the causes of each of these defects and what remedies would you propose?

Define a change in estimate and provide an illustration. When is a change in accounting estimate effected by a change in accounting principle?

The following table shows the average cost and average revenue (price) for a firm at each level of output.            1 2 3 4 5 6 7 8 9 10 AC (£) 7.00 5.00 4.00 3.30 3.00 3.10 3.50 4.20 5.00 6.00 AR (£) 10.00 9.50 9.00 8.50 8.00 7.50 7.00 6.50 6.00 5.50   (a)  Construct a table to show TC, MC, TR and MR at each level of output (put the figures for MC and MR mid-way between the output figures). (b)  Using MC and MR figures, find the profit-maximising output. (c)  Using TC and TR figures, check your answer to (b). (d)  Plot the AC, MC, AR and MR figures on a graph. (e)  Mark the profit-maximising output and the AR and AC at this output. (f)   Shade in an area to represent the level of profits at this output.

Differentiate between a lag indicator and a lead indicator.  Provide two examples of each.                   (LO1)

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.)