Question & Answer

The flow rate of liquid metal into the downsprue of a mold = 1 liter/sec. The cross-sectional area at the top of the sprue = 800 mm2 , and its length = 175 mm. What area should be used at the base of the sprue to avoid aspiration of the molten metal?

Define bulk density and true density for metallic powders.

If MCX/MCY were greater than PX/PY how would firms behave? What would bring production back into equilibrium where MCX/MCY = PX/PY?

For what reasons might the exchange rate diverge from the purchasing-power parity rate over the longer term?

Relative to arm’s-length transactions, why do related-party transactions receive more IRS scrutiny?

Salen Company finances some of its current operations by assigning accounts receivable to a finance company. On July 1, 2014, it assigned, under guarantee, specific accounts amounting to $150,000. The finance company advanced to Salen 80% of the accounts assigned (20% of the total to be withheld until the finance company has made its full recovery), less a finance charge of ½% of the total accounts assigned. On July 31, Salen Company received a statement that the finance company had collected $80,000 of these accounts and had made an additional charge of ½% of the total accounts outstanding as of July 31. This charge is to be deducted at the time of the first remittance due Salen Company from the finance company. (Hint: Make entries at this time.) On August 31, 2014, Salen Company received a second statement from the finance company, together with a check for the amount due. The statement indicated that the finance company had collected an additional $50,000 and had made a further charge of ½% of the balance outstanding as of August 31. Instructions Make all entries on the books of Salen Company that are involved in the transactions above.

In 2014, Ghostbusters Corp. spent $420,000 for “goodwill” visits by sales personnel to key customers. The purpose of these visits was to build a solid, friendly relationship for the future and to gain insight into the problems and needs of the companies served. How should this expenditure be reported?

Explain why the tax law imposes constructive stock ownership rules on stock redemptions.

Flagstad Inc. presented the following data. Net income $2,500,000 Preferred stock: 50,000 shares outstanding, $100 par, 8% cumulative, not convertible 5,000,000 Common stock: Shares outstanding 1/1 750,000 Issued for cash, 5/1 300,000 Acquired treasury stock for cash, 8/1 150,000 2-for-1 stock split, 10/1 Instructions Compute earnings per share.

Explain systemic risk as it relates to the futures market. Explain how the Financial Reform Act of 2010 attempted to improve the monitoring of systemic risk in the futures market and other markets. (LO4)

Why does the required rate of return for a particular bond change over time? (LO2)

A face milling operation is not yielding the required surface finish on the work. The cutter is a four-tooth insert type face milling cutter. The machine shop foreman thinks the problem is that the work material is too ductile for the job, but this property tests well within the ductility range for the material specified by the designer. Without knowing any more about the job, what changes in (a) cutting conditions and (b) tooling would you suggest to improve the surface finish?

Compare the relative benefits of subsidies and high minimum prices to (a) the consumer; (b) the producer.

Identify some of the general principles and guidelines that apply specifically to automated 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 financial statements and the accompanying notes to answer the following questions. (a) What is the par or stated value of P&G’s preferred stock? (b) What is the par or stated value of P&G’s common stock? (c) What percentage of P&G’s authorized common stock was issued at June 30, 2011? (d) How many shares of common stock were outstanding at June 30, 2011, and June 30, 2010? (e) What was the dollar amount effect of the cash dividends on P&G’s stockholders’ equity? (f) What is P&G’s return on common stock equity for 2011 and 2010? (g) What is P&G’s payout ratio for 2011 and 2010? (h) What was the market price range (high/low) of P&G’s common stock during the quarter ended June 30, 2011?

The following facts pertain to a noncancelable lease agreement between Mooney Leasing Company and Rode Company, a lessee. Inception date: May 1, 2014 Annual lease payment due at the beginning of each year, beginning with May 1, 2014 $21,227.65 Bargain-purchase option price at end of lease term $ 4,000.00 Lease term 5 years Economic life of leased equipment 10 years Lessor’s cost $65,000.00 Fair value of asset at May 1, 2014 $91,000.00 Lessor’s implicit rate 10% Lessee’s incremental borrowing rate 10% The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility for all executor costs. Instructions (Round all numbers to the nearest cent.) (a) Discuss the nature of this lease to Rode Company. (b) Discuss the nature of this lease to Mooney Company. (c) Prepare a lease amortization schedule for Rode Company for the 5-year lease term. (d) Prepare the journal entries on the lessee’s books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2014 and

Why is it difficult to test the assumption that firms seek to maximise long-run profits?

A peripheral milling operation is performed on the top surface of a rectangular workpart which is 400 mm long by 60 mm wide. The milling cutter, which is 80 mm in diameter and has five teeth, overhangs the width of the part on both sides. Cutting speed = 70 m/min, chip load = 0.25 mm/tooth, and depth of cut = 5.0 mm. Determine (a) the actual machining time to make one pass across the surface and (b) the maximum material removal rate during the cut

Explain how the amount of cash payments to suppliers is computed under the direct method.

You manage a hotel resort located on the South Beach on the Island of Kauai in Hawaii. You are shifting the focus of your resort from a traditional fun-in-the-sun destination to eco-tourism. (Eco-tourism focuses on environmental awareness and education.) How would you classify the following projects in terms of compliance, strategic, and operational?   a.   Convert the pool heating system from electrical to solar power. b.   Build a 4-mile nature hiking trail. c.   Renovate the horse barn. d.   Launch a new promotional campaign with Hawaii Airlines. e.   Convert 12 adjacent acres into a wildlife preserve. f.    Update all the bathrooms in condos that are 10 years or older. g.   Change hotel brochures to reflect eco-tourism image. h.   Test and revise disaster response plan.                                                         How easy was it to classify these projects? What made some projects more difficult than others?

The following information has been obtained for the Gocker Corporation. 1. Prior to 2014, taxable income and pretax financial income were identical. 2. Pretax financial income is $1,700,000 in 2014 and $1,400,000 in 2015. 3. On January 1, 2014, equipment costing $1,200,000 is purchased. It is to be depreciated on a straightline basis over 5 years for tax purposes and over 8 years for financial reporting purposes. (Hint: Use the half-year convention for tax purposes, as discussed in Appendix 11A.) 4. Interest of $60,000 was earned on tax-exempt municipal obligations in 2015. 5. Included in 2015 pretax financial income is an extraordinary gain of $200,000, which is fully taxable. 6. The tax rate is 35% for all periods. 7. Taxable income is expected in all future years. Instructions (a) Compute taxable income and income taxes payable for 2015. (b) Prepare the journal entry to record 2015 income tax expense, income taxes payable, and deferred taxes. (c) Prepare the bottom portion of Gocker’s 2015 income statement, beginning with “Income before income taxes and extraordinary item.” (d) Indicate how deferred income taxes should be presented on the December 31, 2015, balance sheet.

Volker Inc. issued $2,500,000 of convertible 10-year bonds on July 1, 2014. The bonds provide for 12% interest payable semiannually on January 1 and July 1. The discount in connection with the issue was $54,000, which is being amortized monthly on a straight-line basis. The bonds are convertible after one year into 8 shares of Volker Inc.’s $100 par value common stock for each $1,000 of bonds. On August 1, 2015, $250,000 of bonds were turned in for conversion into common stock. Interest has been accrued monthly and paid as due. At the time of conversion, any accrued interest on bonds being converted is paid in cash. Instructions Prepare the journal entries to record the conversion, amortization, and interest in connection with the bonds as of the following dates. (Round to the nearest dollar.) (a) August 1, 2015. (Assume the book value method is used.) (b) August 31, 2015. (c) December 31, 2015, including closing entries for end-of-year.

As the recently appointed auditor for William J. Bryan Corporation, you have been asked to examine selected accounts before the 6-month financial statements of June 30, 2014, are prepared. The controller for William J. Bryan Corporation mentions that only one account is kept for intangible assets. The account is shown below. Intangible Assets Debit Credit Balance Jan. 4 Research and development costs 940,000 940,000 Jan. 5 Legal costs to obtain patent 75,000 1,015,000 Jan. 31 Payment of 7 months’ rent on property 91,000 1,106,000 leased by Bryan Feb. 11 Premium on common stock 250,000 856,000 March 31 Unamortized bond discount on bonds 84,000 940,000 due March 31, 2034 April 30 Promotional expenses related to 207,000 1,147,000 start-up of business June 30 Operating losses for fi rst 6 months 241,000 1,388,000 Instructions Prepare the entry or entries necessary to correct this account. Assume that the patent has a useful life of 10 years.

Your client took accounting a number of years ago and was unaware of comprehensive income reporting. He is not convinced that any accounting standards exist for comprehensive income. Instructions Go to http://aahq.org/asclogin.cfm to log in and prepare responses to the following. Provide Codification references for your responses. (a) What authoritative literature addresses comprehensive income? When was it issued? (b) Provide the definition of comprehensive income. (c) Define classifications within net income and give examples. (d) Define classifications within other comprehensive income and give examples. (e) What are reclassification adjustments?

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 is the par or stated value of M&S’s preference shares? (b) What is the par or stated value of M&S’s ordinary shares? (c) What percentage of M&S’s authorized ordinary shares was issued at 31 March 2012? (d) How many ordinary shares were outstanding at 31 March 2012, and 2 April 2011? (e) What was the pound amount effect of the cash dividends on M&S’s equity? (f) What is M&S’s return on ordinary share equity for 2012 and 2011? (g) What is M&S’s payout ratio for 2012 and 2011?