Question & Answer

Would it be possible for a country with a comparative disadvantage in a given product at pre-trade levels of output to obtain a comparative advantage in it by specialising in its production and exporting it?

Based on your forecast of interest rates, would you recommend that investors purchase bonds today? Explain. (LO1, LO2)

What major types of items are reported in the retained earnings statement?

If a good were free, why would total consumer surplus equal total utility? What would be the level of marginal utility?

Jasmine transferred land she held as an investment (fair market value $140,000; basis $110,000) in exchange for 50 percent of Kandy Corporation stock (40 shares valued at $100,000) and $40,000 cash in a qualifying §351 exchange. What are the amount and character of gain Jasmine recognizes on the transfer?

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?

Discuss the relationship between the yield and the liquidity of securities. (LO1)

Why are held-to-maturity investments applicable only to debt securities?

What are some steps taken by both the FASB and IASB to move to fair value measurement for financial instruments? In what ways have some of the approaches differed?

In Figures 2.21 and 2.22, the initial change in price was caused by a shift in the demand curve. Redraw these two diagrams to illustrate the situation where the initial change in price was caused by a shift in the supply curve (as would be the case in the wheat market that we have just considered).

The plant manager of a manufacturing firm suggested in a conference of the company’s executives that accountants should speed up depreciation on the machinery in the finishing department because improvements were rapidly making those machines obsolete, and a depreciation fund big enough to cover their replacement is needed. Discuss the accounting concept of depreciation and the effect on a business concern of the depreciation recorded for plant assets, paying particular attention to the issues raised by the plant manager.

Should management be upset if all variances for the period are unfavourable?

This year, Bobcat Corporation reports a deficit in current E&P of ($300,000) that accrued evenly throughout the year. At the beginning of the year, Bobcat’s accumulated E&P was $200,000. Bobcat distributed $200,000 to its sole shareholder, Melanie, on June 30 of this year. Melanie’s tax basis in her Bobcat stock before the distribution was $75,000.

What is a composite material?

Is business income allocated from a flow-through business entity to its owners self-employment income? Explain.

Using the facts from the previous problem, when should Reese pay the bill if she expects her marginal tax rate to be 35 percent next year? 24 percent next year?

Presented below is information related to the purchases of common stock by Lilly Company during 2014. Cost Fair Value (at purchase date) (at December 31) Investment in Arroyo Company stock $100,000 $ 80,000 Investment in Lee Corporation stock 250,000 300,000 Investment in Woods Inc. stock 180,000 190,000 Total $530,000 $570,000 Instructions (Assume a zero balance for any Fair Value Adjustment account.) (a) What entry would Lilly make at December 31, 2014, to record the investment in Arroyo Company stock if it chooses to report this security using the fair value option? (b) What entry would Lilly make at December 31, 2014, to record the investment in Lee Corporation, assuming that Lilly wants to classify this security as available-for-sale? This security is the only available-for-sale security that Lilly presently owns. (c) What entry would Lilly make at December 31, 2014, to record the investment in Woods Inc., assuming that Lilly wants to classify this investment as a trading security?

How do securities firms facilitate leveraged buyouts? Why are securities firms that are better able to raise funds in the capital markets preferred by corporations that need advice on proposed acquisitions? (LO1)

Solve Problem 16.5, except that the diameter of the particles is 0.004 in. Assume the same packing factor.

List some of the products produced on a rolling mill.

What is the theoretical justification of the allowance method as contrasted with the direct write-off method of accounting for bad debts?

Charity Property Cost FMV Athens Academy School Cash $ 5,000 $5,000 United Way Cash 4,000 4,000 American Heart Association Antique painting 15,000 75,000 First Methodist Church Coca Cola stock 12,000 20,000 Determine the maximum amount of charitable deduction for each of these contributions ignoring the AGI ceiling on charitable contributions and assuming that the American Heart Association plans to sell the antique painting to fund its operations. Ray Ray has owned the painting and Coca-Cola stock since 1990.

A horizontal true centrifugal casting process is used to make brass bushings with the following dimensions: length = 10 cm, outside diameter = 15 cm, and inside diameter = 12 cm. (a) Determine the required rotational speed in order to obtain a G-factor of 70. (b) When operating at this speed, what is the centrifugal force per square meter (Pa) imposed by the molten metal on the inside wall of the mold?

Identify the two recognized lease accounting methods for lessees and distinguish between them.

If speculators had better information about future exchange rates, would their actions be more or less stabilising than at present?