Question & Answer

How did the Financial Services Modernization Act affect securities firms? (LO2)

What is the sequence of processing steps required to produce finished rubber goods?

Assume the same information as E17-9 and that Steffi Graf Inc. reports net income in 2013 of $120,000 and in 2014 of $140,000. Total holding gains (including any realized holding gain or loss) total $40,000. Instructions (a) Prepare a statement of comprehensive income for 2013 starting with net income. (b) Prepare a statement of comprehensive income for 2014 starting with net income.

How will the size of normal ‘profit’ vary with the general state of the economy?

1.    : Should a multinational organization operate as a tightly integrated, worldwide business system, or would it be more effective to let each national subsidiary operate autonomously? Why?

Given the liquidity advantage of holding Treasury bills, why do banks hold only a relatively small portion of their assets as T-bills? (LO2)

Dain’s Diamond Bit Drilling purchased the following assets this year. Assume its taxable income for the year was $53,000 for purposes of computing the §179 expense (assume no bonus depreciation).

Balanced scorecard; strengths and weaknesses Brewster House is a not-for-profit shelter for the homeless. Lately funding has decreased, but the demand for overnight shelter has increased. In cold weather, clients are turned away because the shelter is full. The director believes that the current capacity could be used more efficiently. No one has taken time to analyse the physical layout of the shelter and current use of space. Several rooms are used for storage that could probably be used for temporary housing. The stored boxes need to be sorted and moved. Volunteers currently assign beds and manage overnight housing, because the director is busy with fund-raising. Volunteers work just a few shifts each week, so no one has taken responsibility for coordinating improvements in the services offered. The director is considering whether to implement a balanced scorecard to focus the attention of all volunteers on areas that need improvement.   Brewster receives funds from several sources including a set annual budget from the council and direct donations from supporters. The director develops a budget each year based on expected funding, but she cannot precisely predict donations. The budget is used primarily to justify funding requests submitted to the council.   The director has asked a group of accounting students from the local university to evaluate operations and recommend whether the organisation should develop a balanced scorecard. She cannot give bonuses based on the measures, but she wonders whether developing and monitoring performance measures would encourage the volunteers to increase the use of capacity. She also wonders whether some information from the balanced scorecard could be used to show donors the effectiveness of operations.   Required (a)     Describe several potential costs and benefits of the balanced scorecard for this organisation. (b)     Describe one potential measure for each scorecard perspective appropriate for Brewster House. Explain how information for each measure will be collected. (c)     Prepare a memo to the director that recommends whether Brewster House should adopt a balanced scorecard. In writing the memo, consider what information the director needs from you to help her make a decision.

Absent any special elections, what effect does a sale of partnership interest have on the partnership?

In its 2011 annual report, Campbell Soup Company reports beginning-of-the-year total assets of $6,276 million, end-of-the-year total assets of $6,862 million, total sales of $7,719 million, and net income of $805 million. (a) Compute Campbell’s asset turnover. (b) Compute Campbell’s profit margin on sales. (c) Compute Campbell’s return on assets using (1) asset turnover and profit margin and (2) net income.

In a chemical blanking operation, stock thickness of the aluminum sheet is 0.015 in. The pattern to be cut out of the sheet is a hole pattern, consisting of a matrix of 0.100 in diameter holes. If photochemical machining is used to cut these holes, and contact printing is used to make the resist (maskant) pattern, determine the diameter of the holes that should be used in the pattern.

Assume that Sonic Foundry Corporation has a contractual debt outstanding. Sonic has available two means of settlement. It can either make immediate payment of $2,600,000, or it can make annual payments of $300,000 for 15 years, each payment due on the last day of the year. Instructions Which method of payment do you recommend, assuming an expected effective interest rate of 8% during the future period?

Ballard Company rents a warehouse on a month-to-month basis for the storage of its excess inventory. The company periodically must rent space whenever its production greatly exceeds actual sales. For several years, the company officials have discussed building their own storage facility, but this enthusiasm wavers when sales increase sufficiently to absorb the excess inventory. What is the nature of this type of lease arrangement, and what accounting treatment should be accorded it?

Mortonson Company has not yet prepared a formal statement of cash flows for the 2014 fiscal year. Comparative balance sheets as of December 31, 2013 and 2014, and a statement of income and retained earnings for the year ended December 31, 2014, are presented as follows. MORTONSON COMPANY STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE YEAR ENDED DECEMBER 31, 2014 ($000 OMITTED) Sales revenue $3,800 Expenses Cost of goods sold $1,200 Salaries and benefi ts 725 Heat, light, and power 75 Depreciation 80 Property taxes 19 Patent amortization 25 Miscellaneous expenses 10 Interest 30 2,164 MORTONSON COMPANY STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE YEAR ENDED DECEMBER 31, 2014 (CONTINUED) Income before income taxes 1,636 Income taxes 818 Net income 818 Retained earnings—Jan. 1, 2014 310 1,128 Stock dividend declared and issued 600 Retained earnings—Dec. 31, 2014 $ 528 MORTONSON COMPANY COMPARATIVE BALANCE SHEETS AS OF DECEMBER 31 ($000 OMITTED) Assets 2014 2013 Current assets Cash $ 333 $ 100 U.S. Treasury notes (available-for-sale) 10 50 Accounts receivable 780 500 Inventory 720 560 Total current assets 1,843 1,210 Long-term assets Land 150 70 Buildings and equipment 910 600 Accumulated depreciation—buildings and equipment (200) (120) Patents (less amortization) 105 130 Total long-term assets 965 680 Total assets $2,808 $1,890 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 420 $ 330 Income taxes payable 40 30 Notes payable 320 320 Total current liabilities 780 680 Long-term notes payable—due 2016 200 200 Total liabilities 980 880 Stockholders’ equity Common stock 1,300 700 Retained earnings 528 310 Total stockholders’ equity 1,828 1,010 Total liabilities and stockholders’ equity $2,808 $1,890 Instructions Prepare a statement of cash flows using the direct method. Changes in accounts receivable and accounts payable relate to sales and cost of goods sold. Do not prepare a reconciliation schedule.

What is a part family?

Presented below is information taken from a bond investment amortization schedule with related fair values provided. These bonds are classified as available-for-sale. 12/31/14 12/31/15 12/31/16 Amortized cost $491,150 $519,442 $550,000 Fair value $497,000 $509,000 $550,000 Instructions (a) Indicate whether the bonds were purchased at a discount or at a premium. (b) Prepare the adjusting entry to record the bonds at fair value at December 31, 2014. The Fair Value Adjustment account has a debit balance of $1,000 prior to adjustment. (c) Prepare the adjusting entry to record the bonds at fair value at December 31, 2015.

Draw a diagram with MC and MR curves. Mark the output (a) at which profits are maximised; (b) at which sales revenue is maximised.

Besides the starting material, what other feature distinguishes the rapid prototyping technologies?

Which of the three types of merger (horizontal, vertical and conglomerate) are most likely to lead to (a) reductions in average costs; (b) increased market power?

Parnevik Company has the following securities in its investment portfolio on December 31, 2014 (all securities were purchased in 2014): (1) 3,000 shares of Anderson Co. common stock which cost $58,500, (2) 10,000 shares of Munter Ltd. common stock which cost $580,000, and (3) 6,000 shares of King Company preferred stock which cost $255,000. The Fair Value Adjustment account shows a credit of $10,100 at the end of 2014. In 2015, Parnevik completed the following securities transactions. 1. On January 15, sold 3,000 shares of Anderson’s common stock at $22 per share less fees of $2,150. 2. On April 17, purchased 1,000 shares of Castle’s common stock at $33.50 per share plus fees of $1,980. On December 31, 2015, the market prices per share of these securities were Munter $61, King $40, and Castle $29. In addition, the accounting supervisor of Parnevik told you that, even though all these securities have readily determinable fair values, Parnevik will not actively trade these securities because the top management intends to hold them for more than one year. Instructions (a) Prepare the entry for the security sale on January 15, 2015. (b) Prepare the journal entry to record the security purchase on April 17, 2015. (c) Compute the unrealized gains or losses and prepare the adjusting entry for Parnevik on December 31, 2015. (d) How should the unrealized gains or losses be reported on Parnevik’s balance sheet?

How will competition between growth-maximising firms benefit the consumer?

What are the major lessor groups in the United States? What advantage does a captive have in a leasing arrangement?

What is service cost, and what is the basis of its measurement?

Mel and Cindy Gibson’s 12-year-old daughter Rachel was abducted on her way home from school on March 15, 2017.Police reports indicated that a stranger had physically dragged Rachel into a waiting car and sped away.Everyone hoped that the kidnapper and Rachel would be located quickly.However, as of the end of the year, Rachel was still missing.The police were still pursuing several promising leads and had every reason to believe that Rachel was still alive.In 2018, Rachel was returned safely to her parents.a.Are the Gibsons allowed to claim an exemption deduction for Rachel in 2017 even though she only lived in the Gibson’s home for two-and-one-half months?Explain and cite your authority.

How would the radical right reply to these arguments?