Question & Answer

For each of the following citations, identify the type of authority     (statutory, administrative, or judicial) and explain the citation.

Crowe Company purchased a heavy-duty truck on July 1, 2011, for $30,000. It was estimated that it would have a useful life of 10 years and then would have a trade-in value of $6,000. The company uses the straight-line method. It was traded on August 1, 2015, for a similar truck costing $42,000; $16,000 was allowed as trade-in value (also fair value) on the old truck and $26,000 was paid in cash. A comparison of expected cash flows for the trucks indicates the exchange lacks commercial substance. What is the entry to record the trade-in?

Midori Company had ending inventory at end-of-year prices of $100,000 at December 31, 2013; $119,900 at December 31, 2014; and $134,560 at December 31, 2015. The year-end price indexes were 100 at 12/31/13, 110 at 12/31/14, and 116 at 12/31/15. Compute the ending inventory for Midori Company for 2013 through 2015 using the dollar-value LIFO method.

A cup-drawing operation is performed in which the inside diameter = 80 mm and the height = 50 mm. The stock thickness = 3.0 mm, and the starting blank diameter = 150 mm. Punch and die radii = 4 mm. Tensile strength = 400 MPa and yield strength = 180 MPa for this sheet metal. Determine (a) drawing ratio, (b) reduction, (c) drawing force, and (d) blankholder force.

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 investments does P&G report in 2011, and how are these investments accounted for in its financial statements? (b) How are P&G’s investments valued? How does P&G determine fair value? (c) How does P&G use derivative financial instruments?

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.

AMP Corporation (calendar-year-end) has 2024 taxable income of $1,900,000 for purposes of computing the §179 expense. During 2024, AMP acquired the following assets:

Name three factors that determine whether a taxpayer is required to file a tax return.

Halvor Corporation is having financial difficulty and therefore has asked Frontenac National Bank to restructure its $5 million note outstanding. The present note has 3 years remaining and pays a current rate of interest of 10%. The present market rate for a loan of this nature is 12%. The note was issued at its face value. Instructions Presented below and on the next page are four independent situations. Prepare the journal entry that Halvor and Frontenac National Bank would make for each of these restructurings. (a) Frontenac National Bank agrees to take an equity interest in Halvor by accepting common stock valued at $3,700,000 in exchange for relinquishing its claim on this note. The common stock has a par value of $1,700,000. (b) Frontenac National Bank agrees to accept land in exchange for relinquishing its claim on this note. The land has a book value of $3,250,000 and a fair value of $4,000,000. (c) Frontenac National Bank agrees to modify the terms of the note, indicating that Halvor does not have to pay any interest on the note over the 3-year period. (d) Frontenac National Bank agrees to reduce the principal balance due to $4,166,667 and require interest only in the second and third year at a rate of 10%.

The bookkeeper for Geronimo Company has prepared the following balance sheet as of July 31, 2014.   The following additional information is provided. 1. Cash includes $1,200 in a petty cash fund and $15,000 in a bond sinking fund. 2. The net accounts receivable balance is comprised of the following two items: (a) accounts receivable $44,000 and (b) allowance for doubtful accounts $3,500. 3. Inventory costing $5,300 was shipped out on consignment on July 31, 2014. The ending inventory balance does not include the consigned goods. Receivables in the amount of $5,300 were recognized on these consigned goods. 4. Equipment had a cost of $112,000 and an accumulated depreciation balance of $28,000. 5. Income taxes payable of $6,000 were accrued on July 31. Geronimo Company, however, had set up a cash fund to meet this obligation. This cash fund was not included in the cash balance but was offset against the income taxes payable amount. Instructions Prepare a corrected classified balance sheet as of July 31, 2014, from the available information, adjusting the account balances using the additional information.

Assume that Toni Braxton Company has recently fallen into financial difficulties. By reviewing all available evidence on December 31, 2014, one of Toni Braxton’s creditors, the National American Bank, determined that Toni Braxton would pay back only 65% of the principal at maturity. As a result, the bank decided that the loan was impaired. If the loss is estimated to be $225,000, what entry(ies) should National American Bank make to record this loss?

Cosmo contributed land with a fair market value of $400,000 and a tax basis of $90,000 to the Y Mountain partnership in exchange for a 25 percent profits and capital interest in the partnership. The land is secured by a $120,000 nonrecourse liability. Other than this nonrecourse liability, Y Mountain partnership does not have any liability. a. How much gain will Cosmo recognize from the contribution? b. What is Cosmo’s tax basis in his partnership interest?

Where can authoritative IFRS guidance be found related to the statement of financial position (balance sheet) and the statement of cash flows?

1.      : What should Clarke do now to try to recover from the negative impact of his e-mails? Suggest specific steps.

Wayne Rogers Corp. maintains its financial records on the cash basis of accounting. Interested in securing a long-term loan from its regular bank, Wayne Rogers Corp. requests you as its independent CPA to convert its cash-basis income statement data to the accrual basis. You are provided with the following summarized data covering 2013, 2014, and 2015.   Instructions (a) Using the data above, prepare abbreviated income statements for the years 2013 and 2014 on the cash basis. (b) Using the data above, prepare abbreviated income statements for the years 2013 and 2014 on the accrual basis.

When an S corporation shareholder has suspended losses due to the tax-basis or at-risk amount limitation, are they allowed to deduct the losses if the S corporation status is terminated? Why or why not?

The balance sheet of Starsky Company at December 31, 2013, includes the following. Notes receivable $ 36,000 Accounts receivable 182,100 Less: Allowance for doubtful accounts 17,300 $200,800 Transactions in 2014 include the following. 1. Accounts receivable of $138,000 were collected including accounts of $60,000 on which 2% sales discounts were allowed. 2. $5,300 was received in payment of an account which was written off the books as worthless in 2013. 3. Customer accounts of $17,500 were written off during the year. 4. At year-end, Allowance for Doubtful Accounts was estimated to need a balance of $20,000. This estimate is based on an analysis of aged accounts receivable. Instructions Prepare all journal entries necessary to reflect the transactions above.

1. Could isoquants ever cross? 2. Could they ever slope upward to the right? Explain your answers.

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 investments does M&S report in 2012, and where are these investments reported in its financial statements? (b) How are M&S’s investments valued? How does M&S determine fair value? (c) How does M&S use derivative financial instruments?

What are the reporting issues in a sale and buyback agreement?

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) Based on the information contained in these financial statements, determine each of the following for each company. (1) Cash used in (for) investing activities during 2011 (from the statement of cash flows). (2) Cash used for acquisitions and investments in unconsolidated affiliates (or principally bottling companies) during 2011. (3) Total investment in unconsolidated affiliates (or investments and other assets) at the end of 2011. (b) (1) Briefly identify from Coca-Cola’s December 31, 2011, balance sheet the investments it reported as being accounted for under the equity method. (2) What is the amount of investments that Coca-Cola reported in its 2011 balance sheet as “cost method investments,” and what is the nature of these investments? (c) In its Note 2 on Investments, what total amounts did Coca-Cola report at December 31, 2011, as: (1) trading securities, (2) available-for-sale securities, and (3) held-to-maturity securities?

Based on equations in the text, derive an equation to compute the average volume per chip formed in the grinding process

1. Will the shape of the long-run AS curve here depend on just how the ‘long’ run is defined? 2. If a shift in the aggregate demand curve from AD to AD1 in Figure 20.17 causes a movement from point a to point d in the long run, would a shift in aggregate demand from AD1 to AD cause a movement from point d back to point a in the long run?

The following three situations involve the capitalization of interest. Situation I: On January 1, 2014, Oksana Baiul, Inc. signed a fixed-price contract to have Builder Associates construct a major plant facility at a cost of $4,000,000. It was estimated that it would take 3 years to complete the project. Also on January 1, 2014, to finance the construction cost, Oksana Baiul borrowed $4,000,000 payable in 10 annual installments of $400,000, plus interest at the rate of 10%. During 2014, Oksana Baiul made deposit and progress payments totaling $1,500,000 under the contract; the weightedaverage amount of accumulated expenditures was $800,000 for the year. The excess borrowed funds were invested in short-term securities, from which Oksana Baiul realized investment income of $250,000. Instructions What amount should Oksana Baiul report as capitalized interest at December 31, 2014? Situation II: During 2014, Midori Ito Corporation constructed and manufactured certain assets and incurred the following interest costs in connection with those activities. Interest Costs Incurred Warehouse constructed for Ito’s own use $30,000 Special-order machine for sale to unrelated customer, produced according to customer’s specifi cations 9,000 Inventories routinely manufactured, produced on a repetitive basis 8,000 All of these assets required an extended period of time for completion. Instructions Assuming the effect of interest capitalization is material, what is the total amount of interest costs to be capitalized? Situation III: Peggy Fleming, Inc. has a fiscal year ending April 30. On May 1, 2014, Peggy Fleming borrowed $10,000,000 at 11% to finance construction of its own building. Repayments of the loan are to commence the month following completion of the building. During the year ended April 30, 2015, expenditures for the partially completed structure totaled $7,000,000. These expenditures were incurred evenly throughout the year. Interest earned on the unexpended portion of the loan amounted to $650,000 for the year. Instructions How much should be shown as capitalized interest on Peggy Fleming’s financial statements at April 30, 2015?

Compare the entity-level tax consequences for C corporations, S corporations, and business entities taxed as partnerships for both nonliquidating and liquidating distributions of noncash property. Do the tax rules tend to favor one entity type more than the others? Explain.