Question & Answer

Why is the term pressworking often used for sheet metal processes?

In June 2014, the board of directors for McElroy Enterprises Inc. authorized the sale of $10,000,000 of corporate bonds. Jennifer Grayson, treasurer for McElroy Enterprises Inc., is concerned about the date when the bonds are issued. The company really needs the cash, but she is worried that if the bonds are issued before the company’s year-end (December 31, 2014) the additional liability will have an adverse effect on a number of important ratios. In July, she explains to company president William McElroy that if they delay issuing the bonds until after December 31 the bonds will not affect the ratios until December 31, 2015. They will have to report the issuance as a subsequent event which requires only footnote disclosure. Grayson expects that with expected improved financial performance in 2015, ratios should be better. Instructions (a) What are the ethical issues involved? (b) Should McElroy agree to the delay?

How is a pull system distinguished from a push system in production and inventory control?

What are some common separately stated items, and why must they be separately stated to the partners?

Why are firms likely to experience economies of scale up to a certain size and then diseconomies of scale after some point beyond that?

Explain how and why high-frequency trading affects spreads. (LO3)

Dover Company began operations in 2014 and determined its ending inventory at cost and at LCNRV at December 31, 2014, and December 31, 2015. This information is presented below. Cost Net Realizable Value 12/31/14 $346,000 $322,000 12/31/15 410,000 390,000 (a) Prepare the journal entries required at December 31, 2014, and December 31, 2015, assuming that the inventory is recorded at LCNRV and a perpetual inventory system using the cost-of-goods-sold method is used. (b) Prepare journal entries required at December 31, 2014, and December 31, 2015, assuming that the inventory is recorded at cost and a perpetual system using the loss method is used. (c) Which of the two methods above provides the higher net income in each year?

Assume that fracking becomes common across the UK. The result is that supplies of shale gas and oil increase sharply. Trace through the effects of this on the market for oil, gas and the market for other fuels.

GAAP requires the statement of cash flows be presented when financial statements are prepared. Instructions (a) Explain the purposes of the statement of cash flows. (b) List and describe the three categories of activities that must be reported in the statement of cash flows. (c) Identify and describe the two methods that are allowed for reporting cash flows from operations. (d) Describe the financial statement presentation of noncash investing and financing transactions. Include in your description an example of a noncash investing and financing transaction.

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 accompanying notes to answer the following questions. (a) Under P&G’s stock-based compensation plan, stock options are granted annually to key managers and directors. (1) How many options were granted during 2011 under the plan? (2) How many options were exercisable at June 30, 2011? (3) How many options were exercised in 2011, and what was the average price of those exercised? (4) How many years from the grant date do the options expire? (5) To what accounts are the proceeds from these option exercises credited? (6) What was the number of outstanding options at June 30, 2011, and at what average exercise price? (b) What number of diluted weighted-average common shares outstanding was used by P&G in computing earnings per share for 2011, 2010, and 2009? What was P&G’s diluted earnings per share in 2011, 2010, and 2009? (c) What other stock-based compensation plans does P&G have?

Explain how the conversion feature of convertible debt has a value (a) to the issuer and (b) to the purchaser.

Draw a diagram like Figure 19.18, only with just one L curve. Assume that the current level of national income is at Y1. Now assume that the supply of money decreases. Show the effect on (a) the rate of interest; (b) the position of the LM curve.

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?

Some of the transactions of Torres Company during August are listed below. Torres uses the periodic inventory method. August 10 Purchased merchandise on account, $12,000, terms 2/10, n/30. 13 Returned part of the purchase of August 10, $1,200, and received credit on account. 15 Purchased merchandise on account, $16,000, terms 1/10, n/60. 25 Purchased merchandise on account, $20,000, terms 2/10, n/30. 28 Paid invoice of August 15 in full. Instructions (a) Assuming that purchases are recorded at gross amounts and that discounts are to be recorded when taken: (1) Prepare general journal entries to record the transactions. (2) Describe how the various items would be shown in the financial statements. (b) Assuming that purchases are recorded at net amounts and that discounts lost are treated as financial expenses: (1) Prepare general journal entries to enter the transactions. (2) Prepare the adjusting entry necessary on August 31 if financial statements are to be prepared at that time. (3) Describe how the various items would be shown in the financial statements. (c) Which of the two methods do you prefer and why?

A SMAW operation is accomplished in a work cell using a fitter and a welder. The fitter takes 5.5 min to place the unwelded components into the welding fixture at the beginning of the work cycle, and 2.5 min to unload the completed weldment at the end of the cycle. The total length of the several weld seams to be made is 2000 mm, and the travel speed used by the welder averages 400 mm/min. Every 750 mm of weld length, the welding stick must be changed, which takes 0.8 min. While the fitter is working, the welder is idle (resting); and while the welder is working, the fitter is idle. (a) Determine the average arc time in this welding cycle. (b) How much improvement in arc time would result if the welder used FCAW (manually operated), given that the spool of flux-cored weld wire must be changed every five weldments, and it takes the welder 5.0 min to accomplish the change? (c) What are the production rates for these two cases (weldments completed per hour)?

Coldwell, Inc. issued a $100,000, 4-year, 10% note at face value to Flint Hills Bank on January 1, 2014, and received $100,000 cash. The note requires annual interest payments each December 31. Prepare Coldwell’s journal entries to record (a) the issuance of the note and (b) the December 31 interest payment.

Distinguish between generating and forming when machining workpart geometries.

Compare and contrast an employee’s FICA tax payment responsibilities with those of a self-employed taxpayer.

What are the arguments for giving separate accounting recognition to the conversion feature of debentures?

Corrs Wholesalers Co. sells industrial equipment for a standard 3-year note receivable. Revenue is recognized at time of sale. Each note is secured by a lien on the equipment and has a face amount equal to the equipment’s list price. Each note’s stated interest rate is below the customer’s market rate at date of sale. All notes are to be collected in three equal annual installments beginning one year after sale. Some of the notes are subsequently sold to a bank with recourse, some are subsequently sold without recourse, and some are retained by Corrs. At year end, Corrs evaluates all outstanding notes receivable and provides for estimated losses arising from defaults. Instructions (a) What is the appropriate valuation basis for Corrs’s notes receivable at the date it sells equipment? (b) How should Corrs account for the sale, without recourse, of a February 1, 2014, note receivable sold on May 1, 2014? Why is it appropriate to account for it in this way? (c) At December 31, 2014, how should Corrs measure and account for the impact of estimated losses resulting from notes receivable that it (1) Retained and did not sell? (2) Sold to bank with recourse?

An NC lathe cuts two passes across a cylindrical workpiece under automatic cycle. The operator loads and unloads the machine. The starting diameter of the work is 3.00 in and its length = 10 in. The work cycle consists of the following steps (with element times given in parentheses where applicable): 1 - Operator loads part into machine, starts cycle (1.00 min); 2 - NC lathe positions tool for first pass (0.10 min); 3 - NC lathe turns first pass (time depends on cutting speed); 4 - NC lathe repositions tool for second pass (0.4 min); 5 - NC lathe turns second pass (time depends on cutting speed); and 6 - Operator unloads part and places in tote pan (1.00 min). In addition, the cutting tool must be periodically changed. This tool change time takes 1.00 min. The feed rate = 0.007 in/rev and the depth of cut for each pass = 0.100 in. The cost of the operator and machine = $39/hr and the tool cost = $2.00/cutting edge. The applicable Taylor tool life equation has parameters: n = 0.26 and C = 900 (ft/min). Determine (a) the cutting speed for minimum cost per piece, (b) the average time required to complete one production cycle, (c) cost of the production cycle. (d) If the setup time for this job is 3.0 hours and the batch size = 300 parts, how long will it take to complete the batch?

1.       : Analyze three decisions you made over the past six months. Which of these were programmed and which were nonprogrammed? Which model—the classical, administrative, or political—best describes the approach you took to making each decision?

Each of the following items must be considered in preparing a statement of cash flows for Blackwell Inc. for the year ended December 31, 2014. State where each item is to be shown in the statement, if at all. (a) Plant assets that had cost $18,000 6½ years before and were being depreciated on a straight-line basis over 10 years with no estimated scrap value were sold for $4,000. (b) During the year, 10,000 shares of common stock with a stated value of $20 a share were issued for $41 a share. (c) Uncollectible accounts receivable in the amount of $22,000 were written off against Allowance for Doubtful Accounts. (d) The company sustained a net loss for the year of $50,000. Depreciation amounted to $22,000, and a gain of $9,000 was realized on the sale of available-for-sale securities for $38,000 cash.

Richardson Company is contemplating the establishment of a share-based compensation plan to provide long-run incentives for its top management. However, members of the compensation committee of the board of directors have voiced some concerns about adopting these plans, based on news accountsrelated to a recent accounting standard in this area. They would like you to conduct some research on this recent standard so they can be better informed about the accounting for these plans. Instructions Access the IFRS authoritative literature at the IASB website (http://eifrs.iasb.org/). (Click on the IFRS tab and then register for free eIFRS access if necessary.) When you have accessed the documents, you can use the search tool in your Internet browser to respond to the following questions. (Provide paragraph citations.) (a) Identify the authoritative literature that addresses the accounting for share-based payment compensation plans. (b) Briefly discuss the objectives for the accounting for share-based compensation. What is the role of fair value measurement? (c) The Richardson Company board is also considering an employee share-purchase plan, but the Board does not want to record expense related to the plan. What are the IFRS requirements for the accounting for an employee share-purchase plan?

What technological developments are likely to have reduced menu costs in recent years?