Question & Answer

Yong recently paid his accountant $10,000 for elaborate tax planning strategies that exploit the timing strategy. Assuming this is an election year and there could be a power shift in the White House and Congress, what is a potential risk associated with Yong’s strategies?

To what extent do (a) income tax, (b) VAT and (c) a poll tax meet the various requirements for a good tax system?

Consider the data in Problem 21.10 except that rake angle is a variable, and its effect on the forces in parts (b), (c), and (d) is to be evaluated. (a) Using a spreadsheet calculator, compute the values of shear force, cutting force, thrust force, and friction force as a function of rake angle over a range of rake angles between the high value of 20° in Problem 21.10 and a low value of -10°. Use intervals of 5° between these limits. The chip thickness ratio decreases as rake angle is reduced and can be approximated by the following relationship: r = 0.38 + 0.006 , where r = chip thickness and = rake angle. (b) What observations can be made from the computed results?

Daniel Barenboim sells and erects shell houses, that is, frame structures that are completely finished on the outside but are unfinished on the inside except for flooring, partition studding, and ceiling joists. Shell houses are sold chiefly to customers who are handy with tools and who have time to do the interior wiring, plumbing, wall completion and finishing, and other work necessary to make the shell houses livable dwellings. Barenboim buys shell houses from a manufacturer in unassembled packages consisting of all lumber, roofing, doors, windows, and similar materials necessary to complete a shell house. Upon commencing operations in a new area, Barenboim buys or leases land as a site for its local warehouse, field office, and display houses. Sample display houses are erected at a total cost of $30,000 to $44,000 including the cost of the unassembled packages. The chief element of cost of the display houses is the unassembled packages, inasmuch as erection is a short, low-cost operation. Old sample models are torn down or altered into new models every 3 to 7 years. Sample display houses have little salvage value because dismantling and moving costs amount to nearly as much as the cost of an unassembled package. Instructions (a) A choice must be made between (1) expensing the costs of sample display houses in the periods in which the expenditure is made and (2) spreading the costs over more than one period. Discuss the advantages of each method. (b) Would it be preferable to amortize the cost of display houses on the basis of (1) the passage of time or (2) the number of shell houses sold? Explain.

Define and sketch a groove weld.

Normal and abnormal spoilage Franklin Fabrication produces custom-made security doors and gates. Currently two jobs are in process, 359 and 360. During production of Job 359, the supervisor was on holidays and the employees made several errors in cutting the metal pieces for the two doors in the order. The spoiled metal pieces cost $20 each and had zero scrap value. In addition, an order of five gates that had been manufactured for Job 360 required a fine wire mesh that sometimes tore as it was being mounted. Because a similar wire could be used that was much easier to install, the customer had been warned that costs could run over the bid if any difficulty was encountered in installing the wire. One of the gates was spoiled during the process of installing the wire. The cost of the materials and direct labour for the gate was $150. The gate and metal were hauled to the dump and discarded.   Required (a)          Should the spoilage for Job 359 be categorised as normal or abnormal spoilage? Explain. (b)          Should the spoilage for Job 360 be categorised as normal or abnormal spoilage? Explain. (c)           Prepare spoilage journal entries for both jobs.

Suppose you asked your favorite AI query tool “Under the timing strategy, does it make sense for a person to accelerate income recognition when tax rates are increasing?” and the AI tool responded as follows:

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 were P&G’s net sales for 2011? (b) What was the percentage of increase or decrease in P&G’s net sales from 2010 to 2011? From 2009 to 2010? From 2009 to 2011? (c) In its notes to the financial statements, what criteria does P&G use to recognize revenue? (d) How does P&G account for trade promotions? Does the accounting conform to accrual accounting concepts? Explain.

List three factors that managers might consider in deciding whether to expend resources to reduce spoilage.

What factors could cause a rise in the market rate of interest?

The certified public accountant is frequently called upon by management for advice regarding methods of computing depreciation. Of comparable importance, although it arises less frequently, is the question of whether the depreciation method should be based on consideration of the assets as units, as a group, or as having a composite life. Instructions (a) Briefly describe the depreciation methods based on treating assets as (1) units and (2) a group or as having a composite life. (b) Present the arguments for and against the use of each of the two methods. (c) Describe how retirements are recorded under each of the two methods.

Learning and growth perspective Markman Ltd, a large pharmaceutical company, is concerned about the ability of its research and development department to develop profitable new prescription drugs. Once a drug has been developed and patented, it takes 9 to 12 years to meet all of the regulatory requirements. The company can then market the drug for about 11.5 years, on average, before the patent expires. Then competitors produce generic drugs. Employees currently participate in profit-sharing plans, but the company wants to give additional bonuses to improve performance. Markman decided to implement a balanced scorecard approach.   Required (a)     Explain why monitoring and rewarding non-financial performance might be particularly important for Markman. (b)     List one objective for Markman’s learning and growth perspective. (c)     List two performance measures for the objective you picked in part (B).

When is revenue recognized under the cost-recovery method?

Turner, Inc. began work on a $7,000,000 contract in 2014 to construct an office building. During 2014, Turner, Inc. incurred costs of $1,700,000, billed its customers for $1,200,000, and collected $960,000. At December 31, 2014, the estimated future costs to complete the project total $3,300,000. Prepare Turner’s 2014 journal entries using the percentage-of-completion method.

Explain the potential for corruption when a trustee has the power to determine who will manage a pension fund. (LO5)

Irene is disabled and receives payments from a number of sources. The interest payments are from bonds that Irene purchased over past years and a disability insurance policy that Irene purchased herself. Calculate Irene’s gross income.

Hamilton Construction Company uses the percentage-of-completion method of accounting. In 2014, Hamilton began work under contract #E2-D2, which provided for a contract price of $2,200,000. Other details are as follows. 2014 2015 Costs incurred during the year $640,000 $1,425,000 Estimated costs to complete, as of December 31 960,000 –0– Billings during the year 420,000 1,680,000 Collections during the year 350,000 1,500,000 Instructions (a) What portion of the total contract price would be recognized as revenue in 2014? In 2015? (b) Assuming the same facts as those shown above except that Hamilton uses the cost-recovery method of accounting, what portion of the total contract price would be recognized as revenue in 2015?

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/Marks-and- 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 were M&S’s sales for 2012? (b) What was the percentage of increase or decrease in M&S’s sales from 2011 to 2012? From 2010 to 2011? From 2010 to 2012? (c) In its notes to the financial statements, what criteria does M&S use to recognize revenue? (d) How does M&S account for discounts and loyalty schemes? Does the accounting conform to accrual-accounting concepts? Explain.

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) What were Coca-Cola’s and PepsiCo’s net revenues (sales) for the year 2011? Which company increased its revenues more (dollars and percentage) from 2010 to 2011? (b) Are the revenue recognition policies of Coca-Cola and PepsiCo similar? Explain. (c) In which foreign countries (geographic areas) did Coca-Cola and PepsiCo experience significant revenues in 2011? Compare the amounts of foreign revenues to U.S. revenues for both Coca-Cola and PepsiCo.

Becker Ltd. is planning to adopt IFRS and prepare its first IFRS financial statements at December 31, 2015. What is the date of Becker’s opening balance sheet, assuming one year of comparative information? What periods will be covered in Becker’s first IFRS financial statements?

What else is the diagram telling us?

Explain how the failure of a large commercial bank could cause a worldwide swap credit crisis. (LO1, LO7)

What is meant by the paradox of aggregates? Of what importance might they be for how we analyse macroeconomic problems?

Orthogonal cutting is performed on a metal whose mass specific heat = 1.0 J/g-C, density = 2.9 g/cm3 , and thermal diffusivity = 0.8 cm2 /s. The cutting speed is 4.5 m/s, uncut chip thickness is 0.25 mm, and width of cut is 2.2 mm. The cutting force is measured at 1170 N. Using Cook's equation, determine the cutting temperature if the ambient temperature = 22°C.

On September 30 of last year, Rex received some investment land from Holly as a gift. Holly’s basis was $50,000 and the land was valued at $40,000 at the time of the gift. Holly acquired the land five years ago. What are the amount and character of Rex’s recognized gain (loss) if he sells the land on May 12 this year at the following prices? a. $32,000 b. $70,000 c. $45,000   a. $8,000 short-term capital loss, computed as follows: Description Amount Explanation (1) Amount Realized$32,000 (2) Adjusted Basis 40,000 Rex’s basis is the fair market value of the land at the date of the gift. Gain (Loss) Recognized ($8,000) (1) – (2)