Question & Answer

1.      Have you heard of Casper, purchased a Casper mattress, or visited a Casper store? What is your impression? What do you value most and what do you want to avoid when buying a mattress?

Diamond Mountain was originally thought to be one of the few places in North America to contain diamonds, so Diamond Mountain Inc. (DM) purchased the land for $1,000,000. Later, DM discovered that the only diamonds on the mountain had been planted there and the land was worthless for mining. DM engineers discovered a new survey technology and discovered a silver deposit estimated at 5,000 pounds on Diamond Mountain. DM immediately bought new drilling equipment and began mining the silver.  In years 1-3 following the opening of the mine, DM had net (gross) income of $200,000 ($700,000), $400,000 ($1,100,000), and $600,000 ($1,450,000), respectively. Mining amounts for each year were as follows: 750 pounds (year 1), 1,450 pounds (year 2), and 1,800 pounds (year 3). At the end of year 2, engineers used the new technology (which had been improving over time) and estimated there were still an estimated 6,000 pounds of silver deposits. DM also began a research and experimentation project with the hopes of gaining a patent for its new survey technology. Diamond Mountain Inc. chose to capitalize research and experimentation expenditures and to amortize the costs over 60 months or until it obtained a patent on its technology. In March of year 1, DM spent $95,000 on research and experimentation. DM spent another $75,000 in February of year 2 for research and experimentation. DM realizes benefits from the research and experimentation expenditures when the costs are incurred. In September of year 2, DM paid $20,000 of legal fees and was granted the patent in October of year 2 (the entire process of obtaining a patent was unusually fast). The patent's life is 20 years.

Angela Corporation issues 2,000 convertible bonds at January 1, 2013. The bonds have a 3-year life, and are issued at par with a face value of $1,000 per bond, giving total proceeds of $2,000,000. Interest is payable annually at 6%. Each bond is convertible into 250 ordinary shares (par value of $1). When the bonds are issued, the market rate of interest for similar debt without the conversion option is 8%. Instructions (a) Compute the liability and equity component of the convertible bond on January 1, 2013. (b) Prepare the journal entry to record the issuance of the convertible bond on January 1, 2013. (c) Prepare the journal entry to record the repurchase of the convertible bond for cash at January 1, 2016, its maturity date.

On November 1 of this year, Jaxon borrowed $50,000 from Bucksnort Savings and Loan for use in his business. In December, Jaxon paid interest of $4,500 relating to the 12-month period from November of this year through October of next year.  a) How much interest, if any, can Jaxon deduct this year if his business uses the cash method of accounting for tax purposes? b) How much interest, if any, can Jaxon deduct this year if his business uses the accrual method of accounting for tax purposes?

Drawing an indifference curve diagram that illustrates Giffen behaviour can be difficult. Given that the substitution effect of the price change must be relatively small, how do you draw the indifference curves: i.e. how bowed in towards the origin should they be?

A gundrilling operation is used to drill a 9/64-in diameter hole to a certain depth. It takes 4.5 minutes to perform the drilling operation using high pressure fluid delivery of coolant to the drill point. The current spindle speed = 4000 rev/min, and feed = 0.0017 in/rev. In order to improve the surface finish in the hole, it has been decided to increase the speed by 20% and decrease the feed by 25%. How long will it take to perform the operation at the new cutting conditions?

Ford Motor Co. is considering alternate methods of accounting for the cash discounts it takes when paying suppliers promptly. One method suggested was to report these discounts as financial income when payments are made. Comment on the propriety of this approach.

What will determine the size of the shift in the BP curve in each case?

When is an S corporation required to pay a built-in gains tax?

1.    You are a bright, hard-working, entry-level manager who fully intends to rise through the ranks. Your performance evaluation gives you high marks for your technical skills, but low marks when it comes to people skills. Do you think people skills can be learned, or do you need to rethink your career path? If people skills can be learned, how would you go about it?

1.       : What opportunities and potential problems are posed by the formation of more than one coalition within an organization, each one advocating a different direction or alternative? What steps can you take as a manager to make sure that dueling coalitions result in constructive discussion rather than dissension?

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:

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?

Discuss the behavioural issues that need to be considered when establishing a standard cost.

Rasheed works for Company A, earning $350,000 in salary during 2024.  Assuming he is single and has no other sources of income, what amount of FICA tax will Rasheed pay for the year?

What are the natural tolerance limits?

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?

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.

Fergiehas the choice between investing in a State of New York bond at 5 percent and a Surething bond at 8 percent.  Assuming that both bonds have the same nontax characteristics and that Fergie has a 30 percent marginal tax rate, in which bond should she invest?

When the Fed lowers the federal funds rate target, will the cost of capital of U.S. companies be reduced? Explain how the segmented markets theory regarding the term structure of interest rates (as explained in Chapter 3) could influence the degree to which the Fed’s monetary policy affects long-term interest rates. (LO2)

1. Trace through the effects in both factor and goods markets of the following:                (a) An increase in the productivity of a particular type of labour.                (b) An increase in the supply of a particular factor. 2. Show in each case how initially social efficiency will be destroyed and then how market adjustments will restore social efficiency.

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.

Carlos has located a regulation that appears to answer his tax research question.  He is concerned because the regulation is a temporary regulation.  Evaluate the authoritative weight of this type of regulation.  Should he feel more or less confident in his answer if the regulation is a proposed regulation?

In the iron-iron carbide phase diagram of Figure 6.4, identify the phase or phases present at the following temperatures and nominal compositions: (a) 650°C (1200°F) and 2% Fe3C, (b) 760°C (1400°F) and 2% Fe3C, and (c) 1095°C (2000°F) and 1% Fe3C.

Dillons Corporation made credit sales of $30,000 which are subject to 6% sales tax. The corporation also made cash sales which totaled $20,670 including the 6% sales tax. (a) Prepare the entry to record Dillons’ credit sales. (b) Prepare the entry to record Dillons’ cash sales.