Question & Answer

Given the LRAC curve in Figure 6.11, what would the firm’s long-run total cost curve look like?

What is the difference between a process layout and a product layout in a production facility?

Describe some ways in which taxes affect the political process in the United States.

What is the difference between the APBO and the EPBO? What are the components of postretirement expense?

What is the basic difference between low-density and high-density polyethylene?

What are some common point defects in a crystal lattice structure?

For Warren Corporation, year-end plan assets were $2,000,000. At the beginning of the year, plan assets were $1,780,000. During the year, contributions to the pension fund were $120,000, and benefits paid were $200,000. Compute Warren’s actual return on plan assets.

Brecker Company leases an automobile with a fair value of $10,906 from Emporia Motors, Inc., on the following terms: 1. Non-cancelable term of 50 months. 2. Rental of $250 per month (at end of each month). (The present value at 1% per month is $9,800.) 3. Estimated residual value after 50 months is $1,180. (The present value at 1% per month is $715.) Brecker Company guarantees the residual value of $1,180. 4. Estimated economic life of the automobile is 60 months. 5. Brecker Company’s incremental borrowing rate is 12% a year (1% a month). It is impracticable to determine Emporia’s implicit rate. Instructions (a) What is the nature of this lease to Brecker Company? (b) What is the present value of the minimum lease payments? (c) Record the lease on Brecker Company’s books at the date of inception. (d) Record the first month’s depreciation on Brecker Company’s books (assume straight-line). (e) Record the first month’s lease payment.

Explain the difference between a freely floating system and a dirty float. Which type is more representative of the U.S. system? (LO1)

What other factors will determine the MPP of land for industry?

How do shaping and planing differ?

Adriana Co., with annual net sales of $5 million, maintains a markup of 25% based on cost. Adriana’s expenses average 15% of net sales. What is Adriana’s gross profit and net profit in dollars?

Veldre Company provides the following information about its defined benefit pension plan for the year 2014. Service cost $ 90,000 Contribution to the plan 105,000 Prior service cost amortization 10,000 Actual and expected return on plan assets 64,000 Benefi ts paid 40,000 Plan assets at January 1, 2014 640,000 Projected benefi t obligation at January 1, 2014 700,000 Accumulated OCI (PSC) at January 1, 2014 150,000 Interest/discount (settlement) rate 10% Instructions Compute the pension expense for the year 2014.

Twelve cars were inspected after final assembly. The number of defects found ranged between 87 and 139 defect per car with an average of 116. Determine the center and upper and lower control limits for the c chart that might be used in this situation.

Assuming Alexa receives $20,000 in gross rental receipts, answer the following questions:

Andrews Company has five employees participating in its defined benefit pension plan. Expected years of future service for these employees at the beginning of 2014 are as follows. Future Employee Years of Service Jim 3 Paul 4 Nancy 5 Dave 6 Kathy 6 On January 1, 2014, the company amended its pension plan, increasing its projected benefit obligation by $72,000. Instructions Compute the amount of prior service cost amortization for the years 2014 through 2019 using the years-ofservice method, setting up appropriate schedules.

Tensile testing is not appropriate for hard brittle materials such as ceramics. What is the test commonly used to determine the strength properties of such materials?

Explain why the stock price of a firm may rise when the firm announces that it is repurchasing its shares. (LO4)

Explain the role of the SEC, FINRA, and the stock exchanges in regulating the securities industry. (LO2)

Explain how venture capital (VC) funds finance private businesses as well as how they exit from their participation in a firm. (LO1)

Henning Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the year 2014 in which no benefits were paid. 1. The actuarial present value of future benefits earned by employees for services rendered in 2014 amounted to $56,000. 2. The company’s funding policy requires a contribution to the pension trustee amounting to $145,000 for 2014. 3. As of January 1, 2014, the company had a projected benefit obligation of $900,000, an accumulated benefit obligation of $800,000, and a debit balance of $400,000 in accumulated OCI (PSC). The fair value of pension plan assets amounted to $600,000 at the beginning of the year. The actual and expected return on plan assets was $54,000. The settlement rate was 9%. No gains or losses occurred in 2014 and no benefits were paid. 4. Amortization of prior service cost was $50,000 in 2014. Amortization of net gain or loss was not required in 2014. Instructions (a) Determine the amounts of the components of pension expense that should be recognized by the company in 2014. (b) Prepare the journal entry or entries to record pension expense and the employer’s contribution to the pension trustee in 2014. (c) Indicate the amounts that would be reported on the income statement and the balance sheet for the year 2014.

What date or event does the profession believe should be used in determining the value of a stock option? What arguments support this position?

Define the recrystallization temperature for a metal.

Assume that on January 1, 2014, Elmer’s Restaurants sells a computer system to Liquidity Finance Co. for $680,000 and immediately leases the computer system back. The relevant information is as follows. 1. The computer was carried on Elmer’s books at a value of $600,000. 2. The term of the noncancelable lease is 10 years; title will transfer to Elmer. 3. The lease agreement requires equal rental payments of $110,666.81 at the end of each year. 4. The incremental borrowing rate for Elmer is 12%. Elmer is aware that Liquidity Finance Co. set the annual rental to insure a rate of return of 10%. 5. The computer has a fair value of $680,000 on January 1, 2014, and an estimated economic life of 10 years. 6. Elmer pays executory costs of $9,000 per year. Instructions Prepare the journal entries for both the lessee and the lessor for 2014 to reflect the sale and leaseback agreement. No uncertainties exist, and collectibility is reasonably certain.

Explain how the Fed’s monetary policy may indirectly affect the prices of equity securities. (LO2)