Question & Answer

Prepare a memorandum containing responses to the following items. (a) Describe the cost flow assumptions used in average-cost, FIFO, and LIFO methods of inventory valuation. (b) Distinguish between weighted-average-cost and moving-average-cost for inventory costing purposes. (c) Identify the effects on both the balance sheet and the income statement of using the LIFO method instead of the FIFO method for inventory costing purposes over a substantial time period when purchase prices of inventoriable items are rising. State why these effects take place.

: Send copies of the reports anonymously to the operations manager, who is Taandil’s boss

1. How will the length of the short run for the airline depend on the state of the aircraft industry? 2. Up to roughly how long is the short run in the following cases? (a) A firm supplying DJs for clubs and parties. (b) Nuclear power generation. (c) A street food wagon. (d) Superstore Hypermarkets Ltd. In each case specify your assumptions.

Two new software projects are proposed to a young, start-up company. The Alpha project will cost $150,000 to develop and is expected to have annual net cash flow of $40,000. The Beta project will cost $200,000 to develop and is expected to have annual net cash flow of $50,000. The company is very concerned about their cash flow. Using the payback period, which project is better from a cash flow standpoint? Why?

Union Planters is a Tennessee bank holding company (that is, a corporation that owns banks). (Union Planters is now part of Regions Bank.) Union Planters manages $32 billion in assets, the largest of which is its loan portfolio of $19 billion. In addition to its loan portfolio, however, like other banks it has significant debt investments. The nature of these investments varies from short-term in nature to long-term in nature. As a consequence, consistent with the requirements of accounting rules, Union Planters reports its investments in two different categories—trading and available-for-sale. The following facts were found in a recent Union Planters’ annual report. Gross Gross Amortized Unrealized Unrealized Fair (all dollars in millions) Cost Gains Losses Value Trading account assets $ 275 — — $ 275 Securities available for sale 8,209 $108 $15 8,302 Net income 224 Net securities gains (losses) (9) Instructions (a) Why do you suppose Union Planters purchases investments, rather than simply making loans? Why does it purchase investments that vary in nature both in terms of their maturities and in type (debt versus stock)? (b) How must Union Planters account for its investments in each of the two categories? (c) In what ways does classifying investments into two different categories assist investors in evaluating the profitability of a company like Union Planters? (d) Suppose that the management of Union Planters was not happy with its net income for the year. What step could it have taken with its investment portfolio that would have definitely increased reported profit? How much could it have increased reported profit? Why do you suppose it chose not to do this?

Piecewise linear cost function; regression measurement error The following is the description of a cost: Total fixed costs are $50 000 per month and the variable cost per unit is $10.00 when production is under 1000 units. The variable cost drops to $9.00 per unit after the first 1000 units are produced.   Required (a)          Write the algebraic expression of the cost function and graph it. (b)          Assume that the cost function just described is a reasonable representation of total costs. If the accountant performed regression analysis on weekly observations of this cost and did not realise that there were two relevant ranges, what problems would arise in the cost function that was produced? In other words, how would the cost function be mismeasured?

The Kellys are planning for a retirement home. They estimate they will need $200,000 4 years from now to purchase this home. Assuming an interest rate of 10%, what amount must be deposited at the end of each of the 4 years to fund the home price? (Round to two decimal places.)

Discuss the reasons why most welding operations are inherently dangerous.

What are some of the costs of providing accounting information? What are some of the benefits of accounting information? Describe the cost-benefit factors that should

Wayne Cooper has some questions regarding the theoretical framework in which GAAP is set. He knows that the FASB and other predecessor organizations have attempted to develop a conceptual framework for accounting theory formulation. Yet, Wayne’s supervisors have indicated that these theoretical frameworks have little value in the practical sense (i.e., in the real world). Wayne did notice that accounting rules seem to be established after the fact rather than before. He thought this indicated a lack of theory structure but never really questioned the process at school because he was too busy doing the homework. Wayne feels that some of his anxiety about accounting theory and accounting semantics could be alleviated by identifying the basic concepts and definitions accepted by the profession and considering them in light of his current work. By doing this, he hopes to develop an appropriate connection between theory and practice. Instructions (a) Help Wayne recognize the purpose of and benefit of a conceptual framework. (b) Identify any Statements of Financial Accounting Concepts issued by the FASB that may be helpful to Wayne in developing his theoretical background.

What is the constructive receipt doctrine?  What types of taxpayers does this doctrine generally affect?  For what tax planning strategy is the constructive receipt doctrine a potential limitation

What is cross-linking in a polymer, and what is its significance?

: Explain how factors such as creating an open communication climate, the choice of communication channels, candor, questions, and nonverbal communications influence the quality of communication.

Describe the business purpose, step-transaction, and substance-over-form doctrines. What types of tax planning strategies may these doctrines inhibit?

Structuring a compensation plan   Required Describe the factors that need to be considered when structuring a compensation plan for executives. (LO2 and 4)

Design the nominal sizes of a GO/NO-GO plug gage to inspect a 30.00 ± 0.18 mm diameter hole. There is a wear allowance applied only to the GO side of the gage. The wear allowance is 3% of the entire tolerance band for the inspected feature. Determine (a) the nominal size of the GO gage including the wear allowance and (b) the nominal size of the NO-GO gage

Comparative balance sheet accounts of Sharpe Company are presented below. SHARPE COMPANY COMPARATIVE BALANCE SHEET ACCOUNTS AS OF DECEMBER 31 Debit Balances 2014 2013 Cash $ 70,000 $ 51,000 Accounts Receivable 155,000 130,000 Inventory 75,000 61,000 Investments (available-for-sale) 55,000 85,000 Equipment 70,000 48,000 Buildings 145,000 145,000 Land 40,000 25,000 Totals $610,000 $545,000 Credit Balances Allowance for Doubtful Accounts $ 10,000 $ 8,000 Accumulated Depreciation—Equipment 21,000 14,000 Accumulated Depreciation—Buildings 37,000 28,000 Accounts Payable 66,000 60,000 Income Taxes Payable 12,000 10,000 Long-Term Notes Payable 62,000 70,000 Common Stock 310,000 260,000 Retained Earnings 92,000 95,000 Totals $610,000 $545,000 Additional data: 1. Equipment that cost $10,000 and was 60% depreciated was sold in 2014. 2. Cash dividends were declared and paid during the year. 3. Common stock was issued in exchange for land. 4. Investments that cost $35,000 were sold during the year. 5. There were no write-offs of uncollectible accounts during the year. Sharpe’s 2014 income statement is as follows. Sales revenue $950,000 Less: Cost of goods sold 600,000 Gross profi t 350,000 Less: Operating expenses (includes depreciation expense and bad debt expense) 250,000 Income from operations 100,000 Other revenues and expenses Gain on sale of investments $15,000 Loss on sale of equipment (3,000) 12,000 Income before taxes 112,000 Income taxes 45,000 Net income $ 67,000 Instructions (a) Compute net cash provided by operating activities under the direct method. (b) Prepare a statement of cash flows using the indirect method.

The residual value is the estimated fair value of the leased property at the end of the lease term. (a) Of what significance is (1) an unguaranteed and (2) a guaranteed residual value in the lessee’s accounting for a capitalized-lease transaction? (b) Of what significance is (1) an unguaranteed and (2) a guaranteed residual value in the lessor’s accounting for a direct-financing lease transaction?

“The financial statements of a company are management’s, not the accountant’s.” Discuss the implications of this statement.

Yanmei Construction Company began operations January 1, 2014. During the year, Yanmei Construction entered into a contract with Lundquist Corp. to construct a manufacturing facility. At that time, Yanmei estimated that it would take 5 years to complete the facility at a total cost of $4,500,000. The total contract price for construction of the facility is $6,000,000. During the year, Yanmei incurred $1,185,800 in construction costs related to the construction project. The estimated cost to complete the contract is $4,204,200. Lundquist Corp. was billed and paid 25% of the contract price. Instructions Prepare schedules to compute the amount of gross profit to be recognized for the year ended December 31, 2014, and the amount to be shown as “costs and recognized profit in excess of billings” or “billings in excess of costs and recognized profit” at December 31, 2014, under each of the following methods. (a) Completed-contract method. (b) Percentage-of-completion method. Show supporting computations in good form.

Novak Corporation is preparing its 2014 statement of cash flows, using the indirect method. Presented below is a list of items that may affect the statement. Using the code below, indicate how each item will affect Novak’s 2014 statement of cash flows. Code Letter Effect A Added to net income in the operating section D Deducted from net income in the operating section. R-I Cash receipt in investing section P-I Cash payment in investing section R-F Cash receipt in financing section P-F Cash payment in financing section N Noncash investing and financing activity Items ____ (a) Purchase of land and building. ____ (j) Increase in accounts payable. ____ (b) Decrease in accounts receivable. ____ (k) Decrease in accounts payable. ____ (c) Issuance of stock. ____ (l) Loan from bank by signing note. ____ (d) Depreciation expense. ____ (m) Purchase of equipment using a note. ____ (e) Sale of land at book value. ____ (n) Increase in inventory. ____ (f) Sale of land at a gain. ____ (o) Issuance of bonds. ____ (g) Payment of dividends. ____ (p) Redemption of bonds payable. ____ (h) Increase in accounts receivable. ____ (q) Sale of equipment at a loss. ____ (i) Purchase of available-for-sale investment. ____ (r) Purchase of treasury stock.

Why are fillers added to a polymer?

] Santiago and Lauren are equal partners in the PJenn Partnership. The partners formed the partnership seven years ago by contributing cash. Prior to any distributions, the partners have the following bases in their partnership interests: Partner Outside Basis Santiago $ 22,000 Lauren 22,000 On December 31 of the current year, the partnership makes a pro rata operating distribution of: Partner Distribution Santiago Cash $ 25,000 Lauren Cash 18,000 Property    7,000 (FMV) ($2,000 basis to partnership) a. What are the amount and character of Santiago’s recognized gain or loss? b. What is Santiago’s remaining basis in his partnership interest? c. What are the amount and character of Lauren’s recognized gain or loss? d. What is Lauren’s basis in the distributed assets? e. What is Lauren’s remaining basis in her partnership interest?

Describe the order in which different types of tax credits are applied to reduce a taxpayer’s tax liability.

Using the availability heuristic, explain hindsight bias.