Question & Answer

Equipment was purchased on January 2, 2014, for $24,000, but no portion of the cost has been charged to depreciation. The corporation wishes to use the straight-line method for these assets, which have been estimated to have a life of 10 years and no salvage value. What effect does this error have on net income in 2014? What entry is necessary to correct for this error, assuming that the books are not closed for 2014?

Define viscosity of a fluid.

Why is photolithography based on visible light not used in nanotechnology?

Why is it a nontax advantage for corporations to be able to trade their stock on the stock market?

Cajun Company has outstanding 2,500 shares of $100 par, 6% preferred stock and 15,000 shares of $10 par value common. The following schedule shows the amount of dividends paid out over the last 4 years. Instructions Allocate the dividends to each type of stock under assumptions (a) and (b). Express your answers in pershare amounts using the format shown below. Assumptions (a) (b) Preferred, noncumulative, Preferred, cumulative, and nonparticipating and fully participating Year Paid-out Preferred Common Preferred Common 2012 $13,000 2013 $26,000 2014 $57,000 2015 $76,000

Why would a financial institution holding a stock consider buying a put option on that stock rather than simply selling it? (LO4)

What are the three committees that debate proposed tax legislation?  What documents do these committees generate, and how might they be used?

How does the viscosity of a polymer melt differ from most fluids that are Newtonian.

Presented below are three independent situations. Situation 1: A company offers a one-year warranty for the product that it manufactures. A history of warranty claims has been compiled, and the probable amounts of claims related to sales for a given period can be determined. Situation 2: Subsequent to the date of a set of financial statements but prior to the issuance of the financial statements, a company enters into a contract that will probably result in a significant loss to the company. The amount of the loss can be reasonably estimated. Situation 3: A company has adopted a policy of recording self-insurance for any possible losses resulting from injury to others by the company’s vehicles. The premium for an insurance policy for the same risk from an independent insurance company would have an annual cost of $4,000. During the period covered by the financial statements, there were no accidents involving the company’s vehicles that resulted in injury to others. Instructions Discuss the accrual or type of disclosure necessary (if any) and the reason(s) why such disclosure is appropriate for each of the three independent sets of facts above.

From Table 29.1, C = 0.92 x 10-4 in3/A-min, cathode efficiency E = 15%. Plated volume V = EC∫Idt = EC∫(12 + 0.2t)dt = EC(12t + 0.1t2) over the range 0 to 20 min. V = 0.15(0.92 x 10-4)(12 x 20 + 0.1(20)2) = 0.00386 in3

What are the three ways in which a threaded fastener can fail during tightening?

Why does an unstable demand for money make it difficult to control the supply of money?

Larson Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2015, the following balances related to this plan. Plan assets (market-related value) $270,000 Projected benefi t obligation 340,000 Pension asset/liability 70,000 Cr. Prior service cost 90,000 OCI—Loss 39,000 As a result of the operation of the plan during 2015, the actuary provided the following additional data for 2015. Service cost $45,000 Actual return on plan assets 27,000 Amortization of prior service cost 12,000 Contributions 65,000 Benefi ts paid retirees 41,000 Settlement rate 7% Expected return on plan assets 8% Average remaining service life of active employees 10 years Instructions (a) Compute pension expense for Larson Corp. for the year 2015 by preparing a pension worksheet that shows the journal entry for pension expense. (b) Indicate the pension amounts reported in the financial statements.

Burnitz Manufacturing Company was organized on January 1, 2014. During 2014, it has used in its reports to management the straight-line method of depreciating its plant assets. On November 8, you are having a conference with Burnitz’s officers to discuss the depreciation method to be used for income tax and stockholder reporting. James Bryant, president of Burnitz, has suggested the use of a new method, which he feels is more suitable than the straight-line method for the needs of the company during the period of rapid expansion of production and capacity that he foresees. Following is an example in which the proposed method is applied to a fixed asset with an original cost of $248,000, an estimated useful life of 5 years, and a salvage value of approximately $8,000. Accumulated Years of Depreciation Book Value Life Fraction Depreciation at End at End Year Used Rate Expense of Year of Year 1 1 1/15 $16,000 $ 16,000 $232,000 2 2 2/15 32,000 48,000 200,000 3 3 3/15 48,000 96,000 152,000 4 4 4/15 64,000 160,000 88,000 5 5 5/15 80,000 240,000 8,000 The president favors the new method because he has heard that: 1. It will increase the funds recovered during the years near the end of the assets’ useful lives when maintenance and replacement disbursements are high. 2. It will result in increased write-offs in later years and thereby will reduce taxes. Instructions (a) What is the purpose of accounting for depreciation? (b) Is the president’s proposal within the scope of generally accepted accounting principles? In making your decision, discuss the circumstances, if any, under which use of the method would be reasonable and those, if any, under which it would not be reasonable. (c) The president wants your advice on the following issues. (1) Do depreciation charges recover or create funds? Explain. (2) Assume that the Internal Revenue Service accepts the proposed depreciation method in this case. If the proposed method were used for stockholder and tax reporting purposes, how would it affect the availability of cash flows generated by operations?

Define process capability.

Technically, what is the difference between a fiber and a filament?

An injection-molding machine is divided into two principal components. Name them

Bienvenu Enterprises reported cost of goods sold for 2014 of $1,400,000 and retained earnings of $5,200,000 at December 31, 2014. Bienvenu later discovered that its ending inventories at December 31, 2013 and 2014, were overstated by $110,000 and $35,000, respectively. Determine the corrected amounts for 2014 cost of goods sold and December 31, 2014, retained earnings

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) Were there changes in accounting principles reported by P&G during the three years covered by its income statements (2009–2011)? If so, describe the nature of the change and the year of change. (b) What types of estimates did P&G discuss in 2011?

What is the function of gates in injection molds?

As part of the year-end accounting process and review of operating policies, Cullen Co. is considering a change in the accounting for its equipment from the straight-line method to an accelerated method. Your supervisor wonders how the company will report this change in accounting. It has been a few years since he took intermediate accounting, and he cannot remember whether this change would be treated in a retrospective or prospective manner. Your supervisor wants you to research the authoritative guidance on a change in accounting policy related to depreciation methods. 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) What are the accounting and reporting guidelines for a change in accounting policy related to depreciation methods? (b) What are the conditions that justify a change in depreciation method, as contemplated by Cullen Co.?

In 12 samples of size n = 7, the average value of the sample means is x = 6.860 cm for the dimension of interest, and the mean of the ranges of the samples is R = 0.027 cm. Determine (a) lower and upper control limits for the x chart and (b) lower and upper control limits for the R chart. (c) What is your best estimate of the standard deviation of the process?

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) Were there changes in accounting policies reported by M&S during the two years covered by its income statements (2011–2012)? If so, describe the nature of the change and the year of change. (b) What types of estimates did M&S discuss in 2012?

According to the injection molding video, name the four types of mold design most common in industry.

Bradley Co. is expanding its operations and is in the process of selecting the method of financing this program. After some investigation, the company determines that it may (1) issue bonds and with the proceeds purchase the needed assets or (2) lease the assets on a long-term basis. Without knowing the comparative costs involved, answer these questions: (a) What might be the advantages of leasing the assets instead of owning them? (b) What might be the disadvantages of leasing the assets instead of owning them? (c) In what way will the balance sheet be differently affected by leasing the assets as opposed to issuing bonds and purchasing the assets?