Question & Answer

For Problem 13.11, assume the material is acrylic. (a) Using Figure 13.2, determine the temperature of the polymer melt. (b) If the temperature is lowered 20°C, estimate the resulting viscosity of the polymer melt. (Hint: the y-axis of Figure 13.2 is a log scale, not linear)

Hoosier Corporation declared a stock distribution to all shareholders of record on March 25 of this year. Shareholders will receive one share of Hoosier Corporation stock for each share of stock they already own. Hoosier reported current E&P of $600,000 and accumulated E&P of $3,000,000. The total fair market value of the stock distributed was $1,500,000. Barbara owned 1,000 shares of Hoosier stock with a tax basis of $100 per share.

The accounting staff of Usher Inc. has prepared the following pension worksheet. Unfortunately, several entries in the worksheet are not decipherable. The company has asked your assistance in completing the worksheet and completing the accounting tasks related to the pension plan for 2014.   Instructions (a) Determine the missing amounts in the 2014 pension worksheet, indicating whether the amounts are debits or credits. (b) Prepare the journal entry to record 2014 pension expense for Usher Inc. (c) The accounting staff has heard of a pension accounting procedure called “corridor amortization.” Is Usher required to record any amounts for corridor amortization in (1) 2014? In (2) 2015? Explain.

Consider an extruder in which the barrel diameter = 4.5 in and length = 11 ft. The extruder screw rotates at 60 rev/min; it has channel depth = 0.35 in and flight angle = 20°. The plastic melt has a shear viscosity = 125 x 10-4 lb-sec/in2 . Determine: (a) Qmax and pmax; (b) the shape factor Ks for a circular die opening in which Dd = 0.312 in and Ld = 0.75 in; and (c) the values of Q and p at the operating point

Using the facts in problem 39, if Jorge and Anita earn an additional $100,000 of taxable income, what is their marginal tax rate on this income?  What is their marginal rate if, instead, they reported an additional $100,000 in deductions?

What is a policy loan? When are policy loans popular? Why? (LO3)

Dan has AGI of $50,000 and paid the following taxes during this tax year. Calculate how much Dan can deduct for taxes as an itemized deduction this year.

Explain systemic risk as it relates to the futures market. Explain how the Financial Reform Act of 2010 attempted to improve the monitoring of systemic risk in the futures market and other markets. (LO4)

LaTour Inc. is based in France and prepares its financial statements in accordance with IFRS. In 2014, it reported cost of goods sold of $578 million and average inventory of $154 million. Briefly discuss how analysis of LaTour’s inventory turnover (and comparisons to a company using GAAP) might be affected by differences in inventory accounting between IFRS and GAAP.

Peter M. Dell Co. purchased equipment for $510,000 which was estimated to have a useful life of 10 years with a salvage value of $10,000 at the end of that time. Depreciation has been entered for 7 years on a straight-line basis. In 2015, it is determined that the total estimated life should be 15 years with a salvage value of $5,000 at the end of that time. Instructions (a) Prepare the entry (if any) to correct the prior years’ depreciation. (b) Prepare the entry to record depreciation for 2015.

Draw a pair of diagrams like those in Figure 8.4. Illustrate what would happen if there were a rise in market demand and no rise in the costs of either the leader or the followers. Would there be an equal percentage increase in the output of both leader and followers?

Describe how a country’s laws can influence the degree of its financial market liquidity. (LO3)

Peter Henning Tool Company’s December 31 year-end financial statements contained the following errors. December 31, 2014 December 31, 2015 Ending inventory $9,600 understated $8,100 overstated Depreciation expense $2,300 understated — An insurance premium of $66,000 was prepaid in 2014 covering the years 2014, 2015, and 2016. The entire amount was charged to expense in 2014. In addition, on December 31, 2015, fully depreciated machinery was sold for $15,000 cash, but the entry was not recorded until 2016. There were no other errors during 2014 or 2015, and no corrections have been made for any of the errors. (Ignore income tax considerations.) Instructions (a) Compute the total effect of the errors on 2015 net income. (b) Compute the total effect of the errors on the amount of Henning’s working capital at December 31, 2015. (c) Compute the total effect of the errors on the balance of Henning’s retained earnings at December 31, 2015.

Is it possible for the government to target the money supply over the longer term without targeting the level of public-sector net borrowing?

On January 1, 2014, Perriman Company sold equipment for cash and leased it back. As seller-lessee, Perriman retained the right to substantially all of the remaining use of the equipment. The term of the lease is 8 years. There is a gain on the sale portion of the transaction. The lease portion of the transaction is classified appropriately as a capital lease. Instructions (a) What is the theoretical basis for requiring lessees to capitalize certain long-term leases? Do not discuss the specific criteria for classifying a lease as a capital lease. (b) (1) How should Perriman account for the sale portion of the sale-leaseback transaction at January 1, 2014? (2) How should Perriman account for the leaseback portion of the sale-leaseback transaction at January 1, 2014? (c) How should Perriman account for the gain on the sale portion of the sale-leaseback transaction during the first year of the lease? Why?

Would a corporation with a small amount of current-year taxable income (before the net operating loss deduction) and a large net operating loss carryover have a tax liability for the current year?  Explain.

: Describe the major components of the classical perspective and current uses of the management science approach

A parison is extruded from a die with outside diameter = 11.5 mm and inside diameter = 7.5 mm. The observed die swell is 1.25. The parison is used to blow mold a beverage container whose outside diameter = 112 mm (a standard size 2-liter soda bottle). (a) What is the corresponding wall thickness of the container? (b) Obtain an empty 2-liter plastic soda bottle and (carefully) cut it across the diameter. Using a micrometer, measure the wall thickness to compare with your answer in (a)

James Kirk is a financial executive with McDowell Enterprises. Although James Kirk has not had any formal training in finance or accounting, he has a “good sense” for numbers and has helped the company grow from a very small company ($500,000 sales) to a large operation ($45 million in sales). With the business growing steadily, however, the company needs to make a number of difficult financial decisions in which James Kirk feels a little “over his head.” He therefore has decided to hire a new employee with “numbers” expertise to help him. As a basis for determining whom to employ, he has decided to ask each prospective employee to prepare answers to questions relating to the following situations he has encountered recently. Here are the questions. (a) In 2013, McDowell Enterprises negotiated and closed a long-term lease contract for newly constructed truck terminals and freight storage facilities. The buildings were constructed on land owned by the company. On January 1, 2014, McDowell took possession of the leased property. The 20-year lease is effective for the period January 1, 2014, through December 31, 2033. Advance rental payments of $800,000 are payable to the lessor (owner of facilities) on January 1 of each of the first 10 years of the lease term. Advance payments of $400,000 are due on January 1 for each of the last 10 years of the lease term. McDowell has an option to purchase all the leased facilities for $1 on December 31, 2033. At the time the lease was negotiated, the fair value of the truck terminals and freight storage facilities was approximately $7,200,000. If the company had borrowed the money to purchase the facilities, it would have had to pay 10% interest. Should the company have purchasedrather than leased the facilities? (b) Last year the company exchanged a piece of land for a non-interest-bearing note. The note is to be paid at the rate of $15,000 per year for 9 years, beginning one year from the date of disposal of the land. An appropriate rate of interest for the note was 11%. At the time the land was originally purchased, it cost $90,000. What is the fair value of the note? (c) The company has always followed the policy to take any cash discounts on goods purchased. Recently, the company purchased a large amount of raw materials at a price of $800,000 with terms 1/10, n/30 on which it took the discount. McDowell has recently estimated its cost of funds at 10%. Should McDowell continue this policy of always taking the cash discount?

1. What effect will trade have on the price of capital in developing and developed countries? 2. It is sometimes claimed that trade with developing countries is unjust because it leads to the importation of goods produced at pitifully low wages. How can the Heckscher–Ohlin theory be used to refute this claim? Is there any validity in the claim? (see Box 24.3)

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) Which method of computing net cash provided by operating activities does P&G use? What were the amounts of net cash provided by operating activities for the years 2009, 2010, and 2011? Which two items were most responsible for the decrease in net cash provided by operating activities in 2011? (b) What was the most significant item in the cash flows used for investing activities section in 2011? What was the most significant item in the cash flows used for financing activities section in 2011? (c) Where is “deferred income taxes” reported in P&G’s statement of cash flows? Why does it appear in that section of the statement of cash flows? (d) Where is depreciation reported in P&G’s statement of cash flows? Why is depreciation added to net income in the statement of cash flows?

{Planning} Billups, a physician and cash-method taxpayer, is new to the concept of tax planning and recently learned of the timing strategy.  To implement the timing strategy, Billups plans to establish a new policy that allows all his clients to wait two years to pay their co-pays.  Assume that Billups does not expect his marginal tax rates to change.  What is wrong with his strategy?

Name three common types of income shifting.

An extruder barrel has a diameter of 4.0 in and an L/D ratio of 28. The screw channel depth = 0.25 in, and its pitch = 4.8 in. It rotates at 60 rev/min. The viscosity of the polymer melt is 100 x 10- lb-sec/in2 . What head pressure is required to obtain a volume flow rate = 150 in3 /min?-

As compared with the FIFO method of costing inventories, does the LIFO method result in a larger or smaller net income in a period of rising prices? What is the comparative effect on net income in a period of falling prices?