Question & Answer

Solve Problem 24.21 except that in parts (a) and (b), determine the cutting speeds and tool lives for maximum production rate. Use of a spreadsheet calculator is recommended

In 2013, Chirac Enterprises issued, at par, 60 $1,000, 8% bonds, each convertible into 100 shares of common stock. Chirac had revenues of $17,500 and expenses other than interest and taxes of $8,400 for 2014. (Assume that the tax rate is 40%.) Throughout 2014, 2,000 shares of common stock were outstanding; none of the bonds was converted or redeemed. Instructions (a) Compute diluted earnings per share for 2014. (b) Assume the same facts as those assumed for part (a), except that the 60 bonds were issued on September 1, 2014 (rather than in 2013), and none have been converted or redeemed. (c) Assume the same facts as assumed for part (a), except that 20 of the 60 bonds were actually converted on July 1, 2014.

How do partners determine whether they are passive participants in partnerships when applying the passive activity loss limitation rules?

Assume that there is a fall in aggregate demand (for goods). Trace through the short-run and long-run effect on employment.

In what ways is a monopolistically competitive firm likely to be less efficient than one under perfect competition?

What is an uncertain tax position, and what are the general guidelines for accounting for uncertain tax positions?

Aston Corporation performs year-end planning in November of each year before its calendar year ends in December. The preliminary estimated net income is $3 million. The CFO, Rita Warren, meets with the company president, J. B. Aston, to review the projected numbers. She presents the following projected information. Pretax Income Percentage-of-Completion Completed-Contract Prior to 2014 $150,000 $105,000 2014 60,000 20,000 ASTON CORPORATION PROJECTED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2014 Sales $29,000,000 Cost of goods sold $14,000,000 Depreciation 2,600,000 Operating expenses 6,400,000 23,000,000 Income before income tax 6,000,000 Income tax 3,000,000 Net income $ 3,000,000 ASTON CORPORATION SELECTED BALANCE SHEET INFORMATION AT DECEMBER 31, 2014 Estimated cash balance $ 5,000,000 Available-for-sale securities (at cost) 10,000,000 Fair value adjustment (1/1/14) —0— Estimated fair value at December 31, 2014: Security Cost Estimated Fair Value A $ 2,000,000 $ 2,200,000 B 4,000,000 3,900,000 C 3,000,000 3,100,000 D 1,000,000 1,800,000 Total $10,000,000 $11,000,000 Other information at December 31, 2014: Equipment $3,000,000 Accumulated depreciation (5-year SL) 1,200,000 New robotic equipment (purchased 1/1/14) 5,000,000 Accumulated depreciation (5-year DDB) 2,000,000 The corporation has never used robotic equipment before, and Warren assumed an accelerated method because of the rapidly changing technology in robotic equipment. The company normally uses straightline depreciation for production equipment. Aston explains to Warren that it is important for the corporation to show a $7,000,000 income before taxes because Aston receives a $1,000,000 bonus if the income before taxes and bonus reaches $7,000,000. Aston also does not want the company to pay more than $3,000,000 in income taxes to the government. Instructions (a) What can Warren do within GAAP to accommodate the president’s wishes to achieve $7,000,000 in income before taxes and bonus? Present the revised income statement based on your decision. (b) Are the actions ethical? Who are the stakeholders in this decision, and what effect do Warren’s actions have on their interests?

A cylindrical riser with diameter-to-length ratio = 1.0 is to be designed for a sand casting mold. The casting geometry is illustrated in Figure P10.25, in which the units are inches. If the mold constant in Chvorinov's rule = 19.5 min/in2 , determine the dimensions of the riser so that the riser will take 0.5 min longer to freeze than the casting itself.

What is viscoelasticity, as a material property?

Soundgarden Company sold 200 color laser copiers in 2014 for $4,000 apiece, together with a one-year warranty. Maintenance on each copier during the warranty period averages $330. Instructions (a) Prepare entries to record the sale of the copiers and the related warranty costs, assuming that the accrual method is used. Actual warranty costs incurred in 2014 were $17,000. (b) On the basis of the data above, prepare the appropriate entries, assuming that the cash-basis method is used.

How are FASB preliminary views and FASB exposuredrafts related to FASB “statements”?

As the recently appointed auditor for William J. Bryan Corporation, you have been asked to examine selected accounts before the 6-month financial statements of June 30, 2014, are prepared. The controller for William J. Bryan Corporation mentions that only one account is kept for intangible assets. The account is shown below. Intangible Assets Debit Credit Balance Jan. 4 Research and development costs 940,000 940,000 Jan. 5 Legal costs to obtain patent 75,000 1,015,000 Jan. 31 Payment of 7 months’ rent on property 91,000 1,106,000 leased by Bryan Feb. 11 Premium on common stock 250,000 856,000 March 31 Unamortized bond discount on bonds 84,000 940,000 due March 31, 2034 April 30 Promotional expenses related to 207,000 1,147,000 start-up of business June 30 Operating losses for fi rst 6 months 241,000 1,388,000 Instructions Prepare the entry or entries necessary to correct this account. Assume that the patent has a useful life of 10 years.

What are the major types of subsequent events? Indicate how each of the following “subsequent events” would be reported. (a) Collection of a note written off in a prior period. (b) Issuance of a large preference share offering. (c) Acquisition of a company in a different industry. (d) Destruction of a major plant in a flood. (e) Death of the company’s chief executive officer (CEO). (f) Additional wage costs associated with settlement of a four-week strike. (g) Settlement of an income tax case at considerably more tax than anticipated at year-end. (h) Change in the product mix from consumer goods to industrial goods.

Morlan Corporation is preparing its December 31, 2014, financial statements. Two events that occurred between December 31, 2014, and March 10, 2015, when the statements were authorized for issue, are described below. 1. A liability, estimated at $160,000 at December 31, 2014, was settled on February 26, 2015, at $170,000. 2. A flood loss of $80,000 occurred on March 1, 2015. Instructions What effect do these subsequent events have on 2014 net income?

See if you can identify two companies that are vertically integrated and what advantages they have from such integration.

As part of the year-end audit, you are discussing the disclosure checklist with your client. The checklist identifies the items that must be disclosed in a set of IFRS financial statements. The client is surprised by the disclosure item related to accounting policies. Specifically, since the audit report will attest to the statements being prepared in accordance with IFRS, the client questions the accounting policy checklist item. The client has asked you to conduct some research to verify the accounting policy disclosures. 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) In general, what should disclosures of accounting policies encompass? (b) List some examples of the most commonly required disclosures.

1.    Contemporary best-selling management books often argue that customers are the most important element in the external environment. Do you agree? In what company situations might this statement be untrue?

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) What specific items does M&S discuss in its Note 1—Summary of Significant Accounting Policies? (List the headings only.) (b) For what segments did M&S report segmented information? Which segment is the largest? Who is M&S’s largest customer? (c) What interim information was reported by M&S?

Instructions Go to the book’s companion website and use information found there to answer the following questions related to The Coca-Cola Company and PepsiCo, Inc. (a) (1) What specific items does Coca-Cola discuss in its Note 1—Accounting Policies? (Prepare a list of the headings only.) (2) What specific items does PepsiCo discuss in its Note 2—Our Summary of Significant Accounting Policies? (Prepare a list of the headings only.) (b) For what lines of business or segments do Coca-Cola and PepsiCo present segmented information? (c) Note and comment on the similarities and differences between the auditors’ reports submitted by the independent auditors of Coca-Cola and PepsiCo for the year 2011.

Identify why RPE would be used t the company level.

How might the reimbursement of a portion of an employee expense influence the deductibility of the expense for the employee?

Orthogonal cutting is performed on a metal whose mass specific heat = 1.0 J/g-C, density = 2.9 g/cm3 , and thermal diffusivity = 0.8 cm2 /s. The cutting speed is 4.5 m/s, uncut chip thickness is 0.25 mm, and width of cut is 2.2 mm. The cutting force is measured at 1170 N. Using Cook's equation, determine the cutting temperature if the ambient temperature = 22°C.

Answer the following multiple-choice questions. 1. GAAP stands for: (a) governmental auditing and accounting practices. (b) generally accepted attest principles. (c) government audit and attest policies. (d) generally accepted accounting principles. 2. Accounting standard-setters use the following process in establishing accounting standards: (a) Research, exposure draft, discussion paper, standard. (b) Discussion paper, research, exposure draft, standard. (c) Research, preliminary views, discussion paper, standard. (d) Research, discussion paper, exposure draft, standard. 3. GAAP is comprised of: (a) FASB standards, interpretations, and concepts statements. (b) FASB financial standards. (c) FASB standards, interpretations, EITF consensuses, and accounting rules issued by FASB predecessor organizations. (d) any accounting guidance included in the FASB Codification. 4. The authoritative status of the conceptual framework is as follows. (a) It is used when there is no standard or interpretation related to the reporting issues under consideration. (b) It is not as authoritative as a standard but takes precedence over any interpretation related to the reporting issue. (c) It takes precedence over all other authoritative literature. (d) It has no authoritative status. 5. The objective of financial reporting places most emphasis on: (a) reporting to capital providers. (b) reporting on stewardship. (c) providing specific guidance related to specific needs. (d) providing information to individuals who are experts in the field. 6. General-purpose financial statements are prepared primarily for: (a) internal users. (b) external users. (c) auditors. (d) government regulators. 7. Economic consequences of accounting standard-setting means: (a) standard-setters must give first priority to ensuring that companies do not suffer any adverse effect as a result of a new standard. (b) standard-setters must ensure that no new costs are incurred when a new standard is issued. (c) the objective of financial reporting should be politically motivated to ensure acceptance by the general public. (d) accounting standards can have detrimental impacts on the wealth levels of the providers of financial information. 8. The expectations gap is: (a) what financial information management provides and what users want. (b) what the public thinks accountants should do and what accountants think they can do. (c) what the governmental agencies want from standard-setting and what the standard-setters provide. (d) what the users of financial statements want from the government and what is provided.

1.    : Assume that Southern University decides to raise its admission standards. What plan might it develop to achieve this goal?

How does mechanical assembly differ from the other methods of assembly discussed in previous chapters (e.g., welding, brazing, etc.)?