Question & Answer

What is a polymer?

On July 31, 2014, Mexico Company paid $3,000,000 to acquire all of the common stock of Conchita Incorporated, which became a division of Mexico. Conchita reported the following balance sheet at the time of the acquisition. It was determined at the date of the purchase that the fair value of the identifiable net assets of Conchita was $2,750,000. Over the next 6 months of operations, the newly purchased division experienced operating losses. In addition, it now appears that it will generate substantial losses for the foreseeable future. At December 31, 2014, Conchita reports the following balance sheet information. It is determined that the fair value of the Conchita Division is $1,850,000. The recorded amount for Conchita’s net assets (excluding goodwill) is the same as fair value, except for property, plant, and equipment, which has a fair value $150,000 above the carrying value. Instructions (a) Compute the amount of goodwill recognized, if any, on July 31, 2014. (b) Determine the impairment loss, if any, to be recorded on December 31, 2014. (c) Assume that fair value of the Conchita Division is $1,600,000 instead of $1,850,000. Determine the impairment loss, if any, to be recorded on December 31, 2014. (d) Prepare the journal entry to record the impairment loss, if any, and indicate where the loss would be reported in the income statement. Salaries and Other Expenses Number Employee (excluding Building of Projects Benefits Depreciation Charges) Completed projects with long-term benefits 15 $ 90,000 $50,000 Abandoned projects or projects that benefit the current period 10 65,000 15,000 Projects in process—results indeterminate 5 40,000 12,000 Total 30 $195,000 $77,000 Current assets $ 800,000 Current liabilities $ 600,000 Noncurrent assets 2,700,000 Long-term liabilities 500,000 Total assets $3,500,000 Stockholders’ equity 2,400,000 Total liabilities and stockholders’ equity $3,500,000 Current assets $ 450,000 Noncurrent assets (including goodwill recognized in purchase) 2,400,000 Current liabilities (700,000) Long-term liabilities (500,000) Net assets $1,650,000

When must an S corporation make estimated tax payments?

To what extent do you consider the following items to be proper costs of the fixed asset? Give reasons for your opinions. (a) Overhead of a business that builds its own equipment. (b) Cash discounts on purchases of equipment. (c) Interest paid during construction of a building. (d) Cost of a safety device installed on a machine. (e) Freight on equipment returned before installation, for replacement by other equipment of greater capacity. (f) Cost of moving machinery to a new location. (g) Cost of plywood partitions erected as part of the remodeling of the office. (h) Replastering of a section of the building. (i) Cost of a new motor for one of the trucks.

What is strategic decision making? What role does it play in the balanced scorecard?

Determine the meaning of the following terms. (a) Contributory plan. (b) Vested benefits. (c) Retroactive benefits. (d) Years-of-service method.

Charlie was hired by Ajax this year as a corporate executive and a member of the board of directors. During the current year, Charlie received the following payments or benefits paid on his behalf.

Dejan owns stock in two S corporations, Blue and Green. He actively participates in the management of Blue but maintains ownership in Green only as a passive investor.  Dejan has no other business investments.  Both Blue and Green anticipate a loss this year, and Dejan’s basis in his stock of both corporations is $0. All else equal, if Dejan plans on making a capital contribution to at least one of the corporations this year, to which firm should he contribute in order to increase his chances of deducting the loss allocated to him from the entity?  Why?

Effects of robotic equipment on overhead rates 'Our costs are out of control, our accounting system is screwed up, or both!' screamed the sales manager. 'We are simply non-competitive on a great many of the jobs we bid on. Just last week we lost a customer when a competitor underbid us by 25 per cent! And I bid the job at cost because the customer has been with us for years but has been complaining about our prices.'                                 This problem, raised at the weekly management meeting, has been getting worse over the years. The Johnson Tool Company produces parts for specific customer orders. When the entity first became successful, it employed nearly 500 skilled machinists. Over the years the entity has become increasingly automated and now uses a number of different robotic machines. It currently employs only 75 production workers but output has quadrupled.   The problems raised by the sales manager can be seen in the portions of two bid sheets brought to the meeting (as reproduced). The bids are from the cutting department, but the relative size of these three types of manufacturing costs is similar for other departments.   The cutting department charges overhead to products based on direct labour hours. For the current period, the department expects to use 4000 direct labour hours. Departmental overhead, consisting mostly of depreciation on the robotic equipment, is expected to be $1 480 000.   An employee can typically set up any job on the appropriate equipment in about 15 minutes. Once machines are operating, an employee oversees five to eight machines simultaneously. All that is required is to load or unload materials and monitor calibrations. The department’s robotic machines will log a total of 25 000 hours of run time in the current period.   For bid 74683 the entity was substantially underbid by a competitor. The entity did get the job for bid 74687, but the larger jobs are harder to find. Small jobs arise frequently, but the entity is rarely successful in obtaining them.             Required (a)     Critique the cost allocation method used within the current cost accounting system. (b)     Suggest a better approach for allocating overhead. Allocate costs using your approach and compare the costs of both jobs under the two systems. (c)      Discuss the pros and cons of using job costs to determine the price for a job order.

Can you think of any reasons why the predictions of the Cournot and Bertrand models of oligopoly are so different?

In 2024, Janet and Ray are married filing jointly. They have five dependent children under 18 years of age. Janet and Ray’s taxable income (all ordinary) is $2,400,000 and they itemize their deductions as follows: state income taxes of $10,000 and mortgage interest expense of $25,000 (acquisition debt of $300,000).  What is Janet and Ray’s AMT? Complete Form 6251 for Janet and Ray.

Criticise the use of increasing government expenditure as a means of reducing unemployment.

1.      : What should Clarke do now to try to recover from the negative impact of his e-mails? Suggest specific steps.

Inuk is the sole shareholder of Tex Corporation.  Inuk first formed Tex as a C corporation.  However, in an attempt to avoid having Tex’s income double-taxed, Inuk elected S corporation status for Tex several years ago.  On December 31, 2024, Tex reports $5,000 of earnings and profits from its years as a C corporation and $50,000 in its accumulated adjustments account from its activities as an S corporation (including its 2024 activities).  Inuk discovered that for the first time Tex was going to have to pay the excess net passive income tax.  Inuk wanted to avoid having to pay the tax, but he determined the only way to avoid the tax was to eliminate Tex’s E&P by the end of 2024.  He determined that, because of the distribution ordering rules (AAA first), he would need to have Tex immediately (in 2024) distribute $55,000 to him.  This would clear out Tex’s accumulated adjustments account first and then eliminate Tex’s C corporation earnings and profits in time to avoid the excess net passive income tax.  Inuk was not sure Tex could come up with $55,000 of cash or property in time to accomplish his objective.  Does Inuk have any other options to eliminate Tex’s earnings and profits without first distributing the balance in Tex’s accumulated adjustments account?

Evaluate grading scheme; professional responsibilities Variance analysis reflects information about actual performance relative to a standard. Variance analysis reports provide managers with information about the performance of employees, from direct labour to supervisors and managers. Grades provide similar information for recruiters who want to hire graduating students. Following is information about Professor Grader’s performance measurement system.   Professor Grader is popular; almost all of his students receive As. This phenomenon is widely attributed to Professor Grader’s superior teaching skills. Grades for this professor’s courses are determined as follows:       A student needs 700 points for an A, 600 points for a B, 500 for a C, and 400 for a D. From the 200 points given for perfect attendance, a student loses 5 points for every class missed (out of 40 class meetings); however, attendance is seldom taken.   If the major assignment paper is 20 pages or longer, 200 points are earned; 10 points are lost for each page less than 20 (thus, a 12-page paper is worth 120 points).   Professor Grader has given the same mid-semester exam for the past 20 years. To reduce the number of exam copies in students’ files, Professor Grader does not return the exams; grades are simply reported to individual students. A student group obtained a copy of the exam 15 years ago. They have chosen not to share the exam with any person not a member of the group; thus Professor Grader usually observes that grades on this exam are nearly normally distributed.   The final exam is a take-home exam that the students have two weeks to complete.   Required (a)     Is it possible to develop a perfect system for measuring student performance in a course? Why? (b)     How much variation is likely in student performance for each of the four graded items? Explain. (c)     Describe the weaknesses in Professor Grader’s grading system as a performance measurement system. (d)     What are Professor Grader’s professional responsibilities to various stakeholders in this situation? (e)     Discuss whether Professor Grader has acted ethically in this situation. Describe the ethical values you use to draw your conclusions. (f)      Is it ethical for students in this situation to access a copy of the prior mid-semester exam or to seek assistance in completing take-home assignments? Does Professor Grader’s system affect the students’ responsibilities? Describe the ethical values you use to draw your conclusions.

For each of the following citations, identify the type of authority     (statutory, administrative, or judicial) and explain the citation.

Irene is disabled and receives payments from a number of sources. The interest payments are from bonds that Irene purchased over past years and a disability insurance policy that Irene purchased herself. Calculate Irene’s gross income.

If speculators on average gain from their speculation, who loses?

Is business income allocated from a flow-through business entity to its owners self-employment income? Explain.

An RSW operation is used to make a series of spot welds between two pieces of aluminum, each 2.0 mm thick. The unit melting energy for aluminum = 2.90 J/mm3. Welding current = 6,000 amps, and time duration = 0.15 sec. Assume that the resistance = 75 micro-ohms. The resulting weld nugget measures 5.0 mm in diameter by 2.5 mm thick. How much of the total energy generated is used to form the weld nugget?

Crowe Company purchased a heavy-duty truck on July 1, 2011, for $30,000. It was estimated that it would have a useful life of 10 years and then would have a trade-in value of $6,000. The company uses the straight-line method. It was traded on August 1, 2015, for a similar truck costing $42,000; $16,000 was allowed as trade-in value (also fair value) on the old truck and $26,000 was paid in cash. A comparison of expected cash flows for the trucks indicates the exchange lacks commercial substance. What is the entry to record the trade-in?

What is the fundamental difference between a fusion weld and a solid state weld?

Are taxpayers required to include all realized income in gross income? Explain.

Show the effect of an increase in government expenditure by using (a) the injections and withdrawals diagram; (b) the income/expenditure diagram (see Figures 17.8 and 17.10).

Balanced scorecard; incentives Many organisations use a balanced scorecard set of measures to determine the short-term incentive for senior managers and executives.   Required Outline any potential difficulties associated with using a set of balanced scorecard measures to determine the short-term incentive. (LO2 and 3)