Question & Answer

A milling operation is performed on an NC machining center. Total travel distance = 300 mm in a direction parallel to one of the axes of the worktable. Cutting speed = 1.25 m/s and chip load = 0.05 mm. The end milling cutter has four teeth and its diameter = 20.0 mm. The axis uses a DC servomotor whose output shaft is coupled to a leadscrew with pitch = 6.0 mm. The feedback sensing device connected to the leadscrew is an optical encoder that emits 250 pulses per revolution. Determine (a) feed rate and time to complete the cut, and (b) rotational speed of the motor and the pulse rate of the encoder at the feed rate indicated.

Thinken Technology recently merged with College Electronix (CE), a computer graphics manufacturing firm. In performing a comprehensive audit of CE’s accounting system, Gerald Ott, internal audit manager for Thinken Technology, discovered that the new subsidiary did not record pension assets and liabilities, subject to GAAP. The net present value of CE’s pension assets was $15.5 million, the vested benefit obligation was $12.9 million, and the projected benefit obligation was $17.4 million. Ott reported this audit finding to Julie Habbe, the newly appointed controller of CE. A few days later, Habbe called Ott for his advice on what to do. Habbe started her conversation by asking, “Can’t we eliminate the negative income effect of our pension dilemma simply by terminating the employment of nonvested employees before the end of our fiscal year?” Instructions How should Ott respond to Habbe’s remark about firing nonvested employees?

Based on your forecast of interest rates, would you recommend that investors purchase bonds today? Explain. (LO1, LO2)

What is a best-efforts agreement? (LO1)

Using the facts in problem 36, if Campbell earns an additional $15,000 of taxable income, what is her marginal tax rate on this income?  What is her marginal rate if, instead, she had $15,000 of additional deductions?

How are a bank’s balance sheet decisions regulated? (LO2)

Assessing rewards based on accounting profit Stevan is the divisional manager with the Liberty Property Development Group. His performance report shows a positive divisional margin but a loss for the year. Stevan has complained to the CEO about the common costs that have been charged to his division, and questions the method of charging. If they were not charged or were allocated in a different way, he would have a favourable profit figure and would be awarded his bonus.   Required Should Stevan’s bonus be awarded based on the profit or loss figure? Why? (LO2 and 4)

What will happen to the demand for capital services and the equilibrium rental if the price of some other factor, say labour, changes? Assume that wage rates fall. Trace through the effects on a three-section diagram like that of Figure 10.13. (Clue: a fall in wages will have two significant effects: it will reduce costs and hence the price of the product, so that more will be sold; and it will make labour cheaper relative to capital. How will these two things affect the demand for capital?)

Assume that bond market participants suddenly expect the Fed to substantially increase the money supply. (LO2) a. Assuming no threat of inflation, how would this expectation affect bond prices? b. Assuming that inflation may result, how would bond prices be affected? c. Given your answers to (a) and (b), explain why expectations of the Fed’s increase in the money supply may sometimes cause bond market participants to disagree about how bond prices will be affected.

There are 17 correct answers in the following multiple choice questions (some questions have multiple answers that are correct). To attain a perfect score on the quiz, all correct answers must be given. Each correct answer is worth 1 point. Each omitted answer or wrong answer reduces the score by 1 point, and each additional answer beyond the correct number of answers reduces the score by 1 point. Percentage score on the quiz is based on the total number of correct answers 21.1 Which of the following manufacturing processes are classified as material removal processes (two correct answers): (a) casting, (b) drawing, (c) extrusion, (d) forging, (e) grinding, (f) machining, (g) molding, (h) pressworking, and (i) spinning? 21.2 A lathe is used to perform which one of the following manufacturing operations: (a) broaching, (b) drilling, (c) lapping, (d) milling, or (e) turning? 21.3 With which one of the following geometric forms is the drilling operation most closely associated: (a) external cylinder, (b) flat plane, (c) round hole, (d) screw threads, or (e) sphere? 21.4 If the cutting conditions in a turning operation are cutting speed = 300 ft/min, feed = 0.010 in/rev, and depth of cut = 0.100 inch, which one of the following is the material removal rate: (a) 0.025 in3 /min, (b) 0.3 in3 /min, (c) 3.0 in3 /min, or (d) 3.6 in3 /min? 21.5 A roughing operation generally involves which one of the following combinations of cutting conditions: (a) high v, f, and d; (b) high v, low f and d; (c) low v, high f and d; or (d) low v, f, and d, where v = cutting speed, f = feed, and d = depth? 21.6 Which of the following are characteristics of the orthogonal cutting model (three best answers): (a) a circular cutting edge is used, (b) a multiple-cutting-edge tool is used, (c) a single-point tool is used, (d) only two dimensions play an active role in the analysis, (e) the cutting edge is parallel to the direction of cutting speed, (f) the cutting edge is perpendicular to the direction of cutting speed, and (g) the two elements of tool geometry are rake and relief angle? 21.7 The chip thickness ratio is which one of the following: (a) tc/to, (b) to/tc, (c) f/d, or (d) to/w, where tc = chip thickness after the cut, to = chip thickness before the cut, f = feed, d = depth, and w = width of cut? 21.8 Which one of the four types of chip would be expected in a turning operation conducted at low cutting speed on a brittle work material: (a) continuous, (b) continuous with built-up edge, (c) discontinuous, or (d) serrated? 21.9 According to the Merchant equation, an increase in rake angle would have which of the following results, all other factors remaining the same (two best answers): (a) decrease in friction angle, (b) decrease in power requirements, (c) decrease in shear plane angle, (d) increase in cutting temperature, and (e) increase in shear plane angle? 21.10 In using the orthogonal cutting model to approximate a turning operation, the chip thickness before the cut to corresponds to which one of the following cutting conditions in turning: (a) depth of cut d, (b) feed f, or (c) speed v? 21.11 Which one of the following metals would usually have the lowest unit horsepower in a machining operation: (a) aluminum, (b) brass, (c) cast iron, or (d) steel? 21.12 For which one of the following values of chip thickness before the cut to would you expect the specific energy in machining to be the greatest: (a) 0.010 inch, (b) 0.025 inch, (c) 0.12 mm, or (d) 0.50 mm? 21.13 Which of the following cutting conditions has the strongest effect on cutting temperature: (a) feed or (b) speed?

What is a solid solution in the context of alloys?

At the end of the current year, Pociek Co. has prior service cost of $9,150,000. Where should the prior service cost be reported on the balance sheet?

Despite being a publicly traded company only since 1987, Northland Cranberries of Wisconsin Rapids, Wisconsin, is one of the world’s largest cranberry growers. During its short life as a publicly traded corporation, it has engaged in an aggressive growth strategy. As a consequence, the company has taken on significant amounts of both short-term and long-term debt. The following information is taken from recent annual reports of the company.   Instructions (a) Evaluate the company’s liquidity by calculating and analyzing working capital and the current ratio. (b) The discussion of the company’s liquidity, shown below, was provided by the company in the Management Discussion and Analysis section of the company’s annual report. Comment on whether you agree with management’s statements, and what might be done to remedy the situation.

How should changes in the estimated unguaranteed residual value be handled by the lessor?

The table in Box 1.2 shows time-series data for four different variables for four different countries. Would there have been any advantage in giving the figures for each separate year? Would there have been any disadvantage?

In each of the following independent situations, determine the taxpayer’s filing status and the number of dependents the taxpayer is allowed to claim.

Explain why investors that provided guarantees on commercial paper were exposed to so much risk during the credit crisis. (LO1)

Howat Corporation earned $360,000 during a period when it had an average of 100,000 shares of common stock outstanding. The common stock sold at an average market price of $15 per share during the period. Also outstanding were 15,000 warrants that could be exercised to purchase one share of common stock for $10 for each warrant exercised. Instructions (a) Are the warrants dilutive? (b) Compute basic earnings per share. (c) Compute diluted earnings per share.

What is meant by ‘the poverty trap’? What design of benefit system would offer the best solution to the problem of the poverty trap?

What is a tolerance?

You are auditing the December 31, 2014, financial statements of Hockney, Inc., manufacturer of novelties and party favors. During your inspection of the company garage, you discovered that a used automobile not listed in the equipment subsidiary ledger is parked there. You ask Stacy Reeder, plant manager, about the vehicle, and she tells you that the company did not list the automobile because the company was only leasing it. The lease agreement was entered into on January 1, 2014, with Crown New and Used Cars. You decide to review the lease agreement to ensure that the lease should be afforded operating lease treatment, and you discover the following lease terms. 1. Noncancelable term of 4 years. 2. Rental of $3,240 per year (at the end of each year). (The present value at 8% per year is $10,731.) 3. Estimated residual value after 4 years is $1,100. (The present value at 8% per year is $809.) Hockney guarantees the residual value of $1,100. 4. Estimated economic life of the automobile is 5 years. 5. Hockney’s incremental borrowing rate is 8% per year. Instructions You are a senior auditor writing a memo to your supervisor, the audit partner in charge of this audit, to discuss the above situation. Be sure to include (a) why you inspected the lease agreement, (b) what you determined about the lease, and (c) how you advised your client to account for this lease. Explain every journal entry that you believe is necessary to record this lease properly on the client’s books. (It is also necessary to include the fact that you communicated this information to your client.)

Michaels Company had available at the end of 2014 the information shown on the next page. MICHAELS COMPANY COMPARATIVE BALANCE SHEETS AS OF DECEMBER 31, 2014 AND 2013 2014 2013 Cash $ 10,000 $ 4,000 Accounts receivable 20,500 12,950 Short-term investments 22,000 30,000 Inventory 42,000 35,000 Prepaid rent 3,000 12,000 Prepaid insurance 2,100 900 Supplies 1,000 750 Land 125,000 175,000 Buildings 350,000 350,000 Accumulated depreciation—buildings (105,000) (87,500) Equipment 525,000 400,000 Accumulated depreciation—equipment (130,000) (112,000) Patents 45,000 50,000 Total assets $910,600 $871,100 Accounts payable $ 22,000 $ 32,000 Income taxes payable 5,000 4,000 Salaries and wages payable 5,000 3,000 Short-term notes payable 10,000 10,000 Long-term notes payable 60,000 70,000 Bonds payable 400,000 400,000 Premium on bonds payable 20,303 25,853 Common stock 240,000 220,000 Paid-in capital in excess of par—common stock 25,000 17,500 Retained earnings 123,297 88,747 Total liabilities and stockholders’ equity $910,600 $871,100 MICHAELS COMPANY INCOME STATEMENT AND DIVIDEND INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2014 Sales revenue $1,160,000 Cost of goods sold 748,000 Gross margin 412,000 Operating expenses Selling expenses $ 79,200 Administrative expenses 156,700 Depreciation/Amortization expense 40,500 Total operating expenses 276,400 Income from operations 135,600 Other revenues/expenses Gain on sale of land 8,000 Gain on sale of short-term investment 4,000 Dividend revenue 2,400 Interest expense (51,750) (37,350) Income before taxes 98,250 Income tax expense 39,400 Net income 58,850 Dividends to common stockholders (24,300) To retained earnings $ 34,550 Instructions Prepare a statement of cash flows for Michaels Company using the direct method accompanied by a reconciliation schedule. Assume the short-term investments are classified as available-for-sale.

What is wire drawing and bar drawing?

Benjamin recently bought a truck in Alabama for his business in Georgia.  What different types of federal and state taxes may affect this transaction?

Why should turbulent flow of molten metal into the mold be avoided?