Question & Answer

Bedard Corporation reported net income of $300,000 in 2014 and had 200,000 shares of common stock outstanding throughout the year. Also outstanding all year were 45,000 options to purchase common stock at $10 per share. The average market price of the stock during the year was $15. Compute diluted earnings per share.

Scatter plot; cost function using regression The following scatter plot and simple regression results used revenue as a potential cost driver for research and development costs. Required (a)          Discuss whether the scatter plot suggests that revenue is a cost driver for research and development costs. (b)          Using the regression results, write the cost function for research and development costs. (c)           Based on the regression results, discuss whether it would be appropriate to use total revenue as a cost driver for research and development costs. (d)          If you use the cost function from part (b) to estimate next month’s research and development costs, what assumptions are you making? Identify at least three assumptions and discuss their reasonableness.

Using the IS/MP framework illustrate how the financial accelerator affects the extent of the rise in output following a positive demand-side shock.

If a bank shifts its loan policy to pursue more credit card loans, how will its net interest margin be affected? (LO2)

What are some of the common examples of the conversion strategy?

Khamsah Mining Company has purchased a tract of mineral land for $900,000. It is estimated that this tract will yield 120,000 tons of ore with sufficient mineral content to make mining and processing profitable. It is further estimated that 6,000 tons of ore will be mined the first and last year and 12,000 tons every year in between. (Assume 11 years of mining operations.) The land will have a salvage value of $30,000. The company builds necessary structures and sheds on the site at a cost of $36,000. It is estimated that these structures can serve 15 years but, because they must be dismantled if they are to be moved, they have no salvage value. The company does not intend to use the buildings elsewhere. Mining machinery installed at the mine was purchased secondhand at a cost of $60,000. This machinery cost the former owner $150,000 and was 50% depreciated when purchased. Khamsah Mining estimates that about half of this machinery will still be useful when the present mineral resources have been exhausted, but that dismantling and removal costs will just about offset its value at that time. The company does not intend to use the machinery elsewhere. The remaining machinery will last until about one-half the present estimated mineral ore has been removed and will then be worthless. Cost is to be allocated equally between these two classes of machinery. Instructions (a) As chief accountant for the company, you are to prepare a schedule showing estimated depletion and depreciation costs for each year of the expected life of the mine. (b) Also compute the depreciation and depletion for the first year assuming actual production of 5,000 tons. Nothing occurred during the year to cause the company engineers to change their estimates of either the mineral resources or the life of the structures and equipment.

Explain why many savings institutions experience financial problems at the same time. (LO3)

1.       : Stick to your principles and refuse to fudge the numbers. Tell Tessa you will work overtime to help develop an alternate proposal that stays within the budget by providing more training to employees who work directly with customers and fewer training hours for those who don’t have direct customer contact.

There are 14 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 24.1 Which of the following criteria are generally recognized to indicate good machinability (four best answers): (a) ease of chip disposal, (b) high cutting temperatures, (c) high power requirements, (d) high value of Ra, (e) long tool life, (f) low cutting forces, and (g) zero shear plane angle? 24.2 Of the various methods for testing machinability, which one of the following is the most important: (a) cutting forces, (b) cutting temperature, (c) horsepower consumed in the operation, (d) surface roughness, (e) tool life, or (f) tool wear? 24.3 A machinability rating greater than 1.0 indicates that the work material is (a) easier to machine than the base metal or (b) more difficult to machine than the base metal, where the base metal has a rating = 1.0? 24.4 In general, which one of the following materials has the highest machinability: (a) aluminum, (b) cast iron, (c) copper, (d) low carbon steel, (e) stainless steel, (f) titanium alloys, or (g) unhardened tool steel? 24.5 Which one of the following operations is generally capable of the closest tolerances: (a) broaching, (b) drilling, (c) end milling, (d) planing, or (e) sawing? 24.6 When cutting a ductile work material, an increase in cutting speed will generally (a) degrade surface finish, which means a higher value of Ra or (b) improve surface finish, which means a lower value of Ra? 24.7 Which one of the following operations is generally capable of the best surface finishes (lowest value of Ra): (a) broaching, (b) drilling, (c) end milling, (d) planing, or (e) turning? 24.8 Which of the following time components in the average production machining cycle is affected by cutting speed (two correct answers): (a) part loading and unloading time, and (b) setup time for th 24.9 Which cutting speed is always lower for a given machining operation: (a) cutting speed for maximum production rate, or (b) cutting speed for minimum cost? 24.10 A high tooling cost and/or tool change time will tend to (a) decrease, (b) have no effect on, or (c) increase the cutting speed for minimum cost?

What is a cost object?

What are the carryover and carryback periods for a net operating loss? Does a corporation have the option to choose the years to which it carries back a NOL? Explain.

Oil Products Company purchases an oil tanker depot on January 1, 2014, at a cost of $600,000. Oil Products expects to operate the depot for 10 years, at which time it is legally required to dismantle the depot and remove the underground storage tanks. It is estimated that it will cost $75,000 to dismantle the depot and remove the tanks at the end of the depot’s useful life. Instructions (a) Prepare the journal entries to record the depot and the asset retirement obligation for the depot on January 1, 2014. Based on an effective-interest rate of 6%, the present value of the asset retirement obligation on January 1, 2014, is $41,879. (b) Prepare any journal entries required for the depot and the asset retirement obligation at December 31, 2014. Oil Products uses straight-line depreciation; the estimated salvage value for the depot is zero. (c) On December 31, 2023, Oil Products pays a demolition firm to dismantle the depot and remove the tanks at a price of $80,000. Prepare the journal entry for the settlement of the asset retirement obligation.

What are some of the common law issues that a tax practitioner may face with respect to their duties and how might a tax practitioner avoid these issues?

What is calorizing?

1.              : Tell Carolyn Campbell that employee volunteerism is important to the company and that while her performance evaluation will not be affected by her decision, she should consider helping Hayes because it is an opportunity to help a worthy community project.

Griseta & Dubel Inc. was formed early this year to sell merchandise credits to merchants who distribute the credits free to their customers. For example, customers can earn additional credits based on the dollars they spend with a merchant (e.g., airlines and hotels). Accounts for accumulating the credits and catalogs illustrating the merchandise for which the credits may be exchanged are maintained online. Centers with inventories of merchandise premiums have been established for redemption of the credits. Merchants may not return unused credits to Griseta & Dubel. The following schedule expresses Griseta & Dubel’s expectations as to percentages of a normal month’s activity that will be attained. For this purpose, a “normal month’s activity” is defined as the level of operations expected when expansion of activities ceases or tapers off to a stable rate. The company expects that this level will be attained in the third year and that sales of credits will average $6,000,000 per month throughout the third year. Actual Merchandise Credit Credit Sales Premium Purchases Redemptions Month Percent Percent Percent 6th 30% 40% 10% 12th 60 60 45 18th 80 80 70 24th 90 90 80 30th 100 100 95 Griseta & Dubel plans to adopt an annual closing date at the end of each 12 months of operation. Instructions (a) Discuss the factors to be considered in determining when revenue should be recognized in measuring the income of a business enterprise. (b) Discuss the accounting alternatives that should be considered by Griseta & Dubel Inc. for the recognition of its revenues and related expenses. (c) For each accounting alternative discussed in (b), give balance sheet accounts that should be used and indicate how each should be classified.

Describe the difference in mechanical properties as a function of temperature between a highly crystalline thermoplastic and an amorphous thermoplastic.

Following are selected balance sheet accounts of Allman Bros. Corp. at December 31, 2014 and 2013, and the increases or decreases in each account from 2013 to 2014. Also presented is selected income statement information for the year ended December 31, 2014, and additional information. Increase Selected balance sheet accounts 2014 2013 (Decrease) Assets Accounts receivable $ 34,000 $ 24,000 $ 10,000 Property, plant, and equipment 277,000 247,000 30,000 Accumulated depreciation—plant assets (178,000) (167,000) (11,000) Liabilities and stockholders’ equity Bonds payable $ 49,000 $ 46,000 $ 3,000 Dividends payable 8,000 5,000 3,000 Common stock, $1 par 22,000 19,000 3,000 Additional paid-in capital 9,000 3,000 6,000 Retained earnings 104,000 91,000 13,000 Selected income statement information for the year ended December 31, 2014 Sales revenue $ 155,000 Depreciation 33,000 Gain on sale of equipment 14,500 Net income 31,000 Additional information: 1. During 2014, equipment costing $45,000 was sold for cash. 2. Accounts receivable relate to sales of merchandise. 3. During 2014, $20,000 of bonds payable were issued in exchange for property, plant, and equipment. There was no amortization of bond discount or premium. Instructions Determine the category (operating, investing, or financing) and the amount that should be reported in the statement of cash flows for the following items. (a) Payments for purchase of property, plant, and equipment. (b) Proceeds from the sale of equipment. (c) Cash dividends paid. (d) Redemption of bonds payable.

Joe Dumars Company has outstanding 40,000 shares of $5 par common stock which had been issued at $30 per share. Joe Dumars then entered into the following transactions. 1. Purchased 5,000 treasury shares at $45 per share. 2. Resold 2,000 of the treasury shares at $49 per share. 3. Resold 500 of the treasury shares at $40 per share. Instructions Use the following code to indicate the effect each of the three transactions has on the financial statement categories listed in the table below, assuming Joe Dumars Company uses the cost method (I 5 Increase; D 5 Decrease; NE 5 No effect).

Takemoto Corporation borrowed $60,000 on November 1, 2014, by signing a $61,350, 3-month, zero-interest-bearing note. Prepare Takemoto’s November 1, 2014, entry; the December 31, 2014, annual adjusting entry; and the February 1, 2015, entry.

Sustainability and job costing in a service sector Green and Greener Co., a law firm specialising in environmental litigation, had the following costs last year:       The following costs were included in overhead:         The entity recently improved its ability to document and trace costs to individual cases. Revised bookkeeping procedures now allow it to trace fringe benefit costs for direct professional labour, paralegal costs, telephone charges, computer time, and photocopying costs to each case individually. The managing partner needs to decide whether more costs than just direct professional labour should be traced directly to jobs to allow the entity to better justify billings to clients. During the last year, more costs were traced to client engagements. Two of the case records showed the following:         Three methods are being considered for allocating overhead this year: ·           Method 1: Allocate overhead based on direct professional labour cost. Calculate the allocation rate using last year’s direct professional labour costs of $15 million and overhead costs of $21 million. ·           Method 2: Allocate overhead based on direct professional labour cost. Calculate the allocation rate using last year’s direct professional labour costs of $15 million and overhead costs of $10 million ($21 million less $11 million in direct costs that are traced this year). ·           Method 3: Allocate the $10 million overhead based on total direct costs. Calculate the allocation rate using last year’s direct costs (professional labour of $15 million plus other direct costs of $11 million).   Required (a)     Calculate the overhead allocation rate for method 1. (b)     Calculate the overhead allocation rate for method 2. (c)     Calculate the overhead allocation rate for method 3. (d)     Using each of the three rates calculated in parts (a), (b) and (c), calculate the total costs of cases 875 and 876. (e)     Explain why the total costs allocated to cases 875 and 876 are not the same under the three methods. (f)      Explain why method 1 would be inappropriate. (g)     Would method 2 or method 3 be better? Explain. (h)     Explain how professional service firms, like law firms might engage in sustainability practices. (LO1 and 4)

Glass is classified as a ceramic material; yet glass is different from the traditional and new ceramics. What is the difference?

1.       Consider the example of drug arrests made by patrol officers described in Section 16-4C, “Expectancy Theory.” How did the “effort leads to performance” expectancy and the “performance leads to outcomes” expectancy lead to high performance? Be specific. How do you think “valence” was involved? Explain.

What is the cost of a long-term investment in bonds?

Fixed, variable, and mixed costs Spencer and Church is a CPA entity engaged in local practice. Some selected items from its chart of accounts are listed here.   Required For each account, indicate whether the account represents a fixed, variable, or mixed cost for the operations of the local practice office. If mixed, indicate whether it is predominantly fixed or variable. Explain your answers.   (a) Staff wages (f) Office supplies (b) Clerical wages (g) Professional dues (c) Rent (h) Professinal subscriptions (d) Licences (i) Property taxes (e) Insurance (j) Advertising   (LO2)   [Note about problem complexity: These are difficult questions because students will need to first visualise the costs (with very little information) and then apply chapter concepts. The Step 2 questions (A, B, and F) are the ones requiring significant assumptions to generate an answer.]