Question & Answer

Why might the predictions of the rational choice model generally approximate human behaviour in many situations?

Jansen Corporation shipped $20,000 of merchandise on consignment to Gooch Company. Jansen paid freight costs of $2,000. Gooch Company paid $500 for local advertising, which is reimbursable from Jansen. By year-end, 60% of the merchandise had been sold for $21,500. Gooch notified Jansen, retained a 10% commission, and remitted the cash due to Jansen. Prepare Jansen’s entry when the cash is received.

Assume that just some of the members of a common market like the EU adopt full economic and monetary union, including a common currency. What are the advantages and disadvantages to those members joining the full EMU and to those not?

Distinguish between product costs and period costs as they relate to inventory

Simms Company has significant amounts of trade accounts receivable. Simms uses the allowance method to estimate bad debts instead of the direct write-off method. During the year, some specific accounts were written off as uncollectible, and some that were previously written off as uncollectible were collected. Instructions (a) What are the deficiencies of the direct write-off method? (b) What are the two basic allowance methods used to estimate bad debts, and what is the theoretical justification for each? (c) How should Simms account for the collection of the specific accounts previously written off as uncollectible?

Jerry Prior, Beeler Corporation’s controller, is concerned that net income may be lower this year. He is afraid upper-level management might recommend cost reductions by laying off accounting staff, including him. Prior knows that depreciation is a major expense for Beeler. The company currently uses the doubledeclining- balance method for both financial reporting and tax purposes, and he’s thinking of selling equipment that, given its age, is primarily used when there are periodic spikes in demand. The equipment has a carrying value of $2,000,000 and a fair value of $2,180,000. The gain on the sale would be reported in the income statement. He doesn’t want to highlight this method of increasing income. He thinks, “Why don’t I increase the estimated useful lives and the salvage values? That will decrease depreciation expense and require less extensive disclosure, since the changes are accounted for prospectively. I may be able to save my job and those of my staff.” Instructions Answer the following questions. (a) Who are the stakeholders in this situation? (b) What are the ethical issues involved? (c) What should Prior do?

Johnstone Co. purchased a put option on Ewing common shares on July 7, 2014, for $240. The put option is for 200 shares, and the strike price is $70. (The market price of a share of Ewing stock on that date is $70.) The option expires on January 31, 2015. The following  data are available with respect to the put option. Date Market Price of Ewing Shares Time Value of Put Option September 30, 2014 $77 per share $125 December 31, 2014 75 per share 50 January 31, 2015 78 per share 0 Instructions Prepare the journal entries for Johnstone Co. for the following dates. (a) July 7, 2014—Investment in put option on Ewing shares. (b) September 30, 2014—Johnstone prepares financial statements. (c) December 31, 2014—Johnstone prepares financial statements. (d) January 31, 2015—Put option expires.

A turning operation is carried out on aluminum (100 BHN). Cutting speed = 5.6 m/s, feed = 0.25 mm/rev, and depth of cut = 2.0 mm. The lathe has a mechanical efficiency = 0.85. Based on the specific energy values in Table 21.2, determine (a) the cutting power and (b) gross power in the turning operation, in Watts.

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 on the quiz is based on the total number of correct answers 29.1 Welding can only be performed on metals that have the same melting point; otherwise, the metal with the lower melting temperature always melts while the other metal remains solid: (a) true, (b) false? 29.2 A fillet weld can be used to join which of the following joint types (three correct answers): (a) butt, (b) corner, (c) edge, (d) lap, and (e) tee? 29.3 A fillet weld has a cross-sectional shape that is approximately which one of the following: (a) rectangular, (b) round, (c) square, or (d) triangular? 29.4 Groove welds are most closely associated with which one of the following joint types: (a) butt, (b) corner, (c) edge, (d) lap, or (e) tee? 29.5 A flange weld is most closely associated with which one of the following joint types: (a) butt, (b) corner, (c) edge, (d) lap, or (e) tee? 29.6 For metallurgical reasons, it is desirable to melt the weld metal with minimum energy input. Which one of the following heat sources is most consistent with this objective: (a) high power, (b) high power density, (c) low power, or (d) low power density? 29.7 The amount of heat required to melt a given volume of metal depends strongly on which of the following properties (three best answers): (a) coefficient of thermal expansion, (b) heat of fusion, (c) melting temperature, (d) modulus of elasticity, (e) specific heat, (f) thermal conductivity, and (g) thermal diffusivity? 29.8 The heat transfer factor in welding is correctly defined by which one of the following descriptions: (a) the proportion of the heat received at the work surface that is used for melting, (b) the proportion of the total heat generated at the source that is received at the work surface, (c) the proportion of the total heat generated at the source that is used for melting, or (d) the proportion of the total heat generated at the source that is used for welding? 29.9 The melting factor in welding is correctly defined by which one of the following descriptions: (a) the proportion of the heat received at the work surface that is used for melting, (b) the proportion of the total heat generated at the source that is received at the work surface, (c) the proportion of the total heat generated at the source that is used for melting, or (d) the proportion of the total heat generated at the source that is used for welding? 29.10 Weld failures always occur in the fusion zone of the weld joint, since this is the part of the joint that has been melted: (a) true, (b) false?

Hull Company’s record of transactions concerning part X for the month of April was as follows. Purchases Sales April 1 (balance on hand) 100 @ $5.00 April 5 300 4 400 @ 5.10 12 200 11 300 @ 5.30 27 800 18 200 @ 5.35 28 150 26 600 @ 5.60 30 200 @ 5.80 Instructions (a) Compute the inventory at April 30 on each of the following bases. Assume that perpetual inventory records are kept in units only. Carry unit costs to the nearest cent. (1) First-in, first-out (FIFO). (2) Last-in, first-out (LIFO). (3) Average-cost. (b) If the perpetual inventory record is kept in dollars, and costs are computed at the time of each withdrawal, what amount would be shown as ending inventory in (1), (2), and (3) above? (Carry average unit costs to four decimal places.)

What are some of the possible defects in drawn sheet-metal parts?

Floyd Corporation has the following four items in its ending inventory. Replacement Cost Net Realizable Value (NRV) NRV Less Item Cost Normal Profi t Margin Jokers $2,000 $2,050 $2,100 $1,600 Penguins 5,000 5,100 4,950 4,100 Riddlers 4,400 4,550 4,625 3,700 Scarecrows 3,200 2,990 3,830 3,070 Determine the final lower-of-cost-or-market inventory value for each item.

Describe the turning process.

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

Make the calculations and plot on linearly scaled axes the relationship for unit melting energy as a function of temperature. Use temperatures as follows to construct the plot: 500°F, 1000°F, 1500°F, 2000°F, 2500°F, 3000°F, and 3500°F. On the plot, mark the positions of some of the welding metals in Table 29.2. Use of a spreadsheet program is recommended for the calculations.

King Donovan Resources Group has been in its plant facility for 15 years. Although the plant is quite functional, numerous repair costs are incurred to maintain it in sound working order. The company’s plant asset book value is currently $800,000, as indicated below. Original cost $1,200,000 Accumulated depreciation 400,000 Book value $ 800,000 During the current year, the following expenditures were made to the plant facility. (a) Because of increased demands for its product, the company increased its plant capacity by building a new addition at a cost of $270,000. (b) The entire plant was repainted at a cost of $23,000. (c) The roof was an asbestos cement slate. For safety purposes, it was removed and replaced with a wood shingle roof at a cost of $61,000. Book value of the old roof was $41,000. (d) The electrical system was completely updated at a cost of $22,000. The cost of the old electrical system was not known. It is estimated that the useful life of the building will not change as a result of this updating. (e) A series of major repairs were made at a cost of $47,000, because parts of the wood structure were rotting. The cost of the old wood structure was not known. These extensive repairs are estimated to increase the useful life of the building. Instructions Indicate how each of these transactions would be recorded in the accounting records.

Craig Company asks you to review its December 31, 2014, inventory values and prepare the necessary adjustments to the books. The following information is given to you. 1. Craig uses the periodic method of recording inventory. A physical count reveals $234,890 of inventory on hand at December 31, 2014. 2. Not included in the physical count of inventory is $13,420 of merchandise purchased on December 15 from Browser. This merchandise was shipped f.o.b. shipping point on December 29 and arrived in January. The invoice arrived and was recorded on December 31. 3. Included in inventory is merchandise sold to Champy on December 30, f.o.b. destination. This merchandise was shipped after it was counted. The invoice was prepared and recorded as a sale on account for $12,800 on December 31. The merchandise cost $7,350, and Champy received it on January 3. 4. Included in inventory was merchandise received from Dudley on December 31 with an invoice price of $15,630. The merchandise was shipped f.o.b. destination. The invoice, which has not yet arrived, has not been recorded. 5. Not included in inventory is $8,540 of merchandise purchased from Glowser Industries. This merchandise was received on December 31 after the inventory had been counted. The invoice was received and recorded on December 30. 6. Included in inventory was $10,438 of inventory held by Craig on consignment from Jackel Industries. 7. Included in inventory is merchandise sold to Kemp f.o.b. shipping point. This merchandise was shipped after it was counted. The invoice was prepared and recorded as a sale for $18,900 on December 31. The cost of this merchandise was $10,520, and Kemp received the merchandise on January 5. 8. Excluded from inventory was a carton labeled “Please accept for credit.” This carton contains merchandise costing $1,500 which had been sold to a customer for $2,600. No entry had been made to the books to reflect the return, but none of the returned merchandise seemed damaged. Instructions (a) Determine the proper inventory balance for Craig Company at December 31, 2014. (b) Prepare any correcting entries to adjust inventory to its proper amount at December 31, 2014. Assume the books have not been closed.

How has the opening up of trade and investment between eastern and western Europe likely to have affected the location of industries within Europe that have (a) substantial economies of scale; (b) little or no economies of scale?

What are the differences between primary, secondary, and tertiary industries? Give an example of each category.

] Paul Vote purchased the following assets this year (ignore §179 expensing and bonus depreciation when answering the questions below): Asset Purchase Date Basis Machinery May 12 $23,500  Computers August 13 $20,000  Warehouse December 13 $180,000  a. What is Paul’s allowable MACRS depreciation for the property? b. What is Paul’s allowable alternative minimum tax (AMT) depreciation for the property? You will need to find the AMT depreciation tables to compute the depreciation.

What are some of the advantages of using electrical power in an automated system?

A cup-drawing operation is performed in which the inside diameter = 80 mm and the height = 50 mm. The stock thickness = 3.0 mm, and the starting blank diameter = 150 mm. Punch and die radii = 4 mm. Tensile strength = 400 MPa and yield strength = 180 MPa for this sheet metal. Determine (a) drawing ratio, (b) reduction, (c) drawing force, and (d) blankholder force.

What are the two basic categories of structural frames used in stamping presses?

McNabb Company spent $190,000 developing a new process, $45,000 in legal fees to obtain a patent, and $91,000 to market the process that was patented, all in the year 2014. How should these costs be accounted for in 2014?

How does an “asset gain or loss” develop in pension accounting? How does a “liability gain or loss” develop in pension accounting?