Question & Answer

What will happen to the equilibrium price and quantity of butter in each of the following cases? You should state whether demand or supply (or both) have shifted and in which direction. (In each case assume ceteris paribus.) (a) A rise in the price of non-dairy spread. (b) A rise in the demand for cream. (c) A rise in the price of bread. (d) A rise in the demand for bread. (e) An expected rise in the price of butter in the near future. (f) A tax on butter production. (g) The invention of a new, but expensive, process for removing all saturated fat from butter, alongside the passing of a law which states that all butter producers must use this process.

What are the two basic methods of accounting for longterm construction contracts? Indicate the circumstances that determine when one or the other of these methods should be used.

The balance sheet data of Brown Company at the end of 2014 and 2013 follow. 2014 2013 Cash $ 30,000 $ 35,000 Accounts receivable (net) 55,000 45,000 Inventory 65,000 45,000 Prepaid expenses 15,000 25,000 Equipment 90,000 75,000 Accumulated depreciation—equipment (18,000) (8,000) Land 70,000 40,000 $307,000 $257,000 Accounts payable $ 65,000 $ 52,000 Accrued expenses 15,000 18,000 Notes payable—bank, long-term 202 23,000 Bonds payable 30,000 202 Common stock, $10 par 189,000 159,000 Retained earnings 8,000 5,000 $307,000 $257,000 Land was acquired for $30,000 in exchange for common stock, par $30,000, during the year; all equipment purchased was for cash. Equipment costing $10,000 was sold for $3,000; book value of the equipment was$6,000. Cash dividends of $10,000 were declared and paid during the year. Instructions Compute net cash provided (used) by: (a) Operating activities. (b) Investing activities. (c) Financing activities.

On January 1, 2014, Richards Inc. had cash and common stock of $60,000. At that date, the company had no other asset, liability, or equity balances. On January 2, 2014, it purchased for cash $20,000 of equity securities that it classified as available-for-sale. It received cash dividends of $3,000 during the year on these securities. In addition, it has an unrealized holding gain on these securities of $4,000 net of tax. Determine the following amounts for 2014: (a) net income, (b) comprehensive income, (c) other comprehensive income, and (d) accumulated other comprehensive income (end of 2014).

Assume Tamar uses the IRS method of allocating expenses to rental use of the property.

What is the constructive receipt doctrine?  What types of taxpayers does this doctrine generally affect?  For what tax planning strategy is the constructive receipt doctrine a potential limitation

A batch of 40 identical parts is to be chrome plated using racks. Each part has a surface are = 22.7 cm2. If it is desired to plate an average thickness = 0.010 mm on the surface of each part, how long should the plating operation be allowed to run at a current = 80 amps?

A blow-molding operation is used to produce a bottle with a diameter of 2.250 in and a wall thickness of 0.045 in. The parison has a thickness of 0.290 in. The observed die swell ratio is 1.30. (a) What is the required diameter of the parison? (b) What is the diameter of the die?

Chantal Stores sells merchandise on open account as well as on installment terms. 2014 2015 2016 Sales on account $385,000 $426,000 $525,000 Installment sales 320,000 275,000 380,000 Collections on installment sales Made in 2014 100,000 90,000 40,000 Made in 2015 110,000 140,000 Made in 2016 125,000 Cost of sales Sold on account 270,000 277,000 341,000 Sold on installment 214,400 176,000 228,000 Selling expenses 77,000 87,000 92,000 Administrative expenses 50,000 51,000 52,000 Instructions From the data above, which cover the 3 years since Chantal Stores commenced operations, determine the net income for each year, applying the installment-sales method of accounting. (Ignore interest charges.)

Maurice has a client that recently asked him about the odds of the IRS detecting cash transactions not reported on a tax return.  What are some of the issues that Maurice should discuss with his client?

Ray Albertson is 72 years old and lives by himself in an apartment in Salt Lake City.Ray’s gross income for the year is $3,000.Ray’s support is provided as follows:Himself (11 percent), his daughters Diane (20 percent) and Karen (15percent), his sons Mike (20 percent) and Kenneth (10 percent), his friend Milt (14 percent), and his cousin Henry (12 percent).Absent a multiple support agreement, of the parties mentioned in the problem, who may claim adependency exemption for Ray as a qualifying relative

1. If the firm adjusts the size of its mark-up according to changes in demand and the actions of competitors, could its actions approximate to setting price and output where MC = MR? 2. Some firms set their prices by adding a mark-up to average variable cost (the mark-up would be larger to include an element to cover fixed cost). Why might this make pricing easier for the firm? (See Box 6.7.)

The following note appears in the “Summary of Significant Accounting Policies” section of the Annual Report of Westinghouse Electric Corporation. Note 1 (in part): Revenue Recognition. Sales are primarily recorded as products are shipped and services are rendered. The percentage-of-completion method of accounting is used for nuclear steam supply system orders with delivery schedules generally in excess of five years and for certain construction projects where this method of accounting is consistent with industry practice. WFSI revenues are generally recognized on the accrual method. When accounts become delinquent for more than two payment periods, usually 60 days, income is recognized only as payments are received. Such delinquent accounts for which no payments are received in the current month, and other accounts on which income is not being recognized because the receipt of either principal or interest is questionable, are classified as nonearning receivables. Instructions (a) Identify the revenue recognition methods used by Westinghouse Electric as discussed in its note on significant accounting policies. (b) Under what conditions are the revenue recognition methods identified in the first paragraph of Westinghouse’s note above acceptable? (c) From the information provided in the second paragraph of Westinghouse’s note, identify the type of operation being described and defend the acceptability of the revenue recognition method.

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) What are the primary lines of business of these two companies as shown in their notes to the financial statements? (b) Which company has the dominant position in beverage sales? (c) How are inventories for these two companies valued? What cost allocation method is used to report inventory? How does their accounting for inventories affect comparability between the two companies? (d) Which company changed its accounting policies, which then affected the consistency of the financial results from the previous year? What were these changes?

What distinguishes operating from liquidating distributions?

Draw another two indifference curves on Figure 4.5, one outward from and one inward from the original curve. Read off various combinations of pears and oranges along these two new curves and enter them on a table like Table 4.2.

Absent any special elections, what effect does a sale of partnership interest have on the partnership?

The part in Problem 33.1 is to be fabricated using fused deposition modeling instead of stereolithography. Layer thickness is to be 0.20 mm and the width of the extrudate deposited on the surface of the part = 1.25 mm. The extruder workhead moves in the x-y plane at a speed of 150 mm/s. A delay of 10 s is experienced between each layer to reposition the workhead. Compute an estimate for the time required to build the part.

Explain the difference between artistic-related intangible assets and contract-related intangible assets.

The part dimension for a certain injection molded part made of polycarbonate is specified as 3.75 in. Compute the corresponding dimension to which the mold cavity should be machined, using the value of shrinkage given in Table 13.1.

On January 2, 2014, MacCloud Co. issued a 4-year, $100,000 note at 6% fixed interest, interest payable semiannually. MacCloud now wants to change the note to a variable-rate note. As a result, on January 2, 2014, MacCloud Co. enters into an interest rate swap where it agrees to receive 6% fixed and pay LIBOR of 5.7% for the first 6 months on $100,000. At each 6-month period, the variable rate will be reset. The variable rate is reset to 6.7% on June 30, 2014. Instructions (a) Compute the net interest expense to be reported for this note and related swap transaction as of June 30, 2014. (b) Compute the net interest expense to be reported for this note and related swap transaction as of December 31, 2014.

Ida and Clem were married for several years, but in 2018 they finalized their divorce. In the divorce decree, Ida agreed to deed their car to Clem and pay Clem $10,000 per year for twenty years (but not beyond his death). Did these transfers qualify as alimony for tax purposes? Explain.

What are the general rules for measuring and recognizing gain or loss by both the debtor and the creditor in a troubleddebt restructuring involving a modification of terms?

What is the unit melting energy in welding, and what are the factors on which it depends?

Kohlbeck Corporation, a manufacturer of steel products, began operations on October 1, 2013. The accounting department of Kohlbeck has started the fixed-asset and depreciation schedule presented on page 632. You have been asked to assist in completing this schedule. In addition to ascertaining that the data already on the schedule are correct, you have obtained the following information from the company’s records and personnel. 1. Depreciation is computed from the first of the month of acquisition to the first of the month of disposition. 2. Land A and Building A were acquired from a predecessor corporation. Kohlbeck paid $800,000 for the land and building together. At the time of acquisition, the land had an appraised value of $90,000, and the building had an appraised value of $810,000. 3. Land B was acquired on October 2, 2013, in exchange for 2,500 newly issued shares of Kohlbeck’s common stock. At the date of acquisition, the stock had a par value of $5 per share and a fair value of $30 per share. During October 2013, Kohlbeck paid $16,000 to demolish an existing building on this land so it could construct a new building. 4. Construction of Building B on the newly acquired land began on October 1, 2014. By September 30, 2015, Kohlbeck had paid $320,000 of the estimated total construction costs of $450,000. It is estimated that the building will be completed and occupied by July 2016. 5. Certain equipment was donated to the corporation by a local university. An independent appraisal of the equipment when donated placed the fair value at $40,000 and the salvage value at $3,000. 6. Machinery A’s total cost of $182,900 includes installation expense of $600 and normal repairs and maintenance of $14,900. Salvage value is estimated at $6,000. Machinery A was sold on February 1, 2015. 7. On October 1, 2014, Machinery B was acquired with a down payment of $5,740 and the remaining payments to be made in 11 annual installments of $6,000 each beginning October 1, 2014. The prevailing interest rate was 8%. The following data were abstracted from present value tables (rounded). Present value of $1.00 at 8% Present value of an ordinary annuity of $1.00 at 8% 10 years .463 10 years 6.710 11 years .429 11 years 7.139 15 years .315 15 years 8.559   Instructions For each numbered item on the schedule above, supply the correct amount. (Round each answer to the nearest