Question & Answer

List the most common allocation bases used in job costing and explain under what circumstances each base would be most appropriate.

Variances and flexible budgets Sherry North is the supply manager for West Industries, a manufacturer of garden furniture for the major department store in Australia. As part of her bonus plan, Sherry must meet the materials budget that was established at the beginning of the year. As West Industries manufactures three products in large volumes, standard costs are easily established for the factors of production. The reports for the first half of the year indicate that the materials variance is unfavourable. In an attempt to achieve her bonus target Sherry has been purchasing lower-grade materials at reduced costs for a new supplier. Management have been very pleased with the turnaround in the variance.   Required What implications do Sherry’s actions have for West Industries as a whole (especially in relation to other variances that may be reported in the production area)?

Presented below is the balance sheet of Sargent Corporation for the current year, 2014.   The following information is presented. 1. The current assets section includes cash $150,000, accounts receivable $170,000 less $10,000 for allowance for doubtful accounts, inventories $180,000, and unearned rent revenue $5,000. Inventoy is stated on the lower-of-FIFO-cost-or-market. 2. The investments section includes the cash surrender value of a life insurance contract $40,000; investments in common stock, short-term (trading) $80,000 and long-term (available-for-sale) $270,000; and bond sinking fund $250,000. The cost and fair value of investments in common stock are the same. 3. Property, plant, and equipment includes buildings $1,040,000 less accumulated depreciation $360,000; equipment $450,000 less accumulated depreciation $180,000; land $500,000; and land held for future use $270,000. 4. Intangible assets include a franchise $165,000; goodwill $100,000; and discount on bonds payable $40,000. 5. Current liabilities include accounts payable $140,000; notes payable—short-term $80,000 and longterm $120,000; and income taxes payable $40,000. 6. Long-term liabilities are composed solely of 7% bonds payable due 2022. 7. Stockholders’ equity has preferred stock, no par value, authorized 200,000 shares, issued 70,000 shares for $450,000; and common stock, $1.00 par value, authorized 400,000 shares, issued 100,000 shares at an average price of $10. In addition, the corporation has retained earnings of $320,000. Instructions Prepare a balance sheet in good form, adjusting the amounts in each balance sheet classification as affected by the information given above.

1.       : Why is benchmarking an important component of TQM programs? Do you believe a company could have a successful TQM program without using benchmarking? Explain.

Samantha Cordelia, an intermediate accounting student, is having difficulty amortizing bond premiums and discounts using the effective-interest method. Furthermore, she cannot understand why GAAP requires that this method be used instead of the straight-line method. She has come to you with the following problem, looking for help. On June 30, 2014, Hobart Company issued $2,000,000 face value of 11%, 20-year bonds at $2,171,600, a yield of 10%. Hobart Company uses the effective-interest method to amortize bond premiums or discounts. The bonds pay semiannual interest on June 30 and December 31. Prepare an amortization schedule for four periods. Instructions Using the data above for illustrative purposes, write a short memo (1–1.5 pages double-spaced) to Samantha, explaining what the effective-interest method is, why it is preferable, and how it is computed. (Do not forget to include an amortization schedule, referring to it whenever necessary.)

A single-point HSS tool with a 3/64 in nose radius is used in a shaping operation on a ductile steel workpart. The cutting speed is 120 ft/min. The feed is 0.014 in/pass and depth of cut is 0.135 in. Determine the surface roughness for this operation.

Earnhart Corporation has outstanding 3,000,000 shares of common stock of a par value of $10 each. The balance in its Retained Earnings account at January 1, 2014, was $24,000,000, and it then had Paid-in Capital in Excess of Par—Common Stock of $5,000,000. During 2014, the company’s net income was $4,700,000. A cash dividend of $0.60 a share was declared on May 5, 2014, and was paid June 30, 2014, and a 6% stock dividend was declared on November 30, 2014, and distributed to stockholders of record at the close of business on December 31, 2014. You have been asked to advise on the proper accounting treatment of the stock dividend. The existing stock of the company is quoted on a national stock exchange. The market price of the stock has been as follows. October 31, 2014 $31 November 30, 2014 $34 December 31, 2014 $38 Instructions (a) Prepare the journal entry to record the declaration and payment of the cash dividend. (b) Prepare the journal entry to record the declaration and distribution of the stock dividend. (c) Prepare the stockholders’ equity section (including schedules of retained earnings and additionalpaid-in capital) of the balance sheet of Earnhart Corporation for the year 2014 on the basis of the foregoing information. Draft a note to the financial statements setting forth the basis of the accounting for the stock dividend, and add separately appropriate comments or explanations regarding the basis chosen.

What are the tax practitioner’s standards to avoid a penalty for recommending a tax return position?

An entry to record Purchases and related Accounts Payable of $13,000 for merchandise purchased on December 23, 2015, was recorded in January 2016. This merchandise was not included in inventory at December 31, 2015. What effect does this error have on reported net income for 2015? What entry should be made to correct for this error, assuming that the books are not closed for 2015?

Part B: $187,222 computed as follows: Description Amount Explanation (1) AGI$207,000  From AGI deductions: a) and b) Medical expenses 0 Medical expenses in excess of 7.5 percent of AGI are deductible. See note A below. c) and d) State taxes 2,050 State income taxes paid last year are deductible ($1,800 withheld and $250 overpayment applied on last year’s return treated as paid last year. e) Real property taxes 3,200 Real property taxes deductible from AGI. Payment to developer is not a tax. f) Personal property taxes 200 Property tax on personal property based on value deductible from AGI g) Interest on loans secured by her home 12,300 Primary home loan and home equity loan deductible from AGI h) Charitable contributions 1,828 See note B below i) Investment expenses and tax return preparation fees 0 Nondeductible expenses j) Horse racing activities 0 Nondeductible hobby expenses k) Gambling losses 200 Gambling losses are limited to earnings from gambling deductible as a miscellaneous itemized deduction but not subject to 2% of AGI floor or phase out. (2) Total itemized deductions19,778 (3) Standard deduction 14,600 Single taxpayer (4) Greater of Itemized deductions or standard deduction 19,778 Greater of (2) or (3). Shauna should choose to itemize deductions. Taxable income $187,222 (1) − (4) Note A: $0. Medical expenses = $4,680 (medical expenses for broken ankle), + $24 (115 miles × 21¢ per mile) + 3,400 (unreimbursed health insurance premiums) + 3,000 (Lasik eye surgery) + 450 (other medical expenses) − $15,525 (AGI of 207,000 × 7.5 percent) < $0. Because 7.5 percent of Shauna’s AGI exceeds her total medical expenses, Shauna is unable to deduct any medical expenses. Note B: $1,828. Capital gain property generally in the form of stock is deductible at FMV; Thus, Shauna can deduct $1,000 for her ZYX stock donation to the Red Cross. Cash contributions of $300 are fully deductible. Religious artifacts are used by church in its normal function as a non-profit organization and thus are deductible at FMV of $500. Finally, Shauna may deduct $28 (as a cash donation) expense for her charitable mileage (200 miles × 14¢ per mile). Note that the value of services donated is not deductible. Accordingly, Shauna’s charitable contribution deduction is $1,828 (1,000 + 300 + 500 + 28). Shauna need not be concerned about the AGI-based limitations on her contributions because her AGI is relatively high and her contributions are relatively low.

Compare a centralized database system to a decentralized, distributed blockchain system. (LO2)

There are 20 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. 31.1 In brazing, the base metals melt at temperatures above 840°F (450°C) while in soldering they melt at 840°F (450°C) or below: (a) true or (b) false? 31.2 The strength of a brazed joint is typically (a) equal to, (b) stronger than, or (c) weaker than the filler metal out of which it is made? 31.3 Scarfing in the brazing of a butt joint involves the wrapping of a sheath around the two parts to be joined to contain the molten filler metal during the heating process: (a) true or (b) false? 31.4 Best clearances between surfaces in brazing are which one of the following: (a) 0.0025-0.025 mm (0.0001-0.001 in.), (b) 0.025-0.250 mm (0.001-0.010 in.), (c) 0.250-2.50 mm (0.010-0.100 in.), or (d) 2.5-5.0 mm (0.10-0.20 in.)? 31.5 Which of the following is an advantage of brazing (three best answers): (a) annealing of the base parts is a by-product of the process, (b) dissimilar metals can be joined, (c) less heat and energy required than fusion welding, (d) metallurgical improvements in the base metals, (e) multiple joints can be brazed simultaneously, (f) parts can be readily disassembled, and (g) stronger joint than welding? 31.6 Which of the following soldering methods are not used for brazing (two correct answers): (a) dip soldering, (b) infrared soldering, (c) soldering iron, (d) torch soldering, and (e) wave soldering? 31.7 Which one of the following is not a function of a flux in brazing or soldering: (a) chemically etch the surfaces to increase roughness for better adhesion of the filler metal, (b) promote wetting of the surfaces, (c) protect the faying surfaces during the process, or (d) remove or inhibit formation of oxide films? 31.8 Which of the following metals are used in solder alloys (four correct answers): (a) aluminum, (b) antimony, (c) gold, (d) iron, (e) lead, (f) nickel, (g) silver, (h) tin, and (i) titanium? 31.9 A soldering gun is capable of injecting molten solder metal into the joint area: (a) true, or (b) false? 31.10 In adhesive bonding, which one of the following is the term used for the parts that are joined: (a) adherend, (b) adherent, (c) adhesive, (d) adhibit, or (e) ad infinitum? 31.11 Weldbonding is an adhesive joining method in which heat is used to melt the adhesive: (a) true or (b) false? 31.12 Adhesively bonded joints are strongest under which type of stresses (two best answers): (a) cleavage, (b) peeling, (c) shear, and (d) tension? 31.13 Roughening of the faying surfaces tends to (a) have no effect on, (b) increase, or (c) reduce the strength of an adhesively bonded joint because it increases the effective area of the joint and promotes mechanical interlocking?

1.              : Try to hire the fewest possible Muslim workers so the work line will be efficient on second shift.

Explain how credit rating agencies have changed their rating processes following criticism of their ratings during the credit crisis. (LO1)

Will a general item of expenditure such as food or clothing have a price-elastic or inelastic demand? (Consider both the determinants we have considered so far.)

Job costing, over- and underapplied overhead, journal entries Shane’s Shovels produces small, custom earth-moving equipment for landscaping companies. Manufacturing overhead is allocated to work in process using an estimated overhead rate. During April, transactions for Shane’s Shovels included the following:       Beginning and ending work in process were both zero.   Required (a)     What was the cost of jobs completed in April? (b)     Was manufacturing overhead underapplied or overapplied? By how much? (c)      Write out the journal entries for these transactions, including the adjustment.

How do speculators use call options? Describe the conditions under which their strategy would backfire. What is the maximum loss that could occur for a purchaser of a call option? (LO3)

Presented below is selected information for Alatorre Company. 1. Alatorre purchased a patent from Vania Co. for $1,000,000 on January 1, 2012. The patent is being amortized over its remaining legal life of 10 years, expiring on January 1, 2022. During 2014, Alatorre determined that the economic benefits of the patent would not last longer than 6 years from the date of acquisition. What amount should be reported in the balance sheet for the patent, net of accumulated amortization, at December 31, 2014? 2. Alatorre bought a franchise from Alexander Co. on January 1, 2013, for $400,000. The carrying amount of the franchise on Alexander’s books on January 1, 2013, was $500,000. The franchise agreement had an estimated useful life of 30 years. Because Alatorre must enter a competitive bidding at the end of 2015, it is unlikely that the franchise will be retained beyond 2022. What amountshould be amortized for the year ended December 31, 2014? 3. On January 1, 2014, Alatorre incurred organization costs of $275,000. What amount of organization expense should be reported in 2014? 4. Alatorre purchased the license for distribution of a popular consumer product on January 1, 2014, for $150,000. It is expected that this product will generate cash flows for an indefinite period of time. The license has an initial term of 5 years but by paying a nominal fee, Alatorre can renew the license indefinitely for successive 5-year terms. What amount should be amortized for the year ended December 31, 2014? Instructions Answer the questions asked about each of the factual situations.

Campbell’s tax return was audited because she failed to report interest she earned on her tax return.  What IRS audit selection method identified her tax return?

There are 16 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. 32.1 Which of the following are reasons why mechanical assembly is often preferred over other forming processes (two best answers): (a) ease of assembly, (b) ease of disassembly, (c) economies of scale, (d) involves melting of the base parts, (e) no heat affected zone in the base parts, and (f) specialization of labor? 32.2 Most externally threaded fasteners are produced by which one of the following processes: (a) cutting the threads, (b) milling the threads, (c) tapping, (d) thread rolling, or (e) turning the threads? 32.3 Which of the following methods and tools are used for applying the required torque to achieve a desired preload of a threaded fastener (three best answers): (a) arbor press, (b) preload method, (c) sense of feel by a human operator, (d) snap fit, (e) stall-motor wrenches, (f) torque wrench, and (g) use of lockwashers? 32.4 Which of the following are the common ways in which threaded fasteners fail during tightening (two best answers): (a) excessive compressive stresses on the head of the fastener due to force applied by the tightening tool, (b) excessive compressive stresses on the shank of the fastener, (c) excessive shear stresses on the shank of the fastener, (d) excessive tensile stresses on the head of the fastener due to force applied by the tightening tool, (e) excessive tensile stresses on the shank of the fastener, and (f) stripping of the internal or external threads? 32.5 The difference between a shrink fit and an expansion fit is that in a shrink fit the internal part is cooled to a sufficiently low temperature to reduce its size for assembly, whereas in an expansion fit, the external part is heated sufficiently to increase its size for assembly: (a) true or (b) false? 32.6 Advantages of snap fit assembly include which of the following (three best answers): (a) components can be designed with features to facilitate part mating, (b) ease of disassembly, (c) no heat affected zone, (d) no special tools are required, (e) parts can be assembled quickly, and (f) stronger joint than with most other assembly methods? 32.7 The difference between industrial stitching and stapling is that the U-shaped fasteners are formed during the stitching process while in stapling the fasteners are preformed: (a) true or (b) false? 32.8 From the standpoint of assembly cost, it is more desirable to use many small threaded fasteners rather than few large ones in order to distribute the stresses more uniformly: (a) true or (b) false? 32.9 Which of the following are considered good product design rules for automated assembly (two best answers): (a) design the assembly with the fewest number of components possible, (b) design the product using bolts and nuts to allow for disassembly, (c) design with many different fastener types to maximize design flexibility, (d) design parts with asymmetric features to mate with other parts having corresponding (but reverse) features, and (e) limit the required directions of access when adding components to a base part?

Discuss at least two situations in which estimates could affect the usefulness of information in the balance sheet.

1.              : If you were Kevin how would you initiate a conversation with Jeremy? What would you want to learn? What would you say?

Under what conditions should a contingent liability be recorded?

Explain the argument that the deductions for charitable contributions and home mortgage interest represent indirect subsidies for these activities.

On January 1, 2014, Roosevelt Company purchased 12% bonds, having a maturity value of $500,000, for $537,907.40. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2014, and mature January 1, 2019, with interest receivable December 31 of each year. Roosevelt’s business model is to hold these bonds to collect contractual cash flows. Instructions (a) Prepare the journal entry at the date of the bond purchase. (b) Prepare a bond amortization schedule. (c) Prepare the journal entry to record the interest received and the amortization for 2014. (d) Prepare the journal entry to record the interest received and the amortization for 2015.