Question & Answer

(Threshold Concept 1) 1. Think of three things you did last week. What was opportunity cost of each one? (Threshold Concept 1) 2. Assume that a supermarket has some fish that has reached its sell-by date. It was originally priced at £10, but yesterday was marked down to £5 ‘for quick sale’. It is now the end of the day and it still has not been sold. The supermarket is about to close and there is no one in the store that wants fish. What is the opportunity cost for the store of throwing the fish away?

Uhura Company has decided to expand its operations. The bookkeeper recently completed the balance sheet presented below in order to obtain additional funds for expansion.   Intangible assets Goodwill 80,000 Cash surrender value of life insurance 90,000 Prepaid expenses 12,000 Current liabilities Accounts payable 135,000 Notes payable (due next year) 125,000 Pension obligation 82,000 Rent payable 49,000 Premium on bonds payable 53,000 Long-term liabilities Bonds payable 500,000 Stockholders’ equity Common stock, $1.00 par, authorized 400,000 shares, issued 290,000 290,000 Additional paid-in capital 160,000 Retained earnings ? Instructions Prepare a revised balance sheet given the available information. Assume that the accumulated depreciation balance for the buildings is $160,000 and for the equipment, $105,000. The allowance for doubtful accounts has a balance of $17,000. The pension obligation is considered a long-term liability.

What are the similarities and differences between the tax benefit rule and depreciation recapture?

A corporation distributes appreciated property to a shareholder. What impact does the distribution have on the corporation’s earnings and profits?

What are the three methods of performing the masking step in chemical machining?

On January 1, 2014, Irwin Animation sold a truck to Peete Finance for $33,000 and immediately leased it back. The truck was carried on Irwin’s books at $28,000. The term of the lease is 5 years, and title transfers to Irwin at lease-end. The lease requires five equal rental payments of $8,705 at the end of each year. The appropriate rate of interest is 10%, and the truck has a useful life of 5 years with no salvage value. Prepare Irwin’s 2014 journal entries.

1.       : Why is self-awareness important for being a good manager? Can you think of some specific negative consequences that might result from a manager with low self-awareness?

If intangibles are acquired for stock, how is the cost of the intangible determined?

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)

A GTAW operation is performed on low carbon steel, whose unit melting energy is 10.3 J/mm3. The welding voltage is 22 volts and the current is 135 amps. The heat transfer factor is 0.7 and the melting factor is 0.65. If filler metal wire of 3.5 mm diameter is added to the operation, the final weld bead is composed of 60% volume of filler and 40% volume base metal. If the travel speed in the operation is 5 mm/sec, determine (a) cross-sectional area of the weld bead, and (b) the feed rate (mm/sec) at which the filler wire must be supplied.

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

Campbell, a single taxpayer, earns $400,000 in taxable income and $2,000 in interest from an investment in State of New York bonds.  Using the U.S. tax rate schedule (see Appendix C), how much federal tax will she owe?  What is her average tax rate?  What is her effective tax rate?  What is her current marginal tax rate?

A continuous weld is to be made around the circumference of a round steel tube of diameter = 6.0 ft, using a submerged arc welding operation under automatic control at a voltage of 25 volts and current of 300 amps. The tube is slowly rotated under a stationary welding head. The heat transfer factor for SAW is = 0.95 and the assumed melting factor = 0.7. The cross-sectional area of the weld bead is 0.12 in2. If the unit melting energy for the steel = 150 Btu/in3, determine (a) the rotational speed of the tube and (b) the time required to complete the weld.

Amber is a tax expert, whereas Rob is a tax novice.  Explain how their process in identifying tax issues may differ.

: Discuss the importance of purpose-driven communications, including vision and mission and ways to persuade and influence others.

Marlon and Latoya recently started building a house.  They had to pay $300 to the county government for a building permit.  Is the $300 payment a tax?  Why or why not?

The controller for Clint Eastwood Co. is attempting to determine the amount of cash to be reported on its December 31, 2014, balance sheet. The following information is provided. 1. Commercial savings account of $600,000 and a commercial checking account balance of $900,000 are held at First National Bank of Yojimbo. 2. Money market fund account held at Volonte Co. (a mutual fund organization) permits Eastwood to write checks on this balance, $5,000,000. 3. Travel advances of $180,000 for executive travel for the first quarter of next year (employee to reimburse through salary reduction). 4. A separate cash fund in the amount of $1,500,000 is restricted for the retirement of long-term debt. 5. Petty cash fund of $1,000. 6. An I.O.U. from Marianne Koch, a company customer, in the amount of $190,000. 7. A bank overdraft of $110,000 has occurred at one of the banks the company uses to deposit its cash receipts. At the present time, the company has no deposits at this bank. 8. The company has two certificates of deposit, each totaling $500,000. These CDs have a maturity of 120 days. 9. Eastwood has received a check that is dated January 12, 2015, in the amount of $125,000. 10. Eastwood has agreed to maintain a cash balance of $500,000 at all times at First National Bank of Yojimbo to ensure future credit availability. 11. Eastwood has purchased $2,100,000 of commercial paper of Sergio Leone Co. which is due in 60 days. 12. Currency and coin on hand amounted to $7,700. Instructions (a) Compute the amount of cash to be reported on Eastwood Co.’s balance sheet at December 31, 2014. (b) Indicate the proper reporting for items that are not reported as cash on the December 31, 2014, balance sheet.

Maple Corp. owns several highly valued paintings that are on display in the corporation’s headquarters.  This year, it donated one of the paintings valued at $100,000 (tax basis of $25,000), to a local museum for the museum to display. What is the amount of Maple Corp.’s charitable contribution deduction for the painting (assuming income limitations do not apply)?  What would be Maple’s deduction if the museum sold the painting one month after it received it from Maple? (Assume Maple Corp. had prior knowledge of the museum’s intention to sell the painting after receiving it.)

Locate the IRS Web site at http://www.irs.gov/.  For every $100 the IRS collected, how much was spent on the IRS collection efforts?  What tax system criterion does this information help you to evaluate with respect to the current U.S. tax system?

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

Three savings and loan institutions (S&Ls) have identical balance sheet compositions: a high concentration of short-term deposits that are used to provide long-term, fixed-rate mortgages. The S&Ls took the following positions one year ago. Name of S&L            Position LaCrosse                    Sold financial futures Stevens Point              Purchased put options on interest rate futures Whitewater                 Did not take any position in futures Assume that interest rates declined consistently over the last year. Which of the three S&Ls would have achieved the best performance based on this information? Explain. (LO4, LO6)

A comparative balance sheet for Shabbona Corporation is presented below.   Additional information: 1. Net income for 2014 was $125,000. No gains or losses were recorded in 2014. 2. Cash dividends of $60,000 were declared and paid. 3. Bonds payable amounting to $50,000 were retired through issuance of common stock. Instructions (a) Prepare a statement of cash flows for 2014 for Shabbona Corporation. (b) Determine Shabbona Corporation’s current cash debt coverage, cash debt coverage, and free cash flow. Comment on its liquidity and financial flexibility.

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Last year, Wyeth Company recorded an impairment on an asset held for use. Recent appraisals indicate that the asset has increased in value. Should Wyeth record this recovery in value?

A sufficient amount of pure copper is to be heated for casting a large plate in an open mold. The plate has dimensions: length = 20 in, width = 10 in, and thickness = 3 in. Compute the amount of heat that must be added to the metal to heat it to a temperature of 2150°F for pouring. Assume that the amount of metal heated will be 10% more than what is needed to fill the mold cavity. Properties of the metal are: density = 0.324 lbm/in3 , melting point = 1981°F, specific heat of the metal = 0.093 Btu/lbm-F in the solid state and 0.090 Btu/lbm-F in the liquid state, and heat of fusion = 80 Btu/lbm.