Question & Answer

Discuss the propriety of showing: (a) Treasury stock as an asset. (b) “Gain” or “loss” on sale of treasury stock as additions to or deductions from income. (c) Dividends received on treasury stock as income.

Cameron purchases stock in Corporation X and in Corporation Y. Neither corporation pays dividends. The stocks both earn an identical before-tax rate of return. Cameron sells the stock in Corporation X after three years, and he sells the stock in Corporation Y after five years. Which investment likely earned a greater after-tax return? Why?

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?

Equivalent units under weighted average and FIFO Francisco’s mass-produces folding chairs in Port Sorrell. All direct materials are added at the beginning of production, and conversion costs are incurred evenly throughout production. The following production information is for the month of May:       Required (a)        Calculate the equivalent units used to calculate cost per unit under the weighted average method. (b)        Calculate the equivalent units used to calculate cost per unit under the FIFO method.

Why is the heat transfer factor in arc-welding processes that utilize consumable electrodes greater than in those that use nonconsumable electrodes?

Explain the difference between a static budget and a flexible budget.

Many years ago a famous member of Congress proposed eliminating federal income tax withholding.  What criterion for evaluating tax systems did this proposal violate?  What would likely have been the result of eliminating withholding?

How could a bank generate higher income before tax (as a percentage of assets) when its net interest margin has decreased? (LO2)

Why might some have trouble classifying costs as fixed or variable?

Using the same facts from the previous problem, how would your answer change if Randy estimates that there is only a 20 percent chance that the position will be sustained upon audit or judicial proceeding?

What is the key factor in shifting income from a business to its owners? What are some methods of shifting income in this context?

An annual report of Ford Motor Corporation states, “Net income a share is computed based upon the average number of shares of capital stock of all classes outstanding. Additional shares of common stock may be issued or delivered in the future on conversion of outstanding convertible debentures, exercise of outstanding employee stock options, and for payment of defined supplemental compensation. Had such additional shares been outstanding, net income a share would have been reduced by 10¢ in the current year and 3¢ in the previous year. . . . As a result of capital stock transactions by the company during the current year (primarily the purchase of Class A Stock from Ford Foundation), net income a share was increased by 6¢.” What information is provided by this note?

What is the rule of mixtures?

Compare the relative merits of increased road fuel taxes, electronic road pricing and tolls as means of reducing urban traffic congestion.

How does accounting help the capital allocation process?

What are the possible disadvantages of vertical mergers?

Lease versus buy decision; ROI; residual income; EVA; manager          incentives Refer to the information in Problem 18.21. The manager of Sandy Point Construction is considering a new project. She can buy or lease equipment that will reprocess tailings from old mines to remove any traces of gold left behind by the original separating processes. The purchase price of the equipment is $150 000. The cost to lease is $2000 per month. She estimates the return (incremental revenues minus incremental expenses, including lease cost) to be $40 000 per year. She knows that purchasing the equipment will increase the value of average operating assets. If she leases the equipment, expenses will increase, but not assets. (In other words, the lease will be accounted for as an operating lease.) Although it is more cost effective to purchase the equipment, she has decided to lease it.   Required (a)     Calculate the new ROI if the equipment is (i) purchased or (ii) leased. (b)     Calculate the new residual income if the equipment is (i) purchased, or (ii) leased. (c)     One of the adjustments that can be made using EVA is to treat all operating lease costs as if they were purchases — in other words, to capitalise the lease. If Sandy Point Construction used EVA with this adjustment, how might the manager’s incentives and behaviour change? Explain.

What are the five steps used to determine the proper time to recognize revenue?

The following facts pertain to a noncancelable lease agreement between Mooney Leasing Company and Rode Company, a lessee. Inception date: May 1, 2014 Annual lease payment due at the beginning of each year, beginning with May 1, 2014 $21,227.65 Bargain-purchase option price at end of lease term $ 4,000.00 Lease term 5 years Economic life of leased equipment 10 years Lessor’s cost $65,000.00 Fair value of asset at May 1, 2014 $91,000.00 Lessor’s implicit rate 10% Lessee’s incremental borrowing rate 10% The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility for all executor costs. Instructions (Round all numbers to the nearest cent.) (a) Discuss the nature of this lease to Rode Company. (b) Discuss the nature of this lease to Mooney Company. (c) Prepare a lease amortization schedule for Rode Company for the 5-year lease term. (d) Prepare the journal entries on the lessee’s books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2014 and

Which of the above are examples of economies of scale?

A 12-inch diameter silicon wafer has a processable area that is circular with a diameter = 11.4 in. The IC chips that will be fabricated on the wafer surface are square with 0.75 in on a side, including an allowance for subsequent chip separation. However, the processable area on each chip is only 0.60 in by 0.60 in. The density of circuits within each chip’s processable area is 100,000 circuits per square inch. (a) How many IC chips can be placed onto the wafer? (b) Using Rent’s Rule with C = 3.8 and m = 0.43, how many input/output terminals (pins) will be needed for each chip package?

A 250 mm diameter silicon wafer has a processable area that is circular with a diameter = 225 mm. The IC chips that will be fabricated on the wafer surface are square with 20 mm on a side. However, the processable area on each chip is only 18 mm by 18 mm. The density of circuits within each chip’s processable area is 465 circuits per mm2. (a) How many IC chips can be placed onto the wafer? (b) Using Rent’s Rule with C = 4.5 and m = 0.35, how many input/output terminals (pins) will be needed for each chip package?

] Jimmer has contributed $15,000 to his Roth IRA, and the balance in the account is $18,000. In the current year, Jimmer withdrew $17,000 from the Roth IRA to pay for a new car. If Jimmer’s marginal ordinary income tax rate is 24 percent, what amount of tax and penalty, if any, is Jimmer required to pay on the withdrawal in each of the following alternative situations? a. Jimmer opened the Roth account 44 months before he withdrew the $17,000, and Jimmer is 62 years of age. b. Jimmer opened the Roth account 44 months before he withdrew the $17,000, and Jimmer is age 53. c. Jimmer opened the Roth account 76 months before he withdrew the $17,000, and Jimmer is age 62. d. Jimmer opened the Roth account 76 months before he withdrew the $17,000, and Jimmer is age 53.

Cost variance analysis; use of variance information Baker Street Animal Clinic uses a particular serum routinely in its vaccination program. Veterinarian technicians give the injections. The standard dose is 10cc per injection, and the cost has been $100 per 1000cc. According to records, 2000 injections were administered last month at a serum cost of $2270. The veterinarian noted that the serum for the injections should have cost $2000 [($0.10 per cc) × (10cc per injection) × (2000 injections)]. Moreover, she noted some carelessness in handling the serum that could easily lead to unnecessary waste. When this issue was brought to the attention of the technicians, together with the $270 discrepancy in costs, they claimed that the $270 excess costs must be due to the inflated prices charged by the veterinarian supply company. Purchasing records reveal that the price for the serum used last month had indeed increased to $105 per 1000cc.   Required (a)     Provide variance calculations to help you evaluate the technicians’ argument. (b)     Discuss whether a significant waste of serum occurred last month. Include quantitative and qualitative information in your discussion. (c)     If you were the manager for the Baker Street Animal Clinic, how would you use the results of your analyses in parts (a) and (b)? Explain.

There are 18 correct answers in the following multiple choice questions (some questions have more than one correct answer). To achieve 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 total score by 1 point, and each additional answer beyond the correct number of answers reduces the score by 1 point. The percentage score on the quiz is based on the total number of correct answers. 38.1 Nanotechnology refers to the fabrication and application of entities whose feature sizes are in which of the following ranges (one best answer): (a) 0.1 nm-10 nm, (b) 1 nm-100 nm, or (c) 100 nm-1000 nm? 38.2 One nanometer is equivalent to which of the following (two correct answers): (a) 1 x 10-3 μm, (b) 1 x 10-6 m, (c) 1 x 10-9 m, and (d) 1 x 106 mm. 38.3 NNI stands for which one of the following: (a) Nanoscience Naval Institute, (b) Nanoscience Nonsense and Ignorance, (c) National Nanotechnology Initiative, or (d) Nanotechnology News Identification? 38.4 The surface-to-volume ratio of a cube that is 1 x 10-6 m on each edge is significantly greater than the surface-to-volume ratio of a cube that is 1 m on each edge: (a) true or (b) false? 38.5 The proportion of surface molecules relative to internal molecules is significantly greater for a cube that is 1 x 10-6 m on each edge than for a cube that is 1 m on each edge: (a) true or (b) false? 38.6 Which one of the following microscopes can achieve the greatest magnification: (a) electron microscope, (b) optical microscope, or (c) scanning tunneling microscope? 38.7 Which of the following are correct statements about a buckyball (three best answers): (a) it contains 60 atoms, (b) it contains 100 atoms, (c) it contains 600 atoms, (d) it is a carbon atom, (e) it is a carbon molecule, (f) it is shaped like a basketball, (g) it is shaped like a tube, and (h) it is shaped like a volleyball? 38.8 Which of the following are considered techniques that fall within the category called top-down approaches to nanofabrication (three best answers): (a) biological evolution, (b) electron-beam  lithography, (c) micro-imprint lithography, (d) scanning probe techniques, (e) self-assembly, and (f) X-ray lithography? 38.9 Which of the following are considered techniques that fall within the category called bottom-up approaches to nanofabrication (three best answers): (a) electron beam lithography, (b) extreme ultraviolet lithography, (c) chemical vapor deposition to produce carbon nanotubes, (d) nanoimprint lithography, (e) scanning probe techniques, (f) self-assembly, and (g) X-ray lithography? 38.10 Dip-pen nanolithography uses which one of the following techniques and/or devices: (a) atomic force microscope, (b) chemical vapor deposition, (c) electron beam lithography, (d) nano-imprint lithography, or (e) self-assembly? 38.11 A self-assembled monolayer has a thickness that is which one of the following: (a) one micrometer, (b) one millimeter, (c) one molecule, or (d) one nanometer?