Question & Answer

AMP Corporation (calendar-year-end) has 2024 taxable income of $1,900,000 for purposes of computing the §179 expense. During 2024, AMP acquired the following assets:

On May 3, 2014, Eisler Company consigned 80 freezers, costing $500 each, to Remmers Company. The cost of shipping the freezers amounted to $840 and was paid by Eisler Company. On December 30, 2014, a report was received from the consignee, indicating that 40 freezers had been sold for $750 each. Remittance was made by the consignee for the amount due, after deducting a commission of 6%, advertising of $200, and total installation costs of $320 on the freezers sold. Instructions (a) Compute the inventory value of the units unsold in the hands of the consignee. (b) Compute the profit for the consignor for the units sold. (c) Compute the amount of cash that will be remitted by the consignee.

Pam Erickson Construction Company changed from the completed-contract to the percentage-of completion method of accounting for long-term construction contracts during 2015. For tax purposes, the company employs the completed-contract method and will continue this approach in the future. (Hint: Adjust all tax consequences through the Deferred Tax Liability account.) The appropriate information related to this change is as follows. Pretax Income from: Percentage-of-Completion Completed-Contract Difference 2014 $780,000 $590,000 $190,000 2015 700,000 480,000 220,000 Instructions (a) Assuming that the tax rate is 35%, what is the amount of net income that would be reported in 2015? (b) What entry(ies) are necessary to adjust the accounting records for the change in accounting principle?

Dakota Conrad owns a parcel of land he would like to sell. Describe the circumstances in which the sale of the land would generate §1231 gain or loss, ordinary gain or loss, or capital gain or loss. Also, describe the circumstances under which Dakota would not be allowed to deduct a loss on the sale.

(Looking at the Maths) What is the profit-maximising price if MC = MR = £12 and PεD = –2?

How does the price of a financial futures contract change as the market price of the security it represents changes? Why? (LO1)

Evaluating a reward system You are on the board of a computer software company that has three distinct divisions: home networks, small business systems and ERP systems. In a bid to encourage higher performance, it has been proposed that the company would benefit from creating a reward system with a profit-sharing component for divisional managers. At present, divisional managers are paid a fixed salary. The proposal is for the company to pool 5 per cent of the company’s profits each month and pay this amount at the end of the year based on divisional managers’ performance against targets. The targets will be set in the preliminary performance review at the beginning of the year. Targets will cover both divisional and company-wide performance. It is thought that this approach will encourage a commitment to the organisation and encourage individuals to strive for better results. There will be a vote for the current proposal at the next board meeting.   Required (a) Discuss the advantages and disadvantages of the proposal. (b) Outline an alternative reward system. (LO2 and 4)

Classification of rework costs, uncertainties, critique of rework and scrap policy Fran Markus is in the cost accounting group at Boats Galore, a large manufacturing company that produces customised boats and yachts. The company sometimes experiences quality problems with its fibreglass raw material, causing flawed areas in boat hulls. The problem is often fixed by reworking the flawed areas. Other times the hull is scrapped because it is too flawed, and a new hull is fabricated. The spoilage policy at Boats Galore is to charge the cost of rework and spoilage to overhead unless it arises because a hull design is particularly complicated. In those cases, the cost is assigned to the job.   Two boats currently under construction require triple the amount of materials and labour time to enhance boat security. The customer wants each hull to be able to withstand the explosion of a small bomb. It is the company’s first order with this hull construction. Because of the new design and fibreglass process, the customer has agreed to a cost-plus contract and will pay cost plus a fixed percentage of cost. This contract assures that Boats Galore does not incur a loss from developing the enhanced security hull. This week, the third layer on one of the boat hulls had a flaw in the fibreglass. The area was reworked, after which it met the security requirements.   Fran receives weekly data on labour and materials for each boat under construction. For regular production, workers estimate the time and materials used to rework flawed fibreglass areas, and Fran adds those costs to overhead instead of recording them as a cost of the particular job. Now she needs to decide how to record the cost of rework for the enhanced security hulls. The production people are not sure whether the flaw was due to poor quality fibreglass or to the triple hull design. If Fran adds the cost to the job order, the customer will pay for the labour and supplies as part of the cost-plus price. If she adds the cost to overhead, the cost will be spread across all jobs and only part of it will be allocated to the job having the enhanced security hulls.   Required (a)     Critique the company’s accounting policy for rework and scrap. (b)     Describe uncertainties about the accounting treatment for the rework costs on the enhanced security hull job. (c)      Discuss the pros and cons of alternative accounting treatments for the rework costs on this job. (d)     Suppose you are an accounting work-experience student at Boats Galore. Fran asks you to recommend an accounting treatment for the rework costs on the enhanced security hull job. i) Write a memo to Fran with your recommendation. As you write the memo,          consider what information Fran will need from you to help her make a final            decision. ii) Write one or two paragraphs explaining how you decided what information to   include in your memo.

What is a machine tool?

BT Openreach is responsible for providing and maintaining the fixed-line network connections to customers in the UK. This includes the huge system of telegraph poles and cable ducts (small underground tunnels) that carry telecom lines between BT exchanges and houses/business premises. To what extent do you think this is a natural monopoly?

How does a boring operation differ from a turning operation?

Consider the argument that in the modern world of large-scale short-term international financial movements, the ability of individual countries to affect their exchange rate is very limited.

How does the Fed’s monetary policy affect economic conditions? (LO5)

Shapiro Inc. was incorporated in 2013 to operate as a computer software service firm with an accounting fiscal year ending August 31. Shapiro’s primary product is a sophisticated online inventory-control system; its customers pay a fixed fee plus a usage charge for using the system. Shapiro has leased a large, Alpha-3 computer system from the manufacturer. The lease calls for a monthly rental of $40,000 for the 144 months (12 years) of the lease term. The estimated useful life of the computer is 15 years. Each scheduled monthly rental payment includes $3,000 for full-service maintenance on the computer to be performed by the manufacturer. All rentals are payable on the first day of the month beginning with August 1, 2014, the date the computer was installed and the lease agreement was signed. The lease is noncancelable for its 12-year term, and it is secured only by the manufacturer’s chattel lien on the Alpha-3 system. This lease is to be accounted for as a capital lease by Shapiro, and it will be depreciated by the straightline method with no expected salvage value. Borrowed funds for this type of transaction would cost Shapiro 12% per year (1% per month). Following is a schedule of the present value of $1 for selected periods discounted at 1% per period when payments are made at the beginning of each period. Periods Present Value of $1 per Period (months) Discounted at 1% per Period 1 1.000 2 1.990 3 2.970 143 76.658 144 76.899 Instructions Prepare all entries Shapiro should have made in its accounting records during August 2014 relating to this lease. Give full explanations and show supporting computations for each entry. Remember, August 31, 2014, is the end of Shapiro’s fiscal accounting period and it will be preparing financial statements on that date. Do not prepare closing entries.

What are the two forms of sandwich structure among laminar composite structures? Briefly describe each

Question: What is stare decisis and how does it relate to the Golsen rule?

Draw a diagram like that in Figure 6.21. Now illustrate the effect of a rise in demand for the product. Mark the new profit-maximising price and output. Will the profit-maximising output, price, average cost and profit necessarily be higher than before?

What are the potential implications for future aggregate living standards of ‘super-hysteresis’ compared with ‘hysteresis’ following the COVID-19 pandemic?

: Summarize how SWOT analysis can be used to evaluate a company’s strengths, weaknesses, opportunities, and threats.

Richard Mendez and two friends from law school recently formed Mendez and Associates as a limited liability partnership (LLP). Income from the partnership will be split equally among the partners. The partnership will generate fee income primarily from representing clients in bankruptcy and foreclosure matters. While some attorney friends have suggested that the partners’ earnings will be self-employment income, other attorneys they know from their local bar association meetings claim just the opposite. After examining relevant authority, explain how you would advise Mendez and Associates on this matter. [Hint: See §1402(a)(13) and Renkemeyer, Campbell & Weaver LLP v. Commissioner, 136 T.C. 137 (2011).]

What are the main goals of the Federal Open Market Committee? How does it attempt to achieve these goals? (LO1)

What other forms of intervention are likely to be necessary to back up the work of regulatory bodies?

What are the main components of an integrated manufacturing system?

(a) Assuming no Fair Value Adjustment (available-forsale) account balance at the beginning of the year, prepare the adjusting entry at the end of the year if Laura Company’s available-for-sale securities have a fair value $60,000 below cost. (b) Assume the same information as part (a), except that Laura Company has a debit balance in its Fair Value Adjustment account of $10,000 at the beginning of the year. Prepare the adjusting entry at year-end.

Cost function using high-low method Mernda Health Care Centre recently began to offer day surgery procedures. The Centre was not experienced in the costing of such services and, as a temporary measure, the subsidised patient-day charge was set at $100. This charge was similar to other providers in the region. Management decided to review the charge once cost data was available for the first two months of operations. The following data was collected by the accounting department, together with the number of patient days.     Required (a)   Classify each cost as fixed, variable or mixed, using patient days as the cost driver. (b)   Use the high-low method to separate mixed costs into their fixed and variable components. (c)    The accounting department has estimated that the average patient days per month will be 2000. If the Centre is to be operated as a not-for-profit, how much will it need to charge per patient day? (d)   Suppose the Centre averages 2500 patient days per month. How much would need to be charged per patient day for the Centre to cover costs? (e)    Explain why the per-patient-day charge decreased in (d) above. (f)    Briefly explain the benefit of the classification of costs in the planning for the Centre.