Question 1
1. The management of Austin Corporation is considering dropping product R97C. Data from the company's accounting system appear below: Sales....................................$130,000 Variable expenses..........................56,000 Fixed manufacturing expenses...............49,000 Fixed selling and administrative expenses..35,000 In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $34,000 of the fixed manufacturing expenses and $20,000 of the fixed selling and administrative expenses are avoidable if product R97C is discontinued. What would be the effect on the company's overall net operating income if product R97C were dropped? A) Overall net operating income would increase by $20,000. B) Overall net operating income would increase by $10,000. C) Overall net operating income would decrease by $20,000. D) Overall net operating income would decrease by $10,000. 2. Libbee Corporation is presently making part I50 that is used in one of its products. A total of 8,000 units of this part are produced and used every year. The company's Accounting Department reports the following costs of producing the part at this level of activity: Direct materials..................................$3.70 per unit Direct Labor.......................................1.00 " Variable overhead..................................6.90 " Supervisor's salary................................8.80 " Depreciation of special equipment..................3.30 " Allocated general overhead.........................1.60 " An outside supplier has offered to produce and sell the part to the company for $24.50 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company, none of which would be avoided if the part were purchased instead of produced internally. If management decides to buy part I50 from the outside supplier rather than to continue making the part, what would be the annual impact on the company's overall net operating income? A) Net operating income would decline by $6,400 per year. B) Net operating income would decline by $32,800 per year. C) Net operating income would increase by $32,800 per year. D) Net operating income would increase by $6,400 per year. 3. Scales Corporation has received a request for a special order of 6,000 units of product Y45 for $13.70 each. Product Y45's unit product cost is $11.50, determined as follows: Direct materials..........................$2.50 Direct labor..............................1.90 Variable manufacturing overhead...........2.30 Fixed manufacturing overhead..............4.80 Unit product cost....................$11.40 Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product Y45 that would increase the variable costs by $8.10 per unit and that would require an investment of $20,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. If the special order is accepted, the company's overall net operating income would increase (decrease) by: A) ($26,600) B) $13,200 C) ($55,400) D) ($21,300)
Question 2
MAT540 Week 6 Homework Chapter 2 2. A company produces two products that are processed on two assembly lines. Assembly line 1 has 100 available hours, and assembly line 2 has 42 available hours. Each product requires 10 hours of processing time on line 1, while on line 2 product 1 requires 7 hours and product 2 requires 3 hours. The profit for product 1 is $6 per unit, and the profit for product 2 is $4 per unit. a. Formulate a linear programming model for this problem. b. Solve the model by using graphical analysis. 6. The Pinewood Furniture Company produces chairs and tables from two resources ? labor and wood. The company has 80 hours of labor and 36 board-ft. of wood available each day. Demand for chairs is limited to 6 per day. Each chair requires 8 hours of labor and 2 board-ft. of wood, whereas a table requires 10 hours of labor and 6 board-ft. of wood. The profit derived from each chair is $400 and from each table, $100. The company wants to determine the number of chairs and tables to produce each day in order to maximize profit. Formulate a linear programming model for this problem. a. Formulate a linear programming model for this problem. b. Solve the model by using graphical analysis. 7. In Problem 6, how much labor and wood will be unused if the optimal numbers of chairs and tables are produced? 12. The Elixer Drug Company produces a drug from two ingredients. Each ingredient contains the same three antibiotics, in different proportions. One gram of ingredient 1 contributes 3 units and one gram of ingredient 2 contributes 1 unit of antibiotic 1; the drug requires 6 units. At least 4 units of antibiotic 2 are required and the ingredients contribute 1 unit each per gram. At least 12 units of antibiotic 3 are required; a gram of ingredient 1 contributes 2 units, and a gram of ingredient 2 contributes 6 units. The cost for a gram of ingredient 1 is $80, and the cost for a gram of ingredient 2 is $50. The company wants to formulate a linear programming model to determine the number of grams of each ingredient that must go into the drug in order to meet the antibiotic requirements at the minimum cost. a. Formulate a linear programming model for this problem. b. Solve the model by using graphical analysis. 16. A clothier makes coats and slacks. The two resources required are wool cloth and labor. The clothier has 150 square yards of wool and 200 hours of labor available. Each coat requires 3 square yards of wool and 10 hours of labor, whereas each pair of slacks requires 5 square yards of wool and 4 hours of labor. The profit for a coat is $50, and the profit for slacks is $40. The clothier wants to determine the number of coats and pairs of slacks to make so that profit will be maximized. a. Formulate a linear programming model for this problem. b. Solve the model by using graphical analysis. 20. Solve the following linear programming model graphically: Maximize Z = 5x1 + 8x2 Subject to 3x1 + 5x2 ? 50 2x1 + 4x2 ? 40 x1 ? 8 x2 ? 10 x1, x2 ? 0
Question 3
1. On June 4, White Corporation issued $400 million of bonds for $414 million. During the same year, $1 million of the bond premium was amortized. In a statement of cash flows prepared by the indirect method, White Corporation should report: (Points : 4) A financing activity of $400 million. An addition to net income of $1 million. An investing activity of $414 million. A deduction from net income of $1 million. 2. When preparing a statement of cash flows using the direct method, accrual of payroll expense is: (Points : 4) Reported as an operating activity. Reported as an investing activity. Reported as a financing activity. None of these is correct. 3. During the year, cash increased by $400 million. Investing and financing activities created positive cash flow totaling $500 million. What were net cash flows from operating activities in the statement of cash flows? (Points : 4) Inflow of $300 million. Outflow of $100 million. Outflow of $300 million. Inflow of $600 million. 4. Retrospective restatement usually is appropriate for a change in: (Points : 4) accounting estimate: yes; accounting principle: yes accounting estimate: yes; accounting principle: no accounting estimate: no; accounting principle: yes accounting estimate: no; accounting principle: no 5. Disclosure notes related to a change in accounting principle under the retrospective approach should include: (Points : 4) The effect of the change on executive compensation. The auditor's approval of the change. The SEC's permission to change. Justification for the change. 6. Which of the following describes defined benefit pension plans? (Points : 4) The investment risk is borne by the employee. The plans are simple and easy to construct. The investment risk is borne by the employer. Retirement benefits depend on the individual's account balance. 7. Which of the following is reported as an operating activity in the statement of cash flows? (Points : 4) The purchase of operating assets. The acquisition of treasury stock. The retirement of bonds. The payment of prepaid insurance. 8. An example of an error would be: (Points : 4) Purchasing inventory from a related party. Counting an inventory item twice when taking a physical inventory. Holding back invoices so that accounts payable are understated. Receiving kickbacks in exchange for issuing a purchase order to a vender. 9. When the retrospective approach is used for a change to the FIFO method, which of the following accounts is usually not adjusted? (Points : 4) Deferred Income Taxes Inventory Retained Earnings All of these usually are adjusted 10. Blue Co. has a patent on a communication process. The company has amortized the patent on a straight-line basis since 2005, when it was acquired at a cost of $36 million at the beginning of that year. Due to rapid technological advances in the industry, management decided that the patent would benefit the company over a total of 6 years rather than the 9-year life being used to amortize its cost. The decision was made at the end of 2009 (before adjusting and closing entries). What is the appropriate patent amortization expense in 2009? (Points : 4) $ 4 million. $ 5 million. $10 million. $20 million. 11. Mars Inc. has a defined benefit pension plan. On December 31 (the end of the fiscal year), the company received the PBO report from the actuary. The following information was included in the report: ending PBO, $110,000; benefits paid to retirees, $10,000; interest cost, $8,000. The discount rate applied by the actuary was 8%. What was the beginning PBO? (Points : 4) $ 90,000. $100,000. $107,200. $112,000. 12. Assume that at the beginning of the current year, a company has a net gain-AOCI of $60,000,000. At the same time, assume the PBO and the plan assets are $300,000,000 and $250,000,000, respectively. The average remaining service period for the employees expected to receive benefits is 10 years. What is the amount of amortization to pension expense for the year using the "corridor" approach? (Points : 4) $6,000,000. $15,000,000. $1,500,000. $3,000,000. 13. Gore Inc. recorded a liability in 2009 for probable litigation losses of $2 million. Ultimately, $5 million in legitimate warranty claims were filed by Gore's customers. (Points : 4) Gore has made a change in accounting principle, requiring retrospective adjustment. Gore needs to correct an accounting error. Gore is required to adjust a change in accounting estimate prospectively. Gore is not required to make any accounting adjustments. 14. On January 2, 2009, Tobias Company began using straight-line depreciation for a certain class of assets. In the past, the company had used double-declining-balance depreciation for these assets. As of January 2, 2009, the amount of the change in accumulated depreciation is $40,000. The appropriate tax rate is 40%. The separately reported change in 2009 earnings is: (Points : 4) An increase of $40,000. A decrease of $40,000. An increase of $24,000. None of these 15. Which of the following is not a characteristic that defines a reportable operating segment according to U.S. GAAP? (Points : 4) Operating results are regularly reviewed by the enterprise's chief operating officer. Discrete financial information is available. Engages in business activities from which it may earn revenues and incur expenses. Represents more than 20% of total company revenues, assets, or net income. 16. Sneed Corporation reported balances in the following accounts for the current year: (Points : 4) $280 $220 $210 $190 17. Payment of retirement benefits: (Points : 4) Increases the PBO. Increases the ABO. Reduces the GBO. Reduces the PBO. 18. Lite Travel Company's accounting records include the following information: (Points : 4) $ 50,000. $ 73,000. $ 94,000. $129,000. 19. A subsequent event for an entity with a December 31, 2009, year-end would not include: (Points : 4) A change in the estimated useful lives of equipment in January 2010. An issuance of bonds in January 2010. An acquisition of another company in January 2010. A major uncertainty at December 31, resolved in January 2010. 20. Mobic Inc. acquired some manufacturing equipment in January 2006 for $400,000 and depreciated it $40,000 each year for three years on a straight-line basis. During 2009, the manufacturer announced a new technology for this type of equipment that will make the old models obsolete by the end of 2012. As a result, Mobic will plan to replace the equipment at that time, effectively reducing the asset's life from ten to seven years. In its financial statements for 2009, Mobic should: (Points : 4) Charge $280,000 in depreciation expense. Report the book value of the equipment on its12/31/09 balance sheet at $210,000. Make an adjustment to retained earnings for the error in measuring depreciation during 2006-2008. None of these is correct. 21. Which of the following is not reported as an adjustment to net income when using the indirect method of computing net cash flows from operating activities? (Points : 4) Cash dividends paid. A change in accounts receivable. Depreciation. A change in a prepaid expense. 22. Interest cost is calculated by multiplying the: (Points : 4) ABO by the expected return on the plan assets. ABO by the discount rate. PBO by the expected return on plan assets. PBO by the discount rate. 23. When a change in accounting principle is reported, what is sometimes sacrificed? (Points : 4) Relevance. Consistency. Conservatism. Reliability. 24. The following information pertains to Havana Corporation's defined benefit pension plan: What is the 2009 service cost for Havana's plan? (Points : 4) $276 thousand $528 thousand $648 thousand Cannot be determined from the given information 25. Disclosure notes would not include: (Points : 4) Depreciation methods used and estimated useful life. Definition of cash equivalents. Details of pension plans. Data to adjust the financial statements so that they are not misleading. 26. Interest cost will: (Points : 4) Increase the PBO and increase pension expense. Increase pension expense and reduce plan assets. Increase the PBO and reduce plan assets. Increase pension expense and reduce the return on plan assets. 27. Ludwig Company's prepaid rent was $13,000 at December 31, 2008, and $9,000 at December 31, 2009. Ludwig reported rent expense of $19,000 on the 2009 income statement. What amount would be reported in the statement of cash flows as rent paid using the direct method? (Points : 4) $15,000. $19,000. $23,000. None of these is correct. 28. Pension expense is decreased by: (Points : 4) Amortization of prior service cost. Amortization of net gain. Benefits paid to retired employees. Prior service cost. 29. To help assess the uncertainties that surround a defined benefit pension plan, corporations frequently hire a(n): (Points : 4) CPA. Attorney. Investment analyst. Actuary. 30. Which one of the following financial statements does not report amounts primarily on an accrual basis? (Points : 4) Income statement. Balance sheet. Statement of cash flows. Statement of shareholders' equity. 31. Which of the following changes should be accounted for using the retrospective approach? (Points : 4) A change in the estimated life of a depreciable asset. A change from straight-line to declining balance depreciation. A change to the LIFO method of costing inventories. A change from the completed-contract method of accounting for long-term construction contracts. 32. An overfunded pension plan means that the: (Points : 4) PBO is less than plan assets. PBO exceeds plan assets. ABO is less than plan assets. ABO exceeds plan assets. 33. Which of the following never requires an outflow of cash? (Points : 4) Early extinguishment of debt. Retirement of common stock. Payment of dividends. Amortization of patent. 34. Which of the following is not a required segment reporting disclosure according to U.S. GAAP? (Points : 4) Segment profit or loss. Segment assets. Segment liabilities. General information about the operating segment. 35. Which of the following is an example of a change in accounting principle? (Points : 4) A change in inventory costing methods. A change in the estimated useful life of a depreciable asset. A change in the actuarial life expectancies of employees under a pension plan. Consolidating a new subsidiary. 36. B Company switched from the sum-of-the-years-digits depreciation method to straight-line depreciation in 2009. The change affects machinery purchased at the beginning of 2007 at a cost of $72,000 with no residual value and an estimated life of five years. In 2009 it is estimated that there is a residual value of $3,600. What is B's 2009 depreciation expense? (Points : 4) $ 8,400 $13,680 $15,840 $19,200 37. The amortization of a net gain has what effect on pension expense? (Points : 4) Decreases it. Has no effect on it. Increases it (but only by the amount over 10% of the PBO). Increases it (regardless of the amount). 38. Interest payments to creditors are reported in a statement of cash flows as: (Points : 4) An investing activity. A borrowing activity. A financing activity. An operating activity. 39. Which of the following is reported as an operating activity in the statement of cash flows? (Points : 4) The payment of dividends. The sale of office equipment. The payment of interest on long-term notes. The issuance of a stock dividend. 40. Louie Company has a defined benefit pension plan. On December 31 (the end of the fiscal year), the company received the PBO report from the actuary. The following information was included in the report: ending PBO, $110,000; benefits paid to retirees, $12,000; interest cost, $8,000. The discount rate applied by the actuary was 8%. What was the service cost for the year? (Points : 4) $ 14,000. $12,000. $18,000. $92,000.,I need these questions answered in two hours please.,No unfortunately I need them in 1 hour and 45 minutes. Any help would be appreciated.,Hi, I need the answers within a couple of minutes or I cannot accept them unfortunately.,The deadline has passed. I'm sorry this did not work out in either of our favors. Perhaps next time.
Question 4
1, Page Enterprises has bonds on the market making annual payment, with nine years to maturity, and selling for $948. At this price, the bonds yield 5.9 percent. What must the coupon rate be on the bonds? 2, Bond J is a 3 percent coupon bond. Bond K is a 9 percent coupon bond. Both bonds have 15 year to maturity, make semiannual payments, and have a YTM of 6 percent. If interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds? What if rates suddenly fall by 2 percent instead? What does this problem tell you about the interest rate risk of lower-coupon bonds? 3, Martin software has 9.2 percent coupon bonds on the market with 18 years to maturity. The bonds make semiannual payments and currently sell for 106.8 percent of par. What is the current yield on the bonds? The YTM? The effective annual yield? 4, Backwater Corp. has 8 percent coupon bonds making annual payments with a YTM of 7.2 percent. The current yield on these bond is 7.55 percent. How many years do these bonds have left until they mature? 5, You've just found a 10 percent coupon bond on the market that sells for par
Question 5
6(a) Consider the following three statements: (1) Tom invests in vacant land for the purpose of realizing a profit on its appreciation. He leases the land during the period he holds it. The unadjusted basis of the property is $25,000 and its fair market value is $35,000. The lease payments are $4,000 per year. (2) A rancher owns land with an unadjusted basis of $25,000 and a fair market value of $35,000. He used it for ranching purposes in the two prior years. In the current year, he leases the land to another rancher for $400. (3) Peggy, an automobile dealer, rents cars held for sale by the dealership to customers who are having their own cars repaired by the dealership. In which of the three cases above could the rental activity automatically be considered a passive activity? a. Case 1 only. b. Case 2 only. c. Case 3 only. d. Cases 1 and 2 e. None of the above. 6(b) Tina, an unmarried taxpayer, has $80,000 in salary, $10,000 in income from a limited partnership, and a $26,000 passive loss from a real estate rental activity in which she actively participates. Her modified adjusted gross income is $80,000. Of the $26,000 loss, how much is deductible? a. $0. b. $10,000. c. $25,000. d. $26,000. e. Some other amount. 6(c) Jan dies in 2009 owning a passive activity with an adjusted basis of $60,000. Its fair market value at that date is $65,000. Suspended losses relating to the property were $15,000. Which of the following statements is true? a. The heir's adjusted basis is $65,000, and Jan's final deduction is $10,000. b. The heir's adjusted basis is $65,000, and Jan's final deduction is $15,000. c. The heir's adjusted basis is $60,000, and Jan's final deduction is $15,000. d. The heir's adjusted basis is $80,000, and Jan has no final deduction. e. None of the above. 6(d) Identify from the list below the type of disposition of a passive activity where the taxpayer keeps the suspended losses of the disposed activity and utilizes them on a subsequent taxable disposition. a. Disposition of a passive activity by bequest. b. Nontaxable deferred exchange of a passive activity. c. Disposition of a passive activity as a gift. d. Complete sale of a passive activity. e. None of the above.
