Introductory Accounting A Measurement Approach For Managers 1st Edition Daniel P. Tinkelman - Solutions

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Briefly list some advantages and disadvantages of doing business as a partnership.
Briefly list some of the advantages of doing business as a corporation.
What are some of the rights of shareholders in a corporation?
What is meant by the term “pass-through entity”?
Which of the following are “pass-through entities” for federal income tax purposes?A. Proprietorships B. Partnerships C. C corporations D. Limited liability corporations E. Subchapter S corporations
Based on IRS data, rank the following types of business organization tax returns from least to most common in the U.S.:A. Proprietorships B. S corporations C. LLCs D. C corporations E. Partnership returns, other than LLCs filing as partnerships
Why do most small businesses choose not to be C corporations?
Explain briefly what you understand the factors are that would cause someone to be classified as an employee of a business, and not as an independent contractor.
Explain briefly what costs a business has with regard to an employee that it does not have with regard to independent contractors.
Explain the effect on net income, and on employment taxes, of an S corporation paying:A. A dividend to shareholders B. Salaries to shareholders who work for the company
Explain how the following steps, taken by Rebeli Press, are related to its efforts to reduce risks:A. Doing business as a corporation, not a partnership.B. Trying to use independent contractors as needed, rather than hiring employees on yearly salaries.C. Renting office space, rather than buying an
Explain why Rebeli Press was able to record the prepublication costs and the publishing rights as assets.
What are the Medicare and social security taxes? Are they charged to both the employee and the employer, or just the employee?
Explain why Rebeli recorded the following costs the way it did:A. Costs of doing marketing were considered expenses, even though they may have future value.B. Prepublication costs, such as editing, were recorded as assets, and amortized.C. The purchase of publication rights were recorded as assets,
Explain how estimated sales returns are reflected in the income statement, and in the balance sheet.
Explain how a company can generate cash by:A. Operations B. Investing activities C. Borrowing D. Issuing shares
Why is leasing listed in Table 12.9 as a means of generating cash? Table 12.9 Ways of Getting Cash for Expansion Operating Save income from operations-generate retained earnings. the Business model that receives cash from customers before payments to business vendors are due. Investing Generate
Would the borrower or the lender prefer that a bond be:A. Convertible to common stock at the option of the bondholder?B. Callable by the company whenever it wants, at a set price?C. Secured by particular assets as collateral?
Are the following payments tax deductible by a corporation?A. Payments of interest on bonds.B. Payments of dividends on common stock.C. Payments of dividends on preferred stock.
For each of the following, indicate if it is true of a general partnership, a corporation, or both.A. Owners have unlimited liability for the business’s debts.B. Owners have limited liability.C. Owners have the right to make contracts on behalf of the business.D. The business cannot be created
Three different types of corporations are LLCs, S corporations, and C corporations. They have some features in common, and some differences. For each of the following comments, indicate which types of corporations it applies to. Note that some questions will refer to more than one type of
Assume that the Zhang Corporation is subject to federal corporate income tax. If the Zhang Corporation earns $1000 in 2016:A. Compute the federal corporate income tax at a 35% rate.B. Assume that the company pays out all the after-tax income as dividends to its shareholders, and that the
Assume that Rebeli Press needs secretarial help. It can hire its own secretary, or it can pay a temporary help agency to supply a secretary. If it hires its own secretary, it will pay an annual salary of $35,000.Assuming a normal work year is about 2,000 hours, this is a pay of about $17.50 per
For this question, refer to the tables indicating factors the IRS says are relevant to deciding whether someone is an employee, or a contractor. For each factor, indicate whether you feel the factor indicates the person is an employee, indicates the person is a contractor, of if you feel the factor
Two ways that owners can get money from their business are by declaring dividends on their shares, and by paying salaries and bonuses. For each of the following, indicate whether it is true or false.A. Dividend payments to owners must be made in proportion to the amount of shares held by each
For each of the following journal entries, briefly describe what event you believe it describes.A. Dr. Cash Cr. Accounts receivable B. Dr. Equipment Cr. Cash C. Dr. Salary expense Cr. Cash D. Dr. Royalties expense Cr. Royalties payable E. Dr. Insurance expense Cr. Prepaid insurance.
For each of the following transactions or events, write a journal entry in proper form. Be careful to debit and credit the proper accounts.A. The company makes a sale of books on account of $2,000. (Ignore the related costs.)B. The company receives a shipment of $3,000 worth of books from a
Indicate whether you would use a debit, or a credit, to do each of the following:A. Record an increase in a cash account.B. Record an increase in a revenue account.C. Record a decrease in a liability account.D. Record an increase in an expense account.E. Record a decrease in an asset account.
Using the financial statements given for Rebeli Press, in Tables 12.3 to 12.7, compute the following ratios. (See Chapter 4 for the definitions of these ratios.)A. Profit margin for ROA.B. Profit margin for return on common equity.C. Time interest earned.D. Accounts receivable turnover. For this
Using the financial statements given in the text for Rebeli Press, compute the following ratios. See Chapter 4 for their definitions.A. The operating leverage effect. Here, you should assume that the only variable operating expenses are shipping, printing, and royalties.B. The financial leverage
When you compare the entries that recorded the sales of 15,000 of books, and the related costs, you will see that on average Rebeli Press received a price of $18 per book. There were three variable costs. On average, printing cost $5 per book, royalties were $2, and shipping was $3.In order to
Rebeli Press chose to sell its books through traditional bookstores, at a price of $18 per book. Rebeli press also considered the alternative of selling its books on-line through a major on-line bookselling site, at $16 per book. If it chose to do this, the on-line site would do the printing and
In the chapter, Rebeli Press sold paper copies of its books to bookstores at a price of $18 each, and had a contribution margin per copy of $8. Assume that, instead, it could sell e-books through one of the major on-line bookselling companies. It would not have to incur printing or shipping costs
In the case, Rebeli Press obtained $50,000 of financing by selling stock to Rebecca and Eli, and also borrowed $100,000 at 5%interest from their friends and family. Assume that instead of lending money, these family and friends had bought stock. In this case, the company would have had less
In the chapter, Rebecca and Eli assumed their sales would double. Redo their budget, using the same assumptions they made about all accounts except the following. Assume that sales and the variable costs of printing, shipping, royalties grow only 50%. Compute:A. Total direct publication expenses B.
You may sometimes read about brokers or investment companies that offer their customers the chance to invest in limited partnerships. For example, you will sometimes see interests offered for sale in limited partnerships that invest in new movie projects, or in oil and gas exploration. Why do you
Some corporations have one single class of stock. Others have more than one class, with different rights. For example, a company might have $100 par value preferred stock, which is entitled to a 4%annual dividend on its par value before any dividends can be paid on common shares. Preferred stock
The chapter discussed the distinction between employees and independent contractors from the point of view of Rebeli Press, not from the point of view of the workers. From the worker’s point of view, what do you see as advantages and disadvantages of being an employee, instead of an independent
In this case, Rebeli Press decided not to keep books in inventory, but, instead, to order books printed as it needed them. It made this decision even though its cost per copy would have been lower if it ordered books in larger quantities.A. What characteristics of the publishing industry made it
In this case, Eli and Rebecca received three types of benefits from Rebeli Press: salaries; medical insurance; and dividends. They could have chosen to make a different mix of these payments. For example, they could have paid a year-end bonus, instead of giving themselves dividends. They could also
Under the tax laws, interest expense is deductible, but dividend payments are not. Some people have argued that this is provides businesses an incentive to borrow rather than to sell shares, and has caused the U.S. economy to be too reliant on borrowing. Do you see this as a problem?Why, or why not?
What is a one-person game? Why is budgeting not a oneperson game?
The chapter suggests that people can react to being measured in four different ways. Explain what each of the five ways involves.
Explain what is meant by earnings management.
Explain the difference between accruals management and real earnings management.
Why might a manager try to “manage earnings” so that earnings appear:A. Higher than they really are B. Lower than they really are C. Smoother from year to year than they really are D. Extremely low this year, but higher next year.
Explain how earnings management differs from fraud.
Can fraud be an accident? Why or why not?
Explain what expectations management is. How does it differ from earnings management?
What is budgetary slack? Why would a manager create budgetary slack?
What is meant by window dressing?
Explain what the fraud triangle is.
Give an example of an incentive or pressure that a company might have to report higher earnings.
Give an example of an incentive or pressure that a company might have to report lower earnings.
Give an example of an incentive a new CEO might have to take a “big bath” in the current year, and report very low profits or even losses.
Give an example of something that increases the opportunity of a company to commit fraud.
Give an example of something that a manager might use as a rationalization for overstating reported earnings fraudulently.
What are some reasons that would cause a manager not to use earnings management or fraud when reporting its financial results to investors?
What are some reasons that would cause a manager not to try to create large amounts of budgetary slack?
Explain the difference between rules-based standards and principles-based standards.
What are some advantages of a principlesbased accounting standard system, compared to a rules-based system?
What are some disadvantages of a principlesbased accounting standard system, compared to a rules-based system?
The chapter listed four ways that people react to a measurement that affects them: doing what the measurer wanted; doing something slightly different that is measured well; lying; and avoiding being measured. Note which type of behavior you think is being exhibited in each of 1 to 7 below. Also
The chapter listed four ways that people react to a measurement that affects them: doing what the measurer wanted; doing something slightly different that is measured well; lying; and avoiding being measured. Note which type of behavior you think is being exhibited in each of 1 to 4 below. Also
The chapter listed four ways that people react to a measurement that affects them: doing what the measurer wanted; doing something slightly different that is measured well; lying; and avoiding being measured. Note which type of behavior you think is being exhibited in each of 1 to 7 below. Also
The chapter listed four ways that people react to a measurement that affects them: doing what the measurer wanted; doing something slightly different that is measured well; lying; and avoiding being measured. Note which type of behavior you think is being exhibited in each of 1 to 5 below. Also
The chapter listed four ways that people react to a measurement that affects them: doing what the measurer wanted; doing something slightly different that is measured well; lying; and avoiding being measured. Note which type of behavior you think is being exhibited in each of 1 to 5 below. Also
The balance sheet of the Sunshine Corp. includes the following items (in dollars; the full balance sheet is not shown here):Assume the company had net income of $7,000 and sales of $90,000. The cost of goods sold was $60,000.A. Compute the current ratio. The formula for this is current assets
Shown below are summarized financial information for a retail company.All of this company’s stores are leased. The company treated the leases as operating leases. If it had treated the leases as capital leases, the present value of the lease obligations would have been $3,000. Assume that of this
Assume that the manager of a key division of the Dusk Corp. has a contract, that gives her bonuses based on the profits of her division.It is now early December. In the current year, she believes her division is likely to earn $9 million without her taking any special actions to manage earnings.Her
For each of the items listed below, indicate if it is an example of: an incentive or pressure to commit financial fraud; opportunity; or rationalization. You may feel that some examples relate to more than one of the three parts of the triangle.A. There has been a significant decline in customer
The chapter mentioned that one problem that perpetrators of fraud have is that, when they inflate income, they must also misstate some other account so that the accounting equation will balance. In one real fraud, the company used all of the following methods to try to conceal a large overstatement
In Chapter 4, various ratios and other tools for analyzing financial statements were introduced. For each of the following examples, indicate if an unusual ratio might indicate the company misstating some asset or liability. Explain your answers.A. Inventory turnover is much lower than normal.B.
According to charges made by the SEC, Enron Corporation engaged in a number of “prepay transactions” with Citigroup and J. P. Morgan Chase41 between 1997 and 2001, totaling billions of dollars. In these cases, Enron sold certain commodities to a company owned by one of these banks, and received
This question applies the ideas of the “fraud triangle” to cheating by college students. For each of the following, indicate which part of the fraud triangle is involved: incentive or pressure; opportunity; rationalization.You may believe more than one part of the triangle is involved.A. The
The fraud triangle involves incentives or pressures; opportunity; and rationalizations.Assume a company believes that it would be good if many of its employees donate blood. It cannot order employees to give blood. How might the company use the three parts of the fraud triangle to increase
A model for detecting fraud developed by Messod Beneish(1997) includes eight different factors. Listed below are some of these factors.Explain, for each one, why the factor is likely related to a company improperly reporting overly high earnings. Your answer might involve a pressure on the company
In some cases, FASB standards seem to have been designed to prevent certain reactions by management to engage in “real earnings management” or “window dressing.” Explain what actions the FASB may have been trying to prevent in these cases:A. Classifying leases. The FASB says that a lease is
There has been academic research to develop a measure of the likelihood that a company’s financial reporting is overly aggressive, and contains a high risk of fraud. Could there be any bad effects of creating such a fraud detection measure and making it widely available to the public?
When a company is found to have misstated its financial results, who do you think should be punished—the company, the officers, or both? Remember, while corporations are legally separate from their owners, payments by corporations are ultimately a cost to their shareholders.
Given that there are market pressures to behave honestly, is there any reason that we need to have government regulation of financial reporting by companies? Are market forces sufficient?
What is meant by perfect and complete markets?
Do you believe the market for used cars is a “perfect market”? Explain your answer.
Which of the following types of corporate assets do you think there are functioning “perfect” markets for? Explain your answer.A. U. S. Treasury bonds B. Inventories of standard grades of crude oil C. Inventories of men’s suits D. Equipment used in the assembly line for cars the company makes
What is meant by “historical cost” valuation? Is it an entry price or an exit price?
What is the FASB’s definition of “fair value,” for financial assets? Is it an entry price or an exit price?
What is meant by “net realizable value”? How does it differ from the FASB’s definition of “fair value” with regard to the treatment of transaction costs?
How does the FASB say that the fair value of a nonfinancial asset should be determined?
Why do accountants usually not use liquidation value in financial accounting?
What are some good features of historical cost accounting?
What are some bad features of historical cost accounting?
What is “gains trading”? Why does it arise with historical cost accounting, but not with fair value accounting?
If there is rapid inflation, explain how this would cause the balance sheet assets to be understated for companies with large amounts of fixed assets that use historical cost accounting.
If there is rapid inflation, explain how this would cause income to be overstated for companies with large amounts of fixed assets that use historical cost accounting.
What are some good features of fair value accounting?
What are some potential problems with fair value accounting?
Compare the use of fair value accounting and historical cost accounting for an office building owned by a company, in terms of the following factors from the FASB’s conceptual framework:A. Decision-usefulness (assuming the company intends to keep and operate the building)B. Decision-usefulness
Compare the use of fair value accounting and historical cost accounting for a 20-year U.S. Treasury bond owned by a company, in terms of the following factors from the FASB’s Conceptual Framework:A. Decision-usefulness (assuming the company intends to keep the bond until it matures)B.
Which valuation method is usually used for land used in the business?
Which valuation methods are used for intangible assets that were:Purchased from others, and have definite lives?Purchased from others, and have indefinite lives?Developed internally by the company?

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Introductory Accounting A Measurement Approach For Managers 1st Edition Daniel P. Tinkelman - Solutions

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