Knowledge that Transforms

This article presents a list of problems that were prepared by the Board of Examiners of the American Institute of Certified Public Accountants (CPA) and were presented as the second half of the CPA examination in accounting practice on November 3, 1966. The candidates were required to solve the first four problems and either problem five or six. Time allocated for first problem is 30 to 40 minutes, second problem is 50 to 60 minutes, third problem is 40 to 50 minutes, fourth problem is 50 to 60 minutes and 5th or 6th problem is 50 to 60 minutes. All questions are pertaining to the taxation of partnerships and the answer is to be selected in accordance with the current internal revenue code and regulations. Examinees are instructed to select one answer for each question and their grade will be determined from their total score of correct answers. In the end of the test solutions are also provided to help the examinee. All the questions of the test deals with the internal revenue code and regulations.

The article examines various aspects of the concept of replacement value accounting. Replacement value theory is a particular measurement concept employed in ascertaining what constitutes that maintenance of a capital for the entire entity. Income is the residual that exists after capital is maintained in that sense dictated by this special measurement concept. In some cases it is possible that the capital to be maintained is measured in terms of current replacement costs. Historical cost accounting and the general or specific price level adjustments to it are restricted in the amount of their charges against revenue to the historical or price-level adjusted historical costs of those assets which the entity presently holds. In order to provide a detailed contrast with the price-level adjustments, it is necessary to leave the conceptual level of replacement-value accounting. However, whenever the individual-asset-and-liability-levels are selected for the purposes of brief comparisons, certain simplifying assumptions are required.

Reviews the book "Valuation: Concepts and Practice," by Erich Helfert.

Reviews the book "Advanced Accounting," by Charles H. Griffin, Thomas H. Williams and Glenn A. Welsch.

This article focuses on a study which discussed the views of accounting professors on the problem of efficient utilization of faculty in the teaching of elementary accounting. The need for more efficient utilization of the teaching staff is a pressing problem today with mounting enrollments and a continuing shortage of qualified accounting professors. Some universities have kept their elementary accounting sections small by staffing them with graduate assistants. Other schools schedule large lecture-hall sections taught be regular faculty members. Others reach a large number of students with a single professor via television. The author conducted a study in which thirty-two leading accounting professors presented their views on the problem of more efficient utilization of faculty in the teaching of elementary accounting. The conflict inherent in large group instruction between the necessity of providing instruction to large numbers of students and the desirability of close personal contact between instructor and students is unresolved.

This article focuses on valuation of taxes to be paid by companies. There are three appraisals to be considered by the company, they range from $9.4 to $11.9 million and the $2.5 million deviation is unfortunate and sufficient cause of concern. Compare these to the possibilities for recorded cost. The company used an amortization method that resulted in a zero book value. If it had used Internal Revenue Service guidelines it would have $11.5 million book value, and if it purchases the plant as agreed it will have $1.7 million book value. The deviation of $11.5 million is about five times as large or twice as large as the appraisal deviations. Second, there is the concern over the number of different appraisals with the implication. Initial construction costs are subject to various methods of accumulation which are subject to various methods of cost collection, and so forth until one get back to the cash expended or a fair market value at some past time or some other value. Thus, the initial cost is subject to variation. Finally, there is the objective and verifiable notion. The accountant takes a set of figures which he freely admits are subjective, arranges them in an equation, and then calculates a figure that he considers to be objective.

Reviews the book "Control and Management of Capital Projects," by John W. Hackney.

Reviews the book "Fundamental Accounting Principles," 4th ed., by William W. Pyle and John Arch White.

Reviews the book "Accounting, Evaluation and Economic Behavior," by Raymond J. Chambers.

The article presents mathematical reasoning behind the formula known as the compound interest or exponential law of growth. This formula assumes that there is continuous or instantaneous growth. This type of accumulation is valid when rates of growth are applicable to biological problems or, in business, when the magnitudes of the investments allow to reasonably assume that the interest is earned practically every instant. But for many types of investment the continuous case is not applicable. The principal remains unchanged until the end of the period and then receives, in a lump sum, the total gain that corresponds to the given period. Mathematically we say that accumulation is discrete, not continuous. A different formula is used to determine the amount in those cases. That formula is equally applicable to the discrete case, but the error may be larger and is a function of the rate. That formula is no substitute for the conventional methods of financial mathematics. But it is so simple that it can be used as a fast indicator of growth perspectives.