In any criminal justice role, it is beneficial to have an understanding of basic budget components. You may be asked to provide input on a budget-related to your work, retrieve information from a budget, or create a budget for your department. In this assignment, you explore the basics of budgets, finances, and planning, with special consideration for how these apply to criminal justice agency budgeting. Consider private and public sectors of business, as well as criminal justice agencies, as you research your paper.
.
.
Step 2: Write an 875- to 1,050-word paper in which you do the following:
.
➔List the standard items that are included in a public sector and private sector budget.
.
➔Explain who is involved in the creation of budgets for criminal justice agencies, and what their roles are.
.
➔Compare public and private business budget preparation strategies, addressing the following questions:
.
❖How are budgets prepared?
❖What are some funding sources?
❖Which sector would you prefer to budget for? Explain.
.
➔How can you apply business budgeting concepts in the creation of an effective criminal justice agency budget?
.
Step 3: Cite a minimum of 2 peer-reviewed sources.
6.Activity: Pareto Analysis and Business Process Flow Charting Practice This activity consists of two problems. Problem One Gary Seitz is director of procurement for the Forest Medical Center in Oak Park, Illinois. His medical center recently purchased more than 300 new side tables for the patient rooms from Quick-and-Cheap Furniture. His team, however, is not happy with the paint quality of these tables. They feel the firm providing the tables was rushed to get the order out and did not do a great job. They have examined each of the 312 tables that they have received so far and found the following defects, listed in alphabetical order:
7. Instructions Use Excel to:
●Create a Pareto Chart for this situation.
●Create and complete a table for this situation using the following headers:
○Problem.
○Frequency.
○Cumulate Frequency.
○Percentage.
○Cumulate Percentage.
●List the most frequently occurring problem first in the table, then the next more frequently occurring problem second in the table, and so forth.
8.In a Word document:
●Draw two conclusions about the quality of the patient tables that Quick Furniture has shipped to the Forest Medical Center.
9.Submit both your Word and Excel files. Problem Two Ted Short, manager of procurement at the Lake Luna Medical Center (LLMC), is starting a process to examine at the general process that is followed at his center for procurement of medical supplies at his facility. His first step is to develop a flowchart for the current process that employees at his center follow. He has asked you to draw that flowchart for him and make any obvious changes to shorten the process. Here are the key steps that are followed:
●The LLMC employee fills out a paper requisition and sends that to his department head for approval.
●The department secretary first examines the requisition to see if all needed information is present. If it is, then she sends to the department head for approval. If not, she returns to the employee for any needed corrections. The employee then returns the requisition to the department secretary for review again.
●Requisitions with the correct information are sent to the department head.
●The department head reviews the item to determine if the material requested seems appropriate. He may contact his employee to discuss any questions he might have.
●If he feels it is inappropriate, then he rejects the request and sends it back to the employee.
●If he feels it is appropriate, then he checks the budget to see if there are sufficient monies in the budget to pay for this. If there are not, then he rejects the request and sends it back to the employee. If there are sufficient funds, then he approves them.
●If the requisition is approved, then the department secretary sends the requisition to a member of the LLMC Procurement Team.
●The LLMC procurement specialist checks to see if the suggested vendor on the requisition is on the approved vendor list (AVL).
●If not, he sends the request back to the department secretary and the process starts all over if the LLMC employee wants to continue to pursue it. If the employee does not, then the requisition is terminated.
●If the vendor is on the AVL, the LLMC procurement specialist checks to see if a quote is required, either based on the type of equipment and material required or on the amount of the purchase.
●If no quote is required, the procurement specialist transmits the PO to the vendor for execution.
●If a quote is required, then the specialist contacts the vendor and asks for a quote. If the quote is satisfactory based on past purchases of such items, the specialist approves the quote and places the order.
●If the quote is too high, the specialist contacts the LLMC employee and asks for another vendor to check. The procurement specialist then checks the second vendor. Usually, a procurement specialist will have to check only two vendors at most.
●If the specialist cannot find a vendor with it suitable price after two tries, then the PO is cancelled.
●When the specialist finds a vendor who submits a suitable quote, the transmits the PO to the vendor for execution by US postal service or by telephone.
●The procurement specialist then logs the transaction into the financial system.
●The procurement specialist then forwards the request to the Accounts Payable Department for payment when the receipt of the materials and equipment ordered, if acknowledged.
10.Instructions Use Microsoft Word to complete the following:
●Develop a flowchart for this process.
●Suggest three improvements, based on total quality management, that Ted Short can use to make the current process more efficient.
Response to these two discussions below respectively with critical thinking and references.
.
Example：
I did not know of Russias power over Crimea, and deciding to look into it more after reading your post. I can understand the current conflict at the Russia- Ukraine boarder better with this knowledge. It is no wonder the West worries that Russia will actually attempt to take over Ukraine as a whole since they have already illegally gained control of Crimea, almost seven years ago now (Pifer, 2020).
It seems the taking over of Crimea was done in response to Ukraine signing an association agreement with the European Union (Pifer, 2020). I think this made Putin fear having western influence so close to what was a communist soviet Russia at one point. According to the article I read, not longer after that agreement was signed were Russian soldiers turning up at key facilities and checkpoints in Crimea (Pifer, 2020).
In Putin fashion, the referendum that later took place to determine whether Crimea would become more independent or join Russia; determined 96.7% voted to join Russia (Pifer, 2020). This conclusion has scholars baffled because over 40% of those alleged to have voted in the 83% voting turnout are ethnic Ukrainians and Crimean Tatars who would not have voted to join Russia (Pifer, 2020). Just two months later a report was leaked from a Human Rights Council in Russia which stayed only 30% of people voted and about 50% voted to join Russia (Pifer, 2020). Which in my view means that they attempted to allow few to vote, and only those they thought would win them back Crimea Moscow has continually claimed ownership (Pifer, 2020).
But regardless of claims, or the fact that around the time it was taken there was about 60% of ethnic Russians living there, Crimea was recognized to be apart of Ukraine after the Soviet Union collapsed (Pifer, 2020). The taking of Crimea is in direct violation of many international agreements including the 1997 Treaty on Friendship, Cooperation and Partnership between Russia and Ukraine (Pifer, 2020).
I can definitely see the Russian government using the media as a tool to misinform Russian people about Russias true claim to Crimea. It is hard to criticized your government when you are faced with little information that does not support the governments actions. Media outlets who do criticize it do not get the same access to the public as bigger publications who post the things Putin wants out there. As you mentioned, having actual pro-Russian personnel be given high ranking position in media outlets would definitely ensure only information he wanted out, would be published.
Given the information discussed about the acquisition of Crimea, and the current state of the Russia and Ukraine boarder, what do you predict will happen in the ongoing crisis?
Do you think Russia will truly advance into Ukraine?
Interested to hear your thoughts!
.
.
The discussions need to response：
1.Within Russia, censorship of news sources and the internet is nothing out of the ordinary under the rule of Vladimir Putin. Media regulation and information rights are consistently breached and withheld from residents of Russia and have been presented as a growing issue within the country. Having control of the majority of the news that is shown to Russian citizens, the government’s new target has fallen upon social media platforms.
When investigating the growing issue of media regulation and information rights within social media, I discovered an example that demonstrates Russia’s attempt to regulate social media since it has become one of the main resources for critical public debate in Russia, especially in regards to Alexei Navalny (Human Rights Watch, 2021). Alexei Navalny is the political opposition of Putin who was imprisoned and has sparked protests amongst the citizens of Russia (Human Rights Watch, 2021). To combat those attempting to protest through social media, the Investigative Committee, Russia’s criminal investigation service, posted a video to Youtube claiming that Navalny and his supporters are sponsored by those overseas (Human Rights Watch, 2021). Furthermore, the Russian government has even gone as far as fining social media platforms such as Facebook, Tiktok, Instagram, Twitter, Youtube, VKontakte, and Odnoklassniki, which failed to remove “illegal content” and content that encouraged children to protest (Human Rights Watch, 2021). These acts of the government are a clear representation that the government is attempting to regulate the media in their favour and restrict their citizens from their right to protest.
In addition to restricting the people of Russia’s freedom of speech over social media, they are also monitoring the social media of Russian youth for signs of LBGTQ+ activity and propaganda. Teachers were being instructed to monitor the social media of students between the 5th and 11th grades and report those who showed LGBT symbols to the authorities, along with their addresses and physical descriptions (Baume, 2020). This form of media regulation has stemmed from the anti-gay propaganda laws created in 2013, which has banned queer culture and knowledge from media and public spaces under the pretense that it protects children against the promotion of “non-traditional” sexual relations (Human Rights Watch, 2018). This example can be analyzed through the Network Gatekeeping Theory, which is a theory that explores different reasons why information is included or excluded from the network (Castells, 2011). This theory explains that social actors look to establish their power through gatekeeping strategies to restrict access to ideas that do not add value to the network or go against the actors’ best interests (Castells, 2011). Information regarding the LBGTQ community does not align with the homophobic views of the Russian government, therefore, is restricted to the Russian population.
At this point in my writing process, I have yet to find a third example or an additional theory to incorporate into my paper. If anyone has any suggestions or news articles that they are willing to share I would appreciate the help! Looking forward to hearing from you all and reading your posts!
.
2.The importance of media in a global context is extensive, with huge influence on societies allowing growth for individuals and societies together. Media has evolved social movements to create a positive an informed environment for people around the world but has also come to criticisms for the negative environment and influences it can pose. Media including television, newspaper, and social media have been outlets for governments to positively or negatively shape countries. Countries such as Russia has heavily regulated the use of media with the goal of managing the spread of information and controlling the narrative.
Throughout this assignment Russian media and regulations will be examined to identify it’s importance on the social, cultural, political, and economic aspects of the country’s identity. Russia holds great ownership and influence over media outlets within the nation and has also implemented strict censorship policies in regards to media and internet that are becoming increasingly oppressive.
The Russian government holds ownership over a major proportion of Russian newspapers and television outlets. Specifically the government owns two of the most viewed television channels that are available to individuals within the country (Zakem et al., 2018). This leaves little room for a diverse culture of information and media available to the citizens of Russia creating an impact on the shape of the country’s social and political identity. The remaining television channels are greatly influenced and hold strong ties to the government in Russia (Zakem et al., 2018) . With the Russian government holding significant control over the television channels it has resulted in a 40% distrust for Russian television viewers. This has led some individuals turning to Western media outlets in an attempt to gain more insightful information (Zakem et al., 2018) . The distrust and skepticism in Russia’s television broadcasting and information presented in news media has led programming to turn to “political talk shows” in an attempt to manage public opinions and knowledge in a more authentic manner (Zakem et al., 2018) .
Another example of the extensive censorship by the Russian government in attempt to maintain control of information is the increasing policies regarding social media platforms. The government has placed oppressive restrictions on social media platforms within the country such as requiring major social media platforms like TikTok to remove any content that would be deemed “illegal” within the Russian state (“Russia: Social Media,” 2021). Many are viewing these policies as a human rights violation in regards to freedom of speech and oppression. The goals of the censorships are to regulate the spread of information and to decrease protesting within the state with the government stating that these platforms “manipulate people’s minds” (“Russia: Social Media,” 2021).
The result of these censorship laws that have been increasing within the country has created a large impact on the social identity of the country. Individuals residing in Russia have expressed their increasing frustration with the political ideologies of the government. Mass protests have been an outcome of the increasing outrage towards government corruption within the state (“Russia: Social Media,” 2021).
What are your opinions on the distrust and censorship policies that have been implemented in Russia? Do you view these regulations as a human rights violation?
the levels we generally talk about are Grand, Middle-Range, and Practice Level (Smith & Parker, 2020).
•Grand theories-Have concepts and relational statements (or assumptions) that reflect philosophies and include values and beliefs.
◦Example: Orem’s self-care deficit theory-This theory focuses on patients wanting to take care of themselves and nurses helping them to do so. Grand level theories generally address concepts of the metaparadigm of nursing (Person, Health, Environment, Nursing)
•Middle-Range Theories-Are broad enough for complex situations yet can be empirically tested.
◦Example: Power as Knowing Participation in Change-Includes power as Freedom and Control and Power as Knowing. (Includes concepts that can be measured or tested.)
•Practice-Level theories -Used in specific range of nursing situations, guide interventions and activities.
◦Example: Heart Failure Medication Management
As you look at the definitions, does burke-Harris team ACES theory guide a person in theories and beliefs? Is it able to be tested? Is it limited in scope and only useful in a specific nursing situation?
While choosing the level of theory is not super important, it does help in knowing how much the theory could explain. As I look at this theory, it seems testable, so I would not choose Grand. It seems bigger than a specific situation, so I would actually call it middle-range.
There are multiple types of economic value added to products from their source to the retailers and, ultimately, the consumer. In one sense, the guest of a restaurant is paying for economic value by ordering a burger, because it is prepared in the form they want, delivered where they want it, at the time that they want, rather than having to go to the source for raw beef, vegetables, wheat, etc.
We typically discuss: Time, Form, Place, Information, and Services economic values.
.
Directions The purpose of this exercise is to explore these various types of economic value. For each product, identify the type of economic value and specify how that type is being added. If a type of economic value does not apply, write NA.
.
Example
Product: Ground beef bought at grocery store
•Time
◦Purchasing the meat when you want it, and not when the cows were ready. The ground beef has been stored in the supply chain and at the grocery store, ready for you to purchase it when you want.
•Form
◦Purchasing the meat already ground, and packaged in the size you want. You didn’t have to buy the whole cow, have it processed, then deal with having all the different cuts of meat (upwards of 600 pounds of meat at a time). All you had to do was choose to buy a 1 pound roll of ground beef.
•Place
◦Purchasing the meat from the local grocery store, not at the farm or processing plant (wherever that was in the world).
•Information
◦Purchasing exactly what you wanted, and knowing that. For example you could have purchase exactly 25/75 ground beef. Rather than waiting to see how much fat was in the beef after buying the whole cow. The processing plant put this information on the package so you could use it to buy just what you wanted.
•Services
◦Not applicable in some cases. It is possible that that package of ground beef has a QR code on it; if you scan it, it will pull up a recipe you can use for dinner. This is a pretty mediocre example of services, but it still counts.
.
Application problems
Product: 80 quart Hobart stand mixer
•Time
•Form
•Place
•Information
•Services
.
Product: 1 foot square slate floor tiles for guest bathrooms
•Time
•Form
•Place
•Information
•Services
.
Product: 1 liter hand sanitizer bottles with pumps for front desk and other areas
•Time
•Form
•Place
•Information
•Services
.
Product: 3 ounce hand sanitizer bottles for guest room amenities
•Time
•Form
•Place
•Information
•Services
.
Product: King bed sheets
•Time
•Form
•Place
•Information
•Services
.
Product: Sourdough French bread loaves
•Time
•Form
•Place
•Information
•Services
.
Product: Hamburger buns
•Time
•Form
•Place
•Information
•Services
.
Product: 5 lb spring mix
•Time
•Form
•Place
•Information
•Services
.
Product: 10 pounds of cherry tomatoes
•Time
•Form
•Place
•Information
•Services
.
Product: 5×6 slicer tomatoes
•Time
•Form
•Place
•Information
•Services
.
Product: Russet potatoes, 14 ounces each
•Time
•Form
•Place
•Information
•Services
.
Product: Ribeyes individually cryovac’d from Sysco
•Time
•Form
•Place
•Information
•Services
.
Product: Towel service for kitchen, 20 bundles a week
The process for affecting positive change to improve practice outcomes can start with either the identification of an area of interest or the identification of a potential or existing practice problem. Selecting an area of interest helps to define a direction for further inquiry. The purpose of this assessment is for students to identify and discuss an area of interest specific to advanced practice nursing. Students will identify a common practice problem related to the selected area of interest and provide a recommendation to affect positive change. Students will build on this project in later courses.
Note: The purpose of the MSN project is to translate evidence currently found in the literature into practice within the chosen specialty track. Due to the research complexity, time involvement, and implications regarding human subjects, drug studies are not acceptable areas of interest for an MSN project.
Activity Learning Outcomes
Through this assignment, the student will demonstrate the ability to:
1.Examine roles and competencies of advanced practice nurses essential to performing as leaders and advocates of holistic, safe, and quality care. (CO1)
2.Analyze essential skills needed to lead within the context of complex systems. (CO3)
3.Explore the process of scholarship engagement to improve health and healthcare outcomes in various settings. (CO4)
.
.
.
Requirements:
Criteria for Content
For this presentation, select an area of nurse practitioner (NP) practice that is of interest to you and in which you would like to see a practice change occur. Conduct a review of literature to see what is currently known about the topic and to find research support for the practice change you are recommending. You may use a topic from the list at the link below or may investigate a topic of your choice as long as it pertains to NP practice. If you are unsure of your topic, please reach out to your instructor. Be sure to provide speaker’s notes for all slides except the title and reference slides.
Create an 8-12 slide PowerPoint Presentation that includes the following:
1.Introduction: slide should identify concepts to be addressed and sections of the presentation. Include speaker’s notes that explain, in more detail, what will be covered.
2.Evidence-based projects: slide should explain the general importance of master’s-prepared nurses engaging in evidence-based projects related to nursing practice and profession. Provide speaker’s notes with additional detail and support from at least one outside scholarly source (not the textbook or course lesson).
3.Conceptual Model: slide should provide an illustration of a conceptual model that could be used to develop an evidence-based project. Possible models include The John’s Hopkins or Advancing Research and Clinical Practice through Close Collaboration (ARCC) Models or you may select another model you find in the literature. In the speaker’s notes, explain how the model would be applied to the development of an evidence-based project. Provide support from at least one outside scholarly source (not the textbook or course lesson).
4.Area of Interest: identify an area of interest related to NP practice in which a practice change may be needed. Slide should identify the area of interest and what is currently known on the topic. Speaker’s notes more fully explain what is currently known and should provide rationale for why the area of interest is important to NP practice. Provide support from at least one outside scholarly source (not the textbook or course lesson).
5.Issue/concern and recommendation for change: slide should identify a specific concern related to your general area of interest and your recommendation for a practice change. Speaker’s notes should more fully explain the recommended change and rationale for the change. Recommendation should be supported by at least one outside scholarly source (not the textbook or course lesson).
6.Factors Influencing Change: slide should identify at least 2 internal and external factors that could impact your ability to implement your recommended change. Speaker’s notes should more fully explain how the factors you’ve identified would support or impede the implementation of your recommendations. Factors may be based on personal experience or on information you found in your research. If the identified factors come from the literature, provide reference citations to support your ideas.
7.NONPF Competencies: slide identifies at least two NONPF Competencies that are relevant to an evidence-based project related to your area of interest. Speaker’s notes should explain how the competencies relate to your area of interest. Provide support from at least one outside scholarly source (not the textbook or course lesson).
8.Conclusion: slide provides summary points of presentation. Speaker’s notes provide final comments on the topic.
Preparing the presentation
Submission Requirements
1.Application: Use Microsoft Power Point™ to create the PowerPoint presentation.
2.Length: The PowerPoint presentation must be 8-12 total slides (excluding title and reference slides).
3.Speaker notes are used and include in-text citations when applicable.
4.A minimum of four (4) scholarly literature references must be used.
5.Submission: Submit your file: Last name First initial_Wk6Assessment_Area of Interest.
.
.
Question 2
.
Reflection: write 1-2 paragraphs reflecting on your learning for the week. Guiding questions are provided or you may write about what you felt was most significant to you for the week. .
You will need to post your reflection here before you are able to see other students’ posts.
•As you contemplate your future NP practice, how do you view your role in the implementation of EBP?
•What thoughts do you have about how you will engage in scholarship in your NP role?
•What are some barriers you see to implementing evidence-based practice?
Things you can talk about: the purpose/thesis statement, the structure of the argument, Kristof’s credibility (ethos), his use of other appeals (logos, pathos), use of evidence, tone, the audience.
Remember to label your post.
https://www.nytimes.com/2014/08/14/opinion/nicholas-kristof-dont-dismiss-the-humanities.html?hp&action=click&pgtype=Homepage&module=c-column-top-span-region®ion=c-column-top-span-region&WT.nav=c-column-top-span-region&_r=0Bottom of Form
Assignment 3: Translate the Evidence into Practice (25 points)
The next steps in the evidence-based practice (EBP) process includes implementing and translating the intervention chosen in the PICOT question (Week 1) into the clinical setting. Pilot projects are often used before implementing a change into an entire organization. Discuss the following questions related to implementing the chosen PICOT intervention as if a pilot test project were being facilitated by the masters prepared nurse:
PICOT Question:
In older people with Alzheimer’s disease (AD), how efficient are mental stimulation and memory training compared to Aducanumab in managing agitation and restlessness throughout 10 years after initial diagnosis?
.
Assignment Criteria:
1.Briefly explain the problem and the PICOT question and the intervention
2.Describe the pilot project for the chosen intervention and include:
a.Explain the who, what, where, when and how of the pilot project
b.Describe a specific model or framework of change that will be used to facilitate the implementation of the intervention.
3.Describe the stakeholders and their roles in the pilot project.
4.Propose two (2) strategies that would promote engagement of the stakeholders in the project.
5.Discuss a specific practice guideline that supports the intervention.
6.Identify major organizational resources needed for the pilot project.
7.Discuss how the outcome of the intervention will be measured.
8.The scholarly paper should be in narrative format, 5 to 6 pages excluding the title and reference page.
9.Include an introductory paragraph, purpose statement, and a conclusion.
10.Include level 1 and 2 headings to organize the paper.
11.Write the paper in third person, not first person (meaning do not use ‘we’ or ‘I’) and in a scholarly manner. To clarify: I, we, you, me, our may is not used. In addition, describing yourself as the researcher or the author should not be used.
12.Include a minimum of four (4) professional peer-reviewed scholarly journal references to support the paper (review in Ulrich Periodical Directory) and be less than five (5) years old.
13.APA format is required (attention to spelling/grammar, a title page, a reference page, and in-text citations).
14.Submit the assignment to Turnitin prior to the final submission, review the Originality Report, and make any needed changes.
15.Submit by the posted due date.
.
.
.
.
Assignment 3: Translate the Evidence into Practice (25 points)
Assignment Criteria
10 points
9 points
7 points
0 points
.
All topics/criteria addressed and all questions fully answered.
All topics/criteria addressed and most questions fully answered.
All topics/criteria addressed and most questions partially answered.
One or more topics/criteria not addressed or completely answered.
Quality/Accuracy of Information
9 points
8 points
4 points
0 points
.
Information clearly relates to the main topic/criteria. It includes several supporting details and/or examples.
Information clearly relates to the main topic/criteria. It provides supporting details and/or examples.
Information clearly relates to the main topic/criteria. A few details and/or examples are given.
Information has little or nothing to do with the main topic/criteria.
Organization
4 points
2 points
.50 points
0 points
.
Information is very organized with well-constructed paragraphs and levels of heading.
Information organized with well-constructed paragraphs and levels of heading.
There is an attempt at organization but errors exist. No levels of heading.
The information or overall structure appears disorganized.
Sources
2 points
1 point
0.5 points
0 points
.
All references are from a relevant professional peer-reviewed scholarly journal, within a 5-year timeframe, or a classic/ historical source.
The majority of references are from a relevant professional peer-reviewed scholarly journal, within a 5-year timeframe or a classic/historical source.
Some references are from non-peer-reviewed scholarly sources or older than 5-years.
Majority of references are from non-peer-reviewed scholarly sources or older than 5-years.
Earned Points
.
.
.
.
Up to 10% of the assigned points (total points of assignment) can be deducted from the earned points for errors in APA style [title page, introduction, purpose statement, level heading, conclusion, references, citations, and format], spelling, and/or grammar.
The process for affecting positive change to improve practice outcomes can start with either the identification of an area of interest or the identification of a potential or existing practice problem. Selecting an area of interest helps to define a direction for further inquiry. The purpose of this assessment is for students to identify and discuss an area of interest specific to advanced practice nursing. Students will identify a common practice problem related to the selected area of interest and provide a recommendation to affect positive change. Students will build on this project in later courses.
Note: The purpose of the MSN project is to translate evidence currently found in the literature into practice within the chosen specialty track. Due to the research complexity, time involvement, and implications regarding human subjects, drug studies are not acceptable areas of interest for an MSN project.
Activity Learning Outcomes
Through this assignment, the student will demonstrate the ability to:
1.Examine roles and competencies of advanced practice nurses essential to performing as leaders and advocates of holistic, safe, and quality care. (CO1)
2.Analyze essential skills needed to lead within the context of complex systems. (CO3)
3.Explore the process of scholarship engagement to improve health and healthcare outcomes in various settings. (CO4)
.
.
.
Requirements:
Criteria for Content
For this presentation, select an area of nurse practitioner (NP) practice that is of interest to you and in which you would like to see a practice change occur. Conduct a review of literature to see what is currently known about the topic and to find research support for the practice change you are recommending. You may use a topic from the list at the link below or may investigate a topic of your choice as long as it pertains to NP practice. If you are unsure of your topic, please reach out to your instructor. Be sure to provide speaker’s notes for all slides except the title and reference slides.
Create an 8-12 slide PowerPoint Presentation that includes the following:
1.Introduction: slide should identify concepts to be addressed and sections of the presentation. Include speaker’s notes that explain, in more detail, what will be covered.
2.Evidence-based projects: slide should explain the general importance of master’s-prepared nurses engaging in evidence-based projects related to nursing practice and profession. Provide speaker’s notes with additional detail and support from at least one outside scholarly source (not the textbook or course lesson).
3.Conceptual Model: slide should provide an illustration of a conceptual model that could be used to develop an evidence-based project. Possible models include The John’s Hopkins or Advancing Research and Clinical Practice through Close Collaboration (ARCC) Models or you may select another model you find in the literature. In the speaker’s notes, explain how the model would be applied to the development of an evidence-based project. Provide support from at least one outside scholarly source (not the textbook or course lesson).
4.Area of Interest: identify an area of interest related to NP practice in which a practice change may be needed. Slide should identify the area of interest and what is currently known on the topic. Speaker’s notes more fully explain what is currently known and should provide rationale for why the area of interest is important to NP practice. Provide support from at least one outside scholarly source (not the textbook or course lesson).
5.Issue/concern and recommendation for change: slide should identify a specific concern related to your general area of interest and your recommendation for a practice change. Speaker’s notes should more fully explain the recommended change and rationale for the change. Recommendation should be supported by at least one outside scholarly source (not the textbook or course lesson).
6.Factors Influencing Change: slide should identify at least 2 internal and external factors that could impact your ability to implement your recommended change. Speaker’s notes should more fully explain how the factors you’ve identified would support or impede the implementation of your recommendations. Factors may be based on personal experience or on information you found in your research. If the identified factors come from the literature, provide reference citations to support your ideas.
7.NONPF Competencies: slide identifies at least two NONPF Competencies that are relevant to an evidence-based project related to your area of interest. Speaker’s notes should explain how the competencies relate to your area of interest. Provide support from at least one outside scholarly source (not the textbook or course lesson).
8.Conclusion: slide provides summary points of presentation. Speaker’s notes provide final comments on the topic.
Preparing the presentation
Submission Requirements
1.Application: Use Microsoft Power Point™ to create the PowerPoint presentation.
2.Length: The PowerPoint presentation must be 8-12 total slides (excluding title and reference slides).
3.Speaker notes are used and include in-text citations when applicable.
4.A minimum of four (4) scholarly literature references must be used.
5.Submission: Submit your file: Last name First initial_Wk6Assessment_Area of Interest.
.
.
Question 2
.
Reflection: write 1-2 paragraphs reflecting on your learning for the week. Guiding questions are provided or you may write about what you felt was most significant to you for the week. .
You will need to post your reflection here before you are able to see other students’ posts.
•As you contemplate your future NP practice, how do you view your role in the implementation of EBP?
•What thoughts do you have about how you will engage in scholarship in your NP role?
•What are some barriers you see to implementing evidence-based practice?
PowerPoint Presentation: Changing a Promotion System
.
NO Title Page, just a reference page
“Applications: Changing a Promotion System” (pp. 555-556). Support the analysis and recommendations
Analysis:
•What is the likely cause(s) of Bioglass’ problems?
•Assess Bioglass’ performance appraisal process based on the questions in Exhibit 10.4.
References: 3 academic sources.
.
Accurately identify the cause(s) of Bioglass’ problems. Assess Bioglass’ performance appraisal process based on the questions in Exhibit 10.5.Fully supports analysis with evidence.
Write a formal essay answer consisting of three to five paragraphs for each question (introduction, body, conclusion). The document should be grammatically sound and free of spelling errors. Please provide answers that are detailed and complete and that are free of technical jargon, so that a novice can understand.
.
Question 1: Describe the place of SMS (Safety Management System) within safety theory
.
Question 2: Describe the importance of data sharing for aviation safety
.
Question 3: Compare the methods and strategies for quality assurance and safety assurance
•Week 4 – Consolidate Activity 1 (Mandatory) – Reflection on breaking bad news–
• In your nursing practice placement as a student nurse
•
•Write a 500 word reflection for your campus press on breaking bad news, where you have been on placement and helped or been present when breaking bad news to a patient or their family – use a commonly used reflective model. Please upload this to campus press when completed.
This day focuses on care for an acutely ill patient in an emergency setting
.
The objectives for the activities are:
•Provide safe nursing care to an adult patient in an emergency setting
•Evaluate objective and subjective assessment data
•Correlate laboratory values with potential patient problems
•Identify anticipated medical interventions
•Create a nursing plan of care based upon anticipated medical care
.
Patient Case Study
Answer the questions below according to the clinical case study
.
Synchronous Debriefing – Attend your clinical group’s Teams debriefing session
DML will occur at the end of your clinical day, together with your instructor and peers. Your instructor will provide you details regarding the time of the meeting.
.
During the meeting, you should be prepared to discuss the assignment you completed during your clinical day.
.
What to turn in?
See your clinical instructor for submission requirements for this week.
.
Case Study
.
Scenario
A 34–year old female comes into the ER stating she has been having abdominal pain, nausea, and vomiting for several days. Pain is 10/10.
For the “Warehouse Shopping Center” project, create a simple communication management plan. Your plan should follow the guidance in Figures 3.1 and 3.3 in the textbook(see page 2 below).
.
Consider the following questions:
•What will I need to communicate (project progress, other)?
•To whom will I need to communicate (stakeholders, contacts)?
•When will I need to communicate (timing, frequency)?
•Where will I communicate (location of the sender, receivers)?
•How will I communicate (media)?
•Why am I communicating (analyze all reports both planned and ad hoc to ensure rationale for communication effort is sound)?
•How do my planned communications close any gaps between project objectives and stakeholder expectations? How would such gaps be evaluated and fed back into the project communications cycle?
.
Finally, in addition to writing out your strategies and responses to the questions, summarize the who, what, when, where, how, and why into a quick reference table. For example, consider the building the library scenario in the earlier unit. The “who” would be the stakeholders such as members of the community, future patrons of the library to name just a couple. The “what” would include information regarding the progress of the construction, key milestones, and perhaps some announcements regarding the planned scope of the completed library (such as types of media available for checkout, services to be offered, etc.). Such a table is often used as a succinct at-a-glance form of the communications plan.
.
As a guide to depth, your Communication Management Plan should be a minimum of two pages in length. You may either create your table in Word and include it at the end of the document, or submit it as a separate Excel file.
.
Adhere to APA 7Style when constructing this assignment, including in-text citations and references for all sources that are used. Please note that no abstract is needed.
.
Note: In Unit VIII of this course, you will include a summary of your communication plan as part of a PowerPoint presentation.
.
.
Course textbook:
Singh, H. (2015). Mastering Project Human Resource Management. Pearson FT Press.
.
Figure 3.1 Project Communications Management Planning Process Flow
.
.
Figure 3.3 Project Communications Management Planning Process Summary
This day focuses on care for an acutely ill patient in an emergency setting
.
The objectives for the activities are:
•Provide safe nursing care to an adult patient in an emergency setting
•Evaluate objective and subjective assessment data
•Correlate laboratory values with potential patient problems
•Identify anticipated medical interventions
•Create a nursing plan of care based upon anticipated medical care
.
Patient Case Study
Answer the questions below according to the clinical case study
.
Synchronous Debriefing – Attend your clinical group’s Teams debriefing session
DML will occur at the end of your clinical day, together with your instructor and peers. Your instructor will provide you details regarding the time of the meeting.
.
During the meeting, you should be prepared to discuss the assignment you completed during your clinical day.
.
What to turn in?
See your clinical instructor for submission requirements for this week.
.
Case Study
.
Scenario
A 34–year old female comes into the ER stating she has been having abdominal pain, nausea, and vomiting for several days. Pain is 10/10.
For the “Warehouse Shopping Center” project, create a simple communication management plan. Your plan should follow the guidance in Figures 3.1 and 3.3 in the textbook(see page 2 below).
.
Consider the following questions:
•What will I need to communicate (project progress, other)?
•To whom will I need to communicate (stakeholders, contacts)?
•When will I need to communicate (timing, frequency)?
•Where will I communicate (location of the sender, receivers)?
•How will I communicate (media)?
•Why am I communicating (analyze all reports both planned and ad hoc to ensure rationale for communication effort is sound)?
•How do my planned communications close any gaps between project objectives and stakeholder expectations? How would such gaps be evaluated and fed back into the project communications cycle?
.
Finally, in addition to writing out your strategies and responses to the questions, summarize the who, what, when, where, how, and why into a quick reference table. For example, consider the building the library scenario in the earlier unit. The “who” would be the stakeholders such as members of the community, future patrons of the library to name just a couple. The “what” would include information regarding the progress of the construction, key milestones, and perhaps some announcements regarding the planned scope of the completed library (such as types of media available for checkout, services to be offered, etc.). Such a table is often used as a succinct at-a-glance form of the communications plan.
.
As a guide to depth, your Communication Management Plan should be a minimum of two pages in length. You may either create your table in Word and include it at the end of the document, or submit it as a separate Excel file.
.
Adhere to APA 7Style when constructing this assignment, including in-text citations and references for all sources that are used. Please note that no abstract is needed.
.
Note: In Unit VIII of this course, you will include a summary of your communication plan as part of a PowerPoint presentation.
.
.
Course textbook:
Singh, H. (2015). Mastering Project Human Resource Management. Pearson FT Press.
.
Figure 3.1 Project Communications Management Planning Process Flow
.
.
Figure 3.3 Project Communications Management Planning Process Summary
6.Activity: Pareto Analysis and Business Process Flow Charting Practice This activity consists of two problems. Problem One Gary Seitz is director of procurement for the Forest Medical Center in Oak Park, Illinois. His medical center recently purchased more than 300 new side tables for the patient rooms from Quick-and-Cheap Furniture. His team, however, is not happy with the paint quality of these tables. They feel the firm providing the tables was rushed to get the order out and did not do a great job. They have examined each of the 312 tables that they have received so far and found the following defects, listed in alphabetical order:
7. Instructions Use Excel to:
●Create a Pareto Chart for this situation.
●Create and complete a table for this situation using the following headers:
○Problem.
○Frequency.
○Cumulate Frequency.
○Percentage.
○Cumulate Percentage.
●List the most frequently occurring problem first in the table, then the next more frequently occurring problem second in the table, and so forth.
8.In a Word document:
●Draw two conclusions about the quality of the patient tables that Quick Furniture has shipped to the Forest Medical Center.
9.Submit both your Word and Excel files. Problem Two Ted Short, manager of procurement at the Lake Luna Medical Center (LLMC), is starting a process to examine at the general process that is followed at his center for procurement of medical supplies at his facility. His first step is to develop a flowchart for the current process that employees at his center follow. He has asked you to draw that flowchart for him and make any obvious changes to shorten the process. Here are the key steps that are followed:
●The LLMC employee fills out a paper requisition and sends that to his department head for approval.
●The department secretary first examines the requisition to see if all needed information is present. If it is, then she sends to the department head for approval. If not, she returns to the employee for any needed corrections. The employee then returns the requisition to the department secretary for review again.
●Requisitions with the correct information are sent to the department head.
●The department head reviews the item to determine if the material requested seems appropriate. He may contact his employee to discuss any questions he might have.
●If he feels it is inappropriate, then he rejects the request and sends it back to the employee.
●If he feels it is appropriate, then he checks the budget to see if there are sufficient monies in the budget to pay for this. If there are not, then he rejects the request and sends it back to the employee. If there are sufficient funds, then he approves them.
●If the requisition is approved, then the department secretary sends the requisition to a member of the LLMC Procurement Team.
●The LLMC procurement specialist checks to see if the suggested vendor on the requisition is on the approved vendor list (AVL).
●If not, he sends the request back to the department secretary and the process starts all over if the LLMC employee wants to continue to pursue it. If the employee does not, then the requisition is terminated.
●If the vendor is on the AVL, the LLMC procurement specialist checks to see if a quote is required, either based on the type of equipment and material required or on the amount of the purchase.
●If no quote is required, the procurement specialist transmits the PO to the vendor for execution.
●If a quote is required, then the specialist contacts the vendor and asks for a quote. If the quote is satisfactory based on past purchases of such items, the specialist approves the quote and places the order.
●If the quote is too high, the specialist contacts the LLMC employee and asks for another vendor to check. The procurement specialist then checks the second vendor. Usually, a procurement specialist will have to check only two vendors at most.
●If the specialist cannot find a vendor with it suitable price after two tries, then the PO is cancelled.
●When the specialist finds a vendor who submits a suitable quote, the transmits the PO to the vendor for execution by US postal service or by telephone.
●The procurement specialist then logs the transaction into the financial system.
●The procurement specialist then forwards the request to the Accounts Payable Department for payment when the receipt of the materials and equipment ordered, if acknowledged.
10.Instructions Use Microsoft Word to complete the following:
●Develop a flowchart for this process.
●Suggest three improvements, based on total quality management, that Ted Short can use to make the current process more efficient.
1.Why is it important to examine the marketing environment and organizational resources before proceeding to develop a marketing database?What are some of the examples of organizational resources available as mentioned in the CRISP DM methodology?
Please use your own words.Do not simply define the stages.
.
Question 3 (5 points)
2.You want to make an entire school database with various tables. Create 3 tables: teachers table, students table, feedback table (feedback is about teachers) that will be part of the database. Complete an example of the conceptual, physical, and logical tables for the database. You can make up the fields as you think appropriate.
You can take a copy your diagrams. Write your thought process behind the tables as well to show your work.
.
Question 4 (5 points)
3.Next you want to discuss the importance of the database to your colleagues. Using Codd’s commandments we discussed and other important characteristics of the database, describe at least 3 important things about the need for this database. Explain it in your own words so your colleagues will understand. Don’t just define the commandments.
The process for affecting positive change to improve practice outcomes can start with either the identification of an area of interest or the identification of a potential or existing practice problem. Selecting an area of interest helps to define a direction for further inquiry. The purpose of this assessment is for students to identify and discuss an area of interest specific to advanced practice nursing. Students will identify a common practice problem related to the selected area of interest and provide a recommendation to affect positive change. Students will build on this project in later courses.
Note: The purpose of the MSN project is to translate evidence currently found in the literature into practice within the chosen specialty track. Due to the research complexity, time involvement, and implications regarding human subjects, drug studies are not acceptable areas of interest for an MSN project.
Activity Learning Outcomes
Through this assignment, the student will demonstrate the ability to:
1.Examine roles and competencies of advanced practice nurses essential to performing as leaders and advocates of holistic, safe, and quality care. (CO1)
2.Analyze essential skills needed to lead within the context of complex systems. (CO3)
3.Explore the process of scholarship engagement to improve health and healthcare outcomes in various settings. (CO4)
.
.
.
Requirements:
Criteria for Content
For this presentation, select an area of nurse practitioner (NP) practice that is of interest to you and in which you would like to see a practice change occur. Conduct a review of literature to see what is currently known about the topic and to find research support for the practice change you are recommending. You may use a topic from the list at the link below or may investigate a topic of your choice as long as it pertains to NP practice. If you are unsure of your topic, please reach out to your instructor. Be sure to provide speaker’s notes for all slides except the title and reference slides.
Create an 8-12 slide PowerPoint Presentation that includes the following:
1.Introduction: slide should identify concepts to be addressed and sections of the presentation. Include speaker’s notes that explain, in more detail, what will be covered.
2.Evidence-based projects: slide should explain the general importance of master’s-prepared nurses engaging in evidence-based projects related to nursing practice and profession. Provide speaker’s notes with additional detail and support from at least one outside scholarly source (not the textbook or course lesson).
3.Conceptual Model: slide should provide an illustration of a conceptual model that could be used to develop an evidence-based project. Possible models include The John’s Hopkins or Advancing Research and Clinical Practice through Close Collaboration (ARCC) Models or you may select another model you find in the literature. In the speaker’s notes, explain how the model would be applied to the development of an evidence-based project. Provide support from at least one outside scholarly source (not the textbook or course lesson).
4.Area of Interest: identify an area of interest related to NP practice in which a practice change may be needed. Slide should identify the area of interest and what is currently known on the topic. Speaker’s notes more fully explain what is currently known and should provide rationale for why the area of interest is important to NP practice. Provide support from at least one outside scholarly source (not the textbook or course lesson).
5.Issue/concern and recommendation for change: slide should identify a specific concern related to your general area of interest and your recommendation for a practice change. Speaker’s notes should more fully explain the recommended change and rationale for the change. Recommendation should be supported by at least one outside scholarly source (not the textbook or course lesson).
6.Factors Influencing Change: slide should identify at least 2 internal and external factors that could impact your ability to implement your recommended change. Speaker’s notes should more fully explain how the factors you’ve identified would support or impede the implementation of your recommendations. Factors may be based on personal experience or on information you found in your research. If the identified factors come from the literature, provide reference citations to support your ideas.
7.NONPF Competencies: slide identifies at least two NONPF Competencies that are relevant to an evidence-based project related to your area of interest. Speaker’s notes should explain how the competencies relate to your area of interest. Provide support from at least one outside scholarly source (not the textbook or course lesson).
8.Conclusion: slide provides summary points of presentation. Speaker’s notes provide final comments on the topic.
Preparing the presentation
Submission Requirements
1.Application: Use Microsoft Power Point™ to create the PowerPoint presentation.
2.Length: The PowerPoint presentation must be 8-12 total slides (excluding title and reference slides).
3.Speaker notes are used and include in-text citations when applicable.
4.A minimum of four (4) scholarly literature references must be used.
5.Submission: Submit your file: Last name First initial_Wk6Assessment_Area of Interest.
.
.
Question 2
.
Reflection: write 1-2 paragraphs reflecting on your learning for the week. Guiding questions are provided or you may write about what you felt was most significant to you for the week. .
You will need to post your reflection here before you are able to see other students’ posts.
•As you contemplate your future NP practice, how do you view your role in the implementation of EBP?
•What thoughts do you have about how you will engage in scholarship in your NP role?
•What are some barriers you see to implementing evidence-based practice?
Are you considering transferring credits to another school? Or do you want to finish college within the shortest time possible? This guide will show you how the Sophia Learning Credit Transfer System works and how you can benefit from it! In this guide, we will discuss:
– What is university and college credit transfer?
– Why one would need to transfer credit system?
– How does the Sophia Learning Credit Transfer System work?
– What are the benefits of using this system?
– How can I apply for the Sophia Learning Credit Transfer System?
We hope that this guide provides you with all the information you need to make an informed decision about transferring credits! So let’s get started!
The university and college credit transfer System
Credit transfer is the process of applying earned academic credits from one institution to the other. Students can apply for the degree of credit transfer for the same trade that they have been completed from their previous university. The Sophia Learning Credit Transfer System is an excellent way to get college credit for the courses you have already completed! It allows students to earn college credits for free by taking Self-paced university courses. The credit transfer system is a way for students to get the most out of their education by transferring the credits they have earned from other institutions and to make sure we test in the most through way and ensure no credit will be rejected once given the go ahead.
What are the benefits of using the Sophia Learning Credit Transfer System?
There are many benefits of using Sophia Learning to clear out your general education requirements at the university which include:
– Free college credit for Self-paced university courses you have already completed.
– Easily and automated transfer credits to any of our partnered universities.
– Get ahead in your degree program by transferring more credits than required!
– You get to accumulate college credits while still in high school!
How does the Sophia Learning Credit Transfer System work?
The credit transfer process is simple and easy to follow. After you have registered for a Self-paced university course, your transcript will be automatically generated and sent to our partnered universities that you have chosen. Your credits will then be transferred instantly and you the credits at your pace as they are self paced.
The need for a transfer credit system
No one is interested in doing the same course twice. So, if you have already completed a course or are currently enrolled in one, the last thing you would want is to retake it. The credit transfer system allows students to get the most out of their education by transferring the credits they have earned from other institutions and/or Self-paced university courses.
Credits that are not accepted? We work with partner institution to ensure that all credits earned are accepted. The credit transfer process is simple and straightforward for most institutions. You are only required to provide your transcripts from other institutions and/or Self-paced university courses, and the university will do the rest. They will evaluate your credits and determine how they can be applied to one of the relevant degree programs. If you have any questions about the credit transfer process, please don’t hesitate to contact us! We would be more than happy to assist you.
a. Perform a Du Pont analysis on BestCare. Assume that the industry
average ratios are as follows:
Total margin 3.8%
Total asset turnover 2.1
Equity multiplier 3.2
Return on equity (ROE) 25.5%
b. Calculate and interpret the following ratios for BestCare:
Industry Average
Return on assets (ROA) 8.0%
Current ratio 1.3
Days cash on hand 41days
Average collection period 7days
Debt ratio 69%
Debt-to-equity ratio 2.2
Times interest earned (TIE) ratio 2.8
Fixed asset turnover ratio 5.2
There are TWO parts (A & B) in this assignment. Each part consists of a case study with a number of questions (total 10 questions).
*Calculation, Graph, Diagram & Working are to be shown clearly.
Due by: 1st July 2016
Note:
Questions in Part B, might resemble the attached “Tutorial 3”.
Assignment 1: Discussion Questions—International Business Decision Making
The various factors impacting international business may be brought together into a process for evaluating international business opportunities. Choosing the right mode of entry is the next step.
Research evaluation of business opportunities and modes of entry using your textbook, University online library resources, and the Internet. Respond to the following:
Explain how a business can assess international business opportunities giving examples. Do you think the size of the company matters in assessing an international business opportunity? Give reasons for your answer.
In your opinion, what would be the single most effective way for a potential international business to gain entry into an international market? What are the apparent risks of the mode of entry you recommend? For at least one other mode of entry, explain why it would be less effective compared to the one you chose.
Write your response in 400 words or less. Apply current APA standards for writing style to your work. All written assignments and responses should follow APA rules for attributing sources.
By Wednesday, February 13, 2013
Assignment 2: Presentation—Starting an International Business
Business decisions are not made on a hunch or some vague idea of a good place to do business. Professionals assess business opportunities and modes of entry to choose the best alternative.
Research the topic using your textbook, University online library resources, and the Internet. Based on your research, develop a presentation. Your role is of an educational specialist in international business and your audience is a group of middle managers.
Discuss the following in your presentation:
Steps to analyzing international business opportunities with specifics of what is involved in each step
Alternative methods for gaining entry into an international business opportunity or market
Submit your work in a 10-slide PowerPoint presentation. Use the speaker notes area to write the information supporting the slides. Apply current APA standards for writing style to your work. All written assignments and responses should follow APA rules for attributing sources.
By Saturday, Feb 16,2013
Web Development Test This page has a initial time limit of 0:30:00 Would you like to disable all future page timer notifications? Test True or False: HTML and CSS are front end technology. * This question is required. ⚪True ⚪False What is the difference between HTML and CSS? * This question is required. ⚪CSS is a markup language unlike HTML ⚪HTML is a backend technology and CSS is a front end technology ⚪HTML focuses on a web page’s structure and CSS focuses on its presentation ⚪As of HTML5 there is no difference In a proper webpage, which tag holds all of a webpages visible HTML? * This question is required. ⚪html ⚪head ⚪body ⚪link ⚪script ⚪doctype Alphabet for your reference: A B C D E F G H I J K L M N O P Q R S T U V W X Y Z If the code for CAT is ECV what is the code for DOG? * This question is required. ⚪FQI ⚪BIT ⚪FDW ⚪GRJ The sum of two consecutive numbers is 37. What are they? * This question is required. ⚪18, 19 ⚪7, 30 ⚪20, 17 ⚪36, 1 It’s 3 PM. How many degrees are in the angle between the hour and minute hand? * This question is required. ⚪90 ⚪60 ⚪15 ⚪25 ⚪180 What does the following code alert? var person = { name: “Mike”, age: 25, favoriteFood: “pizza” }; alert(“My best friend’s name is” + person.name + “,he’s ” + person.age + ” years old and his favorite food is ” + person.favoriteFood); * This question is required. ⚪My best friend’s name isMike,he’s 25 years old and his favorite food is pizza ⚪My best friend’s name is Mike, he’s 25 years old and his favorite food is pizza. ⚪My best friend’s name isMike ,he’s 25 years old and his favorite food is pizza. ⚪My friend’s best name isMike,he’s 25 years old and his favorite food is pizza. What language(s) MUST be used to display a bare-minimum web page? ⚪HTML, SQL, Node.js ⚪HTML ⚪JavaScript & PHP ⚪SQL What is the best image format for our website if we needed our image to have a transparent background? ⚪JPEG ⚪JPG ⚪GIF ⚪PNG ⚪PSD ⚪TIFF ⚪None of these Which one of these is the most different? ⚪JavaScript ⚪PHP ⚪Ruby ⚪Python ⚪MySQL Which of these statements is true? ⚪Agile is a programming language ⚪SQL is a database language ⚪HTML stands for “Hypertext Markup Link” ⚪Java is short for JavaScript It’s 2 PM. How many degrees are in the angle between the hour and minute hand? ⚪90 ⚪60 ⚪15 ⚪25 ⚪180 The following HTML and CSS is COMPLETELY CORRECT. This code makes up a web page. When the following code renders onto the screen, which paragraph appears bolded? ⚪The Wonder Years is an American television comedy-drama created by Neal Marlens and Carol Black. ⚪It ran on ABC from 1988 until 1993. ⚪The pilot aired on January 31, 1988, following ABC’s coverage of Super Bowl XXII. ⚪All of the above Which operation could we perform in order to find the number of milliseconds in a year? ⚪60 * 60 * 24 * 7 * 365 ⚪1000 * 60 * 60 * 24 * 365 ⚪24 * 60 * 100 * 7 * 52 ⚪1000 * 60 * 24 * 7 * 52 ⚪None of these You are facing North. Turn 90 degrees left. Turn 180 degrees right. Reverse direction. Turn 45 degrees left. Reverse direction. In which direction are you now facing? ⚪North ⚪West ⚪South West ⚪South East ⚪North West ⚪North East Albert thought of a number, added 5, multiplied the result by 2, took away 6 and then divided by 2 to give an answer of 8. ⚪5 ⚪6 ⚪3 ⚪4 If you’re driving one and a half miles per minute, slow down by 15 miles per hour, and then reduce your speed by one third, how fast are you going now? ⚪90 miles per hour ⚪60 miles per hour ⚪50 miles per hour ⚪75 miles per hour ⚪45 miles per hour What is the value of ????? ???? + ???? = 10; ???? + ???? = 6; ???? + ???? = 5; ⚪6 ⚪9 ⚪7 ⚪8 ⚪1 Which CSS attribute would change an element’s font color to blue? ⚪font-color: blue; ⚪background: blue; ⚪color: blue; ⚪background-color: blue; ⚪font: blue; What is the largest number that can be produced by multiplying any three individual numbers from the following list. [-2, 1, 3, -8, 5, 9, -9, 4, 7, -7, 8] ⚪648 ⚪504 ⚪732 ⚪888
This case written assignment is on Arcadian Microarray Technologies, In. (Case 44).
Report Requirements:
· Cover sheet with case name, date, team number and team members;
· One or two page written report analyzing questions given; and
· Exhibit with any financials, ratios, charts/graphs that you address in your report.
Your analysis should cover the following concerns:
1.
3. 1.. Regarding the cash flow forecasts in case Exhibit 5, at what point in the future would you set the forecast horizon for the three investments? Why? More generally, what should determine when you stop forecasting annual cash flows and estimate a terminal value?
4. 2. Estimate other terminal values based on alternate estimation approaches. From these various estimates, please triangulate toward a single composite estimate of terminal value for each of Sierra Capital and Arcadian’s forecasts.
What is the resulting present value (PV) of cash flows under Sierra Capital and Arcadian’s outlook?
How significant was TV in creating the difference between the two present value estimates?
5. 3. As a general matter in valuation work, how much attention should terminal value garner? What short list of questions about TV could you keep on hand in case a client asked you to opine on a valuation of that company?
Assignment 1: Discussion—Government Role and Trading Blocks
Please answer all questions
While there are powerful economic arguments for international trade, countries do impose restrictions on international trade. At the same time, regional agreements form one method to reduce or eliminate such restrictions among countries signing the agreement.
Research government role in trade and trade agreements using your textbook, University online library resources, and the Internet. Respond to the following:
Should governments promote or restrict international trade? Describe at least three ways in which countries can restrict trade. Irrespective of your answer, which position—promoting or restricting international trade—is most likely to find support as a national strategy? Why do governments commonly initiate policies that support both positions?
Research one regional trading bloc of which the United States is a member. Describe when the bloc was constituted, which countries are currently members, and which products are included in agreements. What is the economic justification for this trade bloc? Do you agree with the U.S. involvement in this trading bloc? What does the U.S. gain or lose?
Write your response in 400 words or less. Apply current APA standards for writing style to your work. All written assignments and responses should follow APA rules for attributing sources.
By Thursday, January 24, 2013, submit your assignment
Assignment 2: Case Analysis—Google in China
Governments play an important role in business decisions and business operations. The case study in this assignment provides a fascinating view of the business environment in China.
Read the following case study:
Baron, D. P. (2006, November 15). Google in China. Harvard Business School. HBS Number: P54.
Analyze the case. In your case analysis, address the following questions:
What is the basic situation described in the case? Summarize the Google experience.
What other companies are described in the case as having had to deal with Chinese censorship. What is your opinion of their actions?
What seems to be the policy of Chinese censorship?
What are some U.S. congressional initiatives related to Chinese censorship? Do you support those initiatives?
Did Google make the right choice? What were the different opinions expressed in the case regarding the Google choice? Form an argument.
Submit your work in a 3-page Word document. Apply current APA standards for writing style to your work. All written assignments and responses should follow APA rules for attributing sources.
WK5 – #4 Case Study – New Belgium Brewing
Answer the following questions related to Case 5 in Business Ethics in a 2-page essay:
• Is there a possible conflict between an industry that sells a product that can have negative consequences from the use of its product and the industry’s ability to engage in socially responsible activities?
• What perks do you see in the New Belgium Brewery that could be an added plus to your work environment? Identify at least two of those perks.
• What are the dangers any company might face if its sole focus is the bottom line? Identify at least five of those dangers.
Read the following sections of Business Ethics:
• Ch. 7, “Organizational Factors: The Role of Ethical Culture and Relationships”
• Ch. 8, “Developing and Effective Ethics Program”
• Case 5, “New Belgium Brewing: Ethical and Environmental Responsibility,” on pp. 437–446
Read the following sections of Conscious Capitalism:
• Ch. 15, ”Conscious Cultures”
• Ch. 16, ”Conscious Management”
• Ch. 18, ”The Power and Beauty of Conscious Capitalism”
• “The Conscious Capitalism Credo” on p. 273
Required Course Materials
Title: Business Ethics: Ethical Decision Making and Cases
Edition: 11th
Authors: Ferrell, O. C., Fraedrich, J., & Ferrell, L.
ISBN-13: 9781305500846
Title: Conscious Capitalism: Liberating the Heroic Spirit of Business
Authors: MacKay, J., & Sisodia, R.
ISBN-13: 9781422144206
I need help completing an excel. I have about 80 percent of the spreadsheet written. The questions are highlighted in orange, and the inputs are highlighted in yellow.
I even have the solutions, I just can’t complete the spreadsheet. 90% of the work has been completed for this question.
This will probably only take 5 minutes to complete.
Thank you
I attached the reading material and questions along with 2 excel templates
a total of 8 questions
I will have to email you because some of the images did not copy to the attachment.
need this in 24 hours…..if you can do please let me know asap
Purpose of Assignment
Provide students with a basic understanding of financial management, goal of the firm, and the basic financial statements. Students should be able to calculate and analyze solvency, liquidity, profitability and market value ratios, and create proforma financial statements.
Assignment Steps
Resources: Tutorial help on Excel® and Word functions can be found on the Microsoft®Office website. There are also additional tutorials via the web that offer support for office products.
Complete the following Questions and Problems (Concepts and Critical Thinking Questions for Ch. 1 Only) from each chapter as indicated.
Show all work and analysis.
Prepare in Microsoft® Excel® or Word.
Ch. 1: Questions 3 & 11 (Concepts Review and Critical Thinking Questions section)
Ch. 2: Questions 4 & 9 (Questions and Problems section): Microsoft® Excel® template provided for Problem 4.
Ch. 3: Questions 4 & 7 (Question and Problems section)
Ch. 4: Questions 1 & 6 (Questions and Problems section): Microsoft® Excel® template provided for Problem 6.
Format your assignment consistent with APA guidelines if submitting in Microsoft® Word.
Click the Assignment Files tab to submit your assignment.
Materials
Question and Problem Sets Grading Guide
Ch. 2 Problem 4 Microsoft® Excel® Template
Ch. 4 Problem 6 Microsoft® Excel® Template
Fundamentals of Corporate Finance, Ch. 1: Introduction to Corporate Finance
Fundamentals of Corporate Finance, Ch. 2: Financial Statements, Taxes, and Cash Flow
Fundamentals of Corporate Finance, Ch. 3: Working with Financial Statements
Fundamentals of Corporate Finance, Ch. 4: Long-Term Financial Planning and Growth
Need a 3 year Strategin Plan , 12 point font, 10 page , double spaced, by tomorrow, 14 December, 7 pm est.
You will have to identify and explain the key issues related to the company’s strategic plan
Recognize stakeholders and their relationship to the strategy
Clearly state the chosen stragety
Examine and evaluate assumptions and preises used in developing the chosen strategy
Clearly explain the rational used in developing the strategy ,i.e. identify and evaluate the information used
I have attached documents that can be helpful. originally is important
Assignment 1: Discussion Questions—International Capital Market
The financial system brings together people or organizations that have excess funds with those who need funds. The system includes the banking industry as well as the capital markets. The capital markets are commonly used to support the purchase of long-term assets through the issuance of bonds and stock. This system exists domestically and internationally.
Research international capital markets using your textbook, University online library resources, and the Internet. Respond to the following:
What is the international capital market? Why would an international business make use of an international capital market?
Describe the important features of the foreign exchange market. Why is this market critical for international businesses? What risks does this market impose on international business? What factors drive changes in exchange rates within this market?
Write your response in 400 words . Apply current APA standards for writing style to your work. All written assignments and responses should follow APA rules for attributing sources.
By Thursday, January 31, 2013
Assignment 2: Presentation—Government, FDI, and Foreign Exchange
One area of international business in which the government has an important regulatory role is foreign direct investment and foreign exchange. It is important for business professionals to understand the rationale and methods for restrictions in these areas.
Research government’s role in FDI and foreign exchange using your textbook, University online library resources, and the Internet. Based on your research, develop a presentation. Your role is of an educational specialist in international business and your audience is a group of middle managers.
Discuss the following in your presentation:
Motivations and methods by which governments can promote and restrict international trade
Foreign direct investment and its importance
Market for foreign exchange and the factors that drive pricing changes in the market
Value of the foreign exchange market to an international business
Risks of the foreign exchange market to an international business and methods to control the risks
Submit your work in a 12 slide PowerPoint presentation. Use the speaker notes area to write the information supporting the slides. Apply current APA standards for writing style to your work. All written assignments and responses should follow APA rules for attributing sources.
Use the following file naming convention: LastnameFirstInitial_M4_A2.ppt.
By Saturday, February 2, 2013, deliver your assignment
Complete the following:
– Develop vision and mission statements for the organization.
-Recommend specific strategies and long-term objectives. Show how much your recommendations will cost. Clearly itemize these costs for each projected year. Compare your recommendations to actual strategies planned by the company.
I have a finanace case study attached, I would like you to please read it and understand it clearly. After that I would like you to put it in presentation format, using 12-14 slides + an introducation slide. Dont not include too much information in the slides use general material and then please describe it in the notes for us to discuss. Thank you
Assignment 1: Due Sunday, Sep 30Analyze the following article and provide a report that answers these questions:
Risk of China economic collapse overblown | Emerging Markets | AMEinfo.com. (n.d.). Middle East business & financial news | business directory & current events | AME Info. Retrieved July 22, 2010, from http://www.ameinfo.com/35739.html
Based on the findings in the report, analyze three factors MNCs can use to evaluate China’s risk as a potential foreign investment.
The Chinese Yuan is not convertible to American dollars. This restricts Chinese investors from exchanging their Yuan for dollars to invest abroad. The rate of exchange is currently 8.28 Yuan to 1 dollar. In this framework, answer the following questions:
What are currency exchange controls?
Why are these controls imposed?
What impact do these controls have on Yuan to dollar exchange rates?
Read the section in the article titled Balance of Payments. How can basic hedging techniques be applied to China?
write a report of findings of three pages as a Microsoft Word document, double-spaced, in Arial 12 pt font. Your report should be your own—original and free from plagiarism.
Assignment 2: Bank of China ( due Saturday, Sep 29)
Bank of China has opened trading in the Chinese currency on the international financial markets. Is this good or bad for China? Is this good or bad for the U.S.? What will be the effect on the U.S. dollar and European Euro as reserve currencies?
You can look for additional readings on Internet related to this topic.
Need High Quality Papers – 2 Days. 0 Plagiarism.
2 Papers (Part I and II)
Part II uses Part I and Part II is 12 Pages, Part I can be 7-8 pages.
All required Information and Documents are uploaded. Nothing else apart from this is required. The Case Study is also attached as in the Document.
Please go through everything before sending the BID.
Assignment 2: Discussion
You are a data analyst with John and Sons Company. The company has a large number of manufacturing plants in the United States and overseas. The company plans to open a new manufacturing plant. It has to decide whether to open this plant in the United States or overseas.
What is an appropriate null hypothesis to compare the quality of the product manufactured in the overseas plants and the U.S. plants? Why? How would you choose an appropriate level of significance for your statistical test? What are the possible outcomes and limitations of your statistical test?
By Saturday, March 16, 2013, post to the Discussion Area the requested information and analysis.
-Due on Saturday at 8 pm
-Assignment Description:
To get the best grade on homework #2, you must list 20 stakeholders. Be as specific as possible; use names if they are available. Read your article over again. Think about the event.
Do not duplicate stakeholders in the same group with the same stakes; even if they are different (for example, 3 branches of government). Never list shareholders. Shareholders, CEOs, Board of Directors–are all owners with the same stakes; do not list them separately.
Look in your book on page 75 for the groups. Add the media. Think about the stakeholder past, present and future. If they have different stakes, you can list them separately.
When you list stakes don’t tell what happened or what might happen, just list 2-3 words about what the stakeholder stands to gain or lose. For example, shareholders: May lost return on investment (ROI).
You must categorize them in two ways. Power, Urgent, Legitimate is found on page 77. Supportive, Marginal, Non-supportive, and Mixed-Blessing is found on page 89.
-Assignment topic I chose:
https://www.opb.org/news/article/portland-doubletree-hotel-racial-profiling-evicted-police/
In the end, as a manager, part of your role is to develop strategy, and share this strategy with various stakeholders within the organization. This assignment will allow you to take your findings as a manager, and communicate these findings to those who are affected.
In M6: Assignment 2, (Please see M6:Assignment 2 in Attachment) you analyzed Ferguson & Son Manufacturing Company’s budgetary control system, explained how the use of an activity-based costing system could change the results of the budget and improve ROI, and made recommendations for goal alignment. This assignment was also the LASA 2.
In this assignment, you will develop an executive summary of your findings in a Microsoft PowerPoint presentation format.
Include the following in your presentation:
Include a statement of the problem or topic of LASA 2, a concise analysis of the findings, and a recapitulation of any main conclusions or recommendations.
Be sure to incorporate specific details from LASA 2 to highlight or support the summary.
Using your knowledge of capital budgeting techniques, explain how principles of capital budgeting, such as the payback method, IRR, and NPV, can be used to assess changes in performance and make decisions for the future based on decisions made within the organization.
Develop a 5-slide presentation in PowerPoint format. Apply APA standards to citation of sources. Use the following file naming convention: LastnameFirstInitial_M7_A2.ppt.
During your weekly meeting, your supervisor discusses some recent operational decisions as well as the strategic and tactical rationales behind them. She is puzzled about the weak reception by front-line employees that she believes has resulted in outcomes that are far less impactful than predicted. Because of the updates you provide about all that you are learning in this course, she asks you to provide a profile of decision-making processes in your organization. Scenario Questions
The following questions provide you with a framework to structure your response to the scenario. No doubt there are many variables that will influence this decision, but your task is to primarily focus on using the cultural context of your organization and the external environment in which it operates to frame a brief response to the following question as part of your initial response post. Also, make sure to read what is expected in the ‘reply’ post so that you are aware that your peers will be using the information you provide to post a response.
Initial Post: Strategic, tactical, and operational decisions are addressed on page 3.3 of your webtext. From the point of view of an employee, offer the following response to your supervisor’s request.
1. Design your product and give it a name/logo, provide a description of its functions and visual/picture of it (this can be your own drawing or an image from the internet with your product brand/logo assigned to the image). Critically explain why you selected your product (i.e. will there be a demand for it? How is it similar or different to existing products in the market? will it solve any social, environmental or financial issues? etc.)
2. Identify and estimate your upstream activities (R&D and design) and costs for your product. As you will be undertaking the R&D and product design activities, assign yourself an hourly R&D wage rate based on market research (i.e. search the internet) and provide detailed explanations and records (log with dates and timing of your activities) about your upstream processes/steps/activities for your chosen product.
3. Undertake market research (i.e. search the internet) to estimate and determine the cost of your product’s direct materials, direct labour and manufacturing overheads (fixed and variable). Clearly list and determine the quantity and types of direct materials, direct labour and manufacturing overheads that will be required to produce one unit of your product and calculate your products per unit cost. Explain the approach/method and activity level you used to calculate the overhead cost per unit and clearly differentiate/list fixed and variable manufacturing overheads.
4. During the month, the cost of your beginning inventory was $60,000 and ending inventory equalled $60,000, and you purchased materials to produce 60,000 units of your product. Calculate the cost of direct materials purchased and used in production for the month.
5. During the month, the cost of your beginning work in process was $150,000 and ending was $150,000. Calculate the cost of goods manufactured using a cost of goods manufactured statement/schedule for 60,000 units of your product produced for the month.
6. During the month, the cost of your beginning finished goods was $200,000 and ending finished goods equalled $200,000. Create a cost of goods sold statement for the month to calculate the cost of goods sold for 60,000 units sold for the month.
7. Determine the price of your product per unit and critically explain how you determined the price (i.e. explain and justify the pricing method, cost base and mark-up you selected and used, and how your products’ price compares to competitors prices if there are any).
8. Undertake market research to identify and estimate your downstream activities and costs for your product for the month (i.e. marketing, packaging, handling, distribution and so forth) and explain in detail how you will market and distribute your product to consumers.
9. Preparation of income statement using the absorption costing method for the month for the 60,000 units sold. Company tax rate is 30%. Make sure to include all relevant expenses for the month.
a) A typical central bank has several interest rates or monetary policy tools it can set to influence markets. Define three (3) such rates.
b) State three (3) functions of a Central Bank.
c) Malcolm Company’s bonds have 5 years remaining to maturity. Interest is paid quarterly; the bonds have a $1,000 par value; and the coupon interest rate is12%. Would you pay $950 for one of these bonds if you thought that the appropriate rate of interest was 14% – that is, if kd = 14%? Why?
d) A Company last paid a dividend of $0.90. It is expected that dividend will grow at 25% per annum for the foreseeable future and the investors are requiring 30 % per annum for stocks in this risk class. What is a fair price for the stock?
e) Define Stagflation and also state what is the CPI used for?
USG Corporation is a major manufacturer of mold-resistant building materials. The company’s flagship product is Sheetrockc Brand Humitekc Gypsum Panels, which can be installed on wall or ceiling interiors in order to minimize moisture and mold damage in building areas that are subject to incidental moisture. USG has just won a coveted contract with a major construction company in the growing Glendale, AZ, area. This company is expected to require 24,000 pounds of Sheetrockc Panels per day for the next year in order to satisfy its busy residential and commercial construction schedule. This contract is so lucrative that USG has agreed to operate a dedicated distribution center near Glendale that carries a safety stock of 100,000 pounds of inventory in order to fulfill the construction company’s orders quickly. The USG traffic manager wants to determine the mode of transportation to utilize for shipments from the USG production facility in Santa Fe Springs, CA (zip code 90670) to the new distribution center in Glendale, AZ (zip code 85301) in order to minimize the total annual logistics cost. The feasible modes of transportation for these shipments are railcar and truckload.
The lane between Santa Fe Springs and Glendale is served by the Burlington Northern Santa Fe (BNSF) Railroad. The average transit time for rail shipments on this lane is 9.5 days. According to BNSF’s website, the cost of a carload of gypsum wallboard weighing less than 167,000 pounds is $2,964.53. The rate for shipments greater than 167,000 pounds is $3,353.53.
The rates you obtained above are ramp-to-ramp rates; thus, they only cover transportation from BNSF’s terminal near Santa Fe Springs to its terminal near Glendale. USG has contracted with a third-party logistics provider that coordinates the local delivery and transloading services from USG’s facility to the BNSF terminal as well as the final delivery in Glendale. The negotiated rate is a flat $100 per carload (regardless of its size) plus a variable cost of $0.002 per pound of freight in the carload.
1 . Using the following cost data and additional information about USG’s production and inventory policies, determine the optimal shipment quantities (in pounds) for small railcar shipments (≤ 167, 000 pounds), large railcar shipments (> 167, 000 pounds), and truckload shipments.
• The value of 1 pound of Sheetrockc Panels held at the plant in Santa Fe Springs is $0.77.
• The value of 1 pound of Sheetrockc Panels held at the warehouse in Glendale is $0.85.
• USG’s inventory holding costs are computed as 39% of the inventory’s value per year held. (Take a simple average of the two values to determine the value of 1 pound of panels while in transit.)
• Storage space at the plant in Santa Fe Springs costs $0.27 / (pound*year).
• Storage space at the warehouse in Glendale costs $0.33 / (pound*year).
• The average truckload transit time is 2 days.
• The USG plant in Santa Fe Springs produces 24,000 pounds of Sheetrockc Panels per day.
2. Compute the total annual logistics cost for all three methods of transportation using the optimal shipment quantities for each mode. Which mode results in the minimum annual cost?
questions can be solved in excel. step by step process needs to be provided on how to solve in excel. Distance from Glendale to Santa Fe Springs is 367 miles.
Daniel Morse is auditing cash payments for Maloneys, a large supermarket. Maloneys deals with several very large corporate suppliers who expect payment by electronic funds transfer within three business days of delivery. Other large suppliers will accept cheques or electronic funds transfer on terms of 14 days, and small suppliers receive cheques with payment terms of 30 days. Other regular large cash payments include wages (weekly by electronic funds transfer from a wages imprest account), utilities (electricity accounts are paid monthly by cheque), cleaning (paid monthly by cheque) and rent (paid monthly by electronic funds transfer). In addition, there are irregular payments for items such as maintenance, fixtures purchase and lease, and vehicle running costs. All cash payments are processed in the central office after the required set of documents has been assembled and checked by two junior accounts staff. Payments are authorised by a senior accountant and electronic funds transfer authorities and cheques are countersigned by the chief accountant (except if he is on leave when another member of the accounts staff performs this task). Journals and ledgers are maintained by staff not involved in cash payment processing. Daniel needs to test controls over cash payments and has planned to make extensive use of sampling. Required: (a) What population(s) would be relevant to Daniel’s control testing? (b) Explain the potential implications of sampling risk for the audit of cash payments. (c) What possible non-sampling risks exist in this case?
***I am not being shown or told what needs to be revised in course hero, so I do not know what to change in my questions?***
This question is answered in Google Collab but the coding can be written out without it! I completed four other questions similar but am stuck on this one. Thank you so much for the help! I have examples of problems I have already completed if you need me to post them for reference
NOW THIS IS THE PROBLEM I NEED HELP WITH. PROBLEM 5.
Problem 5:
I am given a list of values. The values represent money and I need to present the data as monetary values. the list of numbers as input data is given and I need to convert the numbers to monetary values and print them out to the screen where it says #enter your code below. Can you help me with the coding sequence and explain how you got the answer sequence?
The list of numbers is displayed below in the inputData brackets.
Illustrated Excel 2016 | Module 3: SAM Project 1aCassandra’s GradesFORMATTING A WORKSHEETGETTING STARTEDOpen the file IL_EX16_3a_FirstLastName_1.xlsx, available for download fromthe SAM website.Save the file as IL_EX16_3a_FirstLastName_2.xlsx by changing the “1” to a “2”.oIf you do not see the .xlsx file extension in the Save As dialog box, do not type it. The program will add the file extension for you automatically.With the file IL_EX16_3a_FirstLastName_2.xlsx still open, ensure that your first and last name is displayed in cell B6 of the Documentation sheet.oIf cell B6 does not display your name, delete the file and download a new copy from the SAM website.PROJECT STEPS1.Cassandra will finish her Spring classes in the coming weeks. She is using an Excel workbook to analyze her grades to help her focus on the classes that needmore improvement. Cassandra has asked you to format her workbook to make the analysis clearer and easier to understand.Switch to the Grades worksheet. Use AutoFit to resize column A to fit its contents.2.Set the width of column E to approximately 14.00, so that the word “Composition”is completely visible in cell E4.3.Apply the Accent5 cell style to the range A1:E1, then increase the font size in that range to 15 pt.4.Merge and center the range A3:E3, then bold the cell contents. 5.Center the text in the range B4:E4 and change the font color of the range to White, Background 1 (1st column, 1st row of the Theme Colors palette).6.Use the Format Painter to apply the format from the range A7:E7 to the range A9:E9.7.Italicize the contents of cell A11and change its font to Times New Roman.8.In the range A11:E11, apply Thick Outside Borders to the cells, then change the fill color to Yellow (4th column, 1st rowof the Standard Colors palette).9.Cassandra wants to know at a glance which courses she is passing. In the range B11:E11, use Conditional Formatting Highlight Cells Rules to format cells whose contents are greater than 70 with Green Fill with Dark Green Text.
Show all work. Label and clearly explain your answer. This is very important.
1) see attached photo
a) Draw a diagram showing the cash flows for each of the bonds.
b) Calculate the price of the Vermeero bond.
c) Calculate the yield to maturity for the Renwaro bond.
d) Suppose you purchase the Renwaro bond today. You plan to sell this bond one year from now, and you forecast that the yield to maturity of the Renwaro (at the sale date) will be5% annual rate, compounded semiannually. If your forecast is correct, what will the holding period yield for this investment be?
2) See attached photo
The PLAY Index is a price-weighted stock index based on the 5 largest toy and game manufacturers in the nation. The following chart shows the prices and shares outstanding for each of the five companies at year-end for 2016and 2017. The initial divisor for the index is 100.
a) Calculate the rate of return on the PLAY index over 2017.
b) At the end of 2017, Linkna Logs was dropped from the index, and was replaced by Loggle Corporation. Loggle’s share price was $166at the time. Calculate the new divisor for the index.
c) Suppose the PLAY index was a value-weighted index instead of a price-weighted index. If so, what would be the rate of return over 2017?
3) Morocco Manufacturing does not currently pay a cash dividend, but it does pay a stock dividend of 3% per year. A stock dividend does not directly pay cash to the shareholders. Instead, it is a payment in the form of additional shares of stock. For example, if you own 100 shares, a 3% stock dividend will mean that you will receive 3 new shares, giving you a total of 103 shares.
Morocco will not pay a cash dividend, and will maintain the 3% per year stock dividend for 10 years. Morocco will then discontinue the stock dividend and institute a cash dividend of $5 per share, starting in year 11. In subsequent years the cash dividend will increase at a constant growth rate of 6% per year.
The appropriate interest rate is 14% per year. Calculate the current intrinsic or fundamental value of a share of Morocco Manufacturing stock.
4)Lava Development Company has maintained stable earnings of $7 per share, and has also maintained a 100% payout policy. Recently, Lava has decided to start a new line of business to develop luxury housing with scenic views of active volcanoes. The new line will require Lava to change to a policy of retaining 30% of its earnings for the foreseeable future. You estimate that with the new line of business that dividends will grow by 2% per year in perpetuity (after next year). Lava’s current cost of capital is 12%.
a. Calculate the intrinsic value of Lava Development shares?
b. Calculate Lava’s net present value of growth opportunities?
READ THE CASE AND PROVIDE ANSWER TO THE QUESTION BELOW:
Ethan Properties Philippines, Inc. was registered with the Philippine SEC in 2008 and is engaged in developing and
operating for sale, lease, or hold for investment real estate of all kinds, including buildings, houses, apartments, and other structures. From the its inception, the company has completed various developments including a number of high-rise building, a mid-rise development, residential subdivisions, commercial centers, BPO Offices, an Events Venue Center, and serviced residences. Currently, the company has three (3) on-going development of commercial buildings.
The Company markets its projects to residential market segments, office locators and commercial tenants through internal and external sales and marketing channels. For its leasing business, the Company employs a dedicated team who coordinates with business entities for leasing opportunities in the company’s various projects. The Company has a wide network of suppliers, both local and foreign. The Company has also a wide customer base and is not dependent on one or a limited number of customers. The Company complies with all government agencies in securing licenses to sell, development permits, Environmental Compliance Certificate (ECC) and all other mandated requirements of the industry. The Company had 391 and 400 employees at the close of the calendar year December 31, 2019 and 2018, respectively. The Company’s employees do not belong to any labor union or federation. At present, its employees receive compensation and benefits in accordance with the Labor Code of the Philippines.
The Philippine real estate development industry is highly competitive with respect to township developments in Metro Manila and high-rise condominiums. Ethan believes that it is a strong competitor in the mid- and high-end markets due to the quality of its products and materials used in construction and finishing. In addition, the Company believes that the prime locations of its developments allow it to effectively compete in the market. On the other hand, the Company has access, through its holdings and holdings of its affiliates, to one of the most extensive land banks in the Philippines, comprising properties strategically located in the prime areas of Metro Manila and its periphery.
Currently, majority of the Company’s commercial spaces are leased-out to entities in the BPO industry. Should the country experience a slowdown in performance and growth of this sector of the economy, the Company is exposed to the risk of lower occupancy, reduction in rental rates and late or non-payment of rentals. While forecast for the BPO industry remains bullish, the industry is sensitive to changes in government policies particularly with respect to the tax holidays it currently enjoys. Political uncertainty and peace and order problems may likewise affect the growth of this industry as experienced in the past. Despite this, the outlook for the BPO industry continues to be positive as the country remains to be one of top BPO destinations in the world.
The Company’s residential sales on the other hand is exposed to the cyclical nature of the real estate industry. As seen in the past, the real estate industry has the tendency to expand and contract depending on the movement of interest rate and the confidence in the Philippine economy.
The Company operates in a highly regulated environment and it is affected by the development and application of regulations in the Philippines. The development of condominium projects, subdivision and other residential projects is subject to a wide range of government regulations, which, while varying from one locality to another, typically include zoning considerations as well as the requirements to procure a variety of environmental and construction- related permits. The Company closely monitors all government regulatory requirements and institute measures to strictly comply with them.
The Company is exposed to credit risk from its leasing and residential sales. To manage the credit risk from residential sales, the Company has ceased to offer in-house financing to its buyers. Instead, buyers are encouraged to either pay in cash, avail of a deferred cash payment term or secure financing from banks to finance their property acquisition. Credit risk from leasing, on the other hand, is minimal given the profile of the Company’s tenants. The terms of the Company’s leases are likewise structured to mitigate credit risks.
Fluctuations in interest rates, changes in Government borrowing patterns and Government regulations could have a material adverse effect in the Company’s and its customers’ ability to obtain financing. Higher interest rates make it more expensive for the Company to borrow funds to finance its ongoing projects or to obtain financing for new projects. In addition, the Company’s access to capital and its cost of financing are also affected by restrictions, such as single borrower limits, imposed by Bangko Sentral of the Philippines (BSP) on bank lending. These could materially and adversely affect the Company’s business, financial condition, and results of operations. In order to reduce its earnings volatility and diversify its revenue streams, the Company has targeted to derive approximately 35-40% of its revenues from recurring sources within the next five years, primarily through rentals from its BPO properties and retail malls. The Company believes this will complement the Company’s overall growth strategy by providing recurring cash flows to support its developmental capital expenditure requirements and driving demand for its master-planned community residential offerings.
The company reported a net income of P479 million during the year. Real estate sales of P1.7 billion were 101.7% higher y-o-y and comprised 53.3% of revenues. Rental revenue for the year accounted for P1.5 billion or 46.7% of revenues, representing a 7.7% growth over the same period in prior year, as lease contracts were renewed at higher rates for the BPO offices as well as the additional retail space completed late last year. Operating expenses were P948 million during the year.
Background:
Your auditing firm, SDS & Co. CPAs recently accepted Ethan as an audit client and as an audit associate, you were asked to obtain some preliminary information about the real estate industry to provide a basis for understanding the client’s business environment. Background information about the real estate industry is provided below for your review:
State of the Philippine Real Estate
The country’s economic boom shows no signs of slowing down. Considered as one of the fastest-growing economies in the region, it exhibited an increase in gross domestic product (GDP) by 6.7% in 2017. This robust macroeconomic condition continues to pave the way for different sectors to further flourish, including that of the real estate.
The real estate industry’s steady growth in the past decades is attributed to the increase in demand for residential and commercial properties driven by various factors. These demand drivers, according to a report by Leechiu Property Consultants, include rising urban population growth; housing needs of BPO (business process outsourcing) employees, since a growing number of these workers need to live near their workplace; and remittances from overseas Filipino workers (OFWs), more than half of which are real estate-related.
Oxford Business Group (OBG) stated in a 2017 report, “Years of investment and strong economic development in the Philippines have fostered a robust real estate sector that now extends outside of the greater Metro Manila region and into secondary markets around the country. Economic development and a growing middle class continue to fuel demand for new, high-grade residential units, while commercial investment drives an ever-increasing amount of retail and office space.”
The bullish performance of the country’s real estate sector is projected to further thrive in the years to come. The OBG report continued, “Buoyed by a strong macroeconomic environment, cash-laden investors and a full pipeline of projects scheduled to be built over the next decade, the real estate sector will continue to exhibit strong growth in the coming years. A steady stream of new residential and mixed-use projects is under way at locations across the Metro Manila area, as well as other fast-growing secondary cities around the country.”
Real estate consulting services firm Colliers International also shared the same outlook in a December 2017 report, which stated that opportunities abound for the property sector this year.
“Colliers encourages developers to take advantage of opportunities that could arise from the implementation of government policies such as the Comprehensive Tax Reform Package; relaxation of foreign ownership restrictions on retail and construction; and amendments to the existing procurement law and business registration systems which should entice more developers to take part in the government’s ambitious infrastructure development program,” the firm said in the report.
Colliers sees that the improvement of road networks and expansion of airports in major urban areas in the country will further unlock land values, making it more feasible for residential projects.
Moreover, Colliers said that the demand for residential units in these locations would continuously grow, as OFWs will continue to set aside part of their remittances for housing requirements.
“Colliers expects developers to continue venturing into residential projects in second-tier and third-tier cities all over the country, where demand primarily comes from end-user buyers. The markets may be smaller compared to Manila but more stable in terms of end user housing demand,” the report continued.
On the other hand, the firm predicted that there will be less of office launches following the decline in BPO companies’ office space demand. However, there will be a greater demand for flexible office spaces over the near to medium term given that there are 1.3 million freelancers in the Philippines, and as mobility, connectivity, and flexibility is becoming the norm.
Opportunities are also seen in the popularity of e-commerce, which is expected to drive warehousing and logistics demand. According to Colliers, this particular demand will particularly propel the economy of Northern and Central Luzon especially because of Clark Airport’s planned expansion and the construction of the Subic-Clark cargo railway.
Northern and Central Luzon is also set to be an industrial hub as major developers are developing industrial parks, which is foreseen to increase industrial lease rates especially in areas such as Cavite, Laguna, and Batangas.
Not only industrial parks are going outside Metro Manila. Colliers said that townships are also projected to rise in areas such as Cavite, Laguna, Bulacan, Pampanga, Cebu, and Davao over the near to medium term as land values are being unlocked by an aggressive expansion of road networks anchored on the government’s initiative to generate economic opportunities outside Metro Manila.
The increasing tourist arrivals in the country also open more possibilities for the real estate sector. In terms of hotels, it is seen that three-star and four-star hotels in resort destinations will be more visible in the next two to three years with Cebu, Bacolod, Iloilo, Palawan, Davao, and Bohol as among the most attractive locations for these developments.
Cebu, in particular, experiences a continued surge of tourists resulting to an increase in occupancy rate as well. Seeing the rising attractiveness as a tourist spot and growing competitiveness as an investment destination, Colliers encourages industrial locators in Visayas to consider this province.
Moreover, to cater to the growing domestic market driven by millennial travelers, Colliers encourages investors to build more budget hotels.
Meanwhile, for the retail segment, Colliers said that malls will still be an important part of the Filipino lifestyle and will continue to attract consumer traffic, thus, are encouraged to provide more lifestyle amenities that generate a sense of destination.
——
Brainstorm relevant industry, regulatory, and other external factors including the applicable philippine financial reporting framework and then, Identify at least one business risk factors on the following matters:
a. The market and competition, including demand, capacity, and price competition.
b. Cyclical or seasonal activity.
c. Product technology relating to the entity’s products.
d. Energy supply and cost.
e. Regulatory factors.
2. For each of the business risk factors identified in question 1 above, indicate how each risk factor might impact the risk of material misstatements in specific financial statement accounts or disclosures.Skip QuestionShow CommentReport Issue
As the financial advisor to All Star Manufacturing you are evaluating the following new investment in a manufacturing project: –
The project has a useful life of 8 years.
Land costs $10m and is estimated to have a resale value of $15m at the completion of the project.
Buildings cost $12m, with allowable depreciation of 6% pa reducing balance and a salvage value of $10m.
Equipment costs $5m, with allowable depreciation of 10% pa reducing balance and a salvage value of $1m. An investment allowance of 20% of the equipment cost is available.
Revenues are expected to be $15m in year one and rise at 5% pa.
Cash variable costs are estimated at 30% of revenue.
Cash fixed costs are estimated at $3m pa.
Managerial salaries of $800,000 will be allocated to the project, but these managerial positions will be unaffected by the acceptance of the project.
An amount of $200,000 has been spent on a feasibility study for the new project.
The project is to be partially financed with a loan of $13.5m to be repaid annually with equal instalments at a rate of 5% pa over 8 years.
Except for initial outlays, assume cash flows occur at the end of each year.
The tax rate is 30% and is payable in the year in which profit is earned.
The after-tax required return for the project is 11% pa.
Required
(a) Calculate the NPV. Is the project acceptable? Why or why not?
(b) Conduct a sensitivity analysis showing how sensitive the project is to revenues, fixed costs and to the required rate of return. Explain your results.
Show all work. Label and clearly explain your answer. This is very important.
1) See Attached picture
a) Draw a diagram showing the cash flows for each of the bonds.
b) Calculate the price of the Vermeero bond.
c) Calculate the yield to maturity for the Renwaro bond.
d) Suppose you purchase the Renwaro bond today. You plan to sell this bond one year from now, and you forecast that the yield to maturity of the Renwaro (at the sale date) will be 5% annual rate, compounded semiannually. If your forecast is correct, what will the holding period yield for this investment be?
2) The PLAY Index is a price weighted stock index based on the 5 largest toy and game manufacturers in the nation. See attached chart that shows the prices and shares outstanding for each of the five companies at year-end for 2016 and 2017. The initial divisor for the index is 100.
a) Calculate the rate of return on the PLAY index over 2017.
b) At the end of 2017, Linkna Logs was dropped from the index, and was replaced by Loggle Corporation. Loggle’s share price was $166at the time. Calculate the new divisor for the index.
c) Suppose the PLAY index was a value-weighted index instead of a priceweighted index. If so, what would be the rate of return over 2017?
3) Morocco Manufacturing does not currently pay a cash dividend, but it does pay a stock dividend of 3% per year. A stock dividend does not directly pay cash to the shareholders. Instead it is a payment in the form of additional shares of stock. For example, if you own 100 shares, a 3% stock dividend will mean that you will receive 3 new shares, giving you a total of 103 shares. Morocco will not pay a cash dividend, and will maintain the 3% per year stock dividend for 10 years. Morocco will then discontinue the stock dividend and institute a cash dividend of $5 per share, starting in year 11. In subsequent years the cash dividend will increase at a constant growth rate of 6% per year. The appropriate interest rate is 14% per year. Calculate the current intrinsic or fundamental value of a share of Morocco Manufacturing stock.
4) Lava Development Company has maintained stable earnings of $7 per share, and has also maintained a 100% payout policy. Recently, Lava has decided to start a new line of business to develop luxury housing with scenic views of active volcanoes. The new line will require Lava to change to a policy of retaining 30% of its earnings for the foreseeable future. You estimate that with the new line of business that dividends will grow by 2% per year in perpetuity (after next year). Lava’s current cost of capital is 12%. a. Calculate the intrinsic value of Lava Development shares? b. Calculate Lava’s net present value of growth opportunities
I am a beginner at accounting for business but I hope that tutor/s can help me with my questions.
I required help with the following questions and I hope that tutor/s will provide in depth explanation of my question’s answers.
I also required pictures with the answers so that I will be able to understand what is happening.
I have provided all of the information below with all of information that I have got but tutor/s can still comment regarding any part of the information that is unsure to you.
I appreciate a lot of all of the support that tutor/s provided.
So here are the questions.
Questions:
Question 1. Make a cash budget for Unique Flowers for October to December under normal circumstances. (Use the template provided below.)
Question 2. Make a second cash budget for Unique Flowers for October to December that considers a 4-weeks lockdown. (Use the template provided below.)
Question 3. Compare the first budget and second budget and advise on the cash requirements based on your budgets and any other concerns you have about the business. Look at both of the budgets and compare them and written two hundreds and twenty words of the comparison based on the Question 1 and 2.
Question 4. Based on issues identified in this case, provide advice on managing working capital (cash, inventory, account payable). Make specific references to the budget to support the recommendations. (Based on the issues that were found in the case, provide advice on it, Connect the explanation to the budgets to support the recommendations.) Written eight hundreds words of the recommendations. Put at least 5 reference for the recommendations.
Question 5: Use the provided template for Question 1 and Question 2
Template: https://gofile.io/d/98IL7Q
Business Information:
Sutea is the owner of Unique Flowers, located at Sunny Bay Queensland (QLD), Australia. Unique Flowers is a family business that she has operated successfully as a sole trader (Business has ABN and registered for GST) since the 1990’s.
Unique Flowers is a successful business and is well known in the local area, due to its high-quality floral arrangements, prompt delivery and friendly service. Sutea is the florist, and she employs four people to work with her in the business. Harry, the delivery driver, is employed full-time; Mel, the bookkeeper, is employed part-time; Oscar the shop assistant is employed full-time; and Josh, the cleaner is employed as a casual. All employees have worked with Sutea since the business opened its doors, except Josh who joined the team on the 1st of January 2021.
After the outbreak of COVID-19 in 2020, which had a large impact on the business, Unique Flowers is looking to rebound in 2021. Sutea learnt during 2020 that a focus on her financial position was the best way to navigate the uncertainty.
Due to forced closures of her business in 2020 (March- June), Sutea went through a period of problems with her cash flow. She did not have enough money to meet her financial obligations, including paying the employees, the rent, and the other business outgoings. Going forward, she is looking to put those problems behind her but will be cautious in her financial planning.
Sutea is planning to change the way she operates her business with the addition of online ordering and no-contact deliveries.
Sutea has asked Mel for some financial information and was presented with the following:
The cash balance at the end of September is $12,000 (This is the opening cash balance for October)
The projected sales revenue (all sales are cash) for October to December is as follows:
The emergence of the Delta variant worldwide has put significant risk to people and businesses. The Delta variant is more transmissible than the original strain of the virus and is more likely to cause severe illness. “The first sign of trouble for the world came in late March when there was a sudden uptick in new Covid-19 cases in India. Over little more than a month, infections rose from about 20,000 daily cases to more than 400,000 a day”. (University of Western Australia 1 July 2021, News Article).
Australia is lagging behind world vaccination rates. Australian states (Victoria, South Australia and New South Wales (NSW)) went in lockdown in June and July 2021 due to the spread of the Delta variant. Sutea is concerned that short or medium-term lockdowns will occur in Queensland and affect her business. Sutea is very cautious in managing cash (Budgeting) and concerned about the survival of her business.
The cash balance at the end of September is $12,000 (This is the opening cash balance for October)
If Queensland locks down for four weeks in October, Sutea estimates that projected revenue would reduce by 50% in October, 40% in November and 10% in December.
Additional information:
If Queensland locks down for four weeks Sutea expects the business to be eligible for the following grants and support (based on the grants and support that were offered in NSW):
Queensland Small Business COVID-19 Adaption Grant $10,000 in November
Job Saver payment from the government for October and November only ( The Job saver payment must be calculated as per the assumption given under Job Saver Policy.
The landlord will offer 50% rent reduction/relief in October and November
The bank will waive bank fees for October and November
Job Saver:
Fortnightly payments to help maintain employee headcount (as at 13 July) and provide cashflow support to businesses
How much:
Employing businesses: 40% of their weekly Salary/Wages, with payments between $1,500 and $100,000 per week
Eligibility:
A revenue decline of 30% or more
Annual Turnover (Sales Revenue) between $75,000 and $250 million
Information Extracted from NSW government Webpage ( https://www.nsw.gov.au/covid-19/2021-covid-19-support-package/businesses-sole-traders-and-small-not-for-profits#covid-19-business-grants)
QLD Small Business COVID-19 Adaption Grant
Eligibility criteria:
To be eligible, the business must:
have been subject to closure or otherwise highly impacted by current shutdown restrictions announced by Queensland’s Chief Health Officer on 23 March 2020
have experienced a minimum 30% decline since 23 March 2020, over a minimum 1-month period due to the onset and management of COVID-19
employ staff and have fewer than 20 employees at the time of applying for the grant (employees must be on your payroll and does not include the business owner(s))
have a valid Australian Business Number (ABN) active as at 23 March 2020
be registered for GST
have a Queensland headquarters
have an annual turnover over $75,000 for the 2018-19 or 2019-20 financial year, or you can provide financial records that show this will be met for recently started small businesses
have a payroll of less than $1.3 million
not be insolvent or have owners or directors that are an undischarged bankrupt.
Only 1 application per round will be accepted from an individual ABN or a financial beneficiary of a business.
Small Business COVID-19 Adaption Grant Program extracted from Queensland government webpage https://www.business.qld.gov.au/starting-business/advice-support/grants/adaption.
Describe the politics of your community as the dynamics relate to your school. What would you do to positively influence those issues? How? Why?
This assignment is due Sept 22, 2021. please follow the documents thats uploaded below.
There are many benefits to having additional support in the classroom. In addition to providing access to the general education curriculum and setting, co-teaching models within an inclusive classroom can offer specialized instruction for individuals with disabilities and allow these students more collaborative time with their peers. General and special education teachers can also expand their own knowledge and teaching capacity when applying co-teaching instruction and strategies in an inclusive setting.
In this assignment, you will examine the six co-teaching models, and how these collaborative models can provide a better learning environment for all students, especially students with disabilities.
Part 1: Co-Teaching Models
Complete the “Co-Teaching Models and Paraeducator Action Plan Template” that addresses the following:
Co-Teaching Models: Define the six co-teaching models with a visual representation for each model (an appropriate link to the visual is acceptable).
Advantages and Disadvantages: Discuss the advantages and disadvantages of each model.
Instructional Strategies: Describe research-based instructional strategies unique to each model. Discuss how each supports individuals with disabilities.
Positive Effects: Address the positive effects of each co-teaching model on teachers and students.
Responsibility and Accountability: Explain how the shared responsibilities and accountabilities are executed when the co-teaching is between a general and special educator, and when the co-teaching includes collaborating with a paraeducator.
Support your findings with a minimum of two scholarly resources.
Part 2: Paraeducator Action Plan
There are many benefits to having a paraeducator, not only in your classroom, but on campus as well. They can provide services to teachers, students, parents, and the community. Through training, collaboration, and mentoring, a paraeducator can assist in providing quality education alongside special and general educators. In addition, paraeducators can help with classroom instruction, provide additional support for exceptional students, and collaborate with other school personnel to help meet individual student needs.
This part of the assignment will allow you to practice your ability to foster collaboration between the classroom teacher and an assisting paraeducator to create a safe, inclusive, positive learning environment that engages and promotes the well-being of individuals with exceptionalities.
Read the classroom scenario below, and complete Part 2 of the “Co-Teaching Models and Paraeducator Action Plan” template.
Scenario:
Ms. Jeter is a general education teacher in an inclusive seventh-grade classroom that will have 30 students including four students with learning disabilities (LD) and two students with emotional disabilities (ED). She was just informed that a paraeducator would assist her in the classroom for the new school year. She has spoken to the paraeducator and it appears that the two will work very well together in terms of compatible personalities and philosophies regarding students with disabilities. However, Ms. Jeter has never worked with a paraeducator before. Further, the paraeducator has never had this job before, but has worked as a Sunday school teacher and loves children.
Based on the scenario, use the “Co-Teaching Models and Paraeducator Action Plan” to create a 500-750 word action plan for a successful co-teaching environment.
The action plan should address the following:
Teaching Philosophy and Vision of the Classroom Setting: Describe a philosophy and vision that incorporates the teacher/paraeducator relationship.
Rules and Expectations: Describe 3-5 rules and expectations for the teacher and the paraeducator specific to student learning and behavior in the classroom.
Collaboration Model Outline: Selected from Part 1 of this assignment, outline a collaboration model for the paraeducator that promotes the well-being of individuals with disabilities. Include possible challenges and advantages to utilizing the selected collaboration model.
Roles and Responsibilities: Identify roles and responsibilities of the teacher and the paraeducator, including the discussion of confidentiality.
Collaboration Time: Detail a plan for the teacher and paraeducator to meet regularly to prepare for units/lessons, reflect on teaching, review student achievement/goals, and provide feedback and mentoring to the paraeducator.
Prepare this assignment according to the guidelines found in the APA Style Guide, located in the Student Success Center. An abstract is not required.
This assignment uses a rubric. Review the rubric prior to beginning the assignment to become familiar with the expectations for successful completion.
Benchmark Intake Part Two: Mental Status Exam (MSE) Assignment Instructions
Important
For assessment purposes, it is important that you submit both parts of the intake assignment in one document in both Canvas. Simply add this part of the assignment (Intake Part Two: Mental Status Exam (MSE) Assignment) to the first part (Intake Part One: Initial Interview Assignment) and submit them as one Microsoft word document. Your assignment will not be considered complete until you upload both parts together.
Overview
One task in the initial interview is a gathering of information about the client’s mental status. You already have gathered background information in the Intake Part One: Initial Interview Assignment. In this Intake Part Two: Mental Status Exam (MSE) Assignment, you will write up the Mental Status Exam (MSE) portion of that Benchmark Initial Interview Assignment. In the Initial Interview Assignment report, you primarily focused on what the client revealed to you. For the Mental Status Exam (MSE) Assignment, most of what you report on will be based on your observations from that initial interview (appearance, behaviors, mood, affect, thought processes, etc.), from specific questions you would ask in the initial interview. These observations provide information about the client that is not readily discernable from the initial interview data.
Instructions
Length of Mental Status Exam (MSE) Assignment: 600-900 words (not including the title page)
Format of Mental Status Exam (MSE) Assignment: APA for font (Times New Roman, 12 pt.), title page, margins, and section headings
Number of citations: none
Acceptable sources: none
For this Mental Status Exam (MSE) Assignment, you will continue to the fictional character that you interviewed for the initial interview. Remember, the client that you selected is a relatively well-adjusted individual who has already passed the initial interview process with the referring agency. Therefore, your Mental Status Exam (MSE) Assignment will mainly indicate functioning that is considered within the normal limits (WNL) of adaptive functioning.
Important points regarding the Initial Interview:
Because the psychological evaluation was not performed for clinical, forensic, or legal reasons, your character did not have a life-threatening medical condition, a chronic or debilitating psychological disorder, or an extensive criminal history.
Report all applicable MSE information.
Format of the Mental Status Exam:
Gather the MSE information using the categories from pages 345-346 of the Sheperis et al. (2020) text and the “How to Conduct a Mental Status Exam” handout. Report the information using the Mental Status Exam Rubric as a guideline. Remember, you will use this information for another project. As you can see, there are various ways to organize and present MSE information (e.g., the text, the handout, and the sample is up to you). However, for the purposes of this Benchmark Mental Status Exam (MSE) Assignment, make sure that you have all of the information required on the grading rubric.
Please make sure to note if the functioning is adaptive. For example, if no delusional thoughts are present, state it. If you do not specifically note this, the reader does not know if the client did not have delusions or if the counselor simply forgot to ask.
Written in the third person (e.g., “Mr. Jones is a 42 years old…,” or “His greatest strengths are…”).
Be sure that the information is consistent with the Initial Interview. Remember that your client is a well-adjusted individual that does not present with severe pathology.
Note: Your assignment will be checked for originality via the Turnitin plagiarism tool.
Be sure to review the BenchmarkMental Status Exam (MSE) Grading Rubric before beginning the Benchmark Mental Status Exam (MSE) Assignment.
Categories ofMental Status Exam from the Text
Appearance: How was the client dressed and groomed (e.g., neat, disheveled, unkempt)?
Behavior/Psychomotor Activity: Did the client exhibit slow movement, restlessness, or agitation? Did the client have any unusual behaviors such as tics, mannerisms, gestures?
Attitude toward Examiner: Was the client’s attitude toward the examiner cooperative, friendly, attentive, defensive, hostile, evasive, guarded, and so forth?
Affect and Mood: Did the client have sad, angry, depressed, or anxious mood? Was the client emotionally responsive (affect)? Was affect congruent with mood?
Speech: How was the quantity, rate of production, and quality of the client’s speech (e.g., minimal – mostly yes and no answers; talkative; rapid/pressured speech)?
Perceptual Disturbances: Did the client experience hallucinations or illusions? If so, what sensory system did they involve (e.g., auditory, visual, olfactory, tactile)?
Thought: Did the client have any disturbances in thought process, which involves the rate of thoughts and how they flow and are connected (e.g., racing thoughts, flight of ideas, tangential). Were there any disturbances in thought content, such as delusions, obsessions, preoccupations, or suicidal or homicidal thoughts?
Orientation: Was the client aware of (a) the date and time, (b) where he or she was, and
(c) who the people around him or her were (i.e., oriented to time, place, and person)?
Memory: How was the client’s recent memory (e.g., what did he or she have for breakfast?) and remote memory (e.g., memories from childhood)?
Concentration and Attention: Was the client’s concentration or attention impaired? Was the client distractible?
Information and Intelligence: Can the client accomplish mental tasks that would be expected of a person of his or her educational level and background?
Judgment and Insight: Does the client have the capacity for social judgment? Does the client have insight into the nature of his or her illness?
Reliability: How accurately was the client able to report his or her situation?
Categories ofMental Status Exam from the Handout
Appearance:Presenting Appearance (including sex, chronological and apparent age, ethnicity, build, physical deformities; Basic Grooming and Hygiene (plus appropriateness of attire, accessories like glasses or a cane; Gait and Motor Coordination (plus posture, work speed, any noteworthy mannerisms or gestures).
Manner and Approach: Interpersonal Characteristics and Approach to Evaluation (resistant, submissive, defensive, open and friendly, candid and cooperative, showed subdued mistrust and hostility, excessive shyness); Behavioral Approach (distant, indifferent, anxious, alert, etc.) Speech (normal rate and volume, pressured, slow, etc.); Eye Contact (makes, avoids, etc.); Expressive Language (circumstantial and tangential responses, mumbling, etc.); Receptive Language (normal, difficulty understanding questions); Recall and Memory (can explain recent and past events in their personal history, recalls three words, etc.).
Orientation, Alertness, and Thought Processes: Orientation (person, place, time); Alertness (sleepy, alert); Coherence (coherent and easy to understand, overly detailed and difficult to follow); Concentration and Attention (naming the days of the week in reverse order, ABC’s backwards); Thought Processes (loose associations, flight of ideas, delusions); Hallucinations and Delusions; Judgment and Insight; Intellectual Ability; Abstraction Skills
Mood and Affect: Mood (feels most days: happy, sad, anxious, angry); Affect (felt at any given moment); Rapport (easy to establish, easily upset); Facial and Emotional Expressions (relaxed, tense, smiled, laughed); Suicidal and Homicidal Ideation; Risk for Violence; Impulsivity
Benchmark Intake Report Part Two: Mental Status Exam (MSE) Assignment Template
Note: This template includes Part One of the assignment because it should be included in Part Two
Identifying Information
Client name, address, phone number, DOB, gender, marital status, occupation, work/school, work phone, emergency contact, date of interview
Reason for Referral
Referral source, reason for referral (why has the client been sent to you [e.g., consultation, clinical intake, counseling]); presenting complaint (hint: they are coming in for an evaluation)
Current Situation and Functioning
A description of typical daily activities, ability to complete normal activities of daily living (ADLs); general assessment of coping/character skills (e.g., stress management skills, emotional regulation ability; problem-solving, conflict resolution, empathy, cooperation, etc.); self-perceived strengths and weaknesses
Relevant Medical History
Previous and current medical problems (major illnesses and injuries), medications, hospitalizations, and disabilities; any significant major medical disorders in blood relatives (e.g., cancer, diabetes, seizure disorders, thyroid disease, etc.)
Psychiatric Treatment History
Description of previous treatment received, including hospitalization, medications, psychotherapy or counseling, case management, etc. Include a description of all psychiatric and substance abuse disorders found in all blood relatives (i.e., at least parents, siblings, grandparents, and children, but also possibly aunts, uncles, and cousins)
Family History
Information about the client’s family background, including information about first-degree relatives (parents, siblings), the composition of the family during the client’s childhood and
adolescence, and the quality of relationships with family members both past and present.
Social and Developmental History
Significant developmental events that may influence current problems or circumstances. This should include, as aplplicable, issues surrounding pregnancy or birth; social, behavioral, and cognitive milestones; and relational history (include interaction with peers, people in authority, academic performance, and extra-curricular activities – e.g., sports, clubs, etc.); current and previous marital/non-marital relationships, children, and social supports.
Educational and Occupational History
Schools attended, educational level attained, and any professional, technical, and/or vocational training; current employment status, length of tenure on past jobs, military service (rank and duties), job performance, job losses, leaves of absence, and occupational injuries.
Cultural Influences
Potential assessment issues (see chapter 3) when working with a diverse populations.
Mental Status Exam
Appearance and Behavior
Susan C. is a 5’4” single White female of average weight. At the time of the interview, she had a pasty white complexion and several scars from adolescent acne. She presented herself in a cooperative, friendly manner during the interview, was appropriately dressed for the season, and answered questions in a direct fashion. Her eye contact was appropriate. Psychomotor activity was within normal limits as she moved comfortably during the interview. No atypical physical characteristics were noted. Her speech patterns and expressive/receptive language were within normal limits. No evidence of current drug or alcohol intoxication was observed.
Sensorium and Mental Ability
During the interview, Susan C. appeared alert and oriented x4. While not formally assessed, she appears to have average to above average intelligence as evidenced by her vocabulary and reported GPA in college. There was no difficulty with questions assessing her recent or remote memory, or mathematical calculations. Some abstract thinking difficulty was observed in her difficulty describing what the difference was between a lie and a mistake.
Thought
Susan displayed a logical, sequential, coherent flow of thought. No tangential thinking, flight of ideas, or looseness of associations were noted. Thought content appeared to be within normal limits. No evidence of hallucinations, delusions, paranoid ideation, or ruminations was apparent. No compulsions or obsessions were reported.
Sensory Motor and Perceptual Processes
Sensory motor and perceptual processes appeared within normal limits. Susan C. was able to adequately duplicate the drawing of a clock. There was no evidence of fine motor tremor, auditory, or perceptual difficulties.
Affect and Mood
During the interview, Susan displayed a moderately depressed affect. While eye contact was appropriate, she seldom smiled even when an amusing incident occurred while we were in the office. Her voice tone had monotone qualities and she often sighed during the interview. She verbalized feeling depressed since her recent miscarriage (3 weeks ago). No history of manic-like symptoms was reported. She denied suicidal and homicidal ideation. There was no evidence of a risk for violence or impulsivity.
Self-regulation
Susan C. displayed adequate impulse control and judgment. These interview qualities are consistent with her history.
Due in Unit 4: The completed, typed form must contain both the observation and analysis.
PRINT THIS FORM to use for both your video observation and the analysis.
Observation: Videotaped Classrooms
Select and observe one (1) video from the five choices below.
Write your observation notes for the video on this form.
Once the observation is completed, type the information you recorded into the form.
Analysis
Follow the instructions below for analysis of the videotaped classroom observation.
Video Choices
1. North Carolina Rated License Assessment Project (NCRLAP). (2011, February 4). Language for learning: Infants and toddlers [Video file]. Retrieved from https://www.youtube.com/watch?v=7DPhIQh91Mw
Sandra Levine Productions. (2011, September 6). Part 2: High-quality kindergarten today. The classroom environment [Video file]. Retrieved from https://www.youtube.com/watch?v=hPZV- 2XhkdI
Keirsey, B. (2012, Mar 6). Preschool Shark Math Lesson. [Video File].
You are looking for signs of quality, applied theories, one or two specific approaches,
and developmentally appropriate practices.
Program’s Philosophy (Listen for descriptions of the listed items. Is there a specific theory-based philosophy, model, approach or curriculum? What is their approach to family engagement?)
Mission and Vision (if applicable): Educational Philosophy: (if applicable): Curriculum Approach: Family Engagement:
POSTED CLASSROOM INFORMATION
Do you see signs of the following in the videotape?
(Put “X” for all that are observed): ___ Daily Schedule ___ Lesson Plan ___Parent/Family Bulletin Board
___ Other _______________________________________________________________________________
Lesson Plan: Describe evidence of developmental domains and early learning standards?
(Hint: You may find evidence in a lesson plan or postings around the classroom in different learning centers, on the Family Bulletin Board. If there is no evidence, discuss the lesson(s) observed in the video.)
OBSERVED EXPERIENCES
Write only what you see and what you hear! Only the facts! No opinions!
Location (Check all that apply): ____ Classroom _____ Outdoors (e.g., playground)
Daily Schedule Routine (e.g., free choice, morning meeting, transition to outdoors, … ) Materials being used:Signs of Children’s Interest and Engagement in the activities:Teacher-Child Interactions (including words spoken, gestures, actions, etc.):Child-Child Interactions (including words spoken, gestures, actions, etc.):Teacher-Family Interactions (e.g., communication during arrival and departure, encouraging family members to read or play with children, help with separations and transitions)
Other (add any relevant additional information that you gathered below) – not required.
Analysis #1
Complete all four questions.
For each question, provide a substantive response of at least 3 to 4 sentences.
Note: Two student examples are provided of class observations and analysis for both live and videotaped classes. They serve as guides to guide to support your critical analysis and help you identify your own responses.
Is the observed teacher(s) an “intentional teacher”? Explain
What are two signs of developmentally appropriate practice (DAP)?
Describe observed family engagement and/or family-teacher interactions. Do you find the practices effective for supporting families as their children’s first teachers?
If none are observed, write one way the teacher could support families to engage children in similar learning experiences in their homes.
What is one characteristic of this teacher that you would try to emulate as a teacher?
Highlight the issue of equity regarding school funding.
With a price tag of $197.5 million, Newton North (built in 2010) is the most expensive public school ever built in Massachusetts.
Read the article, The lessons of Newton North, and give your opinion regarding whether it is equitable for some students to attend a brand new $197.5 million dollar school while other students attend schools in disrepair? Why or why not?
Purpose Statement (Did the speaker clearly state the purpose of the speech?):
Credibility statement (Did the speaker tell the audience why they should listen to her/him?):
Did the speaker preview main points, and what were the main points?
Did the presentation clearly show a process, and what were the main steps of this process?
Organization of Presentation (Was the presentation organized in a logical, easy to follow manner?):
Content (Was the content relevant to the topic, how or how not?):
Use of transitions (Did the speaker “connect the dots” for the audience?):
Verbal and Non-verbals (Did the speaker exhibit an inordinate number of distracting non-verbal behaviors? Did the speaker show enthusiasm for the subject through her/his vocalics, did the speaker use eye-contact with the audience?):
Conclusion: Did the Speaker clearly summarize main points, and what were the main points?
Attached are possible example of solutions to this project.
Systems Diagrams and Visualization Project Create the following UML diagrams to visualize the process of completing the IT project from the previous exercise (providing IT services for a new building): • Use Case diagram • Activity diagram • Communications diagram • Data Flow diagram Assume the following basic processes:
Procurement of all resources.
Setup of PCs and network servers.
Deployment and Testing of resources to the IT Area/Office.
Deployment and Testing of resources to the Administrative Area.
Deployment and Testing of resources to the Conference Room.
Deployment and Testing of resources to the Meeting Room.
Deployment and Testing of resources to the Individual Offices.
Deployment and Testing of resources to the Computer Labs.
Testing of all Other Locations. • Create a Use Case diagram to show all actors and the basic processes above o Procurement, Setup, Deployment & testing of each major location. • Create an Activity diagram to show the deployment and testing of resources into the Computer Labs o Network connectivity testing requires interaction between the PC and Network Specialist o Projector connectivity testing requires interaction between the PC and AV Specialist. • Create a Communications diagram to show collaboration between the PC Specialist, the Network Specialist and the AV Specialist during deployment and testing of resources into the Computer Labs. o If network connectivity issues arise, the PC Specialist will communicate with the Network Specialist. o If projector connectivity issues arise, the PC Specialist will communicate with the AV Specialist. • Create a Data Flow diagram to show the Procurement of all resources, based on this additional information: o The PC Specialist enters all purchases into the Purchase Application system once the resources are purchased. o The PC Specialists closes all purchases in the Purchase Application system once the resources are received.
This week you reviewed four usability study examples. Each one of these examples takes a different approach to data analysis. Applying your knowledge from the Preece text, which study do you feel does the best job at analyzing the intended platform? What one concept among each study do you believe is consistent? one page with reference
Q3. What is Design Bias? Q6. Describe Web 2.0 Technologies
Q11. What is GUI?
Type each of the three questions question # as an APA Level 1 heading (i.e. Q12, Q14, Q15)
Discuss each question using 40 – 50 words
Use three (3) different sources(one per question)
Each in-text citation must have a matching reference in the References list
To avoid plagiarism, ensure you credit ALL content retrieved from your textbook and online sources
You are the Superintendent of the school district mentioned in the article. Your Director of Transportation called you 10 minutes ago and updated you on the bus accident. News crews are on the scene and parents have not been notified. What are your next steps?
Marcus is a second grade student who qualifies for special education services in the areas of reading comprehension and reading fluency as a student with a specific learning disability. He struggles with decoding grade level words and is unable to correctly answer grade level reading comprehension questions related to what he has just read. When material is read to him, Marcus is able to answer comprehension questions at grade level. According to standardized testing, his current reading comprehension is at the 1.0 grade level. When given a timed test at the first grade level, Marcus is able to correctly read 30 words in two minutes. Marcus also struggles with written expression.
Marcus is able to perform at grade level in math, which is his preferred subject. Marcus appears to be somewhat reserved around his peers, and his parents would like to see him become more social.
Sample Co-Teaching Lesson Plan (Direct Instruction)
Section 1: Lesson Preparation
Teacher Candidate Name:
Ms. Lope
Grade Level:
2nd grade
Date:
Unit/Subject:
ELA
Lesson Summary and Focus:
In 2-3 sentences, summarize the lesson, identifying the central focus based on the content and skills you are teaching.
Classroom and Student Factors/Grouping:
National/State Learning Standards:
Common Core State Standards: RF.2.3 a. Distinguish long and short vowels when reading regularly spelled one-syllable words.
Specific Learning Target(s)/Objectives:
Objective (Explicit) Student will be able to (SWBAT): decode the vowel sound short /e/ in one-syllable words. to distinguish the short /e/ sound in one-syllable word within a sentence. Sub-objectives SWBAT sound out words phonically SWBAT differentiate between different phonemes
Academic Language
Short /e/ sound Long /e/ sound Ben, Ted, let, bed, red, get, tell, then, left, fell, yells, pet, Jen, net, nest, tent, wet, web.
Resources, Materials, Equipment, and Technology:
Short /e/ Vocabulary list Short /e/ paragraph Short /e/ Book Jen Short /e/ Word Search worksheet
Section 2: Instructional Planning
Anticipatory Set
Time Needed
Multiple Means of Representation The teacher will start a conversation with the student, asking the student what the different sounds the different vowels make. Teacher will then lead into conversation about the e sound and it makes two different sounds. Teacher will tell the student that today’s objective is to work on the short /e/ sound. Teacher will review the short and long e sound with student, teacher will ask student about learning it in the past. (How did you learn these sounds? How do you remember which sound to make?) Teacher will tell student that we are going to read a paragraph and look for the short /e/ sound. Explain how you will differentiate materials for students with special needsWhat accommodations/modifications will you include for a specific student?Do you anticipate any student who will need an additional challenge?What co-teaching approach will you use to maximize student achievement?
Time Needed
Multiple Means of Engagement Teacher will have the student read the paragraph that emphasizes the short /e/ sound. The teacher will help the student if needed. The teacher will then have the student highlight the short /e/ sounds. Teacher will explain that it is a short /e/ sound because of the CVC/CVCC pattern. How did you know to use the short /e/ sound? What would it sound like if you used the long /e/ sound? Student will read the paragraph. Student will highlight the words with the short /e/ sound. Student will ask and answer questions. Explain how you will differentiate materials for students with special needsWhat accommodations/modifications will you include for a specific student?Do you anticipate any student who will need an additional challenge?What co-teaching approach will you use to maximize student achievement?
Time Needed
Multiple Means of Expression Teacher will tell the student to read aloud the mini book and highlight the short /e/ sounds. Teacher will visually assess student while working, teacher will ask and answer questions. Why did you highlight that word? How do you know it is not pronounced (use long /e/ sound in place of short /e/ sound)? Student will read the book aloud. Student will highlight the short /e/ sounds. Student will ask and answer questions. Explain how you will differentiate materials for students with special needsWhat accommodations/modifications will you include for a specific student?Do you anticipate any student who will need an additional challenge?What co-teaching approach will you use to maximize student achievement?
Time Needed
Extension Activity and/or Homework Teacher will talk with the student about the importance of knowing when to use the short /e/ sound giving the examples of: Ben vs. Bean Bed vs. Bead Pet vs. Peat Red vs. Read Teacher will ask the student if there are any other words that use the short /e/ sound that make another word when the short /e/ sound is exchanged for the long /e/ sound.
In 2-3 sentences, summarize the lesson, identifying the central focus based on the content and skills you are teaching.
Classroom and Student Factors/Grouping:
Describe the important classroom factors (demographics and environment) and student factors (IEPs, 504s, ELLs, students with behavior concerns, gifted learners), and the effect of those factors on planning, teaching, and assessing students to facilitate learning for all students. This should be limited to 2-3 sentences and the information should inform the differentiation components of the lesson.
National/State Learning Standards:
Review national and state standards to become familiar with the standards you will be working with in the classroom environment.Your goal in this section is to identify the standards that are the focus of the lesson being presented. Standards must address learning initiatives from one or more content areas, as well as align with the lesson’s learning targets/objectives and assessments.Include the standards with the performance indicators and the standard language in its entirety.
Specific Learning Target(s)/Objectives:
Learning objectives are designed to identify what the teacher intends to measure in learning. These must be aligned with the standards. When creating objectives, a learner must consider the following:Who is the audienceWhat action verb will be measured during instruction/assessmentWhat tools or conditions are being used to meet the learningWhat is being assessed in the lesson must align directly to the objective created. This should not be a summary of the lesson, but a measurable statement demonstrating what the student will be assessed on at the completion of the lesson. For instance, “understand” is not measureable, but “describe” and “identify” are.For example:Given an unlabeled map outlining the 50 states, students will accurately label all state names.
Academic Language
In this section, include a bulleted list of the general academic vocabulary and content-specific vocabulary you need to teach. In a few sentences, describe how you will teach students those terms in the lesson.
Resources, Materials, Equipment, and Technology:
List all resources, materials, equipment, and technology you and the students will use during the lesson. As required by your instructor, add or attach copies of ALL printed and online materials at the end of this template. Include links needed for online resources.
Section 2: Instructional Planning
Anticipatory SetYour goal in this section is to open the lesson by activating students’ prior knowledge, linking previous learning with what they will be learning in this lesson and gaining student interest for the lesson. Consider various learning preferences (movement, music, visuals) as a tool to engage interest and motivate learners for the lesson.In a bulleted list, describe the materials and activities you will use to open the lesson. Bold any materials you will need to prepare for the lesson.For example:I will use a visual of the planet Earth and ask students to describe what Earth looks like.I will record their ideas on the white board and ask more questions about the amount of water they think is on planet Earth and where the water is located.
Time Needed
Multiple Means of RepresentationLearners perceive and comprehend information differently. Your goal in this section is to explain how you would present content in various ways to meet the needs of different learners. For example, you may present the material using guided notes, graphic organizers, video or other visual media, annotation tools, anchor charts, hands-on manipulatives, adaptive technologies, etc.In a bulleted list, describe the materials you will use to differentiate instruction and how you will use these materials throughout the lesson to support learning. Bold any materials you will need to prepare for the lesson.For example:I will use a Venn diagram graphic organizer to teach students how to compare and contrast the two main characters in the read-aloud story. I will model one example on the white board before allowing students to work on the Venn diagram graphic organizer with their elbow partner.Explain how you will differentiate materials for each of the following groups: English language learners (ELL): Students with special needs: Students with gifted abilities: Early finishers (those students who finish early and may need additional resources/support):
Time Needed
Multiple Means of EngagementYour goal for this section is to outline how you will engage students in interacting with the content and academic language. How will students explore, practice, and apply the content? For example, you may engage students through collaborative group work, Kagan cooperative learning structures, hands-on activities, structured discussions, reading and writing activities, experiments, problem solving, etc.In a bulleted list, describe the activities you will engage students in to allow them to explore, practice, and apply the content and academic language. Bold any activities you will use in the lesson. Also, include formative questioning strategies and higher order thinking questions you might pose.For example:I will use a matching card activity where students will need to find a partner with a card that has an answer that matches their number sentence. I will model one example of solving a number sentence on the white board before having students search for the matching card. I will then have the partner who has the number sentence explain to their partner how they got the answer.Explain how you will differentiate activities for each of the following groups: English language learners (ELL): Students with special needs: Students with gifted abilities: Early finishers (those students who finish early and may need additional resources/support):
Time Needed
Multiple Means of ExpressionLearners differ in the ways they navigate a learning environment and express what they know. Your goal in this section is to explain the various ways in which your students will demonstrate what they have learned. Explain how you will provide alternative means for response, selection, and composition to accommodate all learners. Will you tier any of these products? Will you offer students choices to demonstrate mastery? This section is essentially differentiated assessment.In a bulleted list, explain the options you will provide for your students to express their knowledge about the topic. For example, students may demonstrate their knowledge in more summative ways through a short answer or multiple-choice test, multimedia presentation, video, speech to text, website, written sentence, paragraph, essay, poster, portfolio, hands-on project, experiment, reflection, blog post, or skit. Bold the names of any summative assessments.Students may also demonstrate their knowledge in ways that are more formative. For example, students may take part in thumbs up-thumbs middle-thumbs down, a short essay or drawing, an entrance slip or exit ticket, mini-whiteboard answers, fist to five, electronic quiz games, running records, four corners, or hand raising.Underline the names of any formative assessments.For example:Students will complete a one-paragraph reflection on the in-class simulation they experienced. They will be expected to write the reflection using complete sentences, proper capitalization and punctuation, and utilize an example from the simulation to demonstrate their understanding. Students will also take part in formative assessments throughout the lesson, such as thumbs up-thumbs middle-thumbs down and pair-share discussions, where you will determine if you need to re-teach or re-direct learning.Explain how you will differentiate assessments for each of the following groups: English language learners (ELL): Students with special needs: Students with gifted abilities: Early finishers (those students who finish early and may need additional resources/support):
Time Needed
Extension Activity and/or HomeworkIdentify and describe any extension activities or homework tasks as appropriate. Explain how the extension activity or homework assignment supports the learning targets/objectives. As required by your instructor, attach any copies of homework at the end of this template.
An essential part of being a special educator is writing and implementing IEPs and lesson plans associated with goals on IEPs. Due to legal requirements, special educators should understand the steps that go into planning effective lessons and appropriate accommodations for students with disabilities. Being able to translate IEP goals into learning objectives and accompanying lessons requires practice.
Review “Marcus Partial IEP and Lesson” to inform the assignment.
Upon reviewing the Present Level of Performance and the second grade literacy-based standards, create one academic goal specific to Marcus’ needs. Include this academic goal within the “Lesson Summary and Focus” section of the “COE Lesson Plan Template.”
Design a standards-based lesson plan, using the “COE Lesson Plan Template,” that modifies and extends skills taught in Marcus’ sample lesson plan and is aligned to his identified academic goal.
Write a 250-500 word rationale explaining your instructional choices, how your lesson extends the skills taught in the “Sample Lesson Plan” for Marcus, and how the lesson is appropriate for meeting Marcus’ academic goal. Discuss how elements of UDL will be incorporated to enhance Marcus’ learning.
Choose the research question you developed in Course Project: Identifying a Problem Assignment. You will complete a total of three annotated bibliography assignments during the course that will serve as the research foundation of your final paper:
What impact does adverse childhood experiences have on student academic achievement?”
Each Course Project: Annotated Bibliography Assignment must follow current APA format and consist of at least 5 scholarly sources. Each Course Project: Annotated Bibliography Assignment must have a title page with a running head and page numbers. No abstract is required. At least 3 of your scholarly resources must be current empirical, peer-reviewed journal articles. All sources must be directly related to your Research Question. Be sure to select a variety of respected sources you can use in your paper (e.g., journal articles, books, e-books, scholarly websites, etc.).
Each source citation must be followed by an annotation. The annotations are designed to help you and your instructor better understand how your sources connect to your Research Question and Problem. The annotation is not a normally required component of current APA format; rather, it is a specific additional requirement for this assignment. Note the following requirements for your annotated bibliography:
An annotated bibliography is a list of citations for all resources you used.
Each citation is followed by a brief (150–200 words), descriptive, and evaluative paragraph (the annotation).
The purpose of the annotation is to inform the reader of the relevance, accuracy, and quality of the sources cited.
Do not cut and paste from your sources, as this constitutes plagiarism. Most of the time, this occurs as an innocent oversight on the part of the candidate. Regardless of the reason, in the event of plagiarism, you will receive 0 points for the entire assignment per Liberty University’s policy on academic dishonesty.
It is highly recommended that you use the Jerry Falwell Library resources. You will find many tips for formatting in current APA style, navigating databases, locating resources for citation, and returning the best results for your online searches through the Education Resource Guide: EDUC 701 link in the Course Project: Annotated Bibliography Assignment page. Additionally, the Education Department has a Library Liaison who is available to assist you in all matters pertaining to conducting your research, including what constitutes an acceptable article (reputable professional, scholarly journals, and/or informational venues that deal with the content of this course). The Library Liaison’s contact information is located in the Education Resource Guide: EDUC 701.
Format the paper in current APA format and see the grading rubric for specific grading criteria.
There is a link between understanding the purpose of one’s research and selecting the appropriate methods to investigate the questions that are derived from that purpose.
–(Newman, Ridenour, Newman, & DeMarco, G. M. P., Jr., 2003, p. 169)
For this Discussion, you will evaluate the purpose statements in assigned journal articles in your discipline and consider the alignment of theory, problem, and purpose. You will also explain your position on the relationship between research and social change.
Alignment means that a research study possesses clear and logical connections among all of its various components. To achieve these connections, researchers must carefully craft the components of their study such that when they are viewed together, there is a coherent interrelationship.
As you read the authors’ purpose statements, consider how well the intent of the study, and its connection to the problem and theoretical framework, is presented. Also consider if the purpose statement reveals the study’s potential for engendering positive social change.
As you know, social change is a distinguishing feature of Walden University’s mission. Positive social change implies a transformation that results in positive outcomes. This can happen at many levels (e.g., individual, family systems, neighborhoods, organizations, nationally and globally); and positive social change can occur at different rates: slow and gradual or fast and radical.
With these thoughts in mind, refer to the Journal Articles document for your assigned articles for this Discussion. You will switch your journal article assignment from Week 3. If your last name starts with A through L, use Article B. If your last name starts with M through Z, use Article A. Follow the prompt below for your program.
Article A:
Picard, D., Martin, P., & Tsao, R. (2014). iPads at school: A quantitative comparison of elementary schoolchildren’s pen-on-paper versus finger-on-screen drawing skills. Journal of Educational Computing Research, 50(2), 203–212. https://doi.org/10.2190/EC.50.2.c
Assignment Task Part 1:
Write a 1pg critique of the research study in which you:
Evaluate the purpose statement using the Purpose Statement Checklist as a guide
Analyze alignment among the theory, problem, and purpose
Explain your position on the relationship between research and social change
Be sure to support your Main Issue Post and Response Post with reference to the week’s Learning Resources and other scholarly evidence in APA Style.
Read a selection of your classmates’ postings.
Assignment Task Part 2
Respond to 2 classmates in 3 paragraphs each who was assigned a different article than you by further supporting his or her critique or respectfully offering a differing perspective. Use intext citations and Citate Information and References APA style.
APAcitationsFor this Discussion, you will evaluate the purpose statements in assigned journal articles in your discipline and consider the alignment of theory, problem, and purpose. You will also explain your position on the relationship between research and social change.Alignment means that a research study possesses clear and logical connections among all of its various components. To achieve these connections, researchers must carefully craft the components of their study such that when they are viewed together, there is a coherent interrelationship.As you read the authors’ purpose statements, consider how well the intent of the study, and its connection to the problem and theoretical framework, is presented. Also consider if the purpose statement reveals the study’s potential for engendering positive social change.As you know, social change is a distinguishing feature of Walden University’s mission. Positive social change implies a transformation that results in positive outcomes. This can happen at many levels (e.g., individual, family systems, neighborhoods, organizations, nationally and globally); and positive social change can occur at different rates: slow and gradual or fast and radical.
The most effective strategies, approaches, and methods for teaching ELLs are supported by language acquisition theories. English language acquisition can be promoted by understanding language as an interconnected system and by integrating the discourse and rhetorical structures of ELLs within instruction.
For this assignment, you will devise a language game or communication activity informed by language acquisition theory that integrates listening, speaking, reading, and writing for a grade level within grades K-3.
For your chosen grade level, select a content standard from the Arizona Academic Standards and a corresponding standard from the Arizona English Language Proficiency (ELP) to be aligned with the game or activity. Create at least one learning objective for your game or activity that is aligned with your chosen academic and ELP standards.
Within a 500-750 word submission, include the following:
The ELA and ELP standards as well as the learning objective(s) to be addressed within your game or activity
An explanation of the game or activity and how it would be carried out in an educational setting
A list of the materials needed for your game or activity
A brief description of at least one language acquisition theory and how it informed the design of your game or activity
A brief definition of phonetics, phonology, morphology, lexicon, semantics, syntax, and pragmatics. Additionally, include a description of how each of these elements relate to the verbal and written exercises within your game or activity.
Support your submission with at least three scholarly resources.
Prepare this assignment according to the guidelines found in the APA Style Guide, located in the Student Success Center. An abstract is not required.
This assignment uses a rubric. Review the rubric prior to beginning the assignment to become familiar with the expectations for successful completion.
You are required to submit this assignment to LopesWrite. A link to the LopesWrite technical support articles is located in Class Resources if you need assistance.
Ana’s mother, who became pregnant while in high school, is a single parent who completed her GED after Ana’s birth. Her mother works full-time to support her and Ana. Ana’s parents never married, and her biological father has very limited contact with her, nor does he offer much support. Her father also did not complete his high school degree. Ana has no siblings, but does have two male same-age cousins who also struggle with attending school. Her mother wants Ana to finish high school, as she wants more for her daughter and for her to be the first in the family to graduate high school.
Medical Information
Ana had delayed physical growth from second grade to eighth grade. Her mother took her to a physician during that time and no medical problems were reported. She has received regular medical check-ups with no noted medical concerns and no significant medical history.
School History
Ana entered kindergarten at age 5 after one year of preschool as a model student in the developmental preschool program at the neighborhood school. Her daycare was provided by her maternal grandmother prior to starting kindergarten. Ana has attended schools in her grandmother’s neighborhood and has had no grade retentions.
Attendance
Ana has missed an average of 10 days of school from Grades K through 7. She had 50 days of absence in Grade 8 and missed two weeks at the beginning of Grade 9. Ana has had no disciplinary referrals in any grades up to the present time.
Grade 8 (last academic year)
Ana was absent at least 1 day per week starting mid-first quarter in the eighth grade. Her absences increased to two or more each week by winter break. Around this time, a pattern of tardiness to school in the morning also began. Ana’s mother reported to the guidance counselor, “She’s refusing to get up in the mornings…lags in getting dressed…complains of tiredness and lethargy.” Ana then arranged to stay in the guidance office to complete work independently, two hours per day in the afternoon.
Soon she was absent as many days as she attended and by April, Ana rarely attended school at all.
Grade 9 (current academic year)
Ana’s physical growth seems to have stopped. At 5’1”, Ana is petite and smaller than most of her peers. She attended the first two days of classes, and then did not attend again for two weeks. She is interested in playing high school sports. She has trouble making friends and keeping connections with peers, but does like teachers and converses easily with them. She has no behavior problems or referrals. She does have trouble completing homework and keeping up with notes in classes and has failing grades in several classes.
Testing and Evaluation
Ana was given both verbal (WISC) and non-verbal (UNIT) IQ testing. Both tests placed her in the average intelligence range with an IQ of 105.
Woodcock-Johnson III Tests of Achievement
Ana was given the WJIII with the following results:
Cluster
Score
Broad Reading
82 (low average range)
Broad Math
99 ( average range)
Broad Written Language
87 (low average range)
Subtest Scores
Letter-Word Identification
85
Reading Fluency
81
Passage Comprehension
91
Calculation
93
Math Fluency
101
Applied Problems
104
Spelling
86
Writing Fluency
87
Writing Samples
98
Classroom Teacher Input
Ana’s English language arts (ELA) teacher reports that Ana is able to write complete sentences, but is unable to complete a paragraph that follows the topic sentence. She often spells words incorrectly on her final draft. Additionally, she has difficulty sounding out words, which affects her reading fluency and her reading comprehension. Currently, Ana can independently read a seventh grade text with 80% comprehension. According to a reading inventory administered by her ELA teacher, Ana reads 40WPM correctly at a seventh grade level.
Interventions Prior to Special Education Referral
Attendance administrator has been initiating calls home every day Ana is absent
1-to-1 sessions have been scheduled weekly with guidance counselor, many of which she has missed due to absences.
Special education teacher has begun building a consultation team to seek input for special education referral
Several after school tutoring sessions have been scheduled, but Ana has only attended a few
A truancy referral to Juvenile Court has been filed (following state-required legal process)
ELA teacher provides small group instruction for reading and writing
Several teachers are providing her extended time to complete tasks and assignments
Reason for Referral
Ana has an escalating pattern of absenteeism, decreasing socialization with peers at school and in the community, has failing grades, and very low self-acceptance/self-concept.
Interviews
Guidance Counselor:
Ana spontaneously smiles and converses with him; says she is comfortable in the guidance office
Ana has told Guidance Counselor that she wants to be in school to please her mom and to participate in sports
Mother:
States that she is concerned about Ana’s health, and that is why she does not insist Ana go to school or leave the house when Ana says she does not feel good
Ana:
Says she thinks she is a “freak” – tiny, odd looking, biracial.
Says other kids make fun of her because she is so small
She tears up when she talks about herself; voice quivers
She acknowledges adults (smiles, “thank you”, responds to questions)
Says she likes adults, would rather talk with adults than peers
Asks questions, initiates comments with adults
Has a good vocabulary and speaks fluently
Says she wants to make her mother happy and proud of her, but does not think she can
Says she likes sports, but is “too small” to play them
Says she is “close” to mother and grandmother
Community
Ana says she does not spend time with friends or participate in school or community groups. She has had no law enforcement involvement and no court appearances, nor has she ever had any formal placements out of the home.
Alex is a 17-year-old student with autism. He receives special education services in a self-contained classroom in an urban high school. Alex receives instruction both in the classroom and in the community to improve his vocational, academic, and social skills. He is currently participating in community-based training in an office setting completing tasks such as data entry and spreadsheet development. He is diligent and methodical in completing the varied tasks assigned to him. Alex reads grade level texts independently; however, he demonstrates deficits in reading comprehension and oral expression. In elementary and middle school, he participated in a general education math course and maintained a B average. In high school, he received two years of Teach Math, opting out of standard courses of Algebra I, II, and Geometry.
After school, Alex works part-time at a local office supply store entering numerical data to keep track of stock and services rendered by store staff. His behavior is appropriate at work and he has expressed that he likes working. He is punctual each day, and he is willing to stay late when needed. He really enjoys getting a paycheck and he usually spends his money on fast food and movies from the local video rental shop. Alex is detail-oriented and reviews each column of numbers several times before moving on to type another column. This results in slower production rates in comparison to other workers who complete similar tasks.
Alex is intimidated by his boss because he knows that the boss has the ability to fire him, a fact that his teachers at school presented during a unit about behavior in the workplace. Alex has perseverated on this fact, making him afraid to talk to his boss. Also, Alex knows that at times his speech is not understood by people he does not know, so sometimes he avoids talking to people he does not know well. As a result, instead of speaking to his boss, Alex usually tells problems or concerns to his school job coach who visits Alex at the job site each week. The job coach is concerned that Alex will not ask for help if an emergency occurs, and that a certain level of communication between Alex and his boss is necessary to develop a good working relationship. The boss views Alex as a valuable employee and is willing to provide opportunities for Alex to develop appropriate communication skills. The boss has also expressed an interest in employing Alex for more hours per week after graduation, if he continues to develop his business skills.
Alex’s mother has expressed that she will support her son in his job at the office supply store by helping him work on skills that are needed for the job, but she believes that he will need support to be successful in this employment setting, especially when new tasks are assigned. She knows that after Alex graduates, his school job coach will stop visiting him at work so she cannot depend on his continued help. Currently, Alex has no services from the local vocational rehabilitation agency, although his mother voiced an interest in this at his last IEP meeting.
Scenario used with permission from the National Secondary Transition Technical Assistance Center.
PRESENT LEVELS OF PERFORMANCE AND INDIVIDUAL NEEDS Documentation of student’s current performance and academic, developmental and functional needs
Evaluation Results (including for school-age students, performance on State and district-wide assessments)
Academic Achievement, Functional Performance and Learning Characteristics Levels of knowledge and development in subject and skill areas including activities of daily living, level of intellectual functioning, adaptive behavior, expected rate of progress in acquiring skills and information, and learning style:
Student strengths, preferences, interests:
Academic, developmental and functional needs of the student, including consideration of student needs that are of concern to the parent:
Social Development The degree (extent) and quality of the student’s relationships with peers and adults; feelings about self; and social adjustment to school and community environments:
Student strengths:
Social development needs of the student, including consideration of student needs that are of concern to the parent:
Physical Development The degree (extent) and quality of the student’s motor and sensory development, health, vitality and physical skills or limitations which pertain to the learning process:
Student strengths:
Physical development needs of the student, including consideration of student needs that are of concern to the parent:
Management Needs The nature (type) and degree (extent) to which environmental and human or material resources are needed to address needs identified above:
Effect of Student Needs on Involvement and Progress in the General Education Curriculum or, for a Preschool Student, Effect of Student Needs on Participation in Appropriate Activities
Student Needs Relating to Special Factors Based on the identification of the student’s needs, the Committee must consider whether the student needs a particular device or service to address the special factors as indicated below, and if so, the appropriate section of the IEP must identify the particular device or service(s) needed.
Does the student need strategies, including positive behavioral interventions, supports and other strategies to address behaviors that impede the student’s learning or that of others? Yes No Does the student need a behavioral intervention plan? No Yes:
For a student with limited English proficiency, does he/she need a special education service to address his/her language needs as they relate to the IEP? Yes No Not Applicable
For a student who is blind or visually impaired, does he/she need instruction in Braille and the use of Braille? Yes No Not Applicable
Does the student need a particular device or service to address his/her communication needs? Yes No In the case of a student who is deaf or hard of hearing, does the student need a particular device or service in consideration of the student’s language and communication needs, opportunities for direct communications with peers and professional personnel in the student’s language and communication mode, academic level, and full range of needs, including opportunities for direct instruction in the student’s language and communication mode? Yes No Not Applicable
Does the student need an assistive technology device and/or service? Yes No If yes, does the Committee recommend that the device(s) be used in the student’s home? Yes No
Beginning not later than the first IEP to be in effect when the student is age 15 (and at a younger age if determined appropriate)
MEASURABLE POSTSECONDARY GOALS long-term goals for living, working and learning as an adult
Education/Training:
Employment:
Independent Living Skills (when appropriate):
TRANSITION NEEDS In consideration of present levels of performance, transition service needs of the student that focus on the student’s courses of study, taking into account the student’s strengths, preferences and interests as they relate to transition from school to post-school activities:
MEASURABLE ANNUAL GOALS
The following goals are recommended to enable the student to be involved in and progress in the general education curriculum, address other educational needs that result from the student’s disability, and prepare the student to meet his/her postsecondary goals.
Annual Goals What the student will be expected to achieve by the end of the year in which the IEP is in effect
Criteria Measure to determine if goal has been achieved
Method How progress will be measured
Schedule When progress will be measured
REPORTING PROGRESS TO PARENTS
Identify when periodic reports on the student’s progress toward meeting the annual goals will be provided to the student’s parents:
Alternate Section for Students Whose IEPs will Include Short-term Instructional Objectives and/or Benchmarks
(required for preschool students and for school-age students who meet eligibility criteria to take the New York State alternate assessment)
MEASURABLE ANNUAL GOALS
The following goals are recommended to enable the student to be involved in and progress in the general education curriculum or, for a preschool child, in appropriate activities, address other educational needs that result from the student’s disability, and, for a school-age student, prepare the student to meet his/her postsecondary goals.
Annual Goal What the student will be expected to achieve by the end of the year in which the IEP is in effect
Criteria Measure to determine if goal has been achieved
Method How progress will be measured
Schedule When progress will be measured
Short-term Instructional Objectives and/or Benchmarks (intermediate steps between the student’s present level of performance and the measurable annual goal):
Annual Goal
Criteria
Method
Schedule
Short-term Instructional Objectives and/or Benchmarks (intermediate steps between the student’s present level of performance and the measurable annual goal):
Annual Goal
Criteria
Method
Schedule
Short-term Instructional Objectives and/or Benchmarks (intermediate steps between the student’s present level of performance and the measurable annual goal):
(Duplicate table/rows as needed)
REPORTING PROGRESS TO PARENTS
Identify when periodic reports on the student’s progress toward meeting the annual goals will be provided to the student’s parents:
RECOMMENDED SPECIAL EDUCATION PROGRAMS AND SERVICES
Special Education Program/Services
Service Delivery Recommendations*
Frequency How often provided
Duration Length of session
Location Where service will be provided
Projected Beginning/ Service Date(s)
Special Education Program:
Related Services:
Supplementary Aids and Services/Program Modifications/Accommodations:
Assistive Technology Devices and/or Services:
Supports for School Personnel on Behalf of the Student:
* Identify, if applicable, class size (maximum student-to-staff ratio), language if other than English, group or individual services, direct and/or indirect consultant teacher services or other service delivery recommendations.
12-Month Service and/or Program – Student is eligible to receive special education services and/or program during July/August: No Yes If yes: Student will receive the same special education program/services as recommended above. OR Student will receive the following special education program/services:
Special Education Program/Services
Service Delivery Recommendations
Frequency
Duration
Location
Projected Beginning/ Service Date(s)
Name of school/agency provider of services during July and August: For a preschool student, reason(s) the child requires services during July and August:
Testing Accommodations (to be completed for preschool children only if there is an assessment program for nondisabled preschool children): Individual testing accommodations, specific to the student’s disability and needs, to be used consistently by the student in the recommended educational program and in the administration of district-wide assessments of student achievement and, in accordance with Department policy, State assessments of student achievement
Testing Accommodation
Conditions*
Implementation Recommendations**
None
*Conditions – Test Characteristics: Describe the type, length, purpose of the test upon which the use of testing accommodations is conditioned, if applicable. **Implementation Recommendations: Identify the amount of extended time, type of setting, etc., specific to the testing accommodations, if applicable.
Beginning not later than the first IEP to be in effect when the student is age 15 (and at a younger age, if determined appropriate).
COORDINATED SET OF TRANSITION ACTIVITIES
Needed activities to facilitate the student’s movement from school to post-school activities
Service/Activity
School District/Agency Responsible
Instruction
Related Services
Community Experiences
Development of Employment and Other Post-school Adult Living Objectives
Acquisition of Daily Living Skills (if applicable)
Functional Vocational Assessment (if applicable)
PARTICIPATION IN STATE AND DISTRICT-WIDE ASSESSMENTS (To be completed for preschool students only if there is an assessment program for nondisabled preschool students)
The student will participate in the same State and district-wide assessments of student achievement that are administered to general education students. The student will participate in an alternate assessment on a particular State or district-wide assessment of student achievement. Identify the alternate assessment: Statement of why the student cannot participate in the regular assessment and why the particular alternate assessment selected is appropriate for the student:
PARTICIPATION WITH STUDENTS WITHOUT DISABILITIES
Removal from the general education environment occurs only when the nature or severity of the disability is such that, even with the use of supplementary aids and services, education cannot be satisfactorily achieved. For the preschool student: Explain the extent, if any, to which the student will not participate in appropriate activities with age-appropriate nondisabled peers (e.g., percent of the school day and/or specify particular activities): For the school-age student: Explain the extent, if any, to which the student will not participate in regular class, extracurricular and other nonacademic activities (e.g., percent of the school day and/or specify particular activities): If the student is not participating in a regular physical education program, identify the extent to which the student will participate in specially-designed instruction in physical education, including adapted physical education: Exemption from language other than English diploma requirement: No Yes – The Committee has determined that the student’s disability adversely affects his/her ability to learn a language and recommends the student be exempt from the language other than English requirement.
SPECIAL TRANSPORTATION Transportation recommendation to address needs of the student relating to his/her disability
None. Student needs special transportation accommodations/services as follows: Student needs transportation to and from special classes or programs at another site:
Marcus is a second grade student who qualifies for special education services in the areas of reading comprehension and reading fluency as a student with a specific learning disability. He struggles with decoding grade level words and is unable to correctly answer grade level reading comprehension questions related to what he has just read. When material is read to him, Marcus is able to answer comprehension questions at grade level. According to standardized testing, his current reading comprehension is at the 1.0 grade level. When given a timed test at the first grade level, Marcus is able to correctly read 30 words in two minutes. Marcus also struggles with written expression.
Marcus is able to perform at grade level in math, which is his preferred subject. Marcus appears to be somewhat reserved around his peers, and his parents would like to see him become more social.
Sample Co-Teaching Lesson Plan (Direct Instruction)
Section 1: Lesson Preparation
Teacher Candidate Name:
Ms. Lope
Grade Level:
2nd grade
Date:
Unit/Subject:
ELA
Lesson Summary and Focus:
In 2-3 sentences, summarize the lesson, identifying the central focus based on the content and skills you are teaching.
Classroom and Student Factors/Grouping:
National/State Learning Standards:
Common Core State Standards: RF.2.3 a. Distinguish long and short vowels when reading regularly spelled one-syllable words.
Specific Learning Target(s)/Objectives:
Objective (Explicit) Student will be able to (SWBAT): decode the vowel sound short /e/ in one-syllable words. to distinguish the short /e/ sound in one-syllable word within a sentence. Sub-objectives SWBAT sound out words phonically SWBAT differentiate between different phonemes
Academic Language
Short /e/ sound Long /e/ sound Ben, Ted, let, bed, red, get, tell, then, left, fell, yells, pet, Jen, net, nest, tent, wet, web.
Resources, Materials, Equipment, and Technology:
Short /e/ Vocabulary list Short /e/ paragraph Short /e/ Book Jen Short /e/ Word Search worksheet
Section 2: Instructional Planning
Anticipatory Set
Time Needed
Multiple Means of Representation The teacher will start a conversation with the student, asking the student what the different sounds the different vowels make. Teacher will then lead into conversation about the e sound and it makes two different sounds. Teacher will tell the student that today’s objective is to work on the short /e/ sound. Teacher will review the short and long e sound with student, teacher will ask student about learning it in the past. (How did you learn these sounds? How do you remember which sound to make?) Teacher will tell student that we are going to read a paragraph and look for the short /e/ sound. Explain how you will differentiate materials for students with special needsWhat accommodations/modifications will you include for a specific student?Do you anticipate any student who will need an additional challenge?What co-teaching approach will you use to maximize student achievement?
Time Needed
Multiple Means of Engagement Teacher will have the student read the paragraph that emphasizes the short /e/ sound. The teacher will help the student if needed. The teacher will then have the student highlight the short /e/ sounds. Teacher will explain that it is a short /e/ sound because of the CVC/CVCC pattern. How did you know to use the short /e/ sound? What would it sound like if you used the long /e/ sound? Student will read the paragraph. Student will highlight the words with the short /e/ sound. Student will ask and answer questions. Explain how you will differentiate materials for students with special needsWhat accommodations/modifications will you include for a specific student?Do you anticipate any student who will need an additional challenge?What co-teaching approach will you use to maximize student achievement?
Time Needed
Multiple Means of Expression Teacher will tell the student to read aloud the mini book and highlight the short /e/ sounds. Teacher will visually assess student while working, teacher will ask and answer questions. Why did you highlight that word? How do you know it is not pronounced (use long /e/ sound in place of short /e/ sound)? Student will read the book aloud. Student will highlight the short /e/ sounds. Student will ask and answer questions. Explain how you will differentiate materials for students with special needsWhat accommodations/modifications will you include for a specific student?Do you anticipate any student who will need an additional challenge?What co-teaching approach will you use to maximize student achievement?
Time Needed
Extension Activity and/or Homework Teacher will talk with the student about the importance of knowing when to use the short /e/ sound giving the examples of: Ben vs. Bean Bed vs. Bead Pet vs. Peat Red vs. Read Teacher will ask the student if there are any other words that use the short /e/ sound that make another word when the short /e/ sound is exchanged for the long /e/ sound.
Professional Development: IEPs, Inclusion, and Team Teaching
Special educators need to understand how to include and engage general educators in the IEP process. They also need to have a firm understanding of the research behind inclusive classrooms for special education students, the benefits of inclusion settings, and their potential drawbacks.
Refer to the “Individualized Education Program (IEP) Blank Template” and the “New Your City Board of Education Individualized Education Program Blank Template” as needed to inform the topic assignment.
Create a 15-20 slide digital presentation for professional development for general education teachers on the topics of IEPs, inclusive classrooms, and team teaching.
Address the following within the presentation:
Explain each major section of an IEP.
Describe what an inclusive classroom setting looks like, and when it may be the most beneficial setting for students with disabilities; include specific examples of students with disabilities being appropriately placed in an inclusive setting.
Describe three team teaching models; include benefits and drawbacks of each.
Include a title slide, reference slide, and presenter’s notes.
Your digital presentation should include graphics that are relevant to the content, visually appealing, and use space appropriately.
Use the IEP template examples to inform the assignment. Support your presentation with a minimum of three scholarly resources.
Resource Teacher Know How
A special education teacher in a resource setting has a very difficult job, meeting the needs of a variety of students and covering a multitude of subject matters in a single class period. Being able to properly structure your class and effectively manage class time will help you meet the needs of all students and not become overwhelmed. Adding a number of strategies and accommodations to your teaching repertoire will also increase your efficacy in the classroom.
For this assignment, take on the role of a first-year special education teacher who has been assigned to the resource room to work with students who are working at the ninth grade level for both English and math. You have about 10 students during this class period and an aide to assist you. Students meet with you for 50 minutes each day to get help with homework, finish their classwork, study for tests, and get extra support in each subject area. You will need to structure the class so that student needs in both subject areas will have time to be addressed.
Use the “Class Profile” to obtain specific information about the needs of your students.
Part 1: Teacher Inquiries
In 250-500 words compose a response for the following:
Questions you would have about your teaching assignment before it begins, including any requests for additional information.
Questions you would have for fellow teachers and administration.
Information you would like to have before the end of the first week of school.
Provide a rationale for each inquiry. Cite both the “Class Profile” and an additional minimum of two outside scholarly resources in your responses.
Part 2: Classroom Environment
In 500-750 words compose a response for the following:
Provide a minimum of three possible ways to structure the classroom setting.
Provide a minimum of two possible ways to structure a class period.
Provide a minimum of three instructional strategies, to include accommodations and/or assistive technology, to meet the curricular content needs of your students in both the English language arts and math classes.
Provide two collaboration strategies to use when working with the classroom aide assisting you in meeting the needs of the students in the resource room setting.
Provide support for your responses, citing both the “Class Profile” and an additional minimum of two outside scholarly resources.
Modifying Lesson Plan
An essential part of being a special educator is writing and implementing IEPs and lesson plans associated with goals on IEPs. Due to legal requirements, special educators should understand the steps that go into planning effective lessons and appropriate accommodations for students with disabilities. Being able to translate IEP goals into learning objectives and accompanying lessons requires practice.
Review “Marcus Partial IEP and Lesson” to inform the assignment.
Upon reviewing the Present Level of Performance and the second grade literacy-based standards, create one academic goal specific to Marcus’ needs. Include this academic goal within the “Lesson Summary and Focus” section of the “COE Lesson Plan Template.”
Design a standards-based lesson plan, using the “COE Lesson Plan Template,” that modifies and extends skills taught in Marcus’ sample lesson plan and is aligned to his identified academic goal.
Write a 250-500 word rationale explaining your instructional choices, how your lesson extends the skills taught in the “Sample Lesson Plan” for Marcus, and how the lesson is appropriate for meeting Marcus’ academic goal. Discuss how elements of UDL will be incorporated to enhance Marcus’ learning.
ELA Lesson Plan and Rationale
Three of your students have specific learning disabilities in the area of reading; one has been diagnosed with ASD, and two have emotional and behavioral disorders which affect their academics in all areas. Two students have mild intellectual disabilities and one student is a speech and language impaired student who is struggling with reading.
One student was retained and is repeating fifth grade, and one is a new student whose records have not yet arrived, but reports this is his second time in fifth grade.
All of your students are decoding and comprehending at approximately a second to third grade reading level. All attend general education classes for at least part of the day. Eight of the nine students are males who show an interest in science and nonfiction texts, while your female student considers herself to be a fairy princess, she adores Disney, and she detests all the topics the other students love.
Review Appendix B of the Common Core Standards and select a fifth-grade exemplar informational text.
Using the “COE Lesson Plan Template,” create a lesson plan designed to meet the specific needs of the students in your class that enhances language development and communication skills, and incorporates:
The chosen fifth grade exemplar informational text.
A Common Core Standard or other state standard specific to informational text.
Assistive technology within the lesson and the lesson’s summative assessment.
In the “Rationale/Reflections” part of the lesson plan, write a 250-500 word rationale explaining your instructional choices. Be sure to address how the lesson enhances language development and communication skills. In addition, reflect upon how you would provide students feedback on formative assessments to prepare them for a summative assessment.
Benchmark – Case Study: PLAAFP and Annual Goals
Special educators must be proficient at more than simply teaching, planning, and addressing student concerns. A large portion of the special educator’s career will be spent creating, implementing, and reviewing IEPs in meetings with families and other professionals. Most educators find that the present level of academic and functional performance (PLAAFP) is the most essential part of the IEP because it paints a picture of the student and guides the goals, services, accommodations, and modifications within the rest of the IEP. Once a solid PLAAFP is written, then appropriate, measurable and observable goals for the student must be written.
Part 1: Present Level of Academic Achievement and Functional Performance (PLAAFP)
For this benchmark assignment, you will use the “Ana Case Study” to write a 250-500 word PLAAFP.
Your PLAAFP should include:
Student academic strengths
Evaluations
Performance in classes
Potential influences of language, culture, and family background
Strengths, preferences, and interests in nonacademic areas
Any other relevant issues
Part 2: Annual Goals
Write two measurable academic goals and two measurable behavioral goals for Ana. Each goal should include:
A specific, measurable skill/behavior to be achieved.
A specific measurement tool or assessment strategy for measuring performance on the goal.
Part 3: Rationale
Provide a 500-750 word rationale that clearly defends how each annual goal, assessment tool or strategy, and action steps are appropriate for Ana, based on the information and data in the PLAAFP.
In addition, using the “College of Education Professional Dispositions of Learners,” identify a disposition that you, as a special education teacher, would want to especially demonstrate with Ana and her family. Explain how this disposition would assist you in incorporating Ana’s language, culture, and family background into planning and delivering instruction that meets Ana’s academic and social-emotional development needs. In addition, what steps would you recommend to Ana, her family, and the IEP team for Ana to accomplish her goals?
Prepare this assignment according to the guidelines found in the APA Style Guide, located in the Student Success Center. An abstract is not required.
Required Components of Transition
All special educators who teach secondary students will be required to create transition plans that are meaningful and appropriate for the student. Transition plans go one step further than the IEP by adding specific goals and services that will help the student be successful after graduation in future education and training, in the community, and/or in the work force. Being able to write an effective transition plan is a legal requirement for high school special education teachers.
Create a 10-15 slide digital presentation for school faculty and staff that explains the components and legal requirements of transition planning under IDEA.
Address the following within your presentation:
Describe each of the required components of a transition plan according to IDEA.
Complete a transition plan for Alex using the data provided in the “Case Scenario: Alex,” sharing each transition plan component as an example.
Describe 2-3 strategies that promote successful transitions for students with disabilities.
Identify 2-3 collaboration strategies that are useful when working with students, families, and IEP teams to create transition plans for students with disabilities.
Include a title slide, reference slide, and presenter notes.
The digital presentation should include graphics that are relevant to the content, visually appealing, and use space appropriately.
Support your findings with 3-5 scholarly resources.
1A: Using sensitive and appropriate language is important in talking about individuals with disabilities, especially when collaborating with colleagues and families. What tips from the readings were new to you regarding communicating about individuals with disabilities? Which habits related to appropriate language do you think special education teachers need to educate their general education colleagues on the most?
1B: Some general educators believe they do not have the time or the expertise to comply with a student’s IEP. Explain how you, as the special education teacher, would support such a teacher in order to best meet the needs of the student.
2A: Provide an example of a situation where a student may need to bypass a learning step that cannot be mastered after a reasonable amount of time in order to move ahead. What adaptations might you make? When might this bypass of a step prove to be a mistake?
2B: What are some behavioral accommodations that you might make for students with disabilities who pose behavioral concerns? How would you explain these accommodations to other teachers and school staff members? Provide an example.
3A: Discuss engagement and what it means when using UDL in an inclusive classroom. What are three ways to differentiate engagement strategies for different types of students? Provide examples.
3B: Do you think it is difficult to write IEP goals that are measurable and observable? Why or why not? Why is it important for the student that IEP goals are measurable and observable?
4A: Assistive technology comes in many forms. What are some simple, inexpensive technologies you may use in the classroom for a student who is easily distractible, has difficulty paying attention, and is fidgety? Name three items, and explain how they would be used.
4B: Some pieces of technology are very expensive, easily breakable, and need updating often. These pieces of technology often go back and forth from home to school with the student, which increases the opportunity for breaking or misplacing them. What are three ways you can increase student and parent accountability with these pieces of technology?
5A: What are three reasons for allowing students to collect and chart their own assessment data? Describe why each are beneficial for students and what students might do with this data.
5B: Name three accommodations that can be made to assessments for students with disabilities. What are some advantages and disadvantages to making these accommodations?
6A: What post-secondary transition planning strategies do you plan to use with your future students to increase their success after graduation? Specifically mention one activity you would use for the case study student, Alex, to better prepare him for life in the vocational world. Why did you choose this activity?
6B: For some teachers, writing transition plans into an IEP is a struggle. Discuss why you think this might be. What would you recommend to such teachers to help them complete purposeful and useful transitions plans in IEPs?
8110-Week 6: Discussion: Designing Quantitative Research
Researchers consider validity and reliability with each new study they design. This is because validity and reliability are not fixed but rather reflect a particular study’s unique variables, research design, instruments, and participants.
In the context of research design, two types of validity, which speak to the quality of different features of the research process, are considered: internal validity and external validity.
Assuming that the findings of a research study are internally valid—i.e., the researcher has used controls to determine that the outcome is indeed due to manipulation of the independent variable or the treatment—external validity refers to the extent to which the findings can be generalized from the sample to the population or to other settings and groups. Reliability refers to the replicability of the findings.
For this Discussion, you will consider threats to internal and external validity in quantitative research and the strategies used to mitigate these threats. You will also consider the ethical implications of designing quantitative research
Assignment Task Part 1:
Write a 1 ½ page explanation of a threat to internal validity and a threat to external validity in quantitative research. Next, explain a strategy to mitigate each of these threats. Then, identify a potential ethical issue in quantitative research and explain how it might influence design decisions. Finally, explain what it means for a research topic to be amenable to scientific study using a quantitative approach.
Be sure to support your Main Issue Post and Response Post with reference to the week’s Learning Resources and other scholarly evidence in APA Style.
Assignment Task Part 2
Read a selection of your classmates’ postings.
Respond to 2 classmates in 2 paragraphs each by offering a strategy to address the ethical issue she or he identified. APA style.
Locate your program below for the assigned journal articles to use for the Discussion assignments in Weeks 3, 4, 5, and 7. Please follow the instructions in the week’s unit and find these articles in the Walden Library.
If your program is not listed, your Instructor will post an announcement with your assigned journal articles.
You will focus on one article in each of these weeks for your Main Question Post; however, you are expected to read and familiarize yourself with all the articles listed to effectively participate in the discussion. Consult the week’s Discussion area for instructions on completing the assignment.
For quick access, press CTRL + left-click on your program’s link below.
If your last name starts with A through L, use Article A.
Article A:
Forster, M., Grigsby, T. J., Unger, J. B., & Sussman, S. (2015). Associations between gun violence exposure, gang associations, and youth aggression: Implications for prevention and intervention programs.Journal of Criminology.
https://doi.org/10.1155/2015/963750
If your last name starts with M through Z, use Article B.
Article B:
Ibarra, P. R., Gur, O. M., & Erez, E. (2014). Surveillance as casework: Supervising domestic violence defendants with GPS technology.Crime, Law and Social Change, 62(4), 417-444. https://doi.org/10.1007/s10611-014-9536-4
Week 4
If your last name starts with A through L, use Article B.
Article B:
Ibarra, P. R., Gur, O. M., & Erez, E. (2014). Surveillance as casework: Supervising domestic violence defendants with GPS technology.Crime, Law and Social Change, 62(4), 417-444. https://doi.org/10.1007/s10611-014-9536-4
If your last name starts with M through Z, use Article A.
Article A:
Forster, M., Grigsby, T. J., Unger, J. B., & Sussman, S. (2015). Associations between gun violence exposure, gang associations, and youth aggression: Implications for prevention and intervention programs.Journal of Criminology. https://doi.org/10.1155/2015/963750
Week 5
If your last name starts A through I, use Article A.
Article A:
Dank, M., Lachman, P., Zweig, J. M., & Yahner, J. (2014). Dating violence experiences of lesbian, gay, bisexual, and transgender youth.Journal of Youth and Adolescence, 43(5), 846-57. https://doi.org/10.1007/s10964-013-9975-8
If your last name starts with J through R, use Article B.
Article B:
Hishinuma, E. S., Chang, J. Y., Goebert, D. A., Helm, S., Else, I. R. N., & Sugimoto-Matsuda, J. (2015). Interpersonal youth violence perpetration and victimization in a diverse Asian American and Pacific Islander adolescent sample.Violence and Victims, 30(2), 225-249. https://doi.org/10.1891/0886-6708.VV-D-13-00043
If your last name starts with S through Z, use Article C.
Article C:
Long, L., & Ullman, S. E. (2016). Correlates of problem drinking and drug use in black sexual assault victims.Violence and Victims, 31(1), 71-84. https:// doi.org/10.1891/0886-6708.VV-D-14-00024
Week 7
If your last name starts A through I, use Article A.
Article A: [This is article is available online and is no longer in the Walden
Library.]
Alqahtani, A. (2014). Awareness of the potential threat of cyberterrorism to the national security.Journal of Information Security, 5(4), 137-146. https://www.scirp.org/pdf/JIS_2014091911584817.pdf
If your last name starts J through R, use Article B.
Article B:
Seda, L. (2014). Identity theft and university students: Do they know, do they care?Journal of Financial Crime, 21(4), 461-483. https://doi.org/10.1108/JFC-05-2013-0032
If your last name starts S through Z, use Article C.
Article C:
Powell, M. B., Guadagno, B. L., & Cassematis, P. (2013). Workplace stressors for investigative interviewers of child-abuse victims.Policing, 36(3), 512-525. https://doi.org/10.1108/PIJPSM-05-2012-0039
EDUCATION
Week 3
If your last name starts with A through L, use Article A.
Article A:
Picard, D., Martin, P., & Tsao, R. (2014). iPads at school: A quantitative comparison of elementary schoolchildren’s pen-on-paper versus finger-on-screen drawing skills. Journal of Educational Computing Research, 50(2), 203–212. https://doi.org/10.2190/EC.50.2.c
If your last name starts with M through Z, use Article B.
Article B:
Swan, B., Coulombe-Quach, X.-L., Huang, A., Godek, J., Becker, D., & Zhou, Y. (2015). Meeting the needs of gifted and talented students: Case study of a virtual learning lab in a rural middle school. Journal of Advanced Academics, 26(4), 294–319. https://doi.org/10.1177/1932202X15603366
Week 4
If your last name starts with A through L, use Article B.
Article B:
Swan, B., Coulombe-Quach, X-L, Huang, A., Godek, J., Becker, D., & Zhou, Y. (2015). Meeting the needs of gifted and talented students: Case study of a virtual learning lab in a rural middle school. Journal of Advanced Academics, 26(4), 294–319. https://doi.org/10.1177/1932202X15603366
If your last name starts with M through Z, use Article A.
Article A:
Picard, D., Martin, P., & Tsao, R. (2014). iPads at school: A quantitative comparison of elementary schoolchildren’s pen-on-paper versus finger-on-screen drawing skills. Journal of Educational Computing Research, 50(2), 203–212. https://doi.org/10.2190/EC.50.2.c
Week 5
If your last name starts with A through I, use Article A.
Article A:
Canfield, M. L., Kivisalu, T. M., van der Karr, C., King, C., & Phillips, C. E. (2015). The use of course grades in the assessment of student learning outcomes for general education. Sage Open, 1–13. https://doi.org/10.1177/2158244015615921
If your last name starts with J through R, use Article B.
Article B:
McConnell, A. E., Martin, J. E., & Hennessey, M. N. (2015). Indicators of postsecondary employment and education for youth with disabilities in relation to GPA and general education. Remedial & Special Education, 36(6), 327–336. https://doi.org/10.1177/0741932515583497
If your last name starts with S through Z, use Article C.
Article C:
Hogenes, M., van Oers, B., Diekstra, R. F. W., & Sklad, M. (2015). The effects of music composition as a classroom activity on engagement in music education and academic and music achievement: A quasi-experimental study. International Journal of Music Education, 1–17. https://doi.org/10.1177/0255761415584296
Week 7
If your last name starts with A through I, use Article A.
Article A:
Dahl, P. (2016). Factors associated with truancy: Emerging adults’ recollections of skipping school. Journal of Adolescent Research, 31(1), 119–138. https://doi.org/10.1177/0743558415587324
If your last name starts with J through R, use Article B.
Article B:
Izumi-Taylor, S., Ito, Y., Lin, C. H., & Lee, Y.-Y. (2014). Pre-service teachers’ views of children’s and adults’ play in Japan, Taiwan, and the USA. Research in Comparative and International Education, 9(2), 213–226. https://doi.org/10.2304/rcie.2014.9.2.213
If your last name starts with S through Z, use Article C.
Article C:
Collins, I. (2015). Using international accreditation in higher education to effect changes in organisational culture: A case study from a Turkish university. Journal of Research in International Education, 14(2), 141–154. https://doi.org/10.1177/1475240915592589
If your last name starts with A through L, use Article A.
Article A:
Spencer, M. S., Rosland, A. M., Kieffer, E. C., Sinco, B. R., Valerio, M., Palmisano, G., Anderson, M., Guzman, J.R., & Heisler, M. (2011). Effectiveness of a community health worker intervention among African American and Latino adults with type 2 diabetes: A randomized controlled trial. American Journal of Public Health, 101(12), 2253–2260. https://doi.org/10.2105/AJPH.2010.300106
If your last name starts with M through Z, use Article B.
Article B:
Greenhalgh, T., Clinch, M., Afsar, N., Choudhury, Y., Sudra, R., Campbell-Richards, D., Claydon, A., Hitman, G.A., Hanson, P., & Finer, S. (2015). Socio-cultural influences on the behaviour of South Asian women with diabetes in pregnancy: Qualitative study using a multi-level theoretical approach. BMC Medicine, 13(1), 1-15. https://doi.org/10.1186/s12916-015-0360-1
Week 4
If your last name starts with A through L, use Article B.
Article B:
Greenhalgh, T., Clinch, M., Afsar, N., Choudhury, Y., Sudra, R., Campbell-Richards, D., Claydon, A., Hitman, G.A., Hanson, P., & Finer, S. (2015). Socio-cultural influences on the behaviour of South Asian women with diabetes in pregnancy: qualitative study using a multi-level theoretical approach. BMC Medicine, 13(1), 1-15. https://doi.org/10.1186/s12916-015-0360-1
If your last name starts with M through Z, use Article A.
Article A:
Spencer, M. S., Rosland, A. M., Kieffer, E. C., Sinco, B. R., Valerio, M., Palmisano, G., Anderson, M., Guzman, J.R., & Heisler, M. (2011). Effectiveness of a community health worker intervention among African American and Latino adults with type 2 diabetes: A randomized controlled trial. American Journal of Public Health, 101(12), 2253–2260. https://doi.org/10.2105/AJPH.2010.300106
Week 5
If your last name starts with A through I, use Article A.
Article A:
Flynn, P. M., Ridgeway, J. L., Wieland, M. L., Williams, M. D., Haas, L. R., Kremers, W. K., & Breitkopf, C. R. (2013). Primary care utilization and mental health diagnoses among adult patients requiring interpreters: A retrospective cohort study. Journal of General Internal Medicine, 28(3), 386–391. https://doi.org/10.1007/s11606-012-2159-5
If your last name starts with J through R, use Article B.
Article B:
Kwate, N. O., & Goodman, M. S. (2015). Cross-sectional and longitudinal effects of racism on mental health among residents of Black neighborhoods in New York City. American Journal of Public Health, 105(4), 711–718. https://doi.org/10.2105/AJPH.2014.302243
If your last name starts with S through Z, use Article C.
Article C:
Blank, M. B., Himelhoch, S. S., Balaji, A. B., Metzger, D. S., Dixon, L. B., Rose, C. E., Oraka, E., Davis-Vogel, A., Thompson, W.W., & Heffelfinger, J. D. (2014). A multisite study of the prevalence of HIV with rapid testing in mental health settings. American Journal of Public Health, 104(12), 2377–2384. https://doi.org/10.2105/AJPH.2013.301633
Week 7
If your last name starts with A through I, use Article A.
Article A:
Dale, C. M., Angus, J. E., Seto Nielsen, L., Kramer-Kile, M., Pritlove, C., Lapum, J., Price, J., Marzolini, S., Abramson, B., Oh, P., & Clark, A. (2015). “I’m no Superman”: Understanding diabetic men, masculinity, and cardiac rehabilitation. Qualitative Health Research, 25(12), 1648–1661. https://doi.org/10.1177/1049732314566323
If your last name starts with J through R, use Article B.
Article B:
Hunleth, J. M., Steinmetz, E. K., McQueen, A., & James, A. S. (2016). Beyond adherence: Health care disparities and the struggle to get screened for colon cancer. Qualitative Health Research, 26(1), 17–31. https://doi.org/10.1177/1049732315593549
If your last name starts with S through Z, use Article C.
Article C:
Spyridonidis, D., Hendy, J., & Barlow, J. (2015). Leadership for knowledge translation: The case of CLAHRCs. Qualitative Health Research, 25(11), 1492–1505. https://doi.org/10.1177/1049732315583268
If your last name starts with A through L, use Article A.
Article A:
Hickman, G. P., & Wright, D. (2011). Academic and school behavioral variables as predictors of high school graduation among at-risk adolescents enrolled in a youth-based mentoring program. Journal of At-Risk Issues, 16(1), 27–33.
If your last name starts with M through Z, use Article B.
Article B:
Smith, Y. (2014). Rethinking decision making: An ethnographic study of worker agency in crisis intervention. Social Service Review, 88(3), 407–442. https://doi.org/10.1086/677846
Week 4
If your last name starts with A through L, use Article B.
Article B:
Smith, Y. (2014). Rethinking decision making: An ethnographic study of worker agency in crisis intervention. Social Service Review, 88(3), 407–442. https://doi.org/10.1086/677846
If your last name starts with M through Z, use Article A.
Article A:
Hickman, G. P., & Wright, D. (2011). Academic and school behavioral variables as predictors of high school graduation among at-risk adolescents enrolled in a youth-based mentoring program. Journal of At-Risk Issues, 16(1), 27–33.
Week 5
If your last name starts with A through I, use Article A.
Article A:
Raskin, J. D, & Brett, B. L. (2014). Does the reverse golden section hold? Journal of Constructivist Psychology, 27(2), 137–146. https://doi.org/10.1080/10720537.2014.879522
If your last name starts with J through R, use Article B.
Article B:
Cardi, V., Di Matteo, R., Gilbert, P., & Treasure, J. (2014). Rank perception and self-evaluation in eating disorders. International Journal of Eating Disorders, 47(5), 543–552. https://doi.org/10.1002/eat.22261
If your last name starts with S through Z, use Article C.
Article C:
de la Sablonnière, R., Auger, E., Taylor, D. M., Crush, J., & McDonald, D. (2013). Social change in South Africa: A historical approach to relative deprivation. British Journal of Social Psychology, 52(4), 703–725. https://doi.org/10.1111/bjso.12003
Week 7
If your last name starts with A through I, use Article A.
Article A:
Perrin-Wallqvist, R., & Lindblom, J. (2015). Coming out as gay: A phenomenological study about adolescents disclosing their homosexuality to their parents. Social Behavior & Personality: An International Journal, 43(3), 467–480. https://doi.org/10.2224/sbp.2015.43.3.467
If your last name starts with J through R, use Article B.
Article B:
Roberts, R. E. (2014). The child maltreatment survivor’s description of the process of becoming a parent: A grounded theory study. Qualitative Report, 19(24), 1–27.
If your last name starts with S through Z, use Article C.
Article C:
Christiansen, B., Borge, L, & Fagermoen, M. S. (2012). Understanding everyday life of morbidly obese adults-habits and body image. International Journal of Qualitative Studies on Health & Well-Being, 7, 1–9. https://doi.org/10.3402/qhw.v7i0.17255
MANAGEMENT AND INFORMATION SYSTEMS AND TECHNOLOGY
Week 3
If your last name starts with A through L, use Article A.
Article A:
Flynn, C. B., Smither, J. W., & Walker, A. G. (2016). Exploring the relationship between leaders’ core self-evaluations and subordinates’ perceptions of servant leadership: A field study. Journal of Leadership & Organizational Studies, 23(3), 260-271. https://doi.org/10.1177/1548051815621257
If your last name starts with M through Z, use Article B.
Article B:
Parboteeah, K. P., Seriki, H. T., & Hoegl, M. (2014). Ethnic diversity, corruption and ethical climates in sub-Saharan Africa: Recognizing the significance of human resource management. The International Journal of Human Resource Management, 25(7), 979–1001. https://doi.org/10.1080/09585192.2013.815251
Week 4
If your last name starts with A through L, use Article B.
Article B:
Parboteeah, K. P., Seriki, H. T., & Hoegl, M. (2014). Ethnic diversity, corruption and ethical climates in sub-Saharan Africa: Recognizing the significance of human resource management. The International Journal of Human Resource Management, 25(7), 979–1001. https://doi.org/10.1080/09585192.2013.815251
If your last name starts with M through Z, use Article A.
Article A:
Flynn, C. B., Smither, J. W., & Walker, A. G. (2016). Exploring the relationship between leaders’ core self-evaluations and subordinates’ perceptions of servant leadership: A field study. Journal of Leadership & Organizational Studies, 23(3), 260-271. https://doi.org/10.1177/1548051815621257
Week 5
If your last name starts with A through I, use Article A.
Article A:
Fu, N., Flood, P. C., Bosak, J., Morris, T., & O’Regan, P. (2015). How do high performance work systems influence organizational innovation in professional service firms? Employee Relations, 37(2), 209–231. https://doi.org/10.1108/ER-10-2013-0155
If your last name starts with J through R, use Article B.
Article B:
Chang, K., Hsu, C., Hsu, Y., & Chen, M. (2019). How green marketing, perceived motives and incentives influence behavioral intentions. Journal of Retailing and Consumer Services, 49, 336-345. https://doi.org/10.1016/j.jretconser.2019.04.012
If your last name starts with S through Z, use Article C.
Article C:
DeRue, D. S., Nahrgang, J. D., Hollenbeck, J. R., & Workman, K. (2012). A quasi-experimental study of after-event reviews and leadership development. Journal of Applied Psychology, 97(5), 997–1015. https://doi.org/10.1037/a0028244
Week 7
If your last name starts with A through I, use Article A.
Article A:
Cope, J. (2011). Entrepreneurial learning from failure: An interpretative phenomenological analysis. Journal of Business Venturing, 26(6), 604–623. https://doi.org/10.1016/j.jbusvent.2010.06.002
If your last name starts with J through R, use Article B.
Article B:
Cassia, L., De Massis, A., & Pizzurno, E. (2012). Strategic innovation and new product development in family firms: An empirically grounded theoretical framework. International Journal of Entrepreneurial Behavior & Research, 18(2), 198–232. https://doi.org/10.1108/13552551211204229
If your last name starts with S through Z, use Article C.
Article C:
Arando, S., Gago, M., Jones, D. C., & Kato, T. (2015). Efficiency in employee-owned enterprises: An econometric case study of Mondragon. International Labor Review, 68(2), 398–425. https://doi.org/10.1177/0019793914564966
NURSING
Week 3
If your last name starts with A through L, use Article A.
Article A:
Wollenhaup, C. A., Stevenson, E. L., Thompson, J., Gordon, H. A., & Nunn, G. (2017). Implementation of a modified bedside handoff for a postpartum unit. The Journal of Nursing Administration, 47(6), 320-326. https://doi.org/10.1097/NNA.000000000000048
If your last name starts with M through Z, use Article B.
Article B:
Falkenstrom, M.K. (2017). A qualitative study of difficult nurse-patient encounters in home health care. Advances in Nursing Science, 40(2),168-183. https://doi.org/10.1097/ANS.0000000000000156
Week 4
If your last name starts with A through L, use Article B.
Article B:
Falkenstrom, M.K. (2017). A qualitative study of difficult nurse-patient encounters in home health care. Advances in Nursing Science, 40(2),168-183. https://doi.org/10.1097/ANS.0000000000000156
If your last name starts with M through Z, use Article A.
Article A:
Wollenhaup, C. A., Stevenson, E. L., Thompson, J., Gordon, H. A., & Nunn, G. (2017). Implementation of a modified bedside handoff for a postpartum unit. The Journal of Nursing Administration, 47(6), 320-326. https://doi.org/10.1097/NNA.000000000000048
Week 5
If your last name starts with A through I, use Article A.
Article A:
Jamison, T.R., & Schuttler, J. O. (2015). Examining social competence, self-perception, quality of life, and internalizing and externalizing symptoms in adolescent females with and without autism spectrum disorder: A quantitative design including between-groups and correlational analyses. Molecular Autism,6(53), 1-16. https://doi.org/10.1186/s13229-015-0044-x
If your last name starts with J through R, use Article B.
Article B:
Lachs, M. S., Teresi, J. A., Ramirez, M., van Haitsma, K., Silver, S., Eimicke, J. P., & … Pillemer, K. A. (2016). The prevalence of resident-to-resident elder mistreatment in nursing homes. Annals of Internal Medicine, 165(4), 229-236. https://doi.org/10.7326/M15-1209
If your last name starts with S through Z, use Article C.
Article C:
Zelenikova, R, Beach, M., Ren, D., Wolff, E., & Sherwood, P. (2014). Faculty perception of the effectiveness of EBP courses for graduate nursing students. Worldviews on Evidence-Based Nursing, 11(6), 401–413. https://doi.org/10.1111/wvn.12068
Week 7
If your last name starts with A through I, use Article A.
Article A:
Scheepmans, K., Diercks de Casterie, B., Paquay, L. von Gansbeke H., & Milisen, K. (2014). Restraint use in home care: A qualitative study from a nursing perspective. BMC Geriatrics, 14, 17.
If your last name starts with J through R, use Article B.
Article B:
Aburn, G., & Gott, M. (2014). Education given to parents of children newly diagnosed with acute lymphoblastic leukemia: The parent’s perspective. Pediatric Nursing, 40(5), 243- 256. https://doi.org/10.1177/1043454211409585
If your last name starts with S through Z, use Article C.
Article C:
Tingsvik, C., Hammarskjöld, F., Mårtensson, J., & Henricson, M. (2018). Patients’ lived experience of intensive care when being on mechanical ventilation during the weaning process: A hermeneutic phenomenological study. Intensive & Critical Care Nursing, 47, 46–53. https://doi.org/10.1016/j.iccn.2018.03.004
If your last name starts with A through L, use Article A.
Article A:
Stedman-Smith, M., DuBois, C. L., & Grey, S. F. (2015). Hand hygiene performance and beliefs among public university employees. Journal of Health Psychology, 20(10), 1263–1274. https://doi.org/10.1177/1359105313510338
If your last name starts with M through Z, use Article B.
Article B:
Wilhelmy, A., Kleinmann, M., König, C. J., Melchers, K. G., & Truxillo, D. M. (2016). How and why do interviewers try to make impressions on applicants? A qualitative study. Journal of Applied Psychology, 101(3), 313-332. https://doi.org/10.1037/apl0000046
Week 4
If your last name starts with A through L, use Article B.
Article B:
Wilhelmy, A., Kleinmann, M., König, C. J., Melchers, K. G., & Truxillo, D. M. (2016). How and why do interviewers try to make impressions on applicants? A qualitative study. Journal of Applied Psychology, 101(3), 313-332. https://doi.org/10.1037/apl0000046
If your last name starts with M through Z, use Article A.
Article A:
Stedman-Smith, M., DuBois, C. L., & Grey, S. F. (2015). Hand hygiene performance and beliefs among public university employees. Journal of Health Psychology, 20(10), 1263–1274. https://doi.org/10.1177/1359105313510338
Week 5
If your last name starts with A through I, use Article A.
Article A:
Davies, B., Griffiths, J., Liddiard, K., Lowe, K., & Stead, L. (2015). Changes in staff confidence and attributions for challenging behaviour after training in positive behavioural support within a forensic medium secure service. Journal of Forensic Psychiatry & Psychology, 26(6), 847–861. https://doi.org/10.1080/14789949.2015.1072574
If your last name starts with J through R, use Article B.
Article B:
Ivcevic, Z., & Brackett, M. A. (2015). Predicting creativity: Interactive effects of openness to experience and emotion regulation ability. Psychology of Aesthetics, Creativity, and the Arts, 9(4), 480–487. https://doi.org/10.1037/a0039826
If your last name starts with S through Z, use Article C.
Article C:
Morillas-Romero, A., Tortella-Feliu, M., Balle, M., & Bornas, X. (2015). Spontaneous emotion regulation and attentional control. Emotion, 15(2), 162–175. https://doi.org/10.1037/emo0000016
Week 7
If your last name starts with A through I, use Article A.
Article A:
Lord, S., Després, C., & Ramadier, T. (2011). When mobility makes sense: A qualitative and longitudinal study of the daily mobility of the elderly. Journal of Environmental Psychology, 31(1), 52–61. https://doi.org/10.1016/j.jenvp.2010.02.007
If your last name starts with J through R, use Article B.
Article B:
Liu, J., McMahon, M., & Watson, M. (2015). Parental influence on child career development in mainland China: A qualitative study. The Career Development Quarterly, 63(1), 74–87. https://doi.org/10.1002/j.2161-0045.2015.00096.x
If your last name starts with S through Z, use Article C.
Article C:
Gonzalez, L. M., Stein, G. L., & Shannonhouse, L. R. (2012). Latina/o adolescents in an emerging immigrant community: A qualitative exploration of their future goals. Journal for Social Action in Counseling & Psychology, 4(1), 83–102. https://doi.org/10.33043/jsacp.4.1.83-102
If your last name starts with A through L, use Article A.
Article A:
Headley, A.M. & Wright, J.E. (2020). Is representation enough? Racial disparities in levels of force and arrests by police. Public Administration Review, 80(6), 1051-1062. https://doi.org/10.1111/puar.13225
If your last name starts with M through Z, use Article B.
Article B:
Onyango, G. (2020). Legislative oversight and policy-reforms in
“unsettled” political contexts of public administration. International Journal of Public Administration, 43(3), 213-228.
https://doi.org/10.1080/01900692.2019.1627556
Week 4
If your last name starts with A through L, use Article B.
Article B:
Onyango, G. (2020). Legislative oversight and policy-reforms in
“unsettled” political contexts of public administration. International Journal of Public Administration, 43(3), 213-228.
https://doi.org/10.1080/01900692.2019.1627556
If your last name starts with M through Z, use Article A.
Article A:
Headley, A.M. & Wright, J.E. (2020). Is representation enough? Racial
disparities in levels of force and arrests by police. Public Administration Review, 80(6), 1051-1062.
https://doi.org/10.1111/puar.13225
Week 5
If your last name starts with A through I, use Article A.
Article A:
Kaufmann, W., Ingrams, A., & Jacobs, D. (2021). Being consistent
matters: Experimental evidence on the effect of rule consistency on
citizen red tape. The American Review of Public Administration, 51(1), 28–39.
https://doi.org/10.1177/0275074020954250
If your last name starts with J through R, use Article B.
Article B:
Bashir, M., & Hassan, S. (2020). The need for ethical leadership in
combating corruption. International Review of Administrative
If your last name starts with S through Z, use Article C.
Article C:
Bauer, Z., & Johnston, J.M. (2020). Who does it better? Comparing
immigration detention facility performance in an intergovernmental
and intersectoral context. Public Administration Review,80(2), 244-258. https://doi.org/10.1111/puar.13127
Week 7
If your last name starts with A through I, use Article A.
Article A:
Agasisti, T., Agostino, D., & Soncin, M. (2020). Implementing performance measurement systems in local governments: Moving from the “how” to the “why”. Public Performance & Management Review, 43(5), 1100-1128. https://doi.org/10.1080/15309576.2019.1700806
If your last name starts with J through R, use Article B.
Article B:
Johnson, III, R.G., McCandless, S., & Renderos, H. (2020). An exploratory study of transgender inmate populations in Latin America. Public Integrity, 22(4), 330-343. https://doi.org/10.1080/10999922.2018.1557027
If your last name starts with S through Z, use Article C.
Article C:
Larson, S. (2020). Exploring how transit practitioners navigate
nervousness. Public Administration Quarterly, 44(1), 31-68.
There is a link between understanding the purpose of one’s research and selecting the appropriate methods to investigate the questions that are derived from that purpose.
There is a link between understanding the purpose of one’s research and selecting the appropriate methods to investigate the questions that are derived from that purpose.
Please submit a minimum 1 page (single spaced) . Based on your Module topics, what did you find new and interesting? And what appeared to be a review? Also, identify at least one discussion post you found interesting, helpful, or beneficial (and why).
Overview & Learning Objectives
Topics covered in this Module
Cluster analysis
K-means clustering
Association rules
Text Mining
Word clouds
Statistical inference
Selecting a sample
Point estimation
Sampling distributions
Interval estimation
Hypothesis tests
Big data
Sampling error
Learning Objectives
By the end of this module, students should be able to:
Explain concepts:
cluster analysis
centroids linkage
k-means clustering
Describe association rules and market basket applications
Explain word clouds
Discuss text mining and unstructured data
Apply k-means clustering
Compute cluster centers
Calculate confidence intervals using Excel
Calculate descriptive statistics using the Data Analysis Toolpak in Excel
Conduct one-tailed and two-tailed hypothesis tests in Excel
Calculate p-values and determine whether the null hypothesis should be rejected
Revised EdD Rubrics and Checklists…Can you explain clearly what forms are required when?
The stages and timing of the University Research Review process have not fundamentally changed; only the documents have changed. However, the following outline may help clarify.
Proposal Writing Stage
Student: Complete the proposal and the appropriate Doctoral Study Checklist by identifying the page number where items are located in the proposal. Use the comment blocks to provide any clarifying information for the reviewers.
Student: Submit the proposal and Doctoral Study Checklist to the Committee Chair.
Committee Chair: Review the proposal and the Doctoral Study Checklist and evaluate the proposal.
If the proposal is assessed as not ready for committee review based on the criteria in the Doctoral Study Minimum Standards Rubric, the Committee Chair provides feedback to the student using the Checklist and/or the Doctoral Study Minimum Standards Rubric (depending on the nature of the feedback).
If the proposal is assessed as ready for further review, the Committee Chair forwards the proposal, the Doctoral Study Checklist, and his/her completed Doctoral Study Minimum Standards Rubric to the Committee Member for review.
Once the Committee Chair and Committee Member agree that the proposal has met all the Doctoral Study Minimum Standards Rubric criteria (items 1-8 of the 10 criteria), the proposal is ready for Committee URR review. The Committee Chair then forwards to the Committee URR: 1) proposal document; 2) Turnitin Report; 3) the completed Doctoral Study Checklist completed by the student and with any comments by the committee Chair and/or Member; and 4) the Doctoral Study Minimum Standards Rubrics completed by each member indicating that the applicable standards have been met (it is best to keep the history of comments to the student for Committee URR to review as well).
Doctoral Study Writing Stage
Student: Complete the doctoral study and extend the Doctoral Study Checklist by identifying the page number where items are located in the final doctoral study. Add directly to the checklist used for the proposal, when possible. Use the comment blocks to provide any clarifying information for the reviewers.
Student: Submit the completed doctoral study and Doctoral Study Checklist to the Committee Chair.
Committee Chair: Review the final study and the Doctoral Study Checklist and evaluate the final study.
If the study document is assessed as not ready for committee review based on the criteria in the Doctoral Study Minimum Standards Rubric, the Committee Chair provides feedback to the student using the Checklist and/or the Doctoral Study Minimum Standards Rubric (depending on the nature of the feedback).
If the final study is assessed as ready for further review, the Committee Chair forwards the study, the Doctoral Study Checklist, and a completed Doctoral Study Minimum Standards Rubric to the Committee Member for review.
Once the Chair and Committee Member agree that the final doctoral study has met all the Doctoral Study Minimum Standards Rubric criteria (all of the 10 criteria), the doctoral study is ready for Committee URR review. The Committee Chair then forwards to the CommitteeURR: 1) final doctoral study document; 2) Turnitin Report; 3) the completed Doctoral Study Checklist completed by the student and with any comments by the committee Chair and/or Member; and 4) the Doctoral Study Minimum Standards Rubrics completed by each member indicating that all standards have been met (it is best to keep the history of comments to the student for Committee URR to review as well).
Final Study Stage/Post-Oral Defense (pre-CAO review)
Committee Chair and Committee Member:
Chair forwards the final study document and final quality rubric from each committee member directly to the URR, while copying doctoralstudy@waldenu.edu
Committee URR:
Forwards review (brief statement to chair, final document, and final quality rubric—indicating if approved for CAO review) to committee chair, while copying doctoralstudy@waldenu.edu
A code of ethics document may outline the mission and values of the business or organization, how professionals are supposed to approach problems, the ethical principles based on the organization’s core values and the standards to which the professional is held.
The Assignment
Why is it important for a profession to have a code of ethics? Look through different comic strips in your local paper and online. As you locate (5) comics that speak to ethics, morals and values, pertaining to education, scan them onto a word document and submit them with a paragraph about why you think why every organozation needs a code of ethics. Why is this important?
Introduction: Creating developmentally appropriate lesson plans involves more than “cute” or “fun” activities. It requires immersing the environment with learning materials focused on the study topic and using learning standards to demonstrate children’s learning.
The Assignment:
Create a developmentally appropriate lesson plan based on children’s interests and supported with learning outcomes from the age-appropriate NC Standard.
Use the attached forms to complete the plans, there is an attached PowerPoint and audio file to assist you.
The plan must be approved by your supervising teacher before you set up a date to teach it in your classroom
Grading Criteria
10 points for study topic that is developmentally appropriate
10 points for materials and supplies that support learning
10 points for listing specific Developmental Indicators.
10 points Group Time, Story Time, Small Group Activity is developmentally appropriate and supports learning.
10 points for Goals listed from NC Foundations for Early Learning and Development..
10 points Lesson Plan Form 1 materials list is complete and items support learning.
10 points activities support the Goals and Developmental Indicators listed.
10 points for Extension activities are appropriate and detailed.
10 points for 3 open ended questions that support deeper learning.
10 points for spelling and grammar.
Resources Review attached Power Point slides for detailed instructions.See sample forms under Resources>Useful Links for this Class>Lesson Planning AssistanceLink to NC Foundations for Early Learning and Development NCFELD
As you will read in chapter two, IDEA is the federal statute that governs special education and the implementation of it in schools. It was first passed in 1975 (P.L. 94-142) and has gone through several revisions (amendments) since then, with the latest one being the 2004 amendments that were agreed upon only after a good bit of debate from many interest groups. IDEA is a far reaching and very comprehensive law that shapes the special educator’s moment to moment practice, but also has a lot of impact in the regular education setting due especially in part to the LRE mandate. Please consider and contemplate this as you answer the discussion question below.
Question: In what ways do you feel and see the effects of special education legislation in the course of your school day? In other words, where do you see IDEA in effect and how does it influence your practice
What data is shared with you at the beginning of the school year both that is system-wide and at the individual student level? What data is not as accessible as you would like? What would it take to change that? If you are not currently teaching in a school, what would you hope to learn about each student in your classroom before the beginning of the school year?
Your reflection should be no shorter than 900 words. It needs to be double spaced using 12 times new roman font with 1 inch margins all around. The cover page does not count toward the minimum length.
As you read each chapter make notes about what you think are the main themes and ideas. You must include at least 3 concepts in every reflection. Particularly make note of points about which you feel strongly, either positively or negatively. Try to write your responses as soon as possible after you have read the chapter, even if you have to go back and modify your reactions after the topic has been discussed with the instructor or your peers. If you wait too long, you may forget the ideas and opinions about a given topic.
One half of the reflection should be a summary of the concepts you feel are the most important. You should demonstrate that you have knowledge of each concept by giving examples and details. The other half should consist of your personal thoughts and opinions about the information and ideas you write about.
The Prompt: Respond to the following discussion question for this module:
You will need the following resource for this post:
United States Department of Agriculture. (2011). Let’s Eat for the health of it: Choose My Plate Brochure. Available from http://www.choosemyplate.gov/food-‐groups/ downloads/MyPlate/DG2010Brochure.pdf
Center for Disease Control. (2012). Winnable Battles: Nutrition, physical activity and obesity. Available from http://www.cdc.gov/WinnableBattles/Obesity/index.html
Study the brochure for the new My Plate Food Guidelines. This system is a revised version of the previous food pyramid system created in response to research and growing public concern over obesity, which has been deemed a “Winnable Battle” by the Center for Disease Control. Review the website “Winnable Battles: Nutrition, Physical Activity, and Obesity.”
Using information from these resources, outline five ways that the battle with obesity can be won. What specific changes can early childhood programs make to support healthy eating?
For this summary, choose a current news article that relates to any of the topics cover in Chapters 4-7. Summaries should be written in a Word Document file. Google docs and other formats will not be accepted.
From the Syllabus: You are responsible for (3) three Current Issues Article Summaries. You will choose a current news article that relates to the journal prompt given. For the article you choose, you should write your summary in the following format:
Article Title: Write the title at the top of your page.
Reference: Cite the article (Chicago Manual of Style) and include the following: Title article; author; source (where you got it from); date retrieved or published. If appropriate include a http:// link.
Summary: Write a summary paragraph, in your own words, about the article. You can’t copy verbatim from the article. Doing so will result in a grade of “0.” Only two quotes may be used in your summary.
Significance: Write at least 3-4 sentences discussing why you chose the article and how it relates to concepts/topics we have engaged with in class. Think about who this event impacts and how. Explain why it is significant or provide your opinion about the topic.
Three Questions: You will need to pose (3) three relevant questions about the article as it relates to concepts/topics we have engaged with in class. TO BE CLEAR – YOU ARE GENERATING ORIGINAL QUESTIONS! You are not answering questions at the end of the chapter, nor are you copy/pasting questions from the reading. These are questions you would like answered or questions that you could ask your classmates. These questions will be utilized for your final journal project.
The article you choose must not have been published more than two (2) years ago and be a minimumof five paragraphs (25-30 sentences.) You may choose your article from a number of sources. They may come from newspapers, weekly news magazines, professional news sources or academic journals located on the internet. * You may not repeat use of the same source that you used for the previous current event assignment.
Introduction This journal assignment will help you reflect the classroom environment and daily schedule. Think about the arrangement of the classroom and the flow of the daily schedule. Do the children have free access to all materials and supplies they need? Does the flow of the schedule allow ample time for freeplay and small group activities? What recommendations would you make to ensure quality learning opportunities were in place? The AssignmentComplete the Reflective Journal assignment using the topic assigned.The journal must be a minimum of 3 paragraphs, each paragraph must be a minimum of 10 sentences in length. The first paragraph should contain a description of the event, activity, or interaction that pertains to the topic. Be specific and detailed to give a clear understanding of the event, activity or interaction you have selected.The second paragraph should contain one NAEYC Sub-Standard (ex. 4b) from the standard summary document that is attached to the assignment. You should reflect upon how this sub-standard is applicable/appropriate to the first paragraph. Give detailed information that relates the NAEYC sub-standard you selected to the event, activity, or interaction from the first paragraph.The third paragraph is your chance to reflect on the event, activity, or interaction. As you reflect, think about what you learned, what could have been done better or differently, or what went exceptionally well. Perhaps this will cause you to change your practice with children and families. Remember this is your chance to respond honestly and think about your role as an early childhood professional. How have you grown as a professional? These are all suggested to help you reflect, it is not necessary to include all the suggestions in your reflective paragraph.Journal TopicThink about the schedule and the classroom arrangement in your practicum site. How does the schedule and the environment assist children with their behaviors? How does the schedule and the environment act as the third teacher? Do the children have enough time to engage in learning centers? Grading Criteria
20 points are deducted if an NAEYC Sub-Standard is not included in the second paragraph.
20 points are deducted if the sub-standard is included but it is not relevant to the event, activity, or interaction.
10 points are deducted if three paragraphs are not included
10 points are deducted if the minimum 10 sentence requirement is not met in all three paragraphs.
15 points are deducted for spelling and grammar
25 points are deducted if the event, activity, or interaction does not relate to the given topic.
Introduction This journal assignment will help you reflect the classroom environment and daily schedule. Think about the arrangement of the classroom and the flow of the daily schedule. Do the children have free access to all materials and supplies they need? Does the flow of the schedule allow ample time for freeplay and small group activities? What recommendations would you make to ensure quality learning opportunities were in place? The AssignmentComplete the Reflective Journal assignment using the topic assigned.The journal must be a minimum of 3 paragraphs, each paragraph must be a minimum of 10 sentences in length. The first paragraph should contain a description of the event, activity, or interaction that pertains to the topic. Be specific and detailed to give a clear understanding of the event, activity or interaction you have selected.The second paragraph should contain one NAEYC Sub-Standard (ex. 4b) from the standard summary document that is attached to the assignment. You should reflect upon how this sub-standard is applicable/appropriate to the first paragraph. Give detailed information that relates the NAEYC sub-standard you selected to the event, activity, or interaction from the first paragraph.The third paragraph is your chance to reflect on the event, activity, or interaction. As you reflect, think about what you learned, what could have been done better or differently, or what went exceptionally well. Perhaps this will cause you to change your practice with children and families. Remember this is your chance to respond honestly and think about your role as an early childhood professional. How have you grown as a professional? These are all suggested to help you reflect, it is not necessary to include all the suggestions in your reflective paragraph.Journal TopicThink about the schedule and the classroom arrangement in your practicum site. How does the schedule and the environment assist children with their behaviors? How does the schedule and the environment act as the third teacher? Do the children have enough time to engage in learning centers? Grading Criteria
20 points are deducted if an NAEYC Sub-Standard is not included in the second paragraph.
20 points are deducted if the sub-standard is included but it is not relevant to the event, activity, or interaction.
10 points are deducted if three paragraphs are not included
10 points are deducted if the minimum 10 sentence requirement is not met in all three paragraphs.
15 points are deducted for spelling and grammar
25 points are deducted if the event, activity, or interaction does not relate to the given topic.
Leading With Purpose: Beginning With The End In Mind
Part of being a leader is to look critically at yourself to identify your strengths and areas of opportunities for growth. In the last topic, you reflected on your professional dispositions as a leader. You will now reflect on your experience in performing the roles and responsibilities of a successful school leader.
Perform a self-assessment using the rubric portion of the “Instrument for Measuring Leadership Effectiveness.” Referencing your self-assessment, write a 250-500 word narrative discussing the following:
Three or more individual professional leadership skills from the self-assessment that you would like to develop further as you prepare for a career in educational leadership, explaining why you selected them.
The professional requirements in your state for becoming a licensed school administrator and your expected timeline for achieving them. (NOTE: If you are in the Educational Leadership program and not seeking licensure, please explain this in your narrative and you may exclude the licensure requirements and steps.)
Two or more professional organizations or journals you would like to join or subscribe to (or have already joined/subscribed) to help you with your ongoing professional development as a school leader.
APA format is not required, but solid academic writing is expected. This assignment uses a rubric. Review the rubric prior to beginning the assignment to become familiar with the expectations for successful completion.
You are required to submit this assignment to LopesWrite. A link to the LopesWrite technical support articles is located in Class Resources if you need assistance.
This project is an exploration of canon formation – specifically, the ways in which some literary works are considered “major” while others are marginalized as “minor” or even “unimportant.” You will no doubt have noticed that while there are, indeed, women writers actively engaged in their craft during the timeframe of our course, they have not generally been included in this rather sparse reading list, and they are not often accorded a major place in the so-called “canon” of literature in most anthologies of Medieval and Renaissance British literature.
Your task, then, will be to select a particular work by a woman writer from the time space of the course (A.D. 800-1774 England) and write a paper that
A) presents a brief account of the writer’s career within the context of her time (as an introductory movement; you are not writing a biography here),
B) provides a detailed analysis of one of her works in a variety of manners:
1) in relation to the social, political, and/or religious events of her time (new historicism),
2) an exploration of the literary and/or rhetorical tropes used in the work (a close, text-based analysis), and
3) an analysis via a defined literary theory of that work,
and
C) argues for its inclusion in (or exclusion from) the canon of major British works of literature.
The essay is to be a minimum of 3000 words in length, follow MLA format (heading on first page – no cover sheet), and include a works cited page and parenthetical citations, using sources to support your analysis and evaluation of the work and author. Be aware that the matter of MLA requirements (the header, the first page information, the title, and the work cited entry list, which must consist of 5-7 sources [including the primary source analyzed]), do not count toward the required length for this assignment; any particularly large quotations (especially block quotations) also are not part of the required word count.
Via email, by the deadline for submitting the research essay, you MUST have emailed to me digital copies of all source material used, with the passages / information appearing in the essay clearly marked (i.e., highlighted).
You may choose any individual work by one of the following female authors:
JULIAN OF NORWICH
MARY HERBERT, COUNTESS OF PEMBROKE
ELIZABETH I
AEMILIA LANYER
APHRA BEHN
MARY ASTELL
LADY MARY WORTLEY MONTAGU
ELIZA HAYWOOD
FRANCES BURNEY
MARY WOLLSTONECRAFT
Grade Rubric
Your submission must be an original, unique, self-produced work complying completely with MLA requirements regarding both formatting and citations It also must meet all minimum requirements. Otherwise, it earns an automatic zero; any evidence of plagiarism will result in an F in the class.
MECHANICS–You are expected to proofread effectively and accurately. Any essay submitted with surface errors will have the result of a reduction of the grade by 5 points per each instance of any error compared the grade it would have earned for content without the errors. And, yes, commas matter, even the ones before conjunctions in lists. Simply consider this class writing assignments as exercises in the correct use of the Oxford comma.
MLA– assumed knowledge at this point. Formatting (whole essay, first-page information, header, margins, quotations [block and internal to sentences corrected for grammar]), parenthetical citations, and works cited entries are all things you are expected to know how to do. Errors in MLA formatting will result in a minimum of 10 points being deducted from the overall grade of the assignment. Errors in citations and/or works cited entries will result in an automatic zero for the assignment with no option for correction and resubmission.
CONTENT
1) present a short account of the writer’s career within the context of her time (10%)
2) provide an original, three-tiered analysis of one of her works (60%)
3) argue for the inclusion or exclusion of the work from the canon of British literature (20%)
4) have a useful introduction setting up a provable thesis, transitions, attributive tags to source materials that serve the overall effort of the essay, and a reasoned and viable conclusion based upon the evaluation and analysis committed in the body of the essay (10%).
This may help with your research essay.
A literary theory is a lens or a filter a critic uses to analyze a text. It gives the critic the filter that they can use to engage the text and parse meaning and / or significance.
Deciding what literary theory to use requires that the reader / critic read the text first to determine what theory or theories might be fruitful when applied to the text to be analyzed.
There is no “right” or “wrong” literary theory. It’s what the critic does with it that matters. As a starting critic, finding one that works requires thinking about what you as the reader, noticed in the text to be analyzed.
As an example, think how you would engage something like Harry Potter and the Half-Blood Prince:
If you’re interested in how Hermione acts / speaks / is represented, you might look to something like Feminist or Gender Theory, as it might give you a way to discuss the female character.
If you’re interested in the story arc or the plot, you might look at Structuralism or Formalism, both of which allow you to engage with structural / plot issues.
If you’re interested in how the novel teaches lessons, you might look at Reader-Response Theory, as it is about what the author brings to the text and what the reader brings to the same text and how that works.
It’s the same novel, but there are a variety of potentially fruitful literary theories. Those are just a few.
Remember that context (in your essay, it’s a particular literary theory that will allow both you and your reader to contextualize the novel) is New Historicism (an engagement with the text in relation to when it was written or produced).
Your literary analysis isn’t about context; it’s about establishing a way of engaging the text to establish value and meaning.
This project is an exploration of canon formation – specifically, the ways in which some literary works are considered “major” while others are marginalized as “minor” or even “unimportant.” You will no doubt have noticed that while there are, indeed, women writers actively engaged in their craft during the timeframe of our course, they have not generally been included in this rather sparse reading list, and they are not often accorded a major place in the so-called “canon” of literature in most anthologies of Medieval and Renaissance British literature.
Do you feel like you have all the time in the world to do what you want?From your childhood, are there experiences that stand out?Did you have a favorite holiday and why?Are you responsible for your own life?Do you have a plan?Can we still have a good life like our parents or grandparents?Does your success depend on if you have a degree from a university ?Do you feel pressure to take a certain path in life?Have your friends been good or bad influencers in your life?Are their times you felt you had to stand up against authority?Are you anxious to grow up or not?Can you accept advice or do you need to experience it yourself?Can you stand up against peer pressure?Are there any adults that you respect and confide in?Is home a safe place for you to ask questions?Do you have opinions that differ from your family?
Our issue to discuss this week is how social media has impacted the recruiting of prospective student-athletes to colleges and universities. While social media has provided an additional avenue for coaches and prospective student-athletes to engage in conversation, it has also provided coaches additional insight into a prospective student-athlete’s personality and off-the-field conduct.
Please develop a DB post this week addressing whether it is appropriate for colleges and universities to monitor the social media use of student-athletes they are recruiting. Additionally, please explain how you would handle a situation where your top recruit was behaving in an inappropriate manner on social media.
Support your statements with evidence from the required studies and your research. Cite and reference your sources in APA style.
Please note…there ARE NO REQUIRED RESPONSES TO CLASSMATES due in week #3. Please focus your attention on Assignment #3, “West Virginia University Recruiting Infractions Case.” In other words, you are only required to make your own initial DB post…no reflections/questions/comments to your classmates. I will respond, but not with questions…only with an assessment of your thoughts, so you do not reply to my posts either.
References
The ‘Social’ Science of Recruiting (ESPN, January 26, 2016). Retrieved from http://www.espn.com/college-football/recruiting/story/_/id/14646545/social-media-becomes-powerful-aide-dangerous-connection-recruiting
Some very successful companies have gained sales and market share by increasing their advertising budgets during a recession. Explain why this could be a successful strategy.
1. Out of the concepts you have studied in this course, choose one that you feel would be particularly difficult for students to understand. Provide a concrete real-world situation or example to help illustrate this concept.
2. It is necessary to have a good understanding of mathematics in order to teach it. Who do you think would make a better math teacher: a person who has natural mathematical talent and understands concepts easily without making mistakes, or a person who had to struggle to gain their understanding of math and learn to avoid making mistakes?
In order to plan a program evaluation, we must first understand the program and the needs of the population served.
For this assignment, you will compose the following components:
Identify and describe a child protection program in your community (you may use the program described in Discussion Post #2).
Program: Texas Department of Family and Protective Services
What is the mission of the program and specific population served?
What services does this program provide?
In what way does this particular program address a significant need in the community? Make sure to cite the relevant literature to support the need for the program.
In what way(s) would the program benefit from an evaluation?
If you were hired as an external evaluator to evaluate this program, what are some initial steps you would take to plan this evaluation?
questionDo you have a plan for your future?Are you comfortable with meeting new people?Do you find yourself comparing yourself to others?Do you find yourself restricted to what society expects of you?Are you confident when you walk into a room?Are you able to hold your own in a discussion?Do you feel peer pressure when it comes to your appearance?Do you feel sisterhood with others?Have you felt pressure from boys?Are there any males in your life that make you feel safe?Do you feel you can become whatever you want in your life?Can you envision yourself in the future as a grownup?Do you feel safe in your daily life?Can you discuss freely ideas with family or friends?Do you feel like there are double standards when it comes to rules for boys and girls?Does your family have certain expectations of you?
In some cultures they wear black for 1 year when someone they love dies, do you think this is a good ritual? What do you do to show respect for those who have passed away?
Globalization is inevitable – how can we make sure people who don’t want to participate can preserve their culture?
How do you know if something is “normal”?
It’s a very different culture. What do people need to know when they move to Thailand?
I am a mixed-raced child. Will any country ever accept me as one of their own?
Have you ever encountered a food that was hard to swallow but you didn’t want to offend someone?
What’s the best way to experience a new culture for you?
What would be disrespectful in one culture but okay in another?
As a woman, would you be willing to wear traditional Moslem clothing and withstand the restrictions on women while traveling in a Moslem country?
What elements of a culture do you look forward to when traveling?
Do you think cultures can learn from each other?
How do you blend in when you are trying to experience a new culture?
What makes up a culture?
What makes a culture better than another culture?
Is it fair to judge someone’s culture good or bad?
If you could ask the president one question, what would you ask?If you could meet (CHARACTER FROM BOOK YOU’VE READ), what is one question you would ask him/her?If you could ask (HISTORICAL FIGURE) one question, what would it be?If you could ask (FAMOUS INVENTOR) one question, what would you ask?If you could ask your principal just one question, what would you ask?If you could ask (INSERT TEACHER NAME) one question, what would it be?If you could ask (CELEBRITY) just one question, what would it be?If you could ask your family pet one question, what would it be?
In this project, you will demonstrate an understanding of management and leadership. You will be exposed to various leadership skills and styles. After reading the project’s case scenario, you will apply what has been learned to make recommendations for a new position at Tasty Products. Keep in mind that this project is a research project and not an essay. The student is expected to make significant use of coursematerials.
Your completed project will be 5-6 pages in length, excluding its title and reference page.
Outcome Met by Completing This Assignment
Demonstrate leadership skills by communicating a shared vision, motivating, and empowering others, and creating a culture of ethical decision-making and innovation.
How to Set Up the Paper
Create a Word or Rich Text Format (RTF) document that is double-spaced using 12-point font.
Create an APA compliant title page to include: project title, date, course number, section numbers, student’s name, and instructor’s name.
Scenario
Tasty Products, a billion-dollar multinational company, has for more than 25 years has developed, produced, and distributed organic food products to major retailers (e.g., Whole Foods; Costco, Safeway) throughout the United States. These products are noted for their salutary effects, including stable blood glucose levels. Tasty Products has recently decided to launch a new line of products.
It will develop, produce, and distribute all-naturally flavored protein bars to its new and existing clients. This new line of all-naturally flavored protein bars will necessitate establishing a new division to develop, produce, market, and distribute the product. A new Executive Vice President will need to be selected to establish and lead the new division.
Your company, Wiz Consultants, has been retained to help Tasty Products’ Human Resources Director make the final selection from the candidates she has previously interviewed and narrowed to three (3) possibilities. She has prepared a detailed written profile for each candidate.
Tasty Products’ Human Resources Director has explained to you that she has been directed to find the best person to establish and run the new division. The Human Resources Director further explained that the protein bar industry consists of many well-established companies. Accordingly, the ideal candidate will need to learn quickly and handle many complex leadership and management tasks.
These complex management and leadership tasks include the following: developing innovative strategy, creating well-made products, effective product marketing, developing and managing the processes and procedures for employees to follow, and creating and articulating a clear vision for the new division. Strong leadership will be the key to the all-naturally flavored energy bars success.
The Executive VP will be the face of Tasty Products’ new brand to existing and prospective clients (e.g., Whole Foods, Safeway, Costco, and the like). The key to success with existing clients and prospective clients will be the ability to communicate to them, “What makes Tasty Products naturally flavored protein bars special.” The new Executive VP must be viewed as a person of integrity and an innovative problem solver.
The Executive VP must be seen by current employees and newly hired employees and their managers, who will all work in the new division, as a leader who understands and supports the culture, values, and traditions of Tasty Products. In a short period of time, Tasty Products’ leadership expects the new Executive VP to have met the leadership and management expectations discussed above and have the new division running efficiently and productively.
In summary, Tasty Products desires that the new Executive VP for the Energy Bars Division have the array of excellent management and leadership skills necessary to lead the new division.
Your specific role is to analyze the candidate profiles that follow and answer the specific questions (as identified below the last candidate profiles) the company’s management has asked you.
Candidate Profiles
T.J. Max
T.J. has spent the past 13 years working for Star Lite Foods, a mid-sized, $220 million in annual sales, vegetarian food distribution company, headquartered and operating its largest facility in Arizona. She started with the company working on the production line that selected the vegetables suitable for distribution throughout the western section of the United States. For the next 4 years, she worked in a variety of management jobs overseeing production.
T.J. then worked for 7 years as a Regional Manager in Idaho, responsible for increasing the production of vegetables on farms that Star Lite used as sources for vegetables needed for their own vegetable production. During her run as a Regional Manager, she was responsible for making visits to farms to help each farm in the Safe Lite network develop a business plan. The focus of these business plans was to help each farm develop a vision, mission, and general operations plan to help ensure production was stable.
T.J. credits her success in that role to her ability to get local farmers to work together instead of independently. She created a program, Community Communications, to keep farmers up to date on farm news affecting the region and encourage cooperative relationships. T.J.’s staff set up a blog and website and expanded social media channels to supplement her Community Communication initiative. These enhancements enabled the latest up-to-date sources of information for farming-related issues and encouraged the cooperative development of strategic goals and plans.
T.J. was promoted and has served for the past 3 years as Star Lite Foods Vice President of the New Product Design and Marketing Department. She proposed focusing on making quality products that can be sourced from local vendors. She stated that once established the company could initiate a move to being more environmentally and attentive to the well-being of consumers. T.J. has long advocated for natural products whenever possible and the need for more nutritious and healthy food lines. Management sees T.J. as clever and creative.
T.J. proudly stated that she likes to surround herself with good people. T.J. indicated she likes to delegate because she feels her team of workers needs the freedom to make decisions. She feels people produce more and like work better without strict guidance. She is hands-off. T.J. boasted that the team was instrumental in helping Star Lite obtain a double-digit increase in market share.
T.J. is well-liked by her employees. She communicates what is important and has a good sense of timing. They, at times, describe her as distant, but when they seek her judgment or she offers an opinion, they respect it. T.J. is very open to conversations with others and is known to be truthful and subtle. She often indicates she’d like to think about the issue or question before she answers, but she always follow-ups, even if it is a day or so later. T.J. likes people. T.J. will not tolerate employees that don’t work well with others, and she is very comfortable working with everyone.
T.J. is confident that her hard work to advance her career and track record in various complex jobs make her capable of taking on the new role. T.J. earned her B.A. in Business in a part-time program at a local college in Idaho.
L.L. Bean
L.L. started Bean’s Frozen Heath 15 years ago. L.L. started Bean’s Frozen Heath in his basement. The company distributes its products throughout the United States and Canada. Sales are currently $360 million annually. Tasty Products agreed to purchase Bean’s Frozen Heath. L.L.’s innovation in moving his standard selling of freshly produced vegetarian products to local supermarkets and specialty food stores, to frozen and pre-packaged goods where he could market and sell throughout the US and Canada led to rapid growth — both in terms of sales and employees, which currently exceed 250.
He was known for his charismatic leadership style and hands-on management. Although popular with employees and managers, he was known to be focused and driven. His primary areas of focus were strategic planning, marketing, and product development. Employees characterized L.L.’s company as a pleasant place to work and one where they were treated fairly.
L.L. agreed to stay in a leadership capacity with Tasty Products for 3 years, but his exact role has yet to be determined. He thinks leading this new division would be a good fit.
L.L.’s agreement makes accommodations for several key managers and key employees (sales, marketing) to work for Tasty Products. Their roles have yet to be decided, but L.L. would have a say in that. The relationship among these key employees is informal; everyone calls each other by their first names, and they like to talk about business and work well together. L.L. indicated that he expects everyone to jump in when a task needs to be done.
L.L. often says, “There are thinkers, and there are doers. Doers get the job done. If we make mistakes, we’ll fix them. Perfection is the enemy of the good. And, in business, to stay ahead of the competition, taking risks is necessary.” He sees himself as a doer and driver of others. L.L. frequently held town hall meetings to rally the troops and communicate a vision. He is forthright and blunt in his one on one. Often there seems to be little reflection before he speaks.
L.L. admitted that while he depends on the people that comprise Bean’s Frozen Health, he likes to be immersed in the business and always wants to stay informed as to what is happening within every department. He likes to walk around and chat with people, although he does not like to waste his time or the time of others.
He also shared that he has limited formal educational experience with marketing since as the company grew, he used in-house personnel and top-of-the-line marketing firms. Still, since he has been leading Beans’ Frozen Health through its growth stages, he could easily manage Tasty Products’ new venture. He boasts that he is a proven innovator and entrepreneur.
As a proven innovator and entrepreneur having started and built a large company, L.L. feels confident he is the best candidate. L.L. dropped out of college in his senior year to pursue his business.
J.C. Penney
J.C. started his role at Tasty Products 12 years ago. Based on his prior 18 months of experience overseeing production for a small ($1m) in annual sales protein bar company, J.C. was hired as a production manager at Tasty Products San Diego facility. His detail-oriented efficiency became widely known throughout Tasty Products. For the past 4 years, he has been working for Tasty Products as the Deputy Director of quality control and all products throughout the U.S. and Canada. He focuses on helping ensure all-natural and organic products are environmentally friendly and appeal to consumer price points.
J.C. is highly regarded within the employee ranks as a fair manager. He applies policies and procedures in a very even-handed manner. J.C., at times, can be seen as distracted by the details of production and quality and tends to get deeply involved in other areas of line operations. He has led many committees to plan new product development and distribution but has not yet been delegated those tasks as a recurring part of his current role. J.C. has hired a group of highly educated employees.
J.C.’s employees comment that he seeks a lot of data before rendering an opinion or a direction to follow. J.C. is known to be ethical and trustworthy. He never reacts immediately to what is being said and likes to research most things before he replies. J.C. likes to say, “the devil is in the details.”
He holds monthly staff meetings, but generally, these are with specific groups on specific topics that he asked certain employees with expertise in those areas to report on the meetings. Management places a great deal of confidence in what J.C. suggests and recommends.
J.C. sees himself as both a manager and a mentor who focuses on employee development. For example, J.C. provides very hands-on guidance in the technical areas of production and quality control and expresses exactly what he’d like to see the end product or report look like. J.C. is seen as a deep thinker who acts when he is certain of the next step. He is known to be someone management can rely on to solve complex technical issues. His opinions, however, in all aspects of the company are valued by management.
J.C. admitted he does not have any marketing or sales experience. Still, he has had a role in overseeing committees that made recommendations in those areas, including developing the new naturally flavored protein bar line. He has a strong desire to see the company become a leader in the protein bar market.
J.C. noted in his cover letter that although he has more hands-on experience in some areas of the new Executive VP role than others, he believes, nonetheless, he would be a good fit for the new position because he is committed to Tasty Products. He understands the company’s vision, mission, and core values. J.C. stated he had demonstrated the managerial and leadership skills to guide the team to success.
J.C. believes his proven record at Tasty Products, his engineering background, and advanced education, as well as the respect he is accorded by employees and management at Tasty Products, make him an ideal candidate for the new role. J.C. has a degree in electrical engineering from Penn State and an MBA from Wharton.
Instructions:
You have been asked to review the three candidate profiles and recommend the Executive Vice President position. The new Executive VP will have a lot of responsibility in managing and leading the new division.
You will evaluate each of the three candidates considering each candidate’s experience and answer the questions Tasty Products’ leadership has requested to select the best candidate to lead the new division. REFERENCES CAN ONLY BE USED FROM LUMEN LEARNING MODULES 7 & 8.
You must use the following BOLDED headings for writing the project:
Introduction
Write an Introduction paragraph.The introduction paragraph is the first paragraph of the paper and will describe to the reader the intent of the paper, explaining the main points covered in the paper. This intent should be understood before reading the remainder of the paper so the reader knows why the paper is being written and what is being covered in the paper. (Use in-text citations, as appropriate, and include the references in the Reference section.)
Consider writing the introduction last to ensure that all of the main points are covered.
Management Skills
Identify and discuss the management skills that each candidate possesses. (Use in-text citations, as appropriate, and include the references in the Reference section.)
Leadership Skills
Identify and discuss the leadership skills that each candidate possesses. (Use in-text citations, as appropriate, and include the references in the Reference section.)
Leadership Style
Identify and discuss the leadership style of each candidate. (Use in-text citations, as appropriate, and include the references in the Reference section.)
Candidate Recommendation
List your candidates in priority order with the # 1 as your first choice. Recommend and justify your first (1st) choice candidate. (Use in-text citations, as appropriate, and include the references in the Reference section.)
Rejected Candidates Explanation
Explain the reasons your second choice and third choice candidates were not selected. Be certain to use their names and their rank order. (Use in-text citations, as appropriate, and include the references in the Reference section.)
Conclusion
Create a concluding paragraph. The conclusion paragraph highlights the major findings covered in the paper. (Use in-text citations as appropriate, and include the references in the Reference section.)
Project 2 outlined the steps involved to produce a final vulnerability and threat assessment, and Project 3 covered risk analysis and mitigation. Those assessments were across the entire enterprise and included numerous elements outside the realm of systems and technology. However, they did uncover opportunities for improvement in the application software processes.
For this step, focus on all areas of application software. Give additional thought to uncover software that perhaps did not make the list or were assumed to be secure and simply overlooked.
The assignment is to create a more comprehensive list of application software that could place the enterprise at risk of a breach, loss of data, loss of production, and/or loss of brand confidence.
The assessment should include the application of secure principles, development models such as the maturity model or integrated product and process development (IPPD), software development methods, libraries and toolsets used in the software development life cycle or systems development life cycle.
Use the Software Vulnerability Assessment Template to submit your results
Software Vulnerability Assessment Template
Application Software that Could Present Vulnerabilities
Note: You can add more rows to the bottom of the table if needed.
Step 2: Review Software Procurement Policy
Upon completion of the software specific vulnerability assessment, conduct a review of the organization’s software procurement policies for software development methods.
Note that there is no submitted assignment for this step. Your review will be used in the submission for the following steps.
When the review is complete, move to the next step, where you will create a table or spreadsheet that lists recommended policies for software procurement that address certain questions or concerns.
Step 3: Create a Software Procurement Policy List
You’ve reviewed the organization’s policies for software development methods. Now it’s time to create a policy list for software procurement. The following are some sample questions to be included in a software procurement policy:
Does the vendor provide any cybersecurity certifications with the product?
Does the vendor provide access to the source code for the product? Are there other security issues in source code to be addressed?
What is the guaranteed frequency of security updates to be provided for the product?
What is the implementation process for software updates/upgrades?
What are additional questions or concerns that should be included in the procurement process? Create a table or spreadsheet that lists recommended policies to properly address these questions or concerns.
Use the Procurement Policy Template to list the cybersecurity implications related to procurement and supply chain risk management and submit your results
Procurement Policy List Template
List appropriate procurement policies to address concerns in the process of software evaluation and acquisition.
Procurement Policy List
Note: You can add more rows to the bottom of the table if needed.
Now that the procurement policies have been identified in the previous step, what assurances or controls should be established as policy that would evaluate the security implications during the software acceptance process? The objective is to provide a one-page overview of security testing that would be included in the acceptance of a vendor’s application.
The next step in this project will document the actual testing and validation. This step is simply to verify the congruence between the procurement process and acceptance process. In other words, do the procurement policies establish the correct cyber security framework for software purchase and do the acceptance policies match?
In considering the security implications of the in the software acceptance phase of the development cycle, use the Software Acceptance Policy Template to document recommended tests and assurances for the procurement policies identified in the previous steps.
Software Acceptance Policy Template
Copy the policy list from the previous step into the column on the right. In the column on the left, document your recommendations for specific testing steps to address each of the policy concerns.
Procurement Policy List
Test Script Procedures for Software Acceptance
Note: You can add more rows to the bottom of the table if needed.
Step 5: Research Software Testing and Validation Procedures
Based on the software acceptance policies created in the previous step, consider what testing and validation procedures could be used to assure compliance.
Note that there is no submitted assignment for this step. You will submit the final list of recommended testing and validation procedures in the next step.
Step 6: Document Software Testing and Validation Procedures
You’ve completed the research, and it is now time to create testing and validation procedures that follow a specific process to assure compliance. The key to the success of this step is to document exact procedures to be followed by a testing team prior to installation.
At a minimum, the procedures should address the following questions:
What are potential vulnerabilities inherent in the application platform?
How well does the vendor document preventive measures built into the application?
Are there alternative solutions provided by the vendor or in the application in case of a breach?
What additional safeguards can be added to ensure the security of the software environment?
The testing and validation procedures should address each of these concerns.
The executive team will want to see specific steps for the testing team to follow as the team members complete the tests and assurances you recommended in the previous step.
Document your specific testing and validation recommendations from a cybersecurity policy standpoint in the Test Script Procedures Template
Test Script Procedures Template
Copy your list from Step 3 into the first column.
Procurement Policy Concern
Specific Testing Recommendation to Address Each Policy Concern
Note: You can add more rows to the bottom of the table if needed.
Step 7: Review Software Upgrade Procedures
In the last step, you documented testing and validation requirements. In this step, it’s important to review software upgrades. Installation of a software upgrade has similar, yet unique requirements from the previous steps. In most enterprise environments, software updates and upgrades follow a specific change management routine. However, complete reliance on this procedure can lead to unintended oversight of cybersecurity issues. The change management process is generally focused on detecting errors and the auditing and logging of changes in the operational environment after the upgrade has been performed.
From the cyber perspective, this is not enough. As demonstrated in previous steps, significant effort is required to ensure a secure environment, not just an operational one. The question to be answered is “when” should the upgrade be performed during an application or system change. Should it be performed multiple times during the update?
Think through this issue thoroughly and make notes on your thought process. It is important that the risk analysis associated with an application or system change is conducted at the optimal time.
Note that there is no submitted assignment for this step. However, the research and corresponding notes related to this step will be applicable to the final report for Maria and the other executives. When this is complete, move to the next step, where supply chain risks will be considered.
Step 8: Review Supply Chain Risks
Following the previous steps relative to the supply chain and previous projects, it is time to thoroughly review risk within the supply chain.
Like many companies, your organization is dependent on a supply chain, so the software development process must include a supply chain risk management (SCRM) plan to minimize the impact of supply chain-related risks on business operations and the security of the infrastructures and data.
Note that there is no submitted assignment for this step. The identified supply chain risks will be reported in the next step.
Step 9: Document Supply Chain Risks
After review, it’s time to document supply chain risks. This portion of the overall report requires a two- to three-page narrative that addresses the following supply chain concerns:
Describe cybersecurity implications related to the procurement process.
Provide recommendations that would address these concerns.
Include appropriate supply chain risk management practices.
Where appropriate, cite references to support the assertions in the recommendations and conclusion.
Step 10: Consider Alignment Issues
Based on the review and recommendations on the supply chain described in the previous step, consider how well the policies and procedures regarding the acquisition, procurement, and outsourcing of software in your organization are aligned.
Outline a strategic approach to getting all the functions in alignment. There is no submission for this step. The alignment recommendations will be submitted in the next step.
Step 11: Develop an Acquisition Alignment Report
Keeping the alignment issues in mind from the previous step, prepare a one-page plan to align acquisition, procurement, and outsourcing of software applications for the enterprise. This should be a strategic approach to getting all the functions in alignment. Start with a request for information, proceed through acquisition, testing, and implementation, and finish with ongoing maintenance of the application.
All the work has been done in the previous steps. This step is designed to “bring it all together” in one easy-to-understand approach. The approach will be used in the final step to complete the supply chain analysis with a mitigation plan as it applies to software acquisition and maintenance.
Submit your one-page plan to align acquisition, procurement, and outsourcing efforts with your organization’s information security goals
Step 12: Consolidate Your Work
The acquisition plan alignment is complete. For this exercise, collate all the material presented in the previous steps into a cohesive presentation that describes the entire software risk analysis processes and articulates specific supply chain cybersecurity threats and the technologies and policies that can be used to mitigate them.
You will use your consolidated results in your final project submission in the next step.
Step 13: Write the Risk Analysis/Supply Chain Threats/Mitigation Report
Management is always interested in solutions, and Maria Sosa and the other executives at your company are no exception. In the case of cybersecurity, there are no absolute solutions to an ever-changing environment. However, there are steps to mitigation that might eliminate or minimize the results of certain vulnerabilities. This final step is to describe the mitigation strategies recommended as a result of all previous steps in the project.
The final report for the executive meeting should be five to seven pages, only one to two of which will have to be written in this step. The remainder is from all the previous steps in the project.
Use the Supply Chain Risk Mitigation Final Report Template to submit your specific testing and validation procedures.
Supply Chain Risk Mitigation Final Report Template
In this report, use applicable systems, tools, and concepts to minimize risks to an organization’s cyberspace and prevent cybersecurity incidents.
Maria and the other executives at your organization will be looking for a final report that applies security principles, methods, and tools to the software development life cycle. They are also seeking your ideas and recommendations concerning any potential cybersecurity implications related to procurement and supply chain risk management.
Supply Chain Risk Mitigation Final Report (five to seven pages using this template)
The report should include the following components:
The headings for the report are:
Title Page
Include:
for whom you are preparing the document, the title, the date prepared, and your name as the preparer of the document
Table of Contents
with all sections
Overview
Include:
introduction and purpose of the report
Software Vulnerability Assessment (one-column table from Step 1)
comprehensive list of application software that could present vulnerability concerns
Procurement Policy List and Acceptance Procedures (two-column table from Step 3)
Policies of concern and specific procedures to test them
Testing and Validation Procedures (from Step 6)
Include specific testing and validation recommendations
The main heading of “Methods” should be centered, boldfaced, and capitalized. Subheadings within this section are left-aligned, boldfaced, and in title case.
Requirements:
2. Participants: detailed description
· Include information about the number of participants used in the study, where they come from and the selection criteria as well as any other important characteristics like age, sex, education level, or occupation. Be sure to mention if participants were given any type of reward or motivation to encourage them to participate in the study.
· Materials: detailed description
· Document any materials or equipment used in your study such as a stopwatch, slide projector, word lists or any other supplies.
· Procedure: detailed description
· Important aspects of the instructions given to participants and what the participants did, step-by-step
· Design: propose the type and provide an explanation, identify independent and dependent variable
· Data analysis strategy: propose the type of analysis and provide an explanation
3. Results section
a. Opening statement
b. Measures of central tendency
c. Measures of variability
d. Hypothesis test
e. Figure description
f. Summary statement
4. Figure and Caption
Style
All versions of the report must conform to the rules and regulations of the American Psychological Association (as described in the APA Manual 7th Ed.)
Page requirements
The report should include around 5 pages, excluding the title page.
Develop a 3-4 page preliminary care coordination plan for a selected health care problem. Include physical, psychosocial, and cultural considerations for this health care problem. Identify and list available community resources for a safe and effective continuum of care.
Introduction
NOTE: You are required to complete this assessment before Assessment 4.
The first step in any effective project is planning. This assignment provides an opportunity for you to strengthen your understanding of how to plan and negotiate the coordination of care for a particular health care problem.
Include physical, psychosocial, and cultural considerations for this health care problem. Identify and list available community resources for a safe and effective continuum of care.
As you begin to prepare this assessment, you are encouraged to complete the Care Coordination Planning activity. Completion of this will provide useful practice, particularly for those of you who do not have care coordination experience in community settings. The information gained from completing this activity will help you succeed with the assessment. Completing formatives is also a way to demonstrate engagement.
Preparation
Imagine that you are a staff nurse in a community care center. Your facility has always had a dedicated case management staff that coordinated the patient plan of care, but recently, there were budget cuts and the case management staff has been relocated to the inpatient setting. Care coordination is essential to the success of effectively managing patients in the community setting, so you have been asked by your nurse manager to take on the role of care coordination. You are a bit unsure of the process, but you know you will do a good job because, as a nurse, you are familiar with difficult tasks. As you take on this expanded role, you will need to plan effectively in addressing the specific health concerns of community residents.
To prepare for this assessment, you may wish to:
Review the assessment instructions and scoring guide to ensure that you understand the work you will be asked to complete.
Allow plenty of time to plan your chosen health care concern.
Instructions
Note: You are required to complete this assessment before Assessment 4.
Develop the Preliminary Care Coordination Plan
Complete the following:
Identify a health concern as the focus of your care coordination plan. In your plan, please include physical, psychosocial, and cultural needs. Possible health concerns may include, but are not limited to:
Stroke.
Heart disease (high blood pressure, stroke, or heart failure).
Home safety.
Pulmonary disease (COPD or fibrotic lung disease).
Orthopedic concerns (hip replacement or knee replacement).
Cognitive impairment (Alzheimer’s disease or dementia).
Pain management.
Mental health.
Trauma.
Identify available community resources for a safe and effective continuum of care.
Document Format and Length
Your preliminary plan should be an APA scholarly paper, 3–4 pages in length.
Remember to use active voice, this means being direct and writing concisely; as opposed to passive voice, which means writing with a tendency to wordiness.
In your paper include possible community resources that can be used.
Be sure to review the scoring guide to make sure all criteria are addressed in your paper.
Study the subtle differences between basic, proficient, and distinguished.
Supporting Evidence
Cite at least two credible sources from peer-reviewed journals or professional industry publications that support your preliminary plan.
Grading Requirements
The requirements, outlined below, correspond to the grading criteria in the Preliminary Care Coordination Plan Scoring Guide, so be sure to address each point. Read the performance-level descriptions for each criterion to see how your work will be assessed.
Analyze your selected health concern and the associated best practices for health improvement.
Cite supporting evidence for best practices.
Consider underlying assumptions and points of uncertainty in your analysis.
Describe specific goals that should be established to address the health care problem.
Identify available community resources for a safe and effective continuum of care.
Organize content so ideas flow logically with smooth transitions; contains few errors in grammar/punctuation, word choice, and spelling.
Apply APA formatting to in-text citations and references, exhibiting nearly flawless adherence to APA format.
Write with a specific purpose with your patient in mind.
Adhere to scholarly and disciplinary writing standards and current APA formatting requirements.
Additional Requirements
Before submitting your assessment, proofread your preliminary care coordination plan and community resources list to minimize errors that could distract readers and make it more difficult for them to focus on the substance of your plan. Be sure to submit both documents.
.
Competencies Measured
By successfully completing this assessment, you will demonstrate your proficiency in the course competencies through the following assessment scoring guide criteria:
Competency 1: Adapt care based on patient-centered and person-focused factors.
Analyze a health concern and the associated best practices for health improvement.
Competency 2: Collaborate with patients and family to achieve desired outcomes.
Describe specific goals that should be established to address a selected health care problem.
Competency 3: Create a satisfying patient experience.
Identify available community resources for a safe and effective continuum of care.
Competency 6: Apply professional, scholarly communication strategies to lead patient-centered care.
Organize content so ideas flow logically with smooth transitions; contains few errors in grammar/punctuation, word choice, and spelling.
Apply APA formatting to in-text citations and references, exhibiting nearly flawless adherence to APA format.
Analyze a health concern and the associated best practices for health improvement.
Does not identify a health concern and the associated best practices for health improvement.
Identifies a health concern and the associated best practices for health improvement.
Analyzes a health concern and the associated best practices for health improvement.
Provides a perceptive analysis of a health concern and the associated best practices for health improvement. Provides credible evidence for best practices and articulates underlying assumptions and points of uncertainty in the analysis.
Describe specific goals that should be established to address a selected health care problem.
Does not describe specific goals that should be established to address a selected health care problem.
Identifies undefined goals that should be established to address a selected health care problem.
Describes specific goals that should be established to address a selected health care problem.
Describes specific goals that should be established to address a selected health care problem. Ensures that the goals are realistic, measurable, and attainable.
Identify available community resources for a safe and effective continuum of care.
Does not identify available community resources.
Identifies available community resources.
Identifies available community resources for a safe and effective continuum of care.
Identifies significant and available community resources for a safe and effective continuum of care. Provides a comprehensive list of resources, with credible evidence of their contribution toward improving community health.
Organize content so ideas flow logically with smooth transitions; contains few errors in grammar/punctuation, word choice, and spelling.
Does not organize content for ideas. Lacks logical flow and smooth transitions.
Organizes content with some logical flow and smooth transitions. Contains errors in grammar/punctuation, word choice, and spelling.
Organizes content so ideas flow logically with smooth transitions; contains few errors in grammar/punctuation, word choice, and spelling.
Organizes content with a clear purpose. Content flows logically with smooth transitions using coherent paragraphs, correct grammar/punctuation, word choice, and free of spelling errors.
Apply APA formatting to in-text citations and references, exhibiting nearly flawless adherence to APA format.
Does not apply APA formatting to headings, in-text citations, and references. Does not use quotes or paraphrase correctly.
Applies APA formatting to in-text citations, headings and references incorrectly and/or inconsistently, detracting noticeably from the content. Inconsistently uses headings, quotes and/or paraphrasing.
Applies APA formatting to in-text citations and references, exhibiting nearly flawless adherence to APA format.
Exhibits strict and flawless adherence to APA formatting of headings, in-text citations, and references. Quotes and paraphrases correctly.
As a software project manager in a company that specializes in the development of software for company X, you have been given the task of discovering the factors that affect the maintainability of the systems developed by your company. Suggest how you might set up a program to analyze the maintenance process and determine appropriate maintainability metrics for the company.
For this week you may write about readings from Week 2 or Week 3!
For your Keyword Portfolio, each week write about 250 about a key concept, word, or idea from our course readings, videos, podcast or other material on the syllabus for this week that strikes you as particularly vibrant, confusing, relevant, troublesome or profound.
Please integrate at least two readings on weeks when there are multiple readings, either by discussing a keyword that links some of the week’s readings or writing two short keyword entries for 2 readings.
You should write for about 30 min, providing a key quote or two with some reflection of your own take on the reading or readings. Please try to make a connection between a couple of readings if there are multiples assigned.
This is not meant to be totally polished writing, but should demonstrate that you have engaged with the required reading for the week, and should be written in academic English (sentences, paragraphs, correct spelling, etc.).
Please make sure to include a “works cited” for your Keyword, indicating which reading you are referencing, and use correct citation style (either MLA, APA or Chicago) to indicate page numbers for your quote. This is an excellent practice to get into for an ethical research practice.
What makes a good keyword entry?
Put your preferred first name and your last name at the top of the page.
Identify which word, concept or phrase you are writing about as your keyword or concept.
Use your own summary AND direct quotations from the text (with page numbers) to demonstrate that you understand the complexity of the term in the context of the argument or ideas of the author(s) of the reading(s) you are referencing.This will help you in the future when you are having your Keyword Conversations and later in the semester when you will be asked to put multiple authors into conversation with each other.
You must be citing materials from this course! If you want to bring in outside materials that is fine, but the point of the exercise is to show that you have read and understood the course material!
Include the Works Cited at the bottom
Make sure you are writing about 250 words (not too many more and not much less).
Make sure to use the author’s/authors’ name/s when you are talking about their work.
PLEASE NOTE: If you want to use an example or want to write whether you disagree or agree or want to evaluate the position or argument of the author(s), put that at the end of your keyword entry! Make sure that you demonstrate that you understand the nuances of the author’s arguments and give direct reference to the texts *before* launching into your example or evaluation.
Keyword grading rubric: (i’ve added a new rubric to better reflect the keyword portfolio)
EAG – Exceptional Awesome Glowing – thoughtful and careful reading, writing and critical analysis; deals with the complexities of the reading/s and demonstrates a rigorous and creative capacity with the key idea/s; this is some polished, shiny work! Come see me to discuss.
GWWP – Good Work Well-Played – meets all elements of the assignment and demonstrates a clear understanding of the material; substantial engagement with the complexities of the material; but not quite polished all the way. Come see me to discuss.
GTNW – Getting There Needs Work – is getting the basic idea, but is not engaging with complexity; needs at least one element of the assignment to be improved. Come see me to discuss.
NSWKG – Needs Significant Work Keep Going– submitted the work, but it’s not fulfilling the terms of the assignment; needs multiple elements to be improved; did you read the assignment carefully? likely the student needs to pay more attention to the assignment details. Come see me to discuss.
“You’ll be pleased. We’re going with the market you recommended.”
“That’s good news!”
“And we’re almost finished staffing the new department. But, before you move on to your next client, we have one more project for you. We need you to put together a 12-month campaign budget and resourcing plan for the expansion.”
“I don’t know what to say.”
“As long as it’s not no. We’re moving quickly, so we need something in two weeks.”
“I’ll get right on it.”
“Great! Talk to you later.”
You take a sip of tea. The recommendation was one thing, but a budget and resourcing plan are beyond any type of planning you’ve done before, at least at Parabolic. Luckily, you have your colleagues’ expertise to draw from. Rebecca still stops by your desk periodically to check in on what’s happening with her old client. Knowing she’s helped with expansions before, you ping her to get her thoughts.
A-ha! This is where things get nitty-gritty. You’ll drill down into the tactics you chose and figure out how you would produce them—and evaluate their success—in this new market. This will probably involve some iteration as you compare your vision with financial reality.
Here’s how I would tackle this:
Review the tactics in your communications plan and verify that they will enable your proposed strategy for the 12-month timeframe. If you went general in the last project, think more deeply about the needs now. I have a timeline from my last expansion that I’ll send so you can get a sense of the appropriate scope and level of detail for our client’s needs.
Now for the Budget component. Drill down to the resources you’ll need to produce each tactic. Do you need to hire contractors? Arrange for studio time? Is travel necessary? Consider the Evaluation part of the plan. How will you evaluate the success of your tactics and conduct further research if necessary? Will you need to hire someone to coordinate focus groups or gather and analyze data?
Once you have a handle on how much your proposed tactics and associated needs will cost, take a look at the client’s financial situation. Is everything you calculated within budget?
Update your budget, tactics, and timeline based on your prioritization.
Finally, create a work breakdown structure outlining your human resourcing needs for the expansion and any cross-functional teamwork you anticipate.
Let me know if you need any help.
A Little More Context
In this project, you’ll strengthen your strategic communications management chops as you prepare a 12-month campaign budget and staffing plan. This will require research, numbers-crunching, evaluation, prioritization, resource reshuffling, more evaluation, and then, finally, a clear and well-organized product for your client.
This is great preparation for your future endeavors at Parabolic. If you’ve never done this kind of planning before, the learning resources and sample budget will help you determine what you know, what you don’t know but can figure out, and what you don’t know and need guidance on. Please ask questions if you’re unsure about anything.
Planning Your Work
You have two weeks to produce your campaign planning documents; be sure to read through all the steps of the project first so that you can plan your time wisely. Here is a possible task breakdown:
Week 9: Steps 1–2
submission in Step 1
Week 10: Steps 3–6
submission in Step 5
Project 4: International Campaign Step 1: Update Your Tactics and Timeline (Submission)
You’re going to spend the next two weeks developing a budget and staffing plan for your campaign. That is, you’re going to greatly expand on the Budget and Timeline sections of the draft communications plan you prepared in Project 3. Basically, you’ll put together a comprehensive list of all that’s needed, how much it will cost, who will handle it, and when it will occur. This is for a 12-month time period.
Once you have a sense of the scope and level of detail expected of you, go over the communications plan you drafted for your recommended market. The PESO model might help you think of additional needs.
The PESO Model
As you review the PESO model, ask yourself the following:
How will you gain a foothold in the new market? Consider what you’ll need to do to leverage already-existing relationships and form new ones. What will your department do to establish ties in the community, with the media, and with the government? Will you need to conduct research?
What owned media will need to be created for this expansion? Will you need a website, blog, or other infrastructure (e.g., video, photo, or print production)? Who will create this? What about a crisis communications plan?
What social media will you need? How much and how often?
What are your earned media needs? What might be required for you to obtain free coverage from the media, including social media influencers, and your publics?
Do you have any paid media needs? Even though paid coverage typically falls more to marketing and advertising than to PR, you may still pay fees for certain types of coverage (see the learning topic above).
How will you evaluate your efforts? If you look at the sample timeline, you’ll see that evaluation occurs on an ongoing basis, especially close to a major event.
When you engage in campaign planning, you typically don’t work solo, but coordinate with the other departments in the organization. You might find, for example, that you can support marketing by producing some of the content needed for ads or that you and marketing can share costs for certain tactics. If you identify places in your timeline where you think you would work with another department or share resources, make a note of it.
Once you’ve finished updating your timeline, send it to Rebecca so she can get you some early feedback.
Project 4: International Campaign Step 2: Draft Your Campaign Budget
Now that you’ve verified all your tactical needs, determine how much each tactical activity will cost and come up with a total.
Use a spreadsheet or table to (1) identify what will cost money and (2) research the costs.
What Will Cost Money?
Your staff is already paid for, so you don’t need to factor their salaries into your budget. If, however, you want to hire contractors or anyone else to assist in your efforts, you will need to calculate hourly rates. You will also need to compensate any consultants, such as a cultural ambassadors who can help you identify intercultural tripwires and make sure your messages are credible to your publics.
Your communications products and your efforts to generate earned media will all cost money. If your tactics include, say, 20 talking head videos of local agriculture experts that you’ll post on Instagram every few weeks, you’ll need to figure out your equipment needs, staffing needs (do you need to hire a videographer and rent production equipment?), transportation needs (do you want to get one of your employees over to the area to conduct the interviews? Where will he or she stay, and for how long? What will be expensed?), and any other need. You might want to hire a local person to conduct the interviews; if so, how much will you pay him or her?
If your tactics include an event, don’t worry: You don’t need to create a line item for every need. Do try to come up with a high-level cost estimate. It might be useful to review the SPCA Pet Day Event Plan Spreadsheet as a guide to the type and variety of costs an event incurs. Of course, a press conference will have radically different costs from those of a CSR or festival-type event.
Finally, look at the efforts that support your tactical decisions. Will you need focus groups, click through rates, surveys to assess how well your products are succeeding? Who will gather and analyze the information?
This is where you might get creative, weighing, say, a six-month contracting hire in the new market against someone you might pay by the hour in your current location. If you’re looking into travel, you might find that putting up the VP of communications away from the city center costs half as much as putting her up in the city center, or that getting to the new market by air is much cheaper off-season than on, which might affect your timeline.
If you need to convert currency, there are many online tools that will help you.
Once you’ve calculated all your costs, add one final item: a reserve fund for emergencies and other contingencies. A good rule of thumb is to create a reserve fund of about 10 percent of your total costs. In other words, you’ll add 10 percent of your total to your total to accommodate the unexpected.
To keep yourself on track, complete your timeline and budget drafts by the end of Week 9.
Next, you’ll check your timeline and budget against your client’s financial situation and revise, incorporating any comments from Rebecca and/or your peers.
Worker 1 with non-labour income Y is facing a wage offer, w and a utility function defined over consumption and leisure
U (c,l) = lnC + 4lnl
a) When comparing worker 1 with worker 2 whose utility function is described by U(c,l) = cl ,
which worker places a higher value on labour market work?
b) Assuming the worker participates in the labour market. Derive the worker’s compensated labour supply function and the compensated labour supply elasticity with respect to wage as a function of utility level and wage
c) Derive worker’s uncompensated labour supply function (for labour market participants and non-participants) and the uncompensated labour supply elasticity (for labour market participants) with respect to wage as a function of non-labour income and wage
Give special attention to pages 6 and 7. In the context of where our school is now, in the face of a pandemic and the next few years, please comment on two of the Technology Infrastructure Strategies and two of the Online and Distance Education Technology Strategies. State the strategy that you are commenting on and then provide your comment/s. The comment should indicate the importance of that strategy and how it has a direct effect on you and your fellow students. If there is something more that needs to be stated regarding the strategy, please provide that information in your comment/s.
The last comment to be provided is your statement on the importance of the work done by the IT Infrastructure staff. What does their work mean to you? How does this affect you?
Provide the answers, while listing your responses using the following format:
1—Selected Technology Infrastructure Strategy 1
2—Selected Technology Infrastructure Strategy 2
3 –Selected Online and Distance Education Technology Strategy 1
4 — Selected Online and Distance Education Technology Strategy 2
5 – My (Your) statement explaining the importance of the work done by the IT Infrastructure Staff.
Once you complete your discussion, you will be able to see the comments of your fellow classmates. Please provide comments to them, in order to get full credit for this Discussion Question. rr
Work with your chair to determine any specific instructions or guidance that he or she may have for you about your topic selection development document.
One of the first steps in research is topic selection. A dissertation focuses on a very narrow, specific topic. An important element of topic selection is bringing together two or three subtopics or concepts to help you focus your research. For example, simply stating, “my topic is transformational leadership” does not provide enough focus for doing an intentional review of the literature. However, adding subtopics can refine your search. Instead, you could state, “My topic is the ethical nature of transformational leaders.” Just by adding that one extra subtopic, you have created a narrower lens through which to start analyzing the literature. Adding one or two more subtopics to the sentence can narrow your focus even further:
Identify a main topic (two or three keywords) within the domain of organizational behavior.
Identify a subtopic (another keyword or two) through which you could “look at” your main topic.
As needed, you may want to identify another subtopic through which you could “look at” your main topic and first subtopic.
State that combination of topics or subtopics as a topical sentence or topical question . . . “What does the literature say about . . .”
Start reviewing some scholarly literature. What is it saying about your topical sentence? Capture the most important information from each article that informs, clarifies, challenges, or raises questions about the topic you are beginning to develop.
Begin segmenting or grouping the literature. Are there different points of view?
Complete a review of at least four to five articles or other scholarly pieces of literature:
Focus on current literature (last five years).
How has the literature helped you reshape your topical sentence/question?
What are some initial gaps in the existing literature that you are beginning to observe?
How would you restate your topic sentence/question after reviewing some initial literature?
Submission Details:
Submit a 3- to 5-page paper that clarifies your refined topic. Support your topic with your preliminary review of the literature.
Use APA style in preparing your paper and citing references.
Notify your chair (e.g., e-mail) when you have submitted the topic paper.
Note: A successful dissertation requires self-directed behaviors. To successfully pass each dissertation course, you must successfully complete (pass) each milestone presented in the course materials. Additionally, you must complete the milestones in the order they are presented in the course. The tasks in some milestones may take you more than a week to complete. Finish each milestone before you move on to the next milestone. In your planning, also allow time for feedback from your dissertation chair/committee and revisions as part of completing each task.
Describe an example of a contract that you or someone you know entered into (e.g., rental agreement, cell phone agreement, property purchase or lease [e.g., car, home, furniture, etc.], home or car repair, or student loan agreement). In your description, be sure to provide specific contractual details including parties and subject matter involved. You must also address the following:
Define the five essential elements of an enforceable contract, and demonstrate how each element relates to your example.
Explain the circumstances of a breach of contract in your example, and discuss possible remedies.
The paper must be three to four pages in length (excluding title and reference pages) and formatted according to APA style as outlined in the Writing Center. You must use at least two scholarly sources other than the textbook to support your claims. Cite your sources in-text and on the reference page. For information regarding APA samples and tutorials, visit the Writing Center.
Many companies, big and small, have experience with consultants and it’s an important topic in the world of business improvement. Some great questions could be:
What is your definition of “consulting”?
What is your opinion of consultants?
What are the advantages/disadvantages of consultants?
What area of advice are you an expert at? Why?
“Sometimes you need a consultant to tell you the obvious.” Do you agree/disagree? Why?
Rules and regulations are literally everywhere in the business world and they could present some useful and interesting information. You could give the students questions like:
What rules and regulations exist at your job?
What happens if you break any of these rules?
How do you feel about the regulations at your job?
Why do you think rules and regulations exist?
Have you ever had any problems with rules and regulations?
What Is Organizational Development – Discussion Entry
One of the most frequently cited definitions of Organizational Development comes from Richard Bechard (1969), an early leader in the field of Organizational Development. He said Organizational Development is “an effort (1) planned, (2) organization-wide, (3) managed from the top, (4) increase organization effectiveness and health through (5) planned interventions in the organization’s process”, using behavior-science knowledge.
In this discussion. Interpret what this definition means to you. How can this definition aid you as a leader?
Behavioral And Contingency Leadership Theories – Paper
Overview
Please write a paper and explain the major difference between behavioral and contingency leadership theories. In addition, please explain the behavioral contribution to contingency theories.
Directions
Please cite your sources
500-1000 words, APA style
CHAPTER 4 in the attached book is the primary source
Please site other sources used. Feel free to add 1 or 2 more reputable sources and site them according to the latest APA guidelines.
In this check-in for this course, you will have a private conversation about your own experiences dealing with unplanned changes at work or in your personal life. You will share leadership behaviors that you demonstrated in the past or plan to use in the future when dealing with unprecedented change. Think about what you learned during these times of change and crisis that support employee engagement and business success.
During this discussion, try to relate to the Fourth Industrial Revolution skills required to serve as a facilitator for change and being a change leader. Discuss the importance of skillssuch as people management, coordinating with others, emotional intelligence, negotiation, judgment, and decision-making when playing the role of a change facilitator or change leader.
Assignment Details:
In this check-in, you will reflect on your own experiences dealing with unplanned changes at work or in your personal life, along with the leadership behavior you displayed while dealing with these changes and relating them to Fourth Industrial Revolution skills.
Based on the prompt above, submit a word document sharing your understanding. Consider the following:
Reflect on your own experiences dealing with unplanned changes at work or in your personal life.
Discuss leadership behaviors that you demonstrated in the past or plan to use in the future to support employee engagement and business success during change.
Relate your leadership behaviors to Fourth Industrial Revolution skills that are required to serve as a change facilitator or change leader.
Submission
Submit a word document which should take 3- to 5-minute to read fully.
If references are used, please place them on the document
Foreign exchange impacts the profitability of transactions in international markets. It can turn a profitable business into one that loses money and can turn an unprofitable business into one that makes money.
In this assignment, you will analyze the impact of foreign exchange on different business scenarios and present your findings in a short business memo.
Scenario
You manage the international business for a manufacturing company. You are responsible for the overall profitability of your business unit. Your company ships your products to Malaysia. The retail stores that buy your products there pay you in their local currency, the Malaysian ringgit (MYR). All sales for the first quarter are paid on April 1st and use the exchange rate at the close of business on April 1st or the first business day after April 1st if it falls on a Saturday or Sunday. The company has sales contracts with different vendors that determine the number of units sold well in advance. The company is contractually obligated to sell 4,000 units for exactly 1.25 million MYR for the first quarter. The break-even point for each unit is $90 in U.S. dollars. Use the following foreign exchange rates:
On January 1, the daily spot rate is 3.13 MYR, and the forward rate is 0.317 U.S. dollars/MYR for April 1st of the same year.
On April 1, the daily spot rate is 3.52 MYR.
Prompt
Using the information above, create a short business memo that explains the profitability, viability, and importance of considering foreign exchange on the basis of the scenarios below.
Scenario 1: The company uses the spot rate on April 1st to convert its sales revenue in MYR to U.S. dollars.
Scenario 2: On January 1st, the company uses that day’s forward rate today to lock in a foreign exchange rate for its expected 1.25 million MYR in sales. This means the company agreed to exchange 1.25 million MYR using the forward rate on January 1st when April 1 arrives.
Scenario 3: Another option for the company is to spend the foreign currency and avoid any currency exchange. Because it is a manufacturing company, raw materials are always needed.
Specifically, you must address the following rubric criteria:
Foreign Exchange Calculations: Determine the profitability of the international business by using foreign exchange calculations for the first and second scenarios.
Spend or Save: Discuss what you would need to consider when determining if the company should buy raw materials with the foreign currency in an effort to avoid foreign exchange risk and whether this is a viable option for the company.
Conclusion: After determining the result for each scenario, explain the importance to a company’s financial results of considering foreign exchange risk.
Guidelines for Submission
Submit this assignment as a 250- to 300-word Microsoft Word document. Sources should be cited according to APA style.
Following the Rubric for the Assignment is Imperative for Successful competition.
Local governments consist of elected officials with administrative, executive, and legislative functions. These officials have to deal with many problems or issues related to productivity. The community depend on these officials to provide and organized framework that will produce results to improve efficiency, conduct governmental affairs effectively, and have the ability to administer policies and regulations as a means of improvement. In order to facilitate these endeavors, the government must have Good Work Performance, Better Management Systems, and effective Training and development.
Focus on chapter 5-10 Mini Analysis 2: Analysis of Community, Political and Social Change (150pts.)
For the second paper, students are required to write about leadership effectiveness and change within broader social and political arenas. Reading materials from Chapters 5-8 of the text-Hickman, G.R. (2010). Leading Change in Multiple Contexts. Los Angeles, CA: Sage Publications. ISBN: 978-1-4129-2678-2 must be central to this paper (although not all content applies directly). However, be sure to engage issues of community, political, and social change in your analysis of change in organizations. Knowledge of non-profits and other types of organizations that function outside the government and profit sections always make for interesting case studies.
Questions to help generate ideas include:
How do we know when change is working well?
What kinds of barriers exist across organizations?
What sorts of measurements might indicate that how well change initiatives are working.
My concern here is not with finding some right answer(s) but exploring leadership and change effectiveness broadly construed. Students may use personal experiences, reading materials, and class discussion ideas. Students have a great deal of latitude in the focus and scope of the paper–“play” a bit in the writing and idea development.
Instructions:
Please choose 3-4 concepts to focus on for your mini-analysis. These concepts can come from anywhere within Parts III and Part IV of the text.
Introduce and explain the concepts, at minimum bring in at least 1 other scholarly/academic reference or citation per concept that you have introduced.
Link the concepts to current or past events for further analysis (As one example of how a student might use material from the readings, consider the discussion of community leadership. A student might take concepts of change and empowerment (visible, hidden, invisible, and power over, to, with, and within) as a conceptual structure for analyzing leadership effectiveness within an organization.
Make sure to include a reference page and reference the text. Again, you will want to bring in external citations and references to strengthen your paper.
Paper will generally be between 4-5 pages. Maximum 5 pages (Title page and reference page are not included in this count).
You must reference your text book and bring in at least 3 additional citation/references for this paper.
Structure:
Make sure that the paper has a well-developed structure and engages reading materials from this class. One of the biggest challenges for students is creating their own analytic structure with a clear purpose or goal. The structure or organization of the paper should include:
1. Introduction that:
a) establishes interest,
b) establishes the topic of focus,
c) provides a clear thesis statement (goal or purpose followed by a brief justification of its importance), and
d) a preview of central points or organization of the body of the paper.
2. In the body of the paper, students should think of each first sentence of a paragraph as a “mini-thesis” that establishes the goal or direction of the paragraph. This first sentence is often an argument, position, or strong “stand alone” statement. By stand-alone statement I mean an idea that makes sense on its own.
3. Conclusion–summarized key ideas (sometimes this is a summary of key points learned or suggests directions for future analysis).
***Please do NOT use materials from John Kotter’s leadership books. I want students to write papers that integrate key ideas from our text. Google Scholar is an excellent resource for scholarly work.
DISCUSSION
Questions from Chapters 7-8
Chapters 7&8 Discussion
Please answer each of the following questions from your readings in your original post by Thursday of each week. Make sure that you provide a reference for the text in the discussion board. Reply to at minimum 2 of your classmates posts for full credit. Responses to your classmates are due by Sunday of each week.
Identify and discuss concepts of political change. Use these concepts to analyze how political change concepts have or can influence your workplace or organization.
Some leadership scholars argue that transformational leadership may be the dominant and most used theory of leadership today. What specific elements of transformational leadership would support this argument?
Book below if you have any questions please message me about he prompt
Week 5 discussion
Walliman whole book
Wheelan just chapters 1-3
We’re onto the second half of the semester, and I know we’ve covered quite a bit of information already. That said, I like using this week’s discussion post as a check-in. Share some of your high points and “a-ha” moments from both the Walliman and Wheelan textbooks.
Lastly, what have been some of the challenges with regard to the textbooks?
1)A taxpayer purchased and placed into service a $1,690,000 piece of equipment. The equipment is 7-year property having a 14.29% applicable depreciation rate for the first year. The taxpayer is making a Section 179 election but is elected out of any bonus depreciation. Assume that the maximum Section 179 limit is $1,020,000 and the threshold is $2,550,000. Before considering any depreciation deduction, the taxpayer had $2,700,000 of taxable business income. What is the maximum amount of cost recovery deduction this year?
A.$241,501
B.$987,178
C.$1,020,000
D.$1,115,743
2) On August 1, Year 1, Sound Co. purchased and placed into service an office building costing $264,000, which includes $30,000 for the land. The MACRS depreciation schedule for 27.5-year property and 39-year property placed in service in the 8th month is listed below.
27.5-year property1.364%39-year property0.963%
What was Sound’s MACRS deduction for the office building in that year?
As an escrow officer, what area have to grow in to do the job successfully? Use the information from Chapter 10 to understand some of the skills/actions required for a successful escrow process.
ESCROW PROCEDURES
After an offer to purchase has been accepted by a seller of real estate, buyer, seller, and broker(s) must ensure that all necessary details have been covered. If there are no vague or ambiguous provisions between the parties, the escrow process will be that much smoother. A real estate agent is considered involved in a transaction, and thus the escrow, even if the agent will not receive a commission or fee.
TRANSACTION CHECKLIST
Buyer and seller will be concerned, and all points will help discuss in the negotiations and the final contract terms. The real estate agent also must make sure that certain information is known to the parties. Has the broker made the appropriate inspection of the property? Is the buyer fully informed of all material facts concerning the property? Have the relevant disclosures been made regarding the broker’s agency relationship to seller and buyer? Have seller and buyer confirmed their understanding of the broker’s role in the transaction? Have all other necessary disclosures been made? Using a checklist, such as the one in Figure 10.1, will help ensure a successful sale closing. Once the transaction requirement is established, the escrow holder knows what to expect from buyer and seller.
A checklist is a necessity to make sure all details (especially disclosures) have been covered.
Some of the essential elements of a successful transaction are included in the items listed in Figure 10.1, such as a property appraisal acceptable to the lender. If the lender isn’t satisfied that the property is sufficient collateral for the loan, the loan will not be granted, and the borrower will use the loan contingency clause.
FIGURE 10.1:
Transaction Checklist
TRANSACTION CHECKLIST
Date and place of signing of the contract by buyer(s).
Full name, address, and marital status of each buyer. The type of business (corporation, general partnership, etc.) should be specified if a company.
The purchase price, deposit amount, and how the deposit will be made (such as by personal check or cashier’s check). The person who will hold the deposit prior to closing (the escrow holder, for instance) also should be named.
Financing terms. The buyer may be required to obtain a loan commitment by a certain date. The buyer should always have the protection of a loan contingency clause in the purchase contract, such as “This offer is subject to and conditioned upon the buyer and property qualifying for and the buyer obtaining said loan within X days of the opening of escrow.” Without such protection, the buyer could risk forfeiting the deposit if the sale were frustrated by the buyer’s or property’s failure to qualify for the loan. If the buyer will assume an existing loan, some provision should be made for the buyer’s approval of the existing loan’s terms.
Encumbrances that affect titles, such as restrictions and easements. These should be clarified as acceptable to the buyer, or a time period should be given in which a preliminary title report is to be received and accepted by the buyer. If the seller will retain any interest in the property, such as an easement, that interest should be specified, as should rights of any person (such as tenants) currently in possession.
Required property inspections and who will pay for them. The person who will pay for necessary repairs also should be named. The buyer usually will want a final “walk-through” of the property just before closing to ensure it has been properly maintained and repaired (if necessary).
Names of escrow holder and title company, as well as who is to pay the escrow fee, title insurance premium, and applicable county and city documentary transfer taxes and other fees.
Description of any other documents required from either party.
Names of all real estate brokers and salespeople involved, as well as the agency role of each in the transaction, the negotiated sales commission, and who will pay the commission.
Contract termination date, how long the buyer’s offer is open, and when the buyer will take possession.
Signatures of all parties, including broker(s). If a salesperson signs on behalf of a broker, the broker must review the contract within five days, initialing and dating it. The Real Estate Law provides for delegation of the broker’s responsibility in certain instances.
RESPONSIBILITIES OF THE BUYER
The buyer will
sign escrow instructions;
provide a copy of any contract of the buyer that will affect the escrow, such as a buyer broker agreement;
review the preliminary report and any encumbrances of record;
review all loan documents, including new loans, loans to be assumed, loans buyer is taking title “subject to,” and disclosure information if the seller is taking back a purchase-money mortgage;
obtain hazard insurance coverage;
review and approve all property inspection reports and arrange for a final property inspection before closing;
examine the bill of sale covering any items of personal property to be conveyed separately at closing; and
deposit the cash needed to cover down payment, closing costs, and other expenses, such as revolving debt and collection accounts, if any, to be paid off at closing.
Usually, expenses may be negotiated between buyer and seller. (An exception may be a government-backed loan.) The buyer typically pays for
buyer’s share of escrow fees,
loan fees,
appraisal fee,
credit report,
lender’s title insurance,
recording fees for documents prepared on the buyer’s behalf,
notary fees for documents prepared on the buyer’s behalf,
prepayment of loan interest,
assumption fee (if applicable),
new fire or other hazard insurance premiums,
FHA mortgage insurance, and
any prorated expenses the seller already has paid.
RESPONSIBILITIES OF THE SELLER
The seller will
sign escrow instructions;
provide a copy of any contract of the seller that will affect the escrow, such as the listing agreement, and any required disclosure statement(s);
include the seller’s deed and title insurance policy and any unrecorded instruments affecting title;
provide information on the present status of existing loans, including consent to the submission of a beneficiary statement or demand for payoff, as required, and financing disclosure information if the seller is taking back a purchase-money mortgage;
provide certificates or releases on any mortgage, judgment, mechanic’s lien, or other encumbrance to be paid off through escrow;
provide any existing hazard insurance policies to be assigned to the buyer;
provide any subordination agreement required by the contract;
provide tenant information, including their names, rent and deposit information, assignment of all leases to buyer, and the fact that tenants have been notified of the change of ownership;
provide executed deed on real property to the buyer;
provide an executed bill of sale on any items of personal property or security agreement if the purchase is by installments; and
make available any other documents or approvals needed to close the sale.
Again, most sale expenses are open to negotiation. The seller typically pays for
seller’s share of escrow fees,
title insurance,
home warranty plan (if any),
structural pest control report and clearance (if needed),
the beneficiary statement,
existing loan payoff and prepayment fee (if any),
mortgage discount points and nonallowable fees on behalf of the buyer in FHA transactions,
all fees in VA transactions,
notary fees on documents prepared primarily on the seller’s behalf,
various transfer fees,
cost of required disclosure reports, and
any arrearages for taxes or other prorated items.
RESPONSIBILITIES OF THE REAL ESTATE AGENT
When a real estate agent represents a party in a transaction, there are steps the agent can take to ensure that the transaction is successfully completed. In general, a real estate agent’s responsibilities are to keep informed of the progress of the escrow and assist the escrow officer when necessary. The agent usually will
deliver copies of the executed (signed) purchase contract to the parties;
deliver and explain the escrow instructions to the parties in the transaction, and ensure that the parties have signed and returned the instructions (it may be best to have the parties go to the escrow office for signatures);
provide all necessary property and transfer disclosure reports;
provide the escrow officer with copies of the seller’s payment coupons on any loans, a property profile or copy of the grant deed indicating the present owner(s), tax information, and any other items that will assist the escrow officer;
advise the buyer(s) (particularly a married couple) to obtain legal advice on how to take title (agents and escrow officers, unless licensed to practice law, may not give this advice);
remind the seller to continue to make all payments on loans during escrow and maintain the property as required by the purchase agreement;
advise the parties (buyer and seller) to notify the escrow officer if they have plans to be traveling during the escrow period, especially if they plan to be out of the country (If so, an arrangement, such as a power of attorney, must be made to ensure that the transaction is not delayed);
review the preliminary report as soon as it is available and explain its contents to the buyer;
assist the buyer in obtaining any necessary loans and place the lender in contact with the escrow officer;
assist the buyer in obtaining an inspection of the property and review the inspection with the buyer afterward;
assist the seller in ordering a timely pest control report and review the required corrective work;
make sure that the parties deliver the required documents and funds to escrow; and
provide any assistance the parties request or require that is within the agent’s abilities to ensure that the parties fulfill their obligations and are fully informed of the progress of the transaction.
The real estate broker for the seller may share the sales commission with a cooperating broker who brings the buyer to the transaction. An agreement between the two brokers will ensure that both understand the compensation that will be paid at the closing of the transaction.
RESPONSIBILITIES OF THE ESCROW HOLDER
Although local practices may vary somewhat, the duties of the escrow holder generally include those listed below and in the flowchart shown in Figure 10.2. Throughout this section, we refer to the escrow officer, someone employed by an escrow company or escrow holder to handle escrow transactions. The escrow officer follows the specific procedures required by the escrow company or escrow holder, which vary from company to company and may be quite detailed.
ESCROW INSTRUCTIONS
The escrow holder in a residential property sale typically uses a printed form of escrow instructions listing what buyer and seller must do. Both buyer and seller must sign the instructions. The instructions will include such items as the
purchase price,
terms,
financing provisions,
how buyer’s title is to vest,
encumbrances that will affect the buyer’s title,
conditions affecting the transaction,
date of closing,
required inspections and other reports,
expenses to be prorated,
date on which buyer will take possession of the property,
documents involved, and
disbursements to be made and who will pay for them.
Since 1999, the CAR Residential Purchase Agreement (Form RPA-CA) has included joint basic escrow instructions. Most escrow companies now send out instructions that serve as a supplement/addendum to the contract, stipulating their additional general provisions of escrow practice and providing disclosures required by federal and state laws applicable to escrow agents.
FIGURE 10.2:
The Escrow Process
ESCROW HOLDER
Accepts purchase contract that includes joint escrow instructions
Prepares escrow holder’s general instructions and any specific instructions
Orders title search
Receives and reviews preliminary report
Requests and receives statements from present lenders
Receives termite and other inspection reports
Receives new loan package
Receives fire and other insurance policies
Receives other required information and statements
Makes instructed prorations and adjustments
Requests and receives necessary funds
Audits file to verify sale ready to close
Orders final check of title and recording of documents
Closes the sale by preparing and delivering settlement statements and transferring funds and documents of title
TITLE SEARCH
Following a request by the escrow officer, the title company named by the parties searches the title records and provides a preliminary report. The preliminary report should identify the property and current owner of record, as well as any recorded liens or other encumbrances. The escrow holder reads the report to verify the legal description and to determine if there are any child support liens, taxes, or judgments for which a release will be required before the close of escrow. The buyer and the buyer’s agent should review the preliminary report.
LENDERS’ STATEMENTS
If the property is encumbered by any loans, the escrow officer contacts all lenders. Each is asked to provide either a demand for payoff (if the loan is to be paid in full through escrow) or a beneficiary statement (if the buyer will take title subject to loans of record)
TERMITE AND OTHER REPORTS
The escrow officer receives all reports authorized by the escrow instructions and obtains the necessary approvals of those reports by the parties. Such reports might include a structural pest control report or a roof, an electrical, a foundation, or a soil report. If the seller has agreed to pay for indicated repairs through escrow, provision for that payment at closing must be made.
NEW LOAN PACKAGE
Most often, the buyer obtains new financing. In that case, the escrow officer receives the appropriate loan documents and instructions, obtains the buyer’s signature of approval, and makes sure all conditions are met before funds are disbursed at closing.
HAZARD INSURANCE POLICIES
Prudent buyers arrange to insure property they purchase, effective as soon as they take title. Lenders will insist on a policy that adequately covers the cost to repair or replace the improvements. The escrow officer must obtain a copy of the policy commitment.
OTHER INFORMATION AND STATEMENTS
The closing may require information on property taxes, assessments for improvements such as sewers, utility payments, and other property expenses that will require an accounting at the time of closing. If the property is rented, rent payments and security deposits also may be part of the computations. Other statements, such as the FHA appraisal value required in an FHA-insured sale, are required.
PRORATIONS AND ADJUSTMENTS
The escrow holder, who has received all of the required information, then computes the necessary prorations of items charged to buyer and seller. These may include insurance, taxes, assessments, utilities, and security deposits and rents.
Tax prorations will depend on whether the tax has been paid. Prepaid taxes from the day of closing will be a credit to the seller and debit to the buyer. If the current tax due has not been paid, the seller will be debited and the buyer credited the amount of tax owed up to the day of closing.
Taxes are prorated as of July 1, the first day of the tax year, or January 1, the beginning of the second half of the tax year. The escrow holder also prorates the buyer’s mortgage interest as of the date funds are disbursed. Because interest payments always are made in arrears (that is, for the month just past), interest for the number of days from closing to the start of the first full month must be computed.
In most prorations, a 30-day month is used. (In interest prorations, the lender sometimes insists on the actual number of days in the month—31 days, for instance.) Prorations typically assume that the buyer’s rights and obligations begin on the day of closing. The buyer is responsible for any payments to be made for that day, such as property taxes and homeowners association dues. The buyer will receive credit for any proceeds, such as rent income, that have been received for that day.
MATH CONCEPTS
FOR EXAMPLE
FOR EXAMPLE
FUNDING
The escrow officer requests the appropriate party to deposit the required funds in the escrow account. The lender provides the committed percentage of the purchase price. The buyer (borrower) will provide whatever amount is necessary to cover the remainder of the purchase price, taking into account any deposits already made as well as costs of closing, such as fees and prorations.
AUDIT OF THE FILE
The escrow officer double-checks that all conditions before closing have been met, including all necessary funding.
FINAL TITLE REVIEW
The escrow officer orders the title company to make a final check of the seller’s title as of the close of business of the escrow completion date. This is done to verify that the title has not changed or been encumbered since the time of the preliminary report. If no change has occurred, the title company records all transaction documents.
CLOSING OF THE SALE
After the escrow officer has confirmed the recording of the transaction documents, the escrow is considered closed. The escrow holder will send settlements to buyer and seller, disburse funds, and deliver documents as soon as possible. Note: California law permits the lender to charge interest for no more than one day before the date that the loan proceeds are disbursed out of escrow or disbursed to the borrower or another party on behalf of the borrower. The law applies to notes secured by a mortgage or deed of trust on property of one to four residential units.
Settlement statements detailing transaction costs to buyers and sellers of dwellings of one to four units are required by the Real Estate Settlement Procedures Act (RESPA). A Closing Disclosure form appears in Figure 10.3.
Closing Disclosure
CANCELLATION OF THE ESCROW
Not every transaction reaches a successful closing. The escrow can be canceled and the deposit returned to the buyer, only if both parties provide written instructions to the escrow holder. The agent(s) should check with the escrow officer for cancellation fees before having buyer and seller sign the cancellation instructions to ensure that all costs are accounted for.
G and L form a limited partnership. G, the general partner, contributes $10,000 and L, the limited partner, contributes $90,000. The partnership purchases a building on leased land, paying $100,000 cash and borrowing $900,000 on a nonrecourse basis from a commercial lender, securing the loan with a mortgage on the building. The terms of the loan require the payment of market rate interest and no principal for the first ten years. Assume for convenience that the building is depreciable at the rate of $50,000 per year for twenty years, and that other partnership income equals expenses for the years in question. The partnership agreement contains a qualified income offset, and G is required to make up any capital account deficit. Except as otherwise required by a minimum gain chargeback provision, the agreement allocates profit and loss 90% to L and 10% to G until such time as the partnership recognizes items of income and gain that exceed the items of deduction and loss that is has recognized over its life. Subsequent partnership income and losses are allocated equally between G and L. Assume that it is reasonably anticipated that the equal allocation will begin after ten years. The partnership agreement states that G and L each has a 50% interest in partnership profits for purposes of § 752.
(a)How is the $900,000 liability allocated in year one?
(b)How will the liability be allocated at the end of year three?
(c)How will the liability be allocated at the end of years one and three if excess nonrecourse liabilities are allocated in a ratio of 90% to L and 10% to G?
(d)What result in (a), above, if the debt is guaranteed by G, who has no right to reimbursement from the partnership? Does the result change if G has a right to reimbursement from the partnership? What if G has a gross assets of only $6,000?
(e)What result in (a), above, if the debt is guaranteed by L, and L has a right to reimbursement from the partnership?
Worker 1 with non-labour income Y is facing a wage offer, w and a utility function defined over consumption and leisure
U (c,l) = lnC + 4lnl
a) When comparing worker 1 with worker 2 whose utility function is described by U(c,l) = cl ,
which worker places a higher value on labour market work?
b) Assuming the worker participates in the labour market. Derive the worker’s compensated labour supply function and the compensated labour supply elasticity with respect to wage as a function of utility level and wage
c) Derive worker’s uncompensated labour supply function (for labour market participants and non-participants) and the uncompensated labour supply elasticity (for labour market participants) with respect to wage as a function of non-labour income and wage
d) Derive worker’s income elasticity. Is leisure a normal or inferior good for this worker?
e) What is the functional form of the income effect from a marginal decrease in income
f) What is the functional form of the substitution and total income effects of a marginal increase
g) Prove that the Slutsky equation holds for this worker
Harmandeep Ltd. is a private company in the pharmaceutical industry. It has been preparing its financial statements in accordance with ASPE. Since it has plans to go public in the next three to five years, it is considering.changing to IFRS for the current year. It wishes to adopt policies that will maximize the return on shareholders’ equity. Based on the draft financial statements prepared in accordance with ASPE, its net income for Year 5 is $409,000, and its shareholders’ equity at December 31, Year 5, is $3,590,000.
Harmandeep has engaged you to reconcile net income and shareholders’ equity from ASPE to IFRS. You have identified the following five areas in which IFRS differs from ASPE:
1. Impaired loans-original versus market rate of interest
2. Interest costs-capitalize versus expense
3. Actuarial gains/losses-recognize immediately in net income versus recognize immediately in other comprehensive income
4. Compound financial instrument-debt versus equity components
5. Income taxes-future income tax method or taxes payable method
Harmandeep, provides the following information with respect to each of these accounting differences.
Impaired Loans
One of Harmandeep’s debtors is in financial difficulty and defaulted on its loan payment during the year. The outstanding balance on this loan receivable at the end of Year 5 was $240.000. As a full settlement of the loan. Harmandeep agreed to accept five annual payments of $59,000 with the first payment due on December 31. Year 6. The original interest rate on the loan was 11%. The market rate of interest for this type of loan is 9%, No adjustment has been made for the impairment of the loan receivable.
Interest Costs
Harmandeep arranged a loan of $980,000 to finance the construction of a warehouse: $490,000 was borrowed on March 1, Year 5, and another $490.000 was borrowed on October 1, Year 5. The loan is repayable over five years with an interest rate of 9%, with the first payment due on September 30, Year 6. The warehouse was nearly complete at the end of Year 5. No interest has been accrued on the loan at the end of Year 5.
Actuarial Gains/Losses
Harmandeep instituted a defined benefit pension plan in Year 3. The first actuarial evaluation, which was done as at June 30. Year 5.indicated an actuarial gain of $163,500. The expected average remaining service life of the employee workforce was 15 years at the time of the actuarial evaluation. The actuarial gain has not yet been recognized in the preliminary financial statements.
Compound Financial Instrument
On December 31, Year 5, Harmandeep issued bonds for proceeds of $1,180,000. The bonds are convertible into common shares at any.time within the next five years. The bonds would have been worth only $1.112.000 if they did not have the conversion feature. The proceeds on the bonds have been recognized as long-term debt in the preliminary financial statements.
Income Tax
Harmandeep’s income tax rate has been and is expected to continue at 40%. Assume that any adjustments to accounting income for the above items are fully deductible or taxable for tax purposes. The preliminary financial statements reflect the tax payable method of accounting for income taxes. If the future income tax method were adopted, future tax liabilities should be set up for $309,000 at the end of Year 4 and $358.000 at the end of Year 5.
Requirement
I’m looking for a schedule to convert net income and total shareholders’ equity from the preliminary financial statements amounts to amounts under ASPE and IFRS. Where accounting choices exist. choose policies that minimize return on total shareholders’ equity under ASPE and maximize return on total shareholders’ equity under IFRS.
Suppose the rational preference relation is continuous, monotonic (maybe weakly monotonic) and homothetic. Show that preference relation is represented by a utility function that satifies, the following: for any α > 0, and any x ∈ X,
MBA Application Essay: Essay 1 Please share your immediate and long-term career goals. How will earning an MBA at Kenan-Flagler Business School benefit you, both personally and professionally, on your journey toward achieving these goals? Limit your response to 500 words”
I specifically would like to have this detail that I found my passion in Corporate Finance while on the GI Bill after spending five years in the United States Marine Corps. My short term goals are to enhance my corporate finance skills, to benefit my current employer in the Nuclear Energy sector. My long term goals are to transition into a new industry while continue working in Corporate Finance.
Page 1 of 7 [911] BUS4001 Understanding the Business Environment Report Date for Submission: Please refer to the timetable on ilearn (The submission portal on ilearn will close at 14:00 UK time on the date of submission) Page 2 of 7 [911] Assignment Brief As part of the formal assessment for the programme you are required to submit an Understanding the Business Environment assignment. Please refer to your Student Handbook for full details of the programme assessment scheme and general information on preparing and submitting assignments. Learning Outcomes: After completing the module you should be able to:
Distinguish between organisational types.
Identify their key stakeholders and evaluate their needs and influence.
Explain the nature of the national environment in which an organisation operates and its impact on selected businesses, including economic, political and legal factors.
Examine the behaviour of selected organisations in their national and international market environments.
Identify, select and use a range of economic tools to determine appropriate business decisions under different economic, political and legal constraints. Your assignment should include: a title page containing your student number, the module name, the submission deadline and a word count; the appendices if relevant; and a reference list in Arden University (AU) Harvard format. You should address all the elements of the assignment task listed below. Please note that tutors will use the assessment criteria set out below in assessing your work. Maximum word count: 3000 words Please note that exceeding the word count by over 10% will result in a reduction in grade by the same percentage that the word count is exceeded. You must not include your name in your submission – Arden University operates anonymous marking, which means that markers should not be aware of the identity of the student. However, please do not forget to include your STU number. Page 3 of 7 [911] Assignment Task Choose an organisation with which you are familiar, either the one where you currently work, a previous employer or one for which you have access to the required information. You should use this organisation (and the industry in which it operates) as your example when one is required. Task One: Business organisations can be classified according to many types of criteria. Provide an introduction an organisation with which you are familiar, identifying the legal structure (public company, private company, voluntary, charity, public sector, etc.) along with an outline of the operations / purpose of your organisation and its main objectives. Identify and explain the market structure under which the organisation operates, including a discussion of how the market structure affects the behaviour of the organisation in looking to achieve competitive advantage. (20 marks) (600 words) (LO2) Task Two: Define the following terms: ‘stakeholder’; ‘shareholder’ and ‘stakeholder analysis’. Using a named real company of your choice, demonstrate how you would apply the stakeholder analysis process to identify the company’s stakeholder groups and evaluate their needs and influence. (20 marks) (600 words) (LOs 3 & 5) Page 4 of 7 [911] Task Three: This Task requires you to research the organisation highlighted and then undertake a business environment analysis using appropriate business analysis tools/frameworks to identify critical issues facing the organisation both in the domestic and international market environments. a) Discuss three reasons why it is imperative for your selected organisation to analyse the business environment it faces. Using the PESTEL framework, identify and explain at least five (5) important macro environmental influences currently affecting your chosen organisation. b) Explain the importance of Porter’s Five (5)-Forces model. Using the Five-Forces model, examine the current behaviour of the selected organisation and explain what you believe to be the five (5) most critical influences arising from the competitive market environments, both nationally and internationally. Coca Cola: https://investors.coca-colacompany.com/ (35 marks) (1050 words) (LOs 4 & 5) Task Four: Referring to the Key Performance Indicators in the annual report of the organisation in Task 3, evaluate the development of the business with reference to short-term and long-term performance. In your own assessment, do you believe current growth reporting practice is balanced in terms financial and non-financial measures of performance? Justify your answer and provide recommendations for improvement. (25 marks) (750 words) (LO1) Page 5 of 7 [911] Formative Feedback You have the opportunity to submit a draft plan to receive formative feedback. The feedback is designed to help you develop areas of your work and it helps you develop your skills as an independent learner. Your plan must be submitted to your tutor at least two weeks before the submission date. This is to allow time for you to reflect on the feedback and draft your final submission. Formative feedback will not be given to work submitted after the above date. Guidelines: You MUST underpin your analysis and evaluation of the key issues with appropriate and wide ranging academic research and ensure this is referenced using the AU Harvard system. The My Study Skills Area on iLearn contains useful resources relating to referencing. You must use the AU Harvard Referencing method in your assignment. Additional notes: Students are required to indicate the exact word count on the title page of the assessment. The word count excludes the title page, tables, figures, diagrams, footnotes, reference list and appendices. Where assessment questions have been reprinted from the assessment brief these will also be excluded from the word count. ALL other printed words ARE included in the word count See ‘Word Count Policy’ on the homepage of this module for more information. Page 6 of 7 [911] Submission Guidance Assignments submitted late will not be accepted and will be marked as a 0% fail. Your assessment should be submitted as a single Word (MS Word) or PDF file. For more information please see the “Guide to Submitting an Assignment” document available on the module page on iLearn. You must ensure that the submitted assignment is all your own work and that all sources used are correctly attributed. Penalties apply to assignments which show evidence of academic unfair practice. (See the Student Handbook which is on the homepage of your module and also in the Induction Area). Page 7 of 7 [911] Assessment Criteria (Learning objectives covered – all) Level 4 is the first stage on the student journey into undergraduate study. At Level 4 students will be developing their knowledge and understanding of the discipline and will be expected to demonstrate some of those skills and competences. Student are expected to express their ideas clearly and to structure and develop academic arguments in their work. Students will begin to apply the theory which underpins the subject and will start to explore how this relates to other areas of their learning and any ethical considerations as appropriate. Students will begin to develop self-awareness of their own academic and professional development. Grade Mark Bands Generic Assessment Criteria First (1) 80%+ Outstanding performance which demonstrates the ability to analyse the subject area and to confidently apply theory whilst showing awareness of any relevant ethical considerations. The work shows an excellent level of competence and confidence in managing appropriate sources and materials, initiative and excellent academic writing skills and professional skills (where appropriate). The work shows originality of thought. 70-79% Excellent performance which demonstrates the ability to analyse the subject and apply theory whilst showing some awareness of any relevant ethical considerations. The work shows a high level of competence in managing sources and materials, initiative and very good academic writing skills and professional skills (where appropriate). The work shows originality of thought. Upper second (2:1) 60-69% Very good performance which demonstrates the ability to analyse the subject and apply some theory. The work shows a good level of competence in managing sources and materials and some initiative. Academic writing skills are good and expression remains accurate overall. Good professional skills (where appropriate). The work shows some original thought. Lower second (2:2) 50-59% A satisfactory to good performance which begins to analyse the subject and apply some underpinning theory. The work shows a sound level of competence in managing basic sources and materials. Academic writing skills are satisfactory and expression remains accurate overall although the piece may lack structure. Satisfactory professional skills (where appropriate). The work lacks some original thought. Third (3) 40-49% Basic level of performance in which there are some omissions in understanding the subject, its underpinning theory and ethical considerations. The work shows a basic use of sources and materials. Academic writing skills are limited and there are some errors in expression and the work may lack structure overall. There are some difficulties in developing professional skills (where appropriate). The work lacks original thought and is largely imitative. Marginal fail 30-39% Limited performance in which there are omissions in understanding the subject, its underpinning theory and ethical considerations. The work shows a limited use of sources and materials. Academic writing skills are weak and there are errors in expression and the work may lack structure overall. There are difficulties in developing professional skills (where appropriate). The work lacks original thought and is largely imitative. 29% and below A poor performance in which there are substantial gaps in knowledge and understanding, underpinning theory and ethical considerations. The work shows little evidence in the use of appropriate sources and materials. Academic writing skills are very weak and there are numerous errors in expression. The work lacks structure overall. Professional skills (where appropriate) are not developed. The work is imitative.
I am writing to you having been instructed to represent Lady Margaret Lascelles, sole beneficiary of a trust set up by her aunt, The Right Honourable Viscountess Sandringham. Lady Lascelles is in a dispute with her trustee, Captain Thomas Mountbatten and a Mr Winston Townsend, the trust’s financial advisor. We would, in turn, like to instruct you to represent our client in this matter.
We have already issued a Part 7 Claim Form (enclosed with this letter) at the Chancery Division of the High Court in the Hatfield District Registry[1] of the Business and Property Courts and stated that the Particulars of Claim will follow. We are still compiling formal witness statements, but we have received the following preliminary information from Lady Lascelles who asserts her belief in its truthfulness.
The trust in favour of Lady Lascelles was created on 11th April 2002 and was for a total capital sum of £2,000,000. The trust instrument was drawn up by us, Akindele, Foskett, and Tan Solicitors. Captain Thomas Mountbatten is the sole trustee of the trust. He was appointed trustee by the settlor, The Right Honourable Viscountess Sandringham as he had served in the Royal Air Force with Viscount Sandringham and Sir Phillip Churchill, Lady Margaret’s father. He had been a close friend of the family for around 50 years and we are told was trusted implicitly. However, recent years have not been kind to Captain Mountbatten. He lost a significant proportion of his wealth in an overseas property investment and while it is not said in public, our instructions are that he has developed an issue with gambling in trying to retrieve his fortune. We understand that he is not quite at the stage of bankruptcy, but Lady Lascelles believes it is a possibility. Since the death of his wife, it is also said that he drinks far more than is advisable.
The trust instrument is a fairly standard form document and the terms of the trust are pretty ordinary. However, there is one particular area where it differs from the standard provisions required by law and which goes to the heart of this matter. The trust instrument does not give the trustee complete freedom over how the trust fund can be invested. The specific clause of the trust instrument[2]states:
10 Powers of Investment
10.1 The application of the General Power of Investment under the Trustee Act 2000 is excluded.
10.2 The Trustee(s) may invest in public limited companies provided that:
a) Reasonable care is taken to ensure that any investments create a diverse portfolio.
b) Advice from a suitably qualified professional is obtained prior to making any investment.
c) Any investment in any one company must be for less than 10% of the initial trust capital.
d) Any investment is reviewed on a regular basis for its ongoing suitability.
Mr Winston Townsend is a financial advisor to the trust and has also advised all of the families over the years regarding their financial affairs (this predates the creation of the trust so it is over 20 years). In fact, the one-time Captain Mountbatten did not seek his advice was when he lost his fortune on the overseas investment. Mr Townsend operates on a contract for service basis so is paid ad hoc as and when the trust needs financial advice, but he is always used, particularly around investments. He has made a lot of money for not just the trust, but also the wider families too as part of their own wealth management. Lady Lascelles has stated how she and Captain Mountbatten have personally told him how grateful they are for his advice and how much they trust his judgment. He should be under no illusions according to Lady Lascelles how much he is relied on, especially by Captain Mountbatten.
The specific dispute for which we have been instructed regards an investment of £200,000 in Crown-Windsor Medical Supplies PLC (the company), consisting of 100,000 shares at a share price of £2 per share. The shares were acquired on 3rd March 2020, we were not involved in the transaction. The company produces medical supplies and equipment to hospitals and veterinary surgeries. The sum invested was exactly 10% of the initial capital sum left on trust and so is a clear breach of clause 10.2(c) of the trust instrument. The investment initially saw good returns with the share price rising upon the company securing a £40,000,000 government contract on 29th April 2020 to supply PPE equipment to the NHS for the supply of PPE. The trust was at that time looking at a profit of £200,000 if it had sold its stake as the share price rose to £4 per share. However, the company failed to deliver on the Government contract, supplying faulty equipment that could not be used for the first delivery. Consequently, it had to repay the value of the contract to the Government and subsequently lost all other orders. This has caused the company to enter administration as of the 2nd November 2020 and the value of the shares has been wiped out losing the trust its investment.
Prior to making the investment, as per the trust instrument, Captain Mountbatten did as required under the trust instrument, seek financial advice and this was given by Mr Townsend who also facilitated the purchase by making the acquisition of the trust’s behalf. At various stages after the investment was made, questions were asked by Lady Lascelles about the size of the investment and the retention of it when a significant profit could have been made, Captain Mountbatten repeatedly informed her that he had been advised by Mr Townsend that the investment was sound and would keep growing, and thus make a significant profit for the trust. In a letter dated 1st May 2020 Captain Mountbatten wrote to Lady Lascelles stating,
“Winston always tells me, you need to speculate to accumulate. We are only getting the return we are because of the size of the investment. Winston told me without significant investment the company would not have been in a position to win the Government contract and we got a special rate for that investment as a result. Your aunt would have approved, of that I have no doubt. Your uncle was always playing the stock market and look how that turned out.”
Since the company went into administration, we have discovered the following information that we feel is pertinent to the matter:
· Shares in the company were freely traded at the time of the investment and had a public value of £2 per share, there was no special rate for bigger investments.
· Captain Mountbatten was also gifted 5,000 shares, worth £2 per share, in the company, receiving them in a personal capacity. The transaction also took place on the 3rd March 2020, the same day as the trust’s investment, and with the previous owner being Mr Townsend.
· Mr Townsend had the company as a client, with Mr Townsend contracted to broker deals leading to investments in the company. Disclosure of documents from the company reveal that Mr Townsend’s contract commenced on 10th February 2020 and contained the following clauses:
31. Payments of Commissions
31.1 You will receive commission for each investment in the company that you broker. The rate of commission will be as follows:
a) Investments of under £10,000 – 1% of the invested sum
b) Investments of between £10,000 and £99,999 – 3% of the invested sum
c) Investments of between £100,000 and £199,999 – 5% of the invested sum
d) Investments of £200,000 and over – 10% of the invested sum
32. Gratuity Stock Options
32.1 Upon starting to act as our agent you will be granted a stock option in the company of 5,000 shares underwritten by the company.
32.2 You must notify the company within 28 days of starting to act for the company if you wish to take up this option.
32.3 If you take up the option you shall be prohibited from selling the shares for a period of three years from the date of exercising the option. However, you may make a gift of the shares, i.e. for no consideration, in full or part, during this period.
· Mr Townsend exercised the stock option on the 20th February 2020.
Lady Lascelles claims that Captain Mountbatten was induced to make the investment in breach of trust by Mr Townsend with the offer of shares for himself. In turn, it is claimed that Mr Townsend, despite knowing he was being relied on, let his own personal gain influence his advice to the trust and took advantage of Captain Mountbatten’s vulnerability.
Lady Lascelles has informed us that Captain Mountbatten is very traditional and lacks digital skills. Consequently, he always corresponds by written letter and will print any emails he receives and stores them. While she has a copy of the trust instrument any claim will be stronger if we can secure documentary evidence between both defendants. We wonder if in light of the situation faced by Captain Mountbatten, we should be concerned with the security of any evidence. Our client has also shared concerns about the ongoing solvency of Captain Mountbatten for the reasons mentioned above, and that Mr Townsend may be in the process of leaving this jurisdiction. We understand that Mr Townsend is currently in Wilmington, Delaware in the United States and has been there for around one month now. He also has a home in Jersey and has set up a new financial services company registered in the British Virgin Islands. His British advisory service does still seem operational for now though. Therefore, we would like you to bear all this in mind and make any interim applications that you feel are necessary to support the claim and protect our client’s position. If you do feel such an application is necessary, we will complete the associated application forms, but would instruct you to draft any order you choose to seek from the court. If you feel that none are need, please can you let me know by way of a memo so I can keep Lady Lascelles updated.
Pursuant to any interim order sought, and the matter generally, I have also received the following information:
· The case, including any interim matters, will be presided over by Mr Justice Murad.
· The court clerk has indicated that we would be able to have a remote without notice pre-trial application hearing no later than Tuesday 12th January 2021 if one were to be needed with a return date of no later than 9th February 2021.
· We have a meeting arranged to secure a sworn affidavit[3] by Lady Lascelles on 4th December 2020, to be filed on behalf of our client at the date or your choosing, if at all. This will be the first sworn affidavit in this matter by Lady Lascelles and the date can be used in any court documentation being drafted.
We are happy for you to use your own initiative and judgment for any other matters where information is required.
Please also note that the firm’s trainee that I am supervising, Donald Wilberforce will be assisting me in all matters related to this claim. We also have the services of Nicholas Walker, a local solicitor with Scott Nicholls and Co. who specialises in Chancery matters if we need any assistance from outside of Akindele, Foskett, and Tan Solicitors.
[1]For the purposes of your assignment, please assume there is a district registry in Hatfield.
[2]For the purposes of the assessment, you do not need to worry about submitting the trust instrument or any other documents referred to in this document, alongside the particulars of claim.
[3]Please note that there is no actual affidavit for you, and you do not need to worry about submitting one with your work. Also, if you are minded to seek an interim order, please note you are not expected to demonstrate any compliance with any template undertakings.
Wormhole Attack Detection Methods in Mobile Ad Hoc Networks
Paper instructions
NS2 Simulation Process And the steps should work on it 1- build the protocols 2- agent code 3- tcl script ( scenario generation ) 4- finalized trace files 5- proposal protocol 6 – build and run simulation and report analysis
Seasoned writer preferred, high quality,logical sentences, accurate facts, well researched. Grammarly should be used. Plag free work.
For this final paper, you will be reviewing and reflecting on the quality management concepts and knowledge gained throughout the course. You will be applying your critical thinking, drawing your own conclusions, and applying what you have learned to improve quality and performance excellence. Follow the prompts below and make sure to address each in sufficient depth to answer the questions and cover the associated concepts. This will serve as a good review of the content, methods, and principles learned of total quality management (TQM).
As you work on your final paper, keep in mind the following bullet point observations on the role of quality.
Six quality perspectives are listed below and explain how each quality perspective applies to the product or service:
Quality in manufacturing.
Quality in service organizations.
Quality in business support functions.
The role of the quality function.
Quality and competitive advantage (business results).
Quality and personal values.
Modern day quality management practices represent the approaches that organizations use to achieve the quality management principles.
Customer satisfaction is vital to keeping customers and growing a business.
Customer requirements, as expressed in the customer’s own terms, are called the voice of the customer.
Organizations continue to learn that to satisfy customers, they must first satisfy the workforce. (Review Chapter 4, specifically Table 4.1: Key Workforce-Focused Practices for Quality, and the two Chapter 4 sections: High-Performance Work Cultures, and Principles of Workforce Engagement and Motivation.)
Motivation theories can be applied to support high performance in any organization.
In your paper,
Explain how (PHILIPS electronics) applies the six steps from key customer-focused practices for quality management in the customer focus to meet or exceed customer requirements.
Identify which of the variety of methods, or “listening posts,” (PHILIPS electronics) uses to gather the voice of the customer, including their needs and expectations, their feeling of importance, and their satisfaction as a customer.
Evaluate the principles of workforce engagement, and empowerment and motivation, and evaluate why these two items are important to quality, and which five of Deming’s 14 points relate directly to the notion of empowerment.
Apply one content theory, one process theory, and one environmentally-based theory to (PHILIPS electronics), detailing the context and situation.
State if (PHILIPS electronics) has a high-performance work culture and describe why or why not.
Summarize how Philips, Inc embodies the Baldrige Award Excellence Framework, core values, and processes.
Assess the impact, if any, of the Baldrige Award Excellence Framework and the Deming philosophy on the organization.
Select a product or service that your organization, or an organization of your choosing, purchases on a regular basis: (PHILIPS Kitchen Applicances)
Explain why quality is important to that product.
Evaluate the competitive environment for the product.
Appraise how each quality perspective applies to the selected product.
Illustrate how each of the seven quality management principles pertains to (PHILIPS electronics) using three approaches per principle.
Appraise how the Deming philosophy and Deming’s 14 points may apply to the product.
PLEASE USE ACADEMIC VOICE
COurse textbook:
Evans, J. R., & Lindsay, W. M. (2020). Managing for quality and performance excellence (11th ed.). Cengage Learning.
Understanding Family Violence: The Intersection of Child Abuse and Elder Abuse
Upon completing the assigned readings, answer the seven questions posed in the assignment. Answers should be submitted in short paragraph form. Please be advised that incomplete sentences or bullet point answers will not be accepted. Be sure to answer each question in its entirety, while appropriately citing the authors using APA format. Simply put, your work should demonstrate a command of this week’s readings. To do so, it is essential that you devote adequate time to each reading; that you reflect on the subject matter; that you organize your thoughts; and that you compose complete and carefully constructed answers. < Questions to Answer:< < 1) What does Mercado-Crespo (2015) recommend to better deal with the co-occurrence of domestic violence and child maltreatment? < < 2) Discuss how the attitudes and behaviors exhibited by abusers may influence the belief system of a child who witnesses domestic violence.< < 3) Discuss the ways in which an abuser may use a child to maintain control in a relationship.< < 4) According to Nerenberg (2008), what challenges exist to defining elder abuse?< < 5) Discuss financial abuse in cases of elder domestic violence. In what ways are the elderly particularly vulnerable to financial abuse? < < 6) Beyond the reasons inferred in the article, what might dissuade elderly victims from accessing services to the same extent as younger women? Think about a senior citizen who you know (e.g., a grandmother or aunt); what is it about her views and beliefs that might make her less inclined to seek help?< < 7) Other than a spouse, who, according to Lundy and Gossman (2009), is most likely to perpetrate abuse against an elder? What might be the reason for this?
Write your personal but professional viewpoint on what you learned in Colonel Fortier’s lecture. Info: I’m a senior industrial engineer student but this class is a junior class. The name of the class is Introduction to Industrial Engineering and Management Systems, but please do not mention any of this info. that is just my background
Reading Journal on George Orwell’s “Shooting an Elephant.”
Reading Journal on George Orwell’s “Shooting an Elephant.”
For this journal entry, consider George Orwell’s “Shooting an Elephant.” What is the point of Orwell’s narrative? Why do you think he wrote it? Does anything in the story surprise you? Did you learn anything new as a result of reading Orwell’s essay?
You should also discuss those elements of the narrative essay that you feel are present in this narrative. How does Orwell engage the reader in the introduction? Does the narrative have a point? What can you say about the arrangement of the events presented in the narrative. Does the point of the essay guide the reader to think further about the subject of the narrative?
Your journal entry should be between 400-500 words and adhere to MLA formatting. Make sure that you organize your ideas into paragraphs. You do not have to answer each of the questions above. Rather, the questions are meant to help guide you as you read the text. Pay attention to how Orwell engages the reader such that it is difficult to put the essay down. You should engage with the text; don’t simply write a summary of Orwell’s essay
Page 1 Case Western Reserve University Weatherhead School of Management FNCE 435 – Empirical Finance Fall 2021 Assignment 4
Part I – Concepts
An earnings restatement is a revision of one or more of a company’s previous financial statements to correct an error. According to Investopedia, such restatements “can result from accounting mistakes, noncompliance, fraud, misrepresentation, or a simple clerical error.” From those, only clerical error is a benign reason for a restatement; all others suggest either poor managerial quality or wrongdoing. As such, your friend says that investors should react negatively to earnings restatements. You want to conduct an experiment to test your friend’s assertion—more specifically, the assertion that the return at time t on the stock of the company announcing the earnings restatement will be negative on average (across all such announcements). Please explain what you should do—in terms of setting up your hypothesis, which data to collect, and how you would test your hypothesis. In particular, be specific about the exact statistical test to be implemented. You can assume you have access to a large sample of earnings restatements, and to any data you deem relevant to your analysis. Figure 1: Targets’ abnormal returns around merger announcements FNCE 435 Fall 2021 Assignment 4 Page 2
An event study of merger announcements tracks what happens to the targets’ returns around announcement dates. Merger announcements occur sometimes after the close of the market, so reactions to such announcements may take place in the next trading day. The pattern is shown in the figure below. Take the first row of the table, for example: it states that average abnormal returns (where abnormal return is measured as the target’s stock return minus the market return) across targets for the 10th trading day preceding the merger announcement is –11 basis points, or –0.11%. Discuss whether merger conveys good news, bad news or no news for the target. Define the null as the merger does not carry any news, and the alternative hypothesis as the merger conveys good news. Please write down the hypothesis and test it. Then discuss whether markets are efficient in incorporating the information in the merger announcement. Part II – Empirical Examination This part will empirically explore the market reactions to sell-side analysts’ recommendations. Sell-side research is big business. It employs many graduates from business schools, and a good amount is money is involved: Most top tier banks in the United States spend more than $100 million per year with equity research. Sell-side analysts do research on specific firms and produce reports with estimates about firms’ future earnings, long-term growth, sales, etc. Analysts also produce recommendations on the firms they follow. Recommendations come with extensive research reports, but in the end a recommendation amounts to a statement about whether someone should buy, hold, or sell. For example, a buy issued by analyst i to firm j’s stock at time t means analyst i recommends that one should buy firm j’s stock at time t because that analyst believes the stock is undervalued and expected to appreciate in the next 12 months. Of course recommendations might be meaningless, just statements without any support from the firm value’s fundamentals. In fact, there is a long literature discussing how sellside analysts face enormous conflicts of interest. They might issue, say, a buy recommendation not because they truly believe the stock will appreciate but due to a different motivation. Here are two stories, for example, on why a buy recommendation might not be really predictive of higher returns for the recommended stock:
Besides issuing recommendations and forecasts, analysts engage in other activities. Most notably, they can assist the investment banking activities of their employers in their advisory role in equity offerings. Specifically, they can help the investment bankers in their “pitch” to become underwriters in equity offerings. Having an analyst cover a firm can be beneficial to the firm since it raises awareness about the firm. It is even more beneficial if the coverage carries a positive tone—that is, if the projections issued by the analyst are optimistic. One big selling point for an investment banker is thus her ability—though the sell-side research arm of her employer—to provide sell-side coverage for the firm involved in the offering—and perhaps a coverage with a positive tone!
Analyst i may also issue unwarranted optimistic recommendation to firm j’s stock in order to curry favor with firm j’s management personnel. FNCE 435 Fall 2021 Assignment 4 Page 3 We want to examine whether recommendations are valuable. One way to do that is to track the path of the recommended stock in the year following the recommendation’s announcement date. That has many challenges, though. Instead, let us take an easier path and examine how investors interpret a recommendation, and thus examine the market reaction to the recommendation. We examine such reaction through two different hypotheses. Take the event of issuance of a buy recommendation. For such event, we want to examine two hypotheses. First, we want to check whether the announcement of a buy carries any implication about the value of the firm. Our null hypothesis is that there is no market reaction to the announcement, so we write: H0: No price reaction to the announcement of a buy Ha: There is price reaction to the announcement Our second hypothesis is conditional on the rejection of H0. If we do find reactions to announcements of a buy we want to further examine the efficiency of the market in impounding new information in the firm’s stock. For that, we look at the overall price pattern around (and more important, after) the event date. I have collected for you 5 subsamples of recommendations. They are randomly selected recommendations issued between 1993 and 2018. The file, ‘a4_rec_data.sas7bdat’ (available on Canvas), contains the following variables: PERMNO (permno of the company for which the recommendation was written), AMASKCD (a code identifying the analyst issuing the recommendation), ANNDATS (the recommendation announcement date), REC_TYPE (the type of the recommendation), and DESCRIPTION (a textual description of the type of recommendation). The following table shows the possible values of REC_TYPE and DESCRIPTION and what they mean exactly: Figure 1: Description of the types of recommendations in the recommendations dataset Take the first record of the dataset. It says that analyst 856 (AMASKCD=856) issued on July 18, 2002 (ANNDATS=”18JUL2002”d) a buy recommendation (REC_TYPE=1, DESCRIPTION=”Buy”) for the firm with PERMNO=10032. Figure 1 shows that dataset “a4_rec_data.sas7bdat” has 5 different types of recommendations. The dataset has 1,000 recommendations of each type. You will run five REC_TYPE DESCRIPTION Comment 1 Buy New recommendation is a buy and the previous recommendation by the same analyst was either a hold or a 2 Sell New recommendation is a sell and the previous recommendation by the same analyst was either a buy or a 3 Up to hold New recommendation is a hold and the previous recommendation by the same analyst was a sell 4 Down to hold New recommendation is a hold and the previous recommendation by the same analyst was a buy 5 Buy Reit New recommendation is a buy and the previous recommendation by the same analyst was also a buy FNCE 435 Fall 2021 Assignment 4 Page 4 different event studies—one for each type of recommendation. In particular, notice that not all buys may be created equal. Figure 1 separates between a buy that implies an upgrade (that is the buy was preceded by a hold or sell, REC_TYPE=1) and a buy that simply reiterates a previous buy (REC_TYPE=5). Investors may interpret these two types differently.
Download daily stock returns and market returns for the firms in the recommendations dataset. Use a period that encompasses all the dates in your input file, let’s say, between between January 1st, 1992 and Dec 31, 2019. Recall that daily stock returns appear in the DSF dataset (located at ‘/wrds/crsp/sasdata/a_stock’), and daily market returns appear in the dataset DSIX (at ‘/wrds/crsp/sasdata/a_indexes’). Of course, you can optimize your data collection and collect returns only around the important dates (let’s say 50 days around ANNDATS_SAS and 50 days around ANNDATS_SAS). It is up to you. (Hint: You will have to download stock returns for the whole sample period, but you do not need to download returns for stocks that are not part of the sample of recommendations. That is, since you need returns only for the included firms you will need to upload the inclusions file into the WRDS server. Use the PROC UPLOAD, which as the name implies does exactly the reverse of the PROC DOWNLOAD we already know. So you will need to run a code like this: proc upload data=d; run; Important: to avoid rerunning the downloading of the data, a task that can be time consuming since it depends on the performance of the Unix server, create a code to run step 1, and once you are done, start a new code for steps 2 and onwards.)
Now you have your events clearly defined and the data on returns, it is time to run the event studies—five of them! The first event is the issuance of buys. Compute average abnormal returns for the firms receiving a buy recommendations in the 11-day period around these announcement dates. You should fill and show a table similar to the first panel (under “Buys”) in Figure 2. In Figure 2, AR stands for market adjusted returns, that is, the abnormal return when we subtract VWRETD from the firm’s actual return (RET variable). (This step is very similar to what we did in class for the event study on dividend announcements. That is, we need to match the datasets, then compute abnormal returns, then average the abnormal returns according to the nature of the subsample. Lavoisier once explained that “in Nature, nothing is lost, nothing is created, everything is transformed”. Accordingly, use the code we discussed in class as a starting point for your analysis.) FNCE 435 Fall 2021 Assignment 4 Page 5 Figure 2: Summary statistics, abnormal returns Plot and show a graph of the cumulative abnormal return around buys’ announcement dates. Important: you are graphing cumulative abnormal returns, not market adjusted returns. A suggestion of the format of your graph (though not exactly its shape) is shown in Figure 3. Figure 3: Average cumulative abnormal returns around event dates How to generate the graph? We’ve used the PROC GPLOT in class. Suppose you have a dataset D with the following variables: REL_DAY (from t=-10 to t=+10), ACAR (average cumulative abnormal return for that specific day and subsample). You thus write: symbol1 color=green interpol=spline value=square; proc gplot data=d; plot acar*rel_day; run; Finally, examine what happens with the cumulative abnormal return from days +2 thru +5. For the event study of buys, for example, you fill out and show the first line in the output Day # obs Average AR(%) t # obs Average AR(%) t # obs Average AR(%) t # obs Average AR(%) t # obs Average AR(%) t -5 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 -4 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 -3 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 -2 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 -1 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 0 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 1 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 2 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 3 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 4 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 5 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 000 0.0000 0.00 Buys Sells Upgrades to hold Downgrades to hold Reiterations of buy FNCE 435 Fall 2021 Assignment 4 Page 6 in Figure 4. This analysis mimics the analysis in page 4-13 of the lecture notes on how to properly examine the efficiency with which the market reacts to announcements. Figure 4: Analyzing cumulative abnormal returns from days +2 thru +5
Now, repeat step 2 for each of the other 4 events and fill in the rest of Figures 2 and 4 accordingly (You may but do not need to create Figure 3 for the other events.) (Hint: You should create one single code to analyze and event and run the code separately, only changing one single line to define the event being analyzed. For example, if dataset D has the full dataset of recommendations for the five events, and you want to restrict the analysis to the event on buys, you run: data d; set d; where rec_type=1; run;
Now, the important part: interpret your results! For each event, use the outputs from steps 2 and 3 to address the hypotheses in this study. Does the announcement of recommendations is interpreted as informative by investors? Does the information matches the recommendation’s advice? That is, do markets react positively to buys, negatively to sells, etc? Is the market efficient in reacting to the recommendations? Make sure you state your hypotheses clearly, and formally examine them from a statistical standpoint. The analysis should be carried out separately for each event. Event # obs Average CAR[+2,+5] t Buys 000 0.0000 0.00 Sells 000 0.0000 0.00 Upgrades to hold 000 0.0000 0.00 Downgrades to hold 000 0.0000 0.00 Reiterations of buy 000 0.0000 0.00
Your instructor may bring example projects to class and facilitate the assignment of students to the various project teams. Alternatively, your instructor may ask you to identify potential projects. Therefore, you may or may not be involved in project selection. If your instructor has each student bring in a project idea, you will first need to create your elevator pitch to describe tersely what work is involved in your project and why it is important. Then you and a small team will likely need to select one of the potential projects using a scoring model. Unlike the criteria for selecting among projects in a typical organization, for your class, you may use criteria that will help you learn. You may want to include size and complexity criteria so the project is involved enough for you to benefit by using many of the techniques in this book, but small enough so you
can do the work in a reasonable amount of time. Finally, you may need to identify resources to accomplish the project using a resource matrix.
Regardless of whether your project is student or faculty generated, one of the first things you should do when assigned to a project is to learn about the company or other organization that wants the project to be completed. Why did they select this project? Is it a must-do project or did it get chosen over other competing projects? By understanding what makes the project so important, you will make better decisions and will be more motivated through the term. If your project is a must-do project, explain why. If it is not a must-do project, explain how it was selected. Explain where it fits in priority with other work of the organization.
Stanley Moore, a U.S. citizen, forensic accountant, and certified fraud examiner, owned a foreign bank account that he controlled in Switzerland. The highest balance of the account was $900,000 and, at one time, Stanley wired $500,000 from his foreign bank account to a U.S. bank account that he also controlled. He did not report that he had a financial interest in (and signatory authority over) this foreign bank account on Schedule B of Form 1040 for any of the years that he owned the account. Penalties for individuals for failure to report on Schedule B are a maximum of $100,000, imprisonment of not more than 3 years, or both, together with the costs of prosecution. In addition, Stanley did not file a “Report of Foreign Bank and Financial Accounts” (commonly referred to as an FBAR) for any of the years that he owned the account. The FBAR is to be filed annually with the U.S. Department of Treasury when a U.S. citizen or resident alien or non-resident alien has a financial interest in, or signatory authority over, a financial account in a foreign country with an aggregate value of more than $10,000 at any time during a calendar year. For not complying with the law, Stanley faces a civil penalty of $10,000 for each non-willful violation; however, if the violation is found to be willful, the penalty for each violation is the greater of $100,000 or 50 percent of the amount in the account.
The case was investigated by the IRS and resulted in Stanley pleading guilty to willful violation of failure to file an FBAR. He was sentenced to pay $200,000 in penalties and to serve two years imprisonment.
Required
Does any part of the CFE Code of Professional Standards Interpretation and Guidance of the Association of Certified Fraud Examiners apply in this situation? What type(s) of punishment could the ACFE Board of Regents impose in this situation?
GT 502 Theory and Practice of Management ESSAY WRITE UP TOPIC 7: Theories of Leadership and group behaviours QUESTION: “Leadership and management must go hand in hand. They are not the same thing, but are necessarily linked” (Sharma. M.,2013). Discuss the above statement with relevant evidence. REQUIRED: 1.) WRITE UP THE ESSAY 2.) WORD LIMIT: 2000 WORDS 3.) ESSAY SHOULD IN PARAGRAPHS: 4.) INCLUDE INTRODUCTIONS AND CONCLUSIONS 5.) PLEASE ALSO PROVIDE REFERENCES INSTRUCTIONS: ARE THE SAME AS THE REQUIRED 1.) WRITE UP THE ESSAY 2.) WORD LIMIT: 2000 WORDS 3.) ESSAY SHOULD IN PARAGRAPHS: 4.) INCLUDE INTRODUCTIONS AND CONCLUSIONS 5.) PLEASE ALSO PROVIDE REFERENCES REFERENCE FOR THE TOPIC: https://drive.google.com/file/d/1_SDBKRIMVJAfQH72Gh_2jWviTYcj8U_B/view?usp=sharing THANK YOU REFERENCE FOR THE TOPIC: https://drive.google.com/file/d/1_SDBKRIMVJAfQH72Gh_2jWviTYcj8U_B/view?usp=sharing
L&T’s Hostile Takeover of Mindtree: Is there Value for Shareholders
The Origin:
The idea of Mindtree came by chance, Krishnakumar Natarajan says in a video on the making of the company. He had invited Subroto Bagchi, his colleague at Wipro, for lunch and the two ended up discussing “what is it that they would be most excited to do?” Mindtree was born in 1999 with 10 co-founders, which included well-known names of the IT industry – besides Natarajan, Bagchi, Ravanan and Parthasarathy, there were Ashok Soota, Anjan Lahiri, Scott Staples and Janakiraman Srinivasan, among others.
Over the next two decades, the company survived many nightmarish scenarios. The dotcom bust of 2000-2001, when it lost many start-up customers overnight; the financial crisis of 2009 after the collapse of Lehman Brothers; internal disputes of 2010/11 when Ashok Soota, the chairman, quit and started a competing firm, Happiest Minds. The company also missed its revenue goals. Around 2008/09, Mindtree said it wanted to be a billion dollar company by 2014. It crossed the mark five years later, in 2018/19.
All this while many of the co-founders rallied behind the idea of Mindtree and ensured many highs. The year 2007 was a watershed. The firm wanted to raise $54 million from an Initial Public Offer (IPO); it collected $6 billion. In that, IPO the company allotted 16.67% of its shares to its employees. Which is strong signal of its culture and riorities.
Despite being a mid-tier company, it bagged interesting projects such as the application development and maintenance services contract for the Unique Identification project, later named Aadhaar. The company nurtured a culture that was different. It was perceived as a compassionate company. Many called it a ‘curd rice’ firm, formed by first generation entrepreneurs from humble backgrounds, many from south India. Bagchi’s father was a junior government employee in Odisha; Janakiraman’s father was a village postmaster in Tamil Nadu.
The ‘curd rice’ company’s co-founders, however, didn’t anticipate a hostile takeover bid. “We didnt plan for such scenarios. We were naive,” says Janakiraman. He quit Mindtree as Chief Technology Officer in 2014 to start Nuvepro Technologies, a product start-up, which is a spinoff from Mindtree.
VG Siddhartha (VGS) the Uncanny Investor:
It is said that there are few dealmakers as shrewd and savvy as VGS in southern part of India. From buying plantations in Latin America to logistics companies in India, driving a hard bargain with landlords for his coffee chain or with marquee funds, he sniffs a good deal from the look of it. But he had always been the silent partner in Mindtree. He backed the Mindtree founding team, when they, led by former Wipro vice-chairman Ashok Soota, wanted to start a next-generation IT services company, way-back in the late 1990s.
He initially took a 6.5% stake and provided office space to the nascent company. The firm went public in 2007, when it hit a revenue of around $100 million. Over the years VGS’s stake swelled to 20.4%.
“Even when the Mindtree management would miss its quarterly targets, it’s unlikely he would criticise them,” said a Bengaluru industrialist. “During this takeover tussle, both parties would still meet over coffee at least once a week at the Coffee Day headquarters.” But by 2018, Siddhartha wanted cash to pay off debt and expand other businesses. Monetising his tech and real estate investments seemed the best way out. “Siddhartha had committed to be a long-term investor. Now it’s nearly two decades,” said a person close to him. “His core business has been under pressure and (he) wanted to give adequate time to sell his stake,” added another associate.
When Siddhartha stepped down from the Mindtree board on March, 2018, it presaged the exit, but Ravanan said it was because the former wanted to focus more on his own businesses. Then, on February 7, 2019, Siddhartha went public with what had become an open secret.
The bankers first approached V.G Siddhartha with L&T’s interest in September 2018. Siddhartha had quit the Mindtree board in March and, according to sources, made it clear to the founders that he wanted to exit. “That was one of the reasons he quit the board. If you are on the board, you cannot sell at certain times due to access to insider information,” says a banker who does not want to be quoted. “L&T offered Rs 1,150-1,180 per share. The condition was that the board should pass a resolution blessing the transaction. Siddhartha called the founders for dinner to discuss this. The founders said don’t sell to L&T but find a Private Equity (PE) player,” he adds.
Winter had set in by the middle of December 2018 when Mindtree’s management agreed to meet executives of Baring Private Equity a prominent PE firm in Bengaluru. The founder- managers, with a 13.2% stake, were looking for a white knight to save them from a predator. In the middle was a passive investor, with a 20.4% stake, who wanted to cash out.
The meeting at The Leela Palace was cordial to start with. Mindtree was represented by three of the four founders — then chairman Krishnakumar Natarajan (KK), NS Parthasarathy and chief executive Rostow Ravanan — along with chief financial officer Pradip Menon.
Café Coffee Day founder VG Siddhartha, known to friends as VGS, was present. With liquidity pressure on his diversified business portfolio, he had been looking for a buyer for his one-fifth stake for the past few months. He stayed for introductions and left soon after.
Jimmy Mahtani and Hari Gopalakrishnan, the two managing directors spearheading the private equity practice of the firm in India, represented Baring. The PE fund acquired Hexaware, a mid-tier IT services firm of India and was looking for more. However, the two sides could not agree to a broad contour.
Baring was not the first private equity fund the Mindtree management engaged with, at least two months earlier, KKR had been in discussions to buy out Siddhartha, but didn’t make headway. The existing promoters were looking for passive investor like VGS, however all PE players were more aggressive in their stance. For example, Baring, made it clear that it was looking for board seats, management information system (MIS) statements, affirmative rights and a proactive role. KKR’s demands were similar. As a result there were expectations mismatch from both the sides
Team Mindtree wanted to know if Baring would want to merge the company with Hexaware. Despite assurances that both would be run independently, the Mindtree team wasn’t too flexible on the Baring demands at that point.
Finally VGS struck a deal to sell his entire 20.4 % stake in Mindtree to Larsen & Toubro (L&T). L&T in turn is seeking an additional 15 percent from the open market and another 31 percent from institutional shareholders taking the total to as much as roughly two-thirds of Mindtree.
“The people at Mindtree, the ‘Mindtree Minds’, have signed up for a mission, and not just a salary,” Ravanan said at a press conference in Bengaluru on March 19, 2019 a day after L&T announced its deal with Siddhartha. Echoing the same sentiment some Mindtree minds(as they are called) started social media(including twitter) campaign to oppose the acquisition.
They argued that Mindtree possess an unique culture which will destroyed if it is acquired by a big conglomerate.
The founders appeared to have five pronged objections to L&T aggressive takeover bid. Firstly, their argument is Mindtree grew its revenues by 18 % in financial year 2018-19, double the industry’s expected growth rate during the year. Investments made in the past were starting to fructify. “The real benefits will accrue over the next one or two years. If you disturb the equilibrium, the stakeholders will lose out,” said Natarajan.
Next, they cited the failure rate of acquisitions. “Every study, across industries, has found that only 20-30 per cent of Merger &Acquisitions (M&As) work. If we go back to people-driven IT services type of acquisitions, we are not able to see any history of large IT services acquisitions working,” said Natarajan.
The third objection was strategic; a bigger size is not relevant in IT services any longer as customers buy based on capability, not capacity.
The founders also appeared agitated at L&T not paying fair value. “Research says anywhere between 30 % and 37 % is the control premium that organisations pay when they buy a listed company. Here, you are paying 1% -2 % more than the current market price – that translates into a 20-30 per cent discount of the historic price,” said Ravanan. The founders’ last objection had to do with the fact that “culture can eat strategy for breakfast”. Disturbing the culture of Mindtree would impact the results, they said. “Mindtree is a high-performing system. There is nothing wrong with it. Just because of a problem at the shareholder level, putting the entire company at risk is bad for all shareholders. But fundamentally, you shouldn’t buy something that doesn’t want to be bought,” said Ravanan.
On March 19, 2019 L&T announced a share purchase agreement. The escrow account was colourfully called ‘Project Carnation, Lotus and Marigold’, possibly to indicate the three sellers – VGS, Coffee Day Trading and Coffee Day Enterprises.
Subsequently L&T made an open offer to buy an additional 31 per cent. When the offer closed on June 28, 2019 it was oversubscribed by 116.47 per cent. Subsequently L&T became the promoter of Mindtree with 60.06 per cent stake in the company. On July 5, Natarajan who was the Executive Chairman, N S Parthasarathy, the Executive Vice Chairman and Ravanan, the CEO and Managing Director, submitted their resignations as members of the Board of Directors of Mindtree as well as employees of the company. Along with the other founders, they asked to be de-classified as promoters.
L&T was keen to bulk up its IT services businesses for quite some time. L&T Infotech, the IT arm of the conglomerate reported a revenue of $1.3 billion in 2018/19. Together with Mindtree, with $1 billion revenue, it wanted to be a greater force to reckon with. It swiftly logged in when Siddhartha wanted to log out.
The Background at L&T:L&T has found itself in a position where it has a lot of excess cash. The Indian engineering giant wants to channel this cash into creating higher growth rates. Acquiring Mindtree in its view gave it an opportunity to earn higher Return on Equity (ROE).
Excess Cash and the Failed Buyback Bid: L&T had more than $2 billion in cash reserves. The company is expected to add another $1.5 billion in terms of free cash flow by the year 2020. This excess cash is currently invested at a rate of 5%. This is obviously dragging down the overall return on equity for the company.
It is important to note that Mindtree was not the first choice for L&T when it came to deploying these additional funds. Instead, the company wanted to buy back outstanding shares from the market. This $1.5 billion bid was foiled by the Securities and Exchanges Bureau of India (SEBI) (the Indian capital market regulator). The regulator did not allow the buyback offer to go through. SEBI objected because, after the buyback, the debt to equity ratio of L&T would have crossed 2:1. This is against the compliance norms laid down by SEBI.
L&T was not left with too many other options either. The company has already been paying excess dividends. The Dividend Payout Ratio (DPR) in the year 2016 was a whopping 33% and increased marginally to 33.59% as on 2019. The problem with raising dividends is that they set expectations for the future. Hence, if dividends are raised still further, they cannot be reduced in the future without a sharp reaction from the market. This is the reason why L&T did not choose to take the dividend route.
Offloading Non-Core Assets: L&T is one of India’s largest conglomerate. It had a revenue base of INR 857.82 billion as on financial year 2018-19.
L&T is also under pressure to increase its ROE. The company’s ROE has fallen from 24% to as low as 9% in the past decade. L&T has stabilized its ROE at a respectable15% at the moment. However, the shareholders are hungry for more. This is why L&T is being forced to sell off non-core assets and deploy the proceeds in high margin business like the information technology industry. The management’s guidance is going forward the company’s ROE will hover around 18%.
Big Institutional Investors Sold Out to L&T:
Nalanda Capital, a Singapore-based Foreign Institutional Investor (FII) agreed to sell its entire 10.61% stake in Mindtree Ltd to L&T. SEBI issued a show cause notice to Nalanda Capital for asking Mindtree’s public shareholders to refrain from selling shares to L&T in the ongoing open offer at ₹980 per share.
Two persons directly aware of the matter confirmed this development to the press. However, it is not known, whether the stake sale is related to the show cause notice.
SEBI served a show cause notice to Pulak Chandan Prasad-led Nalanda Capital, asking the company why a penal action should not be taken against it for behaving like persons acting in concert (PAC) to thwart L&T’s open offer, without making a counter open offer.
Even though Nalanda Capital has now sold its entire stake to L&T, the Singapore-based firm, has to mandatorily reply to SEBI’s show cause and clarify on its actions to save itself from potential penal actions by the market regulator.
“SEBI has asked Nalanda Capital on what basis it had told Mindtree’s other public shareholders that L&T should offer a price 20% higher than ₹980 per share. Nalanda Capital has been asked to clarify that being an FPI, which SEBI regulation empowers it to advise a shareholder in any investee company in India on any such share sale,” said the person, who is directly aware of SEBI’s processes.
The regulator’s notice follows complaints from Mindtree’s investors last week, alleging Nalanda Capital of attempting to prevent the information technology company’s shareholders from selling shares to L&T in the open offer.
On 10 June,2019, The Economic Times first reported that a handful of institutional investors of L&T, Mindtree and in some cases both, have written to SEBI complaining against the founder of Nalanda Capital for allegedly provoking the minority investors of Mindtree to spurn L&T’s offer.
On 20 June, 2019 proxy advisory firm InGovern Research, wrote to SEBI, urging the regulator to enquire into the matter as Nalanda Capital’s actions could be significantly detrimental to the interest of minority shareholders of Mindtree. InGovern, in its letter to SEBI, said it represents the interests of several minority investors (mutual funds, HNIs) of Mindtree, who are aggrieved at the actions of Nalanda Capital.
On June 7, 2019 L&T announced the open offer for Mndtree to acquire additional 31% stake at INR 980 per share. At htat point of time L&T had 28.90 stake in the company. The open offer closed on 28 June, 2019.
Post acquisition of VGS’s stake L&T started tightening its screw in Mindtree. It asked for board seats for three of its senior executives, Mindtree also appointed two additional independent directors. i.e. Prasanna Rangacharya Mysore and Deepa Gopalan Wadhwa as independent directors post L&T takeover. While Prasanna is a former chief legal officer of L&T, Wadhwa is a former ministry of external affairs official.
Incidentally the independent directors of Mindtree said that the L&T’s offer is acceptable. “The shareholders of the target company are advised to independently evaluate the open offer and take an informed decision about tendering equity shares held by them in the open offer,” the independent directors said in a filing with the Bombay Stock Exchange. The independent directors’ panel of Mindtree had further said that L&T’s open offer price at Rs 980/share appears “fair and reasonable”. The committee cited the closing market price of Mindtree shares on the stock exchanges on June 10, being “lower than the offer price” and said that L&T’s offer price of Rs 980 a share is in accordance with the regulations.
Mindtree shares closed at Rs 975.50 a piece on National Stock Exchange (NSE) and Rs
974.65 a share on Bombay Stock Exchange (BSE) as on June 12, 2019.
L&T, on 17 June,2019, launched its 10-day long open offer to buy 31% stake from public shareholders (including Nalanda Capital) in Mindtree at ₹980 per share.
Amansa Holdings Pvt Ltd, another leading institutional investor of Mindtree had sold its entire 2.77% stake to L&T.
L&T’s majority ownership along with management control marked the India’s first-ever hostile takeover in the IT industry.
This takeover also sparked a huge churn out in the upper echelons of Mindtree. All the promoter managers left their executive roles immediately after the L&T’s takeover. Other notable resignations were of Kamran Ozair who was the Executive Vice President, and an employee since inception. He was responsible for P&L, strategy and execution of the enterprise service lines in the company and he was based out of Mindtree’s US headquarters in Warren, NJ.
Anecdotal evidence shows that Indian conglomerates are seldom successful in building a well-functioning IT outsourcing business based out of India. One of the key reasons is the basic difference in culture between traditional manufacturing business houses and the IT outsourcing firms. The only notable exception to this is the India’s largest conglomerate the Tata group and to some extent Mahindra group. Therefore, it will be interesting to note how Mindtree is managed in the days to come. A pointer to this direction is L&T under the stewardship its legendary chairman AM Naik hired IT industry veteran and ex-Infosys top honcho Sanjay Jalona to run L&T Infotech another IT arm of the conglomerate. Post Jalon’s appointment, the company showed noticeable improvements in its performance. Continuing this trend, L&T appointed Cognizant veteran Debashis Chatterjee as the new CEO.
In the 20th.Annual General Meeting (AGM) held in immediate aftermath of the hostile takeover, L&T management wanted to soothe the frayed nerves of the Mindtree shareholders L&T Managing Director and CEO S N Subrahmanyan told the shareholders that Mindtree is not snatched by force, they perceive that the company has now become part of a bigger family. In the same AGM, L&T’s legendary chairman AM Naik was also appointed as the chairman of Mindtree’s board.
PROBLEM 1 – PREPARATION OF JOURNAL, LEDGER & PRELIMINARY TRIAL BALANCE
Assets
Income
Professional Fees Income
Expenses
Insurance Expense
Office Supplies
Expense Salaries Expense
Utilities Expense
Interest Expense
Depreciation Expense
Johnfrivs, CPA
Chart of Accounts
Cash
Accounts Receivable
Office Supplies Inventory
Prepaid Insurance
Library
Accumulated Depreciation – Library
Office Equipment
Accumulated Depreciation – Office Equipment
Liabilities
Accounts Payable Notes Payable Utilities Payable
Owner’s Equity
Johnfrivs, Capital
Johnfrivs, Drawing
Johnfrivs completed the following transactions during August of the current year.
August 1 – Began the practice of accountancy by investing P50,000 in cash and a library worth of P100,000.
August 2 – Purchased P40,000 of office equipment from DIMDI, paying P10,000 down-payment and issuing a promissory note for the balance.
August 3 – Purchased P5,000 office supplies and P15,000 office equipment from GH Office Depot on account. (Record supplies as an asset)
August 6- Completed accounting work for Ace Tan and collected P10,000 cash.
August 10- Paid insurance premiums, P500.(Record insurance as an expense)
August 12- Completed accounting work for Big Enterprises and billed it P14,000 for work done.
August 18- Paid the full balance of account on GH Depot for the items purchased on August 3.
August 25- Received a check from Big Enterprises as full payment of its account on August 12.
August 28- Johnfrivs withdrew P11,000 cash from business for his personal use.
August 31- Paid the monthly salary of secretary, P15,000.
Paid the monthly light bill, P5,000.
Required:
Journalize the above transactions using the general journal. (10 pts)
Post the journal entries to the general ledger accounts. (10 pts)
Prepare the preliminary (unadjusted) trial balance. (10 pts)
PROBLEM 2 – PREPARATION OF JOURNAL, LEDGER, ADJUSTED TRIAL BALANCE & FINANCIAL STATEMENTS
Assume the same information in problem 1, the following transactions for adjustments were available at month-end:
Expired insurance, P300.
Unused office supplies, P4,000.
Depreciation of library for the month, P2,000.
Office equipment has a salvage value of P1,300 and 5-year useful life. Full
depreciation is taken on the month of acquisition.
Unpaid water bill, P2,000.
Required:
Journalize the above transactions using the general journal. (10 pts)
Post the journal entries to the affected general ledger accounts (copy the
previous balances from problem 1, if any). (10 pts)
Prepare the adjusted trial balance. (10 pts)
Prepare the income statement and balance sheet. (10 pts)
PROBLEM 3 – PREPARATION OF JOURNAL, LEDGER & POST-CLOSING TRIAL BALANCE
Using the same problems 1 & 2 extracted in Topic 2 assignment quiz 4, prepare the following requirements:
Journalize the closing entries using the general journal. (10 pts)
Post the closing journal entries to the general ledger accounts (copy all your postings to the ledger account balances from the previous problems before
Posting the closing entries). (10 pts)
Prepare the post-closing trial balance. (10 pts)
Journalize the reversing entries using the general journal. (10 pts)
Post the reversing journal entries to the general ledger accounts. (10 pts)
A) In the LunaPharm model, vary the Belex Sales reps from 0 to 200 with step size of 1. Make a table that shows the Change from Base.
B) Repeat A) with step size of 100.
C) Make a single scatter chart that shows the results from A) and B) together. What do you lose from having a big increment?
D) Using the same input values as in part A), make a single scatter chart that shows Total Net Profit, Belex Sales Revenue, and Belex Net Profit.
E) Suppose you wanted to change the Sales Rep Cost to $70,000 and Belex Contribution Margin to 67%. Briefly describe the actions required to obtain the results from parts A) – D) above. (Don’t actually do it, just describe what to do.)
Amazon company needs to grow. However, there is more competition now than in the past. Identify the steps that Bezos may undertake next to grow his company. Use all parts of this model?
5.Which statement is false?A.The balance sheet of an entity purports to show the true value of the entity.B.The balance sheet should show a company’s liquidity.C.The balance sheet reflects the financial capital of a company.D.The balance sheet summarizes the financial position of an entity at a point in time.6.To be recognized in the financial statements, an item must meet the definition of an element and beA.measurable, understandable, and relevantB.reliable, measurable, and realizedC.realized, relevant, and reliableD.relevant, measurable, and reliable7.The ability of a company to adapt its resources to create change and react to change is calledA.financial flexibilityB.liquidityC.operating capabilityD.resource structure8.Which of the following characteristics must an economic resource have in order to be classified as an asset?A.acquired as a result of a past transactionB.future service potentialC.under the control of the business entityD.all of theseE.none of these9.Which is not a characteristic of an asset?A.The resource must be useful only in the entity’s activities and have been acquired by purchase, production, orstockholder investment.B.The entity must be able to obtain the future benefit and control others’ access to it.C.The transaction or event giving rise to the entity’s right to or control over the benefit must have alreadyoccurred.D.The resource must singly, or in combination with other resources, have the capacity to contribute directly, orindirectly, to the entity’s future net cash inflows.10.Which statement is not true?A.To be a liability, the transaction or event obligating the entity must already have occurred.B.The net worth of an entity is equal to its assets.C.The specific identity of the “
hapter 4–The Balance Sheet and the Statement of Changes in Stockholders’ EquityChapter4–The Balance Sheet and the Statement of Changes inStockholders’ EquityStudent: ___________________________________________________________________________1.If the owners’ equity at the end of the accounting period is greater than the owners’ equity at the beginning ofthe accounting period, the firm’sA.capital has increasedB.working capital has increasedC.cash has increasedD.capital has been maintained2.All of the following items would appear on the balance sheet exceptA.an investment in another company’s bondsB.an investment in marketable securitiesC.a realized gain on the sale of a patentD.the premium related to a bond liability that is still two years from maturity3.The ease with which an asset can be converted into cash is termedA.financial flexibilityB.liquidityC.operating capabilityD.capital maintenance4.The quantity of goods or services produced in a given period or the physical capacity of the operating assetsused to produce goods or services are measures ofA.financial flexibilityB.liquidityC.operating capabilityD.capital maintenance
Stuarts BankANALYZE AND CHART FINANCIAL DATAGETTING STARTEDOpen the file NP_EX19_4b_FirstLastName_1.xlsx, available for download from the SAM website.Save the file as NP_EX19_4b_FirstLastName_2.xlsx by changing the “1” to a “2”.If you do not see the .xlsx file extension in the Save As dialog box, do not type it. The program will add the file extension for you automatically.With the file NP_EX19_4b_FirstLastName_2.xlsx still open, ensure that your first and last name is displayed in cell B6 of the Documentation sheet.If cell B6 does not display your name, delete the file and download a new copy from the SAM website.PROJECT STEPS1.Kayla Rowe is an investment banker at Stuarts Bank in New York City. She is working witha software company called Caretaker Mobile Apps, which is developing an app that detects and manages smart devices in a customer’s home. To help Caretaker Mobile Apps secure funding for its new product, Kayla is using an Excel workbook to analyze their expenses and funding options and to create charts that illustrate the analysis. Switch to the Current Expenses worksheet. In the range E5:E9, add Conditional Formatting to compare the Quarter 4 expenses using Gradient Fill Blue Data Bars.2.In the range F5:F10, add Line sparklines based on the data in the range B5:E10 to compare each category of expense and total expenses from Quarter 1 to Quarter 4. 3.Apply the Red, Accent 6 (10th column, 1st row in the Theme Colors palette) sparkline color to the sparklines to contrast with the data in the worksheet. 4.Kayla created a pie chart comparing how each type of expense relates to the total expenses in Quarter 1. Modify the pie chart in the range G4:O22 as follows to make it more meaningful:a.Enter Quarter 1 Expenses as the chart title.b.Change the data labels to include the Category Name, and position the labels in the Inside End location to clarify what each piece represents.c.Remove the Legend from the chart because it now repeats information in the datalabels
eed some help with the following activity, thanks!
Go to the Bureau of Economic Analysis website (Links to an external site.)
(BEA)and click on the Tools Tab
Click on Interactive Data
Click on GDP and Personal Income under National Income on the right hand side
Click on Begin Using Data
Click on Section 1: Domestic Product and Income
Click on Table 1.1.1. Percent Change from Preceding Period in Real Gross Domestic Product
Use Table 1.1.1 to see the percentage change in Real GDP for most recent years.
Use Table 1.1.6 to see the change in inventories and net exports.
Using the data from the Bureau of Economic Analysis (BEA), answer the following questions:
Evaluate the current (2021 Q2) GDP and economic growth in the US.
Your starting point should be Table 1.1.1. Economic Growth Table (Percent change from previous period)
How did the US economy grow (or contract) since last quarter? What contributed to this change? You need to go over all the components (C, I, G, X, M) and sub-components of GDP to evaluate the overall economy in the second quarter of 2021. You need to research and explain why certain items significantly subtracted from GDP and what items added to GDP.
Research the most current news articles for US GDP growth (The last revision of GDP was on August 26, 2021. The new release is on September 30, 2021). Cite your references. Compare your findings from one of the articles with the GDP data from the Bureau of Economic Analysis. What other information you learned from the BEA tables would you add to the article?
What is the current state of the US economy? Are we in a recession? (A recession is defined as a decline in Real GDP for at least two consecutive quarters).
Evaluate the changes in the GDP components during the great recession of 2008 and 2009. Explain how each component of GDP contributed to the economic slowdown during the recession and which component(s) had the biggest effect.
When you are in Table 1.1.1 on the BEA website
Click on MODIFY on the upper right-hand side of the page
Select 2006 for the first year (you can go all the way back to 1930 – remember that GDP was invented in the 1930s)
Click on refresh table
Explain the economic contraction (see all the negative values) during 2007-2009 using the GDP components (C, I, G, X, M) data from the tables.
Figuring out how to collect and organize evidence (data) can be one of the biggest and least-expected challenges in carrying out research projects. Fortunately, there are a number of tools available to help researchers and students alike. If you have a system for taking and organizing notes for research projects, you are welcome to use that method for this assignment. Just be sure that your notes include:
Complete Bibliographic citations for your sources above the notes on that source.
Easily identifiable quotations and comments. In other words, I should be able to easily distinguish between your words and those of the author in the text. This may just mean using quotation marks as appropriate.
For our purposes and our question, your sources should come from 1933-1936. Do not use sources published after 1936. And only use 5 PRIMARY SOURCES
What is a Monologue? “A monologue is a moment in a play, film, or novel, where a character speaks without being interrupted by any other characters. These speeches can be addressed to someone, or spoken to the actor’s self or to the audience, in which case they are called soliloquies. Another type of this speech, especially in novels, is the interior monologue, where a character has a long bout of thinking personal thoughts that aren’t interrupted by speech or actions” (www.wisegeek.org/what-is-a-monologue.htm#didyouknowout). Like a story, a monologue includes a story arc: exposition, rising action, climax, falling action, and resolution. The ability to ignite the audience’s emotions and interest must happen fairly quickly in a monologue. This happens through exploring a range of emotions from the beginning, middle, and end of the story being told with the monologue, very similar to what we try to achieve in our poems, memoirs, and short stories.
Origin branding focuses on heritage (history) and landscape characteristics that concentrates on the wider “rural idyll”.
How did Australia’s wine industry first develop?
Although Australia has been engaged in planting grapes for a long time, it is an emerging country in wine industry, the situation of which was changed by immigration. Its wine industry was first developed in the category of wines production. For example, fortified wines were popular in the middle of 20th century.
What are the arguments for and against origin branding in Western Australia?
Origin branding has been assumed to be one of the most important selling points for wines among customers and a possible major element in appealing wine-oriented travellers. Western Australia, as an emerging wine growing region, has no history related to wine heritage. In this case, it explores alternatives to build its branding to sell wines and attract tourists.
The essay talks about “local cultural identity” (p.1256). What does this mean to you? How might origin branding affect local cultural identity?
Local culture could act as a label for a group of people and residents, who have common beliefs, customs and values. This kind of identity could help people to behave in a united way. Origin branding centering on history and landscape could help to preserve and develop local cultural identity.
What factors helped create your “local cultural identity”? That is, how do you think about where you are from, and what forces (economic, political, or cultural) helped to shape those thoughts?
I was born in Beijing, the capital of China. As a capital city, Beijing is considered as the economic, political, and cultural center all over China. A large number of companies are located there to felicitate its economic development. In addition, it has been the capital city for several emperors and present political center. Apart from this, the culture there is diversified as there are a wide variety of people from all parts of China and the world.
For this assignment you are required to adopt the role of a marketing consultant hired to conduct a marketing audit and identify and justify a strategic option for a ‘client’ (see below).
The marketing audit (presented in full in the Appendices of the report) will help clarify the client’s current competitive position. It will also help you to critically evaluate the current marketing strategy for one of the company’s major product or service categories.
The associated report should be grounded in the audit and its findings (and your work in developing it). It will identify the role and value of a/the marketing audit (in the context of the wider strategic marketing management process) and, following this, it will document and interpret the key findings from the audit leading to the identification, and justification, of the way forward (from a strategic marketing perspective) for the organisation when it comes to the identified major product or service category area.
As a guide, the organisation should be chosen from one of the following industries:-
Pharmaceuticals
Holiday/travel
Automotive
Financial services
Manufacturing industry
Education/training
Advertising
Leisure
Media
Oil, gas, electricity
Technology
Telecommunications
The organisation that you choose can operate globally, regionally or nationally. However, in making your choice, the thing to ensure is that sufficient material will be available from reliable secondary data sources such as the Financial Times and MINTEL to help you conduct a comprehensive marketing audit.
If your chosen organisation is not from within one of the above industries – please discuss this with the Module Leader. Either way, given the respective deadlines for the submission of assessments, you must identify your chosen organisation as a matter of priority (failure to identify the organisation at the start of this process will have a significant, delaying, impact on your ability to conduct and complete an appropriate Marketing Audit. The Marketing Audit playing a key and influential role in the wider report and submission).
Please note that this assignment is based on available secondary data. Direct and personal contact with your chosen organisation is strictly forbidden.
Summative task
You are required to submit your findings in the form of a 4,000 word business report plus Appendices. The format of your report may include the following areas (although you can choose to adopt an alternative structure – discuss this with the Module Leader as necessary):-
Executive summary(approximately 200 words not included in the overall word count)
a summary of the key findings from your report
(NB do not confuse this section with an ‘Introduction’)
Introduction (approximately 600 words)
short explanation of the task that you have been set
concise background details relating to your chosen organisation that will help provide a commercial context for your marketing audit
justification of the reasons for conducting a comprehensive marketing audit
detail of the approach taken to conducting the marketing audit with full justification of the analytical frameworks chosen
the key macro-environmental factors relevant to your client
the key micro-environmental factors relevant to your client
the key factors deriving from a critical review of your client’s current marketing strategy and marketing capability (i.e. internal analysis)
Strategic Choice(s) – Grounded by the Marketing audit (approximately 1000 words)
a critical analysis and justification of way forward (from a strategic marketing perspective) for the organisation in the chosen product or service category area
it is essential that the strategy is grounded in the outcomes of the audit, your insights to contemporary theory and your associated analysis/ critique
Strategy Implementation and Control (approximately 500 words)
an evaluation of, and insight to, implementation and control related the strategic marketing planning process overall and your selected strategy option
justified examples of two tools to support implementation and control (again related to your selected strategy option)
Conclusion (approximately 300 words)
outline indications of how your findings might impact your client’s future strategic development
Appendices
material from your research which forms the core of your marketing audit (e.g. a full PESTEL analysis, SWOT analysis etc.)
the appendix material must be limited to twelve A4 sides.
Please note that the 4,000 word limit for this report is an absolute maximum. There is no safety margin of +10%. So, you need to ensure that your report contains only the most important pieces of information. This is very much an exercise in developing your ability to focus on the key issues and communicate opinions clearly and succinctly. These are valuable business skills. Please ensure you use the coursework cover sheet included in this brief and on NOW.
Submission deadline (to NOW Dropbox) for your written report is 23:00hrs on 20 August 2021. Don’t forget: your marketing audit and report will need to be submitted to the Dropbox in PDF format. This is important because it ensures that the reader will see the information laid out in exactly the way you intended it.
Module learning outcomes being assessed
This activity is designed to test the following learning outcomes:-
Offer a detailed and comprehensive critique of the role of strategic marketing within an organisational context
Demonstrate a critical awareness of the current strategic marketing activities within an organisational context
Critically evaluate the strategic responses the marketing manager can make to the changing global marketing environment
Demonstrate a critical awareness of how the findings from a comprehensive marketing audit will inform the process of objective setting and strategy formulation
Critically reflect on the problems encountered in the implementation and control stages of the strategic marketing process and how these problems can be overcome
Skills, qualities and attributes.After studying this module you should be able to:
Conduct a comprehensive and critical marketing audit that can be used to inform choice of appropriate marketing strategy
Demonstrate an ability to synthesise and clearly articulate strategic marketing responses to complex and challenging organisational contexts
Assessment criteria
In the following pages, you will find a breakdown of the assessment criteria that will be used to judge your performance. This will give you a very clear idea about how your tutor will approach the task of assessing the written reports.
Assignment cover sheet
Following the grading matrix the assignment coversheet for this assessment is provided.
NBS Feedback Form for Undergraduate Coursework
Module: MKTG32820Strategic Marketing
Course: BA (Hons) Business (Core) and BABM (Option)
Student Number and Name
Assessment Element (as stated in the assessment brief)
Element 1 Element 2
Element 3 Element 4
Tutor name (s)
Moderator name (s)
Assessment submission date 20 August 2021 by 11pm
Please refer to the Module Learning Room Dropbox Folder for the date you were due to submit.
Date Feedback Uploaded
Please refer to the Dropbox folder for the date on which your feedback was uploaded.
MODULE LEARNING OUTCOMES ASSESSED
Offer a detailed and comprehensive critique of the role of strategic marketing within an organisational contextDemonstrate a critical awareness of the current strategic marketing activities within an organisational contextCritically evaluate the strategic responses the marketing manager can make to the changing global marketing environment Demonstrate a critical awareness of how the findings from a comprehensive marketing audit will inform the process of objective setting and strategy formulation Critically reflect on the problems encountered in the implementation and control stages of the strategic marketing process and how these problems can be overcomeConduct a comprehensive and critical marketing audit that can be used to inform choice of appropriate marketing strategyDemonstrate an ability to synthesise and clearly articulate strategic marketing responses to complex and challenging organisational contexts
Element Grade The overall grade for the work is based on a holistic assessment and is determined by how well the criteria have been met overall and not the sum of the individual aspects of the work. In the matrix below (next page), grades awarded against each criterion indicate that the relevant aspect of the work can be more readily associated with that category than any other. Allocation of a grade does not indicate that work exactly matches the associated description.
If a zero grade, select the appropriate comment below:
NS – No work submitted or submitted > 5 working days after deadline
NK – Work submitted and is in moderation
NE – Work is not yet submitted, and student has an Extension.
NN – Student did not attend for an exam
Criteria
Fail
Marginal Fail
Third
Lower Second
Upper Second
First
Exceptional First
Criterion 1 (10%)Demonstrate understanding of marketing audits and auditing in the context of strategic marketing
There is little or no engagement with marketing audits/ auditing and thus there is little understanding demonstrated
Basic understanding of marketing audits/ auditing is offered and demonstrated – fails to convince
Understanding of marketing audits/ auditing is adequate and this broadly underpins the subsequent analysis undertaken
Understanding is good. Insights to marketing audits/ auditing offering a solid context for the work, discussion and analysis that follows
Understanding is very good with insights to marketing audits/ auditing clearly contributing to the report context and the analysis that follows
Understanding is excellent with critical insights to marketing audits/ auditing offered. Very clearly contributes to the report context and analysis that follows
Marketing audits and auditing are explored in such a way as to offer a critical re-evaluation of the conventional wisdom
Criterion 2 (30%)Presentation of a comprehensive and detailed marketing audit in the Appendix
Either no structured marketing audit is presented or the marketing audit is not included at all
There is evidence of a structured marketing audit although the overall approach taken to the task is not particularly convincing
The marketing audit is complete. However, whilst it may offer a number of insights the overall response to the task is limited
A marketing audit is included and, overall, this demonstrates a solid grasp of the task/ requirements
The audit contains a very good spread of relevant information that demonstrates a very good response to the task
An excellent and comprehensive marketing audit that offers a mature and insightful response to the task
An exceptional and professional marketing audit that exceeds expectations in all respects
Criterion 3 (20%)Demonstration of the ability to draw out the key environmental factors from the audit and relate them to an organisational context
It is not clear that the answer relates in any substantial way to the given task
The answer is clearly associated with the given task, but only partially focusses on the key issues
The answer largely addresses the task set and provides an acceptable, albeit limited and possibly overly broad, response to the task
The answer is clearly focused on the task set and there is little doubt that key issues have been identified – the work may lack some focus needed for higher grades
A very good response to the task set that identifies key issues clearly with focus as necessary
An excellent and insightful response to the task. Insight to key issues precise, comprehensive and is of a high standard
The response is exceptionally precise and comprehensive – to the extent that it identifies new and unforeseen issues
Criterion 4 (20%)Demonstration of the ability to develop a coherent, consistent and comprehensive position and response based on the audit
The response is poorly organised and presented and offers little by way of insight to strategic marketing in context
There is some organisation but the response outlined lacks clarity and in the context of strategic marketing
There response proposed is acceptable and some insight to marketing strategy is offered. There is likely to be a lack of some clarity and/or focus though
A solid response is developed, drawing substantially on the evidence presented and theory as necessary. There is insight to strategic marketing as a result
A very good response is presented that is clear, concise, consistent and comprehensive. Clear insight to strategic marketing offered as a result
An excellent and persuasive response that is justified in evidence and theory. Very clear insight to strategic marketing offered as a result
The response presented is exceptional: both academically rigorous and professionally insightful
Criteria
Fail
Marginal Fail
Third
Lower Second
Upper Second
First
Exceptional First
Criterion 5 (10%)Demonstrate understanding of implementation and control in the context of the strategic response
There is little or no engagement with implementation and/ or control thus little understanding and insight demonstrated
Basic understanding of implementation and control but fails to convince
Understanding of implementation and control is adequate but is likely to be broad rather than specific to the response.
Understanding is offered and insights to implementation and control are good. They, broadly, are grounded in the response proposed too
Understanding is very good with insights to implementation and control clearly offered with good links to the response proposed
Understanding is excellent with critical insights to implementation and control offered. Very clearly linked to the response proposed
Implementation and control and are handled (and explored) in such a way that critical and innovative insights are detailed
Criterion 6 (10%)Presentation of report: structure, spelling, grammar, expression and use of illustration and other supporting materials
a) Arbitrary structure and/or expressed with careless grammar and spelling b) Little or no attempt to illustrate points
a) Some weaknesses in structure and/or expression, grammar and spelling b) Limited illustration of points
a) Structure and/or expression, grammar and spelling largely OK b) Limited illustration of points
a) Structure, spelling, expression and grammar are good and enhance the work b) Illustration of points made adds some value
a) Very good structure, spelling, expression and grammar clearly enhance the work b) The illustration of points made adds value to the work
a) Structure, spelling, expression and grammar are excellent with wit and subtlety in evidence b) Illustration is plentiful and lifts the work significantly
a) Structure, spelling, expression and grammar are well beyond expectation b) Illustration is plentiful and makes the work truly exceptional
What you did well in this coursework.
What you can do to improve your future coursework.
Below, if applicable, are highlighted some additional online resources that are maintained by the NTU Library, and that you can access via your NOW Student Help Learning Room. Engaging with these resources and the feedback provided above can also support you to enhance specific aspects of your work.
Writing
Managing your time
Referencing
Presentation skills
Moderator Comment (as necessary):
Declaration
Required for All Coursework
In advance of your submission, please:
Complete the following details and include as the first page of your submission;
Read the Turnitin section and check that you understand how Turnitin is used to assess your work;
Read the declaration to check that your submission conforms with the listed requirements before you submit your work.
Name(s) and Student Number(s):
Module Title:
Strategic Marketing
Title of Coursework:
Strategic Marketing Audit and Report
Word Count (see declaration below):
Required Format See Assessment Brief and FAQ Page Numbers: To be included
Turnitin Similarity Check Where appropriate to the coursework assignment, your document will be submitted to Turnitin to generate a similarity report for review by your tutor. This report will compare your work against millions of previously submitted student papers and online resources (e.g. web sites, journal articles) in the Turnitin database and highlight any text that matches your submission.
Declaration By submitting your work you are certifying that: The submission is the result of your own work and does not contravene the University Regulation on Academic Irregularities.The word count included on this cover sheet is accurate and follows the guidelines outlined in the assignment brief (failure to include an accurate word count will be treated as a minor academic irregularity as defined in the Academic Irregularities Policy.)Your ability to complete your assessment has NOT been adversely impacted by circumstances beyond your control. Once you have submitted your work, any such circumstances would need to be disclosed through the Academic Appeals Policy and process and not through the Notification of Extenuating Circumstances Policy and process.
For this assignment you are required to adopt the role of a marketing consultant hired to conduct a marketing audit and identify and justify a strategic option for a ‘client’ (see below).
The marketing audit (presented in full in the Appendices of the report) will help clarify the client’s current competitive position. It will also help you to critically evaluate the current marketing strategy for one of the company’s major product or service categories.
The associated report should be grounded in the audit and its findings (and your work in developing it). It will identify the role and value of a/the marketing audit (in the context of the wider strategic marketing management process) and, following this, it will document and interpret the key findings from the audit leading to the identification, and justification, of the way forward (from a strategic marketing perspective) for the organisation when it comes to the identified major product or service category area.
As a guide, the organisation should be chosen from one of the following industries:-
Pharmaceuticals
Holiday/travel
Automotive
Financial services
Manufacturing industry
Education/training
Advertising
Leisure
Media
Oil, gas, electricity
Technology
Telecommunications
The organisation that you choose can operate globally, regionally or nationally. However, in making your choice, the thing to ensure is that sufficient material will be available from reliable secondary data sources such as the Financial Times and MINTEL to help you conduct a comprehensive marketing audit.
If your chosen organisation is not from within one of the above industries – please discuss this with the Module Leader. Either way, given the respective deadlines for the submission of assessments, you must identify your chosen organisation as a matter of priority (failure to identify the organisation at the start of this process will have a significant, delaying, impact on your ability to conduct and complete an appropriate Marketing Audit. The Marketing Audit playing a key and influential role in the wider report and submission).
Please note that this assignment is based on available secondary data. Direct and personal contact with your chosen organisation is strictly forbidden.
Summative task
You are required to submit your findings in the form of a 4,000 word business report plus Appendices. The format of your report may include the following areas (although you can choose to adopt an alternative structure – discuss this with the Module Leader as necessary):-
Executive summary(approximately 200 words not included in the overall word count)
a summary of the key findings from your report
(NB do not confuse this section with an ‘Introduction’)
Introduction (approximately 600 words)
short explanation of the task that you have been set
concise background details relating to your chosen organisation that will help provide a commercial context for your marketing audit
justification of the reasons for conducting a comprehensive marketing audit
detail of the approach taken to conducting the marketing audit with full justification of the analytical frameworks chosen
the key macro-environmental factors relevant to your client
the key micro-environmental factors relevant to your client
the key factors deriving from a critical review of your client’s current marketing strategy and marketing capability (i.e. internal analysis)
Strategic Choice(s) – Grounded by the Marketing audit (approximately 1000 words)
a critical analysis and justification of way forward (from a strategic marketing perspective) for the organisation in the chosen product or service category area
it is essential that the strategy is grounded in the outcomes of the audit, your insights to contemporary theory and your associated analysis/ critique
Strategy Implementation and Control (approximately 500 words)
an evaluation of, and insight to, implementation and control related the strategic marketing planning process overall and your selected strategy option
justified examples of two tools to support implementation and control (again related to your selected strategy option)
Conclusion (approximately 300 words)
outline indications of how your findings might impact your client’s future strategic development
Appendices
material from your research which forms the core of your marketing audit (e.g. a full PESTEL analysis, SWOT analysis etc.)
the appendix material must be limited to twelve A4 sides.
Please note that the 4,000 word limit for this report is an absolute maximum. There is no safety margin of +10%. So, you need to ensure that your report contains only the most important pieces of information. This is very much an exercise in developing your ability to focus on the key issues and communicate opinions clearly and succinctly. These are valuable business skills. Please ensure you use the coursework cover sheet included in this brief and on NOW.
Submission deadline (to NOW Dropbox) for your written report is 23:00hrs on 20 August 2021. Don’t forget: your marketing audit and report will need to be submitted to the Dropbox in PDF format. This is important because it ensures that the reader will see the information laid out in exactly the way you intended it.
Module learning outcomes being assessed
This activity is designed to test the following learning outcomes:-
Offer a detailed and comprehensive critique of the role of strategic marketing within an organisational context
Demonstrate a critical awareness of the current strategic marketing activities within an organisational context
Critically evaluate the strategic responses the marketing manager can make to the changing global marketing environment
Demonstrate a critical awareness of how the findings from a comprehensive marketing audit will inform the process of objective setting and strategy formulation
Critically reflect on the problems encountered in the implementation and control stages of the strategic marketing process and how these problems can be overcome
Skills, qualities and attributes.After studying this module you should be able to:
Conduct a comprehensive and critical marketing audit that can be used to inform choice of appropriate marketing strategy
Demonstrate an ability to synthesise and clearly articulate strategic marketing responses to complex and challenging organisational contexts
Assessment criteria
In the following pages, you will find a breakdown of the assessment criteria that will be used to judge your performance. This will give you a very clear idea about how your tutor will approach the task of assessing the written reports.
Assignment cover sheet
Following the grading matrix the assignment coversheet for this assessment is provided.
NBS Feedback Form for Undergraduate Coursework
Module: MKTG32820Strategic Marketing
Course: BA (Hons) Business (Core) and BABM (Option)
Student Number and Name
Assessment Element (as stated in the assessment brief)
Element 1 Element 2
Element 3 Element 4
Tutor name (s)
Moderator name (s)
Assessment submission date 20 August 2021 by 11pm
Please refer to the Module Learning Room Dropbox Folder for the date you were due to submit.
Date Feedback Uploaded
Please refer to the Dropbox folder for the date on which your feedback was uploaded.
MODULE LEARNING OUTCOMES ASSESSED
Offer a detailed and comprehensive critique of the role of strategic marketing within an organisational contextDemonstrate a critical awareness of the current strategic marketing activities within an organisational contextCritically evaluate the strategic responses the marketing manager can make to the changing global marketing environment Demonstrate a critical awareness of how the findings from a comprehensive marketing audit will inform the process of objective setting and strategy formulation Critically reflect on the problems encountered in the implementation and control stages of the strategic marketing process and how these problems can be overcomeConduct a comprehensive and critical marketing audit that can be used to inform choice of appropriate marketing strategyDemonstrate an ability to synthesise and clearly articulate strategic marketing responses to complex and challenging organisational contexts
Element Grade The overall grade for the work is based on a holistic assessment and is determined by how well the criteria have been met overall and not the sum of the individual aspects of the work. In the matrix below (next page), grades awarded against each criterion indicate that the relevant aspect of the work can be more readily associated with that category than any other. Allocation of a grade does not indicate that work exactly matches the associated description.
If a zero grade, select the appropriate comment below:
NS – No work submitted or submitted > 5 working days after deadline
NK – Work submitted and is in moderation
NE – Work is not yet submitted, and student has an Extension.
NN – Student did not attend for an exam
Criteria
Fail
Marginal Fail
Third
Lower Second
Upper Second
First
Exceptional First
Criterion 1 (10%)Demonstrate understanding of marketing audits and auditing in the context of strategic marketing
There is little or no engagement with marketing audits/ auditing and thus there is little understanding demonstrated
Basic understanding of marketing audits/ auditing is offered and demonstrated – fails to convince
Understanding of marketing audits/ auditing is adequate and this broadly underpins the subsequent analysis undertaken
Understanding is good. Insights to marketing audits/ auditing offering a solid context for the work, discussion and analysis that follows
Understanding is very good with insights to marketing audits/ auditing clearly contributing to the report context and the analysis that follows
Understanding is excellent with critical insights to marketing audits/ auditing offered. Very clearly contributes to the report context and analysis that follows
Marketing audits and auditing are explored in such a way as to offer a critical re-evaluation of the conventional wisdom
Criterion 2 (30%)Presentation of a comprehensive and detailed marketing audit in the Appendix
Either no structured marketing audit is presented or the marketing audit is not included at all
There is evidence of a structured marketing audit although the overall approach taken to the task is not particularly convincing
The marketing audit is complete. However, whilst it may offer a number of insights the overall response to the task is limited
A marketing audit is included and, overall, this demonstrates a solid grasp of the task/ requirements
The audit contains a very good spread of relevant information that demonstrates a very good response to the task
An excellent and comprehensive marketing audit that offers a mature and insightful response to the task
An exceptional and professional marketing audit that exceeds expectations in all respects
Criterion 3 (20%)Demonstration of the ability to draw out the key environmental factors from the audit and relate them to an organisational context
It is not clear that the answer relates in any substantial way to the given task
The answer is clearly associated with the given task, but only partially focusses on the key issues
The answer largely addresses the task set and provides an acceptable, albeit limited and possibly overly broad, response to the task
The answer is clearly focused on the task set and there is little doubt that key issues have been identified – the work may lack some focus needed for higher grades
A very good response to the task set that identifies key issues clearly with focus as necessary
An excellent and insightful response to the task. Insight to key issues precise, comprehensive and is of a high standard
The response is exceptionally precise and comprehensive – to the extent that it identifies new and unforeseen issues
Criterion 4 (20%)Demonstration of the ability to develop a coherent, consistent and comprehensive position and response based on the audit
The response is poorly organised and presented and offers little by way of insight to strategic marketing in context
There is some organisation but the response outlined lacks clarity and in the context of strategic marketing
There response proposed is acceptable and some insight to marketing strategy is offered. There is likely to be a lack of some clarity and/or focus though
A solid response is developed, drawing substantially on the evidence presented and theory as necessary. There is insight to strategic marketing as a result
A very good response is presented that is clear, concise, consistent and comprehensive. Clear insight to strategic marketing offered as a result
An excellent and persuasive response that is justified in evidence and theory. Very clear insight to strategic marketing offered as a result
The response presented is exceptional: both academically rigorous and professionally insightful
Criteria
Fail
Marginal Fail
Third
Lower Second
Upper Second
First
Exceptional First
Criterion 5 (10%)Demonstrate understanding of implementation and control in the context of the strategic response
There is little or no engagement with implementation and/ or control thus little understanding and insight demonstrated
Basic understanding of implementation and control but fails to convince
Understanding of implementation and control is adequate but is likely to be broad rather than specific to the response.
Understanding is offered and insights to implementation and control are good. They, broadly, are grounded in the response proposed too
Understanding is very good with insights to implementation and control clearly offered with good links to the response proposed
Understanding is excellent with critical insights to implementation and control offered. Very clearly linked to the response proposed
Implementation and control and are handled (and explored) in such a way that critical and innovative insights are detailed
Criterion 6 (10%)Presentation of report: structure, spelling, grammar, expression and use of illustration and other supporting materials
a) Arbitrary structure and/or expressed with careless grammar and spelling b) Little or no attempt to illustrate points
a) Some weaknesses in structure and/or expression, grammar and spelling b) Limited illustration of points
a) Structure and/or expression, grammar and spelling largely OK b) Limited illustration of points
a) Structure, spelling, expression and grammar are good and enhance the work b) Illustration of points made adds some value
a) Very good structure, spelling, expression and grammar clearly enhance the work b) The illustration of points made adds value to the work
a) Structure, spelling, expression and grammar are excellent with wit and subtlety in evidence b) Illustration is plentiful and lifts the work significantly
a) Structure, spelling, expression and grammar are well beyond expectation b) Illustration is plentiful and makes the work truly exceptional
What you did well in this coursework.
What you can do to improve your future coursework.
Below, if applicable, are highlighted some additional online resources that are maintained by the NTU Library, and that you can access via your NOW Student Help Learning Room. Engaging with these resources and the feedback provided above can also support you to enhance specific aspects of your work.
Writing
Managing your time
Referencing
Presentation skills
Moderator Comment (as necessary):
Declaration
Required for All Coursework
In advance of your submission, please:
Complete the following details and include as the first page of your submission;
Read the Turnitin section and check that you understand how Turnitin is used to assess your work;
Read the declaration to check that your submission conforms with the listed requirements before you submit your work.
Name(s) and Student Number(s):
Module Title:
Strategic Marketing
Title of Coursework:
Strategic Marketing Audit and Report
Word Count (see declaration below):
Required Format See Assessment Brief and FAQ Page Numbers: To be included
Turnitin Similarity Check Where appropriate to the coursework assignment, your document will be submitted to Turnitin to generate a similarity report for review by your tutor. This report will compare your work against millions of previously submitted student papers and online resources (e.g. web sites, journal articles) in the Turnitin database and highlight any text that matches your submission.
Declaration By submitting your work you are certifying that: The submission is the result of your own work and does not contravene the University Regulation on Academic Irregularities.The word count included on this cover sheet is accurate and follows the guidelines outlined in the assignment brief (failure to include an accurate word count will be treated as a minor academic irregularity as defined in the Academic Irregularities Policy.)Your ability to complete your assessment has NOT been adversely impacted by circumstances beyond your control. Once you have submitted your work, any such circumstances would need to be disclosed through the Academic Appeals Policy and process and not through the Notification of Extenuating Circumstances Policy and process.
To what extent is it important for managers to understand employees as unique individuals or in accordance with individual types? Draw on relevant theory, research and illustrative examples to critically assess this question.
How strong is the argument that diverse workplace teams are more effective than those which are not diverse? Draw on relevant theory, research and illustrative examples to critically assess this question.
How influential is leadership in determining organisational effectiveness? Draw on relevant theory, research and illustrative examples to critically assess this question.
Important Notes
Your essay should be 1800words (+/- 10%) excluding bibliography, any contents page and appendices/annexes.
Your essay needs to have a clear argument which is coherently built up using appropriate scholarly reference; you need to demonstrate understanding of relevant theory and debates; you are expected to do additional research beyond recommended readings; you can use illustrative examples of companies or sectors. Please see the Module Outline for the detailed marking guide.
Your essay should be submitted via Turnitin in A4 MSWord format using Times New Roman, Size 12 and Line spacing: 1.5.
Please reference throughout according to the Harvard referencing system and provide a full bibliography at the end. See your Module Outline for further guidance on using the Harvard referencing system.
Please review university plagiarism guides and further information on this in your Module Outline – plagiarism is an academic offence that can have extremely serious consequences and WILL NOT BE TOLERATED.
Essay marking rubric
The below rubric will be used to calculate your essay grade and provide feedback on the different aspects of your performance in the essay.
Excellent
Good
Satisfactory
Unsatisfactory
V. Unsatisfactory
Knowledge (40% of grade)
Evidence of subject knowledge
Total Score for Knowledge = ____ out of 40
Scholarship and Analysis (50% of grade)
Engages critically with scholarly literature and evidence
Offers a balanced and developed argument
Total Score for Scholarship and Analysis = ____ out of 50
Structure, formatting, referencing and use of language (10% or grade)
Structure, formatting, referencing and use of language
Total Score for Structure, formatting and use of language = ____ out of 10
ANU COMP3900/COMP6390 Projects 2021 Taylor & Kyburz 1 ANU COMP3900/COMP6390 Project 1 Specification Updated 18 July 2021 Project 1 – Background Review
Project Overview The purpose of this project is to explore the project theme (environmental sustainability), and to choose a topic of interest by conducting a literature review and analysing existing design products.
Project Specification (1500 words maximum) 2.1 Report cover sheet (not included in word count) Include a cover sheet as the front page of the report, using the cover sheet template on the COMP3900/COMP6390 Wattle Site. Restate your report title on the first page of your report. 2.2 Choose a project topic (100 words maximum) You must choose a topic that relates to the project theme of environmental sustainability. Relevant topics might include “reducing food waste”, “reducing energy use”, “community education about climate change”, “learning about local plant and animal species”, or “being prepared for floods (or bushfires, or other natural disasters)” (based on United Nations Environment Program 2020). The topic should be specifically scoped to focus on a particular activity relating to your topic, a context/setting in which this activity takes place, and a group of people involved in that activity who are prospective users of the technology you design (and could be participants in your project). For example, a well-scoped topic for the area of reducing food waste might be “food composting [activity] at home [setting] by university students living off-campus in Canberra [group of people]”. In a few sentences, describe your topic and its connection to the theme of environmental sustainability (100 words maximum). Some ideas for topics relating to behaviour change from the ANU Below Zero strategy include the following (from the ANU Below Zero Website): • “reducing energy consumption and switching away from fossil fuel energy, wherever possible; • choosing low-emission transport, such as cycling, walking, car sharing and public transport use; • limiting air travel to essential trips only; • being mindful about what we buy, reusing items and choosing locally sourced, low-emission food; ANU COMP3900/COMP6390 Projects 2021 Taylor & Kyburz 2 • reducing waste, recycling and composting food waste” (ANU Below Zero 2021). 2.3 Conduct a literature review (600 words maximum) Conduct a literature review that addresses exactly four HCI conference papers or journal articles relevant to your topic, that involve the technology design and/or evaluation. You must search for HCI literature in the Association of Computing Machinery Digital Library. See the instructions at the end of this document for accessing the ACM Digital Library through the ANU Library website. For each of your chosen articles, write one short paragraph (150 words maximum) that summarises the project aim and key finding(s), discusses the relevance of this paper to your project topic, and provides an in-text citation to your paper (author – year). 2.4 Interaction and experience analysis of two existing designs (500 words maximum) For your chosen topic, find two existing designs that can offer you some interesting insights for your own project. These existing designs may relate to your specific project topic, or if you cannot find existing designs about your specific topic, others with relevant interaction and experience design considerations to your project. You can either refer to HCI literature on these projects (find papers that are different to the projects already discussed in your literature review above), or reflect on your interactions and experiences with a technology that you can access in real life. In 250 words total for each of the two existing designs, write 1-2 paragraphs that explain: • The interactions with this design that are available to users • Key user experience insights from these designs (either from the HCI paper or your own interactions with the device) • Usability issues that you can identify with the design • How the design is relevant to your topic. Reflect on the HCI principles that were introduced during Module 1. 2.5 Literature and product reflection (300 words maximum) Based on your literature review and design analysis, write 300 words that cover all of the following points: • Patterns that you can see in the literature and design products that reviewed (frequent topics and questions, common methods and findings, contradictions between findings) • What interesting research questions or ideas this literature and product review has offered to your project • Gaps in the literature and existing products that could be addressed by your own technology design.
Report Structure Your report should include the following sections: ANU COMP3900/COMP6390 Projects 2021 Taylor & Kyburz 3 • Cover sheet (Task 2.1) • Report Title • Project Topic (Task 2.2) • Literature Review (Task 2.3) • Interaction and Experience Analysis (Task 2.4) • Literature and Product Reflection (Task 2.5) • Bibliography
Genius Rant No. 2: Reflection The new due date for the assignment is Saturday, August 21 at 11:59 PM (ADT) The Genius Rant (a.k.a. reading response) will test your knowledge of critical concepts and terms covered within the course. You are strongly encouraged to include assigned readings, lectures, group discussions in your response. Please cite all references/sources accordingly. The depth and thoroughness of your response will demonstrate proof of engagement with the course materials and class discussions. Primarily, Genius Rant No. 2 covers all the required readings, lectures, and discussions from Weeks 5-7, but I invite you to reflect on the previous themes, readings, lectures and class discussions from Weeks 1-4 for a fulsome reflection of what you have learned from the course. Prompt: To reconsider “Asian [art] history” is to reconstruct nineteenth-century European “world history” and to attempt to break through the twenty-first-century dominant order and its logic. The established (art) historical canon that we continue to refer to and study is in dire need of revision to acknowledge the heterogeneity of Asia. If you are given the opportunity to enhance our understanding of what constitutes Asian art- its histories, interpretations and representations-how and what would you contribute? This Genius Rant assignment reflects what you are taking away at the end of the term. Your task is to analyze the dynamics between art production and consumption, the factors at play that drive the global art market, the place of contemporary Asian art in a predominantly white and Western-centric art world, and your place in it as an emerging artist, craftsperson or designer. Consider when formulating your response: Reflect on your subject position- this is where race, class, gender, ability comes into play; what is your privilege? If your current location is Halifax, where you live, study and work- acknowledge your location. If your home base is elsewhere, recognize that as well- your privilege to travel or the ability to leave your hometown to pursue your dreams. Link your reflection with the knowledge (readings, lectures, class discussions) you gained from taking this course. For the Written Genius Rant: The essay is 1,000 words maximum, double-spaced, 12 pt. Times New Roman font including endnotes or footnotes in MLA or Chicago Manual style or APA. Be sure to include a separate bibliography page. For the Video Genius Rant: If you choose to submit a video response, the length of your recording must be no less than 5 minutes. Record the video response using the video assignment tool or upload it in the Genius Rant folder as an mp4 file. You are encouraged to be creative when choosing to submit the response in video format.
For Tutorial Exercise 1 you are to complete a 200 word summary on the essential reading for Week 2 OR Week 3. For the summary you will need to provide a brief statement of the author’s thesis position or author’s argument and the key points that support this in your own words. Marks will be deducted for the inclusion of quotes. You will need to be very succinct in the summary as you only have 200 words to summarise the essence of the reading. The details of the Summary are as follows:
Summary: Due 11.30pm Friday 6 August 2021
The details for each of the essential readings are as follows. Remember you only choose ONE of the following readings.
Bisley, Nick. (2017). The Cold War and after. (Chapter 10, pp. 155-167). In Devetak, Richard, Jim George and Sarah Percy (Eds.), An Introduction to International Relations (3rd edition). Cambridge UK: Cambridge University Press.
Dear Students
This is a reminder that the summary is due at 11.30pm on Friday 6 August. The normal 10% under and over of the required length is acceptable. If the summary goes over 250 words then it will be penalised.
Some students have asked me whether you need to include a reference list in the summary and also a cover sheet. If you are not sure the following answers these questions
You must always include a reference list in all assessments in this unit even when there is only one reference. This is good practice to get into as not including a reference list will result in marks being deducted in most units of study.
You do not include a cover sheet in any of the assessments. When you submit an assessment item on turnitin you are certifying five things that are listed on the cover sheet in terms of plagiarism. These are listed on page 13 of the Learning Guide under Turnitin. Please do not include a cover sheet as it will also increase your similarity report.
Criteria/Standards
Excellent(85-100)
Very Good(75-84)
Good (65-74)
Fair (50-64)
Unsatisfactory (0-49)
Accurate and concise summary
Highly accurate, excellent judgement of what to include and appropriate length
Very accurate, very good judgement of what to include, appropriate length
Accurate, good judgement of what to include, appropriate length
Reasonably accurate, some good judgement of what to include, appropriate or close to appropriate length
Inaccurate, no or low level judgement of what to include, much too long or too short
Use of own words
Written entirely in own words with well executed paraphrasing
Use of own words throughout, high quality paraphrasing
Use of own words mostly or throughout, good paraphrasing
Use of own words mostly, fair quality or inconsistent paraphrasing
Too close to text, bordering on plagiarism or crude ‘cut and paste’
Compliance with scholarly conventions
Complete compliance with referencing style and due acknowledgement of sources and ideas with no or very minor mistakes
Mostly compliant with referencing style and due acknowledgement of sources and ideas with few lapses
Good effort, but with minor lapses in compliance with referencing style and/or in acknowledgement of sources and ideas
Basic effort to comply with referencing style and to acknowledge sources and ideas properly, but with mistakes
Little or no compliance with referencing style and/or acknowledgement of sources and ideas
English expression, correct spelling and grammar
Fluent, literate, clear and elegant with no or only very minor grammatical or spelling errors
Fluent, literate, clear sentences with very few grammatical or spelling errors
Generally well written and literate with some lapses in clarity or some clumsy sentences and/or with some grammatical and spelling errors
Not well written, with some unclear passages, some poorly constructed sentences or paragraphing with too many grammatical and/or spelling errors
Badly written, unclear, many sentences poorly constructed with many errors in grammar and spelling – does not meet minimum literacy standards
Nathan What is COVID-19? Covid-19 also known as the Coronavirus is a respiratory disease which shows various symptoms from the common cold to more serious health issues such as pneumonia which could lead to death. The Covid-19 has a mortality rate of about 15% insert health.gov.au.
Australian Response- egs, jobkeeper, jobseeker
Zijie
Impacts of COVID-19- lifestyle, economy, individual & Target Group (20-24 yo)
Economy
The COVID-19 Pandemic had a large impact on the Australian Economy over the past year and this is greatly reflected when looking at our Gross Domestic Product (GDP). There was a large negative impact to our GDP (-7.3%) in the 2020 2nd quarter as this was the height of the pandemic and there was a slow recovery each quarter till present with an average increase of 3.975% (Australian Bureau of Statistics, 2021).
Individual
The pandemic did not only affect our economy but had an impact on the population. COVID-19 led to a large loss of income for the average individual, through mass redundancies/ unemployment, and increased cost of living due to lockdowns and restrictions. As shown in Appendix 2, there was large spike in unemployment from March to August 2020 which slowly declined over time till present which is also reflected in the job vacancies
Target Group (20-24 yo)
The Recovery – what has the government done to help aid recovery
Hong (Kris) Le
Importance of this proposal/ project (Western Sydney University)→ how does reading this report help understand the issue
Assessment task 1 – tentative structure Title page (clearly indicate your name and student ID)
Executive summary (refer to the attached document on how to write a good executive summary) Table of contents (refer to the attached document on how to prepare a good table of contents) 1.0 Background
In this background section, concisely introduce:
Purpose of the briefing paper;
Issues to be discussed and their significance. 2.0 Supply Chain Analysis (use appropriate subheadings to divide the subsections) In this section, address the following assessment requirements:
Draw a map of the supply chain of the selected product (including materials, information and financial flows);
Identify the major upstream tier-one and tier-two suppliers in the supply chain of the selected product (real world organisations);
Identify all downstream organisations and Singapore customers in the supply chain of the selected product (real world organisations);
Identify the materials, information and financial flows in the supply chain of the selected product;
Identify and discuss the challenges in the supply chain of the selected product. 3.0 Conclusion (refer to the attached document on how to write a good conclusion) In this conclusion section, summarise the main points and conclude the paper. References Appendices (optional) Notes:
Word count: 1500 words (+/- 10%);
Word count does not include title page, executive summary, table of contents and references;
Refer to the grading criteria for further details;
Note paper presentation and writing style (i.e. convey information coherently and concisely, in a quality written format appropriate to target audience);
Check grammatical and referencing mistakes;
Please observe JCU policies on plagiarism. Refer to https://www.jcu.edu.au/students/exams- and-results/what-is-plagiarism for detailed information.
ASSESSMENT ITEM 1: DESCRIPTION
You are the Operations Manager of Lion Pte Ltd, a Singapore-based company. You are analysing the supply chain of a particular product in the product portfolio of Lion Pte Ltd. For this analysis, you are to select only one product among electric bicycle, automatic coffee maker, or solar panel. You are to write a briefing paper to inform the newly appointed CEO of Lion Pte Ltd regarding the findings of the analysis.
Lion Pte Ltd designs a range of products in Singapore. Currently, Panda Co Ltd in Guangdong Province, China, is the contracted manufacturer of its products.
Instructions
The supply chain analysis should succinctly identify the supply chain of the selected product and discuss the relevant supply chain issues based on evidence.
The supply chain analysis is to address the following:
Draw a map of the supply chain of the selected product (including materials, information and financial flows);
Identify the major upstream tier-one and tier-two suppliers in the supply chain of the selected product (real world organisations);
Identify all downstream organisations and Singaporean customers in the supply chain of the selected product (real world organisations);
Identify the materials, information and financial flows in the supply chain of the selected product;
Identify and discuss the challenges in the supply chain of the selected product. Page 9 of 26
Report structure
Use the following structure to write the briefing paper:
Title page
Executive summary
Table of contents
Background
Purpose of the briefing paper
Issues to be discussed and their significance
Paper body
Address each of the assessment requirements listed in the instructions
Conclusion
Reference list
Appendices (optional)
Where do I find more information about Lion Pte Ltd?
Lion Pte Ltd is fictional (so is the contract manufacturer Panda Co Ltd). They are mentioned in the assignment brief just to provide a context for the analysis. The only information we need to know about the company is that it is a Singapore company which designs its own products. However, the products are made by a contract manufacturer (Panda Co Pte) in China.
How do I write a description about Lion Pte Ltd?
There is actually no need to write a description about the company. Following the tentative report structure, you may write in the background section a sentence or two to mention something like: “This report is prepared for the CEO of Lion Pte Ltd on an analysis of the supply chain of [selected product].”
Can I make assumptions about the product?
You may make reasonable assumptions about the selected product and its supply chain. It is just like if you are to start up a new company to make a new product, you are now doing a research about the potential suppliers (upstream supply chain) and distribution partners (downstream supply chain).
How do I identify the real-world suppliers?
You should first select a product. Then, analyse the key components or materials that are needed to make the product. Having known about the key components or materials, you try to search online to identify some real-world suppliers who can supply these components or materials. You should identify up to two tiers of suppliers (not counting Panda Co Ltd). You may follow the same approach for the downstream supply chain.
How do I explain financial flow?
This is not about preparing some financial statements. In supply chain management, the term “financial flow” refers to payments for goods or refunds. In this case, you can concisely describe the flow of payments for goods, e.g. from end-customers to retailers, from retailers to distributors, from Panda Co Ltd to its suppliers, etc.
How do I explain information flow?
In supply chain management, the term “information flow” refers to the flow of information between supply chain partners (including end-customers), e.g. demand information, order or delivery details, inventory information, etc. Information flows in both upstream and downstream directions.
How do I draw the supply chain map?
You may use any software you like, e.g. Microsoft PowerPoint.
Should I include a detailed description about the real-world suppliers in the appendix?
You may just cite a company (and very briefly mention what it supplies) in your discussion and provide the URL of the company (if any) in the reference list (following the APA referencing style). You may follow the same approach for the distribution partners.
Assessment Overview The objective of the 1500‐word essay is for you to apply theories and concepts from the module to complete a critical analysis of selected situations when you have worked with other people. The purpose is to reflect on how you can learn from applying theories and concepts in order to develop the effectiveness of how you work with other people. Deadline ‐ Friday, 21st May 2021 12:00pm (noon) A critical analysis involves applying academic source materials (theories and concepts) to explore a particular situation when you have worked with other people to complete certain tasks or achieve particular outcomes in the past twelve months (e.g. workshop or tutorial tasks, a group project/assignment, undertaken a voluntary or paid role, participated in a sports team) in order to develop new insights and understanding. By applying theories as an analytical lens you will be able to show your critical engagement by expressing the benefits and limitations of the theories and concepts for making sense of your selected situation. Key definitions for the assignment Critical analysis – involves applying academic source materials (theories and concepts from peer‐reviewed journal articles and books) to understand and examine a given case or situation by recognising the underlying assumptions of the theories and concepts applied, and so appreciating how different theories and concepts have benefits and limitations for making sense of particular contexts and situations. Theory (also relates to ‘theoretical perspective’ and ‘theoretical framework’) – explains particular organizational dynamics and relations e.g. Competing Values Framework. It is a perspective, model, framework or lens that we can use to help us to understand and make sense of a given situation, organization, group, manager etc. It is not understood to be an abstract and comprehensive representation of reality or a prescriptive way to be or do things right. Critique – relates to being critical in how you apply theory. In general, you can consider two types of related critique. Firstly, ‘general critique’ that have previously been written by others about general limitations of a theory e.g. that Maslow’s Hierarchy of Need is less applicable in collectivist cultures. Secondly, ‘specific or contextual critique’ that is about your judgement about how the theory does or doesn’t relate to your specific context of analysis, based on the particular individual, group and organisational dynamics involved in your study. Concept – is something that describes a particular organizational phenomenon e.g. social loafing. Situation – relates to a particular occasion when something happened (e.g. when I was working with a group of people on a specific task in a workshop or tutorial) or repeated engagement with the same people in the same setting (e.g. at a job, volunteering, participating in a sports team, completing a group assignment). Developing your analysis In your essay you need to select one situation which you have been involved with in the past twelve months. As above these can include: A group workshop task which you have completed during MGT120 A group project or group assignment undertaken as part of your degree Voluntary or paid work where you have worked closely with others Involvement in particular events as part of a sports team, student society or community group 7 You need to choose two topics from the module (each weekly lecture is a topic) to select theories from for your analysis. Your chosen situation needs to be critically analysed through the application of two theories per selected lecture topic. You may draw on literature beyond the module reading list where appropriate, but you need to include at least three references from the module reading list – see ‘MyResource List’ accessible via the module Blackboard site. Choosing a situation In your essay you will need to give a brief but clear account of your chosen situation, so you need to have a good record or memory of specifically what was said and done. A good situation to select would involve one or more the following characteristics: Something happened within the group that was unexpected and surprised you so that you were unclear about how and why things happened in the way they did (e.g. somebody became particularly angry without obvious explanation). The group did not manage to successfully achieve the task or expected outcome, or the quality of the output from the group was poor. The group managed to successfully achieve the task or intended outcome far beyond your expectations of what was possible. There was a conflict or disagreement within the group which led to some members reducing or ending their involvement in the group. That a person or a couple of people were particularly dominant in the group. Selecting two topics and associated theories Once you have identified your situation to analyse you need to decide which topics and associated theories can best support your critical analysis. It is your choice about which OB topics are more interesting and relevant to apply. However, you need to make sure that from your account of the situation you have enough material to relate to the particular elements of the theories that you have chosen. For example, if you did not know the other group members very well then it might be hard to assess the different ‘bases of power’ (related to the ‘Power and politics’ topic) which they might each be understood to possess, but you may be able to explore the different ‘types of conflict’ which emerged (related to the ‘Conflict at work’ topic). Structuring your essay Your essay needs to be clearly structured as below:
Introduction – explain what your essay will cover and in what order, which will include introducing the situation that you are going to analyse as well as mentioning which lecture topics and theories you will apply in your analysis. (about 150 words)
Situation ‐ An account of the situation which includes information about: the background context of the group work, the task being completed, the people involved, what happened, and why you chose this situation. (about 250 words)
Analysis: a. Topic 1 ‐ Application of theory/theories: explain briefly what theory or theories (maximum two) you are applying to the situation that is/are associated with your first chosen topic, explain what understanding you have developed about the situation by applying the theory. (about 350 words) b. Topic 2 ‐ Application of theory/theories: explain briefly what theory or theories (maximum two) you are applying to the situation that is/are associated with your second chosen topic, explain what understanding you have developed about the situation by applying the theory. (about 350 words)
Findings and reflections – bring together the key understanding from your application of theory. Explain what you think is the value of the theories for analysing your chosen situation of working with others. What are the benefits and limitations of the theories applied for making sense of your particular situation? From your analysis do you agree with assumptions about how people behave 8 which underpin the theories applied? From what you have learnt from your analysis how will you improve the ways you work with other people in the future? (about 400 words) Please note that for all students to gain fully from any assessment enquiries, your questions about the assessment should be posted on the module Blackboard discussion board and not emailed personally to the lecturer or any tutors on the module. Additionally, there are the bi‐weekly ‘Drop‐in Q&A Sessions’ where you can ask the module leader any questions about the module and assessment. Some general advice on essay writing Use the key references provided in the module reading list as your starting point for understanding theories. You may well want to refer to other sources, but please make sure you focus on academic quality references (for support please see ‐ https://sheffield.libguides.com/guidemanagement ) to explain core theories (i.e. peer reviewed journal articles and books). Remember, as stated above, you need to include at least three references from the module reading list in your essay. General websites such as www.businessballs.com and www.businessdictionary.com must be avoided. It will likely be easier to write your introduction if you have already completed your analysis and have a plan about the key messages that you want to communicate in your essay. You need to make sure that there is a coherent flow and connections made between the parts of the essay so it is clear how it is a joined‐up piece of writing. Your work should be presented with care and attention to detail and have a fluent and accurate written style with appropriate referencing conventions (Harvard style see ‐ https://www.librarydevelopment.group.shef.ac.uk/referencing/harvard.html ). Where quotes and statistics are used make sure you also include page numbers from the reference source. Where the data or theory is more generally taken from a text you just cite the author and year. Make sure you leave time to proof read to avoid poor grammar and unclear sentences. Never purchase an essay/coursework. Purchasing a ready‐made essay, and submitting the same as your work, is the highest level of academic misconduct and is likely to result in expulsion from the university. We strongly advise that you should not entrust the fate of your degree to such organizations and the services they offer. Formatting Essays must be typed in 11 or 12‐point font, and should be single or 1.5 line spaced. Your essay needs to include a completed assignment coversheet which is available on the ‘MGT UG Information Room’ Blackboard site in the section ‘Assessment Guidance and Support’. The essays are marked anonymously so your name should not appear anywhere in the document that you submit. You can include a title for your essay such as ‘MGT120 Individual Assignment’, or it might be something more specific to your chosen situation and analysis. You may use section headings in your essay. You do not need to include a title page, contents list, abstract or executive summary. You need to follow the Harvard referencing approach, please see https://librarydevelopment.group.shef.ac.uk/referencing/harvard.html . The assignment word limits are fixed and anything over the word limit on either submission will be penalised automatically as per the Management School guidelines. The reference list and appendices are not included in the word count. Submitting You are required to submit a single electronic copy only for each essay (which should be submitted on the module Blackboard site via the Management School’s plagiarism detection software, Turnitin). 9 Turnitin Check is available via the ‘MGT UG Information Room’ Blackboard site under ‘Originality Check (Turnitin)’. You are allowed unlimited ‘Turnitin Checks’ per assignment. This allows you to generate an originality report and can be used to help to improve your referencing and citation skills. For the essay use ‘ MGT120‐1’ as the document’s file name, and also as the Assignment Title in Turnitin. It is your responsibility to check you have obtained a receipt for your submission containing the paper ID. You will need to present this if a query around the submission arises. You should allow sufficient time to upload your assignment in case of any technical difficulties. During busy periods it can take in excess of five minutes for work to upload. If you submit your assignment after the deadline late penalties will be applied as per the Management School guidelines. If you are not at the University at the time of the submission then it’s not a problem as submission is completed electronically. Extensions It is possible to agree an extension to a coursework deadline in exceptional circumstances. Forms and guidance should be downloaded from here http://www.sheffield.ac.uk/ssid/forms/circs . All extenuating circumstances forms should be emailed to Syed Mehdi Reza at the SEO in the Management School ‐ s.reza@sheffield.ac.uk . Reassessment You will be required to attempt a new essay of 1500 words by completing a critical analysis through the application of different topics and associated theories to your first attempt.
LAST NAME: FIRST NAME: STUDENT ID#: CORPFIN 2502 Business Valuation Semester 2 2020 ONLINE TEST #1 September 1, 2020 ANSWER KEY INSTRUCTIONS:
This is an individual examination. It is not a group project! Failure to supply individual work will result in a zero exam score!
You have 60 minutes to complete your work on this test.
You may use one two-sided A4-size sheet with your personal notes, equations, etc. to work on this exam. Notes/equations can be hand-written and/or typed.
Use your best judgement and understanding of the material in answering the questions.
I have provided all the necessary information you would need in order to supply an answer. However, if you feel you need to make additional assumptions in order to answer a question feel free to do so as long you are explicit about your assumptions!
If you think that the correct answer to a question is not among the listed alternatives then please write down your answer and clearly indicate that this is what you believe the correct answer is. CORPFIN 2502 Business Valuation 2020 Semester 2 Online Test #1 Page 2 of 4 A. True/False Questions Each true/false question in this section is worth 4 points. There are 10 true/false questions altogether in this section of the exam and they are worth a total of 40 points. Circle T or F (but only one for full credit!) if you believe that the statement is True or False, respectively. T F 1. In the context of DCF, a company maintaining a capital structure policy of a xed level of debt will experience a gradual decline in its levered equity beta in the future. (All all other inputs remain unchanged.) T F 2. In DCF valuation, a company can increase its equity value by borrowing more money provided that the return on capital exceeds the after-tax cost of debt. (Assume all other inputs are xed.) T F 3. A major assumption of DCF valuation is that a company needs to periodically issue debt to match any reinvested retained earnings in order to stay on target with its debt-equity leverage ratio. (Assume all other inputs are xed.) T F 4. The conventional dividend payout ratio will, typically, be smaller than the modi ed dividend payout ratio. (Assuming the company buys back some shares.) T F 5. The amount of money raised by a new equity issue by the rm does not constitute free cash ow to equity. T F 6. In the context of CAPM, a risky asset with = 0 will have a positive expected return. (Assuming the risk-free rate is positive and investors are risk-averse.) T F 7. If the corporate income tax rate increases then greater leverage ratios will lead to an increase in ROE. T F 8. In DCF valuation, capitalizing operating lease expenditures will typically lead to a material change in the company’s EBIT. T F 9. In the context of DDM, a dividend payout ratio equal to 0% implies that the equity value today will be equal to $0. T F 10. Every company with ROE exceeding its cost of equity will be worth even more if mana- gement were to reinvest a larger fraction of the company’s earnings. Date: September 1, 2020 Time: 3:00pm{5:00pm Location: MyUni Quiz Tool CORPFIN 2502 Business Valuation 2020 Semester 2 Online Test #1 Page 3 of 4 B. Multiple Choice Questions Each multiple choice question in this section is worth 6 points. There are 10 multiple choice questions altogether in this section of the exam and they are worth a total of 60 points. Circle (a), (b), (c), or (d) (but only one for full credit!) if you believe that the statement is accurate.
Lot 15 Pty. is forecast to have a dividend growth rate of 7% in perpetuity and its dividend payout ratio (DPY) is expected to be equal to 37% in perpetuity. What is the expected return on equity (ROE) equal to? (a) 11.11%. (b) 18.92%. (c) 33.33%. (d) 66.67%.
Wacky Warehouse Inc. is expected to have a weighted-average cost of capital equal to 9%. The company has a debt-to-equity ratio equal to 2. Wacky Warehouse Inc.’s after-tax cost of debt is equal to 5%. The cost of equity must be equal to: (a) 9%. (b) 17%. (c) 22%. (d) 27%.
Tic Toc Inc. has an expected rate of return on equity next year, ROE1, equal to 12.5% and a dividend payout ratio next year, DPY1, equal to 80%. Tic Toc Inc.’s equity beta is equal to 1 and the company is expected to pay dividend per share next year, DPS1, equal to $1. The long-run risk-free rate is equal to 2.5% while the stock market risk premium is equal to 5%. If Tic Toc Inc. change their dividend payout ratio next year to 60% then their intrinsic equity value per share will be equal to: (a) $10.00. (b) $20.00. (c) $30.00. (d) $40.00.
The ASX All Ordinaries index is currently trading at 6000 points and is widely expected to pay a dividend (DPS1) equal to 360 points next year. At the same time, shares in ABC Corp. are trading at $20 and are expected to pay a dividend next year (DPS1) equal to $1. The consensus analyst forecast is that the growth rate of both ABC Corp. dividends and ASX All Ordinaries dividends will be 4% in perpetuity. The long-run risk-free rate is given as 5%. Assuming that the market prices of the ASX All Ordinaries index and ABC Corp. are ecient, what is the beta of ABC Corp.’s using the ASX All Ordinaries index as the market portfolio? (a) 0.8. (b) 0.9. (c) 1.0. (d) 1.2.
G&T Corp. (GTC) currently has an ROE of 12%, total assets of $1000 and a dividend payout ratio of 50%. GTC’s beta is currently equal to 2 and they have no debt. The marginal corporate income tax rate is equal to 50%. The long-term risk free rate is currently equal to 2% and the expected stock market risk premium is equal to 5%. If GTC increase their debt-to-equity ratio to 1 with an after-tax cost of debt equal to 4% and simultaneously reduce their dividend payout ratio to 40% then GTC’s new intrinsic value of equity will be equal to: (a) $500. (b) $600. (c) $700. (d) $800. Date: September 1, 2020 Time: 3:00pm{5:00pm Location: MyUni Quiz Tool CORPFIN 2502 Business Valuation 2020 Semester 2 Online Test #1 Page 4 of 4
Ouzo AE. is expected to pay a dividend per share next year equal to $1.00 and is forecast to have a dividend payout ratio of 50% in perpetuity. The company is also forecast to have an ROE of 20%. The market price per share is $4 which also happens to equal the intrinsic value of equity per share, i.e., the market price is ecient. What is the implicit discount rate which makes the intrinsic equity value per share equal to market price per share? (a) 10.25%. (b) 17.50%. (c) 20.00%. (d) 35.00%.
Net ex Corp. is expected to have earnings per share next year (EPS1) of $0.12. Analysts expect Net ex Corp.’s return on equity (ROE) will equal 12% in perpetuity. It is also expected that the company’s dividend payout ratio will be equal to 50% in perpetuity. Under the dividend discount model and assuming the intrinsic equity value is equal to the book value of equity, the required rate of return on equity, re, must be equal to: (a) 1.2%. (b) 6%. (c) 12%. (d) 24%.
Quaternion Corp. currently has a rate of return on capital (ROC) of 10% and is expected to be able to maintain that in perpetuity. The company has a debt-to-equity ratio of 1, faces a corporate income tax rate of 50% and pays 4% before-tax interest rate on its debt. Quaternion Corp. is expected to have earnings per share next year of $1 and is expected to have a dividend-payout ratio of 50% in perpetuity. Shares in Quaternion Corp.’s stock are forecast to have an unlevered = 2. The risk-free rate is currently equal to 1% and the market risk premium is equal to 3%. According to the dividend discount model, Quaternion Corp.’s current intrinsic value per share must be equal to: (a) $10.00. (b) $25.00. (c) $50.00. (d) $100.00.
Zero G Inc. currently has an earnings growth rate of 0% which is expected to stay constant in perpetuity. Zero G Inc.’s next year’s dividend per share is expected to be equal to $1.20 and their cost of equity is equal to 12%. What is the intrinsic value of one share of stock in Zero G Inc. equal to? (a) $1.20. (b) $2.40. (c) $10.00. (d) $12.00.
Virion Corp. currently has a book value of equity per share equal to $100. The company is expected to have ROE of 21% and reinvest 100% of its earnings every year over the course of the next 4 years. According to analysts’ forecasts, Virion Corp. will be liquidated at the end of year 4 with a liquidation value equal to the book value of equity per share at the end of year 4. The required rate of return on the company’s equity is equal to 10%. What is the current intrinsic value of one share of stock in Virion Corp.? (Assume that the current, i.e., t = 0 dividend has already been paid.) (a) $100.00. (b) $146.41. (c) $161.05. (d) $177.16. (e) $194.87. END OF ONLINE TEST #1 Date: September 1, 2020 Time: 3:00pm{5:00pm Location: MyUni Quiz Tool
Please watch the three operas at first, thank you!(Link below)
Choose either or both Turandot by Giacomo Puccini and/or Nixon in China by John Adams and compare and contrast with Dream of the Red Chamber by Bright Sheng in terms of its portrayals of China and Chinese culture. Be sure to consider the historical context in which the opera was created and also the background of the composer. Be sure to also consider the music and its role in either supporting or not supporting these depictions of China.
Consider the following questions:
Does the opera contain elements of or embody Orientalism?
Is the opera imperialist in nature?
Does the opera exoticize its subject?
How does the music reflect or support the above
In all cases does the genesis or the composer’s background affect the answers to the above questions?
Critically discuss the importance of teams and team leadership in organisational performance.
Distinguish between workgroups and teams and the leadership thereof.
Critically compare and contrast formal and informal groups within organisations and within wider society.
Critically discuss the stages of group and team development and the role of leadership in maximising group and team performance. Delivery: ▪1x PowerPoint Presentation ▪1x set of speaker notes supporting each PowerPoint slide (circa 500 words) Submission: • 1x set of Speaker notes (circa 500 words) • 1 Powerpoint presentation slide Referencing: • Each PowerPoint must reflect any supporting Harvard style citations. • A comprehensive Harvard style reference list must be included at the end of the presentation. Overall evidence to be submitted: • Case study – 1500 words. • Essay – 1500 words. • Business Presentation (1000-words equivalent). • Presentation speaker notes – 500 words Format of the submission • Font: Time New Roman, Size: 12, Line space 1.5
Among the three companies, Astrobucks has the best financial situation, because it can be seen from the financial statements of both the first year and the second year that Astrobucks has the highest net profit compared with the other two companies. The net profit of the first year is $212,686, while the other two companies are $5,970 and $26,378 respectively.In the second year, the net profit of Astrobucks is $268,346, while that of the other two companies is $6,266 and $33,478 respectively. It can be seen that the net profit of Astrobucks is much higher than that of the other two companies.On the other hand, Astrobucks’ assets and equity are also much larger than those of White Mountain Cofee and Krunchy-Krust-Donuts.In the first year, Astrobucks’ assets and interests were $2,214,392,1,723,189 and White Mountain Cofee’s assets and interests were $54,687 and $27,065, respectively,Assets and interests of Krunchy-Krust-Donuts were $255,376 and $187,667, respectively.In the second year, Astrobucks’ assets and interests were $2,729,746 and $2,082,427, and White Mountain Cofee’s assets and interests were $59,990 and $35,148, respectively,The assets and equity of Krunchy-Krust-Donuts are $410,487 and $273,352 respectively, so it can be seen that the assets and equity of Astrobucks are much larger than the other two.So Astrobucks is in the best financial position of the three.
Among the three companies, White Mountain Cofee has the best performance. From the perspective of profitability, in the first year, White Mountain Cofee’s net profit margin on sales is 6%, return on total assets is 19.53% and return on equity is 17.83%.The net profit margin on sales of Astrobucks is 6.58%, return on total assets is 12.78%, and return on net assets is 12.34%. The net profit margin on sales of Krunchy-Krust-Donuts is 6.69%, return on total assets is 16.4%, and return on net assets is 14.06%. In the second year,White Mountain Cofee had a net profit margin on sales of 5.4%, return on total assets of 21.87% and return on equity of 16.99%, while Astrobucks had a net profit margin on sales of 6.47%, return on total assets of 14.15% and return on equity of 12.89%.The net profit rate on sales of Krunchy-Krust-Donuts is 6.81%, the return on total assets is 14.57%, and the return on net assets is 12.25%. It can be seen that the return on total assets and return on net assets of White Mountain Cofee are higher than those of the other two companies.And the second year increased from the first year, so in terms of profitability, White Mountain Cofee was the best performer of the three companies.
In terms of debt paying ability, in the first year, White Mountain Cofee’s current interest rate, quick ratio and cash ratio were 150.19%, 100.25% and 6.8% respectively; in the second year, the current interest rate, quick ratio and cash ratio were 169.33%, 113.43% and 3.76% respectively.
It can be seen that the short-term solvency of the second year has increased compared with that of the first year. The possible reason is that the company is gradually reducing the proportion of current liabilities, which can keep the company in a state of sufficient liquidity and guarantee the company’s future financing ability with liabilities.
In the first year, the asset-liability ratio, equity ratio and equity multiplier of White Mountain Cofee were 50.51%, 102.6% and 202.06% respectively. In the second year, the asset-liability ratio, equity ratio and equity multiplier were 41.41%, 70.68% and 170.68% respectively.
It can be seen that the company increases the proportion of long-term debt in the second year. Since the interest of long-term debt can act as a tax shield, it can reduce the weighted average cost of capital of the company to some extent, thus helping to improve the profitability and value of the company.
However, it is worth noting that when the proportion of debt is too high, the cost of financial crisis brought by debt may be higher than the income brought by tax deduction. Therefore, the financial leverage ratio should be kept within a reasonable range, which is still within a reasonable range at present.
In terms of operating capacity, in the first year, the accounts receivable turnover, inventory turnover, current assets turnover, fixed assets turnover and total assets turnover of White Mountain Cofee were respectively 1095.05%, 972.33%, 565.90%, 270.15% and 182.86%.
The accounts receivable turnover, inventory turnover, current assets turnover, fixed assets turnover and total assets turnover of the second year are respectively 918.53%, 907.11%, 516.22%, 312.29% and 194.58%, thus it can be seen that White Mountain Cofee has a strong operational capacity.
Turnover are at a higher level, the second year of turnover has decreased from the first year, mainly because the White Mountain Cofee is in order to improve the level of earnings and to a certain extent, reduce the turnover rate, but it is worth noting that while reduce the turnover rate can improve profitability in a certain extent, but also increase the management risk of the enterprise,
Therefore, the turnover rate must be kept at a reasonable level. At present, the turnover rate of White Mountain Cofee is within a reasonable range.
Zhang, J., Wang, H., Wang, Y., Xue, H., Wang, Z., Du, W., … Zhang, B. (2015). Dietary patterns and their associations with childhood obesity in China. British Journal of Nutrition, 113(12), 1978-1984. https://doi.org/10.1017/S0007114515001154
The authors divide this article into three main sections: methods, results and discussion, which help the reader locate information clearly and provide a cohesive overall structure. In the beginning, they clarify that their purpose is to determine the typical dietary patterns of Chinese children as well as their relationship to childhood obesity. Secondly, specific survey methodology such as standard method and odds ratio calculation are provided as evidence in support of the correlation between obesity and diet. Finally, the results indicate that high intakes of energy and low nutrient-density are major contributing factors leading to childhood obesity. This book is dependable as the part of data is supported by the National Institutes of Health (NIH) which is one of the most influential medical research centers in the world. Nonetheless, one possible shortcoming of this article which is mentioned by the authors is that different cultural and geographical conditions affecting child obesity in northern and southern China have contributed to the difficulties of obtaining accurate survey results.
Kelly, S., & Swinburn, B. (2015). Childhood obesity in New Zealand. The New Zealand Medical Journal, 128(1417), 6-7. Retrieved from https://www.nzma.org.nz/journal
This article was written by a surgeon and a university professor who is an expertise of population nutrition and global health fields, which represents academic style and professionalism. Initially, they introduce the background of severe obesity of children in New Zealand where the proportion of overweight and obese is the third largest in the Organization for Economic Co-operation and Development (OCED). Moreover, the overconsumption of unhealthy food is considered by the authors to be a crucial factor which has contributed to childhood obesity. Finally, the authors propose numerous effective strategies for the government to combat childhood obesity including policies and regulations. This article is supported to be reliable as the authors provide authoritative sources such as the New Zealand government to demonstrate the feasibility of its solutions. Nevertheless, the lack of statistical data to support the notion that unhealthy food can cause childhood obesity is a weakness.
This article mainly focuses on analyzing the causes of childhood obesity and formulate some approaches. In addition, the authors mention that more than 30% of New Zealand children are overweight while 11 percent are obese, which can be used in the research essay to illustrate that childhood obesity has become a widespread phenomenon in New Zealand. Furthermore, they identify several solutions including prohibiting retailers from marketing unhealthy food to children, as well as imposing additional taxes on sugary drinks. These strategies can be regarded as a specific example for the government should issue policies to alleviate the excessive ingestion of unhealthy food among children.
The authors begin by providing an assessment of the state of childhood and adult obesity in New Zealand and discussing the negative effects of obesity on the public. For instance, obesity is implicated in certain forms of cancer such as kidney and gallbladder. They then evaluate strategies such as enhancing the awareness of preventing obesity and restricting the advertising of unhealthy foods. This article is reliable as it was from the New Zealand Medical Association which is a reputable governmental source and included a detailed reference list with credible medical sources. The strength of this article is to not only discusses the means of managing and reducing the existing obesity crisis, but also to identify and evaluate precautionary measures. However, a distinct weakness of this article is that the subjects in the research are mainly Maori and Pacific children, while ignoring all the children from different background in New Zealand such as Asian and European. Thus, the accuracy of survey results may be doubtful.
This article discusses both the dietary and lifestyle cause childhood obesity in New Zealand and has suggested multifaceted policy recommendations. The article explains that Project Energize, a nutrition and fitness initiative, has reduced the obesity rates of younger and older Waikato children by 31 and 15 percent between 2006 and 2011 by providing nutritional and physical fitness advice. Thus, these data can be used as an example to prove that physical activity is a practical approach to address the childhood obesity issue. Moreover, the author contends that encouraging public service centers to promote food and nutrition guideline, as well as providing nutrition as the compulsory subject in school to tackle obesity. This point can directly support that taking action against childhood obesity is the obligation of the whole society including schools and the public.
Assessment Topic: Summarise and discuss three course readings
Worth: 40%
Length: 2500 words
Due: End of Week 8 @ 11.00pm by Blackboard
Introduction
This briefing note is to assist you in gaining an orientation on how to complete the essay, information regarding the 3 required readings and some direction to useful resources.
If you feel clear about what is expected please proceed without this briefing note.
Please read the detailed description of the assessment format and criteria in the Course Outline and if you are unclear about what is required, please contact your tutor or discuss with student colleagues. Or ask a question in the lecture. This can save you a lot of wasted time.
We will be marking closely to the marking criteria – see the marking rubric also provided on Bb – so do be sure to include relevant content against each criteria. It will not be sufficient to describe what the authors say – we want to know what you think of their ideas.
Word length is one of the criteria components and will be adhered to – you must avoid writing anything in excess of 2500 words (+ 10% allowable) not including end of text references or direct quotes.
We suggest you write about one of the three required readings at a time, then make some comparison comments at the end as well as critically discerning comments. You need to use other references to back up your claims – some likely to be useful additional references are any provided so far in weekly modules in the Learning Materials section or Course Readings on Bb and others available in the yet to be conducted lectures – these lectures are provided in draft form until the week preceding actual lecture. The related materials should be self-explanatory.
Whenever you are citing one of the three required readings (or any other reference), please be sure to include reference citation. Referring to the readings and not to do so can constitute plagiarism so do be careful in this regard.
The Three Required Readings
You must use the following readings as the basis to this assessment:
Germov, J 2014/2018, ‘Imagining health problems as social issues’, in J Germov (ed.), Second opinion: an introduction to health sociology, 5th edn, Oxford University Press, South Melbourne, pp. 5-22. [e book version on Course Readings list on BB]
Thompson, N 2011/2018, Chapter 5: ‘Health and the medicalization of inequality’, in Promoting equality: working with diversity & difference, 3rd or 4th edn, Palgrave Macmillan, London. [See Course Readings list on BB]
McMurray, A & Clendon, J 2012/2015, ‘Creating and maintaining a healthy community’, Community health and wellness, Elseiver, Chatswood, pp. 4-23. [See Course Readings list on BB]
About the Readings
In relation to the three readings, you need to provide a comprehensive summary but this does not mean you have to mention every point the author makes. In the lecture early in semester we will give a briefing and also provide some key concepts for each readings which should be covered. Then you might focus on one or two key arguments by the author more and explore these in some depth. For example, in the Thompson (2011/2018) chapter, after providing a comprehensive summary, you might wish to focus on gender inequality and the health implications as Thompson sees it and augment with relevant Australian examples and further theoretical points from other sources. But do be careful not to spend too much of the essay on giving an example as this may not sufficiently address the marking criteria.
The readings are quite different from each other and this could be a challenge on your first read of them. Thompson (2011/2018) is quite complex theorising broadly on health and the dominance of the medical model. He is from the UK and so his ideas are not directly contextualised to Australia. Germov (2014) provides an overview and introduction to the sociology of health and so goes less into depth but it is an Australian text. McMurray & Clendon (2012/2015) are also Australian and their chapter gives some ideas that draw from an approach which is compatible with the social model of health.
Key Concepts
You may wish to make sure you address some of these concepts or aspects of the models of health –
Agency versus structure
The sociological imagination
The medical model
The medicalization of inequality; dominant medical discourse
The social model
The social construction of health
The social determinants of heath
Privilege
Stigma
Sustainability
Social injustice/inequality
Social difference
It will not be possible to define and discuss all these ideas in every way, so do think carefully about what you think needs to be focused on. There are other ideas discussed by the authors you may wish to include in your essay. Remember the lecture notes have covered these ideas as well.
Addressing the Marking Criteria
Briefly the assessment requires you to:
Show you understand the main points of the 3 readings
Show you can explore them using critical thinking … discerning thinking
Provide a developed summary statement of all 3 readings
Use at least 5 other references to support your claims, and use of Germov (2014/2018) is recommended
Construct an essay according to academic protocols – see detail in Course Outline.
Note:
You will need to access other references from the course and elsewhere to back up your claims about the 3 required readings – ie at least 3 references and this can include strong use of Germov (2014/2018) – this is an edited book and so you can use several chapters as each are separate references. You can use lecture notes provided you adequately reference them and the reference is not available in the provide e reserve materials. If the lecture notes are quoting someone you need to reference it as such.
Thus, for comments by the lecturer:
In text/paper
(Ross, 2018 slide 6)
End of text/paper
Ross, D 2018, ‘Social difference and health’, lecture notes, Week 4, USC.
And for citing another source used by the lecturer:
In Text
(Thomson cited by Ross, 2018 slide 6)
End of text
Ross, D 2018, ‘Social difference and health’, lecture notes, Week 4, USC.
1 Queen Mary University of London School of Business and Management M.Sc. (Management), M.Sc. (Innovation and Management) and M.Sc. (Marketing) BUSM145 Research Methods (2020/2021) Research Proposal Assignment The aim of the proposal The research proposal requires you to demonstrate your ability to identify, analyse a research problem related to business and management, and to set out a plan for a research project to investigate that problem. The aim of this assessment is to enable you to develop and demonstrate your ability to: (a) diagnose a problem in business and management, (b) arrive at the consequent research questions, (c) determine how to answer these questions by drawing on the academic literature, (d) assess the potential of different research methods and (e) plan a small-scale research project. Your report is intended to form the plan for how you might use the literature (by drawing on the ideas and findings of others), design a research project and analyse the findings. This report is among the most challenging assignments set during the M.Sc. programmes. You are being asked to anticipate the issues that will confront you in conducting a small research project. Thus it is quite different from, and more difficult than, writing a conventional coursework paper. The best reports are usually those produced by those students who have devoted considerable thought to the assignment before even beginning to write the report. Your choice of problem for the project proposal report does not commit you to that topic for your dissertation. You can just complete the report as a free-standing exercise in which you are assessed on your ability to analyse a problem, grasp the arguments and the evidence contained in the literature and devise a suitable research design. You are free to select a different topic for your dissertation if you so wish, although there are obvious advantages in sticking to a topic to which you have already given thought and invested some work (although you must avoid cutting-and-pasting parts of the proposal into the dissertation). The Research Proposal requirements The report must include the following main elements:
Title. This can include a subtitle and should indicate what the research is essentially about. (5%) 2
Abstract. The abstract sums up the research problem/questions, research design and methods, and relation to the literature and/or practice. (10%)
Introduction in the form of a statement of the problem to be addressed. This introductory material will include a clear statement of the problem, the question(s) to be researched, the importance of those questions and an indication of the potential role of business and management theories in answering the questions. The introduction should have clear labelling of the aim and objectives. (15%)
A summary critical review of the relevant literature, both theoretical and applied. This section will indicate what can be learnt from the current literature and will seek to identify some of the strengths and weaknesses of that literature. You are not expected to provide a comprehensive guide to the literature but you are expected to communicate an understanding of some of the main ideas, theories and evidence relating to your topic. You must refer to the academic literature and not just to the professional literature (note that the former usually involves seeking an in-depth and critical understanding of problems while the latter is usually restricted to matters of ‘how-to-do-it’). (30%)
An outline of the proposed research design and methods. You should outline the research design and the likely methods, taking care to point to the strengths and weaknesses of your proposed research methods. You must demonstrate that the research can be done within the constraints of the M.Sc. dissertation process, that you have good reason to believe that the necessary data is available and can be collected, that your choice of method(s) is reasonable and likely to produce reliable and valid results, and that you have considered any ethical questions raised by the research. (20%)
Conclusion. The conclusion summarizes the problem, the purposes of the study, the research question/s, and the methodology. It should also acknowledge any ethical issues and the possible limitations of the approach (e.g. generalizability from limited number of cases). (5%)
Presentation. Appendix, references, and general presentation of the work. Using the Harvard approach to referencing and the references are done correctly in alphabetic order. The format of the references is correct. The Appendix only has the required sections, if any. The general structure of the proposal is correct as above with section and subsection numbering. Diagrams and tables are numbered, captioned, and presented correctly. (15%) To pass the assignment, you must include all these key elements. However, you do not have to devote an equal number of words to each of them. In particular, the statement of the problem is very likely to be shorter than the other elements. What you should NOT do (these reflect the failings of past research proposals) • Do not write an essay about a general topic. 3 • Do not just describe the application of a particular management technique or method (e.g. TQM, a project management technique), you must analyse the underlying problem and critically evaluate the alternative ‘solutions’. • Do not write a literature review that is solely or largely dependent on pop management books or the professional rather than the academic literature. • Do not write a literature review in the form of an annotated bibliography. • Do not write a general essay on research methods. Instead critically evaluate those methods you are likely to use. • Do not include lots of incidental, trivial detail about how you would actually carry out the research. What makes for a good topic for the report? (Further guidance will be given in class)
Are you interested in the topic? You are going to spend a lot of time studying it, and if you are not interested, your motivation will be low.
Is the topic relevant and timely? A good way of finding a topic is to ask yourself what issues are of current concern in the academic and professional literature. Another way is to consult your former or present employers.
Is the topic specific enough? Most students start with too broad a topic. Usually, the more successful project report/dissertations have a specific and clearly defined problem and set of research questions. A dissertation that goes deeply into a narrow topic is much better than one that touches the topic’s surface.
Can the topic be completed in the time available? Most students begin with an overly ambitious topic. Remember that you have only a short period of time in which to plan and research the topic. Can you obtain the necessary data? You can, at this stage, just indicate the main issues involved in gathering the necessary data or information.
Have you the skills to use the necessary research methods? You should avoid committing yourself to use a research method which involves skills which you do not have, for instance avoid highly quantitative methods if you are uncertain of your numeracy skills.
Are there any ethical issues involved, such as problems of confidentiality? What makes for a good research proposal There are many ways to write a project proposal report, and we have no particular model answer in mind. The following are some of the points we are looking for: 4 • You must have a problem which you can analyse, define and for which you can devise feasible research questions. • You should explain the main issues in your chosen topic and their wider academic and practical relevance. • When reviewing the literature, you should communicate an awareness of the quality of the evidence on which an author draws and of the methodological issues posed by the way in which that evidence has been gathered. • You should give a sense of how the literature has developed and identify the main themes of schools of thought in the literature. How do later articles and contributions in books build on the earlier results findings, and ideas in the literature? • Most importantly, you should be critical and evaluative. Do not just describe the literature you survey, explain why the authors have arrived at the conclusions they have. State whether you consider the authors have achieved their aims. Explain any weaknesses you feel there are in specific articles or books and, if possible, how those weaknesses could have been overcome. It is better to evaluate critically fewer references rather than cite many references with little critical appraisal. • You should indicate the wider significance of your study – what are the wider implications of what you have found both for the academic literature (whose approaches/viewpoints/hypotheses do your findings support?) and for practice (e.g. should people in organizations do things differently as a result?). • Observe the usual requirements for a good presentation – be grammatical, use punctuation marks correctly, try to avoid jargon etc. You should use headings and sub-headings to organise your material. Formal Requirements The report should be no more than 3000 words in length (excluding the bibliography), with a 10% upper limit and should be organised as indicated above. The report should be double-spaced, well presented and structured. Appendices should only be used when judged to be strictly necessary to the understanding of the project. The work should use the Harvard system of references, and all references should be included in a properly presented bibliography. Marking descriptors (80-100) Exemplary definition of a relevant research question, very focussed and critical literature review, very clear and concise research design, convincing rationales for the suggested research method(s), outstanding description of the suggested method(s) and critical reflection on the research limitations. (70-79) Excellent definition of a relevant research question, well focussed literature review, development of a clear research design, good rationales for the suggested 5 research method(s), excellent description of the suggested method(s) and good reflection on the research limitations. (65-69) Very good definition of a relevant research question, thorough and comprehensive literature review, development of good research design, good rationales for the suggested research method(s), very good description of the suggested method(s) and good reflection of on the research limitations. Merit (60-64) Good definition of a relevant research question, sound literature review, development of good research design, good rationales for the suggested research method(s), good description of the suggested method(s), and adequate reflection on the research limitations. Pass (50-59) Definition of a relevant research question, basic literature review, development of good research design, adequate rationales for the suggested research method(s), adequate description of the suggested method(s), and reflection on the research limitations.
This assignment will cover topics studied in weeks 2-6 of the course. Choose ONE (1) of the topics from the list below. Research the topic using good quality academic sources, such as books, book chapters and articles from academic journals. You may use material from the list of assigned readings where relevant, however, you are also expected to conduct independent research. Develop your own critical response to the topic based on your research and textual analysis, and use these results as the basis of a coherent, well-supported argument. Please note you may not pick a topic that you already discussed for assignment 2.
The essay must be typed, properly referenced and contain a bibliography of at least FIVE (5) academic sources. It is very important that you reference adequately and correctly. This will allow you to demonstrate good scholarship, and also to avoid allegations of plagiarism (see course outline).
Topics
Discuss the defining features of the Classical Hollywood style using TWO films to illustrate your argument.
Discuss the legacy of the French New Wave on contemporary cinema using TWO films of your choice.
Discuss the differences (in aesthetic, production and distribution terms) between contemporary Hollywood and a small national cinema such as the New Zealand one using TWO films of your choice as examples.
Compare the different stylistic and thematic strategies deployed by TWO Third Cinema films to articulate their respective political messages.
Choose TWO films and discuss the extent to which they can be considered Fourth Cinema. In doing so, take into account Barry Barclay’s definition of Fourth Cinema.
Submission The essay must be submitted by the deadline on Blackboard (see relevant link in the ‘Assignment 3’ folder).
Assessment Criteria:
Fulfilling the set task in a clear, direct, relevant and complete manner
Clear evidence of engagement with the ideas and materials discussed in class
Clear evidence of independent research, including the use of academic articles, chapters and books
The originality of your findings. This will include your ability to engage in textual analysis, and develop and express new ideas
ECON 330 Problem Set I(Due in class by the date stated on the syllabus)You can work the problems in groups and turn in a single answer sheet with your names on it. 1.(Probably you want to do it in excel or your spreadsheet of choice) Consider the following table with the values for two variables at three points in time.tY(t)X(t)1950100,0001001951104,0801012000815,900210For the growth rate between 1950 and 1951 and the average yearly growth rate between 1950 and 2000.a)Calculate them exactly, i.e. without using the log approximation.b)Calculate them using the log approximation.No consider an additional variable, Z(t), which is defined in the following waysi)Z(t) = Y(t) * X(t)ii)Z(t) = Y(t) / X(t)iii)Z(t) = Y(t)^2iv)Z(t) = 2 * Y(t)c)Calculate the values of Z(t) in each case, for the three years under considerationFor the growth rate of Z(t) between 1950 and 1951 and the average yearly growth rate between 1950 and 2000.d)Use the data in c) to calculate them exactly, i.e. without using the log approximation.e)Use the data in c) to calculate them using the log approximation.f)Use only data from your answers tob) to calculate the growth rates of Z(t).By now you should be convinced that the log approximation works well. In the remaining of the course feel free to use any of the two methods (exact or logs).2. Consider three variables that change through time; xt(),yt()and zt(). The first two variables grow at the constant rates gxand gyrespectively. Calculate the growth rate of zt()in the following cases, where kis some constant.a) zt()=kxt()yt()b) zt()=xt()()kyt()c) zt()=xt()()kyt()()k−1d) zt()=−1yt()
Jason Ltd is a company with only one product, and spare capacity – that is, it could make and sell more if only there was a greater demand for the product. We are given the following information: Normal production Selling price per unit 40 Total variable costs per unit 30 Units demanded 5,000 The fixed costs of Jason Ltd are £40,000. Jason Ltd has now received an order for an additional 1,000 units but the purchaser is only willing to pay £36 per unit for these extra 1,000 units. What should the company do with this extra order at the lower price? Show all the calculations necessary to arrive at your conclusion.
Project description
Organize Meeting and Interpretation (OMI) is an worldwide agency that offers event company for international leaders to build up and communicate critical worldwide issues. OMI determines the place for the meeting, meeting begin and prevent dates, quantity of periods in every assembly, start and give up times for each session, and assigns interpreters to each meeting. The interpreters have a fixed of language competencies. Each assembly has a fixed of language interpretation desires, and interpreters are assigned to each assembly consistent with the languages spoken within the assembly.
Currently, OMI’s operations are supported via a legacy machine that runs on pc systems Windows running tool. The OMI staff access the legacy application via a shared folder. The database supporting the application is a Sybase database management device. Because of the nature of computing device programs, the OMI system is not to be had through a browser, and those pts boundaries at the OMI personnel, while they will be visiting and would really like to get admission to the machine.
OMI is looking to beautify their gadget and migrate their machine to a Web software and migrate their database into Cloud.
The new machine, TO-BE machine, so one may be a web utility with a database in Cloud, need to be capable of the following functionalities:
· Allow OMI employees to login and get right of entry to software competencies in keeping with their roles
· Allow OMI staff to create new meeting, assign begin and give up dates, crate one or greater periods for every meeting with begin and surrender times, choose out one or extra languages for the assembly, assign interpreters in keeping with the language desires of the meeting, assign a meeting room consistent with the extensive style of humans attending the meeting, and choose out the region of the assembly.
· The tool shall allow net get right of entry to by meeting attendees and allow on-line registration for the meeting.
· The machine shall permit electronic mail notifications to attendees of the meetings
Th tool have to have the subsequent characteristics:
· Fast response while a person logs in and uses the gadget
· The look and sense of the internet pages need to be consumer best
· Users have which will use the device with out problem
· The device must be secure
The interpreters are identified through their first call, ultimate name, schooling, languages they recognize and diploma of competence in their languages, and their address of house.
The meeting vicinity is recognized by means of name, street deal with, town name, state/province, united states of america call.
A meeting is identified with the aid of assembly call, start and stop dates, and associated lessons.
Create Use case diagrams and use case descriptions for TO-BE tool for the above challenge.
Create Business procedure modeling with pastime diagrams for the above mission.
Identify instructions for the above project. Draw a Class diagram of the device for the above mission.
Draw an ERD (Entity Relationship Diagram) for the above venture.
Find a mockup screen of the consumer interfaces for the above challenge. Include the Navigation form design.
System implementation: Find internet software or a computing tool utility for the above undertaking.
Problem 3:Home Station Inc. is reviewing its weekly sales. The sales data is reported by each department manager and can be found in HW1 Sales.txtfile. The owner wants to rotate the department managers in each of the store’s departments, so each manager becomes more familiar with the entire store’s operation. Your task is to determine the impact of rotating the managers on store sales by quarterly sales by department and by manager. You are to use Tableau application on this problem. If it is easier, rename your variables after connecting your text file to Tableau or import the data to Excel, then connect the Excel file to Tableau. Create the appropriate sheets to analyze the department sales by quarter. (Hint: You will need to readjust/regroup your data by quarters).1.Which department had the highest quarterly sales and in which quarter did it occur?(create sheet 1 with Department field in rows, Sales and Date fields in columns, Sales fieldwill re-adjust itself). Display your results using Text Tableoption.2.Which manager had the highest sales for each department? In which quarter did the manager’s highest sales occur? (create sheet 2 with Manager field in row, Department and Sales fields in columns). Display your results using Highlight Tablesoption.3.Which department resulted in the highest sales?(create sheet 3 Department field in columns, Manager and Sales fields in rows).Display your results using Box-and-whiskerplots option.4.From the above results, which manager would you choose to manage each department on a long-term basis? Support your recommendations with values from the Tables.5.Your results should be added to a Dashboard, give each sheet an appropriate name, print the dashboard to PDF using HW1LastnameFirstnameProblem3.Problem 4The file HW 1 2012FuelEcon.xlsxcontains 309 cases extracted from the U.S. Environmental Protection Agency’s 2012 Fuel Economy Guide data for 2012 model years cars and trucks. The variables include:•company that manufacturesthe cars•engine displacement (in liters) •fuel types (regular or premium gasoline)•type of wheel drive (A = all, F = front, R = rear)•fuel efficiency rating for highway driving in terms of miles per gallon (HWY MPG)Usingrisk value at 5%, youare to perform the following tasks:1.Perform descriptive statistics on the given variables. Comment on the results.2.Develop an estimated regression equation to predict the fuel efficiency for highway driving given the numerical independent variables. 3.Consider the categorial variables given, develop an estimated regression equation to predict the fuel efficiency for highway driving given all independent variables. (Hint: you will need to use dummy variables).4.Based on the above results(questions 1, 2, 3), give your comments, recommendations and conclusions.Note:For this problem, you can use either Excel or SPSS for your analysis.You are to address all regression assumptions in this problem (see Chapter 2 Slides-part 3).
HOMEWORK 1There are four (4) problems in this homework. In order for you to receive full credit, you must answer the questions thoroughly. For problems2, 3and 4, perform the appropriate analyses and answer each question thoroughly as specified in the problem.This homework assignment contributes to 3% of the course grade.SUBMISSION REQUIREMENTS•Create a new MS Word file called HW1LastnameFirstname(e.g. HW1NewbyThuyuyen). Do not use the actual word “LastnameFirstname” as the name of your file. •Answer questions in each problem in the order in which they are given.•For an example on how to structure youranswers, see “Solutions to Practice data file: AmusementPark Writeup” file posted on the course website in Week 3.•Save and submit the file to Homework 1 submission link on Titanium. •You are also required to submit three(3) output files for problems 2, 3and 4which will contain the analyses that you performed to answer the questions in the problems. If you are using SPSS, submit the output file *.spv only. Problem 1:Read the Application Case 1.4: Analyzing Athletic Injuries, in your textbook, page 26. Answer the following questions?1.What types of analytics are applied in the injury analysis?2.How do visualizations aid in understanding the data and delivering insights into the data?3.What is a classification problem?4.What can be derived by performing sequence analysis?Problem 2:Johnson’s Corporation is in the process of reviewing its sales between January 2012 and March 2013. The sales data isprovided in a text file called HW1 Pacific Region.txt. You are to convert the data to Excel and construct PivotTable(s) to answer the following questions. 1.What are the total number of orders from each state? Provide both values and an appropriate chart for this question.2.What are the average total sales(January 2012 throughMarch 2013)from each state?Provide both values and an appropriate chart for this question.3.Show the average number of orders from each city, by thestateof Alaska(Hint:use the filter option for the State/Prov).Note: You will need to cleanup your data before you can use them in the PivotTable.
Question 3a.According to annual stock data, Facebook has paid $0 dividend from 31 Dec2012 to 31 Dec 2018. Facebook has never declared to pay any cash dividendfor the purpose of retain earning to finance the operation and expansion(Facebook Inc 2018, p.28). b.During the period from 31 Dec 2012 to 31 Dec 2018, Facebook repurchased1,132 shares in 2015, and there was no other share repurchased in year 2012,2013 and 2016 (Appendix 7). Until November 2016, it was announced thatshare repurchase program of up to $6.0 billion stocks commencing in January2017, with no expiration date (Facebook Inc 2016, p.24). Following theannouncement, Facebook buyback in total 5,840 shares during 2017, and25,708 shares in 2018 (Appendix 7). During 2015, Facebook exercised their rights to repurchase the unvestedacquisition share, as the recipience of the unvested shares are no longer employedby Facebook (Facebook Inc 2015, p.28). It was not a publicly announced plan orprogram, and the share was purchased directly from specific shareholders, thereforeit’s very likely that Facebook used ‘Targeted Repurchase’ as the form of sharebuyback in 2015. Furthermore, in 2017 and 2018, the shares were repurchasedthrough open market purchases or privately negotiated transactions (Facebook Inc2018, p.79). The price decreased to almost 40% of the peak price due to scandal in2018, and also there was a significant quantity of shares to be repurchased, buybackthrough the open market could be the most flexible and cost-effective way as thetiming of the share repurchase minimizes price impact while taking advantage of theshare price under-valuation (Rodriguez,2018).c.Facebook’s annual report stated that it never declared and did not expect topay any cash dividend, the intention is to retain its earnings for the purposeof accelerating corporate growth and expansion. Facebook prefers payouts inform of share repurchasing over cash dividends for a few reasons.Shareholders are effectively taxed twice in the year when receiving cashdividends, which leads them to pay an unnecessarily higher tax (Fedorov2017). Moreover, payout dividends reduce the earnings to finance expansion,likely slowing down the growth of share prices. Facebook implemented alarge number of share repurchasing in 2018, due to the extremely low stockprice, which Facebook believed was undervalued. Stock buyback indicates theremaining shares became more valuable to investors and higher EPS, whichalso lead to appreciations in share price. Therefore, buybacks are beneficialfor investors by enhancing shareholder value, and creating tax beneficialopportunities. The payout policy of Facebook is quite consistent with firms in the sameindustry, such as Google, Snapchat and Twitter that payout as forms of sharerepurchase, and no dividend payout due to IPO (Appendix 8). These major socialmedia players are all mature firms that mostly focus on developmentand expansion
Due Sunday by 11:59pm Points 100 Submitting a file upload Available Sep 20 at 12am – Sep 26 at 11:59pm 7 days
Tables for a Retail Company
Figure 5.31 Completed Exercise
Retail companies with today’s online, as well as, in-store sales have a lot of data to keep track of! Keeping track of sales, costs, and profits on a daily basis is essential to making the most of a business. This exercise illustrates how to use the skills presented in this chapter to generate the data needed on a daily basis by a retail company. See Figure 5.31 above.
When saving files for submission, include your last name in the file name.
Open the data file SC5 Data from the Data Files and save the file to your computer as SC5 Dynamite Customer Sales.
Click on the Sales sheet. In I4, enter a VLOOKUP function that will find the Product Price for the Product in E4 in the table in the Product Table sheet and return it to I4. In your VLOOKUP function, fill in the required parameters using Figure 5.32 below. Copy the VLOOKUP function down column I.
Figure 5.32 VLOOKUP window
In J4, enter a VLOOKUP function that will find the Product Cost for the Product in E4 in the table in the Product Table sheet and return it to J4. This VLOOKUP function will be the same as the VLOOKUP function in I4 – Except the Col_index_num will be 3 instead of 4. Copy the function down column J.
In K4, calculate Profit (Product Price – Product Cost). Copy this formula down column K.
Format columns I, J, and K as currency with two decimal places.
Click in cell A3. Insert a table with headers for the range A3:K52. Be careful here: Excel will try to insert a table starting with A2. You want to make sure your range starts with A3 here.
Make a copy of the Sales sheet and rename it Online Sales by Date. Place this sheet to the right of the Sales sheet. Filter out Retail in Sales Type, so that only Online Sales are displayed. Sort the filtered data by Date Sold (oldest to newest).
Make a copy of the Sales sheet and rename it June Sales by Country. Place this new sheet to the right of the Online Sales by Date sheet. Filter this sheet to only show June dates by using the Date Filter Between. Sort this sheet alphabetically (A to Z) by Country and then alphabetically by Name.
Make a copy of the Sales sheet and rename it Subtotals by Date. Subtotal the sheet by Date (Oldest to Newest), summing the Profit column. Click the 2 Outline button to show just the subtotals by date and the grand total.
Make one final copy of the Sales sheet and rename it Subtotals by Type. Place this new sheet to the right of the Subtotals by Date sheet. Subtotal the sheet by Sales Type, summing the Profit column.
Add a 2nd subtotal to the Subtotals by Type sheet that subtotals by Type and averages the Profit column. (Hint: uncheck Replace Current Subtotals in the Subtotal dialog box.) Notice that 4 Outline buttons appear with the 2nd subtotal. Figure out which Outline button to click to display both subtotals for Online and Retail and two Grand Totals.
Preview each worksheet in Print Preview and make any necessary changes for professional printing. (Hint: Orientation, page scaling, and print titles might need to be used)
Double-check that your sheets are in the following order from left to right: Sales, Online Sales by Date, June Sales by Country, Subtotals by Date, Subtotals by Sales Type, and Product Table.
Save the SC5 Dynamite Customer Sales workbook.
Submit the SC5 Dynamite Customer Sales workbook as directed by your instructor.
Attribution
“5.5 Scored Assessment” (Links to an external site.)
by Diane Shingledecker, Portland Community College (Links to an external site.)
is licensed under CC BY 4.0 (Links to an external site.)
Can someone compose a concept map by using key words (sometimes enclosed in shapes such as circles, boxes, triangles, etc.) and then using arrows between the ideas that are related.
Show what are the effects of globalization in personal life;
1. As a student 2. As a Filipino 3. As a Global citizen
consider the following:
1. Shows an understanding of the topic’s concepts and principles and uses appropriate terminology and notations.
2. Identifies all the important concepts and shows an understanding of the relationships among them.
3. Constructs an appropriate and complete concept map and includes examples; places concepts in an appropriate hierarchy and places linking words on all connections; produces a concept map that is easy to interpret.
CHAPTER 3: FINANCIAL STATEMENT ANALYSIS TOOLSInstructor’s Manual Problem SetSolutions can be found in the accompanying Excel files. Note that if you wish to see all of the formulas at once, you may use the CTRL+` (Control plus grave accent) shortcut key to toggle them on or off. 1.Sweet Dreams Corp. has prepared the following financial statements:Sweet Dreams Corp.Sweet Dreams Corp.Income StatementBalance SheetFor the Year Ended Dec. 31 2017As of Dec. 31 201720172016Assets20172016Sales3,074,0002,567,000Cash431,000339,000Cost of Goods Sold2,088,0001,711,000Accounts Receivable503,000365,000Gross Profit986,000856,000Inventories289,000300,000Selling and G&A Expenses294,000295,000Total Current Assets1,223,0001,004,000Fixed Expenses35,00035,000Gross Fixed Assets4,669,0004,322,000Depreciation Expense239,000223,000Accumulated Depreciation2,295,0002,056,000EBIT418,000303,000Net Fixed Assets2,374,0002,266,000Interest Expense93,00091,000Total Assets3,597,0003,270,000Earnings Before Taxes325,000212,000Liabilities and Owners’ EquityTaxes94,00064,000Accounts Payable382,000270,000Net Income231,000148,000Short-term Notes Payable79,00099,000Accrued Expenses159,000114,000Total Current Liabilities620,000483,000Long-term Debt1,023,000967,000Total Liabilities1,643,0001,450,000Common Stock819,000808,000Retained Earnings1,135,0001,012,000Total Shareholder’s Equity1,954,0001,820,000Total Liabilities and Owners’ Equity3,597,0003,270,00015Chapter 3: Financial Statement Analysis ToolsInstructor’s Manual Problem Seta)Set up a worksheet similar to the one in Exhibit 4-4, page 124, and calculate all of the ratios for Sweet Dreams Corp.b)Verify the change in 2017 Sweet Dreams Corp’s ROE using the Du Pont method.c)Using the Altman’s model for privately held firms and public ones, calculate the Z-score for Sweet Dreams Corp. Assume that the market value of Sweet Dreams Corp. is $1,200,000.d)Calculate Sweet Dreams Corp.’s economic profit for these years and compare it to net income. Assume that the weighted average cost of capital is 12%. e)Using the following 2017 industry averages, evaluate Sweet Dreams Corp.’s financial situation. Set up a ratio analysissystem similar to the one in Exhibit 3-6, page 92.RatioValueRatioValueCurrent Ratio2.50xDebt to Equity0.90xQuick Ratio0.60xLong-Term Debt to Equity40.00%Inventory Turnover Ratio6.50xTimes Interest Earned2.50xAccounts Receivable Turnover Ratio8.00xCash Coverage Ratio3.50xAverage Collection Period40.00 daysGross Profit Margin20.00%Fixed Asset Turnover2.00xOperating Profit Margin7.00%Total Asset Turnover2.00xNet Profit Margin5.00%Total Debt Ratio50.00%Return on Total Assets5.00%Long-Term Debt Ratio20.00%Return on Equity8.00%LTD to Total Capitalization30.00%Return on Common Equity10.00%
Assume that the real risk-free rate of return, k*, is 3%, and it will remain at that level far into the future. Also assume that maturity risk premiums (MRP) increase from zero for bonds that mature in one year or less to a maximum of 1%, and MRP increases by 0.2% for each year to maturity that is greater than one year-that is, MRP equals 0.2% for two-year bond, 0.4% for a three-year bond, and so forth. Following are the expected inflation rates for the next five years:
Year Inflation Rate (%)
2017 3
2018 4
2019 5
2020 6
2021 7
a. Compute the interest rate for a one-, two-, three-, four-, and five-year bond.
b. If inflation rate is expected to be equal 7% every year after 2021, what should be the interest rate for a 10- and 20-year bond?
c. Plot the yield curve for the interest rates you computed in part [a] and [b].
d. Based on the curve (in part c), what would you do if you are the lender? Are going to lend more? Or less? Explain your answer. Skip QuestionShow CommentReport Issue
Use the weekly historical prices of four companies, Santos (STO), Rio Tinto (RIO), Qantas (QAN) and Crown Resorts (CWN), and of the All-Ordinaries index from the unit site for the Jan 2018 -Dec 2019 and April 2020-Jun2021 periods, and ignore dividend payments in these periods to answer the following questions:
Question 1: As equal weighting scheme may not give the optimal portfolio, calculate the optimal weight of the two assets recommended in part d. that would further minimise the risk of the portfolio in both periods, the Jan 2018 -Dec 2019 and April 2020-Jun 2021. What is the expected return and risk of the portfolio based on this optimal weight? (5 marks)
Question 2 : . Crown Resorts has been found not suitable to hold casino licences in some states in Australia in the recent royal commission report. Briefly highlight the misconducts detailed in the royal commission report that leads to a serious agency problem between the management and shareholders of the company. What type of risk the company is facing because of the Royal Commission findings? What possible actions should shareholders take to alleviate this problem in the future? (5 marks)
I shared stock data with you on Google Drive, pls check it !!!
The Island of Kalonia has a budgetary surplus of $150 million. Several proposals have been examined for using the money. Two project proposals emerged as candidates for serious consideration. One of the projects (Project A) uses the entire surplus for countrywide road repairs.The other project (Project B) proposes to invest the entire $150 million in a long neglected hazardous waste cleanup with a project life of 20 years. The project’s annual benefits and maintenance costs are summarized in Table 1. (Note: $150 million is the initial investment that will be spent in year 0).
(a) For each project, set up the annual benefit and cost tables in an Excel spreadsheet.
(b) Calculate the Present Value of Benefit (PVB) and Present Value of Costs (PVC) for each project at discount rates of 5% and 18%.
(c) Use the PVB and PVC obtained from (b) to calculate the Net Present Value (NPV) and Benefit Cost Ratios(BCR) of each project.
(d) Which project is preferred based on your analysis and at what discount rate? Explain the reasons supporting your decision. (hint: use results from c.)
(e) What would happen to your decision if the discount rate was changed to 0% on project B. Explain why and draw a conclusionDownload Attachments:
The market value of the assets of a corporation is currently $195.0 million and the firm has on issue a debt outstanding that has a par value of $125.0 million and a due date of exactly four years. No intermediate interest payments are required. The risk-free (continuous) rate is 2.25%.
Management is interested in the standard deviation of returns of the firm’s assets so that they can negotiate with the debt holders a fair interest rate of approximately10%.
What is the standard deviation of returns of the firm’s assets to achieve a fair interest rate of approximately 9% (your answer should ensure that the fair interest rate is in the range of >8% and <10%)?
Assignment 1: Discussion Questions—International Capital Market
The financial system brings together people or organizations that have excess funds with those who need funds. The system includes the banking industry as well as the capital markets. The capital markets are commonly used to support the purchase of long-term assets through the issuance of bonds and stock. This system exists domestically and internationally.
Research international capital markets using your textbook, University online library resources, and the Internet. Respond to the following:
What is the international capital market? Why would an international business make use of an international capital market?
Describe the important features of the foreign exchange market. Why is this market critical for international businesses? What risks does this market impose on international business? What factors drive changes in exchange rates within this market?
Write your response in 400 words . Apply current APA standards for writing style to your work. All written assignments and responses should follow APA rules for attributing sources.
By Thursday, January 31, 2013
Assignment 2: Presentation—Government, FDI, and Foreign Exchange
One area of international business in which the government has an important regulatory role is foreign direct investment and foreign exchange. It is important for business professionals to understand the rationale and methods for restrictions in these areas.
Research government’s role in FDI and foreign exchange using your textbook, University online library resources, and the Internet. Based on your research, develop a presentation. Your role is of an educational specialist in international business and your audience is a group of middle managers.
Discuss the following in your presentation:
Motivations and methods by which governments can promote and restrict international trade
Foreign direct investment and its importance
Market for foreign exchange and the factors that drive pricing changes in the market
Value of the foreign exchange market to an international business
Risks of the foreign exchange market to an international business and methods to control the risks
Submit your work in a 12 slide PowerPoint presentation. Use the speaker notes area to write the information supporting the slides. Apply current APA standards for writing style to your work. All written assignments and responses should follow APA rules for attributing sources.
Use the following file naming convention: LastnameFirstInitial_M4_A2.ppt.
By Saturday, February 2, 2013, deliver your assignment
1. Future value (LO2) You invest $2,500 a year for three years at 8 percent.
a. What is the value of your investment after one year? Multiply $2,500 × 1.08.
b. What is the value of your investment after two years? Multiply your answer to part a by 1.08.
c. What is the value of your investment after three years? Multiply your answer to part b by 1.08. This gives your final answer.
d. Confirm that your final answer is correct by going to Appendix A (future value of $1), and looking up the future value for n = 3, and i = 8 percent. Multiply this tabular value by $2,500 and compare your answer to the answer in part c. There may be a slight difference due to rounding.
9-1. Solution:
a. $2,500 × 1.08 = $2,700
b. $2,700 × 1.08 = $2,916
c. $2,916 × 1.08 = $3,149.28
d. Appendix A (8%, 3 periods)
FV = PV × FVIF
$2,500 × 1.260 = $3,150
2. Present value (LO3) What is the present value of:
a. $8,000 in 10 years at 6 percent?
b. $16,000 in 5 years at 12 percent?
c. $25,000 in 15 years at 8 percent?
Solution:
3. Present Value (LO3)
a. What is the present value of $100,000 to be received after 40 years with an 18 percent discount rate?
b. Would the present value of the funds in part a be enough to buy a $125 concert ticket?
Solution:
Appendix B
PV = FV × PVIF (18%, 40 periods)
a. $100,000 × .001 = $100
b. NO. You only have $100 in present value.
4. Present Value (LO4) You will receive $4,000 three years from now. The discount rate is 10 percent.
a. What is the value of your investment two years from now? Multiply $4,000 × .909 (one year’s discount rate at 10 percent).
b. What is the value of your investment one year from now? Multiply your answer to part a by .909 (one year’s discount rate at 10 percent).
c. What is the value of your investment today? Multiply your answer to part b by .909 (one year’s discount rate at 10 percent).
d. Confirm that your answer to part c is correct by going to Appendix B (present value of $1) for n = 3 and i = 10%. Multiply this tabular value by $4,000 and compare your answer to part c. There may be a slight difference due to rounding.
9-4. Solution:
5. Future value (LO2) If you invest $12,000 today, how much will you have:
a. In 6 years at 7 percent?
b. In 15 years at 12 percent?
c. In 25 years at 10 percent?
d. In 25 years at 10 percent (compounded semiannually)?
9-5. Solution:
Appendix A
FV = PV × FVIF
a. $12,000 × 1.501 = $ 18,012
b. $12,000 × 5.474 = $ 65,688
c. $12,000 × 10.835 = $130,020
d. $12,000 × 11.467 = $137,604 (5%, 50 periods)
6. Present value (LO3) Your aunt offers you a choice of $20,000 in 50 years or $45 today. If money is discounted at 13 percent, which should you choose?
9-6. Solution:
7. Present Value (LO3) Your uncle offers you a choice of $100,000 in 10 years or $45,000 today. If money is discounted at 8 percent, which should you choose?
9-7. Solution:
Appendix B
PV = FV × PVIF (8%, 10 periods)
PV = $100,000 × .463 = $46,300
Choose $100,000 after 10 years.
8. Present Value (LO3)In Problem 7, if you had to wait until 12 years to get the $100,000, would your answer change? All other factors remain the same.
9-8. Solution:
9. Present Value (LO3) You are going to receive $200,000 in 50 years. What is the difference in present value between using a discount rate of 15 percent versus 5 percent?
9-9. Solution:
Appendix B
EMBED Equation.DSMT4
The difference is $17,200
EMBED Equation.DSMT4
10. Present Value (LO3) How much would you have to invest today to receive:
a. $12,000 in 6 years at 12 percent?
b. $15,000 in 15 years at 8 percent?
c. $5,000 each year for 10 years at 8 percent?
d. $40,000 each year for 40 years at 5 percent?
9-10. Solution:
11. Future value (LO2) If you invest $8,000 per period for the following number of periods, how much would you have?
a. 7 years at 9 percent.
b. 40 years at 11 percent.
9-11. Solution:
Appendix C
FVA = A × FV IFA
a. $8,000 × 9.20 = $ 73,600
b. $8,000 × 581.83 = $ 4,654,640
12. Future value (LO2) You invest a single amount of $12,000 for 5 years at 10 percent. At the end of 5 years you take the proceeds and invest them for 12 years at 15 percent. How much will you have after 17 years?
9-12. Solution:
13. Present value (LO3) Mrs. Crawford will receive $6,500 a year for the next 14 years from her trust. If a 8 percent interest rate is applied, what is the current value of the future payments?
9-13. Solution:
Appendix D
PVA = A × PVIFA (8%, 14 periods)
= $6,500 × 8.244 = $53,586
14. Present value (LO3) John Longwaite will receive $100,000 in 50 years. His friends are very jealous of him. If the funds are discounted back at a rate of 14 percent, what is the present value of his future “pot of gold”?
9-14. Solution:
15. Present Value (LO3) Sherwin Williams will receive $18,000 a year for the next 25 years as a result of a picture he has painted. If a discount rate of 10 percent is applied, should he be willing to sell out his future rights now for $160,000?
9-15. Solution:
Appendix D
PVA = A × PVIFA (10%, 25 periods)
PVA = $18,000 × 9.077 = $163,386
No, the present value of the annuity is worth more than $160,000.
16. Present value (LO3) General Mills will receive $27,500 per year for the next 10 years as a payment for a weapon he invented. If a 12 percent rate is applied, should he be willing to sell out his future rights now for $160,000?
9-16. Solution:
17. Present value (LO3) The Western Sweepstakes has just informed you that you have won $1 million. The amount is to be paid out at the rate of $50,000 a year for the next 20 years. With a discount rate of 12 percent, what is the present value of your winnings?
9-17. Solution:
Appendix D
PVA = A × PVIFA (12%, 20 periods)
PVA = $50,000 × 7.469 = $373,450
18. Present value (LO3) Rita Gonzales won the $60 million lottery. She is to receive $1 million a year for the next 50 years plus an additional lump sum payment of $10 million after 50 years. The discount rate is 10 percent. What is the current value of her winnings?
9-18. Solution:
19. Future value (LO2) Bruce Sutter invests $2,000 in a mint condition Nolan Ryan baseball card. He expects the card to increase in value 20 percent a year for the next five years. After that, he anticipates a 15 percent annual increase for the next three years. What is the projected value of the card after eight years?
9-19. Solution:
Appendix A
FV = PV × FVIF (20%, 5 periods)
= $2,000 × 2.488 = $4,976
FV = PV × FVIF (15%, 3 periods)
= $4,976 × 1.521 = $7,568.50
20. Future value (LO2) Christy Reed has been depositing $1,500 in her savings account every December since 2001. Her account earns 6 percent compounded annually. How much will she have in December 2010? (Assume that a deposit is made in December of 2010. Make sure to count the years carefully.)
9-20. Solution:
21. Future value (LO2) At a growth (interest) rate of 8 percent annually, how long will it take for a sum to double? To triple? Select the year that is closest to the correct answer.
9-21. Solution:
Appendix A
If the sum is doubling, then the tabular value must equal 2.
In Appendix A, looking down the 8% column, we find the factor closest to 2 (1.999) on the 9-year row. The factor closest to 3 (2.937) is on the 14-year row.
22. Present value (LO3) If you owe $30,000 payable at the end of five years, what amount should your creditor accept in payment immediately if she could earn 11 percent on her money?
9-22. Solution:
23. Present value (LO3) Barney Smith invests in a stock that will pay dividends of $3.00 at the end of the first year; $3.30 at the end of the second year; and $3.60 at the end of the third year. Also, he believes that at the end of the third year he will be able to sell the stock for $50. What is the present value of all future benefits if a discount rate of 11 percent is applied? (Round all values to two places to the right of the decimal point.)
9-23. Solution:
Appendix B
PV = FV × PVIF
Discount rate = 11%
$ 3.00 × .901 = $ 2.70
3.30 × .812 = 2.68
3.60 × .731 = 2.63
50.00 × .731 = 36.55
$44.56
24. Present value (LO3) Mr. Flint retired as president of Color Title Company but is currently on a consulting contract for $45,000 per year for the next 10 years.
a. If Mr. Flint’s opportunity cost (potential return) is 10 percent, what is the present value of his consulting contract?
b. Assuming that Mr. Flint will not retire for two more years and will not start to receive his 10 payments until the end of the third year, what would be the value of his deferred annuity?
I attached the reading material and questions along with 2 excel templates
a total of 8 questions
I will have to email you because some of the images did not copy to the attachment.
need this in 24 hours…..if you can do please let me know asap
Purpose of Assignment
Provide students with a basic understanding of financial management, goal of the firm, and the basic financial statements. Students should be able to calculate and analyze solvency, liquidity, profitability and market value ratios, and create proforma financial statements.
Assignment Steps
Resources: Tutorial help on Excel® and Word functions can be found on the Microsoft®Office website. There are also additional tutorials via the web that offer support for office products.
Complete the following Questions and Problems (Concepts and Critical Thinking Questions for Ch. 1 Only) from each chapter as indicated.
a. The book value of equity is the book value per share times the number of shares, and the book value of debt is the face value of the company’s debt, so: Equity = 8,300,000($4) = $33,200,000 Debt = $70,000,000 + 60,000,000 = $130,000,000 So, the total book value of the company is: Book value = $33,200,000 + 130,000,000 = $163,200,000 And the book value weights of equity and debt are: Equity/Value = $33,200,000/$163,200,000 = .2034 Debt/Value = 1 – Equity/Value = .7966 b. The market value of equity is the share price times the number of shares, so: S = 8,300,000($53) = $439,900,000 Using the relationship that the total market value of debt is the price quote times the par value of the bond, we find the market value of debt is: B = 1.083($70,000,000) + 1.089($60,000,000) = $141,150,000 This makes the total market value of the company: V = $439,900,000 + 141,150,000 = $581,050,000 And the market value weights of equity and debt are: S/V = $439,900,000/$581,050,000 = .7571 B/V = 1 – S/V = .2429 c. The market value weights are more relevant. PART 2 First, we will find the cost of equity for the company. The information provided allows us to solve for the cost of equity using the CAPM, so: RS = .031 + 1.2(.07) = .1150, or 11.50% Next, we need to find the YTM on both bond issues. Doing so, we find: P1 = $1,083 = $35(PVIFAR%,16) + $1,000(PVIFR%,16) R = 2.847% YTM = 2.847% × 2 = 5.69% P2 = $1,089 = $37.50(PVIFAR%,54) + $1,000(PVIFR%,54) R = 3.389% YTM = 3.389% × 2 = 6.78% To find the weighted average aftertax cost of debt, we need the weight of each bond as a percentage of the total debt. We find: XB1 = 1.083($70,000,000)/$141,150,000 = .537 XB2 = 1.089($60,000,000)/$141,150,000 = .463 Now we can multiply the weighted average cost of debt times one minus the tax rate to find the weighted average aftertax cost of debt. This gives us: RB = (1 – .35)[(.537)(.0569) + (.463)(.0678)] = .0403, or 4.03% Using these costs and the weight of debt we calculated earlier, the WACC is: RWACC = .7571(.1150) + .2429(.0403) = .0968, or 9.68%
I need help completing an excel. I have about 80 percent of the spreadsheet written. The questions are highlighted in orange, and the inputs are highlighted in yellow.
I even have the solutions, I just can’t complete the spreadsheet. 90% of the work has been completed for this question.
This will probably only take 5 minutes to complete.
Case Studies Read the respective module page for each Case Study for assignment details. Please refer to the grading rubric below for guidance and specific Case Study requirements. A minimum of 2,000 words is expected for each of the case studies. This does not include the cover page and reference page(s).
Case 1.
Read the case study “Apple: The Best Supply Chains in the World” on pages 628-630 in your textbook. Answer questions 3 and 4. Explain your answer in a clear and concise manner.
Case 2
Read the case study “Global Medical Tourism” on pages 609-610 in your textbook. Answer questions 2 and 3. Explain your answer in a clear and concise manner.
Case 3
Read the case study “The Global Financial Crisis and its Aftermath: Declining Cross-Border Capital Flows” on pages 622-623 in your textbook. Answer question 5. Explain your answer in a clear and concise manner.
Final Paper Select any topic discussed within the text of the book to conduct research on and discuss. Please refer to the grading rubric below for guidance and specific Final Paper requirements. A minimum of 3,000 words is expected for the Final Paper. This does not include the cover page or reference page(s).
The brewery includes two brew houses, four quality assurance labs, a wastewater treatment facility, a canning and bottling line, and numerous technological innovations for which New Belgium has become nationally recognized as a “paradigm of environmental efficiencies.” Under the leadership of Kim Jordan, who has since become CEO, NBB currently offers a variety of permanent and seasonal ales and pilsners. The company’s standard line includes Sunshine Wheat, Blue Paddle, 1554, Ranger IPA, Abby, Shift, Trippel, Rampant, Slow Ride IPA, Snapshot, and the original Fat Tire Amber Ale, still the firm’s bestseller. Some customers even refer to the company as the Fat Tire Brewery. The brewery’s seasonal ales include Skinny Dip, Portage Porter, and Accumulation. The firm also started a Lips of Faith program, where small batch brews like La Folie, Gruit, and Salted Belgian Chocolate Stout are created for internal celebrations or landmark events. Additionally, New Belgium is working in collaboration with other craft brewers to come up with new products. Through this, they hope to create improved efficiency and experimentation, along with taking collaborative strides toward the future of American craft beer making. One product resulting from these collaborations is a beer brewed with Anaheim and Marash Chilies in collaboration with Cigar City Brewing. NBB’s most effective form of advertising has always been its customers’ word of mouth, especially in the early days. Indeed, before New Belgium beers were widely distributed throughout Colorado, one liquor-store owner in Telluride is purported to have offered people gas money if they would stop by and pick up New Belgium beer on their way through Fort Collins. Although New Belgium has expanded distribution to a good portion of the U.S. market, the brewery receives numerous emails and phone calls every day inquiring when its beers will be available in other parts of the country. Although still a small brewery when compared to many beer companies, like fellow Coloradan Coors, NBB has consistently experienced strong growth with estimated sales of more than $180 million (with NBB being a private firm, detailed sales and revenue numbers are not available). It now has its own blog, Twitter, and Facebook pages. The organization sells more than 800,000 barrels of beer per year and has many opportunities for continued growth. For instance, while total beer consumption has remained flat, the market share of the craft beer industry is now at 11 percent. Growth for craft beer is likely to continue as new generations of beer drinkers appear to favor beers that are locally brewed. Currently, New Belgium’s products are distributed in 38 states plus the District of Columbia, British Columbia, and Alberta. It plans to begin distribution in Hawaii in 2016. Beer connoisseurs that appreciate the high quality of NBB’s products, as well as the company’s environmental and ethical business practices, have driven this growth. For example, when the company began distribution in Minnesota, the beers were so popular that a liquor store had to open early and make other accommodations for the large amount of customers. The store sold 400 cases of Fat Tire in the first hour it was open. With expanding distribution, however, the brewery recognized a need to increase its opportunities for reaching its far-flung customers. It consulted with Dr. Douglas Holt, an Oxford professor and cultural branding expert. After studying the company, Holt, together with former Marketing Director Greg Owsley, drafted a 70-page “manifesto” describing the brand’s attributes, character, cultural relevancy, and promise. In particular, Holt identified in New Belgium an ethos of pursuing creative activities simply for the joy of doing them well and in harmony with the natural environment. With the brand thus defined, NBB worked with New York advertising agency Amalgamated to create a $10 million advertising campaign. The campaign would target highend beer drinkers, men aged 25 to 44, and highlight the brewery’s down-to-earth image.
The grainy ads focused on a man, Charles the Tinkerer, rebuilding a cruiser bike out of used parts and then riding it along pastoral country roads.
The product appeared in just five seconds of each ad between the tag lines, “Follow Your Folly … Ours Is Beer.” With nostalgic music playing in the background, the ads helped position the growing brand as whimsical, thoughtful, and reflective. NBB later re-released its Tinkerer commercial during the U.S. Pro Challenge.
The re-released commercial had an additional scene with the Tinkerer riding part way next to a professional cyclist contestant, with music from songwriter and Tour de Fat enthusiast Sean Hayes. The commercial was featured on NBC. It would be eight more years before NBB would develop its next television advertising campaign. In 2013 NBB developed a campaign called “Pairs Well with People” that included a 30-second television advertisement. The television ad described the unique qualities of NBB as an organization, including its environmental consciousness and 100 percent employee ownership. The advertisement was launched on four major networks in large cities across the United States. Because the primary purpose of the campaign was to create awareness in areas not as familiar with the brand (such as Raleigh-Durham and Minneapolis), NBB did not air the commercial in Colorado and states where the brand is wellknown. The campaign also featured four 15-second online videos of how its beer “pairs well with people.” Bar patrons featured in the 15-second digital ads were NBB employees. In addition to the ad campaigns, the company maintains its strategy of promotion through event sponsorships and digital media. To launch its Ranger IPA beer, New Belgium created a microsite and an online video of its NBB sales force dressed as rangers performing a hip-hop number to promote the beer. The only difference was that instead of horses, the NBB rangers rode bicycles. The purpose of the video was to create a hip, fun brand image for its new beer, with the campaign theme “To Protect. To Pour. To Partake.” The company’s Beer Mode mobile app gives users who download it access to exclusive content, preselects messages to post on the users’ social media sites when they are spending time enjoying their beers, and provides users with the locations of retailers that sell NBB products. The company offers rewards to users for downloading the Beer Mode app, visiting the NBB website, sharing the website on social media networks, and attending NBB events. NEW BELGIUM ETHICAL CULTURE According to New Belgium, the company places great importance on the ethical culture of the brand. The company is aware that if it embraces citizenship in the communities it serves, it can forge enduring bonds with customers. More than ever before, what a brand says and what a company does must be synchronized. NBB believes that as the mandate for corporate social responsibility gains momentum, business managers must realize that business ethics is not so much about the installation of compliance codes and standards as it is about the spirit in which such codes and standards are integrated. The modern-day brand steward—usually the most externally focused of the business management team—must prepare to be the internal champion of the bottom-line necessity for ethical, values-driven company behavior. At New Belgium, a synergy of brand and values occurred naturally because the firm’s ethical culture (in the form of core values and beliefs) was in place long before NBB had a marketing department. Back in early 1991, when New Belgium was just a fledgling home-brewed business, Jeff Lebesch and Kim Jordan took a hike into Rocky Mountain National Park armed with a pen and a notebook. There they took their first stab at what
the company’s core purpose would be. If they were going forward with this venture, what were their aspirations beyond profitability? What was at the heart of their dream? What they wrote down that spring day, give or take a little editing, are the core values and beliefs you can read on the NBB website today. Since its inception, NBB adopted a triple bottom-line (TBL) approach to business. Whereas the traditional bottom-line approach for measuring business success is economic, TBL incorporates economic, social, and environmental factors. In other words, rather than just looking at financial data to evaluate company success, NBB looks at its impact upon profits, people, and the planet. One way that it is advancing the TBL approach is through the creation of a high-involvement corporate culture. All employees at NBB are expected to contribute to the company vision, and accountability is spread throughout the organization. Just about any New Belgium worker can list many, if not all, of these shared values. For NBB, branding strategies are rooted in its company values.
New Belgium’s Purpose and Core Beliefs
New Belgium’s dedication to quality, the environment, its employees, and its customers is expressed in its mission statement: “To operate a profitable brewery which makes our love and talent manifest.” The company’s stated core values and beliefs about its role as an environmentally concerned and socially responsible brewer include the following:
Remembering that we are incredibly lucky to create something fine that enhances people’s lives while surpassing our consumers’ expectations.
Producing world-class beers.
Promoting beer culture and the responsible enjoyment of beer.
Kindling social, environmental, and cultural change as a business role model.
Environmental stewardship: minimizing resource consumption, maximizing energy efficiency, and recycling.
Cultivating potential through learning, participative management, and the pursuit of opportunities.
Balancing the myriad needs of the company, staff, and their families.
Trusting each other and committing ourselves to authentic relationships, communications, and promises.
Continuous, innovative quality and efficiency improvements.
Having Fun. Employees believe that these statements help communicate to customers and other stakeholders what New Belgium, as a company, is about. These simple values—developed roughly 25 years ago—are just as meaningful to the company and its customers today, even though there has been much growth.
Employee Concerns
Recognizing employees’ role in the company’s success, New Belgium provides many generous benefits for its employees. In addition to the usual paid health and dental insurance and retirement plans, employees get a catered lunch every month to celebrate employees’ birthdays as well as a free massage once a year, and they can bring their children and dogs to work. Employees who stay with the company for five years earn an all-expenses paid trip to Belgium to “study beer culture.” Employees are also reimbursed for one hour of paid time off for every two hours of volunteer work that they perform. Perhaps most importantly, employees can also earn stock in the privately held corporation, which grants them a vote in company decisions. Employees currently own 100 percent of company stock. Open book management also allows employees to see the financial costs and performance of the company. Employees are provided with financial training so they can understand the books and ask questions about the numbers. New Belgium also wishes to get its employees involved not only in the company but in its sustainability efforts as well. To help their own sustainability efforts, employees are given a fat-tired cruiser bike after one year’s employment so they can ride to work instead of drive. An onsite recycling center is provided for employees. Additionally, each summer New Belgium hosts the Tour de Fat, where employees can dress in costumes and lead locals on a bike tour. Other company perks include inexpensive yoga classes, free beer at quitting time, and a climbing wall. To ensure that workers’ voices are heard, NBB has a democratically elected group of coworkers called POSSE. POSSE acts as a liaison between the board, managers, and employees.
Sustainability Concerns
New Belgium’s marketing strategy involves linking the quality of its products, as well as its brand, with the company’s philosophy of environmental friendliness. As chair of the sustainability subcommittee for its trade group the Brewers Association, NBB is at the forefront in advancing eco-friendly business processes among companies in its industry. Co-workers and managers from all areas of the organization meet monthly to discuss sustainability ideas as part of NBB’s natural resource management team. From leading-edge environmental gadgets and high-tech industry advancements to employee-ownership programs and a strong belief in giving back to the community, New Belgium demonstrates its desire to create a living, learning community. NBB strives for cost-efficient energy-saving alternatives for conducting its business and reducing its impact on the environment. In staying true to the company’s core values and beliefs, the brewery’s employee–owners unanimously agreed to invest in a wind turbine, making New Belgium the first fully wind-powered brewery in the United States. NBB has also invested in the following energy-saving technologies:
• A smart grid installation that allows NBB to communicate with its electricity provider to conserve energy. For example, the smart grid alerts NBB to non-essential operational functions, allowing the company to turn them off and save power.
• The installation of a 20-kilowatt photovoltaic array on top of the packaging hall. The array produces 3 percent of the company’s electricity.
• A brew kettle, the second of its kind installed in the nation, which heats wort sheets instead of the whole kettle at once. This kettle heating method conserves energy more than standard kettles do.
• Sun tubes, which provide natural daytime lighting throughout the brew house all year long.
• A system to capture its waste water and extract methane from it. This can contribute up to 15 percent of the brewery’s power needs while reducing the strain on the local municipal water treatment facility.
• A steam condenser that captures and reuses the hot water that boils the barley and hops in the production process to start the next brew. The steam is redirected to heat the floor tiles and de-ice the loading docks in cold weather.
In April 2014, New Belgium was featured in a half-page advertisement supporting the EPA clean water rule that was introduced on March 26, 2014. Andrew Lemley, New Belgium’s Government Relations Director, was quoted in an EPA news release championing continued support for the Clean Water Act while also associating quality water with quality beer. In addition to voicing political support for environmental protections, New Belgium also takes pride in reducing waste through recycling and creative reuse strategies. The company strives to recycle as many supplies as possible, including cardboard boxes, keg caps, office materials, and the amber glass used in bottling. The brewery also stores spent barley and hop grains in an on-premise silo and invites local farmers to pick up the grains, free of charge, to feed their pigs. Beyond the normal products that are recycled back into the food chain, NBB is working with partners to take the same bacteria that create methane from NBB wastewater and convert it into a harvestable, high-protein fish food. NBB also buys recycled products when it can, and even encourages its employees to reduce air pollution by using alternative transportation. Reduce, Reuse, Recycle—the three R’s of environmental stewardship—are taken seriously at NBB. The company has been a proud member of the environmental group Business for Innovative Climate & Energy Policy (BICEP), and it signed BICEP’s Climate Declaration in 2013 which calls for American businesses, stakeholders, and regulators to address climate change. Additionally, New Belgium has been a long-time participant in green building techniques. With each expansion of its facility, the company has incorporated new technologies and learned a few lessons along the way. In 2002 NBB agreed to participate in the United States Green Building Council’s Leadership in Energy and Environment Design for Existing Buildings (LEED-EB) pilot program. From sun tubes and day lighting throughout the facility to reusing heat in the brew house, NBB continues to search for new ways to close loops and conserve resources. New Belgium has made significant achievements in sustainability, particularly compared to other companies in the industry. For instance, New Belgium’s goal is to use only 3.5 gallons of water to make 1 gallon of beer, which is more than 20 percent less than most other companies. The company is attempting to create a closed-loop wastewater system with its own Process Water Treatment Plant, in which microbes are used to clean the wastewater. NBB recycles over 99.9 percent of its waste, and today 100 percent of its electricity comes from renewable energy sources. Despite these achievements, it has no intention of halting its sustainability efforts. By 2015 the company hopes to reduce its carbon emissions by 25 percent per barrel. To encourage sustainability throughout the supply chain, NBB adopted Sustainable Purchasing Guidelines. The Guidelines allow them to pinpoint and work closely with eco-friendly suppliers to create sustainability throughout the entire value chain. For its part, NBB conducts life-cycle analysis on its packaging components while continually seeking more efficient refrigeration and transportation technology that can be incorporated into its supply chain.
Social Concerns
Beyond its use of environmentally friendly technologies and innovations, New Belgium also strives to improve communities and enhance people’s lives through corporate giving, event sponsorship, and philanthropic involvement. Since its inception, NBB has donated more than $7 million to philanthropic causes. For every barrel of beer sold the prior year, NBB donates $1 to philanthropic causes within its distribution territories. The donations
are divided between states in proportion to their percentage of overall sales. This is the company’s way of staying local and giving back to the communities that support and purchase NBB products. NBB also participates in One Percent for the Planet, a philanthropic network to which the company donates 1 percent of its sales. In addition, NBB employees also partnered with Habitat for Humanity to build a house for a family who had lost their home to a fire. Funding decisions are made by NBB’s Philanthropy Committee, which is comprised of employees throughout the brewery, including owners, employee–owners, area leaders, and production workers. NBB looks for nonprofit organizations that demonstrate creativity, diversity, and an innovative approach to their mission and objectives. The Philanthropy Committee also looks for groups that incorporate community involvement in their operations. Additionally, NBB maintains a community bulletin board in its facility and posts an array of community involvement activities and proposals. This community board allows tourists and employees to see the various opportunities to help out in the community, and it gives nonprofit organizations a chance to make their needs known. The NBB website also has a dedicated link where organizations can apply for grants. The company donates to causes with a particular emphasis on water conservation, sensible transportation and bike advocacy, sustainable agriculture, and youth environmental education, among other areas. NBB also sponsors a number of events, with a special focus on those that involve “human-powered” sports that cause minimal damage to the natural environment. Through event sponsorships, such as the Tour de Fat, NBB supports various environmental, social, and cycling nonprofit organizations. In the Tour de Fat, one participant hands over his or her car keys and vehicle title in exchange for an NBB commuter bike and trailer. The participant is then filmed for the world to see as he or she promotes sustainable transportation over driving. In the course of one year, New Belgium can be found at anywhere from 150 to 200 festivals and events across the nation.
Organizational Success
New Belgium Brewing Company’s efforts to embody a sustainability-oriented business has paid off with a very loyal following—in fact, the company expanded the number of tours it offers of its facilities due to such high demand. The company has also been the recipient of numerous awards. Past awards for NBB include the Business Ethics Magazine’s Business Ethics Award for its “dedication to environmental excellence in every part of its innovative brewing process,” its inclusion in The Wall Street Journal’s 15 best small workplaces, and the award for “best mid-sized brewing company of the year” and best mid-sized brewmaster at the Great American Beer Festival. New Belgium has been awarded medals for three different brews: Abbey Belgian Style Ale, Blue Paddle Pilsner, and La Folie specialty ale. Many applaud New Belgium Brewing Company’s sustainability and philanthropic initiatives. According to David Edgar, former director of the Institute for Brewing Studies at the Brewers Association in Boulder, Colorado, “They’ve created a very positive image for their company in the beer-consuming public with smart decision-making.” Although some members of society do not believe that a company whose major product is alcohol can be socially responsible, NBB has set out to prove that for those who make a choice to drink responsibly, the company can do everything possible to contribute to society. NBB also promotes the responsible appreciation of beer through its participation in and support of the culinary arts. For instance, it frequently hosts New Belgium Beer Dinners, in which every course of the meal is served with a complementary culinary treat. Although NBB has made great strides in creating a socially responsible brand image, its work is not done. It must continually reexamine its ethical, social, and environmental responsibilities. In 2004 it received the Environmental Protection Agency’s regional Environmental Achievement Award. It was both an honor and a motivator for the company to continue its socially responsible goals. After all, there are still many ways for NBB to improve as a corporate citizen. For example, although all electric power comes from renewable sources, the NBB plant is still heated in part by using natural gas. Furthermore, continued expansion requires longer travel distances to distribute its products, which increases the use of fossil fuels. Perhaps as a way to deal with these longer distances and expand production capacity, NBB opened a second brewery in Asheville, North Carolina, in 2015. In addition to addressing logistical challenges, NBB is part of an industry where there is always a need for more public dialogue on avoiding alcohol abuse. Practically speaking, the company has a never-ending to-do list. NBB executives acknowledge that as its annual sales increase, the company will face increasing challenges to remain committed on a human level while also being culturally authentic. Indeed, how to boldly grow the brand while maintaining its perceptions of a humble feel has always been a challenge. Additionally, reducing waste to an even greater extent will require more effort on behalf of managers and employees, creating the need for a collaborative process that will require the dedication of both parties toward sustainability. NBB also faces increased competition from other craft breweries. It remains behind D.G. Yuengling and Son, Boston Beer Co. (maker of Samuel Adams beer), and Sierra Nevada in market share. Like NBB, Boston Beer Co. and Sierra Nevada have plans to expand. Boston Beer allocated $35 million for capital investment projects at breweries in Massachusetts, Pennsylvania, and Ohio in 2012. NBB must also compete against craft beer alternatives released by traditional breweries, such as MillerCoor’s New Moon Belgian White. It must constantly engage in environmental scanning and competitive analysis to compete in this increasingly competitive environment. Every six-pack of New Belgium Beer displays the phrase “In this box is our labor of love. We feel incredibly lucky to be creating something fine that enhances people’s lives.” Although Jeff Lebesch and Kim Jordan are divorced and Lebesch has left the company to focus on other interests, the founders of New Belgium hope this statement captures the spirit of the company. NBB’s most important asset is its image—a corporate brand that stands for quality, responsibility, and concern for society. Defining itself as more than a beer company, the brewer also sees itself as a caring organization that is concerned for all stakeholders.
QUESTIONS FOR DISCUSSION
What environmental issues does the New Belgium Brewing Company work to address? How has NBB taken a strategic approach to addressing these issues? Why do you think the company has taken such a strong stance toward sustainability?
Do you agree that New Belgium’s focus on social responsibility provides a key competitive advantage for the company? Why or why not?
Some segments of society contend that companies that sell alcoholic beverages and tobacco products cannot be socially responsible organizations because of the nature of their primary products. Do you believe that New Belgium’s actions and initiatives are indicative of a socially responsible corporation? Why or why not?
SOURCES
“The 2011 World’s Most Ethical Companies,” Ethisphere, Q1 2011, 37–43; The facts of this case are from Peter Asmus, “Goodbye Coal, Hello Wind,” Business Ethics 13 (July/August 1999): 10–11; “A Tour of the New Belgium Brewery—Act One,” LiveGreen Blog, April 9, 2007, http://www.livegreensd.com/2007/04/tour-of-newbelgium-brewery-act-one.html (accessed April 13, 2012); Robert Baun, “What’s in a Name? Ask the Makers of Fat Tire,” [Fort Collins] Coloradoan.com, October 8, 2000, E1, E3; Beerpulse.com, “New Belgium 2014 Update: Groundbreaking Hawaii, Kentucky, 3 Floyds Grätzer, FOCOIIab,” March 25, 2014, http://beerpulse.com/2014/03/ new-belgium-2014-update-hawaii-kentucky-2745/ (accessed August 18, 2014); The Brewer’s Association, “Craft Brewer Volume Share of U.S. Beer Market Reaches Double Digits in 2014,” March 16, 2015, http:// www.brewersassociation.org/press-releases/craft-brewer-volume-share-of-u-s-beer-market-reaches-doubledigits-in-2014/ (accessed April 7, 2015); Leigh Buchanan, “It’s All about Ownership,” Inc., April 18, 2013, http:// www.inc.com/audacious-companies/leigh-buchanan/new-belgium-brewing.html (accessed April 7, 2015); Karen Crofton, “How New Belgium Brewery Leads Colorado’s Craft Brewers in Energy,” GreenBiz, August 1, 2014, http:// www.greenbiz.com/blog/2014/08/01/how-new-belgium-brewery-leads-colorados-craft-brewers-energy (accessed August 18, 2014); Robert F. Dwyer and John F. Tanner, Jr., Business Marketing (Burr Ridge, IL: McGraw-Hill/ Irwin, 1999), 104; The Egotist Network, “New Belgium Pairs Well with People in New Campaign from Denver’s Cultivator,” The Denver Egotist, May 20, 2013, http://www.thedenveregotist.com/news/local/2013/may/20/newbelgium-pairs-well-people-new-campaign-denvers-cultivator (accessed May 6, 2015); Garrett Ellison, “New Belgium’s Biere de Garde, a Collaboration with Brewery Vivant of Grand Rapids, Hits Shelves,” Michigan Live, December 10, 2012, http://www.mlive.com/business/west-michigan/index.ssf/2012/12/new_belgiums_biere_de_ garde_a.html (accessed August 18, 2014); Environmental Protection Agency, “Here’s What They’re Saying about the Clean Water Act Proposed Rule,” March 26, 2014, http://yosemite.epa.gov/opa/admpress.nsf/d0cf6618525a9ef b85257359003fb69d/3f954c179cf0720985257ca7004920fa!OpenDocument (accessed August 18, 2014); Mike Esterl, “Craft Brewers Tap Big Expansion,” The Wall Street Journal, December 28, 2011, http://online.wsj.com/article/ SB10001424052970203686204577114291721661070.html (accessed August 18, 2014); “Four Businesses Honored with Prestigious International Award for Outstanding Marketplace Ethics,” Better Business Bureau, press release, September 23, 2002, http://www.bbb.org/alerts/2002torchwinners.asp; Julie Gordon, “Lebesch Balances Interests in Business, Community,” Coloradoan.com, February 26, 2003; Del I. Hawkins, Roger J. Best, and Kenneth A. Coney, Consumer Behavior: Building Marketing Strategy, 8th ed. (Burr Ridge, IL: McGraw-Hill/Irwin, 2001); “How New Belgium Brewing Is Positioning Itself to Remain Independent,” Denver Post, January 15, 2013, http:// blogs.denverpost.com/beer/2013/01/15/new-belgium-positio/7872/ (accessed April 16, 2013); “Industry Profile: Breweries,” First Research, October 17, 2011, http://www.firstresearch.com (accessed February 17, 2012); David Kemp, Tour Connoisseur, New Belgium Brewing Company, personal interview by Nikole Haiar, November 21, 2000; Dick Kreck, “Strange Brewing Standing Out,” Denver Post, June 2, 2010, http://www.denverpost.com/ lifestyles/ci_15198853 (accessed August 18, 2014); Devin Leonard, “New Belgium and the Battle of the Microbrews,” Bloomberg Businessweek, December 1, 2011, http://www.businessweek.com/magazine/new-belgium-and-thebattle-of-the-microbrews-12012011.html (accessed August 18, 2014); Karlene Lukovitz, “New Belgium Brewing Gets ‘Hopped Up’,” Media Post News, February 3, 2010, http://www.mediapost.com/publications/article/121806/ new-belgium-brewing-gets-hopped-up.html (accessed August 18, 2014); NBB Films, “NBBspotsonNBC,” NBB Films, YouTube, http://www.youtube.com/watch?v=KCnzyX-x-WQ (accessed August 18, 2014); New Belgium Brewing website, http://www.newbelgium.com (accessed August 18, 2014); New Belgium Brewing, “Beer Mode,” http://www.newbelgium.com/app.aspx (accessed May 6, 2015); New Belgium Brewing, “Beer Mode: A Brand (Spanking) New Mobile App! For Your Consideration…,” April 23, 2013, http://www.newbelgium. com/community/Blog/13-04-23/Beer-Mode-a-brand-spanking-new-mobile-app-For-your-consideration.aspx (accessed May 6, 2015); “New Belgium Brewing Announces Asheville as Site for Second Brewery,” Denver Post, April 5, 2012, http://marketwire.denverpost.com/client/denver_post/release.jsp?actionFor=1595119 (accessed April 19, 2012); “New Belgium Brewing Company, Inc.,” Businessweek, http://investing.businessweek.com/ research/stocks/private/snapshot.asp?privcapId=919332 (accessed August 18, 2014); New Belgium Brewing, Corporate Sustainability Report, New Belgium Brewing website, http://www.newbelgium.com/culture/ alternatively_empowered/sustainable-business-story.aspx (accessed April 13, 2012); New Belgium Brewing, New Belgium Brewing: Follow Your Folly, May 9, 2007, http://www.newbelgium.com/Files/NBB_student-info-packet. pdf (accessed August 18, 2014); New Belgium Brewing, New Belgium Brewing Packaging Reduction Goals, 2014, http://www.newbelgium.com/files/sustainability/NBBPackagingReductionGoals2014.pdf (accessed April 7, 2015); New Belgium Brewing, Our Sustainable Success Story, http://www.newbelgium.com/files/sustainability/ New_Belgium_Sustainability_Brochure.pdf?pdf=sustainabilityreport (accessed April 7, 2015); New Belgium Brewing, “Philanthropy,” http://www.newbelgium.com/sustainability/Community/Philanthropy.aspx (accessed August 18, 2014); “New Belgium Brewing Wins Ethics Award,” Denver Business Journal, January 2, 2003, http:// www.bizjournals.com/denver/stories/2002/12/30/daily21.html (accessed August 18, 2014); One Percent for the Planet, “FAQ,” http://onepercentfortheplanet.org/about/faq-about-1ftp/ (accessed August 18, 2014); Greg Owsley, “The Necessity for Aligning Brand with Corporate Ethics,” in Sheb L. True, Linda Ferrell, O. C. Ferrell, Fulfilling Our Obligation, Perspectives on Teaching Business Ethics (Atlanta, GA: Kennesaw State University Press, 2005), 128–132; Steve Raabe, “New Belgium Brewing Turns to Cans,” Denver Post, May 15, 2008, http://www.denverpost. com/breakingnews/ci_9262005 (accessed August 18, 2014); Steve Raabe, “Plans Brewing for New Belgium Facility on East Coast,” Denver Post, December 22, 2011, http://www.denverpost.com/business/ci_19597528 (accessed August 18, 2014); Bryan Simpson, “New Belgium Brewing: Brand Building through Advertising and Public Relations,” Michaelcoronado.com, http://www.michaelcoronado.com/michaelcoronado/images/pdf/NBB_ research/new_belgium_brewing.pdf (accessed August 18, 2014); Mike Snider, “Big Brewers Happy to Go Hoppy,” USA Today, October 30, 2013, 4B; Mike Snider, “Sales of Craft beer Are Still Bubbling Up,” USA Today, April 3, 2014, 3B; Jonathan Shikes, “New Belgium Airs TV Commercials for the First Time in Eight Years, but Not in Colorado,” Westword, May 21, 2013, http://www.westword.com/restaurants/new-belgium-airs-tv-commercialsfor-the-first-time-in-eight-years-but-not-in-colorado-5728121 (accessed May 6, 2015); Kelly K. Spors, “Top Small Workplaces 2008,” The Wall Street Journal, February 22, 2009, http://online.wsj.com/article/SB122347733961315417. html (accessed August 18, 2014); “Tour de New Belgium,” Brew Public, November 23, 2010, http://brewpublic. com/places-to-drink-beer/tour-de-new-belgium/ (accessed April 16, 2013).
Ferrell, O. C.; John Fraedrich; Linda Ferrell. Business Ethics: Ethical Decision Making & Cases (Page 446). South-Western College Pub. Kindle Edition.
Answer the following questions related to Case 5 in Business Ethics in a 2-page essay:
• Is there a possible conflict between an industry that sells a product that can have negative consequences from the use of its product and the industry’s ability to engage in socially responsible activities?
• What perks do you see in the New Belgium Brewery that could be an added plus to your work environment? Identify at least two of those perks.
• What are the dangers any company might face if its sole focus is the bottom line? Identify at least five of those dangers.
Read the following sections of Business Ethics:
• Ch. 7, “Organizational Factors: The Role of Ethical Culture and Relationships”
• Ch. 8, “Developing and Effective Ethics Program”
• Case 5, “New Belgium Brewing: Ethical and Environmental Responsibility,” on pp. 437–446
Read the following sections of Conscious Capitalism:
• Ch. 15, ”Conscious Cultures”
• Ch. 16, ”Conscious Management”
• Ch. 18, ”The Power and Beauty of Conscious Capitalism”
• “The Conscious Capitalism Credo” on p. 273
Required Course Materials
Title: Business Ethics: Ethical Decision Making and Cases
Edition: 11th
Authors: Ferrell, O. C., Fraedrich, J., & Ferrell, L.
ISBN-13: 9781305500846
Title: Conscious Capitalism: Liberating the Heroic Spirit of Business
Answer the following questions related to Case 5 in Business Ethics in a 2-page essay:
• Is there a possible conflict between an industry that sells a product that can have negative consequences from the use of its product and the industry’s ability to engage in socially responsible activities?
• What perks do you see in the New Belgium Brewery that could be an added plus to your work environment? Identify at least two of those perks.
• What are the dangers any company might face if its sole focus is the bottom line? Identify at least five of those dangers.
Read the following sections of Business Ethics:
• Ch. 7, “Organizational Factors: The Role of Ethical Culture and Relationships”
• Ch. 8, “Developing and Effective Ethics Program”
• Case 5, “New Belgium Brewing: Ethical and Environmental Responsibility,” on pp. 437–446
Read the following sections of Conscious Capitalism:
• Ch. 15, ”Conscious Cultures”
• Ch. 16, ”Conscious Management”
• Ch. 18, ”The Power and Beauty of Conscious Capitalism”
• “The Conscious Capitalism Credo” on p. 273
Required Course Materials
Title: Business Ethics: Ethical Decision Making and Cases
Edition: 11th
Authors: Ferrell, O. C., Fraedrich, J., & Ferrell, L.
ISBN-13: 9781305500846
Title: Conscious Capitalism: Liberating the Heroic Spirit of Business
Assignment 1: Discussion—Government Role and Trading Blocks
Please answer all questions
While there are powerful economic arguments for international trade, countries do impose restrictions on international trade. At the same time, regional agreements form one method to reduce or eliminate such restrictions among countries signing the agreement.
Research government role in trade and trade agreements using your textbook, University online library resources, and the Internet. Respond to the following:
Should governments promote or restrict international trade? Describe at least three ways in which countries can restrict trade. Irrespective of your answer, which position—promoting or restricting international trade—is most likely to find support as a national strategy? Why do governments commonly initiate policies that support both positions?
Research one regional trading bloc of which the United States is a member. Describe when the bloc was constituted, which countries are currently members, and which products are included in agreements. What is the economic justification for this trade bloc? Do you agree with the U.S. involvement in this trading bloc? What does the U.S. gain or lose?
Write your response in 400 words or less. Apply current APA standards for writing style to your work. All written assignments and responses should follow APA rules for attributing sources.
By Thursday, January 24, 2013, submit your assignment
Assignment 2: Case Analysis—Google in China
Governments play an important role in business decisions and business operations. The case study in this assignment provides a fascinating view of the business environment in China.
Analyze the case. In your case analysis, address the following questions:
What is the basic situation described in the case? Summarize the Google experience.
What other companies are described in the case as having had to deal with Chinese censorship. What is your opinion of their actions?
What seems to be the policy of Chinese censorship?
What are some U.S. congressional initiatives related to Chinese censorship? Do you support those initiatives?
Did Google make the right choice? What were the different opinions expressed in the case regarding the Google choice? Form an argument.
Submit your work in a 3-page Word document. Apply current APA standards for writing style to your work. All written assignments and responses should follow APA rules for attributing sources.
This case written assignment is on Arcadian Microarray Technologies, In. (Case 44).
Report Requirements:
· Cover sheet with case name, date, team number and team members;
· One or two page written report analyzing questions given; and
· Exhibit with any financials, ratios, charts/graphs that you address in your report.
Your analysis should cover the following concerns:
1.
3. 1.. Regarding the cash flow forecasts in case Exhibit 5, at what point in the future would you set the forecast horizon for the three investments? Why? More generally, what should determine when you stop forecasting annual cash flows and estimate a terminal value?
4. 2. Estimate other terminal values based on alternate estimation approaches. From these various estimates, please triangulate toward a single composite estimate of terminal value for each of Sierra Capital and Arcadian’s forecasts.
What is the resulting present value (PV) of cash flows under Sierra Capital and Arcadian’s outlook?
How significant was TV in creating the difference between the two present value estimates?
5. 3. As a general matter in valuation work, how much attention should terminal value garner? What short list of questions about TV could you keep on hand in case a client asked you to opine on a valuation of that company?
Web Development Test This page has a initial time limit of 0:30:00 Would you like to disable all future page timer notifications? Test True or False: HTML and CSS are front end technology. * This question is required. ⚪True ⚪False What is the difference between HTML and CSS? * This question is required. ⚪CSS is a markup language unlike HTML ⚪HTML is a backend technology and CSS is a front end technology ⚪HTML focuses on a web page’s structure and CSS focuses on its presentation ⚪As of HTML5 there is no difference In a proper webpage, which tag holds all of a webpages visible HTML? * This question is required. ⚪html ⚪head ⚪body ⚪link ⚪script ⚪doctype Alphabet for your reference: A B C D E F G H I J K L M N O P Q R S T U V W X Y Z If the code for CAT is ECV what is the code for DOG? * This question is required. ⚪FQI ⚪BIT ⚪FDW ⚪GRJ The sum of two consecutive numbers is 37. What are they? * This question is required. ⚪18, 19 ⚪7, 30 ⚪20, 17 ⚪36, 1 It’s 3 PM. How many degrees are in the angle between the hour and minute hand? * This question is required. ⚪90 ⚪60 ⚪15 ⚪25 ⚪180 What does the following code alert? var person = { name: “Mike”, age: 25, favoriteFood: “pizza” }; alert(“My best friend’s name is” + person.name + “,he’s ” + person.age + ” years old and his favorite food is ” + person.favoriteFood); * This question is required. ⚪My best friend’s name isMike,he’s 25 years old and his favorite food is pizza ⚪My best friend’s name is Mike, he’s 25 years old and his favorite food is pizza. ⚪My best friend’s name isMike ,he’s 25 years old and his favorite food is pizza. ⚪My friend’s best name isMike,he’s 25 years old and his favorite food is pizza. What language(s) MUST be used to display a bare-minimum web page? ⚪HTML, SQL, Node.js ⚪HTML ⚪JavaScript & PHP ⚪SQL What is the best image format for our website if we needed our image to have a transparent background? ⚪JPEG ⚪JPG ⚪GIF ⚪PNG ⚪PSD ⚪TIFF ⚪None of these Which one of these is the most different? ⚪JavaScript ⚪PHP ⚪Ruby ⚪Python ⚪MySQL Which of these statements is true? ⚪Agile is a programming language ⚪SQL is a database language ⚪HTML stands for “Hypertext Markup Link” ⚪Java is short for JavaScript It’s 2 PM. How many degrees are in the angle between the hour and minute hand? ⚪90 ⚪60 ⚪15 ⚪25 ⚪180 The following HTML and CSS is COMPLETELY CORRECT. This code makes up a web page. When the following code renders onto the screen, which paragraph appears bolded? ⚪The Wonder Years is an American television comedy-drama created by Neal Marlens and Carol Black. ⚪It ran on ABC from 1988 until 1993. ⚪The pilot aired on January 31, 1988, following ABC’s coverage of Super Bowl XXII. ⚪All of the above Which operation could we perform in order to find the number of milliseconds in a year? ⚪60 * 60 * 24 * 7 * 365 ⚪1000 * 60 * 60 * 24 * 365 ⚪24 * 60 * 100 * 7 * 52 ⚪1000 * 60 * 24 * 7 * 52 ⚪None of these You are facing North. Turn 90 degrees left. Turn 180 degrees right. Reverse direction. Turn 45 degrees left. Reverse direction. In which direction are you now facing? ⚪North ⚪West ⚪South West ⚪South East ⚪North West ⚪North East Albert thought of a number, added 5, multiplied the result by 2, took away 6 and then divided by 2 to give an answer of 8. ⚪5 ⚪6 ⚪3 ⚪4 If you’re driving one and a half miles per minute, slow down by 15 miles per hour, and then reduce your speed by one third, how fast are you going now? ⚪90 miles per hour ⚪60 miles per hour ⚪50 miles per hour ⚪75 miles per hour ⚪45 miles per hour What is the value of ????? ???? + ???? = 10; ???? + ???? = 6; ???? + ???? = 5; ⚪6 ⚪9 ⚪7 ⚪8 ⚪1 Which CSS attribute would change an element’s font color to blue? ⚪font-color: blue; ⚪background: blue; ⚪color: blue; ⚪background-color: blue; ⚪font: blue; What is the largest number that can be produced by multiplying any three individual numbers from the following list. [-2, 1, 3, -8, 5, 9, -9, 4, 7, -7, 8] ⚪648 ⚪504 ⚪732 ⚪888
Assignment 1: Discussion Questions—International Business Decision Making
The various factors impacting international business may be brought together into a process for evaluating international business opportunities. Choosing the right mode of entry is the next step.
Research evaluation of business opportunities and modes of entry using your textbook, University online library resources, and the Internet. Respond to the following:
Explain how a business can assess international business opportunities giving examples. Do you think the size of the company matters in assessing an international business opportunity? Give reasons for your answer.
In your opinion, what would be the single most effective way for a potential international business to gain entry into an international market? What are the apparent risks of the mode of entry you recommend? For at least one other mode of entry, explain why it would be less effective compared to the one you chose.
Write your response in 400 words or less. Apply current APA standards for writing style to your work. All written assignments and responses should follow APA rules for attributing sources.
By Wednesday, February 13, 2013
Assignment 2: Presentation—Starting an International Business
Business decisions are not made on a hunch or some vague idea of a good place to do business. Professionals assess business opportunities and modes of entry to choose the best alternative.
Research the topic using your textbook, University online library resources, and the Internet. Based on your research, develop a presentation. Your role is of an educational specialist in international business and your audience is a group of middle managers.
Discuss the following in your presentation:
Steps to analyzing international business opportunities with specifics of what is involved in each step
Alternative methods for gaining entry into an international business opportunity or market
Submit your work in a 10-slide PowerPoint presentation. Use the speaker notes area to write the information supporting the slides. Apply current APA standards for writing style to your work. All written assignments and responses should follow APA rules for attributing sources.
The complete course has reveled us the great idea to influence our trends and intelligence while analyzing the entire details of Sunflower Nutraceuticals (SNC) company followed with all the decisions of the company which tends to increase their working capital and maximizing the overall organizational growth potentially with respect to time, as we have figured out the data and change in numbers below which reflects the growth annually. Moreover in addition to various details of the SNC firm we have also examined various decisions which took place in each of the phase of SNC’s simulation which has an estimated values to figure out the results, secondly the paper also describes how SNC’s decisions are influenced with respect to their working capital followed with the final step of evaluating the general affects associated with the limited access of financial mix.
Sunflower Nutraceuticals (SNC) Background
No wonder SNC is a privately owned Nutraceuticals company , more over one can say it is a wide distributor which provides all the vital dietary supplements such as herbs for women’s, vitamins, and minerals for all the consumers (mainly women’s), distributors and retailers. (Harvard Business School Publishing, 2012). Once the business was initiated after 2006, SNC expanded their operations and came up with various retail outlets in the nutraceutical industry and moreover has been successful while introducing their own brands of sports drinks, vitamins for teenagers, metabolism- boosting powders, etc and various other products from a same product line which enable to enhance the metabolism system of humans.
Although being potential to grow as one of the major nutraceutical distributors in the, they are still struggling to break even and one more than one occasion have been forced to exceed the company’s credit line ($1,00,000) to finance their payroll and other operational needs. Because of their somewhat restrictive financing options, they are only able to use a small percentage (approx. 10%) to evaluate and invest in new business expansion which resembles great opportunities in other retail markets across the globe.
Phase 1 of SNC’s Simulation (Years 2013-2015)
During the initial phase of the simulation, they presented four major opportunities which could be helpful for their company to maximize their growth, those opportunities includes-
Discontinuing their Poorer Selling Nutraceutical Products –since they have more than 100 products, some of those products can be dropped off SNC’s inventory because they are outdated. Reducing or discounting those items will allow SNC to a) reduce its DSI to approximately 3 months, b) cut its EBIT by 50k approximately, c) drop sales to 1mm, and d) create more inventory space for the popular products. Doing this will rationalize the SNC’s SKU count.
Leveraging their Supplier Discount –SNC is considering an offer to add Atlantic Wellness (a large successful food chain) to their nutraceutical product line. The company considered and accepted the Atlantic Wellness contract as it allows them to increase company sales almost doubled for 2mm. In addition to their contract offer with Atlantic Wellness, SNC also considered the acceptance of Ayurveda Naturals with the contract offer which was favorable to SNC as it payment terms reflected a net gain of approximately 50. They could have lower its AP if it was related to pay of Ayurveda Naturals within a month and that payment can rise a discount of almost 2% on some of their raw materials.
Acquiring a New Client – SNC acquired a new client by acquiring the services of health food giant Atlantic Wellness to their nutraceutical products line. This decision increased SNC’s EBIT by approximately 200,000 and thus their sales figures by 4mm. Although SNC’s sales and EBIT figures increased, their net working capital and profit margins will remain at current figures.
Additionally, acquiring Atlantic Wellness as a client will help increase SNC’s sales significantly, but those increase sales does not come without a cost as the increase sales will come at the sacrifice of inventory and accounts receivable. Sacrificing inventory and accounts receivable is not a good deal for SNC because of their current cash position as SNC must keep a minimum of $3 lakh on hand to meet their company’s operational needs. However, there is a positive lining for SNC as the risk of inventory and accounts receivable could be balanced by negotiating a profitable deal with merchant Ayurveda Natural.
Limiting their Receivable Accounts – Since Super Sports Centers account for 20% of SNC’s sales figures, those receivable accounts takes the company approximately 200 days to pay and those 200 days is well above the normal 90-day average. To resolve this issue, SNC could drop Super Sports Centers and improve their DSO number, but that come at a cost as SNC’s sales would drop $2mm.
Phase 2 of SNC’s Simulation (Years 2016-2018)
During phase two of the simulation, SNC was presented with three different opportunities and those opportunities include:
Expansion of SNC’s Online Presence –Since SNC would like to expand their operations into new retail markets its company was presented with an opportunity to partner with Golden Years Nutracueticals so that they could reach a larger, more diverse consumer base.From 2016-2018, this partnership reduced SNC’s DSO figures because its web sales began to be collected more rapidly from few days almost 7 to 2 days throughout the duration of 2016-2018. Also SNC also saw about 10%, increase in their sales from 2016-2018. This was an ideal opportunity for SNC as it will allow them to increase their sales with having little-to-no effect on the company’s working capital.
Take up Big-Box Contributions – SNC established a partnership with sales giant Mega-Mart, and that decision allowed SNC to see increase in sales of 25%, 10%, and 5% approximately during 2016-2018. Additionally, this decision dropped SNC’s from about 1%, however, their bills were paidon time causing SNC’s DSO to drop. Beginning with a partnership with Mega-Mart is a good idea. However, this partnership will drop margins and reduce SNC’s EBIT.
Create a Private Label Product –SNC has a partnership with Fountain of Youth Spas, and Fountain of Youth Spas want SNC to develop their own private label product so that SNC can expand their nutraceutical products line and increase their sales and consumer base. Doing this would increase SNC’s 2016-2018 sales by 5%, 4%, and 3% approximately. Additionally, it will also increase margin by 2% while increasing SNC’s DSO’s and DSI. This partnership will allow SNC to increase their EBIT while slightly raising their accounts receivable figures.
Phase 3 of SNC’s Simulation (Years 2019-2021)
During phase three of SNC’s simulation, there were three opportunities for SNC to consider, and those opportunities include:
Adapt a Global Expansion Plan–SNC acquired a new Latin America client (Viva Familia), which helped SNC expand their business operations into Latin America. SNC’s partnership with Viva Familia allowed SNC to decrease their DSO for a couple of days because Viva Familia will cover delivery charges. However, this new partnership increased the company’s DSI by two days, and it also increased SNC’s sales by 2% with margins remaining parallel to current business.
Renegotiate Current Supplier Credit Terms – SNC want to renegotiate its credit terms with other vendors so they used their main vendor Dynasty Enterprises (located in China) as leverage (suppose SNC needed a 3% discount for payment in 10 days) with other vendors. SNC could use their negotiation tactics with other vendors because their main vendor, Dynasty Enterprise offered SNC profitable terms of 2/10 with a net of 30. This reduces SNC’s costs of sales by 200k and their AR by 800k.
Acquire a High-Risk Client –Midwest Miracles is a potential high-risk client for SNC because of Midwest Miracles excessive debt and risky financial situation. However, acquiring this client will increase the sales of future prospects of SNC sales by approximately 30% in 2019. Midwest Miracles is a potential risk for SNC as their company has lesser chance of going bankrupt as compared with the recovery. Other effects of this client, includes a likely increase in DSO by 190 days, and higher fees with a longer than average invoice pay-period.
SNC’s Final Metrics Results
Final Metrics Results (Figures Reflect 2013-2021) Estimated values:
EBIT (202% Increase): Figure went from $440 to $1,330,
Sales (27% Increase): Figure went from $10k to $12,672
Net Income (412% Increase): Figure went from $156 to $798
Free Cash Flow (124% Increase): Figure went from $365 to $798
Total Firm Value (56% Increase): Figure went from $3,248 to $5,082
General Effects of Limited Access to Financing
There are several general effects that limited access to financing can have several effects on entrepreneurs trying to start or grow his or her businesses. For example, limited access to financing can lead to 1) higher interest rates on a business loans or credit fees. 2) Force a business to face a complicated and expensive entry (registration costs, policies, equipment fees, etc.) and exit procedures(Parrino, Kidwell, & Bates, 2012). C) Limit the amount of growth (profits, SME, consumer/client base, etc.) a company can have in that new market. D) Make it more challenging (longer and more expensive process) to implement property and intellectual rights of privately owned and developed brand products.
Conclusion
Finally while concluding the entire paper would like to say that SNC simulation reflected us the challenging ways of handling the managing growth and capital of an organization in our present scenario. Especially it is found in the business market where we can find a company with limited financial power or take on business partnerships because they cannot support financially with their credit line or resources as they are more than their estimated budgets. Hence you must say that really managing a company while handling all the competitors in the market is really a difficult task to be performed in a best possible way along with the acceptance of all the updated trends in our community.
In preparation for this week’s discussion, students should read pages 335–341, chapter 12, in the course textbook. They should also study a number of the academic articles relating to market efficiency that are identified in footnotes to this reading.
Question: How efficient are capital markets? Explain.
Writing about 250 words with APA style if have references.
Sentel plc is a UK financial services company with offices in the south east and north west of England. In total the company has five offices in the south east of England and six in the north west. It currently employs 97 staff. The company has been trading successfully for 17 years. For the year ending 31 December 2005 the company’s fee income was £18.4m and its net profit for the year was £10.1m. During 2006, however, Sentel’s computer system/network was targeted by a number of UK based groups attempting to gain unauthorized access to the company’s system/network and steal confidential client information. During May 2006 the company computer system/network was severely infected by a polymorphic virus and on 6 May 2006 the computer system/network suffered a complete systems failure resulting in company losses of approximately £655,000.
Required
Explain the main prevention strategies and technology tools a company like Sentel plc could adopt/use to prevent or at least manage unauthorised access and virus infection.
Fraud can be defined as the use of deception with the intention of obtaining an advantage, avoiding an obligation or causing loss to another party.
Although there are many types of fraud, the following – although not exclusively restricted to technology based issues – nevertheless rely heavily on remote communication (often via the internet) to further the aim of the fraud.
Required
Distinguish between computer assisted fraud and computer related fraud, and describe and explain each of the following types of fraud:
§ false billing,
§ financial (funds) fraud,
§ advanced fee frauds, and
§ identity theft.
Briefly explain the strategies a company could adopt to minimise the potential impact of fraud on its commercial and business related activities.
Biloce Ltd is an established retail company located in the south east of England. The company has been operating successfully for over 35 years with the late 1980s and early 1990s in particular being a period of rapid growth and expansion both in market share and profitability. The company is currently in the process of consolidating its market position and is seeking to enhance its accounting information system by the introduction of an upgraded computing network and an extensive web based e commerce facility.
The managing director of Biloce Ltd is, however, concerned that the proposed accounting information system development may introduce an unacceptable level of risk into the company’s operations. His concerns have been aroused by recent press articles and academic studies that have alluded to a dramatic growth in computer crime in the retail sector over the past 10 years. He is particularly concerned about potential exposure to computer virus infection.
Required
Prepare a brief report for the managing director of Biloce Ltd addressing his concerns. In your report you must:
§ Clearly define the term ‘computer crime’ and describe the various categories of computer crime.
§ Describe the main types of computer virus and describe risks such computer viruses present to a retail company such as Biloce Ltd.
§ Explain the possible courses of action Biloce Ltd could take to minimise risk exposure to computer crime, in particular risk exposure to computer virus infection.
Jessica Leigh and Christopher James were both undergraduate students at the University of Hull studying for a BSc in Computing. Not only were Jessica and Christopher potential first class honours students, they were also highly skilled computer hackers, collectively known among their friends as ‘Matrix’.
At a recent high profile trial, both Jessica and Christopher were found guilty of six offences of corporate espionage and extortion. In January 2002 they were both sentenced to eight years in prison.
Their illegal activities began shortly after Jessica and Christopher had both completed a six month undergraduate work placement during 2001. They were both employed at Dia gen UK Plc, a computer software developer. By accident, they both came across confidential information containing software codes for an advanced computer operating system which Dia gen Plc was developing with Intec Inc. an American based development think tank.
In order to profit from this information, Jessica distributed the stolen software codes on the black market and Christopher placed a trojan horse, designed to trap and save passwords, in the software code’s logon procedure. They also made modified codes available to other hackers by setting up a home page on the web.
Finally, Christopher inserted the modified code into Dia gen’s computer system and obtained a range of passwords relating to sensitive development files, using them to access information in the files, information which Jessica then sold via the web.
Over a four month period Jessica and Christopher sold confidential information about Dia gen Plc and IntecInc. products for approximately £1.5m.
Required
(a) Discuss the nature of the risk exposure illustrated by this situation.
(b) What are the similarities and differences between a trojan horse and a computer virus?
(c) Identify in broad terms several control procedures and security measures that a company might employ to protect itself against such activities.
In January 2006, Jessica Leigh (finance director) and Stephanie Dodsworth (sales director) both resigned from the management board of Deeport plc, a large UK retail company, following a critical report by the company’s auditors, Barber LLP. The company’s auditors found that insufficient internal controls and a lack of systems management had resulted in the fraudulent misuse of funds and resources. For the first time in its 22 year history, the company declared a loss of £26m (for the year ending 31 March 2006).
Required
Distinguish between general controls and application controls, and identify in broad terms only, the general control procedures and security measures that could be employed by a company such a Freeport plc to protect against the activities indicated in the above situation.
During a recent information systems review of HTM Ltd, the following internal control procedures were identified:
§ Assigning different employees to maintain physical stock in the warehouse and the stock records.
§ Storing high value stock items within a secure area with authorised/restricted access.
§ Requiring all payments for sales to be made by cheque/credit or debit card.
§ Counting stock periodically and comparing the count of each item to the stock records.
§ Requiring all returns of sold goods to be listed on a special credit form that is prepared and signed by a manager.
§ E mailing a monthly statement to each customer, showing the details of all transactions and the balance owed.
Required
Identify a risk exposure that each of the following control procedures or practices is intended to prevent or detect. For each of the above, provide an example of what might occur if the control were not in place and list one or more factors that could cause the risk exposure to be relatively high:
The business environment of the early 21st century continues to change with increasing vigour. The growth of e commerce and e retailing, and the use of the internet for the movement of goods, services and information has clearly promoted a greater interconnectivity. An interconnectivity that has not only opened up and created enormous business opportunities, but has also increased the exposure of UK businesses, in particular UK retail companies, to previously unknown levels of risks and security threats, the costs and consequences of which have been and indeed continue to be significant.
Required
Critically evaluate the type and nature of risk and security threats such a company faces and the internal control procedures and security strategy/measures that it might employ to protect itself.
VeTel Ltd is a well established industrial cleaning company with a turnover of approximately £30m. The company has 15 regional offices throughout the UK and its head office is in Beverley.
Five days ago, the company’s head office suffered severe fire and the IT services and facilities department is completely destroyed. The cause of the fire has yet to be determined, but deliberate sabotage is not suspected.
The company has activated its DCRP (last reviewed six months ago) and is currently at the qualification stage of recovery.
Required
Define and explain the main stages and contents of a DCRP and, making whatever assumptions you believe necessary, comment on VeTel Ltd’s progress so far in recovering from the severe fire.
Learn a lot Ltd is a small but expanding Leeds based retail company that provides computer based educational facilities and equipment for a range of public and private sector colleges and universities specialising in post graduate professional IT courses. As a result of a recent increase in demand for the courses offered by universities and colleges, the company is considering expanding its current retail facilities.
The company is seeking to establish a presence in both Hull and York in order to benefit from the high number of undergraduates studying IT and computer science related degrees at the local universities. The company is, however, aware that such an expansion would require not only a substantial capital investment, but also a significant change in the company’s accounting information systems procedures, especially those concerned with the recording of sales income.
Required
As their recently appointed systems accountant, prepare a report for the management of Learn a lot Ltd on the importance for a company like Learn a lot Ltd to possessing a cohesive strategy for the development and implementation of information and communication technologies within its accounting information systems.
In January 2006, Richard Houghton was appointed as group systems accountant for FIRST plc a UK based retail company. Currently, the company has 18 retail outlets located throughout the UK. The company’s head office is in Manchester. The company currently operates three alternative sales facilities; web based sales, mail order sales and over the counter sales.
All web based and mail order sales are processed at the company’s head office in Manchester and= despatched from its main distribution centre in Wigan. All over the counter sales are processed at each individual retail outlet. For the year ending 31 March 2006 the company retail sales were £87m and its net profits were £28m.
At a recent meeting with the company management board, Richard suggested that the company should explore the possibility of reviewing its over the counter sales procedures by introducing a new range of ‘Pay by Touch technologies’ to replace the existing chip and PIN technologies. Although many of the management board were not clear on exactly what ‘Pay by Touch technologies’ were, they were sufficiently intrigued by the idea of using biometrics as part of the company’s revenue cycle that they suggested a feasibility study be undertaken on the possible advantages and disadvantages of introducing such technologies.
Required
Making what ever assumptions are necessary prepare a feasibility report for the management board of FIRST plc detailing the possible advantages and disadvantages of introducing ‘Pay by Touch technologies’.
UKP plc is a UK based shoe manufacturer producing a range of orthopaedic shoes. The company produces12 different styles of orthopaedic shoes, based on NHS demand. The company operates a computer based production planning/manufacturing systems as follows. At the end of each production cycle (a production cycle is 10 days) the production planning department prepares a master production schedule for the next production cycle detailing the styles and quantities ofshoes to be produced during the next production cycle. The master production plan is used to prepare a production operations list, for which a production order is generated for the production of each style of shoe.
Each production order is added to an open production order master file.
At the end of each day, the store clerk reviews the open production orders and the master production schedule to identify the materials and components required to be issued for production purposes for the next day. All materials are RFID tagged.
The 12 different orthopaedic shoe styles are produced at eight different production locations in the company’s factory. Materials and components received by the factory workers at each production location are scanned as they are used.
To operate the production equipment, factory workers use computer based biometric fingerprint readers to both commence and terminate the production. This information is used to monitor production levels and determine remuneration levels. (All factory workers are paid a fixed basic wage plus a bonus based on levels of production.)
Once the shoes have been produced, each pair is RFID tagged and despatched to the company warehouse for safe storage. Every one in 50 pairs of shoes produced is quality checked prior to despatch to the warehouse.
Required
Prepare a systems flowchart of the production system described above and describe the internal control procedures you would expect to be included in such a production process.
SCW Ltd is a small UK based company that manufactures custom made pine furniture. The company employs 12 specialist carpenters, four designers, one production scheduler, two administrators and a manager. Because of the high reputation enjoyed by the company only one sales person is employed since the quality of the company’s furniture attracts sufficient orders to maintain production at full capacity. When a customer order is received, it is allocated to a designer who designs the product, manages the production process and approves the final result. The production scheduler assigns at least two specialist carpenters to each order, depending on factors such as complexity of the design and the requested date of delivery. Once the product is completed, the production price is determined by accumulating all related costs and a percentage mark up is added to determine the sale price.
Required
(a) Prepare a list of the data elements that would be required to be able to plan, manufacture and monitor the progress of a customer order.
(b) Explain what data elements would be required to calculate a sales price for a customer order.
(c) Prepare an systems diagram for the above production system – from the receipt of the customer order to the completion and delivery of the finished product.
(d) Describe several reports that will be useful to the production scheduler and carpenter in performing their duties.
(e) A customer order has recently been received, the details are as follows:
· Order No:
498983
· Order details:
One Cartier style dining room suite
· Customer No:
Clare Barber, Ardslave, Western Isles, Scotland
· Order Date:
1 April 2007
· Delivery date:
1 October 2007
· Assigned designer:
Jordon Reece Spencer
· Assigned carpenters:
Tony Barber
Louise Ritter
Briefly describe the possible internal control problems that could arise in the processing of this order.
You are an internal auditor working for Eketel plc., a UK based retail company. The company has an in house training policy that requires all graduate entrants to the company’s finance department to work within the internal audit department for the first six months of their training contract. The chief internal auditor of Eketel plc has asked you to write an induction pack for the graduate entrants, explaining the importance and relevance of internal controls in the management of current assets.
Required
Prepare a report for the chief internal auditor, explaining the importance and relevance of internal controls in the management of current assets, and evaluate the types of internal controls you would expect to find in the management of stock and of debtors.
One of the most important operational resources a company possesses is undoubtedly cash. Often regarded as the lifeblood of corporate activity, cash systems (especially cash receiving systems) are surrounded by elaborate internal control procedures, often based on the separation of operational duties between a range of company employees and the control of cash receiving documentation.
Required
(a) Describe the documentation you would expect to find in an operationally controlled cash receiving system of a medium sized retailer and briefly explain the purpose of the documentation you have described.
(b) With the aid of a columnar documentary flowchart illustrate how the separation of duties between company employees can be used to reduce the potential of cash fraud occurring. (In your flowchart you must use all the documentation you have described above.)
You have been appointed to audit GTH Ltd, a local restaurant that has recently opened. The owner and head chef of the restaurant is Helen Betts. Helen is a wonderful cook but possesses little knowledge of business and business practices. As a result she has a tendency to trust her employees . . . perhaps a little too much.
At the restaurant the waiters are given a note pad each day on which to take orders. The sheets are turned over to the kitchen to prepare the orders as instructed. The waiters then deliver the prepared meal to the customer. When the customers are ready to leave, the waiters merely sum up the total bill and take the cash.
Since there is no cashier, the waiters tender change to the customers from sums they have received. The restaurant does not accept payment by cheque and/or credit cards.
At the end of the day the waiters tender their net cash receipts to Helen who then banks the cash.
Recently Helen remarked that even though she was always busy in the kitchen, daily sales have not been as high as expected. Indeed, because of the cash flow problems being experienced by the business, Helen is now considering closing it down.
Required
Explain to Helen what internal controls need to be implemented over cash sales and offer a possible explanation as to why the business is experiencing cash flow problems.
QLP plc is a UK based delivery company. The company has 26 depots located throughout the UK with a head office in Birmingham.
At a recent board meeting the company discussed a proposal to replace part of its fleet of delivery vans. The replacement will entail the acquisition 14 vehicles and the disposal of 16 others of varying age and condition.
Although such vehicle replacements have occurred in the past – the most recent being 18 months ago – problems have always arisen, in particular regarding the disposal of old vehicles.
Required
As the recently appointed chief internal auditor of QLP plc, the managing director of the company has asked you to prepare a report for the management board of the company describing the main stages and evaluating the key internal controls you would expect to find in the acquisition and disposal process.
BPL Ltd is a small local retail company. The company sells a branded clothing range for 18–30 year olds.
During the last financial year (year ending 31 December 2005) the company had an annual turnover of £1.5m and an annual net profit of approximately £700,000.
The company has two retail outlets located in Manchester and Oxford, and employs five part time sales assistants, one administrator and one manager.
Currently, sales are either over the counter sales at either retail location or mail order sales from the company’s annual catalogue. Over the counter sales can be for cash, credit/debit card payment or payment by cheque. Mail order sales can be for credit/debit card payment and/or cheque payment only. All mail order sales are processed at the company’s Manchester retail outlet. Last year 42% of the company’s turnover was from mail order sales.
For credit/debit card related sales, the company operates a chip and PIN based ePOS. All over the counter sales are processed by the sales assistants. All mail order sales are recorded by the administrator.
At a recent management meeting the manager informed the administrator that he had appointed an external consultant to develop and design a web based e commerce facility to replace its catalogue based mail order facility. The manager expected the new facility to be operational within the next two months.
Required
Critically evaluate the main advantages and disadvantages to the company of using a web based e commerce facility to replace its current mail order catalogue facility.
During a recent computer system/network review of HaTiMu Ltd, the following issues were identified:
§ computer staff are allowed unrestricted and unmonitored access to the internet,
§ all company staff are allowed free access to the offices in which the main computer facilities are located,
§ access to software programs is restricted by the use of a company password which is posted on the company’s intranet site (for security purposes the password is changed every three months),
§ all e mails are monitored for key words (attachments to e mails are not monitored).
Required
Identify a risk exposure that each of the above issues present. For each of the above, give an example of the security procedure/control protocol that should exist and list one or more factors that could cause the risk exposure to be relatively high.
The business environment of the early 21st century continues to change with increasing vigour. The growth of e commerce and e retailing and the use of the internet for the movement of goods, services and information has clearly promoted a greater interconnectivity. An interconnectivity that has not only opened up and created enormous business opportunities, but has also increased the exposure of UK businesses, in particular UK companies, to previously unknown levels of risks and security threats, the costs and consequences of which have been and indeed continue to be significant (see DTI (2004)).
Required
For a UK based retail company, critically evaluate (with specific reference to the company’s accounting information system (and related systems), the type and nature of risk and security threats such a company faces and the control procedures and security strategy/measures that such a company might employ to protect itself against such risks and threats.
Westelle Ltd is a large, UK based, machine component manufacturing company that has been trading successfully for approximately 45 years. The company has a number of production facilities and wholesale retail outlets throughout the UK. The sales of Westelle’s products currently account for approximately 18% of the total market for machine components in the UK.
Anthony Fisher is production manager of Westelle’s Newcastle production facility. The company has five other production facilities located in Glasgow, Birmingham, Leeds, Swindon and Bristol, and four wholesale retail outlets located in Manchester, Bradford, Sheffield and
Cambridge. The company’s head office is in York.
The Newcastle production facility is a specialist non trading division of the company. The production facility has limited contact with outside agencies (apart from contacting suppliers) and has no retail staff. Transactions at each of the six production facilities are internal in nature – that is with other production facilities and/or wholesale retail outlets within the company.
For accounting purposes, all the company’s production facilities are treated as cost centres rather than an income generating revenue or profit centres.
Senior managers committee meeting Tuesday 17 August 2004
Because of the company’s somewhat dispersed geography, both wholesale retail managers and production facility managers meet on a regular basis but usually only every two months at the company’s head office in York. They discuss management issues relating to the company’s activities.
It is also common practice for head office managers including the company accountant, the company personnel manager and the company operations manager to attend these meetings.
The chairmanship of the senior committee is rotated on an annual basis. This year the chairmanship is in the hands of John Lightman White, Westelle’s operations manager.
Although the August 2004 meeting agenda was unremarkable and similar to those of previous numerous meetings, the final agenda item – proposed by Anthony Fisher – was somewhat unusual and bound to raise the ambient temperature of the meeting. The agenda item concerned the ineffectiveness of the company’s budgetary system as a corporate control mechanism.
The meeting commenced at 10:15 am in the board room at the company’s head office in York. After nearly 11/2 hours of rather mundane pleasantries, bureaucratic idiosyncrasies and tedious committee protocol, at approximately 11.45 pm John Lightman White, in his role as chairman, looked at Anthony Fisher, and said, ‘I believer this final item is your agenda item
Anthony – the meeting is yours.’
With that Anthony looked around at the other members of the committee and took a deep breath. He began: ‘As you may well know, I have been at Newcastle production facility of Westelle Ltd for a little over 18 months and have during that time become increasingly concerned about the ineffectiveness and inefficiency of the company’s budgetary control system.
In my opinion, and may I add an opinion supported by many of you around this table, the company’s corporate accounting department – its accounting information system and in particular its budgetary control system – provides little useful information for either production managers or wholesale retail managers. The historical emphasis of the accounting information system – the historical nature of the budgetary control statements issued monthly to production and wholesale retail managers – continues to have a negative motivational impact on managers because the statements fail to reflect adequately on how efficiently and effectively both production and wholesale retail managers are in their day to day managerial activities.
Indeed, despite repeated representations to the company head office by many of the productions facility managers and repeated attempts to discuss/explore these concerns with the company accountant, over the past 12 months little has changed.
‘In my opinion, the budgetary control statements producted by corporate head office not only lack any realism, they are ambiguous, confusing, disingenuous and misleading.
‘Over the past year the Newcastle production facility – and may I also add, the Birmingham,
Leeds and Swindon production facilities – have all exceeded their budgeted production targets.
Yet for the past 12 months the budgetary control statements continue to show Newcastle,
Birmingham, Leeds and Swindon production facilities as carrying excessive costs. This despite the Newcastle and Leeds production facilities making substantial improvements in raw materials used in the production process, and the Birmingham and Swindon production facilities making vast improvements to man hour output levels – none of which has been, nor will be to my knowledge, ever reflected in the production facilities budgetary control statements. It appears that any information provided by production and wholesale retail managers to head office – and in particular the company accountant – is continually ignored as irrelevant.
‘Looking back over the past two years’ budgetary control statements, all six of the production facilities have shown negative total variances for 20 out of the 24 months – and there appears little that either the production and/or the wholesale retail managers can do.
‘It is clearly time for the accounting information system – and the budgetary control statements – to reflect what is actually happening at the various production and wholesale retail facilities and not some abstract notion created by head office accounting staff of what “might” be happening.
‘Perhaps the company accountant would like to comment using the June 2004 budgetary control statement for the Newcastle production facility and explain why, as in the previous 15 months, actual head office costs have exceeded the budgeted head office costs.’
Anthony distributed a copy of the report to each of the committee members.
Newcastle Production Facility: Budgetary Control Statement, June 2004
Allocation
Actual cost
/()
£000
£000
£000
Materials
Potassium ethnolitrate
2,000
1,980
(20)
Abe lithium
1,980
1,970
(10)
Zinctricate
460
408
(52)
Labour
Skilled
1,200
1,200
0
Technician
1,180
1,090
(90)
Semi skilled
3,040
3,010
(30)
Manual
560
540
(20)
Head office costs Total
100
534
434
10,520
10,732
212
Throughout Anthony’s presentation, most of the company’s productions facility managers nodded in agreement, whilst the wholesale retail managers voiced an occasional word of support.
The company accountant, Alun Wayle, however sat quietly as he listened attentively to Anthony’s critique. ‘Alun, would you like to respond,’ asked the chairman. After a brief pause, Alun Wayle rose to his feet and began his response. ‘Firstly, I think it would be inappropriate for me to respond to the specifics in terms of levels of head office expenditure at each of the outlying production/ wholesale retail facilities as raised by the Newcastle production facility manager.’
‘That’s a surprise,’ whispered Anthony.
Whilst the other production facility managers smiled at Anthony’s witty rhetoric – the company accountant scornfully ignored the comment, treating it with the contempt he believed it deserved. ‘However,’ he continued ‘what I think is important is that we must not lose sight of the bigger picture. The accounting information system and the budgetary reporting system are a component part of a larger corporate information system that has operated successfully in the company for a number of years. Whilst the past few years has seen some change – the introduction of the company’s new “online” accounting system and increased network facilities – the core accounting system has remained generally unchanged and in my opinion rightly so. The budgetary reporting systems have, and indeed continue, to operate and satisfy all the reporting requirements as laid down in the company’s operation procedures guidelines issued some two years ago – and may I add agreed and ratified by this committee. More importantly, to undertake changes alluded to by the Newcastle production facilities manager would require substantial investment – funds which the company does not have available at its disposal.
‘Whilst the budgetary control statements, produced by the budgetary reporting system are the basis for:
§ evaluating the efficiency of both production facilities and wholesale retail facilities, and
§ determining whether managers have compiled with the company’s longer term strategy and performed in accordance with set targets, both production and wholesale retail managers should not worry too much. None of you have been sacked – yet!’
At this Anthony became extremely annoyed and agitated by the truculent attitude and arrogant demeanour of the company accountant. From discussions with other production managers, in particular Jessica Lee, the production manager of the Swindon facility, Anthony was certain that the company accountant was incorrect. He was aware for example, that over the past few years, because of the introduction of new computing technology, some rather substantial changes to the financial reporting systems of other non production and non retail facilities had been made.
As the company accountant retook his seat, Anthony rose to his feet without invitation, and started his reply. ‘May I say that I find the egotistical attitude of the company accountant both naïve and insulting! I am sure that Alun is aware that the staff turnover of production managers at the company continues to be extremely high even though “few” managers have ever been sacked. Most managers seemed to resign – usually in disgust because of the belief that they are not being fairly evaluated – a point I’m sure the company personnel manager could confirm from his personnel records.
‘The following are typical comments of production managers who have left Westelle Ltd over the past year:
§ ‘The company accountant may well be able to justify the numbers they use – but they know nothing about production. I just used to ignore the budgetary control statements entirely and pretend they didn’t exist.’ Len Chapman ex Production facilities manager Leeds
§ ‘No matter what they say about firing people, negative budgetary control statements mean only one thing – negative evaluations.’ Bryn Robson ex Production facilities manager Swindon
§ ‘the company head office in York has never and probably never will listen to production facility managers. They see us as inconsequential – as a blot on the landscape. All the head office bureaucrats are concerned with are those wretched misleading budgetary control statements.’ Jim Barnes ex Production facilities manager Bristol
‘The market we operate in is a select and highly specialised market. Of the five managers who have left the company over the past year, four of them – including the three I have quoted – have taken posts of a similar nature with companies in direct competition with Westelle. Surely that cannot be good for the company – can it!’
‘Absolutely not,’ said Herald Bosse, company personnel manager ‘but may I point out . . .’.
‘Perhaps you could point it out at a later date,’ said John Lightman White, chairperson.
‘Unfortunately we have run out of time. As you are all aware head office imposes a time limit on our meetings of two hours and we have just about reached that time limit. Perhaps we can carry the discussion on item 12 over to our next meeting – on 9 October 2004. Agreed?’
‘Looks like we have no alternative,’ said Anthony disdainfully. ‘Yes – it does look as if we have no alternative, doesn’t it,’ replied the chairman. There were no further dissenting voices. The meeting was adjourned.
Learn a lot Ltd is a small but expanding Leeds based retail company that provides computer based educational facilities and equipment for a range of public and private sector colleges and universities specialising in postgraduate professional IT courses. As a result of a recent increase in demand for the courses offered by universities and colleges, the company is considering expanding its current retail facilities.
The company is seeking to establish a presence in both Hull and York in order to benefit from the high number of undergraduate university students studying IT and computer science related degrees. The company is, however, aware that such an expansion would require not only a substantial capital investment, but also a significant change in the company’s accounting information systems procedures, especially those concerned with the recording of sales income.
Required
As their recently appointed systems accountant, prepare a report for the management of Learn a lot Ltd on the importance for a company like Learn a lot Ltd to possess a cohesive control structure within its accounting information systems and the possible consequences of a failure of such controls.
Making whatever assumption you feel necessary, explain what type of network (i.e. a centralised wide area network, a decentralised wide area network or a local area network) would each of the following types of companies/organisations be likely to adopt:
§ a financial institution with numerous offices located throughout the UK,
§ a specialist retailer based in York with three retail outlets located in North Yorkshire,
§ a bus company with a head office in Edinburgh and bus stations located in a number of cities throughout the UK,
§ a manufacturing company with a head office and factory located in Hull,
§ a regional water authority with automated monitoring offices in Bristol and the surrounding area,
§ a travel agent with three outlets in Manchester, and
Clare Barber is an internal auditor with IQC, a large, London based, consulting company. For the last financial year, IQC generated income of £200m from its consulting activities. In February 2007 the management committee of IQC decided to restructure the company’s accounting and finance information systems. The management committee have decided to migrate all accounting and finance related applications currently run on the company’s centralised mainframe to eight local area networks with the migration to be complete by March 2008. Clare is the audit department’s representative on the company’s systems committee responsible for designing and implementing the new system.
Required
§ Explain what the term local area network (LAN) means and describe its major components and configurations.
§ What are the main advantages and disadvantages of using a LAN.
§ Explain why a company such as IQC consulting would choose a distributed LAN system over the centralised mainframe system, and describe the possible internal control problems that could arise from adopting the new LAN.
Ergon plc was a Cambridge based UK listed company. During the late 1990s the company produced digital positioning equipment for the global transportation sector, especially the merchant navy. The company’s products were sold throughout Europe, North America, Australia and Canada, and were widely regarded as the best in the market. Indeed during the period 1993 to 2003 the company’s digital positioning equipment consistently won high praise for both its design and capabilities.
In January 2004, however, Ergon plc went into liquidation, with reported debts of £230m. In March 2005, after extensive investigation, the company receivers, Hopwind LLP, published its findings on the failure of Ergon plc. The report suggested that the principal cause of Ergon plc’s failure had been inadequate internal control within the company’s revenue cycle operations, in particular the management of debtor payments.
Required
Describe the primary function of a revenue cycle for a company such as Ergon plc and explain how a lack of internal control could lead to the eventual collapse of the company.
Louis P. Lou is managing director of Ann de Pandy Ltd an established female lingerie retail company located in the north and the south west of England. The company has been operating successfully for many years with the period between 1998 and 2004 being one of exceptional growth both in market share (customer numbers and sales) and overall profitability.
Over the past three years the company has continued to enhance its accounting information system and has recently upgraded its computer network, and will from August 2006 introduce an extensive web based e commerce facility. Louis P. Lou is however concerned that the accounting information system development – especially the development of a web based e commerce facility could potentially reduce the company’s level of control over its business operations.
Required
As the company’s systems accountant prepare a brief report for the managing director of Ann de Pandy Ltd addressing the managing director’s concerns.
Microsoft Engineer Charged With Fraud – FBI says he resold $9 million in software, bought cars, jewellery, and yacht.
Sales of Microsoft’s high end software were brisk last year – at least for one employee who was charged on Wednesday 11 December 2002 with illegally pilfering and selling $9 million worth of it for his own profit.
Daniel Feussner, a mid level Microsoft engineer who headed up one of Microsoft’s .Net technology projects, was arrested after an FBI probe uncovered his scheme. Feussner allegedly ordered products through
Microsoft’s internal purchasing programme and sold them on the street. According to a complaint filed a day before his arrest with the US District Court in Seattle, federal authorities say Feussner used his earnings to acquire a lavish car collection, a $172,000 yacht, expensive watches and diamond jewellery. He is charged with 15 counts of fraud and could face a maximum of five years in prison and a $250,000 fine for each charge, according to a spokesman for the US Attorney’s Office in Seattle. Microsoft released a statement on the matter, raising an issue that prompted some analysts to say that most companies should worry about internal control. ‘We take employee theft very seriously and realize the effects it can have on the value we provide our customers and shareholders,’ it said in the written statement. ‘We have a number of internal measures in place to identify theft and work very closely with the appropriate authorities on these matters.’
While working as a manager of a speech recognition project out of Microsoft’s .Net development group, among other positions, Feussner used internal purchase orders to buy high end server software, which he then sold for cut rate prices while keeping the proceeds, the complaint alleges. Orders passed through a New York software vendor called ClientLogic, which would mail products to Feussner. He then sold the software out of a Seattle area parking lot for cash, as well as through a middleman company called Cybershop Inn, court records indicate. Some 1700 products filtered through the scam, including development software, and copies of Microsoft’s Windows operating system, beginning in late 2001, authorities said. The FBI said that Feussner’s arrest is part of a larger probe into illegal use of Microsoft’s internal purchasing programme. Matt Berger, IDG News Service, 13 December 2002, Available @ www.pcworld.com/news
Post Script – Microsoft Engineer Charged With Fraud – found dead
A former Microsoft manager facing federal fraud charges dies unexpectedly at a Bellevue hospital while out on bail. The circumstances surrounding the death of Daniel Feussner, 32, remain under investigation.
Following the submission of Daniel Feussner’s death certificate to Assistant US District Attorney’s office in Seattle, prosecutors closed the case. Ian Ith, Seattle Times, 17 February 2003, Available @ www.seattletimes.nwsource.com
Required
(a) Describe the main functional cycles of operation that may exist in a company such as Microsoft Inc.
(b) Critically assess the key objectives of control within the transaction processing cycles of a company such as Microsoft Inc.
(c) Based on the information above, explain:
§ what control activities appear to have failed,
§ why the control activities appear to have failed, and
§ how Daniel Feussner took advantage of such failures.
Enron left behind $15bn of debts, its shares become worthless, and 20,000 workers around the world lost their jobs. Many banks were exposed to the firm, from lending money and trading with it. JP Morgan admitted to $900m of exposure, and Citigroup to nearly $800m. Former high ranking Merrill Lynch bankers have been charged with fraud in connection with Enron transactions. Andersen, which failed to audit the Enron books correctly, collapsed with the loss of 7500 jobs in the US, and 1500 in the UK. BBC News Online, 08 July 2004, Available Ebbers guilty of WorldCom fraud
Former Worldcom chief executive Bernie Ebbers has been convicted of conspiracy and fraud in connection with the 2002 collapse of the telecoms giant. Mr Ebbers, 63, who is to appeal against the verdict, was also found guilty of seven counts of filing false documents. Shareholders lost about $180bn (£94bn) in Worldcom’s collapse – the largest bankruptcy in US history – and 20,000 workers lost their jobs. Mr Ebbers could face up to 85 years in prison when he is sentenced on 13 June 2005. Worldcom emerged from bankruptcy last year and is now known as MCI. A federal jury in Manhattan had spent eight days deliberating before returning their verdicts. BBC News Online, 15 March 2005, Available
Required
Whilst very different companies, both the Enron Inc. and Worldcom Inc. collapses have significant similarities. The source of their respective failures rests almost entirely on a lack of control. Research the above corporate collapses and answer the following:
(a) What were the key objectives of control within Enron Inc. and Worldcom Inc.?
(b) What control activities appear to have failed in Enron Inc. and why did the control activities appear to have failed?
(c) What control activities appear to have failed in Worldcom Inc. and why did the control activities appear to have failed?
(d) How have the Enron Inc. collapse and the Worldcom Inc. collapse affected:
§ contemporary notions of control (especially internal control), and
§ the regulatory framework managing/controlling those responsible/accountable for the existence of internal control/corporate governance
ELF Ltd is an Edinburgh based company that has been under the control of the same family for the past 50 years. During that time the company has been run on a friendly, informal basis with little reference to the principles of internal control and/or formal documentation. As a result of a recent fraud by a purchasing assistant, just over two years ago the directors of the company reorganised the company’s purchasing and receiving procedures in order to guard against a recurrence of the purchase fraud. The directors have asked you to review the current system of internal control and the functions of the documents in the company’s purchasing and receiving of goods for resale. In particular, the directors have asked you to prepare a system flowchart of the current purchasing/receiving system.
Following discussions with the company directors, you are aware that the company operates the followingdepartments:
§ a requisitioning department,
§ a purchasing department,
§ a receiving department,
§ a stores department,
§ a purchasing ledger (accounts) department,
§ cashier/treasury department.
The general purchasing procedures are as follows. The requisitioning department raises a purchase request. This purchase request is forwarded to the purchasing department. The purchasing department then obtains a quotation from an approved supplier. Once the quotation has been received and approved, the purchasing department raises a purchase order (four copies). Two copies of the purchase order are sent to the supplier, one is sent to the receiving department and one to the purchase ledger department.
Prior to delivery the supplier is requested to send one copy of the purchase order back to the purchasing department as acknowledgement of the purchase order receipt. When the goods are delivered a goods received note (GRN) (three copies) is received. One copy is filed in the receiving department, one is kept by the stores department and one is sent to the purchase ledger department, where it is matched and filed with the appropriate purchase order. The supplier retains a delivery note – authorised (signed) by an appropriate member of staff from the receiving department. When the invoice is received from the supplier the purchasing department matches the purchase order, GRN and invoice, and authorises payment. All payments are made by cheque and require authorisation from the company cashier.
Required
Prepare a document flowchart of the above purchasing system and comment on any problem areas.
BeTiCe Ltd is a newly formed, UK based retail company. The company will specialise in street fashion accessories for both men and women, and will commence trading in three months, once a number of retail outlets have been refurbished. At a recent management meeting the company financial director proposed that the company should use a non card payment system – particularly a Pay By Touch EFT system – for payments by customers. He was however unable to provide precise details of how such a system would work.
Required
Provide a brief report to the company’s management committee and explain:
§ how a Pay By Touch system would operate,
§ the main stages involved in implementing a Pay By Touch system, and
§ the main advantages and disadvantages of such a payment system.
ZKO Plc was an UK listed company that produced digital audio equipment for the retail market. The company’s products were sold throughout Europe, North America, Australia and Canada, and were widely regarded as the best in the market. Indeed, during the period 1995 to 2001, the company’s digital audio equipment consistently won high praise from both consumer groups and retail critics.
In January 2002, however, ZKO Plc suddenly went into liquidation. The company failed with debts amounting to £105m.The failure of the company was headline news around the world with press speculation focusing on the possibility of large scale financial reporting irregularities and potential management fraud. However, in April 2002 the company receivers published their findings. Their report indicated that whilst some unacceptable accounting irregularities had been evident in the company’s published financial reports for a number of years, the principal cause of ZKO Plc’s failure had been inadequate control within its revenue cycle operations – in particular the management of debtor payments.
The company receivers’ report concluded that:
whilst substantial profits were generated by sales transactions these profits were rarely converted into cash based resources. Moreover, the company increasingly maintained an unhealthy and somewhat excessive level of debtors, many of which were clearly irrecoverable.
Required
Describe the main function of a sales system for a company such as ZKO Plc and explain the inherent risk associated with the failure of such a system.
Describe the primary function of debtor management and explain the separation of duties necessary for adequate debtor management in a company such as ZKO Plc. Indicate the problems that may occur in a debtor management system when such separation of administrative powers does not exist.
You have recently been appointed by the management board of JKL Ltd, a small electrical accessories company, to design a company wide computer based sales/debtors system. To date, the company has maintained a manual record system for its sales/debtors.
For the previous three financial year the company has had an average annual turnover of £18m (all sales are in the UK), and average annual profits of approximately £4.4m. The company has approximately 50 employees working at six locations throughout the UK: Manchester, which is the company’s head office, Birmingham, Leeds, Swindon, Bristol and Newcastle. In Manchester, five staff are directly involved in sales/debtors system, whereas in the remaining five locations only 10 members of staff are directly involved – two at each regional location.
For the year ended 31 January 2007, approximately 95% of the company’s sales were trade sales to UK retail companies, of which 88% of these sales were on credit. In addition, for the past three financial years, bad debts relating to trade sales have averaged approximately 5% of the company’s turnover in each year, resulting in lost income over the three years of approximately £2.7m. It is this loss of sales income that has prompted the management board of the company to review its sales/debtors system.
The company purchases all its retail stock.
Required
Making whatever assumptions you consider necessary, prepare a draft design for the management board of JKL Ltd indicating, where appropriate, the necessary control procedures you recommend in order to minimize the growing level of bad debts.
UK card fraud has risen steadily over the past 10 years, from £83.3m in 1995 to £504.8m in 2004. Over the same period, card usage and the number of cards issued has risen, and continues to rise in the UK. With increasing card use comes an increased risk of exposure and . . . (companies) . . . should remain vigilant to the potential fraud risk.
Required
To assist in the prevention of fraud (especially in relation to point of service EFT), a large number of anti fraud measures are now available for retailers to use. Some of the more popular anti fraud measures are:
§ the use of forced online protocols,
§ the use of floor limits,
§ the use of ‘one in n’ checks – that is sample random transactions checks,
§ the use of multiple transaction checks,
§ the use of Hot Card files,
§ the use of encryption,
§ the use of Secure Sockets Layer (SSL),
§ the use of Card Security Code (CSC),
§ the use of address verification services (AVS), and
§ the use of payer authentication.
Describe and critically evaluate each of the above anti fraud measures.
BPL Ltd is a small local retail company. The company sells a branded clothing range for 18–30 year olds.
During the past financial year (year ending 31 December 2005) the company had an annual turnover of £1.5m and an annual net profit of approximately £700,000.
The company has two retail outlets located in Manchester and Oxford, and employs five part time sales assistants, one administrator and one manager.
Currently, sales are either over the counter sales at either retail location, or mail order sales from the company’s annual catalogue. Over the counter sales can be for cash, credit/debit card payment or payment by cheque. Mail order sales can be for credit/debit card payment and/or cheque payment only. All mail order sales are processed at the company’s Manchester retail outlet. Last year 42% of the company’s turnover was from mail order sales.
For credit/debit card related sales, the company operates a chip and pin based ePOS (electronic point of sale) system. All over the counter sales are processed by the sales assistants. All mail order sales are recorded by the administrator.
Mail order sales are only accepted from authorised customers. These customers are authorised by the manager in advance and are allowed 45 days’ credit. In the past financial year, however, the manager authorised the write off of £86,000 for bad debts arising from non payment by mail order customers. Estimates for the current financial year suggest that bad debt write offs may exceed £100,000.
The manager has become increasingly concerned about the growing level of bad debts, and is exploring the possibility of developing an internet based e commerce facility to replace its catalogue based mail order facility, and eliminate ever increasing levels of bad debt.
Required
Describe the main function of a sales system for a company such as BPL Ltd and explain the inherent risk associated with the failure of internal controls within such a system.
HLU plc is a UK based retail company. During a recent systems review of its creditor based expenditure cycle, you noted the following requirements:
§ employees responsible for the receipting of products from product suppliers cannot be involved in the approving/authorising of invoices for payment to creditors,
§ employees responsible for the approving/authorising of invoices for payment to creditors cannot be involved in the processing of payments to creditors,
§ employees responsible for the processing of payments to creditors cannot be involved in the reconciliation of the company bank account, and
§ employees responsible for the receipting of products from product suppliers cannot be involved in periodic stock checks of products in store.
Required
Explain:
§ the purpose of each of the above requirements within a company such as HLU plc, and
§ the problems which could occur should the above requirements not be complied with.
You have recently been appointed Systems Accountant at BHJ Ltd, a small electrical accessories company.
Your main brief is to design a company wide computer purchasing system. To date the company has maintained a semi manual record system for all its purchases. For the previous five financial years the company has made average annual purchases of £15m (all purchases are from UK suppliers) and average annual profits of approximately £9m. The company has 47 employees working at seven locations throughout the UK: York, Hull, Birmingham, Oxford, Swindon, Bristol and Portsmouth.
For the year ended 31 March 2007, approximately 95% of the company’s purchases were on credit. The company is currently reviewing its purchasing system and is considering introducing a fully computerized purchasing system with the possibility of a web based purchasing protocol linked to selected suppliers.
Required
Making whatever assumptions you consider necessary, prepare a draft report for the management board ofBHJ Ltd, detailing the following:
§ the control objectives of a company purchasing system.
§ the general controls and application controls you would expect to find in a computerised purchasing system, and
§ the control issues relevant to a web based purchasing system.
SEC Ltd, a small electrical accessories company, wants to design a company wide computer purchasing system. To date the company has maintained a semi manual record system for all its purchases.
For the previous three financial years the company has made average annual purchases of £34m (all purchases from UK suppliers) and average annual profits of approximately £10.6m. The company has approximately 350 employees working at six locations throughout the UK: Manchester, which is the company’s head office, Birmingham, Leeds, Swindon, Bristol and Newcastle.
You have recently completed an audit of activities within the purchasing department within SEC Ltd. The department employs 15 buyers, seven supervisors, a manager and clerical personnel. Your audit has disclosed the following conditions:
The company has no formal rules on conflicts of interest. Your analysis produced evidence that one of the 15 buyers in the department owns a substantial interest in a major supplier and that he procures supplies averaging £150,000 a year from that supplier. The prices charged by the supplier are competitive.
· Buyers select proposed sources without submitting lists of bidders for review. Your tests disclosed no evidence that higher costs were incurred as a result of that practice.
· Buyers who originate written requests for quotations from suppliers receive the suppliers’ bids directly from the mail room. In your test of 100 purchases based on competitive bids, you found that in 55 cases the lower bidders were awarded the purchase order.
· Requests to purchase (requisitions) received in the purchasing departments in the company must be signed by persons authorised to do so. Your examination of 200 such requests disclosed that three requisitions, all for small amounts, were not properly signed. The buyer who had issued all three orders honoured the requests because he misunderstood the applicable procedures. The clerical personnel responsible for reviewing such requests had given them to the buyer in error.
Required
(a) For each of the above, explain the risk, if any, that is incurred if each of the conditions described previously is permitted to continue and describe the control(s), if any, you would recommend to prevent continuation of the condition described.
(b) Explain the main function of a purchasing system employed by a company such as SEC Ltd, the risks associated with its failure and the controls that can be installed in order to minimise the impact of such risks.
OWS Ltd has been under the control of the same family Mr I and Mrs N Sane (who are now both 62 years old) for the past 30 years. During that time the company has expanded rapidly. Unfortunately it still operates a fairly simple manual based/cheque based purchasing system.
A document flowchart of the company’s current purchasing system is provided in Figure 9.11 below.
Required
Identify the major internal controls within the company’s purchasing systems and, where appropriate, suggest possible improvements to the company’s purchasing system.
PR= Purchase requisition;
PO= Purchase Order;
QR = Quotation request;
SQ = Supplier Quotation;
N = File (Numerical Order);
POA = Purchase order acknowledgement;
DN = Delivery Note;
CR = Cheque Register;
Figure 9.11 OWS Ltd purchasing system – document flowchart
You have recently been appointed as an accountant at LQOH, a Harrogate based firm of certified accountants.
You are currently reviewing the payroll system of PLT plc. The company is a small local manufacturing company with an annual turnover of £4.2m and an annual net profit of approximately £1.2m. The company currently employs a factory workforce of 56 employees and has an annual factory wage bill of £2.2m.
The following document flowchart (see Figure 9.12) of PLT’s factory payroll system was prepared during the last systems audit of the company approximately three months ago.
Required
Based on the above flowchart, identify and describe the weaknesses within PLT’s factory payroll system and recommend possible areas for improvement.
PU = Payroll update; TC= Timecards; PR= Payroll register; PC= Payroll cheque; HWS = Hours worked summary,
Events/activities
1. Personal file reviewed and timecards prepared.
2. Timecards used to record hours worked.
3. Timecards submitted for approval on a weekly basis.
4. Timecards review and authorized – hours worked noted.
5. Hours worked calculated and overtime hours worked noted.
6. Employee status checked and pay rate and deductions confirmed.
7. Gross pay and net pay are calculated and payroll register prepared.
8. Payrall register details checked and confirmed.
9. Sequentially numbered cheques are prepared for each employee.
10. Gross pay and net pay calculations are checked and the sequence of cheques confirmed.
11. Hours Worked and overtime worked verified.
12. Employee’s identity confirmed and all cheques signed (using automated cheque signing machine).
13. Chequessentto Finance for distribution to employees.
Figure 9.12 PLT plc payroll system – document flowchart
An article appearing in the Independent newspaper (UK, 18 April 2005, p20) entitled:
“The ethical revolution sweeping through the world’s sweatshops identified how organisations such as Nike and Gap have put in place various mechanisms to help ensure improvement in the conditions of factory workers.
Required:
Discuss fully why companies Nike and Gap have responded to community concerns.
This is to be a THOUGHTFUL and ANALYTICAL short piece of writing that focuses on the topic detailed above. This is a RESEARCHessay. The word limit is a maximum of 1000 words. There should be at least a minimum of fifteen references when you complete the essay
“Franchise Fees and Revenue Recognition” Please respond to the following:
From the e Activity, briefly describe the company’s franchise structure which you researched. Suggest one (1) way in which the company could improve its franchise structure to make it more attractive to potential customers.
Outline a fraud prevention plan for a retail organization to reduce the likelihood of error and fraud. In your plan, identify two (2) types of potential errors that could occur and two (2) types of fraud that could occur. Explain how your plan can prevent errors and fraud from occurring.
“Accounting for Income Taxes and Losses” Please respond to the following:
From the e Activity, compare and contrast the key similarities and differences between GAAP and IFRS with respect to income tax accounting. Analyze two (2) tax differences and determine which difference would provide the greatest tax benefit to a corporation. Write a brief memo to the International Accounting Standards Board (IASB) that will convince the board to adopt the tax method that provides the greatest tax benefit to corporations.
Differentiate between a loss carryback and loss carry forward. Explain the way in which carrybacks and carry forwards affect the reporting of deferred tax assets and deferred tax liabilities. Provide one (1) example, situation, or scenario of this affection to support your response.
Total views: 2 (Your views: 2)
“Pension Plans” Please respond to the following:
Imagine you are an accounting manager and are in the process of implementing a pension plan for your organization. Prepare a brief report to management on the various types of pension plans. In your report, compare and contrast a contributory pension plan and a noncontributory pension plan, and discuss the theoretical justification for the accrual recognition of pension cost. Include one (1) recommendation to management on which type of pension plan would be most beneficial to the company.
Discuss the type of information that must be included in notes to financial statements, and explain why the information is relevant to financial statement users. Imagine you are an employee of a company and want to know if the pension plan will provide you with the necessary benefits upon retirement. Determine the type of information you would look for in the notes on the pension funds, and ascertain the way in which the information will provide assurance that the company will properly fund your pension.
Hamilton Company operates in an industry with numerous competitors. It is experiencing a shortage of cash and decides to obtain money from a large bank by using some of its receivables as collateral. Hamilton “pledges” $100,000 of its receivables, is charged a 12% fee on this amount, and notifies these credit customers to make their payments directly to the bank. Hamilton transfers the receivables to the bank and the bank assumes the servicing activities, but Hamilton is responsible for all bad debts, which it reasonably estimates to be 2% of the receivables amount. When the balance of the receivables is reduced to $3,000, Hamilton is required to “repurchase” the receivables, notify the remaining credit customers to make payments to it, and reassume the servicing activities. The bank has the right to sell the receivables, except to Hamilton’s major competitor. Hamilton’s President has asked you how to account for (and record) this transaction in the financial statements.
Required:Research the related generally accepted accounting principles and prepare a typewritten memo to the president that answers his question. Cite your authority under generally accepted accounting principles.
Computer Information Services is a computer software consulting company. Its three major functional areas are computer programming, information systems consulting, and software training. Carol Birch, a pricing analyst in the Accounting Department, has been asked to develop total costs for the functional areas. These costs will be used as a guide in pricing a new contract. In computing these costs, Birch is considering three different methods of allocating overhead costs – the direct method, the step method, and the reciprocal method. Birch assembled the following data on overhead from its two service departments, the Information Systems Department and the Facilities Department. Required: 1) Using computer usage time as the application base for the Information Systems Department and square feet of floor space for the Facilities Department, apply overhead from these service departments to the production departments, using th
Maxine Frith Social Affairs Correspondent.The Independent[London (UK)] 16 Apr 2005: 20. Turn on hit highlighting for speaking browsers by selecting the Enter button Abstract (summary) The clothing companyGapmade a similar declaration a few months ago when it published a shocking ‘social responsibility’ report that revealed terrible working conditions in its factories in Mexico, China, Russia and India.Gapcancelled contracts with 136 factories after the report disclosed details of child labour, the virtual slavery of workers and working weeks in excess of 80 hours. Levi Strauss, the jeans company, is now being praised by anti sweatshop campaigners for working with unions and activists to improve conditions in its factories, when just a few years ago it was accused of a ‘two fingers’ attitude towards allegations of exploitation. The protests started in America in the 1990s, when Levi Strauss moved its operations from California to factories in Mexico. But the campaigns were run by the big American unions and their attitude was more protectionist than focused on the plight of foreign workers. Then in the mid 1990s, students became involved, staging protests on behalf of Mexican workers and supporting strikes and attempts to organise local unions. Full Text
TranslateFull text
They are the global brands that have raked in multimillion pound profits on the back of sweatshop labour in developing countries. But after a decade of denying any wrongdoing, companies such asNIKEandGAPare now admitting that their workers have been exploited and abused, and have pledged to improve the conditions of the millions of people who are paid a few pence a day to make their top selling goods. The wholesale reform is being hailed as a victory for anti sweatshop campaigners who just a few years ago were being derided and dismissed by the big brand names. With consumers becoming increasingly concerned with ‘ethical shopping’, activists say firms are realising that being linked with sweatshop labour can lead to a dip rather than a rise in profits. This week, for the first time,NIKEpublished details of the 700 factories that make its goods in an effort to create more ‘transparency’ for customers. The company pledged to set up a task force to ensure that its codes of conduct on pay, hours and conditions are complied with. Extraordinarily, Phil Knight, the founder and chairman ofNIKE, also admitted that the firm had failed to respond to previous allegations of exploitation, and disclosed that a quarter of its factories were still not meeting minimum standards. Just two years ago,NIKEaggressively defended a court case in which it was accused by activists of lying and making misleading claims about its working practices in a corporate and social responsibility report. The company eventually donated $2m (pounds 1.1m) to the American Fair Labour Association as part of an out of court settlement. The clothing companyGAPmade a similar declaration a few months ago when it published a shocking ‘social responsibility’ report that revealed terrible working conditions in its factories in Mexico, China, Russia and India.GAPcancelled contracts with 136 factories after the report disclosed details of child labour, the virtual slavery of workers and working weeks in excess of 80 hours.LEVI STRAUSS, the jeans company, is now being praised by anti sweatshop campaigners for working with unions and activists to improve conditions in its factories, when just a few years ago it was accused of a ‘two fingers’ attitude towards allegations of exploitation. Mick Duncan, the founder and secretary of the campaign group No Sweat, said: ‘When the protests and campaigns first started 10 years ago, the companies were really bullish ” they either completely denied there was a problem or adopted a ‘so what?’ attitude. The real change we have seen in the last year or so is that they are putting their hands up to it and admitting that they have got a problem. ‘There is a still long way to go but we are beginning to see real movement on this issue.’ Campaigners have changed their tactics in recent years, from backing boycotts and protesting outside city stores, to playing companies at their own game and then working with them to improve conditions. The protests started in America in the 1990s, whenLEVI STRAUSSmoved its operations from California to factories in Mexico. But the campaigns were run by the big American unions and their attitude was more protectionist than focused on the plight of foreign workers. Then in the mid 1990s, students became involved, staging protests on behalf of Mexican workers and supporting strikes and attempts to organise local unions. When No Sweat was established, it decided not to back boycott campaigns. Mr Duncan said: ‘Boycotts just meant that people don’t buy the goods, companies close down factories and people lose their jobs. What we have switched to doing is working on the ground with the workers and local unions, and working with the companies to improve conditions and pay.’ Activists have also used slick poster campaigns and detailed research to raise awareness among consumers of the issue. Sam Maher, of the protest group LabourBehind The Label, said: ‘These companies are obsessed with branding and spend millions of pounds on advertising to get a very particular image of their products across. By raising awareness of sweatshop labour, that really tarnished the brands, and hit these companies where they hurt.’ Having been ‘fobbed off’ in the late 1990s by companies issuing codes of conduct, which were then routinely broken, activists have now piled pressure on the companies to raise monitoring standards and ensure compliance. And in the David and Goliath battle of the small activists against big business, even the companies themselves are admitting defeat. Hans Faber, the senior manager in corporate communications forNIKEEurope, said: ‘There have been problems in the past and we admit that, and one of our weaknesses was that we thought we could sort these out on our own. We are now working with NGOs and governments, and the campaigners, to make sure standards are raised, because we care about the people who work for us, and of course our customers.’ But concerns remain over the continued abuse of garment workers around the world ” 70 per cent of them are women, particularly with the ending in January this year of the World Trade Organisation’s multi fibre agreement. The MFA was established in the 1970s and set international quotas for textiles, in an effort to protect the industries of countries with higher manufacturing costs from a flood of cheaper foreign imports. Campaigners are worried that the scrapping of the agreement will lead to a huge shift in manufacturing to countries with the cheapest costs but the worst record on working conditions, such as China. And despite some companies’ repentance and reforms, other top name brands are still using sweatshops. Among those on the target list of campaigners areTommy Hilfiger,Umbroand Fila. Changing practices NIKE BEFORE: Along withAdidas,NIKEcontrols 49 per cent of the sports shoe market and employs more than 600,000 people in contract factories. Workers in Indonesia, Thailand and other countries have complained in the past of 77 hour weeks, a ban on unions and dangerous conditions in which employees have lost limbs through crush injuries. NOW: It has published its first corporate and social responsibility report (CSR) in four years, with details of all its factories and a pledge to increase monitoring of working conditions. GAP BEFORE: One of several companies sued in 1999 by workers on the island of Saipan in the western Pacific over conditions in its garment factories. GAP, along with the other firms, paid a $20m settlement after the court heard of ‘indentured’ workers, withheld wages and forced overtime. NOW: Four months ago it published a ‘mea culpa’ CSR report in which it admitted to the failings and announced that it was cancelling contracts with 136 factories because of low pay and hideous working conditions. LEVI STRAUSS BEFORE: Was accused of contracting to factories in Haiti and Mexico where workers have been sacked for being union members, as well as using low wages to prop up profits. NOW: When the campaign group No Sweat uncovered evidence of abuses at a factory in Mexico recently,LEVI STRAUSSsent its own investigators, accepted the accusations were true and worked with the contractor to ensure unions were recognised. The jeans maker has also started to buy some of its cotton from organic sources. Illustration Caption: Campaigners are still concerned about conditions in garment factories. Women comprise 70 per cent of the workforce in garment factories such as this one in China, which has one of the worst records Word count:1243 Maxine Frith Social, Affairs Correspondent. 2005. “The Ethical Revolution Sweeping through the World’s Sweatshops.”The Independent, Apr 16, 20. http://0 search.proquest.com.prospero.murdoch.edu.au/docview/310762216?accountid=12629.
Brian and Maureen Sullivan are married and live in Chicago, Illinois. They have two children, Luke a 5 – year old boy and Claire, a 2 – year old girl. Their address is 456 Park Avenue, Chicago, IL 52083. They own their home.
The Social security numbers of the family are:
Brian: 190 50 4462
Maureen: 183 93 5466
Luke: 290 40 6733
Claire: 290 41 8900
In 2012, they paid $12000 in mortgage interest. Their real estate taxes amounted to $6,500.
During 2012, the couple sent both children to Sunnyside Daycare. The daycare is located at 222 Sunnyside Way, Chicago, IL 52804. The employer identification number (EIN) for the daycare is 91 8765432. The total cost for the children’s daycare was $10,000 for the year (at $5,000 each).
Maureen is employed by a prestigious law firm in downtown Chicago. Her 2012 wages were $85,000. She had $15,000 withheld on her form W 2.
Brian is self employed. His business is called Irish Football Clothes and sells merchandise for Notre Dame Football games.
The business address is 123 Irish Way, South Bend, In 68722.
Brian uses the cash basis of accounting, and the business, which he runs alone, is his only source of income. The cost method is used to value inventory. Following is the additional information regarding Brian’s business:
Gross receipts
$195,000
Returns from dissatisfied customers
$2,000
Beginning inventory for 2012
$45,000
Inventory at the end of 2012
$10,000
Purchases for 2012
$90,000
Business insurance
$1,000
Cost of an accountant
$2,000
Taxes
$2,250
Wages for a single employee
$35,000
Maureen and Brian love the Fighting Irish, and in 2012 they made a $2,500 cash contribution to the University.
During 2012, Luke was very sick with viral meningitis and to be hospitalized for a few days. Luckily, he was okay. The family had to pay medical expense of $4,600 for that hospital visit.
Brian and Maureen are conservative when it comes to investing. Brian and Maureen have a savings account at Bank of the USA. In 2012, they received $130 in interest income, from their savings account.
Additionally, Brian and Maureen received $50 in dividends from their investment in ABC Corporation and $150 in dividends from their investment in the Candle Company of Chicago. They sold part of an investment in the candle company of Chicago during 2012. They had purchased 100 shares of stock in the company on February 1, 2011 for $5 per share and sold 50 shares on January 31, 2012 for $7 per share. Brian and Maureen also sold 100 shares of stock in the coffee company of Chicago. They had purchased the stock on June 1, 2009 for $10 per share and sold it on June 1, 2012 for $12 per share. They used the proceeds to purchase 10 shares of Starbucks stock. Finally, they sold their stock in the Running Company of Chicago. They had purchased the stock (25 shares) on August 21, 2008 for $15 per share and sold it on November 21, 2012 for $16 per share.
The couple paid $350 to have their 2011 income tax return prepared by a certified public accountant.
They filed their return as married filing jointly.
Woodwick Company issues 6%, five year bonds, on December 31, 2012, with a par value of $102,000 and semiannual interest payments.
Semiannual Period End
Unamortized Premium
Carrying Value
(0)
12/31/2012
$
8,151
$
110,151
(1)
6/30/2013
7,336
109,336
(2)
12/31/2013
6,521
108,521
Use the above straight line bond amortization table and prepare journal entries for the following.
(a)
The issuance of bonds on December 31, 2012.
(b)
The first interest payment on June 30, 2013.
(c)
The second interest payment on December 31, 2013.
Duval Co. issues four year bonds with a $115,000 par value on June 1, 2013, at a price of $110,888. The annual contract rate is 7%, and interest is paid semiannually on November 30 and May 31.
2.value:
6.00 points
2.
Prepare journal entries to record the first interest payment, accrued interest as of December 31, 2013 and to record the second interest payment. Assume no reversing entries have been prepared.(Round your answers to the nearest dollar amount.)
On May 1, 2013, Brussels Enterprises issues bonds dated January 1, 2013, that have a $1,700,000 par value, mature in 20 years, and pay 9% interest semiannually on June 30 and December 31. The bonds are sold at par plus four months’ accrued interest.
1.
How much accrued interest do the bond purchasers pay Brussels on May 1, 2013? (Do not round intermediate calculations.)
2.
Prepare Brussels’s journal entries for the following.
(a)
The issuance of bonds on May 1, 2013. (Do not round intermediate calculations.)
(b)
The first interest payment on June 30, 2013. Assume no reversing entries have been prepared. (Do not round intermediate calculations.)
(c)
The second interest payment on December 31, 2013.
On January 1, 2013, Boston Enterprises issues bonds that have a $2,000,000 par value, mature in 20 years, and pay 10% interest semiannually on June 30 and December 31. The bonds are sold at par.
1.
How much interest will Boston pay (in cash) to the bondholders every six months?
Feed the Hungry Foundation is a non profit organization that has a cost of capital of 8 percent. The foundation is considering the replacement of piece of equipment. The old machine has a book value of $3,000 and a remaining estimated life of 5 years with no salvage value at that time. The salvage value of the old machine is currently $1,500. The new equipment will cost $10,000. It has an estimated life of 5 years with no salvage value then. Annual cash operating costs are $4,000 for the old machine and $2,000 for the new machine. Hint: Use the Present Value Tables in the back of the text book.
a. What is the present value of the operating cash outflows for the old machine?b. What is the present value of the operating cash outflows for the new machine?c.What is the present value of salvage value of the old machine if it is replaced now?d. Would you advise the organization to replace the machine?
Palisade Creek Co. is a merchandising business. The account balances for Palisade Creek Co. as of May 1, 2014 (unless otherwise indicated), are as follows:
110
Cash
$ 83,600
112
Accounts Receivable
233,900
115
Merchandise Inventory
602,400
116
Prepaid Insurance
16,800
117
Store Supplies
11,400
123
Store Equipment
569,500
124
Accumulated Depreciation—Store Equipment
56,700
210
Accounts Payable
96,600
211
Salaries Payable
—
310
Capital Stock
100,000
311
Retained Earnings
585,300
312
Dividends
135,000
313
Income Summary
—
410
Sales
5,221,100
411
Sales Returns and Allowances
92,700
412
Sales Discounts
59,400
510
Cost of Merchandise Sold
2,823,000
520
Sales Salaries Expense
664,800
521
Advertising Expense
281,000
522
Depreciation Expense
—
523
Store Supplies Expense
—
529
Miscellaneous Selling Expense
12,600
530
Office Salaries Expense
382,100
531
Rent Expense
83,700
532
Insurance Expense
—
539
Miscellaneous Administrative Expense
7,800
During May, the last month of the fiscal year, the following transactions were completed:
May 1. Paid rent for May, $5,000.
3. Purchased merchandise on account from Martin Co., terms 2/10, n/30, FOB shipping point, $36,000.
4. Paid freight on purchase of May 3, $600.
6. Sold merchandise on account to Korman Co., terms 2/10, n/30, FOB shipping point, $68,500. The cost of the merchandise sold was $41,000.
7. Received $22,300 cash from Halstad Co. on account, no discount.
10. Sold merchandise for cash, $54,000. The cost of the merchandise sold was $32,000.
13. Paid for merchandise purchased on May 3, less discount.
14. Received merchandise returned on sale of May 6, $13,500. The cost of the merchandise returned was $8,000.
15. Paid advertising expense for last half of May, $11,000.
16. Received cash from sale of May 6, less return of May 14 and discount.
19. Purchased merchandise for cash, $18,700.
19. Paid $33,450 to Buttons Co. on account, no discount.
Record the following transactions on Page 21 of the journal.
20. Sold merchandise on account to Crescent Co., terms 1/10, n/30, FOB shipping point, $110,000. The cost of the merchandise sold was $70,000.
21. For the convenience of Crescent Co., paid freight on sale of May 20, $2,300.
21. Received $42,900 cash from Gee Co. on account, no discount.
21. Purchased merchandise on account from Osterman Co., terms 1/10, n/30, FOB destination, $88,000.
24. Returned $5,000 of damaged merchandise purchased on May 21, receiving credit from the seller.
May 26. Refunded cash on sales made for cash, $7,500. The cost of the merchandise returned was $4,800.
28. Paid sales salaries of $56,000 and office salaries of $29,000.
29. Purchased store supplies for cash, $2,400.
30. Sold merchandise on account to Turner Co., terms 2/10, n/30, FOB shipping point, $78,750. The cost of the merchandise sold was $47,000.
30. Received cash from sale of May 20, less discount, plus freight paid on May 21.
31. Paid for purchase of May 21, less return of May 24 and discount.
Instructions
1. Enter the balances of each of the accounts in the appropriate balance column of a four column account. Write Balance in the item section, and place a check mark (*) in the Posting Reference column. Journalize the transactions for July, starting on Page 20 of the journal.
2. Post the journal to the general ledger, extending the month end balances to the appropriate balance columns after all posting is completed. In this problem, you are not required to update or post to the accounts receivable and accounts payable subsidiary ledgers.
3. Prepare an unadjusted trial balance.
4. At the end of May, the following adjustment data were assembled. Analyze and use these data to complete (5) and (6).
a. Merchandise inventory on May 31
$550,000
b. Insurance expired during the year
12,000
c. Store supplies on hand on May 31
4,000
d. Depreciation for the current year
14,000
e. Accrued salaries on May 31:
Sales salaries
$7,000
Office salaries
6,600
13,600
5. (Optional.) Enter the unadjusted trial balance on a 10 column end of period spreadsheet (work sheet), and complete the spreadsheet.
6. Journalize and post the adjusting entries.
7. Prepare an adjusted trial balance.
8. Prepare an income statement, a retained earnings statement, and a balance sheet.
9. Prepare and post the closing entries. Record the closing entries on Page 23 of the journal. Indicate closed accounts by inserting a line in both the Balance columns opposite the closing entry. Insert the new balance in the retained earnings account.
Phoebe and Parker are equal members in Phoenix Investors, LLC. They are real estate investors who formed the LLC several years ago with equal cash contributions. Phoenix then purchased a piece of land. On January 1 of the current year, to acquire a one third interest in the entity, Reece contributed to the LLC some land she had held for investment. Reece purchased the land five years ago for $75,000; its fair market value at the contribution date was $90,000. No special allocation agreements were in effect before or after Reece was admitted to the LLC. Phoenix holds all land for investment. Immediately before Reece’s property contribution, the balance sheet of Phoenix Investors, LLC, was as follows:
Basis
FMV
Basis
FMV
Land
$30,000
$180,000
Phoebe, capital
$15,000
$ 90,000
$30,000
$180,000
Parker, capital
15,000
90,000
$30,000
$180,000
a. At the contribution date, what is Reece’s basis in her interest in the LLC?
b. When does the LLC’s holding period begin for the contributed land?
c. On June 30 of the current year, the LLC sold the land contributed by Reece for $90,000. How much is the recognized gain or loss? How is it allocated among the LLC members?
d. Prepare a balance sheet reflecting basis and fair market value for the LLC immediately after the land sale described in (c). Assume that no other transactions occurred during the year.
Bill Gross, a manager of a bond investment fund, “denounced a ‘lack in candor’ related to GE’s recent debt deal.” He said, “it was the most recent and most egregious example of how bondholders are mistreated.” Gross argued that GE was not forthright when GE Capital recently issued $11 billion in bonds, one of the largest issues ever from a U.S. corporation. What bothered Gross is that three days after the issue the company announced its intention to sell as much as $50 billion in additional debt, warrants, preferred stock, guarantees, letters of credit, and promissory notes at some future date.”
In your opinion, did GE Capital act unethically by selling $11 billion of long term debt without telling those investors that a few days later it would be filing documents to prepare for another $50 billion debt offering? Please explain why the action is unethical and if the action is illegal as well.
1 Unit: ACC203 – Management Accounting Submission Date: 14 Oct 2014 before 1.00 pm Weighting: The assignment is worth 25% of the total unit weight. Instructions: 1. Students are required to cover all stated requirements. 2. Your answer must be both uploaded to Moodle in word file and handed over a printed copy. 3. You need to support your answers with appropriate Harvard style references where necessary. 4. Only include information in your appendixes that has been directly referred to in the body of your document. 5. Include a title/cover page containing the subject title and code and the name, student id numbers. 6. Please save the document as ACC203AT2_first name_Surename_Student Number Eg:ACC203AT2_John_Smith_20140000 2 Question 1: Activity based costing East Coast Marine Ltd (ECM) manufactures parts for small marine craft. Over the past decade, ECM’s management has met its goal of reducing its reliance on government contract work to 50 per cent of total sales. ECM is now equally reliant on commercial sales and government contracts. Traditionally, the costs of the Material Handling Department have been allocated to direct material as a percentage of direct material dollar value. This was adequate when the majority of the manufacturing was homogeneous and related to government contracts. Recently, however, government auditors have rejected some proposals, stating that ‘the amount of Material Handling Department costs allocated to these proposals is disproportionate to the total effort involved’. Eloise Smith, the newly hired cost accounting manager, was asked by the manager of ECM’s Government Contracts Unit, Paul Jones, to find a more equitable method of allocating the Material Handling Department costs to the user departments. Her review has revealed the following information: ¦ The majority of the direct material purchases for government contracts are high dollar, low volume purchases, while commercial materials represent low dollar, high volume purchases. ¦ Administrative departments such as Marketing, Finance and Administration, Human Resources and Maintenance also use the services of the Material Handling Department on a limited basis but have never been charged in the past for material handling costs. ¦ One purchasing manager with a direct phone line is assigned exclusively to purchasing high dollar, lowvolume material for government contracts on an annual salary of $36 000. Employee on costs are estimated to be 20 per cent of the annual salary. The annual costs of the dedicated phone line are $2800. ¦ The components of the Material Handling Department’s budget for the coming year, as proposed by Lindley’s predecessor, follow. Payroll $180000 Employee on costs 36000 Telephone 38000 Other utilities 22000 Materials and supplies 6000 Depreciation 6000 Direct material budget: Government contracts 2006000 Commercial products 874000 Smith has estimated the number of purchase orders to be processed in the coming year as follows: Government contracts* 80000 Commercial products 156000 Marketing 1800 Finance and Administration 2700 Human Resources 500 Maintenance 1000 Total 242000 3 * Exclusive of high dollar, low volume materials. Smith has recommended to Jones that material handling costs should be allocated on a per purchase order basis. Jones realises that the company has been allocating to government contracts more material handling costs than can be justified. However, the implication of Smith’s analysis could be a decrease in his unit’s earnings and, consequently, a cut in his annual bonus. Jones told Smith to ‘adjust’ her numbers and modify her recommendation so that the results will be more favourable to the Government Contracts Unit. Being new in her position, Smith is not sure how to proceed. She feels ambivalent about Jones’ instructions and suspects his motivation may not be in the best interest of ECM. To complicate matters for Smith, the company’s new managing director has asked her to prepare a three year forecast of the Government Contracts Unit’s results, and she believes that the newly recommended allocation method would provide the most accurate data. However, this would put her in direct opposition to Jones’ directives. Smith has assembled the following data to project the material handling costs over the next three years: ¦ The number of purchase orders increases 5 per cent per year. ¦ The ratio of government purchase orders to total purchase orders remains at 33 per cent. ¦ Total direct material costs increase 2.5 per cent per year. ¦ Material handling costs remain the same percentage of direct material costs. ¦ Direct government costs (payroll, employee on costs, and direct phone line) remain constant. ¦ In addition, she has assumed that the cost of government material in the future will be 70 per cent of total material. Required: 1 Calculate the material handling rate that would have been used by Eloise Smith’s predecessor at East Coast Marine. 2 Calculate the revised material handling costs to be allocated on a per purchase order basis. 3 Discuss why purchase orders might be a more reliable cost driver than the dollar amount of direct material. 4 Calculate the difference due to the change to the new method of allocating material handling costs to government contracts. 5 Prepare a forecast of the cumulative dollar impact over a three year period (based on the coming year plus 2 more years) of Eloise Smith’s recommended change for allocating Material Handling Department costs to the Government Contracts Unit. Round all calculations to the nearest whole number. 6 Referring to the standards of ethical conduct for accountants described in Chapter 1: (a) Discuss why Eloise Smith has an ethical conflict. (b) Identify several steps that Smith could take to resolve the ethical conflict. 4 Question 2: Pricing & possible plant closure Handy Household Products Ltd is a multiproduct company with several manufacturing plants. The Fremantle plant manufactures and distributes two household cleaning and polishing compounds, standard and commercial, under the Clean & Bright label. The forecast operating results for the first six months of the current year, when 100000 boxes of each compound are expected to be manufactured and sold, are presented in the following statement: Clean& Bright Compounds, Fremantle plant Forecast results of operations for the six month period ending June 30 (in $’000s) Sales Standard $2000 Commercial $3000 Total $5000 Cost of goods sold 1600 1900 3500 Gross profit $ 400 $1100 $1500 Selling and administrative expenses: Variable $ 400 $ 700 $1100 Fixed* 240 §QQ Total selling and administrative expenses $ 640 $1060 $1700 Profit (loss) before taxes $ (240) $ 40 = $ (200) *The fixed selling and administrative expenses are allocated between the two products on the basis of dollar sales volume. The standard compound sold for $20 a box and the commercial compound sold for $30 a box during the first six months of the year. The manufacturing costs are presented in the schedule below. Each product ismanufactured on a separate production line.Annual normal manufacturing capacity is 200 000 boxes of each product. However. the plant is capable of producing 250 000 boxes of standard compound and 350000 boxes of commercial compound annually. Cost per box Standard Commercial Direct material $7.00 $8.00 Direct labour 4.00 4.00 Variable manufacturing overhead 1.00 2.00 Fixed manufacturing overhead 4.00 5.00 Total manufacturing cost $16.00 $19.00 Variable selling and administrative costs $4.00 $7.00 The following schedule reflects the consensus of top management regarding the price volume alternatives for the Clean & Bright products for the last six months of the current year. These are essentially the same alternatives management had during the first six months of the year. Standard compound Commercial compound Alternative prices (per box) Sales volume (in boxes) Alternative prices (per box) Sales volume (in boxes) $18 120000 $25 175000 20 100000 27 140000 21 90000 30 100000 22 80000 32 55000 23 50000 35 35000 5 Handy Household Products’ top management believe that the loss for the first six months reflects a tight profit margin caused by intense competition. Management also believe that many companies will leave this market by next year and profit should improve. Required: 1. What unit selling price should management select for each of the Clean & Bright compounds for the remaining six months of the year to maximise profit? Support your selection with appropriate calculations. 2. Independently of your answer to requirement 1, assume that the optimum alternatives for the last six months were as follows: a selling price of $23 and volume of 50 000 boxes for the standard compound, and a selling price of $35 and volume of 35 000 boxes for the commercial compound. (a) Should management consider closing down the plant’s operations until January 1 of the next year in order to minimise its losses? Support your answer with appropriate calculations. (b) Identify and discuss the strategic factors that should be considered in deciding whether the Fremantle plant should be closed down during the last six months of the current year. Question 3: Budgeting Hawthorn Leisure Works (HLW) offers tennis courts and other physical fitness facilities to its members. The club has 2000 members. Revenue is derived from annual membership fees and hourly court fees. The annual membership fees are: Individual $45 Student 30 Family 100 Approximately half the members are ‘family’, and the remaining memberships are split equally between individuals and students. For the next two financial years, the hourly court fees are $8 and $12, depending on the season and the time of day (prime versus non prime time). There are 10 courts at each club. The courts are available for 12 hours per day, from 9 am to 9 pm. The peak tennis season runs from October to April (181 days). During this period, court usage averages from 90 to 100 per cent of capacity during prime time (5 to 9 pm) and from 50 to 60 per cent of capacity during the remaining hours (9 am to 4 pm). Daily court usage during the off season averages from only 20 to 40 per cent of capacity, and is charged at $6 per hour. All of HLW’s memberships expire at the end of September. A substantial amount of the cash receipts is collected during the early part of the tennis season due to the renewal of annual membership fees and heavy court usage. However, cash receipts are not as large in autumn and drop significantly in the winter months. For the start of the new financial year on 1 October, HLW is considering introducing a new membership and fee structure in an attempt to improve its cash flow planning. Under the new membership plan, only an annual membership fee would be charged, rather than a membership fee plus hourly court fees. There would be two classes of membership, with annual fees as follows: Individual $300 Family 500 The annual fee would be collected in advance at the time the membership application was completed. Members would be allowed to use the tennis courts as often as they wished during the year under the new plan. All future memberships would be sold under these new terms. A special promotional campaign would be instituted to attract new members and to encourage current members to remain with the club. The annual fees for individual and family memberships would be reduced to $250 and $450 respectively if members pay for their yearly memberships in advance during the two month promotional campaign. Hawthorn Leisure Works’ management estimates that 70 per cent of the current members will continue with the club, and student members would convert to individual membership. The most active members (45 per cent of the current members) would pay the yearly fee in advance and receive the special fee reduction, while the remaining members who continued would renew memberships in October. Those members who would not rejoin are not considered active (that is, they play five times or less during the year). Management estimates that the loss of members would be offset fully by new members within six months of instituting the new plan. These new 6 members would pay a proportional amount of the yearly fee on joining. Furthermore, many of the new members would be individuals who would play during non prime time. Management estimates that adequate court time will be available for all members under the new plan. If the new membership plan is adopted, it would be instituted at the start of the new financial year (1 October), which is the start of the tennis season. The special promotional campaign would be conducted during August and September, prior to the start of the new financial year. Required: Your consulting firm has been hired to help HLW to evaluate its new fee structure. Write a letter to the club’s managing director dealing with the following issues: 1 Will HLW’s new membership plan and fee structure improve its ability to plan its cash receipts? Explain your answer. 2 Estimate the effect on sales revenue resulting from the planned change in fee structure for the next financial year, which starts 1 October and ends on 30 September. State any assumptions that you need to make. 3 Hawthorn Leisure Works should evaluate the new membership plan and fee structure completely before it decides to adopt or reject it. (a) Identify the key factors that HLW should consider in its evaluation. (b) Explain what type of financial analyses HLW should prepare in order to make a complete evaluation. 4 Explain how HLW’s cash management practices may differ from the present if the new membership plan and fee structure are adopted.
Deltum Ltd is an established retail company located in the north east of England. The company has been operating successfully for over 50 years. In 2000, following a rather aggressive takeover bid Deltum Ltd finally acquired the company’s only regional retail competitor, Hetmex Ltd. Although the combined company did experience some early operating successes, the overall profitability and efficiency of the combined company has recently fallen sharply, market share and product quality are now at record lows with the combined company recording its first annual trading loss in 2003. Despite attempts by the management of Deltum Ltd to combine the two companies’ accounting information systems, a recent external consultants’ report was highly critical suggesting that the core problems being experienced by the company have resulted from Deltum Ltd’s management’s inability to understand the nature, context and purpose of a company’s accounting information system.
Required
Provide a report for the management of Deltum Ltd explaining the nature, purpose and uses of a company’s accounting information system, and offer reasons why Deltum Ltd has faced such significant problems.
Jeamer plc was an UK listed company that produced digital audio equipment for the retail market. The company’s products were sold throughout Europe, North America, Australia and Canada, and were widely regarded as the best in the market. Indeed during the period 1995 and 2001 the company’s digital audio equipment consistently won high praise from both consumer groups and retail critics.
In January 2003, however, Jeamer plc suddenly went into liquidation. The company failed with debts amounting to £125m. The failure of the company was headline news around the world with press speculation focusing on the possibility of large scale financial reporting irregularities and potential management fraud. However in April 2003, following extensive enquiries, the company receivers published their findings. Their report indicated that whilst some unacceptable accounting irregularities had been evident in the company’s published financial reports for a number of years, the principal cause of Jeamer plc’s failure had been an inadequate accounting information system.
The company receivers’ report concluded that: whilst accounting information was produced on a regular basis, this information was often out of date and of little use to managers.
Required
Describe the main function of an accounting information system for a company such as Jeamer plc and explain the possible risks associated with the failure of such a system.
Taj a Jac Ltd is a UK based hand crafted furniture manufacturer, launched in the mid 1980s by Charles Wood. The business started its operations from one shop in York and has grown substantially so that by 2002 it had 48 shops located around the UK. In addition, in 1999, a seven year contract with a national chain of leading department stores was signed which gave Taj a Jac Ltd wider market access in return for a flat fee and a precentage share of profits.
Originally, Charles Wood was the only full time employee of Taj a Jac Ltd. He was responsible for the design, construction and marketing of the business’s products as well as the day to day management of the firm. The business, which required £190,000 to start, was a partnership and in addition to his own investment, 50% of the required capital, was provided by Charles’ brotherin law, Thomas Heath. Thomas was an accountant by profession and acted in a part time capacity as the company accountant and assisted Charles in certain aspects of management.
The company quickly expanded and problems emerged as supply could not keep pace with demand. It became necessary, therefore, to employ someone else to assist Charles in the construction of the furniture. As the business continued to grow, more people joined the company, so that by 1987, 21 people were employed by the firm. At the same time, further shops were opened and a separate workshop/warehouse was established. Taj a Jac Ltd’s expansion was funded by a combination of reinvesting profits and medium term bank loans. The result of all these changes was that by 1987, Charles Wood’s time was almost exclusively given over to the management of the business. The following year the decision was made that the company would become a private limited company and it was at this point that Thomas heath joined as full time finance director. One of the first changes that Thomas brought about was the direct sourcing of the core materials used in the company’s products. The pine now used is directly imported from Canada and Scandinavia.
On the 31 March 2003, after 19 years of trading, the financial statements of the company showed a turnover of £60m and a pre tax profit of £14m.
Strategic review
In 2002, external consultants were asked to identify the strategic options open to Taj a Jac Ltd. The review found that, although the middle/upper end of the furniture market was becoming increasingly competitive, there was still room for significant growth. Despite numerous store openings, the company was still very much a regional operator. Expansion of the market was predicted to continue for many years, although Taj a Jac Ltd’s product and strategic positioning left the business vulnerable to changes in the business cycle. Indeed, the company had been affected quite significantly by a fall in turnover in the mid/late 1990s.
Aware of this, the consultants suggested a number of alternatives for the company. The first was for more stores to be opened – particularly in the south of England where the company had little presence. This option had implications for the management and organisational structure of the company as at least two additional workshop, warehouse and distribution centres would be necessary to provide the required infrastructure. Such a centre was opened in the latter part of 1997, as a programme of store openings had already been an idea that the management had been considering for some time. The company had previously considered franchising as a way to achieve this growth and the company did in 1999 enter into a seven year contract that was signedwith a large UK based department store. However, subsequent market and business research regarding the UK market had suggested that franchising would not be an attractive/profitable propposition for a company like Taj a Jac Ltd and as a consequence the policy was abandoned.
A second alternative recommended was diversification. Significant experience of the import of quality pine from North America and Northern Europe was, the consultants suggested, not being exploited. The wholesale purchase of wood was therefore recommended. This had the added advantage of producing economies of scale which would have the effect of reducing unit costs. Charles and Thomas together with their senior managers had not previously considered this proposal and felt that so long as they were not supplying major competitors this was a proposition that could and should be pursued.
Thirdly, the consultants suggested the development of the ‘lifestyle concept’ store format – stores that not only sold furniture but also related accessories (such as soft furnishings) in a themed environment. Such stores had started to develop at the lower end of the market, but such a format had not yet been rolled out in the market sector that the company occupied. This proposal found immediate favour with some of the management board, although the size of each of the existing shops would not easily accommodate such a change. The movement to larger retail outlets or the opening of new additional stores that could accommodate this format would be necessary but costly.
Fourthly, the demand for English designed quality furniture had always been popular in Asia. The region as a whole was becoming potentially a more significant market and the consultants argued that a gradual move into this market would in time reduce the company’s dependence on UK demand. The consultants, concerned about the risk associated with this alternative, felt that expansion in this way should be via joint venture. This idea was one with which Charles, Thomas and their senior managers readily agreed. The proposal suggested that, in the long run, furniture should be manufactured in Asia using designs and templates from the UK. In the short and medium term, however, in order to establish the viability of the market, furniture should be exported – a practice that the consultants suggested should continue until the market was sufficiently mature – approximately five years hence.
As part of their review the consultants provided the following estimated summary costing for each of the alternatives.
Alternative 1 – additional new stores
Initial investment cost
£86m
Potential annual income
£16m pa
Alternative 2 – diversification
Initial investment cost
£23m
Potential annual income
£6m pa
Alternative 3 – lifestyle concept
Initial investment cost
£57m
Potential annual income
£10m pa rising to £15m pa in four years
Alternative 4 – move into the Asian market
Initial investment cost
£46m
Potential annual income
£6m pa rising to £14m pa in six years
Despite their caution, Charles and Thomas were keen to advance on each of the options identified by the external consultants. The question was how this growth should be financed. Financial advisors recommended a combination of possible financial strategies.
Since 1998 Taj a Jac Ltd had begun generating significant cash surpluses which, the financial advisors had suggested, should be used to partly fund the selected proposal/proposals. Another possibility, given the risks that expansion involved, was conversion to public limited company (plc) status so that a ‘listing’ might be sought. This, the consultants suggested, would raise an additional £40m.
In addition to this, the consultants suggested that debt instruments should be used to fund any remaining shortfall – given the current gearing ratio of the company. The company currently has a cost of equity of 12% and an after tax cost of debt of 16%. In addition, it limits project life cycles to a maximum of 20 years. The company believes that if additional funds were raised through borrowing then its cost of equity would rise to 16%. The following financial statements relate to Taj a Jac Ltd for the years 2001 to 2003.
Balance sheets at 31 March
2001
2002
2003
£m
£m
£m
Fixed Assets
36
47
75
less Depreciation
10
17
20
26
30
55
Current Assets
Stocks
16
16
20
Trade Debtors
28
47
57
Debtors
3
16
5
Bank
5
7
3
52
86
85
Current Liabilities
Trade Creditors
18
35
43
Other Creditors
15
7
15
Taxation
6
9
4
Dividends
3
4
3
42
55
65
Total Net Assets
36
61
75
Long Term Liabilities
Debentures
2
14
20
34
47
55
Capital
Share Capital
20
32
40
£1 Ordinary Shares
Accumulated Reserves
14
15
15
34
47
55
Profit and Loss Accounts for the years ending 31 March
Katz and Kahn in The Social Psychology of Organisations (1966) cite five generic types of sub system to meet an organisation’s functional needs:
§ The production or technical sub system, concerned with the work done on the throughput.
§ The supportive sub system, concerned with obtaining inputs and disposing of outputs.
§ The maintenance sub system, which ensures conformance of personnel to their roles through selection, and through rewards and sanctions.
§ The adaptive sub system, ensuring responsiveness to environmental variations.
§ The managerial sub system, which directs, coordinates and controls other sub systems and activities through various regulatory mechanisms.
Required
Identify these sub systems in accounting terms and give an example of how the accounting information system obtains and supplies information for each of these sub systems.
In December 2002, ERT plc, an established retail company located in the north east of England, merged with PLR plc, an Edinburgh based company that had been operating successfully for over 45 years and who had over the past seven years become a major competitor of ERT plc. In December 2002, the combined companies began trading as GBI plc.
Both ERT plc and PLR plc had enjoyed record profits during 2000 and 2001.
Although market reaction to the acquisition was positive with GBI’s share price rising dramatically, the overall profitability and efficiency of the new merged company fell sharply during 2003, with GBI recording an annual trading loss in January 2004.
In March 2004, the management of GBI appointed consultants to identify why such a fall in the company’s fortunes had occurred. The consultants’ report was highly critical, suggesting that the core problems being experienced by GBI had resulted from an incompatibility of the ERT and PRT accounting information systems.
In particular, the consultants identified an inability of GBI’s management to understand the nature of systemic functional cycles of operation and the implications of systems theory in the management of corporate activity.
Required
(a) Describe and diagrammatically represent the main functional cycles of operation that may exist in a retail company such a GBI plc.
(b) Explain briefly why in the context of the above scenario the ERT’s and PRT’s cycles of operations may have been incompatible.
(c) Explain how a knowledge of systems theory may have assisted the management of GBI in their attempt to reverse the decline in the new company’s financial fortune.
GHS Ltd is a small local company that sells motor car accessories. The company has 26 small retail outlets located throughout the UK. Each retail outlet employs five people: a sales assistant, a receptionist/secretary, two technical advisors and a manager.
The company operates a networked EPOS (electronic point of sale) system for all sales.
Sales are:
§ through the companies website,
§ by mail order, or
§ over the counter cash/credit card sales.
Internet sales are handled by the company’s head office and despatched from the company’s main distribution centre in Crawley.
Mail order and over the counter sales are handled by the sales assistant at each individual retail outlet.
Over the counter sales can be for cash, credit card payment or payment by cheque. The sales assistant records the sale using the company’s EPOS system and issues a sales receipt to the customer.
Mail order sales are only accepted from authorised customers. These customers are authorised by the retail outlet manager and are allowed 30 days’ credit.
All mail order sales are recorded as a deferred sale using the company’s EPOS system.
A list of these sales is held by the sales assistant until the payment is received when payment is recorded.
Payments not received within the 30 day period are referred to the manager.
The receptionist/secretary opens all incoming mail and passes any payments to the manager for review. The manager passes these back to the sales assistant for recording in the company’s EPOS system, and for the issue of a receipt which is sent back to the customer.
The sales assistant passes all cash and cheques back to the manager, in time for them to be banked each day, when the manager leaves to pick up his children from school. The manager also prepares the bank deposit slip.
The manager is solely responsible for any discounts and verifies these before payments are recorded in the company’s EPOS system. The manager is also responsible for writing off any bad debts after seeking and receiving approval for these actions from head office.
Required
Describe the system from a systems perspective, including suggestions for improvements.
Cash discount decisions The credit terms for each of three suppliers are shown in the following table. (Note: Assume a 365 day year.)
Supplier
Credit terms
X
1/10 net 55 EOM
Y
2/10 net 30 EOM
Z
2/20 net 60 EOM
a. Determine the approximate cost of giving up the cash discount from each supplier.
b. Assuming that the firm needs short term financing, indicate whether it would be better to give up the cash discount or take the discount and borrow from a bank at 15% annual interest. Evaluate each supplier separately using your findings in part a.
c. What impact, if any, would the fact that the firm could stretch its accounts payable (net period only) by 20 days from supplier Z have on your answer in part b relative to this supplier?
Borrow or pay cash for an asset Bob and Carol Gibbs are set to move into their first apartment. They visited Furniture R’Us, looking for a dining room table and buffet. Dining room sets are typically one of the more expensive home furnishing items, and the store offers financing arrangements to customers. Bob and Carol have the cash to pay for the furniture, but it would definitely deplete their savings, so they want to look at all their options.
The dining room set costs $3,000 and Furniture R’Us offers a financing plan that would allow them to either (1) put 10% down and finance the balance at 4% annual interest over 24 months or (2) receive an immediate $200 cash rebate, thereby paying only $2,800 cash to buy the furniture.
Bob and Carol currently earn 5.2% annual interest on their savings.
a. Calculate the cash down payment for the loan.
b. Calculate the monthly payment on the available loan. (Hint: Treat the current loan as an annuity and solve for the monthly payment.)
c. Calculate the initial cash outlay under the cash purchase option.
d. Assuming that they can earn a simple interest rate of 5.2% on savings, what will Bob and Carol give up (opportunity cost) over the 2 years if they pay cash?
e. What is the cost of the cash alternative at the end of 2 years? f. Should Bob and Carol choose the financing or the cash alternative?
Cash discount decisions Prairie Manufacturing has four possible suppliers, all of which offer different credit terms. Except for the differences in credit terms, their products and services are virtually identical. The credit terms offered by these suppliers are shown in the following table. (Note: Assume a 365 day year.)
Supplier
Credit terms
J
1/10 net 30 EOM
K
2/20 net 80 EOM
L
1/20 net 60 EOM
M
3/10 net 55 EOM
a. Calculate the approximate cost of giving up the cash discount from each supplier.
b. If the firm needs short term funds, which are currently available from its commercial bank at 16%, and if each of the suppliers is viewed separately, which, if any, of the suppliers’ cash discounts should the firm give up? Explain why.
c. What impact, if any, would the fact that the firm could stretch by 30 days its accounts payable (net period only) from supplier M have on your answer in part b relative to this supplier?
Unsecured sources of short term loans John Savage has obtained a short term loan from First Carolina Bank. The loan matures in 180 days and is in the amount of $45,000. John needs the money to cover start up costs in a new business. He hopes to have sufficient backing from other investors by the end of the next 6 months. First Carolina Bank offers John two financing options for the $45,000 loan: a fixed rate loan at 2.5% above prime rate, or a variable rate loan at 1.5% above prime.
Currently, the prime rate of interest is 6.5%, and the consensus forecasts of a group of mortgage economists for changes in the prime rate over the next 180 days are as follows: Sixty days from today the prime rate will rise by 0.5%; 90 days from today the prime rate will rise another 1%; 180 days from today the prime rate will drop by 0.5%.
Using the forecast prime rate changes, answer the following questions.
a. Calculate the total interest cost over 180 days for a fixed rate loan.
b. Calculate the total interest cost over 180 days for a variable rate loan.
c. Which is the lower interest cost loan for the next 180 days?
Integrative—Comparison of loan terms Cumberland Furniture wishes to establish a prearranged borrowing agreement with a local commercial bank. The bank’s terms for a line of credit are 3.30% over the prime rate, and each year the borrowing must be reduced to zero for a 30 day period. For an equivalent revolving credit agreement, the rate is 2.80% over prime with a commitment fee of 0.50% on the average unused balance. With both loans, the required compensating balance is equal to 20% of the amount borrowed. (Note: Cumberland currently maintains $0 on deposit at the bank.) The prime rate is currently 8%. Both agreements have $4 million borrowing limits. The firm expects on average to borrow $2 million during the year no matter which loan agreement it decides to use.
a. What is the effective annual rate under the line of credit?
b. What is the effective annual rate under the revolving credit agreement?
c. If the firm does expect to borrow an average of half the amount available, which arrangement would you recommend for the borrower? Explain why.
Cost of commercial paper Commercial paper is usually sold at a discount. Fan Corporation has just sold an issue of 90 day commercial paper with a face value of $1 million. The firm has received initial proceeds of $978,000. (Note: Assume a 365 day year.)
a. What effective annual rate will the firm pay for financing with commercial paper, assuming that it is rolled over every 90 days throughout the year? b. If a brokerage fee of $9,612 was paid from the initial proceeds to an investment banker for selling the issue, what effective annual rate will the firm pay, assuming that the paper is rolled over every 90 days throughout the year?
a. What effective annual rate will the firm pay for financing with commercial paper, assuming that it is rolled over every 90 days throughout the year?
b. If a brokerage fee of $9,612 was paid from the initial proceeds to an investment banker for selling the issue, what effective annual rate will the firm pay, assuming that the paper is rolled over every 90 days throughout the year?
Accounts receivable as collateral Springer Products wishes to borrow $80,000 from a local bank using its accounts receivable to secure the loan. The bank’s policy is to accept as collateral any accounts that are normally paid within 30 days of the end of the credit period, as long as the average age of the account is not greater than the customer’s average payment period. Springer’s accounts receivable, their average ages, and the average payment period for each customer are shown in the following table. The company extends terms of net 30 days.
Account
Average age
Average payment
Customer
receivable
of account
period of customer
A
$20,000
10 days
40 days
B
6,000
40
35
C
22,000
62
50
D
11,000
68
65
E
2,000
14
30
F
12,000
38
50
G
27,000
55
60
H
19,000
20
35
a. Calculate the dollar amount of acceptable accounts receivable collateral held by Springer Products.
b. The bank reduces collateral by 10% for returns and allowances. What is the level of acceptable collateral under this condition?
c. The bank will advance 75% against the firm’s acceptable collateral (after adjusting for returns and allowances). What amount can Springer borrow against these accounts?
Accounts receivable as collateral, cost of borrowing Maximum Bank has analyzed the accounts receivable of Scientific Software, Inc. The bank has chosen eight accounts totaling $134,000 that it will accept as collateral. The bank’s terms include a lending rate set at prime 3% and a 2% commission charge. The prime rate currently is 8.5%.
a. The bank will adjust the accounts by 10% for returns and allowances. It then will lend up to 85% of the adjusted acceptable collateral. What is the maximum amount that the bank will lend to Scientific Software?
b. What is Scientific Software’s effective annual rate of interest if it borrows $100,000 for 12 months? For 6 months? For 3 months? (Note: Assume a 365 day year and a prime rate that remains at 8.5% during the life of the loan.)
Factoring Blair Finance factors the accounts of the Holder Company. All eight factored accounts are shown in the following table, with the amount factored, the date due, and the status on May 30. Indicate the amounts that Blair should have remitted to Holder as of May 30 and the dates of those remittances. Assume that the factor’s commission of 2% is deducted as part of determining the amount of the remittance.
Inventory financing Raymond Manufacturing faces a liquidity crisis—it needs a loan of $100,000 for 1 month. Having no source of additional unsecured borrowing, the firm must find a secured short term lender. The firm’s accounts receivable are quite low, but its inventory is considered liquid and reasonably good collateral. The book value of the inventory is $300,000, of which $120,000 is finished goods. (Note: Assume a 365 day year.)
(1) City Wide Bank will make a $100,000 trust receipt loan against the finished goods inventory. The annual interest rate on the loan is 12% on the outstanding loan balance plus a 0.25% administration fee levied against the $100,000 initial loan amount. Because it will be liquidated as inventory is sold, the average amount owed over the month is expected to be $75,000.
(2) Sun State Bank will lend $100,000 against a floating lien on the book value of inventory for the 1 month period at an annual interest rate of 13%.
(3) Citizens’ Bank and Trust will lend $100,000 against a warehouse receipt on the finished goods inventory and charge 15% annual interest on the outstanding loan balance. A 0.5% warehousing fee will be levied against the average amount borrowed. Because the loan will be liquidated as inventory is sold, the average loan balance is expected to be $60,000.
a. Calculate the dollar cost of each of the proposed plans for obtaining an initial loan amount of $100,000.
b. Which plan do you recommend? Why?
c. If the firm had made a purchase of $100,000 for which it had been given terms of 2/10 net 30, would it increase the firm’s profitability to give up the discount and not borrow as recommended in part b? Why or why not?
The adjusted trial balance of Knapp Ltd as at 30 June 2017 is as follows: Debit Credit $ $ Administration expenses 689,000 Advertising expenses 109,000 Bank loan 216,000 Carrying amount of plant and machinery sold 23,000 Cost of sales 3,421,000 Sales commission expense 45,000 Deposits at call 132,000 Dividends received 43,000 Deferred tax asset 212,000 Ordinary shares, fully paid 3,960,000 Gen
Document Preview:
QUESTION 1 – DISCLOSURE The adjusted trial balance of Knapp Ltd as at 30 June 2017 is as follows: Debit Credit $ $ Administration expenses 689,000 Advertising expenses 109,000 Bank loan 216,000 Carrying amount of plant and machinery sold 23,000 Cost of sales 3,421,000 Sales commission expense 45,000 Deposits at call 132,000 Dividends received 43,000 Deferred tax asset 212,000 Ordinary shares, fully paid 3,960,000 General reserve 724,000 Goodwill 742,000 Accounts receivable 1,334,000 Asset revaluation reserve 346,000 Accumulated impairment loss – goodwill 180,000 Accumulated depreciation Plant & machinery 206,000 Fixtures & fittings 47,000 Retained profits – 1/7/2016 800,000 Mortgage loan (secured over land – due 30/9/2021) 239,000 Accounts payable 486,000 Current tax liabilities 268,000 GST payable 8,000 Provision for long service leave (only 40% is currently eligible) 265,000 Deferred tax liability 175,000 Allowance for doubtful debts 77,000 Provision for annual leave 62,000 Freehold land (at fair value) 1,724,000 Buildings (at fair value) 900,000 Listed investments – at cost (long term) 559,000 Plant & machinery at cost 684,000 Preference shares, fully paid 200,000 Prepayments 30,000 Inventories 2,000,000 Income tax expense 367,000 Final dividend payable 165,000 Fixtures & fittings at cost 118,000 Cash at bank 483,000 Sales revenue 6,124,000 Share options 19,000 7% debentures (secured over inventories – due 30/4/2018) 120,000 Proceeds on sale of plant and…
i don’t know how to do the consolidation statements especially how we can get the consideration transferred
Document Preview:
ADVANCED FINANCIAL ACCOUNTING 260 ASSIGNMENT – SEMESTER 2, 2014 CONSOLIDATED FINANCIAL STATEMENTS On 1 July 2011, Kookaburra Ltd acquired all the shares of Magpie Ltd on a cum div basis. At this date, the equity and liability sections of Magpie Ltd.’s statement of financial position showed the following balances: Share Capital (60 000 shares) $60 000 General Reserve $30 000 Retained Earnings $21 000 Option Reserve $6 000 Dividend payable $5 000 The dividend payable at acquisition date was subsequently paid in September 2011. At acquisition date, all the identifiable assets and liabilities of Magpie Ltd were recorded at amounts equal to fair value except for: Carrying Fair Amount Value Inventory $50 000 $56 000 Machinery (cost $17 000) 15 000 16 000 Equipment (cost $30 000) 24 000 32 000 Land 18 480 24 480 Manufacturing Software (cost $36 000) 28 800 31 800 The manufacturing software is a custom designed programme used by Magpie Ltd to run its robotic manufacturing plant. It has a remaining useful life of four years. Additionally, Magpie Ltd owns, but has not recognised, the internally generated brand name “Handytrax”. The fair value of the brand, which is regarded as having an indefinite life, is $30 000 at 1 July 2011. The inventory on hand in Magpie Ltd at 1 July 2011 was sold during the following 12 months. The machinery, which had a further five year life on acquisition date, was sold on 1 January 2014. The land on hand at acquisition date was sold on 1 August 2013. The equipment was estimated to have a further 8 year life. At 1 July 2011, Magpie Ltd had not recorded any goodwill. On 30 June 2013, half of the goodwill acquired was written off as a result of an impairment test. Any adjustments for differences between carrying amounts at acquisition date and fair values are made on consolidation. Any valuation reserves created are transferred on consolidation to retained earnings when assets are sold, fully consumed or completely…
Parker Company produces mathematical and financial calculators and operates at capacity. Data related to the two product lines are presented here.
MathematicalFinancial
Annual production in units 50,000 100,000
Direct material costs (total) $200,000 $300,000
Direct labor costs (total) $50,000 $100,000
Direct labor hours (total) 2,500 5,000
Machine hours (total) 25,000 50,000
Number of production runs (total) 50 100
Inspection hours (total) 500 1,000
Manufacturing overhead costs total $600,000, and can be divided into the following three activity cost pools (with corresponding cost drivers):
Activities and Activity Cost Drivers
Machinery (machine hours) $375,000
Setup (production runs) 120,000
Inspection (inspection hours) 105,000
REQUIRED: Based on the above information, answer the following questions.
1. Compute the total cost per unit of the mathematical calculator and the financial calculator. Assume the company uses a single plant wide rate based on direct labor hours to allocate manufacturing overhead to the two product lines.
a. Total product cost per unit of the mathematical calculator:
b. Total product cost per unit of the financial calculator:
2. Calculate the activity cost rates in each of the three activity areas, assuming the use of ABC.
a. Machinery cost rate per machine hour:
b. Setup cost rate per production run:
c. Inspection cost rate per inspection hour:
3. Compute the new product cost per unit for the mathematical and financial calculator, using the ABC system.
a. Total product cost per unit of the mathematical calculator:
b. Total product cost per unit of the financial calculator:
4. Is there any difference in the cost of the two calculators using the single plant wide rate and the ABC method? Briefly explain why or why not:
Your answers for my assignment need to be 100% correct. Otherwise, order will be rejected for revision.
Document Preview:
Question 1) Why WACC cannot be used as a discount for calculating the value of a merger and acquisition for the first few years of the analysis? Question 2) When calculating the value of a target for acquisition, why do different acquirers arrive at different valuations for the target? Question 3) Calculate the cost of unlevered equity if the cost of equity is 20%, the cost of debt is 7%, and the capital is 50% equity and 50% debt. Question 4) Calculate the cost of funds or WACC if the cost of equity is 20%, the cost of debt is 7%, and the capital is 50% equity and 50% debt. The tax rate is 40%. Use the following information for Questions 5 through 8 Suppose we are planning to buy a company with the following forecasts: Year?1?2?3 & afterwards??FCF?$5 million?$ 5.5 million?3% constant growth rate??Debt level?$50 million?$35 million?Constant debt to equity ratio. Capital will be 50% debt and 50% equity, wd = ws = 0.5.?? The cost of debt is 5% The cost of equity is 20% The tax rate is 40% The company has 15 million shares outstanding The current stock price is $2.05 The company is currently holding no financial assets. The company has $3,000,000 in debt. WACC, the cost of capital, is equal to 11.5% RSU, the cost of unlevered equity, is equal to 12.5% Question 5) Calculate the value of the debt tax shield. Question 6) Calculate the horizon value of the target. Question 7) Calculate the value of operations. Question 8) What is the highest offer price we can make? Is the acquisition feasible? Question 9) Why do the target’s free cash flows vary from one acquirer to another? Question 10) What are the main disadvantages of the payback method for evaluating projects?
Custom Floral, Inc., produces special order artificial flower arrangements, so it uses a job order costing system. Overhead is applied at the rate of 80 percent of direct labor cost. The following is a list of transactions for June:
June 1 Purchased direct materials on account, $300.
2 Purchased indirect materials on account, $50.
4 Requested direct materials costing $250 ($200 used on Job AX and $50 used on Job BY) and indirect materials costing $40 for production.
10 Paid the following overhead costs: utilities, $40; manufacturing rent, $300; and maintenance charges, $10.
15 Recorded the following gross wages and salaries for employees: direct labor, $1,000 ($700 for Job AX and $300 for Job BY); indirect labor, $300.
15 Applied overhead to production.
16 Completed and transferred Job AX and Job BY to finished goods inventory; total cost of both jobs was $2,050.
20 Delivered Job AX to the customer; total production cost was $1,460 and billed customer for the sales price $2,000.
30 Recorded these overhead costs (adjusting entries): prepaid insurance expired, $30; and depreciation—machinery, $150.
Required
1. Record the entries for all transactions in June using T accounts for the following: Materials Inventory, Work in Process Inventory, Finished Goods Inventory, Overhead, Cash, Accounts Receivable, Prepaid Insurance, Accumulated Depreciation—Machinery, Accounts Payable, Payroll Payable, Sales, and Cost of Goods Sold. Determine the partial account balances. Assume no beginning inventory balances. Also assume that when the payroll was recorded, entries were made to the Payroll Payable account.
2. Compute the amount of underapplied or overapplied overhead as of June 30 and transfer it to the Cost of Goods Sold account.
Ma Hardware is the only hardware store in a remote area of Hong Kong. Some of Ma’s transactions during the current year are as follows:
Nov.
5
Sold lumber on account to Bemidji Construction, $13,390. The inventory subsidiary ledger shows the cost of this goods was $9,105.
Nov.
9
Purchased tools on account from Owatonna Tool Company, $3,800.
Dec.
5
Collected in cash the $13,390 account receivable from Bemidji Construction.
Dec.
9
Paid the $3,800 owed to Owatonna Tool Company.
Dec.
31
Ma’s personnel counted the inventory on hand and determined its cost to be $182,080. The accounting records, however, indicate inventory of $183,790 and a cost of goods sold of $695,222. The physical count of the inventory was observed by the company’s auditors and is considered correct.
University of the South Pacific Faculty of Business and Economics School of Accounting and Finance AF201 Managerial Accounting Assignment 2 Weighting: The total mark for this assignment is 20 and is worth 5% of your total assessment. Due date: Friday 17th October, at 4.00 PM sharp in Rm.: 092 001 – AusAid Lecture Hall. ALL ASSIGNMENTS HANDED IN AFTER THIS TIME WILL BE REGARDED AS LATE ASSIGNMENTS. Introduction This assignment will assess your problem solving ability.
Document Preview:
University of the South Pacific Faculty of Business and Economics School of Accounting and Finance AF201 Managerial Accounting Assignment 2 Weighting: The total mark for this assignment is 20 and is worth 5% of your total assessment. Due date: Friday 17th October, at 4.00 PM sharp in Rm.: 092 001 – AusAid Lecture Hall. ALL ASSIGNMENTS HANDED IN AFTER THIS TIME WILL BE REGARDED AS LATE ASSIGNMENTS. Introduction This assignment will assess your problem solving ability. As a future management accountant it is essential to have a problem solving ability and effectively make appropriate decisions to create value for shareholders and customers. Furthermore, this assignment addresses learning objective (6) as depicted on the course outline. Instructions: 1. Your assignment MUST be word processed. Hand written assignments will NOT be accepted. 2. The maximum page to write the assignment is 3 pages. 3. Please upload the soft copy of the assignment via turn it in and the hard copy must be handed in Rm.: 092 001 – AusAid Lecture Hall 4. Chapter Reference: Chapter 12 of the textbook 5. Ensure that your name, ID No., tutor’s name and tutorial day and time are stated clearly on the cover page, which can be downloaded from AF201 moodle page. 6. A penalty of 10% will be deducted each day or part thereof that the assignment is late. 7. Plagiarized assignment will be awarded a Zero (0) mark. Galatia Products, Inc., has just purchased a small company that specializes in the manufacturing of electronic tuners that are used as a component part of TV sets. Galatia Products, Inc. is a decentralized company, and it will treat the newly acquired company as an autonomous division with full profit responsibility. The new division, called the Tuner Division, has the following revenue and costs associated with each tuner that it manufactures and sells: Selling price $20 Expenses: Variable $11 Fixed (based on a capacity of 100,000 tuners per year) …
(Decisions based on ROI and RI) Miami Marine uses ROI to evaluate the performance of both its Powerboat and Sailboat Division managers. The following estimates of relevant measures have been made for View complete question »
(Decisions based on ROI and RI) Miami Marine uses ROI to evaluate the performance of both its Powerboat and Sailboat Division managers. The following estimates of relevant measures have been made for the upcoming year:
Powerboats
Sailboats
Total Company
Sales
$18,000,000
$48,000,000
$66,000,000
Expenses
16,200,000
42,000,000
58,200,000
Divisional assets
15,000,000
30,000,000
45,000,000
Both division managers have the autonomy to make decisions regarding new investments. The Powerboats manager is considering investing in a new asset that would generate a 14 percent ROI; the Sailboats manager is considering an investment that would generate an 18 percent ROI.
a. Compute the projected ROI for each division, disregarding the contemplated new investments.
b. Based on your answer in (a), which manager is likely to actually invest in the additional assets under consideration?
c. Are the outcomes of the investment decisions in (b) likely to be consistent with overall corporate goals? Explain.
d. If the company evaluated the division managers’ performances using a residual income measure with a target return of 15 percent, would the outcomes of the investment decisions be different from those described in (b)? Explain.
National Health Corporation (NHC) has a cumulative preferred stock issue outstanding, which has a stated annual dividend of $8 per share. The company has been losing money and has not paid preferred dividends for the last five years. There are $350,000 shares of preferred stock outstanding and 650,000 shares of common stock.
a. How much is the company behind in preferred dividends?
b. if NHC earns $13, 500,000 in the coming year after taxes but before dividends and this is all paid out to the preferred stock holders, how many will the company be in arrears (behind in payments)? Keep in mind that the coming year would represent the sixth year.
c. How much if any would be available in common stock dividends in the coming year if $13,500,000 is earned as explained in part b?
The following transactions were selected from among those completed by Bear’s Retail Store in 2012:
Nov. 20
Sold two items of merchandise to Cheryl Jahn, who paid the $400 sales price in cash. The goods cost Bear’s $300.
25
Sold 20 items of merchandise to Vasko Athletics at a selling price of $4,000 (total); terms 3/10, n/30. The goods cost Bear’s $2,500.
28
Sold 10 identical items of merchandise to Nancy’s Gym at a selling price of $6,000 (total); terms 3/10, n/30. The goods cost Bear’s $4,000.
29
Nancy’s Gym returned one of the items purchased on the 28th. The item was in perfect condition, and credit was given to the customer.
Dec. 6
Nancy’s Gym paid the account balance in full.
30
Vasko Athletics paid in full for the invoice of November 25, 2012.
Required:
Assuming that Sales Returns and Sales Discounts are reported as contra revenues, compute Net Sales for the two months ended December 31, 2012. (Omit the “$” sign in your response.)
Fazio Pump Corporation currently has 1.1 million shares of common stock outstanding and $8 million in debt bearing an interest rate of 10 percent on average. It is considering a $5 million expansion program financed with common stock at $20 per share being realized (option 1), or debt at an interest rate of 11 percent (option 2), or preferred stock with a 10 percent dividend rate (option 3). Earnings before interest and taxes (EBIT) after the new
funds are raised are expected to be $6 million, and the company’s tax rate is 35 percent.
a. Determine likely earnings per share after financing for each of the three alternatives.
b. What would happen if EBIT were $3 million? $4 million?$8 million?
c. What would happen under the original conditions if the tax rate were 46 percent? If the interest rate on new debt were 8 percent and the preferred stock dividend rate were 7 percent? If the common could be sold for $40 per share?
Boehm Gau Real Estate Speculators, Inc., and the Northern California Electric Utility Company have the following EBIT and debt servicing burden:
NORTHERN
BOEHM GAU
CALIFORNIA
Expected EBIT
$5,000,000
$100,000,000
Annual interest
1,600,000
45,000,000
Annual principal payments on debt
2,000,000
35,000,000
The tax rate for Boehm Gau is 40 percent, and for Northern California Electric Utility is 36 percent. Compute the interest coverage and the debt service coverage ratios for the two companies. With which company would you feel more comfortable if you were a lender? Why?
The companies are part of the following industries: supermarket, chemical, apparel making, and airline (not in order). Match the company with the industry.
The Borowiak Rose Water Company expects with some degree of certainty to generate the following net income and to have the following capital expenditures during the next five years (in thousands of dollars):
YEAR
1
2
3
4
5
Net income
$2,000
$1,500
$2,500
$2,300
$1,800
Capital expenditures
1,000
1,500
2,000
1,500
2,000
The company currently has 1 million shares of common stock outstanding and pays annual dividends of $1 per share.
a. Determine dividends per share and external financing required in each year if dividend policy is treated as a residual decision.
b. Determine the amounts of external financing that will be necessary in each year if the present annual dividend per share is maintained.
c. Determine dividends per share and the amounts of external financing that will be necessary if a dividend payout ratio of 50 percent is maintained.
d. Under which of the three dividend policies are aggregate dividends (total dividends over five years) maximized? External required financing (total financing over five years) minimized?
Dew Drop Inn, Inc.’s earnings per share over the last 10 years were the following:
YEAR
1
2
3
4
5
6
7
8
9
10
EPS
$1.70
$1.82
$1.44
$1.88
$2.18
$2.32
$1.84
$2.23
$2.50
$2.73
a. Determine annual dividends per share under the following policies:
i A constant dividend payout ratio of 40 percent (to the nearest cent).
ii A regular dividend of 80 cents and an extra dividend to bring the payout ratio to 40 percent if it otherwise would fall below.
iii A stable dividend that is occasionally raised. The payout ratio may range between 30 percent and 50 percent in any given year, but it should average approximately 40 percent.
b. What are the valuation implications of each of these policies?
The Klingon Fastener Company has the following shareholders’ equity account:
Common stock ($8 par value)
$ 2,000,000
Additional paid in capital
1,600,000
Retained earnings
8,400,000
Total shareholders’ equity
$12,000,000
The current market price of the stock is $60 per share.
a. What will happen to this account and to the number of shares outstanding with (1) a 10 percent stock dividend? (2) a 2 for 1 stock split? (3) a 1 for 2 reverse stock split?
b. In the absence of an informational or signaling effect, at what share price should the common stock sell after the 10 percent stock dividend? What might happen to stock price if there were a signaling effect?
The DeWitt Company’s shareholders’ equity account (book value) as of December 31, 20X1, is as follows:
Common stock ($5 par value; 1,000,000 shares)
$ 5,000,000
Additional paid in capital
5,000,000
Retained earnings
15,000,000
Total shareholders’ equity
$25,000,000
Currently, DeWitt is under pressure from shareholders to pay some dividends. DeWitt’s cash balance is $500,000, all of which is needed for transactions purposes. The stock is trading for $7 a share.
a. Reformulate the shareholders’ equity account if the company pays a 15 percent stock dividend.
b. Reformulate the shareholders’ equity account if the company pays a 25 percent stock dividend.
c. Reformulate the shareholders’ equity account if the company declares a 5 for 4 stock split.
Tijuana Brass Instruments Company treats dividends as a residual decision. It expects to generate $2 million in net earnings after taxes in the coming year. The company has an all equity capital structure, and its cost of equity capital is 15 percent. The company treats this cost as the opportunity cost of “internal” equity financing (retained earnings). Because of flotation costs and underpricing, “external” equity financing (new common stock) is not relied on until internal equity financing is exhausted.
a. How much in dividends (out of the $2 million in earnings) should be paid if the company has $1.5 million in projects whose expected returns exceed 15 percent?
b. How much in dividends should be paid if it has $2 million in projects whose expected returns exceed 15 percent?
c. How much in dividends should be paid if it has $3 million in projects whose expected returns exceed 16 percent? What else should be done?
The firm earned $300,000 after taxes in 20X3 and paid out 50 percent of these earnings as cash dividends. The price on the firm’s stock on December 30 was $5.
a. If the firm declared a stock dividend of 3 percent on December 31, what would be the reformulated shareholders’ equity account?
b. Assuming the firm paid no stock dividend, how much would earnings per share be for 20X3? Dividends per share?
c. Assuming a 3 percent stock dividend, what would happen to earnings per share (EPS) and dividends per share (DPS) for 20X3?
d. What would the price of the stock be after the 3 percent stock dividend if there were no signaling or other effects?
Johore Trading Company has 2.4 million shares of common stock outstanding, and the present market price per share is $36. Its equity capitalization is as follows:
Common stock ($2.00 par; 2,400,000 shares)
$ 4,800,000
Additional paid in capital
5,900,000
Retained earnings
87,300,000
Total shareholders’ equity
$98,000,000
a. If the company were to declare a 12 percent stock dividend, what would happen to these accounts? A 25 percent stock dividend? A 5 percent stock dividend?
b. If, instead, the company declared a 3 for 2 stock split, what would happen to the accounts? A 2 for 1 stock split? A 3 for 1 split?
c. What would happen if there were a reverse stock split of 1 for 4? 1 for 6?
Burger Rex is expanding its chain of fast food outlets. This program will require a capital expenditure of $3 million, which must be financed. The company has settled on a three year revolving credit of $3 million, which may be converted into a three year term loan at the expiration of the revolving credit commitment. The commitment fee for both credit arrangements is 0.5 percent of the unused portions. The bank has quoted Burger Rex an interest rate of 1 percent over prime for the revolving credit and 1.5 percent over prime for the term loan, if that option is taken. The company expects to borrow $1.4 million at the outset and another $1.6 million at the very end of the first year. At the expiration of the revolving credit, the company expects to take down the full term loan. At the end of each of the fourth, fifth, and sixth years, it expects to make principal payments of $1 million.
a. For each of the next six years, what is the expected commitment fee in dollars?
b. What is the expected dollar interest cost above the prime rate?
On January 1, Acme Aglet Corporation is contemplating a four year, $3 million term loan from the Fidelity First National Bank. The loan is payable at the end of the fourth year and would involve a loan agreement that would contain a number of protective covenants. Among these restrictions are that the company must maintain net working capital (current assets minus current liabilities) of at least $3 million at all times, that it cannot take on
any more long term debt, that its total liabilities cannot be more than 0.6 of its total assets, and that capital expenditures in any year are limited to depreciation plus $3 million. The company’s balance sheet at December 31, before the term loan, is as follows (in millions):
Current assets
$ 7
Current liabilities
$ 3
Net fixed assets
10
Long term debt (due in 8 years)
5
Shareholders’ equity
9
Total
$17
Total
$17
The proceeds of the term loan will be used to increase Acme Aglet’s investment in inventories and accounts receivables in response to introducing a new “fit to be tied” metal aglet. The company anticipates a subsequent need to grow at a rate of 24 percent a year, equally divided between current assets and net fixed assets. Profits after taxes of $1.5 million are expected this year, and these profits are expected to grow by $250,000 per year over
the subsequent three years. The company pays no cash dividends and does not intend to pay any over the next four years. Depreciation in the past year was $2.5 million, and this is predicted to grow over the next four years at the same rate as the increase in net fixed assets.
Under the loan agreement, will the company be able to achieve its growth objective? Explain numerically.
Valesquez Ranches, Inc., wishes to use a new truck fueled by compressed natural gas that costs $80,000. The ranch intends to operate the truck for five years, at the end of which time it is expected to have a $16,000 residual value. Assume that the asset falls in the three year property class for modified accelerated cost recovery (depreciation) purposes, and that Valesquez Ranches is in a 30 percent tax bracket. Two means of financing the new truck are available. A five year, “net lease” arrangement calls for annual lease payments of $17,000, payable in advance. A debt alternative carries an interest cost of 10 percent. Debt payments will be made at the start of each of the five years using a mortgage type of debt amortization. Using the present value of cash outflows method, determine the best financing alternative.
Red Herring Pizza has outstanding warrants, where each warrant entitles the holder to purchase two shares of stock at $24 per share. The market price per share of stock and market price per warrant were the following over the last year:
OBSERVATION
1
2
3
4
5
6
Stock price
$20
$18
$27
$32
$24
$38
Warrant price
5
3
12
20
8
29
Determine the theoretical value per warrant for each of these observations. Then plot the market value per warrant in relation to this theoretical value. At what price per common share is the warrant premium over theoretical value the greatest? Why?
The common stock of the Blue Sky Corporation earns $3 per share, has a 60 percent dividend payout, and sells at a P/E ratio of 8.333. Blue Sky wishes to offer $10 million of 9 percent, 20 year convertible debentures with an initial conversion premium of 20 percent and a call price of 105 ($1,050 per $1,000 face value). Blue Sky currently has 1 million common shares outstanding and has a 40 percent tax rate.
a. What is the conversion price?
b. What is the conversion ratio per $1,000 debenture?
c. What is the initial conversion value of each debenture?
d. How many new shares of common stock must be issued if all debentures are converted?
e. If Blue Sky can increase operating earnings (before taxes) by $1 million per year with the proceeds of the debenture issue, compute the new earnings per share and earnings retained before and after conversion.
Faversham Fish Farm has outstanding a 7.75 percent, 20 year convertible debenture issue. Each $1,000 debenture is convertible into 25 shares of common stock. The company also has a straight debt issue outstanding of the same approximate maturity, so it is an easy matter to determine the straight bond value of the convertible issue. The market price of Faversham common stock is volatile. Over the last year, the following was observed:
OBSERVATION
1
2
3
4
5
Market price per share
$ 40
$ 45
$ 32
$ 23
$ 18
Straight bond value
690
700
650
600
550
Market price of convertible debenture
1,065
1,140
890
740
640
a. Compute the premium over conversion value (in dollars) and the premium over straight bond value for each of the observations.
b. Compare the two premiums either visually or by graph. What do the relationships tell you with respect to the valuation of the convertible debenture?
The Rambutan Fruit Company needs to raise $10 million by means of a debt issue. It has the following two alternatives: a 20 year, 8 percent convertible debenture issue with a $50 conversion price and $1,000 face value; or a 20 year, 12 percent straight debt issue. Each $1,000 bond has a detachable warrant to purchase four shares of stock for a total of $200. The company has a 40 percent tax rate, and its stock is currently selling at $40 per share. Its net income before interest and taxes is a constant 20 percent of its total capitalization, which currently appears as follows:
Common stock (par $5)
$ 5,000,000
Additional paid in capital
10,000,000
Retained earnings
15,000,000
Total capitalization
$30,000,000
a. Show the capitalization from each alternative, both before and after conversion or exercise (a total of four different capitalizations).
b. Compute earnings per share currently and under each of the four capitalization determined in Part (a).
c. If the price of Rambutan stock went to $75, determine the theoretical value of each warrant issued under the second alternative.
Jenni Shover, Inc., has warrants outstanding that allow the holder to purchase three shares of common stock for a total $60 for each warrant that is held. Currently, the market price per share of Jenni Shover common stock is $18. However, investors hold the following probabilistic beliefs about the stock six months hence.
Market price per share
$16
$18
$20
$22
$24
Probability
0.15
0.20
0.30
0.20
0.15
a. What is the present theoretical value of the warrant?
b. What is the expected value of stock price six months hence?
c. What is the expected theoretical value of the warrant six months hence?
d. Would you expect the present market price of the warrant to equal its theoretical value? If not, why not?
On June 2, 2010, Diebold, Inc., agreed to pay a $25 million fine to settle accounting fraud charges brought by the U.S. Securities and Exchange Commission (SEC). According to the SEC, the management of the Ohio based manufacturer of ATMs, bank security systems, and electronic voting machines regularly received reports comparing the company’s earnings to analyst forecasts. When earnings were below forecasts, management identified opportunities, some of which amounted to accounting fraud, to close the gap.
“Diebold’s financial executives borrowed from many different chapters of the deceptive accounting playbook to fraudulently boost the company’s bottom line,” SEC Enforcement Director Robert Khuzami said in a statement. “When executives disregard their professional obligations to investors, both they and their companies face significant legal consequences.”aA number of the SEC’s claims focused on premature revenue recognition. For example, Diebold was charged with improper use of “bill and hold” transactions. Under generally accepted accounting principles, revenue is typically recognized after a product is shipped. However, in some cases, sellers can recognize revenue before shipment for certain bill and hold transactions. The SEC claimed that Diebold improperly used bill and hold accounting to record revenue prematurely.
The SEC also claimed that Diebold manipulated various accounting accruals. Diebold was accused of understating liabilities tied to its Long Term Incentive Plan, commissions to be paid to sales personnel, and incentives to be paid to service personnel. Diebold temporarily reduced a liability account set up for payment of customer rebates. The company was also accused of overstating the value of inventory and improper inventory write ups.
Each of these activities allowed Diebold to inflate the company’s financial performance. According to the SEC’s complaint, Diebold’s fraudulent activities misstated reported pretax earnings by at least $127 million between 2002 and 2007. Two years prior to the settlement, Diebold restated earnings for the period covered by the charges.
The clawback provision of the 2002 Sarbanes Oxley antifraud law requires executives to repay compensation they receive while their company misled shareholders. Diebold’s former CEO, Walden O’Dell, agreed to return $470,000 in cash, plus stock and options. The SEC is currently pursuing a lawsuit against three other former Diebold executives for their part in the matter.
Why might financial managers still be tempted to manage earnings when a clawback is a legitimate possibility?
The difficult economic and credit environment in the post–September 11 era, combined with historically low interest rates and a deep desire by corporate issuers to reduce exposure to refinancing risk, had a depressing effect on commercial paper volumes from 2001 through 2003. According to the Federal Reserve, U.S. nonfinancial commercial paper, for example, declined 68 percent over the 3 year period, from $315.8 billion outstanding at the beginning of 2001 to $101.4 billion by December 2003. In addition to lower volume, credit quality of commercial paper declined over the same period, with the ratio of downgrades outpacing upgrades 17 to 1 in 2002.
In 2004, signs emerged that the volume and rating contraction in commercial paper was finally coming to an end. The most encouraging of these was the pickup in economic growth, which spurs the need for short term debt to finance corporate working capital. Although commercial paper is typically used to fund working capital, it is often boosted by a sudden surge of borrowing activity for other strategic activities—mergers and acquisitions and long term capital investments, among others. According to Federal Reserve Board data, at the end of July 2004, total U.S. commercial paper outstanding was $1.33 trillion.
By 2006, commercial paper surged to $1.98 trillion—an increase of 21.5 percent over 2005 levels. However, after peaking at $2.22 trillion, the tide changed in response to the credit crisis that began in August 2007. According to Federal Reserve data, as of October 1, 2008, the commercial paper market had contracted to $1.6 trillion, a reduction of nearly 28 percent, and new issues virtually dried up for several weeks. With much of the commercial paper outstanding at the start of the credit crisis coming up for renewal, the Federal Reserve began operating the Commercial Paper Funding Facility (CPFF) on October 27, 2008. The CPFF was intended to provide a liquidity backstop to U.S. issuers of commercial paper and, thereby, increase the availability of credit in short term capital markets. CPFF allowed for the Federal Reserve Bank of New York to finance the purchase of highly rated unsecured and asset backed commercial paper from eligible issuers.
Even with the CPFF up and running, companies that were worried about their ability to roll over their outstanding commercial paper every few weeks turned to long term debt to meet their liquidity needs. Merrill Lynch & Co. and Bloomberg data showed that, to manage short tem liability risk, companies were paying as much as $75 million in additional annual interest to swap long term debt for $1 billion of 30 day commercial paper.
With the recession in the rearview mirror and short term credit markets working again, the CPFF was closed on February 1, 2010. As of mid 2010, the U.S. commercial paper market appeared to be hitting bottom at around $1.06 trillion and showing signs of recovering.
What factors contribute to an expansion of the commercial paper market? What factors cause a contraction in the commercial paper market?
John Henry has a small housecleaning business that currently is a sole proprietorship. The business has nine employees, annual sales of $480,000, total liabilities of $90,000, and total assets of $263,000. Including the business, Henry has a personal net worth of $467,000 and nonbusiness liabilities of $42,000, represented by a mortgage on his home. He would like to give one of his employees, Tori Kobayashi, an equity interest in the business. Henry is considering either the partnership form or the corporate form, where Kobayashi would be given some stock. Kobayashi has a personal net worth of $36,000.
a. What is the extent of Henry’s exposure under the sole proprietorship in the case of a large lawsuit (say, $600,000)?
b. What is his exposure under a partnership form? Do the partners share the risk?
Wallopalooza Financial, Inc., believes that it can successfully “intermediate” in the mortgage market. At present, borrowers pay 7 percent on adjustable rate mortgages. The deposit interest rate necessary to attract funds to lend is 3 percent, also adjustable with market conditions. Wallopalooza’s administrative expenses, including information costs, are $2 million per annum on a base business of $100 million in loans.
a. What interest rates on mortgage loans and on deposits would you recommend to obtain business?
b. If $100 million in loans and an equal amount of deposits are attracted with a mortgage rate of 6.5 percent and a deposit interest rate of 3.5 percent, what would be Wallopalooza’s annual before tax profit on the new business? (Assume that interest rates do not change.)
North Great Timber Company will pay a dividend of $1.50 a share next year. After this, earnings and dividends are expected to grow at a 9 percent annual rate indefinitely. Investors currently require a rate of return of 13 percent. The company is considering several business strategies and wishes to determine the effect of these strategies on the market price per share of its stock.
a. Continuing the present strategy will result in the expected growth rate and required rate of return stated above.
b. Expanding timber holdings and sales will increase the expected dividend growth rate to 11 percent but will increase the risk of the company. As a result, the rate of return required by investors will increase to 16 percent.
c. Integrating into retail stores will increase the dividend growth rate to 10 percent and increase the required rate of return to 14 percent. From the standpoint of market price per share, which strategy is best?
Red Frog Brewery has $1,000 par value bonds outstanding with the following characteristics: currently selling at par; 5 years until final maturity; and a 9 percent coupon rate (with interest paid semiannually). Interestingly, Old Chicago Brewery has a very similar bond issue outstanding. In fact, every bond feature is the same as for the Red Frog bonds, except that Old Chicago’s bonds mature in exactly 15 years. Now, assume that the market’s nominal annual required rate of return for both bond issues suddenly fell from 9 percent to 8 percent.
a. Which brewery’s bonds would show the greatest price change? Why?
b. At the market’s new, lower required rate of return for these bonds, determine the per bond price for each brewery’s bonds. Which bond’s price increased the most, and by how much?
To increase sales from their present annual $24 million, Kim Chi Company, a wholesaler, may try more liberal credit standards. Currently, the firm has an average collection period of 30 days. It believes that, with increasingly liberal credit standards, the following will result:
CREDIT POLICY
A
B
C
D
Increase in sales from previous level (in millions)
$2.8
$1.8
$1.2
$.6
Average collection period for incremental sales (days)
45
60
90
144
The prices of its products average $20 per unit, and variable costs average $18 per unit. No bad debt losses are expected. If the company has a pre tax opportunity cost of funds of 30 percent, which credit policy should be pursued? Why? (Assume a 360 day year.)
Upon reflection, Kim Chi Company has estimated that the following pattern of bad debt losses will prevail if it initiates more liberal credit terms:
CREDIT POLICY
A
B
C
D
Bad debt losses on incremental sales
3%
6%
10%
15%
Given the other assumptions in the Problem , which credit policy should be pursued? Why?
Problem:
To increase sales from their present annual $24 million, Kim Chi Company, a wholesaler, may try more liberal credit standards. Currently, the firm has an average collection period of 30 days. It believes that, with increasingly liberal credit standards, the following will result:
CREDIT POLICY
A
B
C
D
Increase in sales from previous level (in millions)
$2.8
$1.8
$1.2
$.6
Average collection period for incremental sales (days)
45
60
90
144
The prices of its products average $20 per unit, and variable costs average $18 per unit. No bad debt losses are expected. If the company has a pre tax opportunity cost of funds of 30 percent, which credit policy should be pursued? Why? (Assume a 360 day year.)
The Pottsville Manufacturing Corporation is considering extending trade credit to the San Jose Company. Examination of the records of San Jose has produced the following financial statements:
ASSETS
20X1
20X2
20X3
Current assets
Cash
$1.50
$ 1.6
$ 1.6
Receivables
1.3
1.8
2.5
Inventories (at lower of cost or market)
1.3
2.6
4.0
Other
$0
0.5
0.4
Total current assets
$4.50
$ 6.5
$ 8.5
Fixed assets
Building (net)
2
1.9
1.8
Machinery and equipment (net)
$7
6.5
6.0
Total fixed assets
9
$ 8.4
$ 7.8
Other assets
1
0.8
0.6
Total assets
15
$15.7
$16.9
LIABILITIES
Current liabilities
Notes payable (8.5%)
$ 2.1
$ 3.1
$ 3.8
Trade payables
0.2
0.4
0.9
Other payables
0.2
0.2
0.2
Total current liabilities
$ 2.5
$ 3.7
$ 4.9
Term loan (8.5%)
4.0
3.0
2.0
Total liabilities
$ 6.5
$ 6.7
$ 6.9
Net worth
Preferred stock (6.5%)
1.0
1.0
1.0
Common stock
5.0
5.0
5.0
Retained earnings
2.0
3.0
4.0
Total liabilities and net worth
$14.5
$15.7
$16.9
San Jose Company income statements (in millions)
20X1
20X2
20X3
Net credit sales
$15.0
$15.8
$16.2
Cost of goods sold
11.3
12.1
13.0
Gross profit
$ 3.7
$ 3.7
$ 3.2
Operating expenses
1.1
1.2
1.0
Net profit before taxes
$ 2.6
$ 2.5
$ 2.2
Tax
1.3
1.2
1.2
Profit after taxes
$ 1.3
$ 1.3
$ 1.0
Dividends
0.3
0.3
0.0
To retained earnings
$ 1.0
$ 1.0
$ 1.0
The San Jose Company has a Dun & Bradstreet rating of 4A2. Inquiries into its banking disclosed balances generally in the low millions. Five suppliers to San Jose revealed that the firm takes its discounts from the three suppliers offering “2/10, net 30” terms, though it is about 15 days slow in paying the two firms offering terms of “net 30.” Analyze the San Jose Company’s application for credit. What positive factors are present? What negative factors are present?
Common Scents, Inc., makes various scents for use in the manufacture of food products. Although the company does maintain a safety stock, it has a policy of maintaining “lean” inventories, with the result that customers sometimes must be turned away. In an analysis of the situation, the company has estimated the cost of being out of stock associated with various levels of safety stock:
LEVEL OF SAFETY
STOCK (in gallons)
ANNUAL COST
OF STOCKOUTS
Present safety stock level
5,000
$26,000
New safety stock level 1
7,500
14,000
New safety stock level 2
10,000
7,000
New safety stock level 3
12,500
3,000
New safety stock level 4
15,000
1,000
New safety stock level 5
17,500
0
Carrying costs are $0.65 per gallon per year. What is the best level of safety stock for the company?
The Barnes Corporation has just acquired a large account. As a result, it will soon need an additional $95,000 in working capital. It has been determined that there are three feasible sources of funds:
a. Trade credit: The Barnes company buys about $50,000 of materials per month on terms of “3/30, net 90.” Discounts currently are taken.
b. Bank loan: The firm’s bank will loan $106,000 at 13 percent. A 10 percent compensating balance will be required.
c. Factoring: A factor will buy the company’s receivables ($150,000 per month), which have an average collection period of 30 days. The factor will advance up to 75 percent of the face value of the receivables at 12 percent on an annual basis. The factor also will charge a 2 percent fee on all receivables purchased. It has been estimated that the factor’s services will save the company $2,500 per month – consisting of both credit department expenses and bad debts expenses. Which alternative should Barnes select on the basis of annualized percentage cost?
The Kedzie Cordage Company needs to finance a seasonal bulge in inventories of $400,000. The funds are needed for six months. The company is considering the following possibilities:
a. A terminal warehouse receipt loan is obtained from a finance company. Terms are 12 percent annualized with an 80 percent advance against the value of the inventory. The warehousing costs are $7,000 for the six month period. The residual financing requirement ($80,000), which is $400,000 less the amount advanced, will need to be
financed by forgoing some cash discounts on its payables. Standard terms are “2/10, net 30”; however, the company feels that it can postpone payment until the 40th day without adverse effect.
b. A floating lien arrangement is obtained from the supplier of the inventory at an effective interest rate of 20 percent. The supplier will advance the full value of the inventory. c. A field warehouse loan is obtained from another finance company at an interest rate of 10 percent annualized. The advance is 70 percent, and field warehousing costs amount to $10,000 for the six month period. The residual financing requirement will need to be
financed by forgoing cash discounts on payables as in the first alternative.
What is the least costly method of financing the inventory needs of the firm?
Hayleigh Mills Company has a $5 million revolving credit agreement with First State Bank of Arkansas. Being a favored customer, the rate is set at 1 percent over the bank’s cost of funds, where the cost of funds is approximated as the rate on negotiable certificates of deposit (CDs). In addition, there is a 1⁄2 percent commitment fee on the unused portion of the revolving credit. If the CD rate is expected to average 9 percent for the coming year and if the company expects to utilize, on average, 60 percent of the total commitment, what is the expected annual dollar cost of this credit arrangement? What is the percentage cost when both the interest rate and the commitment fee paid are considered? What happens to the percentage cost if, on average, only 20 percent of the total commitment is utilized?
The Shelby Gaming Manufacturing Company has experienced a severe cash squeeze and needs $200,000 over the next 90 days. The company has already pledged its receivables in support of a loan. However, it does have $570,000 in unencumbered inventories. Determine the best financing alternative from the following two that are available.
a. The Cody National Bank of Reno will lend against finished goods provided that they are placed in a public warehouse under its control. As the finished goods are released for sale, the loan will be reduced by the proceeds of the sale. The company currently has $300,000 in finished goods inventory and would expect to replace finished goods that are sold out of the warehouse with new finished goods, so that it could borrow the full $200,000 for 90 days. The interest rate will be 10 percent, and the company will pay quarterly warehousing costs of $3,000. Finally, it will experience a reduction in efficiency as a result of this arrangement. Management estimates that the lower
efficiency will reduce quarterly before tax profits by $4,000.
b. The Vigorish Finance Company will lend the company the money under a floating lien on all of its inventories. The rate will be 23 percent, but no additional expenses will be incurred.
The Bone Company has been factoring its accounts receivable for the past 5 years. The factor charges a fee of 2 percent and will lend up to 80 percent of the volume of receivables purchased for an additional 1.5 percent per month. The firm typically has sales of $500,000 per month, 70 percent of which are on credit. By using the factor, two savings would be effected:
a. $2,000 per month that would be required to support a credit department
b. A bad debt expense of 1 percent on credit sales the firm’s bank has recently offered to lend the firm up to 80 percent of the face value of the receivables shown on the schedule of accounts. The bank would charge 15 percent
per annum interest plus a 2 percent monthly processing charge per dollar of receivables lending. The firm extends terms of “net 30,” and all customers who pay their bills do so by the 30th day. Should the firm discontinue its factoring arrangement in favor of the bank’s offer if the firm borrows, on the average, $100,000 per month on its receivables?
Solid Arity Corporation is a chain of appliance stores in Chicago. It needs to finance all of its inventories, which average the following during the four quarters of the year:
QUARTER
1
2
3
4
Inventory level (in thousands)
$1,600
$2,100
$1,500
$3,200
Solid Arity currently utilizes a loan from a finance company secured by a floating lien. The interest rate is the prime rate plus 7.5 percent, but no additional expenses are incurred. The Boundary Illinois National Bank of Chicago is bidding for the Solid Arity business. It has proposed a trust receipt financing arrangement. The interest rate will be 2.5 percent above the prime rate, with servicing costs of $20,000 each quarter. Should the company switch financing arrangements? Why?
Stallings Specialty Paint Company has fixed operating costs of $3 million a year. Variable operating costs are $1.75 per half pint of paint produced, and the average selling price is $2 per half pint.
a. What is the annual operating break even point in half pints (QBE)?In dollars of sales (SBE)?
b. If variable operating costs decline to $1.68 per half pint, what would happen to the operating break even point (QBE)?
c. If fixed costs increase to $3.75 million per year, what would be the effect on the operating break even point (QBE)?
d. Compute the degree of operating leverage (DOL) at the current sales level of 16 million half pints.
e. If sales are expected to increase by 15 percent from the current sales position of 16 million half pints, what would be the resulting percentage change in operating profit (EBIT) from its current position?
David Ding Baseball Bat Company currently has $3 million in debt outstanding, bearing an interest rate of 12 percent. It wishes to finance a $4 million expansion program and is considering three alternatives: additional debt at 14 percent interest (option 1), preferred stock with a 12 percent dividend (option 2), and the sale of common stock at $16 per share (option 3). The company currently has 800,000 shares of common stock outstanding and
is in a 40 percent tax bracket.
a. If earnings before interest and taxes are currently $1.5 million, what would be earnings per share for the three alternatives, assuming no immediate increase in operating profit?
b. Develop a break even, or indifference, chart for these alternatives. What are the approximate indifference points? To check one of these points, mathematically determine the indifference point between the debt plan and the common stock plan. What are the horizontal axis intercepts?
c. Compute the degree of financial leverage (DFL) for each alternative at the expected EBIT level of $1.5 million.
d. Which alternative do you prefer? How much would EBIT need to increase before the next alternative would be “better” (in terms of EPS)?
Archimedes Torque and Gear Company has $7.4 million in long term debt having the following payment schedule:
AMOUNT
15% serial bonds, $100,000 payable annually in principal
$2,400,000
13% first mortgage bonds, $150,000 payable annually in principal
3,000,000
18% subordinated debentures, interest only until maturity in 10 years
2,000,000
$7,400,000
Archimedes’ common stock has a book value of $8.3 million and a market value of $6 million. The corporate tax rate, federal plus state, is 50 percent. Archimedes is in a cyclical business; its expected EBIT is $2 million, with a standard deviation of $1.5 million. The average debt to equity ratio of other companies in the industry is 0.47.
a. Determine the interest coverage and the debt service coverage ratios for the company.
b. What are the probabilities that these two ratios will go below 1:1?
The Andrea S. Fault Seismometer Company is an all equity financed firm. It earns monthly, after taxes, $24,000 on sales of $880,000. The tax rate of the company is 40 percent. The company’s only product, “The Desktop Seismometer,” sells for $200, of which
$150 is variable cost.
a. What is the company’s monthly fixed operating cost?
b. What is the monthly operating break even point in units? In dollars?
c. Compute and plot the degree of operating leverage (DOL) versus quantity produced and sold for the following possible monthly sales levels: 4,000 units; 4,400 units; 4,800 units; 5,200 units; 5,600 units; and 6,000 units.
d. What does the graph that you drew (see Part (c)) – and especially the company’s DOL at its current sales figure – tell you about the sensitivity of the company’s operating profit to changes in sales?
Cybernauts, Ltd., is a new firm that wishes to determine an appropriate capital structure. It can issue 16 percent debt or 15 percent preferred stock. The total capitalization of the company will be $5 million, and common stock can be sold at $20 per share. The company is expected to have a 50 percent tax rate (federal plus state). Four possible capital structures being considered are as follows:
PLAN
DEBT
PREFERRED
EQUITY
1
0%
0%
100%
2
30
0
70
3
50
0
50
4
50
20
30
a. Construct an EBIT EPS chart for the four plans. (EBIT is expected to be $1 million.) Be sure to identify the relevant indifference points and determine the horizontal axis intercepts.
b. Using Eq. (16.12), verify the indifference point on your graph between plans 1 and 3 and between plans 3 and 4.
c. Compute the degree of financial leverage (DFL) for each alternative at an expected EBIT level of $1 million.
Hi Grade Regulator Company currently has 100,000 shares of common stock outstanding with a market price of $60 per share. It also has $2 million in 6 percent bonds. The company is considering a $3 million expansion program that it can finance with all common stock at $60 a share (option 1), straight bonds at 8 percent interest (option 2), preferred stock at 7 percent (option 3), and half common stock at $60 per share and half 8 percent
bonds (option 4).
a. For an expected EBIT level of $1 million after the expansion program, calculate the earnings per share for each of the alternative methods of financing. Assume a tax rate of 50 percent.
b. Construct an EBIT EPS chart. Calculate the indifference points between alternatives. What is your interpretation of them?
Compare the tax consequences to the shareholder and the distributing corporation of the following three kinds of corporate distributions: ordinary dividends, stock redemptions, and complete liquidations. Include some discussion as to how corporate E&P is affected.
Problem 4 3 Nash is one of three equal unrelated shareholders of MacLeod Corporation. Nash has held MacLeod stock for four years and has a basis in his stock of $50,000. MacLeod has $300,000 of current and accumulated E&P and distributes $100,000 to Nash. a. What are the tax consequences to MacLeod and to Nash if Nash is an individual and the distribution is treated as a dividend? b. In Part a, what would be the tax consequences if Nash were a corporation? c. What are the tax consequences to MacLeod and to Nash (an individual) if Nash surrenders all his stock in a redemption qualifying for sale treatment? d. In Part c, what would be the tax consequences if Nash were a corporation? e. Which treatment would Nash prefer if Nash were an individual? Which treatment would Nash Corporation prefer? Why?
Document Preview:
Problem 4 1 Compare the tax consequences to the shareholder and the distributing corporation of the following three kinds of corporate distributions: ordinary dividends, stock redemptions, and complete liquidations. Include some discussion as to how corporate E&P is affected. Problem 4 3 Nash is one of three equal unrelated shareholders of MacLeod Corporation. Nash has held MacLeod stock for four years and has a basis in his stock of $50,000. MacLeod has $300,000 of current and accumulated E&P and distributes $100,000 to Nash. a. What are the tax consequences to MacLeod and to Nash if Nash is an individual and the distribution is treated as a dividend? b. In Part a, what would be the tax consequences if Nash were a corporation? c. What are the tax consequences to MacLeod and to Nash (an individual) if Nash surrenders all his stock in a redemption qualifying for sale treatment? d. In Part c, what would be the tax consequences if Nash were a corporation? e. Which treatment would Nash prefer if Nash were an individual? Which treatment would Nash Corporation prefer? Why?
Your firm has taken out u$506,000 loan with 82`3,1PR (compounded monthly) for some commercial property. As is conamon commercial real state, the loan is a 5 year loan based on a 15 year amortization. This mains that your loan payments will be calculated as if you will take 15 years to pay off the loan, you actually must do so in 5 years. To do this, you will mare 59 equal payments based on the 15 year amordzation schedule and then make a final 60th payment to pay the remaining balance. (Note: Be care. not to round any intermediate steps less than six decimal places.) What will your monthly payments be? h. Wbat will your final payment be?
Galatia Products, Inc., has just purchased a small company that specializes in the manufacturing of electronic tuners that are used as a component part of TV sets. Galatia Products, Inc. is a decentralized company, and it will treat the newly acquired company as an autonomous division with full profit responsibility. The new division, called the Tuner Division, has the following revenue and costs associated with each tuner that it manufactures and sells:
Selling price $20
Expenses:
Variable $11
Fixed (based on a capacity of
100,000 tuners per year) 6
17_
Net Income $3_
Galati Products also has an Assembly Division that assembles TV sets. This division is currently purchasing 30,000 tuners per year from an overseas supplier at a cost of $20 per tuner, less a 10% purchase discount. The president of Galatia Products is anxious to have the Assembly Division begin purchasing its tuners from the newly acquired Tuner Division in order to “keep the profits within the corporate family.”
REQUIRED
For (1) through (2) below, assume that the Tuner Division can sell all its output to outside TV manufacturers at the normal $20 price.
Are the managers of Tuner and Assembly Divisions likely to voluntarily agree to a transfer price for 30,000 tuners each year? Why or why not? Show relevant calculations. (5 marks)
If the Tuner Division meets the price that the Assembly Division is currently paying to its overseas supplier and sells 30,000 tuners to Assembly Division each year, what will be the net effect on the profits of the Tuner Division, the Assembly Division, and the company as a whole? Show relevant calculations.(6 marks)
For (3) through (5) below, assume that the Tuner Division is currently selling only 60,000 tuners each year to outside TV manufacturers at the stated $20 price.
Are the managers of the Tuner and Assembly Divisions likely to voluntarily agree to a transfer price for 30,000 tuners each year? Why or why not? (4 marks)
Suppose that the Assembly Division’s overseas supplier drops its price (net of the purchase discount) to only $16 per tuner. Should the Tuner Division meet this price? Explain. If the Tuner Division does not meet this price, what will be the effect on the profits of the company as a whole? (4 marks)
Refer to (4) above. Assume that due to inflexible management policies, the Assembly Division is required to purchase 30,000 tuners each year from the Tuner Division at $20 per tuner. What will be the effect on the profits of the company as a whole? (6 marks)
Galatia Products, Inc., has just purchased a small company that specializes in the manufacturing of electronic tuners that are used as a component part of TV sets. Galatia Products, Inc. is a decentralized company, and it will treat the newly acquired company as an autonomous division with full profit responsibility. The new division, called the Tuner Division, has the following revenue and costs associated with each tuner that it manufactures and sells:
Selling price $20
Expenses:
Variable $11
Fixed (based on a capacity of
100,000 tuners per year) 6
17_
Net Income $3_
Galati Products also has an Assembly Division that assembles TV sets. This division is currently purchasing 30,000 tuners per year from an overseas supplier at a cost of $20 per tuner, less a 10% purchase discount. The president of Galatia Products is anxious to have the Assembly Division begin purchasing its tuners from the newly acquired Tuner Division in order to “keep the profits within the corporate family.”
REQUIRED
For (1) through (2) below, assume that the Tuner Division can sell all its output to outside TV manufacturers at the normal $20 price.
Are the managers of Tuner and Assembly Divisions likely to voluntarily agree to a transfer price for 30,000 tuners each year? Why or why not? Show relevant calculations. (5 marks)
If the Tuner Division meets the price that the Assembly Division is currently paying to its overseas supplier and sells 30,000 tuners to Assembly Division each year, what will be the net effect on the profits of the Tuner Division, the Assembly Division, and the company as a whole? Show relevant calculations.(6 marks)
For (3) through (5) below, assume that the Tuner Division is currently selling only 60,000 tuners each year to outside TV manufacturers at the stated $20 price.
Are the managers of the Tuner and Assembly Divisions likely to voluntarily agree to a transfer price for 30,000 tuners each year? Why or why not? (4 marks)
Suppose that the Assembly Division’s overseas supplier drops its price (net of the purchase discount) to only $16 per tuner. Should the Tuner Division meet this price? Explain. If the Tuner Division does not meet this price, what will be the effect on the profits of the company as a whole? (4 marks)
Refer to (4) above. Assume that due to inflexible management policies, the Assembly Division is required to purchase 30,000 tuners each year from the Tuner Division at $20 per tuner. What will be the effect on the profits of the company as a whole? (6 marks)
Alex and Myra Burg, married and filing joint income tax returns, derive their entire income from the operation of their retail candy shop. Their 2013 adjusted gross income was $50,000. The Burgs itemized their deductions on Schedule A for 2013. The following unreimbursed cash expenditures were among those made by the Burgs during 2013:
Repair and maintenance of motorized wheelchair for
physically handicapped dependent child
$ 300
Tuition, meals, and lodging at special school for physically
handicapped dependent child in the institution primarily
for the availability of medical care, with meals and
lodging furnished as necessary incidents to that care
4,000
Without regard to the adjusted gross income percentage threshold, what amount may the Burgs claim in their 2013 return as qualifying medical expenses?
Ever since they enrolled in JMSB’s EMBA program, Dale Pacioretty, Carey Subban, P.K. Weise, Max Gallagher, and Brendan Price have become very interested in business news. On September 9, 2014, these five players walked out Haps’ locker room after practice on ice, and they started to chat. 1. Dale Pacioretty: Pear Inc. launched its jPhone 6 this afternoon, and I saw a lot of reactions in the stock market. See, dBay’s stock fell about 6.7% shortly after Pear’s presentation started. It is crazy! I understand BayBal, one of dBay’s subsidiaries, will be competing with Pear on mobile payment. So, is this the reason? Can any of you explain it to me in detail? – this question relate to efficient market 2. Carey Subban: Hold on Dale. I think we need to make sure dBay’s stock price decline can actually be attributed to jPhone 6. I skipped the class. My bad, my bad! But, you guys have to first help me out on this. – 3. P.K. Weise: I don’t know. I have dBay’s stock. Its stock price went up significantly after its last quarterly earnings announcement where the company reported a positive earnings surprise. Is this the “post announcement drift” we learned in class? I am so confused. 4. Max Gallagher: I heard the Accounting Standards Board (AcSB) takes a position that accrual anomalies could be reduced if the accrual component of earnings is more persistent. This makes a lot of sense to me, but I don’t know how to improve the persistency of the accrual component of earnings. Do you guys have any inputs? – this is expectation for this question from the prof ( if you need more information about it, please let me know In class, we discussed two potential explanations to the low persistence of the accrual component of earnings: that is, (a) managers possibly manipulating earnings through accruals, and/or (2) errors in the process of estimating accruals (e.g., changes in trade receivables, inventories, etc.). In the assignment, Max Gallagher was asking how to improve the persistence of the accruals, and you should come up with your responses from these two aspects. 5. Brendan Price: I always have good experience with Groubon so I bought its stock early this year. Men, I lost almost 50% of my investment. Really bad! Anyway, I did some research on Groubon. In its initial IPO filings, Groubon stated that, in addition to gross profit and free cash flow, the company’s performance measures also included “adjusted consolidated segment operating income” (ACSOI in short)—which excludes expenses that the company considers noncash or “otherwise not indicative of future operating expenses”. Under investors’ scrutiny, however, Groubon later had to strip out this controversial accounting metric in its revised IPO filings. What is wrong with “ACSOI”? I find this measure is intuitive. Why did investors oppose it? Requirement: Suppose you also participated in the conversation. Respond to each of these five players. Note: When applicable (for instance, in your response to Max Gallagher), you are encouraged to make hypothetical proposals. Proposals that are intuitive and with a reasonable possibility to implement will make your assignment stand out. Assignment Format: Times New Roman, font size 12, default space between lines (i.e., 1.15), normal margin, maximum 3 pages (not including reference). Important – I attached 3 lectures that are relevant to those 5 questions. Please refer your answers to the 3 lectures and be intuitive with the answers
Based on its physical count of inventory in its warehouse at year end, December 31, 2014, Madison Company planned to report inventory of $34,500. During the audit, the independent CPA developed the following additional information:
a.
Goods from a supplier costing $700 are in transit with UPS on December 31, 2014. The terms are FOB shipping point (explained in the “Required” section). Because these goods had not yet arrived, they were excluded from the physical inventory count.
b.
Madison delivered samples costing $1,800 to a customer on December 27, 2014, with the understanding that they would be returned to Madison on January 15, 2015. Because these goods were not on hand, they were excluded from the inventory count.
c.
On December 31, 2014, goods in transit to customers, with terms FOB shipping point, amounted to $6,500 (expected delivery date January 10, 2015). Because the goods had been shipped, they were excluded from the physical inventory count.
d.
On December 31, 2014, goods in transit to customers, with terms FOB destination, amounted to $1,500 (expected delivery date January 10, 2015). Because the goods had been shipped, they were excluded from the physical inventory count.
East Coast Marine Ltd (ECM) manufactures parts for small marine craft. Over the past decade, ECM’s management has met its goal of reducing its reliance on government contract work to 50 per cent of total sales. ECM is now equally reliant on commercial sales and government contracts. Traditionally, the costs of the Material Handling Department have been allocated to direct material as a percentage of direct material dollar value. This was adequate when the majority of the manufacturing was homogeneous and related to government contracts. Recently, however, government auditors have rejected some proposals, stating that ‘the amount of Material Handling Department costs allocated to these proposals is disproportionate to the total effort involved’. Eloise Smith, the newly hired cost accounting manager, was asked by the manager of ECM’s Government Contracts Unit, Paul Jones, to find a more equitable method of allocating the Material Handling Department costs to the user departments. Her review has revealed the following information: ¦ The majority of the direct material purchases for government contracts are high dollar, low volume purchases, while commercial materials represent low dollar, high volume purchases. ¦ Administrative departments such as Marketing, Finance and Administration, Human Resources and Maintenance also use the services of the Material Handling Department on a limited basis but have never been charged in the past for material handling costs. ¦ One purchasing manager with a direct phone line is assigned exclusively to purchasing high dollar, lowvolume material for government contracts on an annual salary of $36 000. Employee on costs are estimated to be 20 per cent of the annual salary. The annual costs of the dedicated phone line are $2800.
Document Preview:
Unit: ACC203 – Management Accounting Submission Date: 14 Oct 2014 before 1.00 pm Weighting: The assignment is worth 25% of the total unit weight. Instructions: 1. Students are required to cover all stated requirements. 2. Your answer must be both uploaded to Moodle in word file and handed over a printed copy. 3. You need to support your answers with appropriate Harvard style references where necessary. 4. Only include information in your appendixes that has been directly referred to in the body of your document. 5. Include a title/cover page containing the subject title and code and the name, student id numbers. 6. Please save the document as ACC203AT2_first name_Surename_Student Number Eg: ACC203AT2_John_Smith_20140000 1Question 1: Activity based costing East Coast Marine Ltd (ECM) manufactures parts for small marine craft. Over the past decade, ECM’s management has met its goal of reducing its reliance on government contract work to 50 per cent of total sales. ECM is now equally reliant on commercial sales and government contracts. Traditionally, the costs of the Material Handling Department have been allocated to direct material as a percentage of direct material dollar value. This was adequate when the majority of the manufacturing was homogeneous and related to government contracts. Recently, however, government auditors have rejected some proposals, stating that ‘the amount of Material Handling Department costs allocated to these proposals is disproportionate to the total effort involved’. Eloise Smith, the newly hired cost accounting manager, was asked by the manager of ECM’s Government Contracts Unit, Paul Jones, to find a more equitable method of allocating the Material Handling Department costs to the user departments. Her review has revealed the following information: ¦ The majority of the direct material purchases for government contracts are high dollar, low volume purchases, while commercial materials represent…
Perpetual Inventor Y System with Returns During the year ended 30 June 2014, TooBakko Ltd sold each unit of its goods at $9. Purchases and sales of the goods are shown below. Ignore GST. 2013 July 1 Inventory on hand 200 units@$5.00 each 30 Sales 120 units Aug. 25 Purchases 300 @ $5.25 30 Sales 250 units Sept. 3 Purchases 450 units @$5.30 10 Purchases returns 50 damaged units from 3 September purchase 30 Sales 300 units Oct. 5 Purchases 300 units @$5.40 Dec. 8 Purchases 250 units at $5.45 2014 11 Sales 500 units Feb. 21 Purchases 150 units @$5.50 Marc h 18 Purchases 100 units at $5.60 April 30 Sales 300 units May 2 Sales returns 30unitsfrom30April sales,goods returnedtoinventory 4 Purchases 250 units@$5.70 June 6 Purchases 300 units @$5.85 30 Sales 460 units TooBakko Ltd uses a perpetual inventory system. Required A. Using dollars and cents in appropriate inventory records, determine the cost of the inventory at 30 June 2014 under the following inventory cost flow assumptions: ? FIFO ? Moving average (round to the nearest cent). B. Assuming that a physical count at 30 June 2014 determined that only 300 units remained in inventory, prepare the journal entry to record the fact that some units had gone missing. C. Using the moving average method, prepare the Inventory Control, Cost of Sales and Sales accounts CT account format), assuming that these accounts are balanced yearly on 30 June. Assume as well that the physical count of inventory was as mentioned in requirement B above. Question 2: Depreciation of Machinery In early July 2013 Admirable Ltd is considering the acquisition of some machinery for $1200 000 plus GST to be used in the manufacture of a new product. The machinery has a useful life of 10 years, during which management plans to produce 500 000 units of the new product. The residual value of the machinery is $100 000. The following projections were made in order to select a depreciation method to be used for the machinery: Year ended 30 June Unitsofoutput Repairs and maintenance Profit before depreciation 2014 50 000 $ 70000 $350000 2015 45000 60000 340000 2016 55000 90000 355000 2017 58000 95000 360000 2018 60 000 100000 380000 In calculating the profit before depreciation, all expenses have been deducted, including the repairs and maintenance expense. Required A. As the accountant for Admirable Ltd, prepare separate depreciation schedules for the machinery for the 5 year period, using the following depreciation methods: (a) straight line, (b) diminishing balance, (c) sum of years digits, and (d) units of production. Use the following headings for each schedule: ‘Year ending 30 June’, ‘Annual depreciation 3 expense’, ‘Accumulated depreci ation’, ‘Carrying amount at end of year’. B. Prepare a report for management, stating the advantages and disadvantages of each depreciation method. Include in the report your recommendations on the choice of method consistent with the requirements of IAS 16/AASB 116. Support your recommendations with schedules show ing the total annual cost of operating the machinery, and the profit after depreciation. Question 3: Disposal and Revaluation Increases and Decreases On 1January 2011,Punchbowl Ltdbought amachine for $33000 cash; its useful lifewas 12years and its residual value was $3000. It was decided to depreciate the machine by the straight line method. On 30 September 2013, themachine was traded intoLeichhardt Ltd for anewmodel, the total cost being $25000. Leichhardt Ltd allowed $17000 for the old machine. Itwas decided to depreciate the new machine at the rate of 45% p.a. by the diminishing balance method. Residual value of the newmachine was $7000. On 1 July 2014, Punchbowl Ltd decided to adopt the revaluation model and revalue its machine upwards to reflect fair values. This represented a 15% increase in the carrying amount of the machine. The diminishing balance method of depreciation was continued at the same rate. The accounting period ended on 30 June each year. At 30 June 2015, the carrying amount of the machinewasapproximately equaltofairvalue. Required A. Prepare relevant ledger accounts to record the above transactions up to 30 June 2015. Ignore GST. B. Show how the asset would appear in the financial statements of Punchbowl Ltd as at 30 June 2012, 30 June 2014 and 30 June 2015. C. ShowtheMachinery account andAccumulated Depreciation Machinery account if therevalu ation on 1July 2014 had been downwards instead of upwards
Kathleen Battle Corporation was organized on January 1, 2014. It is authorized to issue 10,000 shares of 8%, $100 par value preferred stock, and 500,000 shares of no par common stock with a stated value of $1 per share. The following stock transactions were completed during the first year.
Jan.
10
Issued 80,000 shares of common stock for cash at $5 per share.
Mar.
1
Issued 5,000 shares of preferred stock for cash at $108 per share.
Apr.
1
Issued 24,000 shares of common stock for land. The asking price of the land was $90,000; the fair value of the land was $80,000.
May
1
Issued 80,000 shares of common stock for cash at $7 per share.
Aug.
1
Issued 10,000 shares of common stock to attorneys in payment of their bill of $50,000 for services rendered in helping the company organize.
Sept.
1
Issued 10,000 shares of common stock for cash at $9 per share.
Nov.
1
Issued 1,000 shares of preferred stock for cash at $112 per share.
Instructions
Prepare the journal entries to record the above transactions.
During the quarter, Menon N Inc. collected $100 of cash from customers, paid $60 of cash to suppliers, paid $30 of cash to employees and other creditors, and recorded a $5 loss on sale of equipment. There were no other cash flows related to operating activities.
What was Menon N’s Cash Flow from Operations during the quarter?
$25
$5
$10
$15
$20
Question 2
Saxena Ltd. had Revenue of $1000, Depreciation and Amortization Expense of $100, Interest Expense of $100, and Tax Expense of $50. All other Expenses were $400. What was Saxena’s EBITDA?
$1000
$250
$400
$500
$600
Question 3
Mangini Co.’s Balance Sheet had the following line item:
12/31/2012 12/31/2011
Accounts Receivable, net of allowances of $500 and $450, respectively $9,200 $8,400
What percentage of gross accounts receivable does Mangini expect to be uncollectable as of 12/31/2012?
5.15%
4.43%
5.08%
5.36%
5.01%
Question 4
Odaine Inc.’s footnotes had the following line item:
12/31/2012 12/31/2011
Allowance for Doubtful Accounts $800 $650
Odaine also disclosed that Bad Debt Expense was $1000 in 2012 and $890 in 2011. There were no recoveries of previously written off accounts in either year. What were total write offs of uncollectable accounts for the year ended 12/31/2012?
$800
$150
$110
$850
$1,150
Question 5
JannaChan Ltd.’s Statement of Cash Flows had the following line items:
2012 2011
Bad Debt Expense, net $1,500 $350
Increase in Accts Receivable $(6,600) $(2,900)
JannaChan reported Sales of $150,000 during the year ended 12/31/2012. There were no write offs or recoveries during 2012. How much cash did JannaChan collect from customers during the year ended 12/31/2012?
$143,400
$156,600
$150,000
$148,500
$141,900
Question 6
A retail company, Telmo Mart, had the following line item on its Balance Sheet:
12/31/2012 12/31/2011
Inventory $5,500 $5,100
Telmo Mart’s Income Statement had the following line item:
2012 2011
Cost of Goods Sold $91,000 $87,000
How much inventory did Telmo Mart purchase during the year ended 12/31/2012?
$90,600
$86,600
$91,400
$91,000
$87,400
Question 7
Nguyen Co. incurred the following costs during the quarter:
Raw materials used in production $132,000
Marketing materials used by sales staff $114,000
Wages of factory workers $191,000
Salaries of sales staff $391,000
Depreciation on factory and production equipment $152,000
Depreciation on headquarters building $132,000
Manufacturing overhead $172,000
How much of these costs would have been recorded in Nguyen’s Work in Process Inventory account during the quarter?
$779,000
$495,000
$1,252,000
$647,000
$488,000
Question 8
A manufacturing company, Kutty Industries Ltd., had the following line items in a footnote:
12/31/2012 12/31/2011
Raw Materials $150 $140
Work in Process $215 $200
Finished Goods $250 $240
$615 $580
LIFO Reserve $(100) $(60)
Total Inventory $515 $520
Kutty Industries’ Income Statement had the following line item:
2012 2011
Cost of Goods Sold $1,850 $1,725
What would Kutty Industries’s Cost of Goods Sold had been if they had used the FIFO inventory method for the year ended 12/31/2012?
Each day at a large hospital, several hundred laboratory tests are performed. The rate at which these tests ate done im properly (and therefore need to be redone) seems steady, at I about 4%. In an effort to get to the root cause of these non conformances, tests that need to be redone, the director of the lab decided to keep records over a period of one week. The laboratory tests were subdivided by the shift of workers who performed the lab tests. The results are as follows:
a. Construct contingency tables based on total percentages, row percentages, and column percentages. b. Which type of percentage—row, column, or total—do you think is most informative for these data? Explain. c. What conclusions concerning the pattern of nonconform ing laboratory tests can the laboratory director reach?
Expert needs to use AAMI car insurance and Allianz car insurance to do analysis
Choose one from the following companies:
Insurance company
Gaming Company
Health Company
So I have chosen the following Insurance companies:
1. AAMI car Insurance
2. Allianz car Insurance
</pclass=”msonormal”>
Document Preview:
Assessment Task 2– Company Analysis and Report Due Date: Week 1 – Sunday 1:5 pm Value: 40% Word Limit: 250 words equivalent Purpose: This assessment asks assists students to develop skills in: Selecting, completing, calculating and interpreting appropriate ratios from Financial Statements to determine measures of business performance and support management planning and decision making. Recognising and considering the effects of interpretations of Financial Statements and performance indicators by external entries. Assessment Task: Lincoln Indicators professes nine golden rules for successful share market investing. The golden rules relate to: financial health; management assessment; outlook/forecast; share price value; share price sentiment; liquidity and size; principal activates; price sensitive announcements; and followed of the rules above. Details on the golden rules are available at: htp:/www.lincolnindicators.com.au/StockMarketSoftware/GoldenRules A pdf information sheet can be downloaded here: htp:/www.lincolnindicators.com.au/Content/Static/PDFs/9GR Info Shet.pdf You will be allocated two listed companies that are in the same industry. Apply the nine golden rules investment framework and write a report which compares and contrasts the financial position/performance of the two companies. The report should conclude by judging whether these stocks satisfy Lincoln’s investment criteria. adapted from Birth et al (2012) p.371 Course Description: BSMAN309 Accounting for Managers In judging whether the stocks satisfy the investment criteria, you should consider a number of issues within each of the golden rules. In addition to calculating ratios and other data, there should be a written discussion summarising the companies’ performance relative to each of the rules: Golden Rule 1: Financial Health ·· Calculate key accounting ratios for each company that measure their profitability, liquidity, capital structure, asset efficiency and market performance…
4.8 Inventory cost flows (LO 3) The following informationis taken from the accounting records of four different companies. Provide the missing amounts. Assume there are no indirect materials used in the company’s finished product.
Direct Materials Inventory, by cg Purchases of direct materials Total direct materials available for use Direct Materials Inventory. ending Direct materials used in production Direct labor Total manufacturing overhead Total manufacturing cost Beginning Work us Process Inventory Ending Work m Process Inventory Cost of goods manufactured Finished Goods Inventory, beginning Cost of goods available for sale Finished Goods Inventory. ending Cost of Goods Sold Company 1 Company 2 Company 3 Company 4 $ 15,0,0, 394,000 ‘o’sn 212.000 ‘,WT.? 77777 49,000 817400 354″se 796.400 “ems 86.400 1 ‘ Ivg 90,500 nr, 106.300 232.800 162.000 34.800 n;von 422.000 7s.n $ 6:000 I’s’is6sT? TM, 25,000 64,300 138,300 38,000 1017, 103.450 WSW 140,050 108,400 0165.000 2.5,B;4,00n 59,150 ‘trv’s 926,650 2.07.01 82,250 984,500 25,000 sm’
Galatia Products, Inc., has just purchased a small company that specializes in the manufacturing of electronic tuners that are used as a component part of TV sets. Galatia Products, Inc. is a decentralized company, and it will treat the newly acquired company as an autonomous division with full profit responsibility. The new division, called the Tuner Division, has the following revenue and costs associated with each tuner that it manufactures and sells:
Selling price $20
Expenses:
Variable $11
Fixed (based on a capacity of
100,000 tuners per year) 6
17_
Net Income $3_
Galati Products also has an Assembly Division that assembles TV sets. This division is currently purchasing 30,000 tuners per year from an overseas supplier at a cost of $20 per tuner, less a 10% purchase discount. The president of Galatia Products is anxious to have the Assembly Division begin purchasing its tuners from the newly acquired Tuner Division in order to “keep the profits within the corporate family.”
REQUIRED
For (1) through (2) below, assume that the Tuner Division can sell all its output to outside TV manufacturers at the normal $20 price.
Are the managers of Tuner and Assembly Divisions likely to voluntarily agree to a transfer price for 30,000 tuners each year? Why or why not? Show relevant calculations. (5 marks)
If the Tuner Division meets the price that the Assembly Division is currently paying to its overseas supplier and sells 30,000 tuners to Assembly Division each year, what will be the net effect on the profits of the Tuner Division, the Assembly Division, and the company as a whole? Show relevant calculations.(6 marks)
For (3) through (5) below, assume that the Tuner Division is currently selling only 60,000 tuners each year to outside TV manufacturers at the stated $20 price.
Are the managers of the Tuner and Assembly Divisions likely to voluntarily agree to a transfer price for 30,000 tuners each year? Why or why not? (4 marks)
Suppose that the Assembly Division’s overseas supplier drops its price (net of the purchase discount) to only $16 per tuner. Should the Tuner Division meet this price? Explain. If the Tuner Division does not meet this price, what will be the effect on the profits of the company as a whole? (4 marks)
Refer to (4) above. Assume that due to inflexible management policies, the Assembly Division is required to purchase 30,000 tuners each year from the Tuner Division at $20 per tuner. What will be the effect on the profits of the company as a whole? (6 marks)
This trial balance of Michels Co. does not balance.
?
Each of the listed accounts has a normal balance per the general ledger. An examination of the ledger and journal reveals the following errors:
1. Cash received from a customer on account was debited for $780, and Accounts Receivable was credited for the same amount. The actual collection was for $870.
2. The purchase of a printer on account for $340 was recorded as a debit to Supplies for $340 and a credit to Accounts Payable for $340.
3. Services were performed on account for a client for $900. Accounts Receivable was debited for $90 and Service Revenue was credited for $900.
4. A debit posting to Salaries and Wages Expense of $700 was omitted.
5. A payment on account for $206 was credited to Cash for $206 and credited to Accounts Payable for $260.
6. Payment of a $600 cash dividend to Michels’ stockholders was debited to Salaries and Wages Expense for $600 and credited to Cash for $600.
Does your organization have a DRP and if so, do you know the procedures/steps it includes?
Use this paper to come up with your answers and also you can use other sources just give me the references.
Abstract
Business continuity and disaster recovery is an ever present, growing concern for many organizations and businesses alike. Although some organizations would like to think that they are immune to the threat of emergencies and disasters, whether it be human made, natural, intentional, or accidental, the truth is no organization is immune, as they can occur in any organization. Organizations must learn how to protect themselves and mitigate the adverse effects of emergencies and disasters. A disaster recovery plan is one of the most important strategies to prepare and protect an organization from disasters and emergencies. This paper discusses the need for a disaster recovery plan and the procedures to include in a typical plan.
Document Preview:
Disaster Recovery Planning Jessica Sipple University of Maryland University College Abstract Business continuity and disaster recovery is an ever present, growing concern for many organizations and businesses alike. Although some organizations would like to think that they are immune to the threat of emergencies and disasters, whether it be human made, natural, intentional, or accidental, the truth is no organization is immune, as they can occur in any organization. Organizations must learn how to protect themselves and mitigate the adverse effects of emergencies and disasters. A disaster recovery plan is one of the most important strategies to prepare and protect an organization from disasters and emergencies. This paper discusses the need for a disaster recovery plan and the procedures to include in a typical plan. Disaster Recovery Planning As organizations rely more on technology and electronic data for their daily business operations, the occurrences of disasters and the amount of data and information technology hardware, software, and equipment lost to disasters appear to be increasing. Organizations are estimated to lose revenue and incur expenses every year due to disasters, unpreparedness, and lost productivity. Costs associated with disasters and being unprepared for such can be detrimental to an organization. The increased occurrence, costs, and impact of disasters and emergencies and the consequential loss present valid concerns for organizations. Measures must be taken to protect organizations from disasters. The more organizations know about disasters and emergencies, the more they can do to prepare and protect themselves. One way an organization can prepare and protect itself is to create and implement a disaster recovery plan (DRP). Create a Plan Organizations need to create a disaster recovery plan (DRP) that can address any type of disaster, is easy to follow, and easy to understand. The plan should be customized to meet the…
Galati Products, Inc.. has just purchased a small company that specializes in the manufacture of electronic tuners that are used as a component part of TV sets. Galati Products. Inc., is a decentralized company, and it will treat the newly acquired company as an autonomous division with full profit responsibility. The new division, called the Tuner Division, has the following revenue and costs associated with each tuner that it manufactures and sells:
Selling price
$20
Expenses:
Variable
$11
Fixed (based on a capacity of 100,000 tuners per year) .
6
17
Net operating income
$ 3
Galati Products also has an Assembly Division that assembles TV sets. This division is currently purchasing 30,000 tuners per year from an overseas supplier at a cost of $20 per tuner, less a 10% purchase discount. The president of Galati Products is anxious to have the Assembly Division begin purchasing its tuners from the newly acquired Tuner Division in order to “keep the profits within the corporate family”
Required:
For (1) and (2) below, assume that the Tuner Division can sell all of its output to outside TV manufacturers at the normal $20 price.
1. Are the managers of the Tuner and Assembly Divisions likely to voluntarily agree to a transfer price for 30,000 tuners each year? Why or why not?
2. If the Tuner Division meets the price that the Assembly Division is currently paying to its overseas supplier and sells 30,000 tuners to the Assembly Division each year, what will be the effect on the profits of the Tuner Division, the Assembly Division, and the company as a whole?
For (3) through (6), assume that the Tuner Division is currently selling only 60,000 tuners each year to outside TV manufacturers at the stated $20 price.
3. Are the managers of the Tuner and Assembly Divisions likely to voluntarily agree to a transfer price for 30,000 tuners each year? Why or why not?
4. Suppose that the Assembly Division’s overseas supplier drops its price (net of the purchase discount) to only $16 per tuner. Should the Tuner Division meet this price? Explain. If the Tuner Division does not meet this price, what will be the effect on the profits of the company as a whole?
5. Refer to (4) above. If the Tuner Division refuses to meet the.$16 price, should the Assembly Division be required to purchase from the Tuner Division at a higher price for the good of the company as a whole? Explain.
6. Refer to (4) on the previous page. Assume that due to inflexible management policies, the Assembly Division is required to purchase 30,000 tuners each year from the Tuner Division at $20 per tuner. What will be the effect on the profits of the company as a whole?
Keith earned a salary of $68,000 this year. He contributed $5,000 to his traditional Individual Retirement Account (IRA) and paid $3,000 alimony to his ex wife. His AGI is computed as follows.
Choose an organisation listed on the stock exchange from the organisations listed below
AMP
BHP Billiton
Woolworths Ltd
Westpac
Harvey Norman
Coles
Required
Develop and excel spread sheet to analyse the operations of the business you have chosen over a three year period, use ratio analysis, trend analysis and other qualitative information to undertake the analysis.
Prepare a report to shareholders and management to explain the performance of the organisation. Note the information provided to management may be more in depth than that provided to shareholders
Prepare a presentation of the key issues identified in you analysis to be undertaken in week 9 maximum of 5 minutes
Document Preview:
ASSIGNEMNT DETAIL Choose an organisation listed on the stock exchange from the organisations listed below AMP BHP Billiton Woolworths Ltd Westpac Harvey Norman Coles Required Develop and excel spread sheet to analyse the operations of the business you have chosen over a three year period, use ratio analysis, trend analysis and other qualitative information to undertake the analysis. Prepare a report to shareholders and management to explain the performance of the organisation. Note the information provided to management may be more in depth than that provided to shareholders Prepare a presentation of the key issues identified in you analysis to be undertaken in week 9 maximum of 5 minutes
As a recently hired accountant for a small business, SMC, Inc., you are provided with last year’s balance sheet, income statement, and post closing trial balance to familiarize yourself with the business.
SMC, Inc.
Balance Sheet December31,2014
Assets
Cash ……………………………………………………………………………………………
$34,500
Accounts receivable ……………………………………………………………………..
25,000
Inventory ……………………………………………………………………………………..
10,000
Supplies ………………………………………………………………………………………
200
Total assets………………………………………………………………………………….
$69,700
Liabilities andStockholders’ Equity
Liabilities:
SMC, Inc.
Income Statement
For theYearEndedDecember31,2014
Sales revenue ………………………………………………………………………………
$110,000
Rent revenue ……………………………………………………………………………….
1,000
Total revenues ……………………………………………………………………………..
$111,000
Less cost of goods sold…………………………………………………………………
60,000
Gross margin ……………………………………………………………………………….
$ 51,000
Less operating expenses:
Supplies expense …………………………………………………………………..
$ 400
Salaries expense ……………………………………………………………………
22,000
Miscellaneous expense ………………………………………………………….
4,100
26,500
Income before taxes……………………………………………………………………..
$ 24,500
Less income taxes………………………………………………………………………..
3,675
Net income…………………………………………………………………………………..
$ 20,825
Accounts payable …………………………………………………………………..
$12,000
Salaries payable …………………………………………………………………….
1,000
Income taxes payable …………………………………………………………….
3,675
Total liabilities………………………………………………………………………………
$16,675
Stockholders’equity:
Capital stock (10,000 shares outstanding)………………………………
$25,000
Retained earnings ………………………………………………………………….
28,025
Total stockholders’ equity ……………………………………………………………..
53,025
Total liabilities and stockholders’ equity…………………………………………
$69,700
SMC, Inc.
Post Closing Trial Balance December31,2014
Debits
Credits
Cash ……………………………………………………………………………………………
$34,500
Accounts Receivable …………………………………………………………………….
25,000
Inventory ……………………………………………………………………………………..
10,000
Supplies ………………………………………………………………………………………
200
Accounts Payable …………………………………………………………………………
$12,000
Salaries Payable …………………………………………………………………………..
1,000
Income Taxes Payable…………………………………………………………………..
3,675
Capital Stock………………………………………………………………………………..
25,000
Retained Earnings ………………………………………………………………………..
28,025
Totals…………………………………………………………………………………………..
$69,700
$69,700
You are also given the following information that summarizes the business activity for the current year, 2015
a. Issued 10,000 additional shares of capital stock for $25,000 cash on January 1st.
b. Borrowed $5,000 on March 1, 2015, from Downtown Bank as a long term loan. The interest rate on the loan is 6% and Interest for the year is payable on January 1, 2016.
c. Paid $4,800 cash on April1 to lease a building for one year.
d. Received $2,400 on May 1 from a tenant for one year’s rent.
e. Paid $1,800 on June 1 for a one year insurance policy.
f. Purchased $1,500 of supplies for cash on June 15th.
g. Purchased inventory for $100,000 on account on July 1.
h. August 1, sold inventory for $150,000 on account; cost of the merchandise sold was $80,000.
i. Collected $90,000 cash from customers’ accounts receivable on August 20th.
j. September 1, Paid $70,000 cash for inventories purchased earlier during the year.
k. September 20th, paid $27,000 for sales reps’ salaries, including $1,000 owed at the beginning of 2015.
l. Dividends for $7,500 were paid on October 20th.
m. The income taxes payable at the beginning of 2015 were paid on November 15th.
n. For adjusting entries, all prepaid expenses are initially recorded as assets, and all unearned revenues are initially recorded as liabilities.
o. At year end, $550 worth of supplies are on hand.
p. At year end, an additional $5,000 of sales salaries are owed, but have not yet been paid.
q. Prepare an adjusting entry to recognize the taxes owed for 2015. The corporate tax rate is 15% of the income before income taxes.
Youareaskedtodothefollowingonanexcelspreadsheet:
1. Journalize the transactions for the current year, 2015, using the accounts listed on the financial statements and other appropriate accounts (See the Chart of Accounts Tab on the Excel Spreadsheet).
2. Set up T accounts and enter the beginning balances from the December 31, 2014, post closing trial balance for SMC. Post all current year journal entries to the T accounts.
3. Journalize and post any necessary adjusting entries at the end of 2015. (Hint: Itemsb, c,d,e,o,p, and q require adjustment.) Post the adjusting entries to your T accounts.
4. After the adjusting entries are posted, prepare an adjusted trial balance, an income statement,
statement of retained earnings and a balance sheet for 2015. (Hint:Incomebeforeincometaxes shouldequal$34,550)
5. Journalize and post closing entries for 2015 and prepare a po
Use the following information to complete the partial worksheet for Bills Company. Record the appropriate adjusting entries using the data below and extend the balances over to the adjusted trial balance columns.
Merchandise inventory—ending $10
Store supplies on hand 3
Depreciation on store equipment 2
Accrued salaries 1
Bill’s Company
Partial Worksheet
For the Year Ended December 31st, 2012
Account Titles
Trial Balance
Adjustments
Adjusted Trial Balance
Debit
Credit
Debit
Credit
Debit
Credit
Merchandise Inv.
16
Store Supplies
10
Store Equipment
20
Accum. Depr. Store Equip.
6
Salaries Payable
Income Summary
Salary Expense
10
Depreciation Expense
Store Supplies Exp.
Part B (15 points each for a possible total of 60 points)
The Bixby Co. had the following transactions involving the purchase of merchandise. Prepare the necessary general journal entries. Any applicable freight costs are prepaid by the seller. The perpetual inventory method is in use.
June 16 Purchased merchandise having a price of $6,000 from the Shelby Manufacturing Co. on account with credit terms 10, n/30. Transportation terms F.O.B destination.
June 16 Purchased merchandise having a price of $9,000 from the Ajax Supply House on account with credit terms 2/10, n/30. Transportation terms F.O.B shipping point. The freight costs were $175.
June 17 Received the goods from Shelby.
June 17 Received the goods from Ajax.
June 20 Returned for credit merchandise with an invoice price of $800 to Ajax.
June 25 Paid Shelby the amount owed.
June 28 Paid Ajax the amount owed.
June 30 Returned for cash, merchandise with an invoice price of $400 to Shelby.
(1) Prepare the necessary general journal entry for June 16, Purchased merchandise having a price of $6,000 from the Shelby Manufacturing Co. on account with credit terms 2/10, n/30. Transportation terms F.O.B destination.
In required reading 3 (Walther n.d. in Week 4, three sets of data are presented in the section‘Leveraging the power of modern information systems’ on pages 14 to 16). this is the case study and the subject is measurement and decision making.Please complete it with the harvard referencing in text and list at the end according to an MBA requiremenmts.
Document Preview:
Week 4: Required reading 1 Granoff, M, Platt, D & Vaysman, I 2000, Using activity based costing to manage more effectively, January, University of Texas at Austin, viewed 30 January 2013,
. COPYRIGHT COMMONWEALTH OF AUSTRALIA Copyright Regulations 1969 WARNING This material has been reproduced and communicated to you by or on behalf of Kaplan Higher Education pursuant to Part VB of the Copyright Act 1968 (the Act). The material in this communication may be subject to copyright under the Act. Any further reproduction or communication of this material by you may be the subject of copyright protection under the Act. Do not remove this noticeGr ant Report January 2000 Using Activity Based Costing to Manage More Effectively Michael H. Granof Professor David E. Platt Assistant Professor Igor Vaysman Assistant Professor Department of Accounting College of Business Administration University of Texas at Austin The PricewaterhouseCoopers Endowment for The Business of GovernmentThe PricewaterhouseCoopers Endowment for The Business of Government About The Endowment Through grants for Research, Thought Leadership Forums, and the SES Leadership Program, The PricewaterhouseCoopers Endowment for The Business of Government stimulates research and facilitates discussion on new approaches to improving the effectiveness of government at the federal, state, local, and international levels. Founded in 1998 by PricewaterhouseCoopers, The Endowment is one of the ways that PricewaterhouseCoopers seeks to advance knowledge on how to improve public sector effec tiveness. The PricewaterhouseCoopers Endowment focuses on the future of the operation and management of the public sector.
This is a self paced study module with a graded homework assignment due in your assignment folder no later than the date shown in the related Conference and Course Schedule.
In each section, I offer lecture notes on aspects of XBRL that take you to vetted XBRL resources that offer review of the concepts covered in the lecture. During this activity, remember, we do not have to learn a lot of XBRL code. What we have to learn is 1) the terminology, 2) how to read some code (similar to reading html code from an Internet doc), 3) how to select appropriate code from an XBRL taxonomy, and 4) how to check code in financial statements. At the end of module are several homework problems that you will submit for grading.
Background on XBRL
eXtensible Business Reporting Language (XBRL) is a language for the electronic communication of business and financial data and has been implemented by International Financial Reporting Standards (IFRS), the United States Generally Accepted Accounting Principles (U.S. GAAP), and many other national and international accounting standards bodies. In the United States, the Securities and Exchange Commission (SEC) requires public companies to file their financial statements in XBRL. The following article from Accounting Web provides a good background of the path to XBRL compliance and the SEC’s filing requirements: Public companies must submit XBRL exhibits to SEC in 2011 . The SEC provides up to date XBRL information, which you can access by visiting: http://xbrl.sec.gov. The FASB reports that
This [XBRL] standard is maintained by XBRL International, an international non profit consortium of approximately 450 major companies, organizations, and government agencies around the world. It is an open standard, provided free of license fees, and is already being used in numerous countries. (http://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1176157087972, 2013)
XBRL – Learning the Terminology
XBRL is an “open technology standard for reporting and analyzing business and financial information. Instead of treating financial information as a block of text, XBRL provides a computer readable tag to identify each individual item of data” (E&Y, 2010). Each tag contains information on reading, calculating and presenting the data. The tags employed in XBRL are interactive, meaning they actively link back to source documents. An example of tagging is shown in the following figure (and you’ll see a real world example in a later section):
Figure 1 2: Example of XBRL tagging in a financial document (Source: Hoffman and Watson, 2010)
This is the XBRL tag hiding behind the number. That’s a lot of information! It’s telling us the reporting period, the account, the amount, and how to format it.
A document that is tagged is called an XBRL enabled “instance document”. Instance documents can be any kind of report, but are primarily financial statements. To learn XBRL, we DO NOT have to learn a lot of coding because there is now software and services to help us. We DO NEED to learn the terminology, be able to read some code, select code from a taxonomy, and check the coding on our documents. The steps involved in creating an XBRL instance document include 1) deciding on the software, 2) selecting the taxonomy, 3) creating an entity profile in the software, 4) tagging the data, 5) validating the tagging (which the software helps with), and 5) exporting/publishing your document.
As Hoffman and Watson (2010) describe, XBRL tags add the behind the scenes structure to instance documents, but “People don’t work with the information at the tag level…computers can work with the information and help people do all sorts of new, interesting and helpful tasks (p. 20).
In the example above, the $1,147 appears on a GAAP Income Statement for the period 2009, in US dollars with three decimal places.
Let’s start to get a better feel for the process
Begin by viewing this video provided by Altova, an XBRL software provider: XBRL Overview
Now let’s carefully read this overview prepared by IFRS.org: XBRL Fundamentals.
What I particularly like is the diagram the IFRS presents (shown below). Simply, an element is an item on a financial statement whose label, definition, calculation, presentation and reference are determined by the schema (list of elements) and linkbases (directions or specifications) contained within the larger taxonomy (classification system).
A taxonomy is an “electronic dictionary of business reporting elements used to report business data. A taxonomy is composed of an element names file (.xsd) and relationships files directly referenced by that schema. The taxonomy schema files together with the relationships files define the concepts (elements) and relationships that form the basis of the taxonomy. The set of related schemas and relationships files altogether constitute a taxonomy (SEC, 2011).
Taxonomies may contain hundreds or even thousands of individual business reporting concepts, mathematical and definitional relationships, along with text labels in multiple languages, references to authoritative literature, and information about how to display each concept to a user.
There’s other terminology used in XBRL, so let’s take a closer look at terminology. Visit this link and print the glossary: http://www.tryxbrl.com/Learn/Glossary/tabid/58/Default.aspx. Read the terms, and now continue reading to learn how they relate to each other in more detail.
Now we’re going to take a closer look at XBRL tagging. Don’t let this scare you because later on, I will show you the software that we use to make our work easier.
Reading the Tagging
Let’s begin by looking at some financial statements that companies have prepared in XBRL.Many companies who file interactive data documents with the SEC also share the information on their websites.
Go to: Footlocker. com and click on SEC XBRL Viewer
Select one of the financial statements from the left hand menu. This takes you to a very nice view of the company’s most recent SEC filings. It’s in a web friendly and readable format. Click on some of the account names on the financial statement. What are you seeing in the pop up boxes? Keep these in mind. We’ll come back to them in homework.
Now exit back to Footlocker. com. Select “XBRL Instance Document”. WOW! You should be seeing something like this.
This is the XBRL tagging stored behind Footlocker’s SEC financials. It’s A LOT of information, but every tag comes from the greater taxonomy and determines the label, definition, calculation, presentation and reference of the linkbase reference.
Now we don’t have to worry, because software (like Altova, Fujitsu, Crossfire, Webfilings) is going to help us create such instance documents. But, we need to have a basic understanding of things so that we know if we are using the software correctly. So, before digging into how to create an instance document, let’s learn more about taxonomies.
More on Taxonomies
Anyone can create a taxonomy, ranging from a local community of users to governing bodies for accounting. XBRL.org is an international non profit organization for XBRL users that has a process for recognizing and approving taxonomies. Visit their Approved Taxonomies page. There are taxonomies approved for GAAP by FASB and the SEC, and taxonomies for IFRS. The taxonomy for US GAAP reporting that we will use for this assignment is the 2014 US GAAP Financial Reporting Taxonomy. Note: The 2015 taxonomy has been created and will be in effect pending SEC acceptance. To read more, visit: Pending 2015 Taxonomy.
If a taxonomy doesn’t contain all the elements needed, the preparer can change it by adding extensions, or company defined line items that “extend” the current taxonomy. Preparers have the ability to create new custom terms if they have a very unique reporting situation that is not available in the taxonomy terms. The extension taxonomy may include, exclude, or change information from the base taxonomy. The extension can be regarded as an overlay that modifies the structure of the taxonomy, adds and prohibits elements, their labels, linking, order of appearance, and other characteristics. The main idea behind an extension is to encourage business users to tailor the taxonomy to their specific needs, while using the elements of the base taxonomy to ensure comparability. For example, if you include revenues for various products in the income statement but the standard taxonomy only includes an element called Other Revenue, you should add these new revenue tags as “children” of Other Revenue that could be rolled up into Other Revenue “parent” for comparability (Edgar Online).
Debreceny & Farewell (2010) summarize common situations with mapping as follows
Exact match you find an exact match between the financial statement line item and the taxonomy concept e.g., “Cash” on the definition, label, reference, balance, etc. In such a case, the company maps to the taxonomy element and no extension or other changes are required.
Label’s not a match – you find taxonomy concepts that have a definition, reference, and balance that seem appropriate but the label is not exactly the same e.g., “Cash and Cash Equivalents, at Carrying Value” and “Cash at Financial Institutions and Cash Equivalents”. Here it is not necessary to extend the taxonomy for a new concept, but the SEC requires that the printed financial statements, including labels, match the XBRL instance document. The company has two choices: changing the label on the traditional paper financial statement or
changing the label on the taxonomy concept. Choosing to align their financial statement to the
taxonomy, will improve comparability.
Element located elsewhere you may find the taxonomy concept that matches the definition, label, reference, balance, etc., but it is located in a different part of the taxonomy. For example, “Dividends Payable” appears in a financial statement disclosure section of the taxonomy. It is not necessary to extend the taxonomy just because a concept does not appear where you want it. The company would simply copy the concept and paste it where they want it to appear e.g., in the current liabilities section of the balance sheet.
Taxonomy presents elements in combination/company presented separately you may find that the taxonomy contains a concept that the company represents as two or more individual line items. For example, the company reports “Loans Receivable” and “Notes—Current,” but the taxonomy has “Notes, Loans, and Financing Receivable, Gross, Current.” The company faces the dilemma of whether to change their paper financial statement to match the taxonomy or whether to extend the taxonomy for the individual line items. For the reasons given in situation two above, the company is likely to extend the taxonomy so that it matches their existing financial reporting.
Taxonomy presents elements separately/company presents combined you may find that the taxonomy contains several concepts that the company reports as a single line item. For example, the company reports “Raw Materials, Work in Process, and Supplies” and the taxonomy has “Inventory, Raw Materials,” “Inventory, Work in Process,” and “Inventory, Supplies.” The company again faces the choice of creating a taxonomy extension or
altering their paper based reporting. Each time the company chooses to extend the taxonomy, they are decreasing the comparability of their instance document with those of comparable firms.
Search tool finds nothing you may conduct an exhaustive search through the financial statement hierarchy and use the search tool to reach the conclusion that the financial statement line item does not exist. In this case, you have no choice but to extend the taxonomy for this unique reporting need.
To gain a deeper understanding of extending taxonomies, read Chapter 6 of the XBRL Preparers Guide. This is important for the homework assignment!
As an example, let’s view the 2014 US GAAP taxonomy. Visit the 2014 US GAAP Financial Reporting Taxonomy. [Note: You will be using the 2014 taxonomy for your assignment]
At the bottom of the page click on the “Accept” button. An XBRL Viewer is now opening. Click on “Taxonomy” in the upper left corner and Open. Click on US GAAP (2014 01 31) and then click on ALL (Main/Entire). Your screen should look something like this:
In the upper left corner, change the selection in the drop down box from Presentation (a type of linkbase) to Calculation (another type of linkbase). Click on the + sign and expand 104000. What you see should look somewhat familiar. It is essentially how we structure and calculate standard classified financial statements. Keep going! Expand different categories to see if anything looks familiar. For instance if you drill down on Assets > Assets, Current > Cash, Cash Equivalents, and Short term Investments > Cash and Cash Equivalents, at Carrying Value > Cash and Due from Banks, and then click on Cash, you will see the following:
Look in the content of the Details window on the right. Notice the good information it tells us. The labels are in English. There is a definition for the element and authoritative references.
Now click on the Tree Locations tab. Note that the image on the right detail screen shows the Presentation specifications for the report. Combined, these are the XBRL “directions” for a classified US GAAP Balance Sheet.
In the view below I am looking at the specifications to calculate the Statement of Income. Can you find it on the left hand menu? Look at the right side; what appears in the Detail Tab? Here, we learn that the item is Discontinued Operations, Income (Loss) from the 2014 GAAP Taxonomy. The data that will populate the field is monetary; the Period Type is “duration” versus “instant”. An element with a period type of “instant” has values that are only measurable at a point in time; “duration” is used for all other elements, including textual information. Most elements in the taxonomy have the “duration” period type.
Viewers like the one we’re using at fasb.org put a user friendly interface on the taxonomy, but remember, there is a lot of tagging that happens as seen in the Footlocker instance document example above. So, how do we create a good instance document?
Rules for Creating XBRL Instance Documents
The “rules” for creating XBRL instance documents, according to White (2010), are that all XBRL instance documents must have the items listed below. (Note: in this example we are referring to a previously approved 2009 GAAP taxonomy, which we might find in an older SEC filing.)
use xbrl as the root “parent” element name with namespace declaration attributes
the namespace is the unique identifier of the taxonomy, for example the root element and namespace declaration for 2009 us gaap taxonomies is:
(for 2011, the namespace looks like this: )
have a first “child” element that is a schemaRef element with two xLink (creates hyperlinks) attributes – one that declares a “simple” link and another that points to the URL of the taxonomy’s schema. for example, to point to the 2009 us gaap taxonomy schema would read:
contain at least one context element with entity and period identifiers, the purpose of which is to identify the business entity, specify the reporting period, and indicate the reporting purpose, for example
BIKES
2008 11 30
contain at least one unit element with a measure element (when reporting numbers), for example
iso4217:USD
have at least one reference to the reported item (properly formatted), for example, if we were tagging the line item for Current Accounts Payable
50921000</us gaap:AccountsPayableCurrent>
Let’s test ourselves and see if we can pick out elements that White (2010) described for us. Go to Footlocker.com. Select XBRL Instance Document.
Did you see these rules being followed in the instance documents that you viewed above? When you go to the financial statement by selecting the SEC XBRL Viewer, do the elements of the financials seem to be following the specifications appearing in the tags?
How Does Software Work?
Software is essential in all of these steps. There are now many software providers in the game. Visit XBRL Vendors and Service Providers. Make note of their market users and their features. For example, are they modular packages that split viewing, tagging, validating, and publishing, or are there complete solutions? In addition here are 10 Questions When Reviewing XBRL Software.
To help us get a feel for what it is like to use such software, however, we’ll go Fujitsu site and watch some of their product demos. Visit Fujitsu XBRL Package Features. If you have time, watch all the demos, they are interesting and offer of review of what we’ve discussed. If your time is limited, watch Demos # 3&4.
Once a preparer completes the tagging of an XBRL instance document, he/she runs a validation check. Like tagging, this process is typically completed by using software that has validation functions. During the process, the preparer checks the document for
well formatted XML
required XBRL elements
proper XBRL formatting and syntax
accurate linking of each schemaRef element to the taxonomy
accurate linking of other elements to the discoverable taxonomy set (DTS – other documents within the taxonomy).
Conclusion
A first look at XBRL can be intimidating. I gave a presentation to one of the financial management organizations that I belong to and a Controller from a small firm asked, “what does this do for me?” I’m going to ask you to help with this question and show me how comfortable you are feeling with what you learned through the homework in the next section.
XBRL INDIVIDUAL GRADED ASSIGNMENT
Your client, Fly Skies, is now required to file XBRL data interactive financials with the SEC. Your firm had just begun to offer XBRL tagging and filing services and your team has been assigned to set up their financials for XBRL reporting.
Prior to jumping into the new software that your company has acquired to perform tagging, validation and filing, your team has decided to manually map the financials in an Excel workbook so that you really get a feel for the company’s reporting. You also anticipate that some extensions to the taxonomy may be required.
You will complete your work (assignment) in two parts.
Part 1:
Using the attached Excel spreadsheet, map the three financial statements to the appropriate 2014 US GAAP Financial Reporting Taxonomy by completing the workbook as follows:
Identify if an element already exists in the taxonomy with a Y or N
Using Copy and Paste, identify the element and post it to the spreadsheet
If an element is not present, and an extension is required, place the name of parent under which the extension “child” would be created (note: I am not asking you to create the name of the extension, I am asking you to say where it would be inserted into the taxonomy).
Some things you should keep in mind when completing this assignment are
The mapping process begins when you look for a match between the company’s financial statement elements and elements in the standard taxonomy. This is not an easy task because the concept may not have the same name that the company uses for the financial statement line item. It is helpful to search several times using synonyms e.g., “net income” could also be “net profit” if you do not find the concept in the financial statement hierarchy. Generally you are using your professional judgment when deciding if an element (including its definition, reference and balance) in the taxonomy is close enough to meet the company’s use/intent and can be applied without extension or must be extended.
This map may be helpful to you when thinking about the mapping process:
When you think that you have a solid match from line item to taxonomy concept, there are
some final tests. You should check if the data type, period, and balance are correct. If the concept passes those tests, you are done with that particular line item in the financial statement. If what you first thought was a good match does not turn out to be a good match after all, cycle back and search again. Once you have exhausted your search and determine there is no match, then you have determined that an extension is required.
Part 2:
In one page, answer the following review questions.
What is the purpose of mapping financial statement line items using XBRL tags?
Why is it important to use the hierarchical structure of taxonomy as well as the search function when looking for concepts (elements)?
Were certain concepts more difficult than others to locate in this assignment? Which ones and why?
What is the most important concept to examine when determining whether a concept is a match to the financial statement line and why?
Units purchased consisted of 35,000 units at $4.21 on Ntarcn z.,,, ,” Selling price Operating expenses July 24; and 5,000 units at $4.83 on Decernber 12. Income taxes are 30%. (a) prepare comparative condensed income statements for 2014 under FIFO , income) wi, 4_1N. Instructions di ,0 . (b) 400•1•”‘ Answer the following questions for management in the form of a bus. (3) Which inventory cost flow method is most likely to approximate the Y? (2) Which inventor), cost flow method produces the most meaningful net * (1) Which inventory cost flow method produces the most meaningful invent — ‘etter. (Show computations of ending inventor i.) amount for the balance sheet? Why? Inc_ sett with the actual (4) How much more cash will be available under LIFO than under FIFO? Why. physical flow of the goods? Why? (5) How much of the gross profit under FIFO is illusionary in comparison • ? gross proIFO? P6 5B You have the following inform under L ormation for Cry stal Inc. for the mo nth ended May 31 , 2014. Crystal uses a periodic method for inventory. Unit Cost or Beginning inventory Price Description 20 Units Selling Purchase 40 Sale 110 23 Sale 70 90 32 40 Purchase 25 Purchase 60 37 26 Sale 80 38
Date May 1 May 6 May 7 May 15 May 18 May 24 May 30
Instructions (a) Calculate (i) ending inventory, (ii) cost of goods sold, (iii) gross profit, and (iv) gross profit rate under each of the following methods. (1) LIFO. (2) FIFO. (3) Average cost. (Round cost per unit to three decimal places.) (b) Compare results for the three cost flow assumptions. P6 6B You have the following information for Limex Watches. Limex uses the periodi method of accounting for its inventory transactions. Limex carries only one brand ( hand crafted jeweled watches—all are identical. Each batch of watches purchased is car’ fully coded and marked with its purchase cost.
Schedule of Expected Cash Collections; Cash Budget [LO2, LO8] The president of the retailer Prime Products has just approached the company’s bank with a request for a $30,000, 90 day loan. The purpose of the loan is to assist the company in acquiring inventories. Because the company has had some diff culty in paying off its loans in the past, the loan off cer has asked for a cash budget to help determine whether the loan should be made. data are available for the months April through June, during which the loan will be used: a. On April 1, the start of the loan period, the cashbalance will be $24,000. Accounts receivable on April 1 will total $140,000, of which $120,000 will be collected during April and $16,000 will be collected during May. The remainder will be uncollectible. b. Past experience shows that 30% of a month’s sales are collected in the month of sale, 60% in the month following sale, and 8% in the second month following sale. The other 2% represents baddebts that are never collected. Budgeted sales and expenses for the three month period follow: c. Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases during March, which will be paid during April, total $140,000.
The following April May June
Sales (all on account) $300,000 $400,000 $250,000
Merchandise purchases $210,000 $160,000 $130,000
Payroll $ 20,000 $ 20,000 $ 18,000
Lease payments $ 22,000 $ 22,000 $ 22,000
Advertisement $ 60,000 $ 60,000 $ 50,000
Equipment purchases $ 65,000
Depreciation $ 15,000 $ 15,000 $ 15,000
d. In preparing the cash budget, assume that the $30,000 loan will be made in April and repaid in June. Interest on the loan will total $1,200.
Required:
1. Prepare a schedule of expected cash collections for April, May, and June, and for the three months in total.
2. Prepare a cash budget, by month and in total, for the three month period.
3. If the company needs a minimum cash balance of $20,000 to start each month, can the loan be repaid as planned? Explain in Excel spreadsheet
I need the answers to ACCT640 Case 2 Performance Drinks Questions 1 6 I also need the solutions for the new questions in ‘ACCT640 Case 3 Performance Drinks Requirements 1 7 Thank you so much for your help!!!!
Document Preview:
ACCT640 – Managerial Accounting Fall 2013 Case #2 – Performance Drinks: Applying Activity Based Costing Written by: Tim Bergsma, CMA, CFE Assistant Professor – Accounting Davenport University Donald W. Maine – College of Business Email: ? HYPERLINK “mailto:tbergsma@davenport.edu” ?tbergsma@davenport.edu? Background: Performance Drinks, LLC is owned by Dave N. Port. Performance Drinks produces a variety of sports centered drinks. They began operations in 1993 shortly after Mr. Port graduated with his M.B.A. from Davenport University. The company saw early success as sports and fitness nutritional products gained new popularity in the 1990’s. Financially the company is sound and has been wise in controlling their growth over the years. However, within the last 18 months Mr. Port has noticed a drop in overall company profitability. This is especially troubling considering that the company has continued to experience top line growth. Mr. Port and his management team have been considering developing a new product line. However, those plans have been put on hold until they can figure out why their profits are shrinking. Performance Drinks makes four different kinds of sports drinks. Those drinks are as follows: Basic Hydration Intensity Post Workout Each of these drinks contains a slightly different nutritional profile and is targeted for different users and uses. The Basic drink has the least nutritional benefit and is targeted for general consumption. The Hydration product targets endurance athletes and specializes in hydration replacement. The Intensity product was designed with energy enhancement in mind. It serves the needs of extreme athletes who need long durations of sustained energy. Lastly, the Post Workout product is a nutritional replacement product that is generally used following exertion. You are the Controller for Performance Drinks. You feel as though you have a good handle on the financial reporting and the overall company…
At the beginning of the year, Sielert Company had total assets of $800,000 and total liabilities of $300,000. Answer the following questions.
(a) If total assets increased $150,000 during the year and total liabilities decreased $80,000, what is the amount of owner’s equity at the end of the year?
Owner’s equity
$
(b) During the year, total liabilities increased $100,000 and owner’s equity decreased $70,000. What is the amount of total assets at the end of the year?
Total assets
$
(c) If total assets decreased $80,000 and owner’s equity increased $120,000 during the year, what is the amount of total liabilities at the end of the year?
USING 2007 ANNUAL REPORTS FOR THE COCA COLA COMPANY AND PEPSICO, IN ANSWER THE FOLLOWING QUESTIONS:
Using these 2007 annual reports for The Coca Cola Company and PepsiCo, Inc., answer the following questions. Write these up in a Word document, clearly identifying your response to each lettered item. Show supporting calculations for the items lettered c, f, h, l, m, o, p, r, s and u. a. What are the primary lines of business of these two companies as shown in their notes to the financial statements? b. Which company has the dominant position in beverage sales? c. Which company has the greater percentage increase in total assets from 2006 to 2007? d. Which company had more depreciation and amortization expense for 2007? Provide a rationale as to why there is a difference in these amounts between the two companies. e. What type of income format(s) is used by these two companies? Identify any differences in income statement format between these two companies. f. What are the gross profits, operating profits, and net incomes for these two companies over the three year period 2005 2007? Which company has had better financial results over this period of time? g. What format(s) did these companies use to present their balance sheets? h. How much working capital did each of these companies have at the end of 2007? Speculate as to their rationale for the amount of working capital they maintain. i. What is the most significant difference in the asset structure of the two companies? What causes this difference? j. What were the two companies’ trends in net cash provided by operating activities over the period 2005 to 2007? k. What were the cash and cash equivalents reported by Coca Cola and PepsiCo at the end of 2007? What does each company classify as cash equivalents? l. What were the accounts receivable (net) for Coca Cola and PepsiCo at the end of 2007? Which company reports the greater allowance for doubtful accounts receivable (amount and percentage of gross receivable) at the end of 2007? m. What is the amount of inventory reported by Coca Cola at December 31, 2007, and by PepsiCo at December 29, 2007? What percent of total assets is invested in inventory by each company? n. What inventory costing methods are used by Coca Cola and PepsiCo? How does each company value its inventories? o. Compute and compare the inventory turnover ratios and days to sell inventory for Coca Cola and PepsiCo for 2007. Indicate why there might be a significant difference between the two companies.ACT350 Portfolio Project Page 2 of 2 p. What amount is reported in the balance sheets as property, plant, and equipment(net) of Coca cola at December 31,2007 and of PepsiCo at December 29,2007? What percentage of total assets is invested in property, plant and equipment by each company?
q. What depreciation methods are used by Coca cola and PepsiCo for property, plant, and equipment? How much depreciation was reported by Coca Cola and PepsiCo in 2007, 2006, and 2005?
r. Compute and compare the following ratios for Coca cola and PepsiCo for 2007: Asset Turnover, Profit margin on sales, and Rate of return on assets.
S. What amounts for intangible assests were reported in their respective balance sheets by coca cola and PepsiCo? What percentage of total assets is each of these reported amounts?
T. On what basis and over what periods of time did Coca Cola and PepsiCo amortize their intangible assets?
U. What were Coca Cola’s and PepsiCo’s net revenues (sales) for the year 2007? Which company increased its revenues more (dollars and percentage) from 2006 to 2007?
V. Are the revenue recognition policies of Coca Cola and PepsiCo similar? EXPLAIN?
MGMT600 1404A 04 Applied Managerial Decision Making
Task Name: Phase 1 Individual Project
Deliverable Length: 5 8 slides with speaker notes
Details:
Weekly tasks or assignments (Individual or Group Projects) will be due by Monday and late submissions will be assigned a late penalty in accordance with the late penalty policy found in the syllabus. NOTE: All submission posting times are based on midnight Central Time.
One of the products that Company W makes is snack foods. The Research and Development department of Company W has developed a new formula for one type of snack food that is cheaper to make than the current formula. They want to test the new formula with consumers. They want to see if consumers can tell the difference between the old and new formulas. You propose to conduct this test and analyze the results in line with WidgeCorp’s approach to gathering statistical data and using it to make decisions. You first need to explain the process to senior management at Company W. You advocate using an unbiased sample of consumers in their test, so that Company W is randomly selecting people based on the following: age; whether or not they have kids; where they live; how often they buy snack foods; whether or not they already buy the current product..
Prepare a presentation that addresses the following:
1.List at least 3 qualitative attributes of the snack food about which they might want to ask consumers. Make sure at least one of them is nominal.
2.For each attribute that is ordinal, assign names for the endpoints of a 5 point rating scale.
3.Explain the difference between nominal and ordinal data.
4.Explain how nominal and ordinal data relate to a rating scale.
5.List at least 2 quantitative attributes of snack food that the scientists might want to measure.
6.Explain the difference between interval and ratio data.
7.Include in your presentation the difference between a population and a sample.
8.Note why it is important to avoid bias when conducting research (see note below)
NOTE: Give 2 examples of possible populations for this test.
Please submit your assignment.
For more information on creating PowerPoint Presentations, please visit the Microsoft Word and PowerPoint Lab
Terri Harrison, CPA, has discussed various reporting considerations with three of the entities she audits. The three entities presented the following situations and asked how they would affect the audit report. a. One of the entities has changed its depreciation method on its machinery from straight line to double declining balance. Both Harrison and the entity agree that the new depreciation method better reflects the usage of the machinery in the manufacturing process. The entity agrees with Harrison that the change is material but claims that it needs disclosure only in the “Summary of Significant Accounting Policies” footnote to the financial statements, not in Harrison’s report. b. The second entity has a loan agreement that restricts the amount of cash dividends that can be paid and requires the maintenance of a particular cur rent ratio. The entity is in compliance with the terms of the agreement, and it is not likely that there will be a violation in the foreseeable future. The entity believes there is no need to mention the restriction in the financial statements because such mention might mislead the readers. c. The third entity correctly accounted for the acquisition of a majority owned domestic subsidiary when that transaction occurred but did not properly present the minority interest in retained earnings or net income of the subsidiary in the consolidated financial statements. The entity agrees with Harrison that the minority interest presented in the consolidated financial statements is materially misstated but takes the position that the minority shareholders of the subsidiary should look to that subsidiary’s financial statements for information concerning their interest therein.
Required: Each of the situations presented relates to one of the four generally accepted auditing standards of reporting. Identify and describe the applicable generally accepted auditing standard of reporting in each situation, and discuss how the particular entity’s situation relates to the standard
The New York Times Company is engaged in diversified activities in media such as newspapers, magazines, televisions and radio stations. For simplicity, assume that any unearned revenue is only due to newspaper subscriptions. Using the 2000 balance sheet and supplementary footnote, please answer th e following questions. Assume that all numbers are in thousands. 1. When does the NY Times recognize revenue on the sale of newspapers? a. When customers pay subscriptions b. When newspapers are delivered c. When customers place orders d. None of the above 2. As of the end of 2000, what was the total value of newspaper subscriptions that NY Times customers had paid, but that the NY Times had not yet recognized as revenue? a. 87,130 b. 80,161 c. 178,302 d. 291,251 3. As of the end of 2000, what percentage of its outstanding acc ounts receivable does the NY Times not expect to collect? a. 10.8% b. 12.9% c. 9.8% d. 11.4% 4. Assume that sales of newspaper subs criptions during 2000 were $765,000. How much revenue did the NY Times recognize in 2000 related to newspapers? a. 758,031 b. 80,161 c. 765,000 d. 87,130 5. Assume that total revenues for the year 2000 were $3,490,000 (this includes the subscription revenue above, as well as revenue from other sources). Also, assume that the NY Times wrote off $37,000 of accounts receivable as permanently uncollectible during 2000. How much did the NY Times recognize as bad debt expense? a. 39,749 b. 37,000 c. 41,420 d. 44,169
A company delivered $10,000 of goods to a customer that agreed to pay cash within 30 days. The goods had cost $8,000 to manufacture.
Which of the following items would beincreasedby this sales transaction? (check all that apply)
Inventory
Total Assets
Total Liabilities
Accounts Receivable
Revenue
Question 2
A company took delivery of $50,000 of new inventory and agreed to pay cash to the supplier within 30 days.
Which of the following items would beincreasedby this inventory purchase transaction? (check all that apply)
Total Stockholders’ Equity
Current Liabilities
Cash from Operations
Inventory
Cost of Goods Sold
Question 3
A company collected $100,000 cash from a customer who both received and was billed for the goods last quarter.
Which of the following items would beincreasedby this cash collection transaction? (check all that apply)
Cash from Operations
Revenue
Accounts Receivable
Total Assets
Total Stockholders’ Equity
Question 4
A company collected $10,000 cash from a customer as a deposit for goods that will be shipped next quarter.
Which of the following items would beincreasedby this cash collection transaction? (check all that apply)
Total Liabilities
Total Assets
Accounts Receivable
Cash from Operations
Revenue
Question 5
A company received $100,000 cash from issuing 10,000 shares of $4 par value stock.
Which of the following items would beincreasedby this stock issuance transaction? (check all that apply)
Revenue
Additional Paid in Capital
Total Liabilities
Cash from Operations
Total Assets
Question 6
A company received $75,000 cash from a bank loan that must be repaid in three years.
Which of the following items would beincreasedby this bank loan transaction? (check all that apply)
Notes Payable
Cash from Investing
Interest Payable
Revenue
Current Assets
Question 7
A company declared $500,000 of dividends that will be paid two months from now.
Which of the following items would beincreasedby this dividend declaration transaction? (check all that apply)
Cash from Financing
Net Income
Dividend Expenses
Retained Earnings
Total Liabilities
Question 8
A company paid $50,000 to its insurance company for fire insurance coverage over the next year.
Which of the following items would beincreasedby this insurance prepayment transaction? (check all that apply)
Prepaid Insurance
Unearned Revenue
Current Assets
Total Stockholders’ Equity
Insurance Expense
Question 9
At the end of the quarter, a company did an adjusting entry to record the fact that $1,000 of Prepaid Advertising had been used up during the quarter.
Which of the following items would beincreasedby this advertising adjusting entry? (check all that apply)
Prepaid Advertising
Cost of Goods Sold
Total Liabilities
Cash from Operations
Advertising Expense
Question 10
A company borrowed $500,000 cash from a bank and used it to purchase $500,000 of new manufacturing equipment.
Which of the following items would beincreasedby the bank loan and equipment purchase transactions? (check all that apply)
Cash from Financing
Notes Payable
Total Assets
Cash from Investing
Inventory
Question 11
At the end of the quarter, a company did an adjusting entry to record $5,000 of depreciation on the fleet of automobiles used by the sales force.
Which of the following items would beincreasedby this depreciation adjusting entry? (check all that apply)
Cash from Operations
Total Assets
SG&A Expense
Accumulated Depreciation
Total Liabilities
Question 12
A company sold a piece of manufacturing equipment for $30,000 cash. The equipment had been listed on the balance sheet at a net book value of $25,000, so the company recorded a gain on sale of equipment of $5,000.
Which of the following items would beincreasedby this equipment sale transaction? (check all that apply)
On the 25thof June 2014 the International Accounting Standards Board (IASB) published amendments that change the financial reporting for bearer plants, such as grape vines, rubber trees and palm oil.
These amendments were made to IAS 16Property, Plant and Equipmentand IAS 41Agriculture.
Required
First, choose ONE of the following companies: Australian Vintage Ltd, Boundary Bend Ltd, or Treasury Wines Ltd, to illustrate your answers below. Use the company’s 2014 Annual Report/Financial Report.
You are a recent graduate working for a Big 4 accounting firm and your manager has asked you to prepare a report which is to be presented to the Chief Financial Officer (CFO) of your selected company. The report should:
a) Outline the main changes to the recognition and measurement of bearer plants contained in the amendments to IAS 16Property, Plant and Equipmentand IAS 41Agriculture;
b) Explain why the IASB has made these amendments, including a discussion of the advantages and disadvantages of fair value measurement (in this context); and
c) Advise the CFO on the possible impact of these amendments for the company in relation to any agricultural assets the company may have. Be as specific as possible, and reference the company’s annual report where necessary.
On the 25thof June 2014 the International Accounting Standards Board (IASB) published amendments that change the financial reporting for bearer plants, such as grape vines, rubber trees and palm oil.
These amendments were made to IAS 16Property, Plant and Equipmentand IAS 41Agriculture.
Required
First, choose ONE of the following companies: Australian Vintage Ltd, Boundary Bend Ltd, or Treasury Wines Ltd, to illustrate your answers below. Use the company’s 2014 Annual Report/Financial Report.
You are a recent graduate working for a Big 4 accounting firm and your manager has asked you to prepare a report which is to be presented to the Chief Financial Officer (CFO) of your selected company. The report should:
a) Outline the main changes to the recognition and measurement of bearer plants contained in the amendments to IAS 16Property, Plant and Equipmentand IAS 41Agriculture;
b) Explain why the IASB has made these amendments, including a discussion of the advantages and disadvantages of fair value measurement (in this context); and
c) Advise the CFO on the possible impact of these amendments for the company in relation to any agricultural assets the company may have. Be as specific as possible, and reference the company’s annual report where necessary.
he beginning inventory for Dunne Co. and data on purchases and sales for a three month period are as follows:
Transaction Units Per Unit Total
Apr 3 Inventory 25 $1200 $30000
Apr 8 Purchase 75 1240 93000
Apr 11 Sale 40 2000 80000
Apr 30 Sale 30 2000 60000
May 8 Purchase 60 1260 75600
May 10 Sale 50 2000 100000
May 19 Sale 20 2000 40000
May 28 Purchase 80 1260 100000
June 5 Sale 40 2250 90000
June 16 Sale 25 2250 56250
June 21 Purchase 35 1264 44240
June 28 Sale 44 2250 99000
Required:
1. Determine the inventory on June 30, 2014, and the cost of goods sold for the three month period, using the first in, first out method and the periodic inventory system.
Merchandise inventory, June 30, 2014
$
Cost of merchandise sold
$
2. Determine the inventory on June 30, 2014, and the cost of goods sold for the three month period, using the last in, first out method and the periodic inventory system.
Merchandise inventory, June 30, 2014
$
Cost of merchandise sold
$
3. Determine the inventory on June 30, 2014, and the cost of goods sold for the three month period, using the weighted average cost method and the periodic inventory system. Round the weighted average unit cost to the nearest cent and final answers to the nearest dollar.
Merchandise inventory, June 30, 2014
$
Cost of merchandise sold
$
4. Compare the gross profit and June 30, 2014, inventories using the following column headings. Enter all amounts as positive numbers.
Weighted Average Cost
FIFO FIFO Sales $ $ $ Cost of merchandise sold Gross profit $ $ $ Inventory, June 30, 2014 $ $ $
On January 1, 2014, Fishbone Corporation purchased 300 of the $1,000 face value, 9%, 10 year bonds of Walters Inc. The bonds mature on January 1, 2024, and pay interest annually beginning January 1, 2015. Fishbone purchased the bonds to yield 11%. How much did Fishbone pay for the bonds?
(c)
Fishbone Corporation bought a new machine and agreed to pay for it in equal annual installments of $4,000 at the end of each of the next 10 years. Assuming that a prevailing interest rate of 8% applies to this contract, how much should Fishbone record as the cost of the machine?
Before her death in 2009, Lucy entered into the following transactions.
a. In 2000, Lucy borrowed $600,000 from her brother, Irwin, so that Lucy could start a business. The loan was on open account, and no interest or due date was provided for. Under applicable state law, collection on the loan was barred by the statute of limitations before Lucy died. Because the family thought that Irwin should recover his funds, the executor of the estate paid him $600,000.
b. In 2007, she borrowed $300,000 from a bank and promptly loaned that sum to her controlled corporation. The executor of Lucy’s estate repaid the bank loan, but never attempted to collect the amount due Lucy from the corporation.
c. In 2008, Lucy promised her sister, Ida, a bequest of $500,000 if Ida would move in with her and care for her during an illness (which eventually proved to be terminal). Lucy never kept her promise, as her will was silent on any bequest to Ida. After Lucy’s death, Ida sued the estate and eventually recovered $600,000 for breach of contract.
d. One of the assets in Lucy’s estate was a palatial residence that passed to George under a specific provision of the will. George did not want the residence, preferring cash instead. Per George’s instructions, the residence was sold. Expenses incurred in connection with the sale were claimed as § 2053 expenses on Form 706 filed by Lucy’s estate.
e. Before her death, Lucy incurred and paid certain medical expenses but did not have the opportunity to file a claim for partial reimbursement from her insurance company. After her death, the claim was filed by Lucy’s executor, and the reimbursement was paid to the estate.
Discuss the estate and income tax ramifications of each of these transactions.
The Sterling Trust owns a business and generated $100,000 in depreciation deductions for the tax year. Mona is one of the income beneficiaries of the entity. Given the following information, can Mona deduct any of the Sterling depreciation on her Form 1040? If so, how much is her deduction?
Complete the following chart, indicating the comparative attributes of the typical simple trust and complex trust by answering yes/no or explaining the differences between the entities where appropriate.
Compute the Federal income tax liability for the Valerio Trust. The entity reports the following transactions for the 2012 tax year. The trustee accumulates all accounting income for the year.
Complete the following chart, indicating the comparative attributes of the typical trust and estate by answering yes/no or explaining the differences between the entities where appropriate.
Attribute
Estate
Trust
Separate income tax entity
Controlling document
Can have both income and remainder beneficiaries
Computes entity accounting income before determining entity
taxable income
Termination date is determinable from controlling document
Legal owner of assets under fiduciary’s control
Document identifies both income and remainder beneficiaries
The trustee of the Pieper Trust can distribute any amount of accounting income and corpus to the trust’s beneficiaries, Lydia and Kent. This year, the trust’s records reflect the following:
Taxable interest income
$40,000
Tax exempt interest income
20,000
Long term capital gains—allocable to corpus
80,000
Fiduciary’s fees—allocable to corpus
9,000
The trustee distributed $26,000 to Lydia and $13,000 to Kent.
a. What is Pieper’s trust accounting income?
b. What is Pieper’s DNI?
c. What is Pieper’s taxable income?
d. What amounts are taxed to each of the beneficiaries?
Each of the following items was incurred by José, a cash basis, calendar year decedent. Under the terms of the will, Dora took immediate ownership in all of José’s assets, except the dividend paying stocks. The estate received José’s final paycheck. Applying the rules for income and deductions in respect of a decedent, indicate on which return each item should be reported: Dora’s income tax return (Form 1040), the estate’s first income tax return (Form 1041), or the estate’s estate tax return (Form 706). More than one alternative may apply in some cases.
Item Incurred
Form(s) Reported on
a.
Wages, last paycheck
b.
State income tax withheld on last paycheck
c.
Capital gain portion of installment payment received
d.
Ordinary income portion of installment payment received
e.
Dividend income, record date was two days prior to José’s
death
f.
Unrealized appreciation on a mutual fund investment
g.
Depreciation recapture accrued as of date of death
h.
Medical expenses of last illness
i.
Apartment building, rents accrued but not collected as
death
j.
Apartment building, property tax accrued and assessed
Determine the tax effects of the indicated losses for the Yellow Estate for both tax years. The estate holds a variety of investment assets, which it received from the decedent, Mrs. Yellow. The estate’s sole income and remainder beneficiary is Yellow, Jr. All
For three generations, the Dexter family has sent its children to Private University, preparing them for successful professional careers. The Edna Dexter Trust was established in the 1950s by LaKeisha’s late grandmother and has accumulated a sizable corpus. It makes distributions to Edna’s descendants rarely, and then only when they need large capital amounts. For example, two years ago, the trust distributed $500,000 to DuJuan Dexter to aid him in starting a practice in retirement and elder law. In most years, the trust’s income is donated to a single charity. Under the terms of the trust, Bigby Dexter, LaKeisha’s uncle and legal guardian, can specify the trust beneficiaries and the amounts to be distributed to them. He can also replace the trustee and designate the charity that will receive the year’s contribution. Accordingly, the trust falls under the grantor trust rules of § 678, and Bigby reports the trust’s transactions on his own Form 1040. LaKeisha wants to attend the prestigious local Academy High School, which will require a four year expenditure for tuition and fees of $100,000, payable in advance. She approaches the Edna Dexter trustee and requests a current year distribution of this amount, payable directly to the Academy. Under the laws of the state, the parent or guardian has the responsibility to provide a child with a public school education (no tuition charge) until age 16. If the payment to the Academy is made, how is it treated under the Subchapter J rules: as a charitable contribution to the Academy, as a corpus distribution to LaKeisha, or in some other manner?
The trustee of the Thornton Trust was approached by the development director of the Orrfield Symphony Orchestra (OSO) for a gift of $1 million toward the OSO building campaign. The parties agreed that because of the size of the gift, the trust would need to obtain the funds by accumulating the income from its investment portfolio over a three year period. The trust’s gift would be made at the end of year 3, and it would represent three years’ worth of trust income from its taxable investments, plus the investment earnings on the accumulation during the three year period. Specifically, the gift would consist of the following amounts:
Investment earnings, accumulated from year 1
$300,000
Investment earnings, accumulated from year 2
300,000
Investment earnings from year 3
300,000
Additional earnings realized from the prior years’
accumulations
100,000
All of the investment earnings of the trust consisted of taxable interest, dividends, and capital gains. Tiffany Thornton, the tax adviser to the trust, asks you whether the Federal income tax law would allow for a year 3 charitable deduction for the whole $1 million, or would the deduction be limited to only the $300,000 current year gross income? Also, would a deduction be allowed for the $100,000 of earnings on the accumulations that were realized during the three year period? Address Tiffany’s concerns in a memo for the tax research file.
José and Alicia, both sole proprietors, have experienced the following results during the past three years:
Profit (or Loss)
Year
José
Alicia
2010
$50,000
$150,000
2011
60,000
60,000
2012
60,000
(40,000)
Although José and Alicia have the same profit of $170,000 over the period from 2010 to 2012, the finality of the annual accounting period concept places Alicia at a definite disadvantage for tax purposes. The net operating loss procedure offers Alicia some relief by allowing her to apply some or all of her 2012 loss to the earlier profitable years (in this case, 2010). Thus, with a net operating loss carryback, Alicia is in a position to obtain a refund for some of the taxes she paid on the $150,000 profit reported for 2010.
Rex, the sole shareholder of Silver Corporation, leases property to the corporation for a yearly rent of $60,000. To test whether the corporation should be allowed a rent deduction for this amount, the IRS and the courts will apply the arm’s length concept. Would Silver Corporation have paid $60,000 a year in rent if it had leased the same property from an unrelated party (rather than from Rex)? Suppose it is determined that an unrelated third party would have paid an annual rent for the property of only $50,000. Under these circumstances, Silver Corporation will be allowed a deduction of only $50,000. The other $10,000 it paid for the use of the property represents a nondeductible dividend. Accordingly, Rex will be treated as having received rent income of $50,000 and dividend income of $10,000.
Emily lives in Texas and sues in the Tax Court on Issue A. The Fifth Circuit Court of Appeals is the appellate court of appropriate jurisdiction. It has already decided, in a case involving similar facts but a different taxpayer, that Issue A should be resolved against the Government. Although the Tax Court believes that the Fifth Circuit Court of Appeals is wrong, under its Golsen policy, it will render judgment for Emily. Shortly thereafter, Rashad, a resident of New York, in a comparable case, sues in the Tax Court on Issue A. Assume that the Second Circuit Court of Appeals, the appellate court of appropriate jurisdiction, has never expressed itself on Issue A. Presuming that the Tax Court has not reconsidered its position on Issue A, it will decide against Rashad. Thus, it is entirely possible for two taxpayers suing in the same court to end up with opposite results merely because they live in different parts of the country.
Early in December 2012, Fred and Megan review their financial and tax situation with their son, Sam, and daughter in law, Dana, who live with them. Fred and Megan are in the 28% tax bracket in 2012. Both Sam and Dana are age 21. Sam, a student at a nearby university, owns some publicly traded stock that he inherited from his grandmother. A current sale of the stock would result in approximately $8,000 of gross income ($19,000 amount realized − $11,000 adjusted basis). At this point, Fred and Megan provide about 55% of Sam and Dana’s support. Although neither is now employed, Sam has earned $960 and Dana has earned $900. The problem: Should the stock be sold, and would the sale prohibit Fred and Megan from claiming Sam and Dana as dependents? Would the stock sale in 2012 result in a tax liability for Sam and Dana?
A tax form completion simulation requires the candidate to fill out a portion of a tax form. For example, Red Company is a limited liability company (LLC) for tax purposes. Complete the income section of the IRS Form 1065 for Red Company using the values found and calculated on previous tabs along with the following data:
Ordinary income from other partnerships
$5,200
Net gain (loss) from Form 4797
2,400
Management fee income
12,000
The candidate is provided with page 1 of Form 1065 on which to record the appropriate amounts.
Any field that requires an entry is a shaded rectangular cell. Some white rectangular cells will automatically calculate based on the entries in the shaded cell.
IrishCo, a manufacturing corporation resident in Ireland, distributes products through a U.S. office. Current year taxable income from such sales in the United States is $12 million. IrishCo’s U.S. office deposits working capital funds in short term certificates of deposit with U.S. banks. Current year interest income from these deposits is $150,000. IrishCo also invests in U.S. securities traded on the New York Stock Exchange. This investing is done by the home office. For the current year, IrishCo records realized capital gains of $300,000 and dividend income of $50,000 from these stock investments. Compute IrishCo’s U.S. tax liability, assuming that the U.S. Ireland income tax treaty reduces withholding on dividends to 15% and on interest to 5%. Assume a 34% U.S. tax rate.
Polly Ling is a successful professional golfer. She is a resident of a country that does not have a tax treaty with the United States. Ling plays matches around the world, about one half of which are in the United States. Ling’s reputation is without blemish; in fact, she is known as being exceedingly honest and upright, and many articles discuss how she is a role model for young golfers due to her tenacious and successful playing style and her favorable character traits. Every year, she reports the most penalty strokes on herself among the participants in womens’ matches, and this is seen as reinforcing her image as an honest and respectful competitor. This combination of quality play and laudable reputation has brought many riches to Ling. She comes to you with several Federal income tax questions. She knows that, as a non U.S. resident, any of her winnings from tournament play that occurs in the United States are subject to U.S. income taxation. But what about each of the following items? How does U.S. tax law affect Ling? Apply the sourcing rules in this regard, and determine whether the graduated U.S. Federal income tax rate schedules apply.
• Endorsement income from Your Golf, for wearing clothing during matches with its logo prominently displayed. Ling must play in at least 10 tournaments per year that are televised around the world. She also must participate in photo sessions and in blogs and tweets associated with the tournaments. Payment to Ling is structured as a flat fee, with bonuses paid if she finishes in the top five competitors for each match. This is known as an on court endorsement.
• Endorsement income from Golf Zone, for letting the company use her likeness in a video game that simulates golf tournaments among known golfers and other players that the (usually middle aged men and women) gamers identify. In this way, the gamer seems to be playing against Ling on famous golf courses. Two thirds of all dollar sales of the game licenses are to U.S. customers.
• Endorsement income from Eliteness, for appearing in print and Internet ads that feature Ling wearing the company’s high end watches. One fifth of all dollar sales of the watches are to U.S. customers. The latter two items are known as off court endorsements.
Give the Circular 230 position concerning each of the following situations sometimes encountered in the tax profession.
a. Taking an aggressive pro taxpayer position on a tax return.
b. Not having a quality review process for a return completed by a partner of the tax firm.
c. Purposely delaying compliance with a document request received from the IRS.
d. Not keeping up with changes in the tax law.
e. Charging $1,500 to complete a Form 1040–EZ.
f. When representing a taxpayer in a Federal income tax audit, charging a fee equal to one third of the reduction of the tax proposed by the IRS agent.
g. Representing both the husband and wife as to tax matters when negotiating their divorce.
h. Advertising on the Web for new tax clients and including Se habla español in the text of the ads.
Compute the undervaluation penalty for each of the following independent cases involving the value of a closely held business in the decedent’s gross estate. In each case, assume a marginal estate tax rate of 35%.
Singh, a qualified appraiser of fine art and other collectibles, was advising Colleen when she was determining the amount of the charitable contribution deduction for a gift of sculpture to a museum. Singh sanctioned a $900,000 appraisal, even though he knew the market value of the piece was only $300,000. Colleen assured Singh that she had never been audited by the IRS and that the risk of the government questioning his appraisal was negligible. But Colleen was wrong, and her return was audited. The IRS used its own appraisers to set the value of the sculpture at $400,000. Colleen is in the 30% Federal income tax bracket, while Singh’s fee for preparing the appraisal was $20,000.
a. Compute the penalty the IRS can assess against Singh. (Do not consider the valuation penalty as to Colleen’s return.)
b. What is the penalty if Singh’s appraisal fee was $7,500 (not $20,000)?
The Eggers Corporation filed an amended Form 1120, claiming an additional $400,000 deduction for payments to a contractor for a prior tax year. The amended return was based on the entity’s interpretation of a Regulation that defined deductible advance payment expenditures. The nature of Eggers’s activity with the contractor did not exactly fit the language of the Regulation. Nevertheless, because so much tax was at stake, Eggers’s tax department decided to broaden its interpretation and claim the deduction. Eggers’s tax department estimated that there was only a 15% chance that Eggers’s interpretation would stand up to a Tax Court review.
a. What is the amount of tax penalty that Eggers is risking by taking this position?
b. What would be the result if there was a 45% chance that Eggers’s interpretation of the Regulation was correct?
The Leake Company, owned equally by Jacquie (chair of the board of directors) and Jeff (company president), is in very difficult financial straits. Last month, Jeff used the $300,000 withheld from employee paychecks for Federal payroll and income taxes to pay a creditor who threatened to cut off all supplies. To keep the company afloat, Jeff used these government funds willfully for the operations of the business, but even that effort was not enough. The company missed the next two payrolls, and today other creditors took action to shut down Leake altogether. How much will the IRS assess in taxes and penalties in this matter and from whom? How can you as a tax professional best offer service to Jacquie, Jeff, and Leake? Address these matters in a memo for the tax research file.
Discuss which penalties, if any, might be imposed on the tax adviser in each of the following independent circumstances. In this regard, assume that the tax adviser:
a. Suggested to the client various means by which to acquire excludible income.
b. Suggested to the client various means by which to conceal cash receipts from gross income.
c. Suggested to the client means by which to improve her cash flow by delaying for six months or more the deposit of the employees’ share of Federal employment taxes.
d. Failed, because of pressing time conflicts, to conduct the usual review of the client’s tax return. The IRS later discovered that the return included fraudulent data.
e. Failed, because of pressing time conflicts, to conduct the usual review of the client’s tax return. The IRS later discovered a mathematical error in the computation of the personal exemption.
Compute the preparer penalty the IRS could assess on Gerry in each of the following independent cases.
a. On March 21, the copy machine was not working, so Gerry gave original returns to her 20 clients that day without providing any duplicates for them. Copies for Gerry’s files and for use in preparing state tax returns had been made on March 20.
b. Because Gerry extended her vacation a few days, she missed the Annual Tax Update seminar that she usually attends. As a result, she was unaware that Congress had changed a law affecting limited partnerships. The change affected the transactions of 25 of Gerry’s clients, all of whom understated their tax as a result.
c. Gerry heard that the IRS was increasing its audits of corporations that hold assets in a foreign trust. As a result, Gerry instructed the intern who prepared the initial drafts of the returns for five corporate clients to leave blank the question about such trusts. Not wanting to lose his position, the intern, a senior accounting major at State University, complied with Gerry’s instructions.
Your firm is preparing the Form 1040 of Norah McGinty, a resident, like you, of Oklahoma. You have contracted for the last three filing seasons with a firm in India, Tax Express Bangalore, to prepare initial drafts of tax returns using tax software that you provide to Tax Express. You find that the use of Tax Express Bangalore’s services significantly increases the profits of your Form 1040 practice. Your firm uses Tax Express annually to help prepare Forms 1040 for about 500 of your clients. Three of your tax managers, JaJuan, Max, and Emma, spend several weeks in the autumn every year in India, training the Bangalore staff in Federal tax law changes and in the operations of your tax software packages. Phil, a tax associate in your Norman office, is handling Norah’s return this year. Phil works with Norah to complete the online tax questionnaire that summarizes Norah’s taxable events and the related dollar amounts. The questionnaire includes the Social Security numbers of Norah and her two dependent children. The children are young, and their income levels do not require them to complete income tax returns. Phil sends the completed questionnaire and electronic files of supporting documents to the Bangalore staff at the end of the work day on Monday, using a secure file transfer site. Upon arriving at work Thursday morning, Phil finds that Tax Express has completed the Form 1040, including a payment voucher. Phil reviews the return, makes a few minor changes to it, and then meets with Norah on Saturday to convey to her the finalized documents. Norah reviews the form, and she signs it and writes a check for the amount due, mailing the return to the IRS Service Center from her home on the following Monday. In a memo for the tax research file, discuss any special rules from the Code and Regulations that might affect your firm’s use of Tax Express Bangalore for your client Norah McGinty.
In each of the following independent situations, indicate whether the transfer is subject to the Federal gift tax.
a. Asa contributes to his mayor’s reelection campaign fund. The mayor has promised to try to get some of Asa’s property rezoned from residential to commercial use.
b. Mary Ann inherits her father’s collection of guns and mounted animals. Five months later, she disclaims any interest in the mounted animals.
c. Same as (b). Ten months later, Mary Ann disclaims any interest in the guns.
d. Haydon pays an orthodontist for the dental work performed on Michele, his dependent cousin.
e. Same as (d), except that Michele is not Haydon’s dependent.
f. Floyd creates a revocable trust with his children as the beneficiaries.
g. Florence purchases a U.S. savings bond listing herself and Taylor (her daughter) as joint owners.
h. Same as (g). One year later, Taylor predeceases Florence.
i. Same as (g). One year later, Florence predeceases Taylor.
In each of the following independent situations, indicate whether the alternate valuation date can be elected. Explain why or why not. Assume that all deaths occur in 2012.
• Transferred $900,000 in cash and securities to a revocable trust, life estate to himself and remainder interest to his three adult children by a former wife.
• In consideration of their upcoming marriage, gave Lindsey (age 21) a $90,000 convertible.
• Purchased a $100,000 certificate of deposit listing title as “Carl, payable on proof of death to Lindsey.”
• Purchased for $80,000 a paid up insurance policy on his life (maturity value of $500,000). Carl designated Lindsey as the beneficiary.
• Paid a college $13,400 for his niece’s tuition and $6,000 for her room and board. The niece is not Carl’s dependent.
• Gave his aunt $22,000 for her gallbladder operation. The aunt is not Carl’s dependent.
Before her death in early 2012, Katie made the following transfers.
• In 2008, purchased stock in Green Corporation for $200,000, listing title as follows: “Katie, payable on proof of death to my son Travis.” Travis survives Katie, and the stock is worth $300,000 when Katie dies.
• In 2010, purchased an insurance policy on her life for $200,000, listing Paul, another of Katie’s sons, as the designated beneficiary. The policy has a maturity value of $1 million and was immediately transferred to Paul as a gift.
• In 2010, made a gift of land (basis of $300,000; fair market value of $1.3 million) to Adriana, Katie’s only daughter. As a result of the transfer, Katie paid a gift tax of $150,000. The value of the land is still $1.3 million at Katie’s death.
• In 2010, established a savings account with $100,000, listing title as “Katie and Wilma, joint tenants with right of survivorship.” Wilma, Katie’s mother, died in 2011 when the account’s balance was $102,000. At Katie’s death, the balance was $104,000.
As to these transfers, how much is included in Katie’s gross estate?
In each of the independent situations below, determine the transfer tax (i.e., estate and gift) consequences of what has occurred. (In all cases, assume that Gene and Mary are married and that Ashley is their daughter.)
a. Mary purchases an insurance policy on Gene’s life and designates Ashley as the beneficiary. Mary dies first, and under her will, the policy passes to Gene.
b. Gene purchases an insurance policy on his life and designates Ashley as the beneficiary. Gene gives the policy to Mary and continues to pay the premiums thereon. Two years after the gift, Gene dies first, and the policy proceeds are paid to Ashley.
c. Gene purchases an insurance policy on Mary’s life and designates Ashley as the beneficiary. Ashley dies first one year later.
d. Assume the same facts as in part (c). Two years later, Mary dies. Because Gene has not designated a new beneficiary, the insurance proceeds are paid to him.
e. Gene purchases an insurance policy on his life and designates Mary as the beneficiary. Gene dies first, and the policy proceeds are paid to Mary.
While vacationing in Florida in November 2012, Sally was seriously injured in an automobile accident (she died several days later). How are the following transactions handled for tax purposes?
a. Bruce, Sally’s son and executor, incurred $6,200 in travel expenses in flying to Florida, retrieving the body, and returning it to Frankfort, Kentucky, for burial.
b. Early in 2012, Sally had pledged $50,000 to the building fund of her church. Bruce paid this pledge from the assets of the estate.
c. Prior to her death, Sally had promised to give her nephew, Gary, $20,000 when he passed the bar exam. Gary passed the exam in late 2012, and Bruce kept Sally’s promise by paying him $20,000 from estate assets.
d. At the scene of the accident and before the ambulance arrived, someone took Sally’s jewelry (i.e., Rolex watch and wedding ring) and money. The property (valued at $33,000) was not insured and was never recovered.
e. As a result of the accident, Sally’s auto was totally destroyed. The auto had a basis of $52,000 and a fair market value of $28,000. In January 2013, the insurance company pays Sally’s estate $27,000.
In each of the following independent situations, determine the gift tax that was due and the decedent’s final estate tax liability (net of any unified tax credit).
In 2000, June, a 75 year old widow, creates an irrevocable trust naming her five adult grandchildren as the beneficiaries. The assets transferred in trust consist of marketable securities (worth $800,000) and June’s personal residence (worth $400,000). Bob, June’s younger brother and a practicing attorney, is designated as the trustee. Other provisions of the trust are as follows.
• Bob is given the discretion to distribute the income to the beneficiaries based on their need or add it to corpus. He is also given the power to change trust investments and to terminate the trust.
• The trust is to last for June’s lifetime or, if sooner, until termination by Bob.
• Upon termination of the trust, the principal and any accumulated income are to be distributed to the beneficiaries (June’s grandchildren). For 2000, June files a Form 709 to report the transfer in trust and pays a gift tax based on value of $1.2 million ($800,000 + $400,000). After the transfer in trust and up to the time of her death, June continues to occupy the residence. Although she pays no rent, she maintains the property and pays the yearly property taxes. June never discussed the matter of her continued occupancy of the residence with either Bob or the beneficiaries of the trust. Upon June’s death in 2008, the value of the trust is $2.3 million, broken down as follows: marketable securities and cash ($1.6 million) and residence ($700,000). Shortly thereafter, Bob sells the residence, liquidates the trust, and distributes the proceeds to the beneficiaries. What are the estate tax consequences of these transactions to June?
For each of the following organizations, determine its UBTI and any related UBIT.
a. Worn, Inc., an exempt organization, provides food for the homeless. It operates a thrift store that sells used clothing to the general public. The thrift shop is solely staffed by four salaried employees. All of the clothes it sells are received as contributions. The $100,000 profit generated for the year by the thrift shop is used in Worn’s mission of providing food to the homeless.
b. Small, Inc., an exempt organization, recorded gross unrelated business income of $900 and unrelated business expenses of $400.
c. In Care, Inc., is a §501(c)(3) exempt organization. It owns a convenience store and gas pumps, which it received as a bequest from a patron. The store/gas pumps entity is organized as Stop By, a C corporation. Because Stop By is profitable, In Care hires a manager and several employees to run the entity. For the current year, Stop By’s profit is $640,000. All of this amount is distributed by Stop By to In Care to use in carrying out its exempt mission.
Complete the following chart by indicating whether each item is true or false. Explain your answers by reference to the overlap of rules appearing in Federal and most state income tax laws.
Item
True or False
a.
Some states use Federal taxable income as their income tax base,
while others modify this amount or create their own state
taxable income.
b.
Federal tax accounting methods such as LIFO inventory and
specific write off of bad debts are followed for state income tax
purposes.
c.
State rules as to which entities can join in a consolidated return
match those of Federal law.
d.
The corporate income tax systems of most states can be
described as having progressive rate structures.
e.
A typical state income tax credit would equal 10% of the costs
incurred to purchase and install solar energy panels for an
For each of the following independent cases, indicate whether the circumstances call for an addition modification (A), a subtraction modification (S), or no modification (N) in computing state taxable income. Then indicate the amount of any modification. The starting point in computing State Q taxable income is the year’s Federal taxable income, before any deduction for net operating losses.
a. Federal cost recovery = $10,000, and Q cost recovery = $15,000.
b. Federal cost recovery = $15,000, and Q cost recovery = $10,000.
c. Federal income taxes paid = $30,000.
d. Refund received from last year’s Q income taxes = $3,000.
e. Local property taxes, deducted on the Federal return as a business expense = $7,000.
f. Interest income from holding U.S. Treasury bonds = $20,000.
g. Interest income from holding Q revenue anticipation bonds = $3,000.
h. An asset was sold for $18,000; its purchase price was $20,000. Accumulated Federal cost recovery = $11,000, and accumulated Q cost recovery = $8,000.
i. Dividend income received from State R corporation = $10,000, subject to a Federal dividends received deduction of 70%.
Perk Corporation is subject to tax only in State A. Perk generated the following income and deductions.
Federal taxable income
$300,000
State A income tax expense
15,000
Refund of State A income tax
3,000
Depreciation allowed for Federal tax purposes
200,000
Depreciation allowed for state tax purposes
120,000
Federal taxable income is the starting point in computing A taxable income. State income taxes are not deductible for A tax purposes. Determine Perk’s A taxable income.
Flip Corporation is subject to tax only in State X. Flip generated the following income and deductions. State income taxes are not deductible for X income tax purposes.
Sales
$4,000,000
Cost of sales
2,800,000
State X income tax expense
200,000
Depreciation allowed for Federal tax purposes
400,000
Depreciation allowed for state tax purposes
300,000
Interest income on Federal obligations
50,000
Interest income on X obligations
30,000
Expenses related to carrying X obligations
10,000
a. The starting point in computing the X income tax base is Federal taxable income.
Derive this amount.
b. Determine Flip’s X taxable income assuming that interest on X obligations is exempt from X income tax.
c. Determine Flip’s X taxable income assuming that interest on X obligations is subject to X income tax.
Dillman Corporation has nexus in States A and B. Dillman’s activities for the year are summarized below.
State A
State B
Total
Sales
$1,200,000
$ 400,000
$1,600,000
Property
Average cost
500,000
300,000
800,000
Average accumulated depreciation
(300,000)
100,000)
(400,000)
Payroll
2,500,000
500,000
3,000,000
Rent expense
–0–
35,000
35,000
Determine the apportionment factors for A and B assuming that A uses a three factor apportionment formula under which sales, property (net depreciated basis), and payroll are equally weighted and B employs a single factor formula that consists solely of sales. State A has adopted the UDITPA with respect to the inclusion of rent payments in the property factor.
State E applies a throwback rule to sales, while State F does not. State G has not adopted an income tax to date. Orange Corporation, headquartered in E, reported the following sales for the year. All of the goods were shipped from Orange’s E manufacturing facilities. Determine its sales factor in those states. Comment on Orange’s location strategy using only your tax computations.
Quinn Corporation is subject to tax in States G, H, and I. Quinn’s compensation expense includes the following:
State G
State H
State I
Total
Salaries and wages for nonofficers
$200,000
$400,000
$400,000
$1,000,000
Officers’ salaries
–0–
–0–
500,000
500,000
Total
$1,500,000
Officers’ salaries are included in the payroll factor for G and I, but not for H. Compute Quinn’s payroll factors for G, H, and I. Comment on your results.
Kim Corporation, a calendar year taxpayer, has manufacturing facilities in States A and B. A summary of Kim’s property holdings follows.
State A
State B
Total
Inventory
$ 300,000
$ 200,000
$ 500,000
Plant and equipment
2,500,000
1,500,000
4,000,000
Accumulated depreciation:
plant and equipment
(1,000,000)
(600,000)
(1,600,000)
Land
600,000
1,000,000
1,600,000
Rental property*
900,000
300,000
1,200,000
Accumulated depreciation: rental property
(200,000)
(90,000)
(290,000)
End of Year
State A
State B
Total
Inventory
$ 400,000
$ 200,000
$ 600,000
Plant and equipment
2,800,000
1,200,000
4,000,000
Accumulated depreciation:
plant and equipment
(1,200,000)
(650,000)
(1,850,000)
Land
600,000
1,200,000
1,800,000
Rental property*
1,000,000
300,000
1,300,000
Accumulated depreciation: rental property
(250,000)
(100,000)
(350,000)
Determine Kim’s property factors for the two states assuming that the statutes of both A and B provide that average historical cost of business property is to be included in the property factor.
True Corporation, a wholly owned subsidiary of Trumaine Corporation, generated a $400,000 taxable loss in its first year of operations. True’s activities and sales are restricted to State A, which imposes an 8% income tax. In the same year, Trumaine’s taxable income is $1 million. Trumaine’s activities and sales are restricted to State B, which imposes an 11% income tax. Both states use a three factor apportionment formula that equally weights sales, payroll, and property, and both require a unitary group to file on a combined basis. Sales, payroll, and average property for each corporation are as follows:
True Corporation
Trumaine Corporation
Total
Sales
$2,500,000
$4,000,000
$6,500,000
Property
1,000,000
2,500,000
3,500,000
Payroll
500,000
1,500,000
2,000,000
True and Trumaine have been found to be members of a unitary business.
a. Determine the overall state income tax for the unitary group.
b. Determine aggregate state income tax for the entities if they were nonunitary.
c. Incorporate this analysis in a letter to Trumaine’s board of directors. Corporate offices are located at 1234 Mulberry Lane, Birmingham, AL 35298.
Chang Corporation is part of a three corporation unitary business. The group has a water’s edge election in effect with respect to unitary State Q. State B does not apply the unitary concept with respect to its corporate income tax laws. Nor does Despina, a European country to which Saldez paid a $7 million value added tax this year. Saldez was organized in Despina and conducts all of its business there. Given the summary of operations that follows, determine Chang’s and Elena’s sales factors in B and Q.
Hernandez, which has been an S corporation since inception, is subject to tax in States Y and Z. On Schedule K of its Federal Form 1120S, Hernandez reported ordinary income of $500,000 from its business, taxable interest income of $10,000, capital loss of $30,000, and $40,000 of dividend income from a corporation in which it owns 30%. Both states apportion income by use of a three factor formula that equally weights sales, payroll, and the average cost of property; both states treat interest and dividends as business income. In addition, both Y and Z follow Federal provisions with respect to the determination of taxable income for a corporation. Y recognizes S status, but Z does not. Based on the following information, write a memo to the shareholders of Hernandez, detailing the amount of taxable income on which Hernandez will pay tax in Y and Z. Hernandez corporate offices are located at 5678 Alabaster Circle, Bowling Green, KY 42103.
Using the following information from the books and records of Grande Corporation, determine Grande’s total sales that are subject to State C’s sales tax. Grande operates a retail hardware store.
Sales to C consumers, general merchandise
$1,100,000
Sales to C consumers, crutches and other medical supplies
Send an e mail to the secretary of revenue for your home state proposing adoption of at least two of the following provisions that do not currently exist in your state.
a. Increase the apportionment weight for the sales factor.
b. Exempt computer and communications technology from the apportionment weight for the property factor.
c. Adopt a throwback rule for the sales factor.
d. Subject advertising expenditures to the sales/use tax.
e. Allow an income tax credit for 20% of the cost of in state construction projects that are substantially completed within the next 18 months.
f. Tax the income of vendors who do not have a physical presence in your state but sell to in state customers online.
g. Add a “nexus team” to find taxpayers operating in your state, but based in Ohio, Illinois, or Arizona.
h. Adopt the definitions and other rules of the Streamlined Sales Tax Project.
i. Allow an income tax credit for film and television producers equal to 30% of in state expenditures.
j. Apply a tax on S corporations operating in the state equal to 2% of the entity’s hypothetical Subchapter C taxable income.
k. Convert the corporate income tax to a tax on gross receipts, in an effort to tax the profits of passive investment companies owned by in state parent entities.
Find a state/local tax policy organization (e.g., the Committee on State Taxation). Read its current newsletter. In an e mail to your instructor, summarize a major article in the newsletter. Look especially for articles on one of these topics:
• Judicial and legislative developments concerning the income taxation of intangible income (e.g., trademark royalties).
• Legislation applying a physical presence test as the exclusive definition of nexus at the Federal level or for your state’s sales/use tax.
• Responses by the states to the economic downturn (e.g., more aggressive enforcement, new taxes and fees, and installment options for the late payment of taxes and penalties).
• Development of nexus rules that apply to cloud computing services.
• The positive or negative “business tax climate” of your state and its neighbors, as measured by two or more policy centers or think tanks, and any measurable trends in the climate over the last 20 years.
• Attempts by the legislatures of your state and its neighbors to add advertising services to the sales/use tax base.
• Limitations on the taxpayer’s ability to carry back net operating losses in computing your state’s corporate taxable income.
Gloria Wang, an NRA, is a professional golfer. She played in seven tournaments in the United States in the current year and earned $200,000 in prizes from these tournaments. She deposited the winnings in a bank account she opened in Mexico City after her first tournament win. Gloria played a total of 30 tournaments for the year and earned $300,000 in total prize money. She spent 40 days in the United States, 60 days in England, 20 days in Scotland, and the rest of the time in South America. Write a letter to Gloria explaining how much U.S. source income she will generate, if any, from her participation in these tournaments and whether any of her winnings are subject to U.S. taxation. Gloria’s address is AV Rio Branco, 149–4#, Rio de Janeiro, RJ 20180, Brazil.
Teal, Inc., a foreign corporation, pays a dividend to its shareholders on November 30. Red, Inc., a U.S. corporation and 7% shareholder in Teal, receives a dividend of 10,000K (a foreign currency). Pertinent exchange rates are as follows:
November 30
.9K:$1
Average for year
.7K:$1
December 31
2K:$1
What is the dollar amount of the dividend received by Red, Inc.? Does Red, Inc., have a foreign exchange gain or loss on receipt of the dividend?
Brandy, a U.S. corporation, operates a manufacturing branch in Chad, which does not have an income tax treaty with the United States. Brandy’s worldwide Federal taxable income is $30 million, so it is subject to a 35% marginal tax rate. Profits and taxes in Chad for the current year are summarized as follows. Compute Brandy’s foreign tax credit associated with its operations in Chad.
Money, Inc., a U.S. corporation, has $500,000 to invest overseas. For U.S. tax purposes, any additional gross income earned by Money will be taxed at 34%. Two possibilities for investment are:
a. Invest the $500,000 in common stock of Exco (a foreign corporation). Exco common stock pays a dividend of $3 per share each year. The $500,000 would purchase 10,000 shares (or 10%) of Exco’s only class of stock (voting common). Exco expects to earn $10 million before taxes for the year and to be taxed at a flat rate of 40%. Its current E & P before taxes is estimated to be $9.4 million. Exco’s government does not withhold on dividends paid to foreign investors.
b. Invest the $500,000 in Exco bonds that pay interest at 7% per year. Assume that the bonds will be acquired at par, or face, value. Exco’s government withholds 25% on interest paid to foreign investors. Analyze these two investment opportunities, and determine which would give Money the better return after taxes. Make sure you consider the effect of the FTC. Write a letter to Money’s CFO Jeffrey Howard, advising the corporation of your findings. Money’s address is 9201 West South Street, Woodstock, IL 60098.
The MGP General Partnership was created on January 1 of the current year by having Melinda, Gabe, and Pat each contribute $10,000 cash to the partnership in exchange for a one third interest in partnership income, gains, losses, deductions, and credits. On December 31 of the current year, the partnership balance sheet reads as follows:
Basis
FMV
Basis
FMV
Assets
$60,000
$75,000
Recourse debt
$30,000
$30,000
Melinda, capital
14,000
19,000
Gabe, capital
14,000
19,000
Pat, capital
2,000
7,000
$60,000
$75,000
Pat’s capital account is less than Melinda’s and Gabe’s capital accounts because Pat has withdrawn more cash than the other partners have. How do the partners share the recourse debt as of December 31 of the current year?
Paul and Anna plan to form the PA General Partnership by the end of the current year. The partners will each contribute $80,000 of cash, and in addition, the partnership will borrow $240,000 from First State Bank. The $400,000 will be used to buy an investment property. The property will serve as collateral, and both partners will be required to personally guarantee the debt. The tentative agreement provides that 60% of operating income, gains, losses, deductions, and credits will be allocated to Paul for the first five years the partnership is in existence. The remaining 40% is allocated to Anna. Thereafter, all partnership items will be allocated equally. The agreement also provides that capital accounts will be properly maintained and that each partner must restore any deficit in the capital account upon the partnership’s liquidation. The partners would like to know, before the end of the tax year, how the $240,000 liability will be allocated for basis purposes. Using the format (1) facts, (2) issues, (3) conclusion, and (4) law and analysis, draft a memo to the tax planning file for the PA Partnership that describes how the debt will be shared between the partners for purposes of computing the adjusted basis of each partnership interest.
Jasmine Gregory is a 20% member in Sparrow Properties, LLC, which is a lessor of residential rental property. Her share of the LLC’s losses for the current year is $100,000. Immediately before considering the deductibility of this loss, Jasmine’s capital account (which, in this case, corresponds to her basis excluding liabilities) reflected a balance of $50,000. Jasmine has personally guaranteed a $10,000 debt of the LLC that is allocated to her as a recourse debt. Her share of the LLC’s nonrecourse debt is $30,000. This debt cannot be treated as qualified nonrecourse debt. Jasmine spends several hundred hours a year working for Sparrow Properties. Jasmine is also a managing member of Skylark Rentals, LLC, which is engaged in long term (more than 30 days) equipment rental activities. (This is considered a passive activity.) Jasmine’s share of Skylark’s income is $36,000. Jasmine’s modified adjusted gross income before considering the LLCs’ activities is $300,000. The “active participation” rental real estate deduction is not available to Jasmine. Determine how much of Sparrow’s $100,000 loss Jasmine can deduct on her current calendar year return. Using the format (1) facts, (2) issues, (3) conclusion, and (4) law and analysis, draft an internal office memo for the client’s tax file describing the loss limitations. Identify the Code sections under which losses are suspended.
In each of the following independent cases in which the partnership owns no hot assets, indicate:
• Whether the partner recognizes gain or loss.
• Whether the partnership recognizes gain or loss.
• The partner’s adjusted basis for the property distributed.
• The partner’s outside basis in the partnership after the distribution.
a. Kim receives $20,000 of cash in partial liquidation of her interest in the partnership. Kim’s outside basis for her partnership interest immediately before the distribution is $3,000.
b. Kourtni receives $40,000 of cash and land with an inside basis to the partnership of $30,000 (value of $50,000) in partial liquidation of her interest. Kourtni’s outside basis for her partnership interest immediately before the distribution is $80,000.
c. Assume the same facts as in (b), except that Kourtni’s outside basis for her partnership interest immediately before the distribution is $60,000.
d. Klois receives $50,000 of cash and inventory with a basis of $30,000 and a fair market value of $50,000 in partial liquidation of her partnership interest. Her basis was $90,000 before the distribution. All partners received proportionate distributions.
In each of the following independent liquidating distributions in which the partnership also liquidates, determine the amount and character of any gain or loss to be recognized by each partner and the basis of each asset (other than cash) received. In each case, assume that distributions of hot assets are proportionate to the partners.
a. Landon has a partnership basis of $40,000 and receives a distribution of $50,000 in cash.
b. Mark has a partnership basis of $50,000 and receives $20,000 of cash and a capital asset with a basis to the partnership of $25,000 and a fair market value of $40,000.
c. Neil has a partnership basis of $100,000 and receives $40,000 of cash, inventory with a basis to the partnership of $30,000, and a capital asset with a partnership basis of $20,000. The inventory and capital asset have fair market values of $20,000 and $30,000, respectively.
d. Oscar has a partnership basis of $40,000 and receives a distribution of $10,000 of cash and an account receivable with a basis of $0 to the partnership (value is $15,000).
RBP Partnership is a service oriented partnership that has three equal general partners. One of them, Barry, sells his interest to another partner, Dale, for $90,000 of cash and the assumption of Barry’s share of partnership liabilities. On the sale date, the partnership’s cash basis balance sheet is as follows. Assume that the capital accounts before the sale reflect the partners’ bases in their partnership interests, excluding liabilities. The payment exceeds the stated fair market value of the assets because of goodwill that is not recorded on the books.
Basis
FMV
Basis
FMV
Cash
$120,000
120,000
Note payable
$ 30,000
$ 30,000
Accounts receivable
–0–
90,000
Capital accounts
Capital assets
30,000
75,000
Barry
40,000
85,000
David
40,000
85,000
Dale
40,000
85,000
Total
$150,000
$285,000
Total
$150,000
$285,000
a. What is the total amount realized by Barry on the sale?
b. How much, if any, ordinary income must Barry recognize on the sale?
c. How much capital gain must Barry report?
d. What is Dale’s basis in the partnership interest acquired?
Your clients, Grayson Investments, Inc. (Ana Marks, President), and Blake Caldwell, each contributed $200,000 of cash to form the Realty Management Partnership, a limited partnership. Grayson is the general partner, and Blake is the limited partner. The partnership used the $400,000 of cash to make a down payment on a building. The rest of the building’s $4 million purchase price was financed with an interest only nonrecourse loan of $3.6 million, which was obtained from an independent third party bank. The partnership allocates all partnership items equally except for the MACRS deductions and building maintenance, which are allocated 70% to Blake and 30% to Grayson. The partnership definitely wants to satisfy the “economic effect” requirements of Reg. §§ 1.704–1 and 1.704–2 and will reallocate MACRS, if necessary, to satisfy the requirements of the Regulations. Under the partnership agreement, liquidation distributions will be paid in proportion to the partners’ positive capital account balances. Capital accounts are maintained as required in the Regulations. Grayson Investments has an unlimited obligation to restore its capital account, while Blake is subject to a qualified income offset provision. Assume that all partnership items, except for MACRS, will net to zero throughout the first three years of the partnership operations. Also assume that each year’s MACRS deduction will be $200,000 (to simplify the calculations). Draft a letter to the partnership evaluating the allocation of MACRS in each of the three years under Reg. §§ 1.704–1 and −2. The partnership’s address is 53 East Marsh Ave., Smyrna, GA 30082. Do not address the “substantial” test.
Using the categories in the following legend, classify each transaction as a plus (+) or minus (−) on Schedule M–2 of Form 1120S. An answer might look like one of these: “+AAA” or “−OAA.”
A calendar year S corporation’s profit and loss statement shows net profits of $90,000 (book income). The corporation is owned equally by three shareholders. From supplemental data, you obtain the following information about items included in the book income.
Tax exempt interest income
$ 2,000
Dividends received
9,000
§ 1231 gain
6,000
Depreciation recapture income
12,000
Recovery of bad debts
4,000
Short term capital loss
(6,000)
Salary to owners (each)
(10,000)
Cost of goods sold
(95,000)
Administrative expenses
(4,500)
Selling expenses
(21,200)
Distribution to shareholders
(6,000)
a. Compute the entity’s no separately computed income or loss.
b. What would be the portion of taxable income or loss for Chang, one of the shareholders?
Peres, Inc., a calendar year S corporation, holds an AAA balance of $767,050 at the beginning of 2012. During the year, the following items are recorded.
Emeline, Inc., of Auburn, Alabama, is an accrual basis S corporation with three equal shareholders. The three cash basis shareholders have the following stock basis at the beginning of the year: Andre, $12,000; Crum, $22,000; and Barbara, $31,000.
Emeline reports the following income and expense items.
Operating loss
($30,000)
Short term capital gain
37,500
Long term capital loss
(6,000)
Nondeductible fees and penalties
(3,000)
Emeline distributes $6,000 of cash to each of the shareholders during the tax year. Calculate each of the shareholders’ stock bases at the end of the year.
Rodeo, Inc., a cash basis S corporation in College Station, Texas, formerly was a C corporation. Rodeo records the following assets and liabilities on January 1, 2012, the date its S election is made.
Adjusted Basis
Fair Market Value
Cash
$ 200,000
$ 200,000
Accounts receivable
–0–
105,000
Equipment
110,000
100,000
Land
1,800,000
2,500,000
Accounts payable
–0–
110,000
During 2012, Rodeo collects the accounts receivable and pays the accounts payable. The land is sold for $3 million, and taxable income for the year is $590,000. What is Rodeo’s built in gains tax?
Bushong, Inc., a calendar year S corporation, has a “tax cash flow” provision in its shareholder agreement. Bushong must make annual distributions by the December 31 following a tax year in which there is an income pass through. Each distribution must be in an amount sufficient to enable shareholders to pay their state and Federal income taxes on the pass through. The agreement also provides that if an audit adjustment is made to items reported on the Schedule K–1, Bushong can make a discretionary distribution to handle the increased taxes resulting from the adjustment. The shareholders want to change the agreement. Under the proposal, if an audit adjustment is made and Bushong makes a discretionary payment, the payment would be in accordance with the shareholders’ ownership shares during the tax year of the adjustment, rather than as of the distribution date. Would the proposal create a second class of stock and terminate Bushong’s S election? Explain.
Roadrunner, Inc., is an exempt medical organization. Quail, Inc., a sporting goods retailer, is a wholly owned subsidiary of Roadrunner. Roadrunner inherited the Quail stock last year from a major benefactor of the medical organization. Quail’s taxable income is $550,000. Quail will remit all of its earnings, net of any taxes, to Roadrunner to support the exempt purpose of the parent.
a. Is Quail subject to Federal income tax? If so, calculate the liability.
b. Arthur Morgan, the treasurer of Roadrunner, has contacted you regarding minimizing or eliminating Quail’s tax liability. He would like to know if the tax consequences would be better if Quail were liquidated into Roadrunner. Write a letter to Morgan that contains your advice. Roadrunner’s address is 500 Rouse Tower, Rochester, NY 14627.
c. Would your answer in (a) change if Roadrunner had acquired the Quail stock by purchase or gift rather than by inheritance? Discuss.
d. How would the tax consequences change if Quail’s taxable income was only $100,000 and it remitted only 75% of its earnings, net of taxes, to Roadrunner?
Pigeon, Inc., a § 501(c)(3) organization, received support from the following sources.
Governmental unit A for services rendered
$ 6,300
Governmental unit B for services rendered
4,500
Fees from the general public for services rendered
(each payment was $100)
75,000
Gross investment income
39,000
Contributions from disqualified persons
26,000
Contributions from other than disqualified persons
(each gift was $50)
160,000
Total support
$310,800
a. Does Pigeon satisfy the test for receiving broad public support? Why or why not?
b. Is Pigeon a private foundation? Be specific in your answer.
c. Arnold Horn, Pigeon’s treasurer, has asked you to advise him on whether Pigeon is a private foundation. Write a letter to him in which you address the issue. His address is 250 Bristol Road, Charlottesville, VA 22903.
Otis is the CEO of Rectify, Inc., a private foundation. Otis invests $500,000 (80%) of the foundation’s investment portfolio in derivatives. Previously, the $500,000 had been invested in corporate bonds with an AA rating that earned 7% per annum. If the derivatives investment works as Otis’s investment adviser claims, the annual earnings could be as high as 20%.
a. Determine whether Rectify is subject to any of the taxes imposed on private foundations.
b. If so, calculate the amount of the initial tax.
c. If so, calculate the amount of the additional tax if the act causing the imposition of the tax is not addressed within the correction period.
d. Are Otis and the foundation better off financially if the prohibited transaction, if any, is addressed within the correction period? Explain.
For each of the following organizations, determine its UBTI and any related UBIT.
a. AIDS, Inc., an exempt charitable organization that provides support for individuals with AIDS, operates a retail medical supply store open to the general public. The net income of the store, before any Federal income taxes, is $305,000.
b. The local Episcopal Church operates a retail gift shop. The inventory consists of the typical items sold by commercial gift shops in the city. The director of the gift shop estimates that 80% of the gift shop sales are to tourists and 20% are to church members. The net income of the gift shop, before the salaries of the three gift shop employees and any Federal income taxes, is $300,000. The salaries of the employees total $80,000.
c. Education, Inc., a private university, has vending machines in the student dormitories and academic buildings on campus. In recognition of recent tuition increases, the university has adopted a policy of merely trying to recover its costs associated with the vending machine activity. For the current year, however, the net income of the activity, before any Federal income taxes, is $75,000.
Stork Corporation (E & P of $850,000) has 1,000 shares of common stock outstanding. The shares are owned by the following individuals: Lana Johnson, 450 shares; Lori Johnson (Lana’s sister), 450 shares; and Leo Johnson (Lana’s son), 100 shares. Lana paid $200 per share for the Stork stock eight years ago. Lana is interested in reducing her stock ownership in Stork via a stock redemption for $1,000 per share, the fair market value of the stock. Stork Corporation would distribute cash for the entire redemption transaction. Lana has inquired as to the minimum number of shares she would have to redeem to obtain favorable long term capital gain treatment and the overall tax consequences of such a redemption to both her and Stork Corporation. Prepare a letter to Lana (1000 Main Street, St. Paul, MN 55166) and a memo for the file in which you explain your conclusions.
Cyan Corporation (E & P of $700,000) has 4,000 shares of common stock outstanding. The shares are owned as follows: Angelica, 2,000 shares; Dean (Angelica’s son), 1,500 shares; and Walter (Angelica’s uncle), 500 shares. In the current year, Cyan redeems all of Angelica’s shares. Determine whether the redemption can qualify for sale or exchange treatment under the complete termination redemption rules in each of the following independent circumstances.
a. Angelica remains as a director of Cyan Corporation.
b. Three years after the redemption, Angelica loans $100,000 to Cyan Corporation and receives in return a two year note receivable.
c. Dean replaces Angelica as president of Cyan Corporation.
d. Six years after the redemption, Angelica receives 250 shares in Cyan as a gift from Walter.
The gross estate of Tanya, decedent, includes stock of Finch Corporation (E & P of $2 million) valued at $1.4 million. At the time of her death in 2012, Tanya owned 40% of the Finch stock outstanding, and she had a basis of $220,000 in the stock. The death taxes and funeral and administration expenses related to Tanya’s estate amount to $1.4 million, and the adjusted gross estate is $7 million. The remainder of the Finch stock is owned by shareholders unrelated to Tanya (or her estate). Tanya named her son, Taylor, as the sole heir of her estate. In the current year, Finch Corporation distributes $1.4 million to the estate in redemption of all of its stock in the corporation. What are the tax consequences of the redemption to Tanya’s estate and to Finch Corporation?
Six years ago, Coastal Drillers, Inc., redeemed all of the stock owned directly by Jeremiah Cranston (6870 Vinton Court, Los Angeles, CA 90034). At the time of the redemption, Jeremiah and his immediate family members owned 100% of the stock of Coastal Drillers. Jeremiah satisfied all of the requirements of the family attribution waiver [under § 302(c)(2)]; thus, the transaction qualified as a complete termination redemption and resulted in a significant long term capital gain. Coastal Drillers’ E & P at the time of the transaction exceeded the redemption proceeds. Treatment of the redemption proceeds as a dividend would have resulted in a $200,000 greater tax liability for Jeremiah. In the current year, Coastal Drillers has offered Jeremiah a consulting engagement. The consulting engagement would be for a one year term, but options to renew could extend the contract to a total of five years. Assuming that all options are exercised, Jeremiah would earn $150,000 under the contract. Based on the terms of the contract, Jeremiah would properly be classified as an independent contractor, not as an employee of Coastal Drillers. Jeremiah has contacted you regarding the effect, if any, of the proposed consulting engagement on the tax treatment of his earlier stock redemption. Prepare a letter to Jeremiah and a memo for the file documenting your conclusions.
On April 21, 2011, Crow Corporation acquired land and equipment in a § 351 transaction. At that time, the land had a basis of $300,000 and a fair market value of $225,000, and the equipment had a basis of $20,000 and a fair market value of $100,000. The land and equipment were transferred to Crow Corporation for use as security for a loan the corporation was in the process of obtaining from a local bank. The bank required the additional capital investment as a condition for making the loan. Crow Corporation adopted a plan of liquidation on October 3, 2012. On December 4, 2012, Crow Corporation distributes the land to Ali, a 40% shareholder. On the date of the distribution, the land had a fair market value of only $150,000. What amount of loss may Crow Corporation recognize on the distribution of the land?
Pink Corporation acquired land and securities in a § 351 tax free exchange in 2011. On the date of the transfer, the land had a basis of $720,000 and a fair market value of $1 million, and the securities had a basis of $110,000 and a fair market value of $250,000. Pink Corporation has two shareholders, Maria and Paul, who are unrelated. Maria owns 85% of the stock in the corporation, and Paul owns 15%. Pink adopts a plan of liquidation in 2012. On this date, the value of the land has decreased to $500,000. What is the effect of each of the following on Pink Corporation? Which option should be selected?
a. Distribute all of the land to Maria.
b. Distribute all of the land to Paul.
c. Distribute 85% of the land to Maria and 15% to Paul.
d. Distribute 50% of the land to Maria and 50% to Paul.
e. Sell the land and distribute the proceeds of $500,000 proportionately to Maria and to Paul.
The stock in Ivory Corporation is owned by Gold Corporation (80%) and Imelda (20%). Gold Corporation purchased its shares in Ivory nine years ago at a cost of $650,000, and Imelda purchased her shares in Ivory four years ago at a cost of $175,000.
Ivory Corporation has the following assets that are distributed in complete liquidation:
Adjusted Basis
Fair Market Value
Cash
$600,000
$600,000
Inventory
80,000
200,000
Equipment
350,000
200,000
a. Assume that Ivory Corporation distributes the cash and inventory to Gold Corporation and the equipment to Imelda. What are the tax consequences of the distributions to Ivory Corporation, to Gold Corporation, and to Imelda?
b. Assume that Ivory Corporation distributes the cash and equipment to Gold Corporation and the inventory to Imelda. What are the tax consequences of the distributions to Ivory Corporation, to Gold Corporation, and to Imelda?
At the time of its liquidation under § 332, Cardinal Corporation (E & P of $560,000) had the following assets and liabilities: cash ($175,000); marketable securities (fair market value of $230,000, basis of $250,000); unimproved land (fair market value of $600,000, basis of $300,000); unsecured note payable ($50,000); and mortgage on the unimproved land ($270,000). Cardinal also had a net operating loss carryover of $45,000. Wren Corporation acquired all of the stock of Cardinal seven years ago for $160,000.
a. How much gain (or loss) will Cardinal Corporation recognize upon the liquidating distribution of its assets and liabilities to Wren Corporation?
b. How much gain (or loss) will Wren Corporation recognize in the liquidation of Cardinal?
c. What basis will Wren have in the marketable securities and unimproved land it receives in the liquidation?
d. What happens to Cardinal’s E & P and net operating loss carryover?
Jed acquired 25% of the stock of Alpha Corporation (basis of $100,000) 12 years ago, and the other 75% was purchased by Zia (basis of $510,000) three years ago. Jed also holds a 10 year, $150,000 Alpha bond paying 6% interest. Alpha enters into a tax free consolidation with Beta Corporation, in which Jed will receive an 8% interest in the new Alpha Beta Corporation (value $144,000) plus $36,000 and Zia will receive a 27% interest (value $486,000) plus $54,000 of land. Alpha’s basis in the land is $35,000. Jed also will exchange his $150,000 Alpha bond for a 10 year, $155,000 Alpha Beta bond paying 5.8% interest. Before the reorganization or distributions to its shareholders, Alpha’s value is $720,000, and Beta’s value is $1,170,000.
a. What are Jed’s and Zia’s bases in their new Alpha Beta stock?
b. What is the amount of gain (loss) recognized by Jed, Zia, Alpha, and Beta on the reorganization?
c. Diagram the consolidation of Alpha and Beta Corporation.
Target Corporation holds assets with a fair market value of $4 million (adjusted basis of $2.2 million) and liabilities of $1.5 million. It transfers assets worth $3.7 million to Acquiring Corporation in a “Type C” reorganization, in exchange for Acquiring voting stock and the assumption of $1.4 million of Target’s liabilities. Target retained a building worth $300,000 (adjusted basis of $225,000). Target distributes the Acquiring voting stock and the building with an associated $100,000 mortgage to Wei, its sole shareholder, for all of her stock in Target. Wei’s basis in her stock is $2.6 million.
a. Explain whether this transaction meets the requirements for a “Type C” reorganization.
b. What is the value of the stock transferred from Acquiring to Target?
c. What is the amount of gain (loss) recognized by Wei, Target, and Acquiring on the reorganization?
d. What is Wei’s basis in the stock and building she received?
Liz and John formed the equal LJ Partnership on January 1 of the current year. Liz contributed $80,000 of cash and land with a fair market value of $90,000 and an adjusted basis of $75,000. John contributed equipment with a fair market value of $170,000 and an adjusted basis of $20,000. John had previously used the equipment in his sole proprietorship.
a. How much gain or loss will Liz, John, and the partnership realize?
b. How much gain or loss will Liz, John, and the partnership recognize?
c. What bases will Liz and John take in their partnership interests?
d. What bases will LJ take in the assets it receives?
e. Are there any differences between inside and outside basis? Explain.
f. How will the partnership depreciate any assets it receives from the partners?
Sam and Drew are equal partners in SD, LLC, formed on June 1 of the current year. Sam contributed land that he inherited from his uncle in 2005. Sam’s uncle purchased the land in 1980 for $30,000. The land was worth $100,000 when Sam’s uncle died. The fair market value of the land was $200,000 at the date it was contributed to the partnership. Drew has significant experience developing real estate. After the LLC is formed, he will prepare a plan for developing the property and secure zoning approvals for the LLC. Drew would normally bill a third party $50,000 for these efforts. Drew will also contribute $150,000 of cash in exchange for his 50% interest in the LLC. The value of his 50% interest is $200,000.
a. How much gain or income will Sam recognize on his contribution of the land to the LLC? What is the character of any gain or income recognized?
b. What basis will Sam take in his LLC interest?
c. How much gain or income will Drew recognize on the formation of the LLC? What is the character of any gain or income recognized?
The JM Partnership was formed to acquire land and subdivide it as residential housing lots. On March 1, 2012, Jessica contributed land valued at $600,000 to the partnership, in exchange for a 50% interest in JM. She had purchased the land in 2004 for $420,000 and held it for investment purposes (capital asset). The partnership holds the land as inventory. On the same date, Matt contributed land valued at $600,000 that he had purchased in 2002 for $720,000. He became a 50% owner. Matt is a real estate developer, but this land was held personally for investment purposes. The partnership holds this land as inventory. In 2013, the partnership sells the land contributed by Jessica for $620,000. In 2014, the partnership sells the real estate contributed by Matt for $580,000.
a. What is each partner’s initial basis in his or her partnership interest?
b. What is the amount of gain or loss recognized on the sale of the land contributed by Jessica? What is the character of this gain or loss?
c. What is the amount of gain or loss recognized on the sale of the land contributed by Matt? What is the character of this gain or loss?
d. How would your answer in (c) change if the property was sold in 2019?
In 2012, Tim and Molly form TM Partnership, Ltd. (an LLLP), to own and operate certain real estate. Tim contributed land, and Molly contributed cash to be used for setting up the entity and creating a plan for developing the property. Once a development plan was in place, the partnership sold interests in the partnership to investors to raise funds for constructing a shopping center. The partnership incurred expenses of $12,000 for forming the entity and $52,000 for starting the business (e.g., setting up the accounting systems, locating tenants, and negotiating leases). It also paid $18,000 in transfer taxes for changing the ownership of the property to the partnership’s name. The brokerage firm that sold the interests to the limited partners charged a 6% commission, which totaled $600,000. The calendar year partnership started business in September 2012. Describe how all of these initial expenses are treated by the partnership.
Finch, Inc., a calendar year general contractor, and Cardinal, Inc., a development corporation with a July 31 year end, formed the equal FC, LLC, on January 1 of the current year. Both LLC members are C corporations. The LLC was formed to construct and lease shopping centers in Seattle, Washington. Finch contributed cash of $1 million, equipment (basis of $200,000, fair market value of $500,000), building permits, and architectural designs created by Finch’s employees (basis of $0, fair market value of $200,000). Cardinal contributed land (basis of $500,000, fair market value of $700,000) and cash of $1 million. The cash was used as follows:
Legal fees for drafting LLC agreement
$ 20,000
Materials and labor costs for construction in progress on shopping center
1,900,000
Office expenses (utilities, rent, overhead, etc.)
80,000
What issues must the LLC address in preparing its initial tax return?
On July 1 of the current year, the R & R Partnership (an LLLP) was formed to operate a bed and breakfast inn. The partnership paid $3,000 in legal fees for drafting the partnership agreement and $5,000 for accounting fees related to organizing the entity. It also paid $10,000 in syndication costs to locate and secure investments from limited partners. In addition, before opening the inn for business, the entity paid $15,500 for advertising and $36,000 in costs related to an open house just before the grand opening of the property. The partnership opened the inn for business on October 1.
a. How are these expenses classified?
b. How much may the partnership deduct in its initial year of operations?
c. How are costs treated that are not deducted currently?
Phoebe and Parker are equal members in Phoenix Investors, LLC. They are real estate investors who formed the LLC several years ago with equal cash contributions. Phoenix then purchased a piece of land. On January 1 of the current year, to acquire a one third interest in the entity, Reece contributed to the LLC some land she had held for investment. Reece purchased the land five years ago for $75,000; its fair market value at the contribution date was $90,000. No special allocation agreements were in effect before or after Reece was admitted to the LLC. Phoenix holds all land for investment. Immediately before Reece’s property contribution, the balance sheet of Phoenix Investors, LLC, was as follows:
Basis
FMV
Basis
FMV
Land
$30,000
$180,000
Phoebe, capital
$15,000
$ 90,000
$30,000
$180,000
Parker, capital
15,000
90,000
$30,000
$180,000
a. At the contribution date, what is Reece’s basis in her interest in the LLC?
b. When does the LLC’s holding period begin for the contributed land?
c. On June 30 of the current year, the LLC sold the land contributed by Reece for $90,000. How much is the recognized gain or loss? How is it allocated among the LLC members?
d. Prepare a balance sheet reflecting basis and fair market value for the LLC immediately after the land sale described in (c). Assume that no other transactions occurred during the year.
The KL Partnership is owned equally by Kayla and Lisa. Kayla’s basis is $20,000 at the beginning of the tax year. Lisa’s basis is $16,000 at the beginning of the year. KL reported the following income and expenses for the current tax year:
Sales revenue
$150,000
Cost of sales
80,000
Distribution to Lisa
15,000
Depreciation expense
20,000
Utilities
14,000
Rent expense
18,000
Long term capital gain
6,000
Payment to Mercy Hospital for Kayla’s medical
expenses
12,000
a. Determine the ordinary partnership income and separately stated items for the partnership.
b. Calculate Kayla’s basis in her partnership interest at the end of the tax year. What items should Kayla report on her Federal income tax return?
c. Calculate Lisa’s basis in her partnership interest at the end of the tax year. What items should Lisa report on her Federal income tax return?
Suzy contributed business related assets valued at $360,000 (basis of $200,000) in exchange for her 40% interest in the Suz Anna Partnership. Anna contributed land and a building valued at $640,000 (basis of $380,000) in exchange for the remaining 60% interest. Anna’s property was encumbered by a qualified nonrecourse debt of $100,000, which was assumed by the partnership. The partnership reports the following income and expenses for the current tax year:
Sales
$560,000
Utilities, salaries, and other operating expenses
360,000
Short term capital gain
10,000
Tax exempt interest income
4,000
Charitable contributions
8,000
Distribution to Suzy
10,000
Distribution to Anna
20,000
During the current tax year, Suz Anna refinanced the land and building. At the end of the year, Suz Anna had recourse debt of $100,000 for partnership accounts payable and qualified nonrecourse debt of $200,000.
a. What is Suzy’s basis after formation of the partnership? Anna’s basis?
b. What income and separately stated items does the partnership report on Suzy’s Schedule K–1? What items does Suzy report on her tax return?
c. Assume that all partnership debts are shared proportionately. At the end of the tax year, what are Suzy’s basis and amount at risk in her partnership interest?
Bryan and Cody each contributed $120,000 to the newly formed BC Partnership in exchange for a 50% interest. The partnership used the available funds to acquire equipment costing $200,000 and to fund current operating expenses. The partnership agreement provides that depreciation will be allocated 80% to Bryan and 20% to Cody. All other items of income and loss will be allocated equally between the partners. Upon liquidation of the partnership, property will be distributed to the partners in accordance with their capital account balances. Any partner with a negative capital account must contribute cash in the amount of the negative balance to restore the capital account to $0. In its first year, the partnership reported an ordinary loss (before depreciation) of $80,000 and depreciation expense of $36,000. In its second year, the partnership reported $40,000 of income from operations (before depreciation), and it reported depreciation expense of $57,600.
a. Calculate the partners’ bases in their partnership interests at the end of the first and second tax years. Are any losses suspended? Explain.
b. Does the allocation provided in the partnership agreement have economic effect? Explain.
Michael transfers the following assets to Peach Corporation in exchange for all of its stock. (Assume that neither Michael nor Peach plans to make any special tax elections at the time of incorporation.)
Assets
Michael’s Adjusted Basis
Fair Market Value
Inventory
$ 85,000
$100,000
Equipment
160,000
120,000
Trucks
150,000
130,000
a. What is Michael’s recognized gain or loss?
b. What is Michael’s basis in the stock?
c. What is Peach’s basis in the inventory, equipment, and trucks?
d. If Michael has no intentions of selling his Peach stock for at least 15 years, what action would you recommend that Michael and Peach Corporation consider? How does this change the previous answers?
Tim is a real estate broker who specializes in commercial real estate. Although he usually buys and sells on behalf of others, he also maintains a portfolio of property of his own. He holds this property, mainly unimproved land, either as an investment or for sale to others. In early 2011, Irene and Al contact Tim regarding a tract of land located just outside the city limits. Tim bought the property, which is known as the Moore farm, several years ago for $600,000. At that time, no one knew that it was located on a geological fault line. Irene, a well known architect, and Al, a building contractor, want Tim to join them in developing the property for residential use. They are aware of the fault line but believe that they can circumvent the problem by using newly developed design and construction technology. Because of the geological flaw, however, they regard the Moore farm as being worth only $450,000. Their intent is to organize a corporation to build the housing project, and each party will receive stock commensurate to the property or services contributed. After consulting his tax adviser, Tim agrees to join the venture if certain modifications to the proposed arrangement are made. The transfer of the land would be structured as a sale to the corporation. Instead of receiving stock, Tim would receive a note from the corporation. The note would be interest bearing and due in five years. The maturity value of the note would be $450,000—the amount that even Tim concedes is the fair market value of the Moore farm. What income tax consequences ensue from Tim’s suggested approach? Compare this result with what would happen if Tim merely transferred the Moore farm in return for stock in the new corporation.
Sarah is the sole owner of Bluegrass Corporation. The basis and value of her stock investment in Bluegrass are approximately $100,000. In addition, she manages Bluegrass’s operations on a full time basis and pays herself an annual salary of $40,000. Because of a recent downturn in business, she needs to put an additional $80,000 into her corporation to help meet short term cash flow needs (e.g., inventory costs, salaries, and administrative expenses). Sarah believes that the $80,000 transfer can be structured in one of three ways: as a capital contribution, as a loan made to protect her stock investment, or as a loan intended to protect her job. From a tax perspective, which alternative would be preferable in the event that Bluegrass’s economic slide worsens and bankruptcy results? Explain your answer.
Green Corporation has several employees. Their names and salaries are listed below.
Samantha
$600,000
Chris (Samantha’s daughter)
100,000
Joey (Samantha’s son)
100,000
Jack (an unrelated third party)
250,000
Chris and Joey are the only shareholders of Green Corporation. Samantha and Jack share equally in the management of the company’s operations. Chris and Joey are both full time college students at a university 200 miles away. Green has substantial E & P and has never distributed a dividend. Discuss problems related to Green’s salary arrangement.
In each of the following independent situations, indicate the effect on taxable income and E & P, stating the amount of any increase (or decrease) as a result of the transaction. Assume that E & P has already been increased by taxable income.
Heather, an individual, owns all of the outstanding stock in Silver Corporation. Heather purchased her stock in Silver nine years ago, and her basis is $56,000. At the beginning of this year, the corporation has $76,000 of accumulated E & P and no current E & P (before considering the effect of the distributions). What are the tax consequences to Heather (amount and type of income and basis in property received) and Silver Corporation (gain or loss and effect on E & P) in each of the following situations?
a. Silver distributes land to Heather. The land was held as an investment and has a fair market value of $54,000 and an adjusted basis of $42,000.
b. Assume that Silver Corporation has no current or accumulated E & P prior to the distribution. How would your answer to (a) change?
c. Assume that the land distributed in (a) is subject to a $46,000 mortgage (which Heather assumes). How would your answer change?
d. Assume that the land has a fair market value of $54,000 and an adjusted basis of $62,000 on the date of the distribution. How would your answer to (a) change?
e. Instead of distributing land in (a), assume that Silver decides to distribute equipment used in its business. The equipment has a $14,000 market value, a $1,200 adjusted basis for income tax purposes, and a $5,200 adjusted basis for E & P purposes. When the equipment was purchased four years ago, its original fair market value was $18,000.
Cerulean Corporation has two equal shareholders, Eloise and Olivia. Eloise acquired her Cerulean stock three years ago by transferring property worth $700,000, basis of $300,000, for 70 shares of the stock. Olivia acquired 70 shares in Cerulean Corporation two years ago by transferring property worth $660,000, basis of $110,000. Cerulean Corporation’s accumulated E & P as of January 1 of the current year is $350,000. On March 1 of the current year, the corporation distributed to Eloise property worth $120,000, basis to Cerulean of $50,000. It distributed cash of $220,000 to Olivia. On July 1 of the current year, Olivia sold her stock to Magnus for $820,000. On December 1 of the current year, Cerulean distributed cash of $90,000 each to Magnus and Eloise. What are the tax issues?
Swallow Company is a large real estate construction company that has made a Subchapter S election. The company reports its income using the percentage of completion method. In 2013, the company completed a contract at a total cost of $4.8 million. The contract price was $7.2 million. At the end of 2012, the year the contract was begun, Swallow estimated that the total cost of the contract would be $5.4 million. Total accumulated cost on the contract at the end of 2012 was $1.8 million. The relevant tax rate is 35%, and the relevant Federal interest rate is 5%. Assume that all income tax returns were filed and taxes were paid on March 15 following the end of the calendar tax year.
a. Compute the gross profit on the contract for 2012 and 2013.
b. Compute the look back interest due or receivable with the 2013 tax return.
c. Before bidding on a contract, Swallow generally makes three estimates of total contract costs: (1) optimistic, (2) pessimistic, and (3) most likely (based on a blending of optimistic and pessimistic assumptions). The company has asked you to write a letter explaining which of these estimates should be used for percentage of completion purposes. In writing your letter, you should consider the fact that Swallow is incorporated and has made an S corporation election. Therefore, the income and deductions flow through to the shareholders who are all individuals in the 35% marginal tax bracket. The relevant Federal interest rate is 8%. Swallow’s mailing address is 400 Front Avenue, Ashland, OR 97520.
Your client supplies water to a housing development. The company requires new customers to pay for the extension of the water lines to the customer’s home. The water lines are the company’s property. The company has consistently treated the amounts received from its customers as a nontaxable contribution to capital and used the amounts received as a reduction in the cost of the water lines for tax purposes. In recent decisions, the courts have consistently ruled that the payments received from the utility customers in similar circumstances should be treated as income from services, rather than as a contribution to capital. Your client has concluded that it is only a matter of time before the IRS will apply the recent court decisions to the company. The client would like you to explain the tax consequences of the IRS’s likely adjustments based on these decisions.
In the current year, Azure Company has $350,000 of net operating income before deducting any compensation or other payment to its sole owner, Sasha. In addition, Azure has interest on municipal bonds of $25,000. Sasha has significant income from other sources and is in the 35% marginal tax bracket. Based on this information, determine the income tax consequences to Azure Company and to Sasha during the year for each of the following independent situations.
a. Azure is a C corporation and pays no dividends or salary to Sasha.
b. Azure is a C corporation and distributes $75,000 of dividends to Sasha.
c. Azure is a C corporation and pays $75,000 of salary to Sasha.
d. Azure is a sole proprietorship, and Sasha withdraws $0.
e. Azure is a sole proprietorship, and Sasha withdraws $75,000.
Benton Company (BC) has one owner, who is in the 35% Federal income tax bracket. BC’s gross income is $295,000, and its ordinary trade or business deductions are $135,000. Compute the tax liability on BC’s income for 2012 under the following assumptions:
a. BC is operated as a proprietorship, and the owner withdraws $70,000 for personal use.
b. BC is operated as a corporation, pays out $70,000 as salary, and pays no dividends to its shareholder.
c. BC is operated as a corporation and pays out no salary or dividends to its shareholder.
d. BC is operated as a corporation, pays out $70,000 as salary to its shareholder, and pays out the remainder of its earnings as dividends.
e. Assume that Robert Benton of 1121 Monroe Street, Ironton, OH 45638 is the owner of BC, which was operated as a proprietorship in 2012. Robert is thinking about incorporating the business in 2013 and asks your advice. He expects about the same amounts of income and expenses in 2013 and plans to take $70,000 per year out of the company whether he incorporates or not. Write a letter to Robert [based on your analysis in (a) and (b)] containing your recommendations.
During 2012, Gorilla Corporation has net short term capital gains of $70,000, net long term capital losses of $195,000, and taxable income from other sources of $620,000. Prior years’ transactions included the following:
2008 net short term capital gains
$30,000
2009 net long term capital gains
55,000
2010 net short term capital gains
15,000
2011 net long term capital gains
40,000
a. How are the capital gains and losses treated on Gorilla’s 2012 tax return?
b. Determine the amount of the 2012 capital loss that is carried back to each of the previous years.
c. Compute the amount of capital loss carryover, if any, and indicate the years to which the loss may be carried.
d. If Gorilla is a sole proprietorship, rather than a corporation, how would the owner report these transactions on her 2012 tax return?
Apply the controlled and affiliated group rules to determine whether a parent subsidiary controlled group or an affiliated group exists in each of the following independent situations. Circle Y for yes and N for no.
Swan Corporation, a calendar year C corporation, had the following information for 2012:
Net income per books (after tax)
$174,700
Taxable income
195,000
Federal income tax per books
59,300
Cash dividend distributions
35,000
Unappropriated retained earnings, as of January 1, 2012
636,450
Based on the above information, use Schedule M–2 of Form 1120 (see Example 42 in the text) to determine Swan’s unappropriated retained earnings balance as of December 31, 2012.
Tern Corporation, a calendar year C corporation, is solely owned by Jessica Ramirez. Tern’s only business since its incorporation in 2009 has been land surveying services. In Tern’s state of incorporation, land surveying can be performed only by a licensed surveyor. Jessica, Tern’s only employee, is a licensed surveyor but is not a licensed engineer. Upon audit of Tern’s 2009 and 2010 tax returns, the IRS assessed tax deficiencies stemming from its conclusion that the corporation was a personal service corporation subject to the flat tax rate of 35%. Jessica believes that the IRS’s determination is incorrect, and she has asked you for advice on how to proceed. Evaluate the IRS’s position regarding the treatment of Tern Corporation as a personal service corporation, and prepare a memo for the client files describing the results of your research.
Elizabeth, Rod, June, and Whit form Zelcova Corporation with the following consideration:
Basis to Transferor
Fair Market Value
Number of Shares Issued
From Elizabeth—
Personal services rendered to
Zelcova Corporation
$ –0–
$ 30,000
30
From Rod—
Equipment
345,000
300,000
300
From June—
Unrealized accounts receivable
–0–
150,000
130*
From Whit—
Land and building
210,000
450,000
Mortgage on land and building
300,000
300,000
150
Zelcova Corporation assumes the mortgage transferred by Whit. The value of each share of Zelcova stock is $1,000. As to these transactions, provide the following information:
a. Elizabeth’s recognized gain, income, or loss. Identify the nature of any such gain, income, or loss.
b. Elizabeth’s basis in the Zelcova stock.
c. Rod’s recognized gain or loss. Identify the nature of any such gain or loss.
d. Rod’s basis in the Zelcova stock. What election may Rod consider making as to his stock basis because the property he contributes to Zelcova has a built in loss?
e. Zelcova Corporation’s basis in the equipment. What is the impact to Zelcova if Rod makes the election noted in part (d) above?
f. June’s recognized gain or loss. Identify the nature of any such gain or loss.
g. June’s basis in the Zelcova stock.
h. Zelcova Corporation’s basis in the unrealized receivables.
i. Whit’s recognized gain or loss. Identify the nature of any such gain or loss.
j. Whit’s basis in the Zelcova stock.
k. Zelcova Corporation’s basis in the land and building.
Ron and Gail form Maple Corporation with the following consideration:
Consideration Transferred
Basis to Transferor
Fair Market Value
Number of Shares Issued
From Ron—
Cash
$ 50,000
$ 50,000
Installment obligation
140,000
250,000
30
From Gail—
Cash
150,000
150,000
Equipment
125,000
250,000
Patent
10,000
300,000
70
The installment obligation has a face amount of $250,000 and was acquired last year from the sale of land held for investment purposes (adjusted basis of $140,000). As to these transactions, provide the following information:
a. Ron’s recognized gain or loss.
b. Ron’s basis in the Maple Corporation stock.
c. Maple Corporation’s basis in the installment obligation.
d. Gail’s recognized gain or loss.
e. Gail’s basis in the Maple Corporation stock.
f. Maple Corporation’s basis in the equipment and the patent.
g. How would your answers to the preceding questions change if Ron received common stock and Gail received preferred stock?
h. How would your answers change if Gail was a partnership?
Jane, Jon, and Clyde incorporate their respective businesses and form Starling Corporation. On March 1 of the current year, Jane exchanges her property (basis of $50,000 and value of $150,000) for 150 shares in Starling Corporation. On April 15, Jon exchanges his property (basis of $70,000 and value of $500,000) for 500 shares in Starling. On May 10, Clyde transfers his property (basis of $90,000 and value of $350,000) for 350 shares in Starling.
a. If the three exchanges are part of a prearranged plan, what gain will each of the parties recognize on the exchanges?
b. Assume that Jane and Jon exchanged their property for stock four years ago, while Clyde transfers his property for 350 shares in the current year. Clyde’s transfer is not part of a prearranged plan with Jane and Jon to incorporate their businesses. What gain will Clyde recognize on the transfer?
c. Returning to the original facts, if the property that Clyde contributes has a basis of $490,000 (instead of $90,000), how might the parties otherwise structure the transaction?
Rhonda Johnson owns 50% of the stock of Peach Corporation. She and the other 50% shareholder, Rachel Powell, have decided that additional contributions of capital are needed if Peach is to remain successful in its competitive industry. The two shareholders have agreed that Rhonda will contribute assets having a value of $200,000 (adjusted basis of $15,000) in exchange for additional shares of stock. After the transaction, Rhonda will hold 75% of Peach Corporation and Rachel’s interest will fall to 25%.
a. What gain is realized on the transaction? How much of the gain will be recognized?
b. Rhonda is not satisfied with the transaction as proposed. How would the consequences change if Rachel agrees to transfer $1,000 of cash in exchange for additional stock? In this case, Rhonda will own slightly less than 75% of Peach and Rachel’s interest will be slightly more than 25%.
c. If Rhonda still is not satisfied with the result, what should be done to avoid any gain recognition?
Pat, who is single with no dependents, received a salary of $90,000. She reports interest income of $1,000, dividend income of $5,000, gambling income of $4,000, and interest income from 2006 private activity bonds of $40,000. The dividends are not qualified dividends. The following additional information is relevant. Compute Pat’s 2012 tentative minimum tax.
Robert A. Kliesh, age 41, is single and has no dependents. Robert’s Social Security number is 111–11–1111. His address is 201 Front Street, Missoula, MT 59812. He is independently wealthy as a result of having inherited sizable holdings in real estate and corporate stocks and bonds. Robert is a minister at First Presbyterian Church, but he accepts no salary from the church. However, he does reside in the church’s parsonage free of charge. The fair rental value of the parsonage is $3,000 a month. The church also provides him with a cash grocery allowance of $200 a week. Examination of Robert’s financial records provides the following information for 2011.
a. On January 16, 2011, Robert sold 1,000 shares of stock for a gain of $10,000. The stock was acquired 14 months ago.
b. He received $30,000 of interest on private activity bonds that he had purchased in 2007. He also received $40,000 of interest on tax exempt bonds that are not private activity bonds.
c. He received gross rent income of $190,000 from an apartment complex he owns. He qualifies as an active participant.
d. Expenses related to the apartment complex, which he acquired in 1987, were $225,000.
e. Robert’s interest income (on CDs) totaled $23,000. Robert invests only in growth stocks, so he earns no dividend income.
f. He won $60,000 on the lottery.
g. On October 9, 2009, Robert exercised his rights under Falcon Corporation’s incentive stock option plan. For an option price of $20,000, he acquired stock worth $75,000. The stock became freely transferable in 2011. At the date the stocks became freely transferable, the fair market value was $95,000.
h. Robert was the beneficiary of an $800,000 life insurance policy on his Uncle Jake. He received the proceeds in October.
i. Robert had the following potential itemized deductions from AGI.
• $5,200 fair market value of stock contributed to Presbyterian Church (basis of
stock was $3,000). He had owned the stock for two years.
• $4,200 interest on consumer purchases.
• $3,900 state and local income tax.
• $6,500 medical expenses (before 7.5% floor) for himself. He also paid $15,000 of medical expenses for a parishioner who died.
• $300 for a safe deposit box that is used to store investments and related legal documents.
• $750 contribution to the campaign of the Democratic candidate for governor.
• $5,000 paid for lottery tickets associated with playing the state lottery. Robert contributed $5,000 of his net winnings to the church.
• $5,000 contribution to his traditional IRA.
• Robert lives in Montana, so he paid no sales tax.
Use Forms 1040 and 6251 and Schedules A, B, D, and E to compute Robert Kliesh’s 2011 Federal income tax liability (including AMT, if any). Suggested software: H&R BLOCK At Home.
Samuel had worked for Pearl, Inc., for 35 years when he was discharged and his position filled by a much younger person. He filed and pursued a suit for age discrimination and received an award of $1.5 million. Under the contingent fee arrangement with his attorney, one third of the award was paid directly to the attorney, with the balance going to Samuel. Samuel reported $1 million gross income on his tax return, but he did not include the $500,000 paid to the attorney. The IRS audited Samuel’s return and included the $500,000 contingency fee in gross income. At the same time, Samuel was allowed a miscellaneous itemized deduction (subject to the 2% floor) for the fee paid to the attorney. The IRS adjustment caused a tax deficiency to be assessed for both the regular income tax and the AMT. Evaluate the results reached.
Masha Quigley filed her return for 2009 and reported taxable income computed as follows.
AGI (includes $2,000 state income tax refund previously
deducted with a tax benefit)
$ 80,000
Personal exemption
(3,650)
Miscellaneous itemized deductions in excess of 2% of AGI
(28,000)
Taxable income
$ 48,350
Although Masha had state and local tax expense of $9,000, she chose not to deduct them in calculating taxable income. Masha believed that if she claimed the state and local taxes, she would be subject to the AMT. As a result, she filed her Form 1040 as a single individual and reported a tax liability of $8,281. Upon audit of the return, the IRS concluded that Masha should have included the $9,000 of state and local taxes in her itemized deductions. Thus, her decision not to deduct the state and local taxes did not relieve her from being subject to the AMT. Who is correct? Explain.
Red, White, and Blue are unrelated corporations engaged in real estate development. The three corporations formed a joint venture (treated as a partnership) to develop a tract of land. Assuming that the venture does not have a natural business year, what tax year must the joint venture adopt under the following circumstances?
Gold, Inc., is an accrual basis taxpayer. In 2012, an employee accidentally spilled hazardous chemicals on leased property. The chemicals destroyed trees on neighboring property, resulting in $30,000 of damages. In 2012, the owner of the property sued Gold, Inc., for the $30,000. Gold’s attorney believes that it is liable and that the only issue is whether the neighbor will also seek punitive damages that could be as much as three times the actual damages. In addition, as a result of the spill, Gold was in violation of its lease and was therefore required to pay the landlord $15,000. However, the amount due for the lease violation is not payable until the termination of the lease in 2015. None of these costs were covered by insurance. Jeff Stuart, the president of Gold, Inc., is generally familiar with the accrual basis tax accounting rules and is concerned about when the company will be allowed to deduct the amounts the company is required to pay as a result of this environmental disaster. Write Mr. Stuart a letter explaining these issues. Gold’s address is 200 Elm Avenue, San Jose, CA 95192.
Compute Mary’s income or deductions for 2012 using (1) the cash basis and (2) the accrual basis for each of the following:
a. In May 2012, Mary paid a license fee of $1,200 for the period June 1, 2012, through May 31, 2013.
b. In December 2012, Mary collected $10,000 for January 2013 rents. In January 2013, Mary collected $2,000 for December 2012 rents.
c. In June 2012, Mary paid $7,200 for an office equipment service contract for the period July 1, 2012, through December 31, 2013.
d. In June 2012, Mary purchased office furniture for $273,000. She paid $131,000 in cash and gave a $142,000 interest bearing note for the balance. The office furniture has an MACRS cost recovery period of seven years. Mary did not make the § 179 election and elected not to take additional first year depreciation.
How do the all events and economic performance requirements apply to the following transactions by an accrual basis taxpayer? a. The company guarantees its products for six months. At the end of 2012, customers had made valid claims for $600,000 that were not paid until 2013. Also, the company estimates that another $400,000 in claims from 2012 sales will be filed and paid in 2013.
b. The accrual basis taxpayer reported $200,000 in corporate taxable income for 2012. The state income tax rate was 6%. The corporation paid $7,000 in estimated state income taxes in 2012 and paid $2,000 in 2011 state income taxes when it filed its 2011 state income tax return in March 2012. The company filed its 2012 state income return in March 2013 and paid the remaining $5,000 of its 2012 state income tax liability.
c. An employee was involved in an accident while making a sales call. The company paid the injured victim $15,000 in 2012 and agreed to pay the victim $15,000 a year for the next nine years.
Ross Company is a computer consulting firm. The company also sells equipment to its clients. The sales of equipment account for approximately 40% of the company’s gross receipts. The company has consistently used the cash method to report its income from services and the accrual method to report its income from the sale of inventory. In June of the current year, Ross’s accountant discovered that as a small business, the company qualifies to use the cash method for all of its activities. The company is a calendar year taxpayer. As of the beginning of the current year, the company had $120,000 of inventory on hand and $90,000 of accounts receivable from the sales of equipment and $30,000 of receivables from the consulting services.
a. Compute the adjustment due to the change in accounting method.
b. Is the adjustment positive or negative? Explain.
c. When can the adjustment be taken into account in computing taxable income?
George sold land to an unrelated party in 2011. His basis in the land was $45,000, and the selling price was $120,000: $30,000 payable at closing and $30,000 (plus 10% interest) due January 1, 2012, 2013, and 2014. What would be the tax consequences of the following? [Treat each part independently and assume that (1) George did not elect out of the installment method and (2) the installment obligations have values equal to their face amounts. Ignore interest in your calculations.]
a. In 2012, George gave to his daughter the right to collect all future payments on the installment obligations.
b. In 2012, after collecting the payment due on January 1, George transferred the installment obligation to his 100% controlled corporation in exchange for additional shares of stock.
c. On December 31, 2012, George received the payment due on January 1, 2013. On December 15, 2013, George died, and the remaining installment obligation was transferred to his estate. The estate collected the amount due on January 1, 2014.
The Wren Construction Company reports its income by the completed contract method. At the end of 2012, the company completed a contract to construct a building at a total cost of $800,000. The contract price was $1.2 million, and the customer paid Wren $900,000. However, the customer refused to accept the work and would not pay anything else on the contract because he claimed that the roof did not meet specifications. Wren’s engineers estimated that it would cost $140,000 to bring the roof up to the customer’s standards. In 2013, the dispute was settled in the customer’s favor; the roof was improved at a cost of $150,000, and the customer accepted the building and paid the remaining $300,000.
a. What would be the effects of the above on Wren’s taxable income for 2012 and 2013?
b. Same as (a), except that Wren had $1,100,000 accumulated cost under the contract at the end of 2012.
Rust Company is a real estate construction company with average annual gross receipts of $4 million. Rust uses the completed contract method, and the contracts require 18 months to complete.
a. Which of the following costs would be allocated to construction in progress by Rust?
1. The payroll taxes on direct labor.
2. The current services pension costs for employees whose wages are included in direct labor.
3. Accelerated depreciation on equipment used on contracts.
4. Freight charges on materials assigned to contracts.
5. The past service costs for employees whose wages are included in direct labor.
6. Bidding expenses for contracts awarded.
b. Assume that Rust generally builds commercial buildings under contracts with the owners and reports the income by the completed contract method. The company is considering building a series of similar stores for a retail chain. The gross profit margin would be a low percentage, but the company’s gross receipts would triple. Write a letter to your client, Rust Company, explaining the tax accounting implications of entering into these contracts. Rust’s mailing address is P.O. Box 1000, Harrisonburg, VA 22807.
On March 31, 2010, Big Boats Company entered into a contract with Vacations Unlimited to produce a state of the art cruise ship, to be completed within three years. Big Boats estimated the total cost of building the ship at $300 million. The contract price was $400 million. The ship was completed on February 15, 2013.
a. What tax accounting method must Big Boats use for the contract? Why?
b. Using the financial data provided relating to the contract’s performance, complete the following schedule:
Date
Total Costs Incurred to Date
Total Percentage of Contract Completed
Current Year Revenue Accrued
Current Year Costs Deductible
12/31/10
$ 60 million
______
______
______
12/31/11
180 million
______
______
______
12/31/12
280 million
______
______
______
12/31/13
340 million
N/A
______
______
c. What are the consequences of the total cost of $340 million exceeding the estimated total cost of $300 million?
Ostrich Company makes gasoline storage tanks. Everything produced is under contract (that is, the company does not produce until it gets a contract for a product). Ostrich makes three basic models. However, the tanks must be adapted to each individual customer’s location and needs (e.g., the location of the valves and the quality of the materials and insulation). Discuss the following issues relative to Ostrich’s operations:
a. An examining IRS agent contends that each of the company’s contracts is to produce a “unique product.” What difference does it make whether the product is unique or a “shelf item”?
b. Producing one of the tanks takes over one year from start to completion, and the total price is in excess of $1 million. What costs must be capitalized for this contract that are not subject to capitalization for a contract with a shorter duration and lower cost?
c. What must Ostrich do with the costs of bidding on contracts?
d. Ostrich frequently makes several cost estimates for a contract, using various estimates of materials costs. These costs fluctuate almost daily. Assuming that Ostrich must use the percentage of completion method to report the income from the contract, what will be the consequence if the company uses the highest estimate of a contract’s costs and the actual cost is closer to the lowest estimated cost?
Hilde purchased all of the rights to a patent on a new garden tool developed by a friend of hers who is an amateur inventor. The inventor obtained the patent rights, set up a manufacturing company to produce and sell the garden tool, and produced substantial quantities of the tool, but he then became discouraged when no large garden company would agree to distribute the tool for him. Hilde purchased the patent rights (but not the manufacturing company) for $120,000 on October 24, 2011. Hilde had never engaged in such a transaction before, but she is a salesperson in the garden industry and thought she could succeed where her friend had failed. On June 27, 2012, she sold all the patent rights to Garden Tool Company for $1,233,000. Garden Tool will manufacture the tool in its own factory and sell it to its customers. What is the nature of Hilde’s gain from this transaction?
Mac, an inventor, obtained a patent on a chemical process to clean old aluminum siding so that it can be easily repainted. Mac has a $500,000 tax basis in the patent. Mac does not have the capital to begin manufacturing and selling this product, so he has done nothing with the patent since obtaining it two years ago. Now a group of individuals has approached him and offered two alternatives. Under one alternative, they will pay Mac $600,000 (payable evenly over the next 15 years) for the exclusive right to manufacture and sell the product. Under the other, they will form a business and contribute capital to it to begin manufacturing and selling the product; Mac will receive 20% of the company’s shares of stock in exchange for all of his patent rights. Discuss which alternative is better for Mac.
Elaine Case (single with no dependents) has the following transactions in 2012:
AGI (exclusive of capital gains and losses)
$240,000
Long term capital gain
22,000
Long term capital loss
(8,000)
Short term capital gain
19,000
Short term capital loss
(23,000)
What is Elaine’s net capital gain or loss? Draft a letter to Elaine describing how the net capital gain or loss will be treated on her tax return. Assume that Elaine’s income from other sources puts her in the 35% bracket. Elaine’s address is 300 Ireland Avenue, Shepherdstown, WV 25443.
In 2012, Betty (head of household with three dependents) had a $28,000 loss from the sale of a personal residence. She also purchased from an individual inventor for $18,000 (and resold in two months for $7,000) a patent on a rubber bonding process. The patent had not yet been reduced to practice. Betty purchased the patent as an investment. In addition, she had the following capital gains and losses from stock transactions:
Long term capital loss
($ 6,000)
Long term capital loss carryover from 2011
(12,000)
Short term capital gain
21,000
Short term capital loss
(7,000)
What is Betty’s net capital gain or loss? Draft a letter to Betty explaining the tax treatment of the sale of her personal residence. Assume that Betty’s income from other sources puts her in the 35% bracket. Betty’s address is 1120 West Street, Ashland, OR 97520.
Phil and Susan are married, filing a joint return. The couple have two dependent children. Susan has wages of $34,000 in 2012. Phil does not work due to a disability, but he is a buyer and seller of stocks on the Internet. He generally buys and holds for long term gain, but occasionally gets in and out of a stock quickly. The couple’s 2012 stock transactions are detailed below. In addition, they have $2,300 of qualifying dividends.
Harriet, who is single, is the owner of a sole proprietorship. Two years ago, Harriet developed a process for preserving doughnuts that gives the doughnuts a much longer shelf life. The process is not patented or copyrighted, but only Harriet knows how it works. Harriet has been approached by a company that would like to buy the process. Harriet insists that she receive a long term employment contract with the acquiring company as well as be paid for the rights to the process. The acquiring company offers Harriet a choice of two options: (1) $650,000 in cash for the process and a 10 year covenant not to compete at $65,000 per year or (2) $650,000 in cash for a 10 year covenant not to compete and $65,000 per year for 10 years in payment for the process. Which option should Harriet accept? What is the tax effect on the acquiring company of each approach?
Larry is the sole proprietor of a trampoline shop. During 2012, the following transactions occurred:
• Unimproved land adjacent to the store was condemned by the city on February 1. The condemnation proceeds were $25,000. The land, acquired in 1984, had an allocable basis of $40,000. Larry has additional parking across the street and plans to use the condemnation proceeds to build his inventory.
• A truck used to deliver trampolines was sold on January 2 for $3,500. The truck was purchased on January 2, 2008, for $6,000. On the date of sale, the adjusted basis was zero.
• Larry sold an antique rowing machine at an auction. Net proceeds were $3,900. The rowing machine was purchased as used equipment 17 years ago for $5,200 and is fully depreciated.
• Larry sold an apartment building for $200,000 on September 1. The rental property was purchased on September 1, 2009, for $150,000 and was being depreciated over a 27.5 year life using the straight line method. At the date of sale, the adjusted basis was $124,783.
• Larry’s personal yacht was stolen on September 5. The yacht had been purchased in August at a cost of $25,000. The fair market value immediately preceding the theft was $19,600. Larry was insured for 50% of the original cost, and he received $12,500 on December 1.
• Larry sold a Buick on May 1 for $9,600. The vehicle had been used exclusively for personal purposes. It was purchased on September 1, 2008, for $20,800.
• Larry’s trampoline stretching machine (owned two years) was stolen on May 5, but the business’s insurance company will not pay any of the machine’s value because Larry failed to pay the insurance premium. The machine had a fair market value of $8,000 and an adjusted basis of $6,000 at the time of theft.
• Larry had AGI of $402,000 from sources other than those described above.
• Larry has no no recaptured § 1231 look back losses.
a. For each transaction, what are the amount and nature of recognized gain or loss?
Jay sold three items of business equipment for a total of $300,000. None of the equipment was appraised to determine its value. Jay’s cost and adjusted basis for the assets are shown below.
Asset
Cost
Adjusted Basis
Skidder
$230,000
$ 40,000
Driller
120,000
60,000
Platform
620,000
–0–
Total
$970,000
$100,000
Jay has been unable to establish the fair market values of the three assets. All he can determine is that combined they were worth $300,000 to the buyer in this arm’s length transaction. How should Jay allocate the sales price and figure the gain or loss on the sale of the three assets?
Ashley Panda lives at 1310 Meadow Lane, Wayne, OH 23412, and her Social Security number is 123–45–6789. Ashley is single and has a 20 year old son, Bill. His Social Security number is 111–11–1111. Karl lives with Ashley, and she fully supports him. Bill spent 2011 traveling in Europe and was not a college student. He had gross income of $4,655 in 2011. Ashley owns the Enterprises, LLC sole proprietorship, a data processing service (98– 7654321), which is located at 456 Hill Street, Wayne, OH 43466. The business activity code is 514210. Her 2011 Form 1040, Schedule C for Panda Enterprises shows revenues of $255,000, office expenses of $66,759, employee salary of $63,000, employee payroll taxes of $4,820, meals and entertainment expenses (before the 50% reduction) of $22,000, and rent expense of $34,000. The rent expense includes payments related to renting an office ($30,000) and payments related to renting various equipment ($4,000). There is no depreciation because all depreciable equipment owned has been fully depreciated in previous years. No fringe benefits are provided to the employee. Ashley personally purchases health insurance on herself and Bill. The premiums are $23,000 per year. Ashley has an extensive stock portfolio and has prepared the following analysis:
Stock
Number of Shares
Date Purchased
Date Sold
Per Share Cost
Per Share Selling Price
Total Dividends
Beige
10
10/18/10
10/11/11
$80
$ 74
$30
Garland
30
10/11/04
10/11/11
43
157
70
Puce
15
3/10/11
8/11/11
62
33
45
Ashley had $800 of interest income from State of Ohio bonds and $600 of interest income on her Wayne Savings Bank account. She received $25,000 of alimony from her former husband. His Social Security number is 123–45–6788. Ashley itemizes her deductions and had the following items, which may be relevant to her return:
Item
Amount
Comment
Unreimbursed medical expenses for
$1,786
Does not include health insurance
Ashley (all for visits to doctors)
premiums.
State income taxes paid
1,830
Real property taxes on personal
3,230
residence
Interest paid on home mortgage
8,137
The loan is secured by the residence
(Form 1098)
and was incurred when the home
was purchased.
Charitable contributions
940
Cash paid to Ashley’s church.
Sales taxes
619
Amount per sales tax table.
Ashley made a $21,000 estimated Federal income tax payment, does not wish any of her taxes to finance presidential elections, has no foreign bank accounts or trusts, and wants any refund to be applied against her 2012 taxes. Compute Ashley’s net tax payable or refund due for 2011. If you use tax forms for your computations, you will need Form 1040 and its Schedules A, C, D, and SE and Form 8949. Suggested software: H&R BLOCK At Home.
Justin Stone was an employee of Data Care Services, Inc. His salary was $45,000 through November 10, 2011, when he was laid off. He received $7,000 of unemployment compensation from November 11, 2011, through December 31, 2011. FICA withholdings were as follows: Social Security of $1,890 ($45,000 × 4.2%) and Medicare of $653 ($45,000 × 1.45%). Justin lives at 112 Green Road, Crown City, OH 45623. His Social Security number is 111–11–1111. Justin owned an apartment building until November 22, 2011, when he sold it for $200,000. For 2011, he had rent revenue of $33,000. He incurred and paid expenses as follows: $4,568 of repairs, $22,000 of mortgage interest, and $1,000 of miscellaneous expenses. He had purchased the building on January 2, 2005, for $125,000. The building generated an operating profit each year that Justin owned it. Other information follows:
• On November 22, 2011, Justin sold for $3,500 equipment that had been used for repairing various items in the apartments. The equipment was purchased for $25,000 on July 10, 2004, and was fully depreciated prior to 2011.
• Justin has $3,000 of recaptured § 1231 losses from prior years.
• Justin is age 38, is single, is divorced, and has custody of his nine year old son, Flint. Justin provides more than 50% of Flint’s support. Flint’s Social Security number is 123–45–6789.
• Justin had $1,000 interest income from Blue Corporation bonds.
• Justin had $1,500 interest income from a State Bank certificate of deposit.
• Justin had a $2,000 0%/15% long term capital gain distribution from the Brown Stock Investment Fund.
• Justin had the following itemized deductions: $5,600 real estate taxes on his home; $8,900 mortgage interest on his home; $760 charitable contributions (all in cash, properly documented, and no single contribution exceeded $25); $7,300 state income tax withholding during 2011; $2,000 state estimated income tax payments during 2011; $2,600 sales taxes paid.
• Justin does not want to donate to the Presidential Election Campaign Fund.
• He had $12,000 of Federal income tax withholding during 2011 and made total Federal estimated income tax payments of $14,000 during 2011.
Compute Justin’s 2011 net tax payable or refund due. If you use tax forms for your computations, you will need Form 1040 and Schedules A, B, D, and E. You will also need Form 4797, but ignore Form 6251. Suggested software: H&R BLOCK At Home.
Clean Corporation runs a chain of dry cleaners. Borax is used heavily in Clean’s dry cleaning process and has been in short supply several times in the past. Clean Corporation buys a controlling interest in Dig Corporation—a borax mining concern. Clean’s sole reason for purchasing the Dig stock is to ensure Clean of a continuous supply of borax if another shortage develops. Although borax must be refined before it is usable for dry cleaning purposes, a well established commodities market exists for trading unrefined borax for refined borax. After owning the Dig stock for several years, Clean sells the stock at a loss because Dig is in financial straits. Clean no longer needs to own Dig because Clean has obtained an alternative source of borax. What is the nature of Clean’s loss on the disposition of the Dig Corporation stock? Write a letter to the controller, Salvio Guitterez, that contains your advice and prepare a memo for the tax files. The mailing address of Clean Corporation is 4455 Whitman Way, San Mateo, CA 94404.
Celine will be subject to the AMT in 2012. She owns an investment building and is considering disposing of it and investing in other realty. Based on an appraisal of the building’s value, the realized gain would be $85,000. Ed has offered to purchase the building from Celine with the closing date being December 29, 2012. Ed wants to close the transaction in 2012 because certain beneficial tax consequences will result only if the transaction is closed prior to the beginning of 2013. Abby has offered to purchase the building with the closing date being January 2, 2013. The building has a $95,000 greater AMT adjusted basis. For regular income tax purposes, Celine expects to be in the 25% tax bracket in 2012 and the 28% tax bracket in 2013. What are the relevant income tax issues that Celine faces in making her decision?
Matt, who is single, always has elected to itemize deductions rather than take the standard deduction. In prior years, his itemized deductions always exceeded the standard deduction by a substantial amount. As a result of paying off the mortgage on his residence, he projects that his itemized deductions will exceed the standard deduction by only $500. Matt anticipates that the amount of his itemized deductions will remain about the same in the foreseeable future. Matt’s AGI is $150,000. He is investing the amount of his former mortgage payment each month in tax exempt bonds; the bonds were issued in 2002. A friend recommends that Matt buy a beach house, to increase his itemized deductions with the mortgage interest deduction. What are the relevant tax issues for Matt?
Josepi’s construction company uses the completed contract method. During the three year period 2012–2014, Josepi recognized the following income on his two construction contracts.
Year
Contract 1
Contract 2
2012
$700,000*
$ –0–
2013
–0–
–0–
2014
–0–
800,000**
If Josepi had used the percentage of completion method, he would have recognized the following income.
Year
Contract 1
Contract 2
2012
$40,000
$275,000
2013
–0–
225,000
2014
–0–
300,000
Calculate Josepi’s AMT adjustment for the three tax years.
Walter, who is single, owns a personal residence in the city. He also owns a cabin near a ski resort in the mountains. He uses the cabin as a vacation home. In August, Walter borrowed $60,000 on a home equity loan and used the proceeds to reduce credit card obligations and other debt. This year, he paid the following amounts of interest.
On his personal residence
$16,000
On the cabin
7,000
On the home equity loan
2,500
On credit card obligations
1,500
On purchase of personal use SUV
1,350
What amount, if any, must Walter recognize as an AMT adjustment?
Bill, who is single with no dependents, had AGI of $100,000. His AGI included net investment income of $15,000 and gambling income of $1,100. Bill incurred the following itemized deductions for income tax purposes.
Medical expenses (before 7.5% of AGI floor)
$11,000
State income taxes
3,200
Personal property tax
2,000
Real estate tax
$ 8,400
Interest on personal residence
12,200
Interest on home (never rented to others)
3,800
Interest on home equity loan (proceeds were used to buy a
new automobile)
2,700
Investment interest expense
3,300
Charitable contribution
5,000
Casualty loss (after $100 floor, before 10% of AGI floor)
13,000
Unreimbursed employee expenses (before 2% of AGI floor)
2,400
Gambling losses
900
What is Bill’s AMT adjustment for itemized deductions? Is it positive or negative?
The portion of Earl’s estate distributed to Robert, one of Earl’s beneficiaries, is valued as follows:
Asset
Earl’s Adjusted Basis
FMV at Date of Death
FMV at Alternate Valuation Date
Cash
$10,000
$ 10,000
$ 10,000
Stock
40,000
125,000
60,000
Apartment building
60,000
300,000
325,000
Land
75,000
100,000
110,000
Although the fair market value of the stock six months after Earl’s death in 2012 turned out to be $60,000, the executor of the estate distributed it to Robert one month after Earl’s death when it was worth $85,000. Determine Robert’s basis for the assets if:
a. The primary valuation date applies.
b. The executor elects the alternate valuation date.
Tyneka inherited 1,000 shares of Aqua, Inc. stock from Joe. Joe’s basis was $35,000, and the fair market value on July 1, 2012 (the date of death) was $45,000. The shares were distributed to Tyneka on July 15, 2012. Tyneka sold the stock on July 30, 2013, for $33,000. After giving the matter more thought, she decides that Aqua is a good investment and purchases 1,000 shares for $30,000 on August 20, 2013.
a. What is Tyneka’s basis for the 1,000 shares purchased on August 20, 2013?
b. What would be Tyneka’s basis for the 1,000 Aqua shares inherited from Joe if she had given 1,000 Aqua shares to Joe on March 1, 2012 (assuming that no gift tax was paid)? Her basis at the date of the gift was $35,000, and the fair market value was $45,000.
c. Could Tyneka have obtained different tax consequences in (a) if she had sold the 1,000 shares on December 27, 2012, and purchased the 1,000 shares on January 5, 2013? Explain.
Abby’s home had a basis of $360,000 ($160,000 attributable to the land) and a fair market value of $340,000 ($155,000 attributable to the land) when she converted 70% of it to business use by opening a bed and breakfast. Four years after the conversion, Abby sells the home for $500,000 ($165,000 attributable to the land).
a. Calculate Abby’s basis for gain, loss, and cost recovery for the portion of her personal residence that was converted to business use.
b. Calculate the cost recovery deducted by Abby during the four year period of business use, assuming that the bed and breakfast is opened on January 1 of year 1 and the house is sold on December 31 of year 4.
c. What is Abby’s recognized gain or loss on the sale of the business use portion?
Tanya Fletcher owns undeveloped land (adjusted basis of $80,000 and fair market value of $92,000) on the East Coast. On January 4, 2012, she exchanges it with her sister, Lisa, for undeveloped land on the West Coast and $3,000 cash. Lisa has an adjusted basis of $72,000 for her land, and its fair market value is $89,000. As the real estate market on the East Coast is thriving, on September 1, 2013, Lisa sells the land she acquired for $120,000.
a. What are Tanya’s recognized gain or loss and adjusted basis for the West Coast land on January 4, 2012?
b. What are Lisa’s recognized gain or loss and adjusted basis for the East Coast land on January 4, 2012?
c. What is Lisa’s recognized gain or loss from the September 1, 2013 sale?
d. What effect does Lisa’s 2013 sale have on Tanya?
e. Write a letter to Tanya advising her on how she could avoid any recognition of gain associated with the January 4, 2012 exchange prior to her actual sale of the land. Her address is The Corral, El Paso, TX 79968.
Sarah exchanges a yellow bus (used in her business) for Tyler’s gray bus and some garage equipment (used in his business). The assets have the following characteristics:
Adjusted Basis
Fair Market Value
Yellow bus
$6,000
$15,000
Gray bus
3,000
11,000
Equipment
2,000
4,000
a. What are Sarah’s recognized gain or loss and basis for the gray bus and garage equipment?
b. What are Tyler’s recognized gain or loss and basis for the yellow bus?
In two unrelated transactions, Laura exchanges property that qualifies for like kind exchange treatment. In the first exchange, Laura gives up office equipment purchased in May 2010 (adjusted basis of $20,000; fair market value of $17,000) in exchange for new office equipment (fair market value of $15,000) and $2,000 cash. In the second exchange, Laura receives a parking garage (to be used in her business) with a fair market value of $50,000 in exchange for a plot of land she had held for investment. The land was purchased in April 2004 for $12,000 and has a current fair market value of $48,000. In addition to transferring the land, Laura pays an additional $2,000 to the other party.
a. What is Laura’s adjusted basis for the office equipment?
b. When does the holding period begin?
c. What is Laura’s adjusted basis for the parking garage?
d. When does the holding period begin?
e. How could Laura structure either of the transactions differently to produce better tax consequences?
Ed owns investment land with an adjusted basis of $35,000. Polly has offered to purchase the land from Ed for $175,000 for use in a real estate development. The amount offered by Polly is $10,000 in excess of what Ed perceives as the fair market value of the land. Ed would like to dispose of the land to Polly but does not want to incur the tax liability that would result. He identifies an office building with a fair market value of $175,000 that he would like to acquire. Polly purchases the office building and then exchanges the office building for Ed’s land.
a. Calculate Ed’s realized and recognized gain on the exchange and his basis for the office building.
b. Calculate Polly’s realized and recognized gain on the exchange and her basis in the land.
Tom and Frank are brothers. Each owns investment property in the other’s hometown. To make their lives easier, they decide to legally exchange the investment properties. Under the terms of the exchange, Frank will transfer realty (adjusted basis of $52,000; fair market value of $80,000) and Tom will exchange realty (adjusted basis of $60,000; fair market value of $92,000). Tom’s property is subject to a mortgage of $12,000 that will be assumed by Frank.
a. What are Frank’s and Tom’s recognized gains?
b. What are their adjusted bases?
c. As an alternative, Frank has proposed that rather than assuming the mortgage, he will transfer cash of $12,000 to Tom. Tom would use the cash to pay off the mortgage. Advise Tom on whether this alternative would be beneficial to him from a tax perspective.
Jason, a calendar year taxpayer, is the sole proprietor of a hardware store. His adjusted basis for the building and the related land is $150,000. On March 4, 2012, state authorities notify Jason that his property is going to be condemned so that the highway can be widened. On June 1, Jason’s property is officially condemned, and he receives an award of $212,000. Because Jason’s business has been successful in the past, he would like to reopen the hardware store in a new location.
a. What is the earliest date Jason can acquire a new hardware store and qualify for § 1033 postponement?
b. On June 30, Jason purchases land and a building for $200,000. Assuming that he elects postponement of gain under § 1033, what is his recognized gain?
c. What is Jason’s adjusted basis for the new land and building?
d. If he does not elect § 1033, what are Jason’s recognized gain and adjusted basis?
e. Suppose he invests the $212,000 condemnation proceeds in the stock market on June 30. What is Jason’s recognized gain?
Wanda, a calendar year taxpayer, owned a building (adjusted basis of $250,000) in which she operated a bakery that was destroyed by fire in December 2012. She receives insurance proceeds of $290,000 for the building the following March. Wanda is considering two options regarding the investment of the insurance proceeds. First, she could purchase a local building (suitable for a bakery) that is for sale for $275,000. Second, she could buy a new home for $290,000 and go back to college and finish her degree.
a. To minimize her tax liability, which of these alternatives should Wanda choose?
b. What is the latest date on which Wanda can replace the involuntarily converted property to qualify for § 1033?
c. What is the latest date on which Wanda can replace the involuntarily converted property to qualify for § 1033 if the involuntary conversion is a condemnation?
Webb, who is single, listed his personal residence with a real estate agent on March 3, 2012, at a price of $350,000. He rejected several offers in the $300,000 range during the summer. Finally, on August 16, 2012, he and the purchaser signed a contract to sell for $342,000. The sale (i.e., closing) took place on September 7, 2012. The closing statement showed the following disbursements:
Real estate agent’s commission
$ 21,000
Appraisal fee
750
Exterminator’s certificate
300
Recording fees
500
Mortgage to First Bank
205,000
Cash to seller
114,450
Webb’s adjusted basis for the house is $175,000. He owned and occupied the house for six years. On October 1, 2012, Webb purchases another residence for $270,000.
a. Calculate Webb’s recognized gain on the sale.
b. What is Webb’s adjusted basis for the new residence?
c. Assume instead that the selling price is $735,000. What is Webb’s recognized gain? His adjusted basis for the new residence?
Ben owns a beach house (five years) and a cabin in the mountains (four years). His adjusted basis is $280,000 in the beach house and $315,000 in the mountain cabin. Ben also rents a townhouse in the city where he is employed. During the year, he occupies each of the three residences as follows:
Townhouse
120 days
Beach house
170 days
Mountain cabin
75 days
The beach house is close enough to the city so that he can commute to work during the spring and early fall. While this level of occupancy may vary slightly from year to year, it is representative during the time period that Ben has owned the two residences.
As Ben plans on retiring in several years, he sells both residences. The mountain cabin is sold on March 3, 2012, for $540,000 (related selling expenses of $30,000). The beach house is sold on December 10, 2012, for $600,000 (related selling expenses of $36,000).
a. Calculate Ben’s lowest recognized gain on the sale of the two residences.
b. Assume instead that both residences satisfy the two year ownership and use tests as Ben’s principal residence. Because the mountain cabin is sold first, is it possible for Ben to apply the § 121 exclusion to the sale of the beach house? Why or why not?
Missy, age 30, has owned her principal residence (adjusted basis of $225,000) for five years. During the first three years of ownership, she occupied it as her principal residence. During the past two years, she was in graduate school and rented the residence. After graduate school, Missy returned to the same location where she previously worked. At this point, she purchased another residence for $400,000 and listed her old residence for sale at $340,000. Due to a slow real estate market, 11 months later Missy finally receives an offer of $330,000.
a. What is Missy’s recognized gain if she immediately accepts the $330,000 offer (i.e., 11 months after the listing date)? Selling expenses are $20,000.
b. What is Missy’s recognized gain if she rejects the $330,000 offer and accepts another offer of $340,000 three months later (i.e., 14 months after the listing date)?
c. Advise Missy on which offer she should accept (assume that she is in the 28% tax bracket).
Alton Newman, age 67, is married and files a joint return with his wife, Clair, age 65. Alton and Clair are both retired, and during 2011, they received Social Security benefits of $10,000. Alton’s Social Security number is 111–11–1111, and Clair’s is 123–45–6789. They reside at 210 College Drive, Columbia, SC 29201. Alton, who retired on January 1, 2011, receives benefits from a qualified pension plan of $750 a month for life. His total contributions to the plan (none of which were deductible) were $68,250. In January 2011, he received a bonus of $2,000 from his former employer for service performed in 2010. Although the former employer accrued the bonus in 2010, it was not paid until 2011. Clair, who retired on December 31, 2010, started receiving benefits of $900 a month on January 1, 2011. Her contributions to the qualified pension plan (none of which were deductible) were $74,100. Clair had casino winnings for the year of $4,500 and casino losses of $2,100, while Alton won $17,000 on a $1 lottery ticket. On September 27, 2011, Alton and Clair received a 10% stock dividend on 600 shares of stock they owned. They had bought the stock on March 5, 2004, for $20 a share. On December 16, 2011, they sold the 60 dividend shares for $55 a share. On October 10, 2011, Clair sold the car she had used in commuting to and from work for $17,000. She had paid $31,000 for the car in 2005. On July 14, 2003, Alton and Clair received a gift of 1,000 shares of stock from their son, Thomas. Thomas’s basis in the stock was $35 a share (fair market value at the date of gift was $25). No gift tax was paid on the transfer. Alton and Clair sold the stock on October 8, 2011, for $24 a share. On May 1, 2011, Clair’s mother died, and Clair inherited her personal residence. In February 2011, her mother had paid the property taxes for 2011 of $2,100. The residence had a fair market value of $235,000 and an adjusted basis to the mother of $160,000 on the date of her death. Clair listed the house with a real estate agent, who estimated it was worth $240,000 as of December 31, 2011. Clair received rent income of $6,000 on a beach house she inherited three years ago from her Uncle Chuck. She had rented the property for one week during the July 4 weekend and one week during the Thanksgiving holiday. Uncle Chuck’s adjusted basis in the beach house was $150,000, and its fair market value on the date of his death was $240,000. Clair and Alton used the beach house for personal purposes for 56 days during the year. Expenses associated with the house were $3,700 for utilities, maintenance, and repairs; $2,200 for property taxes; and $800 for insurance. There are no mortgages on the property. Clair and Alton paid estimated Federal income tax of $3,100 and had itemized deductions of $6,800 (excluding any itemized deductions associated with the beach house and gambling). If they have overpaid their Federal income tax, they want the amount refunded. Both Clair and Alton want $3 to go to the Presidential Election Campaign Fund. Compute their net tax payable or refund due for 2011. If you use tax forms for your computations, you will need Form 1040 and Schedule D. Suggested software: H&R BLOCK At Home.
Alice Honeycutt, age 39, is a self employed accountant. Alice’s Social Security number is 123–45–6789. Her address is 101 Glass Road, Hammond, LA 70402. Her income and expenses associated with her accounting practice for 2012 are as follows:
Revenues (cash receipts during 2012)
$195,000
Expenses
Salaries
$ 97,000
Office supplies
3,200
Postage
2,900
Depreciation of equipment
45,000
Telephone
800
$148,900
Because Alice is a cash method taxpayer, she does not record her receivables as revenue until she receives cash payment. At the beginning of 2012, her accounts receivable were $52,000, and the balance had decreased to $25,000 by the end of the year. Alice used one room in her 10 room house as the office for her accounting practice (300 square feet out of a total square footage of 3,000). She paid the following expenses related to the house during 2011:
Utilities
$4,500
Insurance
1,800
Property taxes
5,000
Repairs
3,000
Alice had purchased the house on September 1, 2011, for $300,000 (exclusive of land cost). Alice has one child, Adolph, age 16. Adolph’s Social Security number is 123–45–6788. Adolph lives with his father during the summer and with Alice for the rest of the year. Alice can document that she spent $16,000 during 2012 for the child’s support. The father normally provides about $10,000 per year, but this year he gave Adolph a new car for Christmas. The cost of the car was $24,000. The divorce decree is silent regarding the dependency exemption for Adolph. Alice does not provide her former spouse with a signed Form 8332 for 2012. Under the terms of the divorce decree, Alice is to receive alimony of $8,000 per month. The payments will terminate at Alice’s death or at her remarriage. Alice provides part of the support of her father, age 67. Her father’s Social Security number is 123–45–6787. The total support in 2012 for her father was as follows:
Social Security benefits
$5,200
From Alice
2,900
From Bob, Alice’s brother
2,200
From Susan, Alice’s sister
2,300
Bob and Susan have both indicated their willingness to sign a multiple support waiver form if it will benefit Alice.
Alice’s deductible itemized deductions during 2012, excluding any itemized deductions related to the house, were $24,000. She made estimated tax payments of $29,000.
Part 1—Tax Computation
Compute Alice’s lowest net tax payable or refund due for 2012.
Part 2—Tax Planning
Alice and her former husband have been discussing the $8,000 alimony he pays her each month. Because his new wife has a health problem, he does not believe he can afford to continue to pay the $10,000 each month. He is in the 15% tax bracket. If Alice will agree to decrease the amount by $1,000 each month, he will agree that the amount paid is not alimony for tax purposes. Assume that Alice projects that her marginal tax rate in 2013 will be 25% (both with and without the alimony decrease). Write a letter to Alice that contains your advice on whether she should agree to her former husband’s proposal. Also prepare a memo for the tax files.
Inez Butler is the sole shareholder of Pelican, Inc., which owns car dealerships. Pelican purchases the assets of a Chevrolet dealership. The purchase price of $12 million is allocated to the purchased assets based on the fair market values. This includes $3.5 million that is allocated to goodwill. In addition to the price of $12 million, Pelican incurred legal fees of $250,000 associated with the purchase. According to an itemized invoice provided by the attorney, 80% of the legal fees relate to the acquisition of inventory. Consequently, Pelican assigned $200,000 of the legal fees to inventory with the balance being capitalized as goodwill. The expectation is that 60% of the $200,000 will become part of cost of goods sold in the current year with the remaining 40% doing so in the following year. The IRS has concluded that § 1060 limits the amount that may be assigned to the fair market value of the inventory. Therefore, the $200,000 of legal fees cannot be added to the basis of the inventory. Instead, it must be included in goodwill under the residual method. Who is correct?
April owned an annuity contract (cash balance of $250,000) issued by Teal Insurance Company. She decides to switch to an annuity contract issued by Brown Insurance Company. To make the change, April instructed Teal to cash out her annuity by issuing a check to Brown. Teal refused to do so and issued a check for $250,000 payable to April. April intended that the exchange of annuity contracts qualify for tax deferral treatment under § 1035(a)(3). Consequently, rather than depositing or cashing the check from Teal, she endorsed it and sent it to Brown. On audit, an IRS agent contends that the transaction does not qualify under § 1035(a) (3). For tax deferral to apply, the initial annuity contract must be directly exchanged for the new annuity contract. Evaluate the positions of the parties.
During the year, Eugene had the four property transactions summarized on the next page. Eugene is a collector of antique glassware and occasionally sells a piece to get funds to buy another. What are the amount and nature of the gain or loss from each of these transactions?
Fred is an investor in vacant land. When he thinks he has identified property that would be a good investment, he approaches the landowner, pays the landowner for a “right of first refusal” to purchase the land, records this right in the property records, and then waits to see if the land increases in value. The right of first refusal is valid for four years. Fourteen months ago, Fred paid a landowner $9,000 for a right of first refusal. The land was selected as the site of a new shopping center, and the landowner was offered $1 million for the land. In its title search on the land, the buyer discovered Fred’s right of first refusal and involved him in the purchase negotiations. Ultimately, the landowner paid Fred $220,000 to give up his right of first refusal; the landowner then sold the land to the buyer for $4,220,000. Fred has a marginal tax rate of 35%.
a. What difference does it make whether Fred treats the right of first refusal as an option to purchase the land?
b. What difference does it make whether Fred is a “dealer” in land?
Sarah has investments in four passive activity partnerships purchased several years ago. Last year the income and losses were as follows:
Activity
Income (Loss)
A
$ 30,000
B
(30,000)
C
(15,000)
D
(5,000)
In the current year, she sold her interest in Activity D for a $10,000 gain. Activity D, which had been profitable until last year, had a current loss of $1,500. How will the sale of Activity D affect Sarah’s taxable income in the current year?
Kristin Graf (123 Baskerville Mill Road, Jamison, PA 18929) is trying to decide how to invest a $10,000 inheritance. One option is to make an additional investment in Rocky Road Excursions in which she has an at risk basis of $0, suspended losses under the at risk rules of $7,000, and suspended passive losses of $1,000. If Kristin makes this investment, her share of the expected profits this year would be $8,000. If her investment stays the same, her share of profits from Rocky Road Excursions would be $1,000. Another option is to invest $10,000 as a limited partner in the Ragged Mountain Winery; this investment would produce passive income of $9,000. Write a letter to Kristin to review the tax consequences of each alternative. Kristin is in the 28% tax bracket.
The end of the year is approaching, and Maxine has begun to focus on ways of minimizing her income tax liability. Several years ago she purchased an investment in Teal Limited Partnership, which is subject to the at risk and the passive activity loss rules. (Last year Maxine sold a different investment that was subject to these rules but produced passive income.) She believes that her investment in Teal has good long term economic prospects. However, it has been generating tax losses for several years in a row. In fact, when she was discussing last year’s income tax return with her tax accountant, he said that unless “things change” with respect to her investments, she would not be able to deduct losses this year.
a. What was the accountant referring to in his comment?
b. You learn that Maxine’s current at risk basis in her investment is $1,000 and that her share of the current loss is expected to be $13,000. Based on these facts, how will her loss be treated?
c. After reviewing her situation, Maxine’s financial adviser suggests that she invest at least an additional $12,000 in Teal to ensure a full loss deduction in the current year. How do you react to his suggestion?
d. What would you suggest Maxine consider as she attempts to maximize her current year deductible loss?
Bonnie and Jake are married with no dependents and live in Montana (not a community property state). Because Jake has large medical expenses, they seek your advice about filing separately to save taxes. Their income and expenses for 2012 are as follows:
Bonnie’s salary
$ 42,500
Jake’s salary
26,000
Interest income (joint)
1,500
Rental loss from actively managed rental property
(23,000)
Jake’s unreimbursed medical expenses
8,500
All other itemized deductions:*
Bonnie
9,000
Jake
3,400
Determine whether Bonnie and Jake should file jointly or separately for 2012.
Mary and Charles have owned a beach cottage on the New Jersey shore for several years and have always used it as a family retreat. When they acquired the property, they had no intentions of renting it. Because family circumstances have changed, they are considering using the cottage for only two weeks a year and renting it for the remainder of the year. Their AGI approximates $80,000 per year, and they are in the 32% tax bracket (combined Federal and state). Interest and real estate taxes total $8,000 per year and are expected to continue at this level in the foreseeable future. If Mary and Charles rent the property, their incremental revenue and expenses are projected to be:
Rent income
$ 22,000
Rental commissions
(4,000)
Maintenance expenses
(9,000)
Depreciation expense
(10,000)
If the cottage is converted to rental property, they plan to be actively involved in key rental and maintenance decisions. Given the tax effects of converting the property to rental use, would the cash flow from renting the property be enough to meet the $12,000 annual mortgage payment? Explain.
Helen borrowed $100,000 to acquire a parcel of land to be held for investment purposes. During 2012, she paid interest of $11,000 on the loan. She had AGI of $75,000 for the year. Other items related to Helen’s investments include the following:
Investment income
$10,000
Long term capital gain on sale of stock
7,500
Investment counsel fees
2,000
Helen is unmarried and elects to itemize her deductions. She has no miscellaneous itemized deductions other than the investment counsel fees.
a. Determine Helen’s investment interest deduction for 2012.
b. Discuss the treatment of the portion of Helen’s investment interest that is disallowed in 2012.
Polly and her husband, Leo, file a joint return and expect to report 2012 AGI of $75,000. Polly’s employer offers a child and dependent care reimbursement plan that allows up to $7,000 of qualifying expenses to be reimbursed in exchange for a $7,000 reduction in the employee’s salary. Because Polly and Leo have two minor children requiring child care that costs $6,500 each year, she is wondering if she should sign up for the program instead of taking advantage of the credit for child and dependent care expenses. Polly and Leo are in the 25% tax bracket. Analyze the effect of the two alternatives. How would your answer differ if Polly and Leo’s AGI was $25,000 instead of $75,000? Assume in that case that their marginal tax rate is 10%.
Ahmed Zinna (16 Southside Drive, Charlotte, NC 28204), one of your clients, owns two retail establishments in downtown Charlotte and has come to you seeking advice concerning the tax consequences of complying with the Americans with Disabilities Act. He understands that he needs to install various features at his stores (e.g., ramps, doorways, and restrooms that are handicap accessible) to make them more accessible to disabled individuals. He asks whether any tax credits are available to help offset the cost of the necessary changes. He estimates the cost of the planned changes to his facilities as follows.
Location
Projected Cost
Calvin Street
$22,000
Stowe Avenue
8,500
Ahmed reminds you that the Calvin Street store was constructed in 2004, and that the Stowe Avenue store is in a building that was constructed in 1947. Ahmed operates his business as a sole proprietorship and has approximately eight employees at each location. Write a letter to Ahmed in which you summarize your conclusions concerning the tax consequences of his proposed capital improvements.
Which of the following individuals qualify for the earned income credit?
a. Thomas is single, 21 years old, with no qualifying children. His income consists of $9,000 in wages.
b. Shannon, who is 27 years old, maintains a household for a dependent 11 year old son and is eligible for head of household tax rates. Her income consists of $16,050 of salary and $50 of taxable interest (Shannon’s AGI is $16,100).
c. Keith and Susan, both age 30, are married and file a joint return. Keith and Susan have no dependents. Their combined income consists of $28,500 of salary and $100 of taxable interest (their AGI is $28,600).
d. Colin is a 26 year old, self supporting, single taxpayer. He has no qualifying children and generates earnings of $9,000.
Beth R. Jordan lives at 2322 Sky view Road, Mesa, AZ 85201. She is a tax accountant with Mesa Manufacturing Company, 1203 Western Avenue, Mesa, AZ 85201 (employer identification number 11–1111111). She also writes computer software programs for tax practitioners and has a part time tax practice. Beth is single and has no dependents. Beth’s birthday is July 4, 1971, and her Social Security number is 123–45–6789. She wants to contribute $3 to the Presidential Election Campaign Fund. The following information is shown on Beth’s 2011 Wage and Tax Statement (Form W–2).
Line
Description
Amount
1
Wages, tips, other compensation
$63,000.00
2
Federal income tax withheld
10,500.00
3
Social Security wages
63,000.00
4
Social Security tax withheld
2,646.00
5
Medicare wages and tips
63,000.00
6
Medicare tax withheld
913.50
15
State
Arizona
16
State wages, tips, etc.
63,000.00
17
State income tax withheld
1,650.00
Beth received interest of $1,300 from Arizona Federal Savings and Loan and $400 from Arizona State Bank. Each financial institution reported the interest income on a Form 1099–INT. She received qualified dividends of $800 from Blue Corporation, $750 from Green Corporation, and $650 from Orange Corporation. Each corporation reported Beth’s dividend payments on a Form 1099–DIV. Beth received a $1,100 income tax refund from the state of Arizona on April 29, 2011. On her 2010 Federal income tax return, she reported total itemized deductions of $8,200, which included $2,200 of state income tax withheld by her employer. Fees earned from her part time tax practice totaled $3,800. She paid $600 to have the tax returns processed by a computerized tax return service. On February 8, 2011, Beth bought 500 shares of Gray Corporation common stock for $17.60 a share. On September 12, Beth sold the stock for $14 a share. Beth bought a used sport utility vehicle for $6,000 on June 5, 2011. She purchased the vehicle from her brother in law, who was unemployed and was in need of cash. On November 2, 2011, she sold the vehicle to a friend for $6,500. On January 2, 2011, Beth acquired 100 shares of Blue Corporation common stock for $30 a share. She sold the stock on December 19, 2011, for $55 a share. During 2011, Beth received royalties of $16,000 on a software program she had written. Beth incurred the following expenditures in connection with her software writing activities.
Cost of personal computer (100% business use)
$7,000
Cost of printer (100% business use)
2,000
Furniture
3,000
Supplies
650
Fee paid to computer consultant
3,500
Beth elected to deduct the maximum portion of the cost of the computer, printer, and furniture allowed under the provisions of § 179. This equipment and furniture was placed in service on January 15, 2011. Although her employer suggested that Beth attend a convention on current developments in corporate taxation, Beth was not reimbursed for the travel expenses of $1,420 she incurred in attending the conference. The $1,420 included $200 for meals. During 2011, Beth paid $300 for prescription medicines and $2,875 in physician and hospital bills. Medical insurance premiums were paid by her employer. Beth paid real property taxes of $1,766 on her home. Interest on her home mortgage was $3,845, and interest paid to credit card companies totaled $320. Beth contributed $30 each week to her church and $10 each week to the United Way. Professional dues and subscriptions totaled $350. Beth maintained her sales tax receipts, showing total purchases of $1,954. Beth paid $1,000 in estimated Federal income taxes throughout the year.
Part 1—Tax Computation Compute the 2011 net tax payable or refund due for Beth R. Jordan. If you use tax forms for your solution, you will need Forms 1040, 2106–EZ, and 4562 and Schedules A, B, C, D, and SE. Suggested software: H&R BLOCK At Home.
Part 2—Tax Planning Beth is anticipating significant changes in her life in 2012, and she has asked you to estimate her taxable income and tax liability for that year. She just received word that she has been qualified to adopt a two year old daughter. Beth expects that the adoption will be finalized in 2012 and that she will incur approximately $2,000 of adoption expenses. In addition, she expects to incur approximately $3,500 of child and dependent care expenses relating to the care of her new daughter, which will enable her to keep her job at Mesa Manufacturing. However, with the additional demands on her time because of her daughter, she has decided to discontinue her two part time jobs (i.e., the part time tax practice and her software business), and she will cease making estimated income tax payments. In your computations, assume that all other income and expenditures will remain at approximately the same levels as in 2011.
Ashby and Curtis, a young professional couple, have a two year old son, Jason. Curtis works full time as an electrical engineer, but Ashby has not worked outside the home since Jason was born. As Jason is getting older, Ashby thinks that Jason would benefit from attending nursery school several times a week, which would give her an opportunity to reinvigorate her love of painting at a nearby art studio. Ashby thinks that if she is lucky, the proceeds from the sale of her paintings will pay for the nursery school tuition. But, in addition, she is planning to claim the credit for child and dependent care expenses because the care provided Jason at the nursery school is required for her to pursue her art. Can Ashby and Curtis claim the credit for child and dependent care expenses for the nursery school expenditure? Why or why not?
Your ophthalmologist, Dr. Hunter Francis (55 Wheatland Drive, Hampton, CT 06247), has been very pleased with the growth of his practice in the 15 years he has been in business. This growth has resulted, at least in part, because he has aggressively marketed his services and tried to accommodate clients with various needs. This year, Dr. Francis purchased a sophisticated piece of equipment that enables him to diagnose persons with mental handicaps, hearing impairments, and physical disabilities without having to go through a series of intrusive questions. In addition, he can treat his patients who are not disabled much more accurately and efficiently by using this equipment. Since purchasing the machine this year for $9,500, Dr. Francis has used it on many occasions. Unfortunately, he has not been able to attract any new patients who are disabled, even though previously he referred such people to other ophthalmologists who owned the equipment that he now owns. Therefore, the primary purpose for acquiring the equipment (i.e., to attract disabled patients) has not been realized. Write a letter to Dr. Francis explaining whether he may claim the disabled access credit for this acquisition.
During a recent Sunday afternoon excursion, Miriam, an admirer of early twentieth century architecture, discovers a 1920s era house in the countryside outside Mobile, Alabama. She wants not only to purchase and renovate this house, but also to move the structure into Mobile so that her community can enjoy its architectural features. Being aware of the availability of the tax credit for rehabilitation expenditures, Miriam wants to maximize her use of the provision, if it is available in this case, once the renovation work begins in Mobile. Miriam informs you that she will pursue the purchase, relocation, and renovation of the house only if the tax credit is available. Comment on Miriam’s decision and on whether any renovation expenditures incurred qualify for the tax credit for rehabilitation expenditures.
Ross would like to dispose of some land he acquired five years ago because he believes that it will not continue to appreciate. Its value has increased by $50,000 over the five year period. He also intends to sell stock that has declined in value by $50,000 during the eight month period he has owned it. Ross has four offers to acquire the stock and land:
Buyer number 1:
Exchange land.
Buyer number 2:
Purchase land for cash.
Buyer number 3:
Exchange stock.
Buyer number 4:
Purchase stock for cash.
Identify the tax issues relevant to Ross in disposing of this land and stock.
Bob is notified by the city public housing authority on May 3, 2012, that his apartment building is going to be condemned as part of an urban renewal project. On June 1, 2012, Carol offers to buy the building from Bob. Bob sells the building to Carol on
June 30, 2012. Condemnation occurs on September 1, 2012, and Carol receives the condemnation proceeds from the city. Assume that both Bob and Carol are calendar year taxpayers.
a. What is the earliest date on which Bob can dispose of the building and qualify for § 1033 postponement treatment?
b. Does the sale to Carol qualify as a § 1033 involuntary conversion? Why or why not?
c. What is the latest date on which Carol can acquire qualifying replacement property and qualify for postponement of the realized gain?
d. What type of property will be qualifying replacement property?
Norm is negotiating the sale of a tract of his land to Pat. Use the following classification scheme to classify each of the items contained in the proposed sales contract:
Legend
DARN
=
Decreases amount realized by Norm
IARN
=
Increases amount realized by Norm
DABN
=
Decreases adjusted basis to Norm
IABN
=
Increases adjusted basis to Norm
DABP
=
Decreases adjusted basis to Pat
IABP
=
Increases adjusted basis to Pat
a. Norm is to receive cash of $50,000.
b. Norm is to receive Pat’s note payable for $25,000, payable in three years.
c. Pat assumes Norm’s mortgage of $5,000 on the land.
d. Pat agrees to pay the realtor’s sales commission of $8,000.
e. Pat agrees to pay the property taxes on the land for the entire year. If each party paid his or her respective share, Norm’s share would be $1,000 and Pat’s share would be $3,000.
Karen makes the following purchases and sales of stock:
Transaction
Date
Number of Shares
Company
Price per Share
Purchase
1 1 2010
300
MDG
$ 75
Purchase
6 1 2010
150
GRU
300
Purchase
11 1 2010
60
MDG
70
Sale
12 3 2010
200
MDG
80
Purchase
3 1 2011
120
GRU
375
Sale
8 1 2011
90
GRU
330
Sale
1 1 2012
150
MDG
90
Sale
2 1 2012
75
GRU
500
Assuming that Karen is unable to identify the particular lots that are sold with the original purchase, what is the recognized gain or loss on each type of stock as of the following dates:
Irene Andrews is purchasing the assets of a sole proprietorship from Seth. The fair market values of the assets as agreed to by Irene and Seth are as follows:
Asset
Seth’s Adjusted Basis
Fair Market Value
Accounts receivable
$ –0–
$ 10,000
Notes receivable
15,000
20,000
Machinery and equipment
85,000
110,000
Building
100,000
320,000
Land
200,000
350,000
The purchase price is $950,000.
a. Calculate Seth’s realized and recognized gain.
b. Determine Irene’s basis for each of the assets.
c. Write a letter to Irene informing her of the tax consequences of the purchase. Her address is 300 Riverside Drive, Cincinnati, OH 45207.
Paula owns stock in Yellow, Inc., which she purchased for $5,000. The stock has a fair market value of $6,000. Because Yellow is experiencing a cash flow problem, it chooses to distribute nontaxable stock rights instead of cash to its shareholders.
a. What effect does this distribution have on Paula’s basis in her Yellow stock if the fair market value of the stock rights is $1,000?
b. What is Paula’s basis for the nontaxable stock rights?
c. What is Paula’s recognized gain or loss if she sells the stock rights for $1,200?
d. What is Paula’s recognized gain or loss if she allows the stock rights to lapse?
e. If the fair market value of the stock rights is $750 (not $1,000), how will this change the answers to parts (a) and (b)?
Roberto has received various gifts over the years. He has decided to dispose of the following assets he received as gifts:
a. In 1951, he received land worth $32,000. The donor’s adjusted basis was $35,000. Roberto sells the land for $95,000 in 2012.
b. In 1956, he received stock in Gold Company. The donor’s adjusted basis was $19,000. The fair market value on the date of the gift was $34,000. Roberto sells the stock for $40,000 in 2012.
c. In 1962, he received land worth $15,000. The donor’s adjusted basis was $20,000. Roberto sells the land for $9,000 in 2012.
d. In 2003, he received stock worth $30,000. The donor’s adjusted basis was $42,000. Roberto sells the stock for $38,000 in 2012. What is the recognized gain or loss from each of the preceding transactions? Assume for each of the gift transactions that no gift tax was paid.
Ryan L. and Chloe R. Alford (ages 44 and 42, respectively) are husband and wife who live at 165 Peach Avenue, Denver, CO 80202. Ryan is a regional sales manager for Stilt Industries, a national wholesaler of plumbing and heating supplies, while Chloe is a part time dental hygienist for a chain of dental clinics.
• Ryan is classified by Stilt as a statutory employee with compensation for 2011 (based on commissions) of $91,000. He is expected to maintain his own office and pay for all business expenses from this amount. Stilt does not require him to render an accounting. It does not withhold for Federal and state income taxes but does withhold and account for the payroll taxes incurred (e.g., Social Security and Medicare). Ryan is covered by Stilt’s noncontributory medical plan but has chosen not to participate in its § 401(k) retirement plan.
Ryan’s employment related expenses for 2011 are summarized below.
Airfare
$7,800
Lodging
5,000
Meals (during travel status)
4,600
Entertainment
3,400
Ground transportation (e.g., limos, rental cars, and taxis)
900
Business gifts
600
Office supplies (includes postage, overnight delivery, and
1,300
copying)
The entertainment involved business meals for purchasing agents, store owners, and building contractors. The business gifts consisted of $50 gift certificates to a national steak house. These were sent by Ryan during the Christmas holidays to 12 of his major customers. In addition, Ryan drove his 2008 Ford Expedition 13,000 miles for business (7,000 before July 1) and 3,000 for personal during 2011. He purchased the Expedition on March 15, 2008, and has always used the automatic (standard) mileage method for tax purposes. Parking and tolls relating to business use total $280 for 2011.
• When the Alfords purchased their present residence in March 2008, they devoted 300 of the 3,000 square feet of living space to an office for Ryan. The property cost $340,000 ($40,000 of which is attributable to the land) and has since appreciated in value. Expenses during 2011 relating to the residence (see below for mortgage interest and property taxes) are as follows:
Insurance
$2,500
Repairs and maintenance
900
Utilities
4,600
Carpeting (office area only)
1,700
In terms of depreciation, the Alfords use the MACRS percentage tables applicable to 39 year nonresidential real property.
• Chloe works part time as a substitute for whichever hygienist is ill or on vacation or when one of the clinics is particularly busy (e.g., prior to the beginning of the school year). Besides her transportation, she has to provide and maintain her own uniforms. Her expenses for 2011 appear below.
Uniforms (including laundry charges of $320)
$710
State and city occupational licenses
390
Professional journal and membership dues in the American
320
Dental Hygiene Association
Correspondence study course (taken online) dealing with
teeth whitening procedures
400
In addition, Chloe drove the family Chevrolet Suburban 1,800 miles going from her home to and from work assignments.
Her Form W–2 for the year shows earnings of $40,000 and income tax withholdings of $4,000 (Federal) and $1,000 (state) and the proper amount of payroll taxes (Social Security and Medicare). Because Chloe is a part time employee, she is not included in her employer’s medical or retirement plans.
• Besides the items already mentioned, the Alfords had the following receipts during 2011:
Interest income—
State of Iowa general purpose bonds
$1,500
Ford Motor Company bonds
700
Wells Fargo Bank CD
1,100
$ 3,300
Federal income tax refund for tax year 2010
260
Life insurance proceeds paid by Eagle
Assurance Corporation
200,000
Inheritance of savings account from Amy
Alford
50,000
Sales proceeds from two ATVs
8,000
For several years, the Alfords’ household has included Ryan’s divorced mother, Amy, who has been claimed as their dependent. In late November 2011, Amy unexpectedly died in her sleep of a coronary arrest. Unknown to them, Amy had a life insurance policy and a savings account (with Ryan as the designated beneficiary of each). In 2010, the Alfords purchased two ATVs for $12,000. After several near mishaps, they decided the sport was too dangerous. In 2011, they sold the ATVs to their neighbor.
• Additional expenditures for 2011 include:
Funeral expenses for Amy
$ 5,500
Taxes—
Real property taxes on personal
residence
$5,400
Colorado state income tax due (paid in
April 2011 for tax year 2010)
280
5,680
Mortgage interest on personal residence
6,400
Paid church pledge
2,400
Contributions to traditional IRAs for Chloe
and Ryan ($5,000 + $5,000)
10,000
In 2011, the Alfords made quarterly estimated tax payments of $1,400 (Federal) and $500 (state) for a total of $5,600 (Federal) and $2,000 (state). Compute the Alfords’ Federal income tax payable or refund due, assuming that they file a joint income tax return for 2011. If they have overpaid, they want the amount refunded. They do not want to contribute to the Presidential Election Campaign Fund. Social Security numbers are as follows: 123–45–6787 (Amy), 123–45–6788 (Chloe), and 123–45–6789 (Ryan). Ryan’s business code number is 423700. Suggested software: H&R BLOCK At Home.
Aaron, a resident of Minnesota, has been a driver for Green Delivery Service for the past six years. For this purpose, he leases a truck from Green, and his compensation is based on a percentage of the income resulting from his pickup and delivery services. Green allows its drivers to choose their 10 hour shifts and does not exercise any control on how these services are carried out (e.g., the route to be taken or the order in which parcels are delivered or picked up). Under Green’s operating agreement with its drivers, Green can terminate the arrangement after 30 days’ notice. In practice, however, Green allows its truckers to quit immediately without giving advance notice. The agreement also labels the drivers as independent contractors. Green maintains no health or retirement plans for its drivers, and each year it reports their income by issuing Forms 1099–MISC (and not Forms W–2). Green requires its drivers to maintain a commercial driver”s license and be in good standing with the state highway law enforcement division. Citing the employment tax Regulations in §§ 31.3121(d)–1(c)(2) and 31.3306(i)–1(b), an IRS agent contends that Aaron is an independent contractor and, therefore, is subject to the self employment tax. Based on Peno Trucking, Inc. (93 TCM 1027, T.C. Memo. 2007–66), Aaron disagrees and contends that he is an employee (i.e., not self employed). Who is correct? Why?
Richard Harding is the sheriff of Howard County, Indiana. In addition to the usual law enforcement duties, the sheriff has the responsibility of maintaining the detention facility (i.e., county jail). Further, he must furnish meals for all prisoners in accordance with certain nutritional standards prescribed by the state. Although the sheriff must absorb the cost of the meals, the county provides a personal allowance. During the year, Sheriff Harding received a salary of $35,000 (as reported on a Form W–2 issued by Howard County). He spent $90,000 on prisoner meals and received meal allowances of $110,000. On his income tax return, he reported the salary as employee income, but listed the allowances and meals on a Schedule C. Thus, he treated himself as self employed by claiming the cost of the meals as a deduction for AGI. Upon audit, the IRS determined that the Schedule C treatment was improper. Harding was not in a separate trade or business of providing meals, but was merely carrying out his employment related duties. The costs of the meals are employee business expenses deductible only as miscellaneous itemized deductions on Schedule A. As such, they are subject to the 2% of AGI floor. Is Sheriff Harding or the IRS correct? Why?
Frank, a widower, had a serious stroke and is no longer capable of caring for himself. He has three sons, all of whom live in different states. Because they are unable to care for Frank in their homes, his sons have placed him in a nursing home equipped to provide medical and nursing care. Total nursing home expenses amount to $36,000 per year. Of this amount, $15,000 is directly attributable to medical and nursing care. Frank’s Social Security benefits are used to pay $10,000 of the nursing home charges. He has no other income. His sons plan to split the remaining medical expenses equally.
a. What portion of the nursing home charges is potentially deductible as a medical expense?
b. Can you provide Frank’s sons with a tax planning idea for maximizing the deduction for his medical expenses?
Mason Gregg’s car was destroyed by a flood. Unfortunately, his insurance had lapsed two days before he incurred the loss. Mason uses his car for both business and personal use. Mason, who is self employed, does not have adequate savings to replace the car and must borrow money to purchase a new car. He is considering taking out a home equity loan, at a 5% interest rate, to obtain funds for the purchase. Margaret, his wife, would prefer not to do so because they paid off their mortgage recently and she does not want to incur any obligations related to their home. She would prefer to sell some of their stock in Bluebird, Inc., to raise funds to purchase the new car. Mason does not want to sell the stock because it has declined in value since they purchased it and he is convinced that its price will increase in the next two years. Mason has suggested that they obtain conventional financing for the purchase from their bank, which charges 7% interest on car loans. Identify the tax issues related to each of the three alternatives Mason and Margaret are considering.
Nancy, who is a professor at State University, does some of her writing and class preparation at home at night. Her department provides faculty members with a $1,500 allowance for a desktop computer for use at school, but does not ordinarily provide computers for use at home. To have a computer for use at school and at home, Nancy has asked the department to provide her with a notebook computer that costs $2,500. The head of her department is willing to provide the standard $1,500 allowance and will permit Nancy to purchase the $2,500 notebook computer if she makes a donation of $1,000 to the department. If she acquires the notebook computer, Nancy’s home use of the computer will be approximately 60% for business and 40% for personal use not related to her job. Discuss the tax issues that Nancy should consider in deciding whether to acquire the notebook computer under these conditions.
Andy had AGI of $80,000 for 2012. He was injured in a rock climbing accident and paid $5,200 for hospital expenses and $2,800 for doctor bills. Andy also incurred medical expenses of $2,400 for his child, Jodi, who lives with his former wife, Pearl, and is claimed as a dependent by her. In 2013, Andy was reimbursed $2,600 by his insurance company for the medical expenses attributable to the rock climbing accident.
a. Compute Andy’s deduction for medical expenses in 2012.
b. Assume that Andy would have elected to itemize his deductions even if he had no medical expenses in 2012. How much, if any, of the $2,600 reimbursement must be included in gross income in 2013?
c. Assume that Andy’s other itemized deductions in 2012 were $5,300 and that he filed as a head of household. How much of the $2,600 reimbursement must he include in gross income in 2013?
Pablo suffers from emphysema and severe allergies and, upon the recommendation of his physician, has a dust elimination system installed in his personal residence. In connection with the system, Pablo incurs and pays the following amounts in 2012:
Doctor and hospital bills
$1,600
Dust elimination system
8,800
Increase in utility bills due to the system
350
Cost of certified appraisal
220
In addition, Pablo pays $750 for prescribed medicines.
The system has an estimated useful life of 15 years. The appraisal was to determine the value of Pablo’s residence with and without the system. The appraisal states that his residence was worth $325,000 before the system was installed and $327,500 after the installation. Pablo’s AGI for the year was $50,000. How much of the medical expenses qualifiy for the medical expense deduction in 2012?
During the current year, Susan incurred and paid the following expenses for Beth (her daughter), Ed (her father), and herself:
Surgery for Beth
$4,500
Red River Academy charges for Beth:
Tuition
5,100
Room, board, and other expenses
4,800
Psychiatric treatment
5,100
Doctor bills for Ed
2,200
Prescription drugs for Susan, Beth, and Ed
780
Insulin for Ed
540
Nonprescription drugs for Susan, Beth, and Ed
570
Charges at Heartland Nursing Home for Ed:
Medical care
5,000
Lodging
2,700
Meals
2,650
Beth qualifies as Susan’s dependent, and Ed would also qualify except that he receives $7,400 of taxable retirement benefits from his former employer. Beth’s psychiatrist recommended Red River Academy because of its small classes and specialized psychiatric treatment program that is needed to treat Beth’s illness. Ed, who is a paraplegic and diabetic, entered Heartland in October. Heartland offers the type of care that he requires. Upon the recommendation of a physician, Susan has an air filtration system installed in her personal residence. She suffers from severe allergies. In connection with this equipment, Susan incurs and pays the following amounts during the year:
Filtration system and cost of installation
$6,500
Increase in utility bills due to the system
700
Cost of certified appraisal
360
The system has an estimated useful life of 10 years. The appraisal was to determine the value of Susan’s residence with and without the system. The appraisal states that the system increased the value of Susan’s residence by $2,200. Ignoring the 7.5% floor, what is the total of Susan’s expenses that qualifies for the medical expense deduction?
In 2005, Angela purchased a personal residence from Victor. She paid $300,000 for the residence. Victor paid real estate taxes of $9,125 for the real estate property tax year, of which $5,500 was allocable to the portion of the year that Angela owned the residence. Angela sold the residence to Earl for $350,000 on December 7, 2012. Earl paid real estate taxes of $10,220 for the real estate property tax year, of which $9,576 was allocable to the portion of the year that Angela owned the residence. Angela provided you with the above information and asked that you determine her basis in the residence at the date of sale, the amount realized for the residence, her realized gain on the sale, and her property tax deduction for 2012. Write a letter to Angela Henson, who lives at 17250 Calistoga Drive, El Dorado, KS 67042, to communicate your answers.
Norma, who uses the cash method of accounting, lives in a state that imposes an income tax. In April 2012, she files her state income tax return for 2011 and pays an additional $1,000 in state income taxes. During 2012, her withholdings for state income tax purposes amount to $7,400, and she pays estimated state income tax of $700. In April 2013, she files her state income tax return for 2012, claiming a refund of $1,800. Norma receives the refund in August 2013.
a. Assuming that Norma itemized deductions in 2012, how much may she claim as a deduction for state income taxes on her Federal return for calendar year 2012 (filed April 2013)?
b. Assuming that Norma itemized deductions in 2012, how will the refund of $1,800 that she received in 2013 be treated for Federal income tax purposes?
c. Assume that Norma itemized deductions in 2012 and that she elects to have the $1,800 refund applied toward her 2013 state income tax liability. How will the $1,800 be treated for Federal income tax purposes?
d. Assuming that Norma did not itemize deductions in 2012, how will the refund of $1,800 received in 2013 be treated for Federal income tax purposes?
Ramon had AGI of $180,000 in 2012. He contributed stock in Charlton, Inc. (a publicly traded corporation), to the American Heart Association, a qualified charitable organization. The stock was worth $105,000 on the date it was contributed. Ramon had acquired it as an investment two years ago at a cost of $84,000.
a. Assuming that Ramon carries over any disallowed contribution from 2012 to future years, what is the total amount he can deduct as a charitable contribution?
b. What is the maximum amount Ramon can deduct as a charitable contribution in 2012?
c. What factors should Ramon consider in deciding how to treat the contribution for Federal income tax purposes?
d. Assume that Ramon dies in December 2012. What advice would you give the executor of his estate with regard to possible elections that can be made relative to the contribution?
On December 28, 2012, Roberta purchased four tickets to a charity ball sponsored by the city of San Diego for the benefit of underprivileged children. Each ticket cost $200 and had a fair market value of $35. On the same day as the purchase, Roberta gave the tickets to the minister of her church for personal use by his family. At the time of the gift of the tickets, Roberta pledged $4,000 to the building fund of her church. The pledge was satisfied by a check dated December 31, 2012, but not mailed until January 3, 2013.
a. Presuming that Roberta is a cash basis and calendar year taxpayer, how much can she deduct as a charitable contribution for 2012?
b. Would the amount of the deduction be any different if Roberta was an accrual basis taxpayer? Explain.
In December each year, Eleanor Young contributes 10% of her gross income to the United Way (a 50% organization). Eleanor, who is in the 28% marginal tax bracket, is considering the following alternatives for satisfying the contribution.
Fair Market Value
(1) Cash donation
$23,000
(2) Unimproved land held for six years ($3,000 basis)
23,000
(3) Blue Corporation stock held for eight months ($3,000 basis)
23,000
(4) Gold Corporation stock held for two years ($28,000 basis)
23,000
Eleanor has asked you to help her decide which of the potential contributions listed above will be most advantageous tax wise. Evaluate the four alternatives and write a letter to Eleanor to communicate your advice to her. Her address is 2622 Bay shore Drive, Berkeley, CA 94709.
Alice J. and Bruce M. Byrd are married taxpayers who file a joint return. Their Social Security numbers are 123–45–6789 and 111–11–1111, respectively. Alice’s birthday is September 21, 1964, and Bruce’s is June 27, 1963. They live at 473 Revere Avenue, Lowell, MA 01850. Alice is the office manager for Lowell Dental Clinic, 433 Broad Street, Lowell, MA 01850 (employer identification number 98–7654321). Bruce is the manager of a Super Burgers fast food outlet owned and operated by Plymouth Corporation, 1247 Central Avenue, Hauppauge, NY 11788 (employer identification number 11–1111111). The following information is shown on their Wage and Tax Statements (Form W–2) for 2011.
Line
Description
Alice
Bruce
1
Wages, tips, other compensation
$52,600
$61,500
2
Federal income tax withheld
4,180
5,990
3
Social Security wages
52,600
61,500
4
Social Security tax withheld
2,209
2,583
5
Medicare wages and tips
52,600
61,500
6
Medicare tax withheld
763
892
15
State
Massachusetts
Massachusetts
16
State wages, tips, etc.
52,600
61,500
17
State income tax withheld
2,280
2,290
The Byrds provide over half of the support of their two children, Cynthia (born January 25, 1987, Social Security number 123–45–6788) and John (born February 7, 1991, Social Security number 123–45–6786). Both children are full time students and live with the Byrds except when they are away at college. Cynthia earned $3,700 from a summer internship in 2011, and John earned $3,400 from a part time job. During 2011, the Byrds furnished 60% of the total support of Bruce’s widower father, Sam Byrd (born March 6, 1935, Social Security number 123–45–6787). Sam lived alone and covered the rest of his support with his Social Security benefits. Sam died in November, and Bruce, the beneficiary of a policy on Sam’s life, received life insurance proceeds of $600,000 on December 28. The Byrds had the following expenses relating to their personal residence during 2011:
Property taxes
$4,720
Qualified interest on home mortgage
9,130
Repairs to roof
4,780
Utilities
3,810
Fire and theft insurance
2,290
The following facts relate to medical expenses for 2011:
Medical insurance premiums
$4,380
Doctor bill for Sam incurred in 2010 and not paid until 2011
7,760
Operation for Sam
7,310
Prescription medicines for Sam
860
Hospital expenses for Sam
2,850
Reimbursement from insurance company, received in 2011
3,000
The medical expenses for Sam represent most of the 60% that Bruce contributed toward his father’s support.
Other relevant information follows:
• When they filed their 2010 state return in 2011, the Byrds paid additional state income tax of $950.
• During 2011, Alice and Bruce attended a dinner dance sponsored by the Lowell Police Disability Association (a qualified charitable organization). The Byrds paid $400 for the tickets. The cost of comparable entertainment would normally be $160.
• The Byrds contributed $4,800 to Lowell Presbyterian Church and gave used clothing (cost of $1,100 and fair market value of $450) to the Salvation Army. All donations are supported by receipts and are in very good condition.
• In 2011, the Byrds received interest income of $2,695, which was reported on a Form 1099–INT from Second National Bank.
• Alice’s employer requires that all employees wear uniforms to work. During 2011, Alice spent $482 on new uniforms and $211 on laundry charges.
• Bruce paid $320 for an annual subscription to the Journal of Franchise Management.
• Neither Alice’s nor Bruce’s employer reimburses for employee expenses.
• The Byrds do not keep the receipts for the sales taxes they paid and had no major purchases subject to sales tax.
• Alice and Bruce paid no estimated Federal income tax. Neither Alice nor Bruce wants to designate $3 to the Presidential Election Campaign Fund.
Part 1—Tax Computation Compute net tax payable or refund due for Alice and Bruce Byrd for 2011. If they have overpaid, they want the amount to be refunded to them. If you use tax forms for your computations, you will need Forms 1040 and 2106 and Schedules A and B. Suggested software: H&R BLOCK At Home.
Part 2—Tax Planning Alice and Bruce are planning some significant changes for 2012. They have provided you with the following information and asked you to project their taxable income and tax liability for 2012. The Byrds will invest the $600,000 of life insurance proceeds in short term certificates of deposit (CDs) and use the interest for living expenses during 2012. They expect to earn total interest of $21,000 on the CDs. Bruce has been promoted to regional manager, and his salary for 2012 will be $85,000. He estimates that state income tax withheld will increase by $4,000 and the Social Security tax withheld will be $3,570. Alice, who has been diagnosed with a serious illness, will take a leave of absence from work during 2012. The estimated cost for her medical treatment is $14,500, of which $5,500 will be reimbursed by their insurance company in 2012. John will graduate from college in December 2011 and will take a job in New York City in January 2012. His starting salary will be $37,500. Assume that all of the information reported in 2011 will be the same in 2012 unless other information has been presented above.
After several years of a difficult marriage, Donald and Marla agreed to a divorce. As part of the property settlement, Marla transferred to Donald corporate stock, a commercial building, and a personal residence. Donald transferred other property to Marla, but the fair market value of the property was $600,000 less than the fair market value of the property Marla had transferred to him. To make the settlement equal, Donald agreed to pay Marla $600,000, payable over 10 years at 8% interest. For several years, Donald deducted the interest on his Federal income tax return as investment interest. Upon audit, the IRS disallowed the interest deduction, classifying it as nondeductible personal interest. Donald believes the interest is deductible and has asked you to find support for the deduction. Write a letter indicating your findings to Donald Jansen, 104 South Fourth Street, Dalton, GA 30720.
Heather wants to invest $40,000 in a relatively safe venture and has discovered two alternatives that would produce the following reportable ordinary income and loss over the next three years:
Year
Alternative 1 Income (Loss)
Alternative 2 Income (Loss)
1
($20,000)
($48,000)
2
(28,000)
32,000
3
72,000
40,000
She is interested in the after tax effects of these alternatives over a three year horizon. Assume that Heather’s investment portfolio produces sufficient passive income to offset any potential passive loss that may arise from these alternatives, that her cost of capital is 6% (the present value factors are 0.9434, 0.8900, and 0.8396), that she is in the 25% tax bracket, that each investment alternative possesses equal growth potential, and that each alternative exposes her to comparable financial risk. In addition, assume that in the loss years for each alternative, there is no cash flow from or to the investment (i.e., the loss is due to depreciation), while in those years when the income is positive, cash flows to Heather equal the amount of the income. Based on these facts, compute the present value of these two investment alternatives and determine which option Heather should choose.
Emily has $100,000 that she wants to invest and is considering the following two options:
• Option A: Investment in Redbird Mutual Fund, which is expected to produce interest income of $8,000 per year.
• Option B: Investment in Cardinal Limited Partnership (buys, sells, and operates wine vineyards). Emily’s share of the partnership’s ordinary income and loss over the next three years would be as follows:
Year
Income (Loss)
1
($ 8,000)
2
(2,000)
3
34,000
Emily is interested in the after tax effects of these alternatives over a three year horizon. Assume that Emily’s investment portfolio produces ample passive income to offset any passive losses that may be generated. Her cost of capital is 8% (the present value factors are 0.92593, 0.85734, and 0.79383), and she is in the 28% tax bracket. The two investment alternatives possess equal growth potential and comparable financial risk. Based on these facts, compute the present value of these two investment alternatives and determine which option Emily should choose.
Harry Pickart, one of your clients, operates a business that rents aircraft parts to motion picture studios for use in film production. Harry purchased most of the aircraft parts at auctions held throughout the United States. At those auctions, Harry usually acquired the parts in large quantities because he speculated that he would be able to use at least some of them in his rental business. After the conclusion of a film production, the movie studio returns the aircraft parts it rented from Harry. The parts are often returned in damaged condition or with pieces missing. Harry sometimes attempts to repair a damaged part so that it can be rented again. After being subjected to wear and tear from use, however, a part deteriorates over time, which varies depending on the particular part and its treatment by the studios during rental. Harry believes that all of the aircraft parts have a useful life of less than four years and, therefore, are entitled to be classed as three year property. Write a letter to Harry that contains your advice on whether the aircraft parts can be depreciated over three years. Also prepare a memo for the tax files. Harry’s mailing address is P.O. Box 100, Sun River, OR 97707.
During the year, Kristen holds two jobs. After an eight hour day at the first job, she works three hours at the second job. On Fridays of each week, she returns home for dinner before going to the second job. On the other days (Monday through Thursday), she goes directly from the first job to the second job, stopping along the way for a meal. The mileage involved is as follows:
Home to first job
18
First job to second job
20
Home to second job
24
a. Assuming that Kristen works 49 weeks during the year, how much of her mileage is deductible?
b. Can Kristen deduct the dinners she purchased? Why or why not?
Kirk is employed by an accounting firm and uses his automobile in connection with his work. During the month of October 2012, he works at the office for 3 days and participates in the audit of a key client for 20 days. In the audit situation, Kirk goes directly from his home to the client’s office. On all other days, he drives to his employer’s office. On four Saturdays in October, he drives from his home to a local university where he attends classes in a part time MBA program. Relevant mileage is as follows:
Home to office
3
Office to audit client
2
Home to audit client
10
Home to university
5
Using the automatic mileage method, what is Kirk’s deduction for the month?
Kim is the regional sales manager for a fast food chain. She starts her work day by driving from home to the regional office, works there for several hours, and then visits the three sales outlets in her region. Relevant mileage is as follows:
Home to regional office
11
Regional office to sales outlet 1
12
Sales outlet 1 to sales outlet 2
14
Sales outlet 2 to sales outlet 3
13
Sales outlet 3 to home
16
If Kim uses the automatic mileage method and works 242 days in 2012, what is her deduction for the year?
In June of this year, Dr. and Mrs. Bret Spencer traveled to Denver to attend a three day conference sponsored by the American Society of Implant Dentistry. Bret, a practicing oral surgeon, participated in scheduled technical sessions dealing with the latest developments in surgical procedures. On two days, Mrs. Spencer attended group meetings where various aspects of family tax planning were discussed. On the other day, she went sightseeing. Mrs. Spencer does not work for her husband, but she does their tax returns and handles the family investments. Expenses incurred in connection with the conference are summarized below.
Airfare (two tickets)
$2,000
Lodging (single and double occupancy are the
same rate—$250 each day)
750
Meals ($200 × 3 days)*
600
Conference registration fee (includes $120 for
Family Tax Planning sessions)
620
Car rental
300
How much, if any, of these expenses can the Spencers deduct?
Abigail works for a clothing manufacturer as a dress designer. She travels to New York City to attend three days of fashion shows and then spends four days sightseeing. Her expenses are as follows:
Airfare
$1,600
Lodging (6 nights)
2,400
Meals (6 days)
1,600
Airport transportation
120
[Assume that lodging/meals are the same amount for the business and personal portion of the trip (e.g., $200 per day for meals).]
a. Presuming no reimbursement, how much can Abigail deduct as to the trip?
b. Would the tax treatment of Abigail’s deduction differ if she was an independent contractor (rather than an employee)? Explain.
Caden, a financial planner, decides to quit his job with an investment bank in Charleston, South Carolina, and establish a private practice in Santa Fe, New Mexico. In connection with the move, he incurs the following expenses:
Moving van charge
$4,500
Lodging during move
540
Meals during move
410
Loss on sale of residence in Charleston
$9,000
Mileage for personal autos
3,500 miles
How much of these expenses, if any, can Caden deduct?
Upon losing his job as a plant manager in Quincy (Massachusetts), Anthony incurs $6,200 in job search expenses. Having no success in finding new employment in the same type of work, Anthony moves to Clearwater (Florida) in 2012 and begins a charter boat business. His expenses in connection with the move are summarized below.
Penalty for breaking lease on Quincy rented residence
Marlo is employed as a full time high school teacher. The school district where he works recently instituted a policy requiring all of its teachers to start working on a master’s degree. Pursuant to this new rule, Marlo spent most of the summer of 2012 taking graduate courses at an out of town university. His expenses are as follows:
Tuition
$6,400
Books and course materials
1,400
Lodging
1,600
Meals
2,400
Laundry and dry cleaning
300
Campus parking
260
In addition, Marlo drove his personal automobile 2,100 miles in connection with the education. He uses the automatic mileage method.
a. How much, if any, of these expenses might qualify as deductions for AGI?
b. How much, if any, of these expenses might qualify as deductions from AGI?
In each of the following independent situations, determine how much, if any, qualifies as a deduction for AGI under § 222 (qualified tuition and related expenses):
a. Sophia is single and is employed as an architect. During 2012, she spends $3,900 in tuition to attend law school at night. Her MAGI is $66,000.
b. John is single and is employed as a pharmacist. During 2012, he spends $2,400 ($2,100 for tuition and $300 for books) to take a course in herbal supplements at a local university. His MAGI is $60,000.
c. Hailey is married and is employed as a bookkeeper. She spends $5,200 for tuition and $900 for books and supplies pursuing a bachelor’s degree in accounting. Her MAGI is $40,000 on the separate return she files.
d. Eric spends $6,500 of his savings on tuition to attend Carmine State College. Eric is claimed as a dependent by his parents.
e. How much, if any, of the above amounts not allowed under § 222 might otherwise qualify as a deduction from AGI?
Dexter is a licensed commercial pilot who works for Kite Charter Jet Service.
Typically, Dexter, who lives near the airport, flies a charter out of Frankfort, Kentucky, to either Las Vegas or Reno, spends several nights there, and then returns home with the same group. Kite provides Dexter with a travel allowance of $1,700 per month but requires no accountability. For the current calendar year, Dexter had the following job related expenses:
Meals
$ 8,000
Lodging
11,000
Transportation (taxis, limos)
600
Uniforms
1,100
Dry cleaning of uniforms
300
Annual physical exam
1,000
The uniforms are required to be worn on the job. The Federal Aviation Administration requires the annual physical exam for the maintenance of a commercial pilot’s license. How may Dexter treat these expenses for Federal income tax purposes?
During the current year, Paul, the vice president of a bank, made gifts in the following amounts:
To Sarah (Paul’s personal assistant) at Christmas
$36
To Darryl (a key client)—$3 was for gift wrapping
53
To Darryl’s wife (a homemaker) on her birthday
20
To Veronica (Paul’s boss) at Christmas
30
In addition, on professional assistants’ day, Paul takes Sarah to lunch at a cost of $82. Presuming that Paul has adequate substantiation and is not reimbursed, how much can he deduct?
Melanie is employed full time as an accountant for a national hardware chain. She also has a private consulting practice, which provides tax advice and financial planning to the general public. For this purpose, she maintains an office in her home.
Expenses relating to her home are as follows:
Real property taxes
$3,600
Interest on home mortgage
3,800
Operating expenses of home
900
Depreciation allocated to 20% business use
1,500
Melanie’s income from consulting is $17,000, and the related expenses are $5,000.
a. What is Melanie’s office in the home deduction?
b. Suppose Melanie also spent $4,000 to repaint and replace the carpet in the office.
How do these additional costs change the answer to part (a)?
c. Suppose Melanie’s income from consulting is only $8,000 (not $17,000). How does this change the answer to part (a)?
Answer the following independent questions with respect to traditional IRA contributions for 2012:
a. Juan, age 41, earns a salary of $28,000 and is not an active participant in any other qualified plan. His wife, Agnes, has no earned income. What is the maximum total deductible contribution to their IRAs? Juan wants to contribute as much as possible to his own IRA.
b. Abby, age 29, has earned income of $25,000, and her husband, Sam, has earned income of $2,600. They are not active participants in any other qualified plan. What is the maximum contribution to their IRAs?
c. Leo’s employer makes a contribution of $3,500 to Leo’s simplified employee pension plan. If Leo is single, has earned income of $32,000, and has AGI of $29,000, what amount, if any, can he contribute to an IRA?
During the year, Brenda has the following expenses related to her employment:
Airfare
$8,500
Meals
4,000
Lodging
4,900
Transportation while in travel status (taxis and limos)
940
Entertainment of clients
8,000
Although Brenda renders an adequate accounting to her employer, she is reimbursed for only $12,000 of the above expenses. What are Brenda’s tax consequences based on the following assumptions?
a. The $12,000 reimbursement does not designate which expenses are covered.
b. The reimbursement specifically covers only the meals and entertainment expenses.
c. The reimbursement covers any of the expenses other than meals and entertainment.
d. If Brenda has a choice of reimbursement procedures [parts (a), (b), or (c) above], which should she select? Why?
B. J. and Carolyn Grace are full time employees. B. J. is an elementary school teacher, and Carolyn is a registered nurse at a hospital. During the year, they incur the following employment related expenses:
School supplies for use in the classroom
$1,400
Emergency room uniforms
800
Union dues (teachers association)
200
Job hunting expenses (Carolyn obtained another
nursing position but decided not to change jobs)
1,300
Continuing education correspondence courses
(required to maintain nursing license)
380
Professional dues and subscriptions
1,100
None of these expenses are reimbursed by the employers. For the year, the Graces file a joint return reflecting salary income of $90,000. They also have gambling income of $6,000 and gambling losses of $7,000 (fully substantiated). They pay $400 to have their tax return prepared. They have other itemized deductions (i.e., interest on home mortgage, property taxes on personal residence, state income taxes, and charitable contributions) of $14,500. Determine the total amount of itemized deductions allowed to the Graces.
Adelene, who lives in a winter resort area, rented her personal residence for 14 days while she was visiting Brussels. Rent income was $5,000. Related expenses for the year were as follows:
During the year (not a leap year), Anna rented her vacation home for 30 days, used it personally for 20 days, and left it vacant for 315 days. She had the following income and expenses:
Rent income
$ 7,000
Expenses
Real estate taxes
2,500
Interest on mortgage
9,000
Utilities
2,400
Repairs
1,000
Roof replacement (a capital expenditure)
12,000
Depreciation
7,500
a. Compute Anna’s net rent income or loss and the amounts she can itemize on her tax return, using the court’s approach to allocating property taxes and interest.
b. How would your answer in part (a) differ using the IRS’s method of allocating property taxes and interest?
Elisa and Clyde operate a retail sports memorabilia shop. For the current year, sales revenue is $55,000 and expenses are as follows:
Cost of goods sold
$21,000
Advertising
1,000
Utilities
2,000
Rent
4,500
Insurance
1,500
Wages to Boyd
8,000
Elisa and Clyde pay $8,000 in wages to Boyd, a part time employee. Because this amount is $1,000 below the minimum wage, Boyd threatens to file a complaint with the appropriate Federal agency. Although Elisa and Clyde pay no attention to Boyd’s threat, Chelsie (Elisa’s mother) gives Boyd a check for $1,000 for the disputed wages. Both Elisa and Clyde ridicule Chelsie for wasting money when they learn what she has done. The retail shop is the only source of income for Elisa and Clyde.
a. Calculate Elisa and Clyde’s AGI.
b. Can Chelsie deduct the $1,000 payment on her tax return?
c. How could the tax position of the parties be improved?
Robin is on the accrual basis, and Isabelle and Peter are on the cash basis. Isabelle and Peter each loaned the Robin Corporation $40,000 out of their separate funds. On December 31, 2012, Robin accrued interest at 7% on both loans. The interest was paid on February 4, 2013. What is the tax treatment of this interest expense/income to Isabelle, Peter, and Robin?
For each of the following independent transactions, calculate the recognized gain or loss to the seller and the adjusted basis to the buyer.
a. Bonnie sells Parchment, Inc. stock (adjusted basis $17,000) to Phillip, her brother, for its fair market value of $12,000.
b. Amos sells land (adjusted basis $85,000) to his nephew, Boyd, for its fair market value of $70,000.
c. Susan sells a tax exempt bond (adjusted basis $20,000) to her wholly owned corporation for its fair market value of $19,000.
d. Ron sells a business truck (adjusted basis $20,000) that he uses in his sole proprietorship to his cousin, Agnes, for its fair market value of $18,500.
e. Martha sells her partnership interest (adjusted basis $175,000) in Pearl Partnership to her adult daughter, Kim, for $220,000.
Lee incurred the following expenses in the current tax year. In the spaces provided, indicate whether each expenditure is deductible for AGI, from AGI, or not deductible.
In early 2010, Walter Hodges began investigating the real estate market with the intention of acquiring real estate for investment or rental. He had not previously been involved in any real estate rental or investment ventures. Walter started marketing his business via business cards, flyers, and word of mouth in spring 2010. At the same time, he completed a business plan for buying, remodeling, and renting property. In October 2010, Walter paid $25,000 for training classes designed to provide real estate investment skills. He obtained a loan for his business of $45,000 from the U.S. Small Business Administration in November 2010. During the same month, he obtained an employer ID number from the IRS. In December 2010, he opened a checking account and obtained a credit card in the name of the business. Walter attempted to purchase several properties during the last half of 2010, but he was unsuccessful until he acquired property on December 30, 2010. He listed the property for rent in early January 2011 and was successful in renting it in March 2011. On his Form 1040 for 2010, Walter prepared a Schedule C on which he showed a business loss of $29,000. He included the cost of the training classes, automobile expenses, meals and entertainment, computer and software expenses, and supplies. The IRS has disallowed Walter’s $29,000 deduction on the grounds that he was not yet in a trade or business during 2010. Evaluate the position taken by the IRS.
In 2009, John opened an investment account with Randy Hansen, who held himself out to the public as an investment adviser and securities broker. John contributed $200,000 to the account in 2009. John provided Randy with a power of attorney to use the $200,000 to purchase and sell securities on John’s behalf. John instructed Randy to reinvest any gains and income earned. In 2009, 2010, and 2011, John received statements of the amount of income earned by his account and included these amounts in his gross income for these years. In 2012, it was discovered that Randy’s purported investment advisory and brokerage activity was in fact a fraudulent investment arrangement known as a Ponzi scheme. In reality, John’s account balance was zero, the money having been used by Randy in his scheme. Identify the relevant tax issues for John.
During 2012, someone broke into Jacob’s personal residence and took the following items:
Asset
Adjusted Basis
FMV before
FMV after
Insurance Recovery
Business computer
$12,000
$10,000
$–0–
$ 7,000
Bearer bonds
30,000
25,000
–0–
–0–
Silverware
7,000
20,000
–0–
18,000
Cash
8,000
8,000
–0–
–0–
Jacob is an employee and used the computer 100% of the time in his employment. Although his homeowner’s insurance policy paid Jacob $7,000 for the stolen computer, Jacob’s employer did not reimburse Jacob for any of the remainder of his loss. Jacob’s AGI for the year, before considering any of the above items, is $50,000. Determine the total deduction for the stolen items on Jacob’s 2012 tax return.
Olaf owns a 500 acre farm in Minnesota. A tornado hit the area and destroyed a farm building and some farm equipment and damaged a barn. Fortunately for Olaf, the tornado occurred after he had harvested his corn crop. Applicable information is as follows:
Item
Adjusted Basis
FMV before
FMV after
Insurance Proceeds
Building
$90,000
$ 70,000
$ –0–
$70,000
Equipment
40,000
50,000
–0–
25,000
Barn
90,000
120,000
70,000
25,000
Because of the extensive damage caused by the tornado, the President designated the area as a disaster area.
Olaf, who files a joint return with his wife, Anna, had $174,000 of taxable income last year. Their taxable income for the current year, excluding the loss from the tornado, is $250,000. Determine the amount of Olaf and Anna’s loss and the year in which they should take the loss.
Heather owns a two story building. The building is used 40% for business use and 60% for personal use. During 2012, a fire caused major damage to the building and its contents. Heather purchased the building for $800,000 and has taken depreciation of $100,000 on the business portion. At the time of the fire, the building had a fair market value of $900,000. Immediately after the fire, the fair market value was $200,000. The insurance recovery on the building was $600,000. The contents of the building were insured for any loss at fair market value. The business assets had an adjusted basis of $220,000 and a fair market value of $175,000. These assets were totally destroyed. The personal use assets had an adjusted basis of $50,000 and a fair market value of $65,000. These assets were also totally destroyed. If Heather’s AGI is $100,000 before considering the effects of the fire, determine her itemized deduction as a result of the fire. Also determine Heather’s AGI.
On July 24 of the current year, Sam Smith was involved in an accident with his business use automobile. Sam had purchased the car for $30,000. The automobile had a fair market value of $20,000 before the accident and $8,000 immediately after the accident. Sam has taken $20,000 of depreciation on the car. The car is insured for the fair market value of any loss. Because of Sam’s history, he is afraid that if he submits a claim, his policy will be canceled. Therefore, he is considering not filing a claim. Sam believes that the tax loss deduction will help mitigate the loss of the insurance reimbursement. Sam’s current marginal tax rate is 35%. Write a letter to Sam that contains your advice with respect to the tax and cash flow consequences of filing versus not filing a claim for the insurance reimbursement for the damage to his car. Also prepare a memo for the tax files. Sam’s address is 450 Colonel’s Way, Warrensburg, MO 64093.
Jane Smith, age 40, is single and has no dependents. She is employed as a legal secretary by Legal Services, Inc. She owns and operates Typing Services located near the campus of Florida Atlantic University at 1986 Campus Drive. Jane is a material participant in the business. She is a cash basis taxpayer. Jane lives at 2020 Oak crest Road, Boca Raton, FL 33431. Jane’s Social Security number is 123–45–6789. Jane indicates that she wants to designate $3 to the Presidential Election Campaign Fund. During 2011, Jane had the following income and expense items:
a. $100,000 salary from Legal Services, Inc.
b. $20,000 gross receipts from her typing services business.
c. $700 interest income from Acme National Bank.
d. $1,000 Christmas bonus from Legal Services, Inc.
e. $60,000 life insurance proceeds on the death of her sister.
f. $5,000 check given to her by her wealthy aunt.
g. $100 won in a bingo game.
h. Expenses connected with the typing service:
Office rent
$7,000
Supplies
4,400
Utilities and telephone
4,680
Wages to part time typists
5,000
Payroll taxes
500
Equipment rentals
3,000
i. $9,500 interest expense on a home mortgage (paid to San Jose Savings and Loan).
j. $15,000 fair market value of silverware stolen from her home by a burglar on October 12, 2011. Jane had paid $14,000 for the silverware on July 1, 2002. She was reimbursed $1,500 by her insurance company.
k. Jane had loaned $2,100 to a friend, Joan Jensen, on June 3, 2008. Joan declared bankruptcy on August 14, 2011, and was unable to repay the loan. Assume that the loan is a bona fide debt.
l. Legal Services, Inc., withheld Federal income tax of $18,000 and FICA tax of $5,448 {Social Security tax of $4,050 [($101,000 − $4,580) × 4.2%] + Medicare tax of $1,398 [($101,000 − $4,580) × 1.45%]}.
m. Alimony of $10,000 received from her former husband, Ted Smith.
n. Interest income of $800 on City of Boca Raton bonds.
o. Jane made estimated Federal tax payments of $1,000.
p. Sales taxes from the sales tax table of $964.
q. Charitable contributions of $2,500.
Part 1—Tax Computation
Compute Jane Smith’s 2011 Federal income tax payable (or refund due). If you use tax forms for your computations, you will need Forms 1040 and 4684 and Schedules A, C, and D. Suggested software: H&R BLOCK At Home.
Part 2—Tax Planning
In 2012, Jane plans to continue her job with Legal Services, Inc. Therefore, items a, d, and l will recur in 2012. Jane plans to continue her typing services business (refer to item b) and expects gross receipts of $26,000. She projects that all business expenses (refer to item h) will increase by 10%, except for office rent, which, under the terms of her lease, will remain the same as in 2011. Items e, f, g, j, and k will not recur in 2012. Items c, i, m, n, p, and q will be approximately the same as in 2011.
Jane would like you to compute the minimum amount of estimated tax she will have to pay for 2012 so that she will not have to pay any additional tax upon filing her 2012 Federal income tax return. Write a letter to Jane that contains your advice and prepare
A professional consulting business sells professional tools and equipment and provides associated services, such as repair and maintenance, to its customer base. The company’s employees include technicians, who are required to provide and maintain their own tools and equipment for performing the repairs and maintenance work. The company will reimburse a technician for amounts spent to purchase tools and equipment eligible for a § 179 deduction up to a set amount each year. Any costs for tools and equipment that exceed the set amount will not be reimbursed. John is a technician for the company. During the current year, he purchased equipment that qualifies for the § 179 deduction. John paid $50,000 for the equipment and was reimbursed the set amount of $40,000. Identify the relevant tax issues for John with respect to § 179 and the computation of his taxable income.
Debra acquired the following new assets during 2012:
Date
Asset
Cost
April 11
Furniture
$40,000
July 28
Trucks
40,000
November 3
Computers
70,000
Determine the cost recovery for the current year. Debra does not elect immediate expensing under § 179. She does take additional first year depreciation.
Martha was considering starting a new business. During her preliminary investigations, she incurred the following expenditures:
Salaries
$20,000
Travel
18,000
Interest on short term note
2,000
Professional fees
13,000
Martha begins the business on June 1 of the current year. If Martha elects § 195 treatment, determine her startup expenditure deduction for the current year.
Janice Morgan, age 32, is single and has no dependents. She is a freelance writer. In January 2011, Janice opened her own office located at 2751 Waldham Road, Pleasant Hill, NM 88135. She called her business Writers Anonymous. Janice is a cash basis taxpayer. She lives at 132 Stone Avenue, Pleasant Hill, NM 88135. Her Social Security number is 123–45–6789. Janice wants to contribute to the Presidential Election Campaign Fund. During 2011, Janice had the following income and expense items connected with her business:
Income from sale of articles
$105,000
Rent
16,500
Utilities
7,900
Supplies
1,800
Insurance
5,000
Travel (including meals of $1,200)
3,500
Janice purchased and placed in service the following fixed assets for her business:
• Furniture and fixtures (new) costing $17,000 on January 10, 2011.
• Computer equipment (new) costing $40,000 on July 28, 2011.
Janice did not elect immediate expensing under § 179. She elected not to take additional first year depreciation.
Janice’s itemized deductions are as follows:
State income tax
$3,000
Home mortgage interest paid to First Bank
6,000
Property taxes on home
1,500
Charitable contributions
1,200
Janice did not keep a record of the sales tax she paid. The amount from the sales tax table is $437. Janice has interest income of $5,000 on certificates of deposit at Second Bank. Janice makes estimated tax payments of $17,000 for 2011. Compute Janice Morgan’s 2011 Federal income tax payable (or refund due). If you use tax forms for your computations, you will need Forms 1040 and 4562 and Schedules A, B, C, and SE. Suggested software: H&R BLOCK At Home.
Rosa’s employer has instituted a flexible benefits program. Rosa will use the plan to pay for her daughter’s dental expenses and other medical expenses that are not covered by health insurance. Rosa is in the 25% marginal tax bracket and estimates that the medical and dental expenses not covered by health insurance will be within the range of $3,000 to $5,000. Her employer’s plan permits her to set aside as much as $5,000 in the flexible benefits account. Rosa does not itemize her deductions.
a. Rosa puts $3,000 into her flexible benefits account, and her actual expenses are $5,000. What is her cost of underestimating the expenses?
b. Rosa puts $5,000 into her flexible benefits account, and her actual expenses are only $3,000. What is her cost of overestimating her expenses?
c. What is Rosa’s cost of underfunding as compared to the cost of overfunding the flexible benefits account?
d. Does your answer in part (c) suggest that Rosa should fund the account closer to the low end or to the high end of her estimates?
In January 2012, Ezra purchased 2,000 shares of Gold Utility Mutual Fund for $20,000. In June, Ezra received an additional 100 shares as a dividend, in lieu of receiving $1,000 in cash dividends. In December, the company declared a two for one stock split. Ezra received an additional 2,100 shares, but there was no option to receive cash. At the time of the stock dividend in December and at the end of the year, the fund shares were trading for $11 per share. Also, at the end of the year, the fund offered to buy outstanding shares for $9. Ezra did not sell any shares during the year.
a. What is Ezra’s gross income from the 100 shares received in June?
b. What is Ezra’s gross income from the receipt of the 2,100 shares as a two for one stock split in December?
c. Should Ezra be required to recognize gross income in 2012 even though the fair market value of his investment at the end of the year was less than the fair market value at the beginning of the year? Explain.
Lynn Swartz’s husband died three years ago. Her parents have an income of over $200,000 a year and want to ensure that funds will be available for the education of Lynn’s 8 year old son Eric. Lynn is currently earning $45,000 a year. Lynn’s parents have suggested that they start a savings account for Eric. They have calculated that if they invest $4,000 a year for the next 8 years, at the end of 10 years, sufficient funds will be available for Eric’s college expenses. Lynn realizes that the tax treatment of the investments could significantly affect the amount of funds available for Eric’s education. She asked you to write a letter to her advising about options available to her parents and to her for Eric’s college education. Lynn’s address is 100 Myrtle Cove, Fairfield, CT 06824.
Starting in 2002, Chuck and Luane have been purchasing Series EE bonds in their name to use for the higher education of their daughter Susie, who currently is age 18. During the year, they cash in $12,000 of the bonds to use for freshman year tuition, fees, and room and board. Of this amount, $5,000 represents interest. Of the $12,000, $8,000 is used for tuition and fees, and $4,000 is used for room and board. Chuck and Luane’s AGI, before the educational savings bond exclusion, is $112,000.
a. Determine the tax consequences for Chuck and Luane, who will file a joint return, and for Susie.
b. Assume that Chuck and Luane purchased the bonds in Susie’s name. Determine the tax consequences for Chuck and Luane and for Susie.
c. How would your answer to (a) change if Chuck and Luane file separate returns?
Albert established a qualified tuition program for each of his twins, Kim and Jim. He started each fund with $20,000 when the children were five years old. Albert made no further contributions to his children’s plans. Thirteen years later, both children have graduated from high school. Kim’s fund has accumulated to $45,000, while Jim’s has accumulated to $42,000. Kim decides to attend a state university, which will cost $60,000 for four years (tuition, fees, room and board, and books). Jim decides to go to work instead of going to college. During the current year, $7,500 is used from Kim’s plan to pay the cost of her first semester in college. Because Jim is not going to go to college now or in the future, Albert withdraws the $42,000 plan balance and gives it to Jim to start his new life after high school.
a. During the period since the plans were established, should Albert or the twins have been including the annual plan earnings in gross income? Explain.
b. What are the tax consequences to Kim and Albert of the $7,500 being used for the first semester’s higher education costs?
c. Because of her participation in the qualified tuition program, Kim received a 10% reduction in tuition charges, so less than $7,500 was withdrawn from her account. Is either Albert or Kim required to include the value of this discount in gross income? Explain.
d. What are the tax consequences to Albert and Jim of Jim’s qualified tuition program being closed?
Martin S. Albert (Social Security number 111–11–1111) is 39 years old and is married to Michele R. Albert (Social Security number 123–45–6789). The Alberts live at 512 Ferry Road, Newport News, VA 23601. They file a joint return and have two dependent children, Charlene, age 17, and Jordan, age 18. Charlene’s Social Security number is 123– 45–6788, and Jordan’s Social Security number is 123–45–6787. In 2012, Martin and Michele had the following transactions:
a. Martin received $115,000 in salary from Red Steel Corporation, where he is a construction engineer. Withholding for Federal income tax was $10,750. The amounts withheld for FICA tax were as follows: $4,624 ($110,100 × 4.2%) for Social Security and $1,668 ($115,000 × 1.45%) for Medicare. Martin worked in Mexico from January 1, 2011, until February 15, 2012. His $115,000 salary for 2012 includes $16,000 he earned for January and one half of February 2012 while working in Mexico.
b. Martin and Michele received $800 in qualified dividends on Green, Inc. stock and $400 interest on Montgomery County (Virginia) school bonds.
c. Martin received $2,300 interest from a Bahamian bank account.
d. Michele received 50 shares of Applegate Corporation common stock as a stock dividend. The shares had a fair market value of $2,000 at the time Michele received them, and she did not have the option of receiving cash.
e. Martin and Michele received a $900 refund on their 2011 Virginia income taxes. Their itemized deductions in 2011 totaled $12,500.
f. Martin paid $6,000 alimony to his former wife, Rose T. Morgan (Social Security number 123–45–6786).
g. Martin and Michele kept the receipts for their sales taxes paid of $1,100.
h. Martin and Michele’s itemized deductions were as follows:
• State income tax paid and withheld totaled $5,100.
• Real estate taxes on their principal residence were $3,400.
• Mortgage interest on their principal residence was $2,500.
• Cash contributions to the church totaled $2,800.
Part 1—Tax Computation
Compute the Alberts’ net tax payable (or refund due) for 2012.
Part 2—Tax Planning
The Alberts are considering buying another house. Their house mortgage payments would increase by $500 (to $1,500) per month, which includes a $250 increase in interest and a $100 increase in property tax. The Alberts would like to know how much the mortgage payments would increase net of any change in their income tax. Write a letter to the Alberts that contains your advice.
Classify each of the following expenditures as a deduction for AGI, a deduction from AGI, or not deductible:
a. Amos contributes to his H.R. 10 plan (i.e., a retirement plan for a self employed individual).
b. Keith pays child support to his former wife, Renee, for the support of their son, Chris.
c. Judy pays for professional dues that are reimbursed by her employer.
d. Ted pays $500 as the monthly mortgage payment on his personal residence. Of this amount, $100 represents a payment on principal, and $400 represents an interest payment.
e. Lynn pays a moving company for moving her household goods to Detroit, where she is starting a new job. She is not reimbursed by her employer.
f. Ralph pays property taxes on his personal residence.
Carmine, Inc., a tobacco manufacturer, incurs certain expenditures associated with political contributions and lobbying activities. Which of these expenditures can be deducted?
Payments to Washington, D.C. law firm to lobby members of Congress
$800,000
Payments to Washington, D.C. law firm to lobby the head of the FDA
25,000
Payments to Richmond law firm to lobby members of the state legislature
50,000
Payments to Lexington law firm to lobby members of the Lexington City
Council
5,000
Political contribution to Committee to Reelect the Mayor of Lexington
Jon is a self employed tax attorney. He and Monica, his employee, attend a conference in Houston sponsored by the American Institute of CPAs. The following expenses are incurred during the trip:
Jon
Monica
Conference registration
$ 750
$750
Airfare
1,200
700
Taxi fares
75
–0–
Lodging in Houston
750
300
a. Jon pays for all of these expenses. Calculate the effect of these expenses on Jon’s AGI.
b. Would your answer to part (a) change if the American Bar Association had sponsored the conference? Explain.
Kirby and his wife Melinda own all of the stock of Thrush. Melinda is the president, and Kirby is the vice president. Melinda and Kirby are paid salaries of $500,000 and $350,000, respectively, each year. They consider the salaries to be reasonable based on a comparison of salaries paid for comparable positions in comparable companies. They project Thrush’s taxable income for next year, before their salaries, to be $975,000. They decide to place their three teenage children on the payroll and to pay them total salaries of $125,000. The children will each work about five hours per week for Thrush.
a. What are Kirby and Melinda trying to achieve by hiring the children?
b. Calculate the tax consequences on Thrush and on Kirby and Melinda’s family of hiring the children.
Duck, an accrual basis corporation, sponsored a rock concert on December 29, 2012. Gross receipts were $300,000. The following expenses were incurred and paid as indicated:
Expense
Payment Date
Rental of coliseum
$ 25,000
December 21, 2012
Cost of goods sold:
Food
30,000
December 30, 2012
Souvenirs
60,000
December 30, 2012
Performers
100,000
January 5, 2013
Cleaning of coliseum
10,000
February 1, 2013
Because the coliseum was not scheduled to be used again until January 15, the company with which Duck had contracted did not perform the cleanup until January 8–10, 2013.
Calculate Duck’s net income from the concert for tax purposes for 2012.
Trevor, a friend of yours from high school, works as a server at the ST Café. He asks you to help him prepare his Federal income tax return. When you inquire about why his bank deposits substantially exceed his tip income, he confides to you that he is a bookie on the side. Trevor then provides you with the following documented income and expenses for the year:
Tip income
$16,000
Gambling income
52,000
Gambling expenses
Payouts to winners
29,000
Employee compensation
8,000
Bribe to police officer who is aware of
Trevor’s bookie activity
7,500
a. How will these items affect Trevor’s AGI?
b. His taxable income?
c. If Trevor’s business was an illegal drug operation and the cost of the illegal drugs sold was $6,200, how would your answers to parts (a) and (b) differ?
You are a senior government major at City University. Two of the five seats on city council are up for election. Friends, knowing your interest in local politics, encourage you to run for city council. You are elected by a two to one majority. You received campaign contributions from the following:
Your parents
$1,000
Your sister
1,500
Government professor who is your faculty
adviser
500
Friends who are classmates
750
Other friends
400
All of these funds were used for legitimate campaign purposes (e.g., signs and ads in local newspaper). How much of the campaign contributions can be deducted by the donors?
Amber, a publicly held corporation (not a TARP recipient), currently pays its president an annual salary of $900,000. In addition, it contributes $20,000 annually to a defined contribution pension plan for him. As a means of increasing company profitability, the board of directors decides to increase the president’s compensation. Two proposals are being considered. Under the first proposal, the salary and pension contribution for the president would be increased by 30%. Under the second proposal, Amber would implement a performance based compensation program that is projected to provide about the same amount of additional compensation and pension contribution for the president.
a. Evaluate the alternatives from the perspective of Amber, Inc.
b. Prepare a letter to Amber’s board of directors that contains your recommendations. Address the letter to the board chairperson, Agnes Riddle, whose address is 100 James Tower, Cleveland, OH 44106.
Vermillion, Inc., a publicly held corporation (not a TARP recipient), pays the following salaries to its executives:
Salary
Bonus
Retirement Plan Contribution
CEO
$2,000,000
$100,000
$80,000
Executive vice president
1,800,000
90,000
72,000
Treasurer
1,600,000
–0–
64,000
Marketing vice president
1,500,000
75,000
60,000
Operations vice president
1,400,000
70,000
56,000
Distribution vice president
1,200,000
60,000
48,000
Research vice president
1,100,000
–0–
44,000
Controller
800,000
–0–
32,000
Vermillion normally does not pay bonuses, but after reviewing the results of operations for the year, the board of directors decided to pay a 5% bonus to selected executives. What is the amount of these payments that Vermillion may deduct?
Terry traveled to a neighboring state to investigate the purchase of two hardware stores. His expenses included travel, legal, accounting, and miscellaneous expenses. The total was $52,000. He incurred the expenses in June and July 2012. Under the following circumstances, what can Terry deduct in 2012?
a. Terry was in the hardware store business and did not acquire the two hardware stores.
b. Terry was in the hardware store business and acquired the two hardware stores and began operating them on October 1, 2012.
c. Terry did not acquire the two hardware stores and was not in the hardware store business.
d. Terry acquired the two hardware stores but was not in the hardware store business when he acquired them. Operations began on October 1, 2012.
Alex, who is single, conducts an activity that is appropriately classified as a hobby. The activity produces the following revenues and expenses:
Revenue
$18,000
Property taxes
3,000
Materials and supplies
4,500
Utilities
2,000
Advertising
5,000
Insurance
750
Depreciation
4,000
Without regard to this activity, Alex’s AGI is $42,000. Determine the amount of income Alex must report, the amount of the expenses he is permitted to deduct, and his taxable income.
Sandra, an orthodontist, is single and has net earnings of $90,000 from her practice. In addition, she collects antique books that she buys and sells at antique shows. She participates in six to eight weekend shows per year. Her income and expenses for the current year are as follows:
Revenue from sale of antique books
$22,000
Expenses
Cost of goods sold
12,000
Show registration costs
3,000
Advertising
1,000
Dealer’s license—annual fee
500
Insurance
900
Depreciation of display cases
1,200
Sandra has no other items that would affect her AGI. Itemized deductions consisting of taxes, interest, and charitable contributions are $19,000. Calculate Sandra’s taxable income if the antique book activity is classified as:
Melissa, who is 70 years old, is unmarried and has no dependents. Her annual income consists of a taxable pension of $20,000, $12,000 in Social Security benefits, and $3,000 of dividend income. She does not itemize her deductions. She is in the 15% marginal income tax bracket. She is considering getting a part time job that would pay her $10,000 a year.
a. What would be Melissa’s after tax income from the part time job, considering Social Security and Medicare tax (5.65%) as well as Federal income tax on the earnings of $10,000?
b. What would be the effective tax rate (increase in tax/increase in income) on the additional income from the part time job?
c. Assume instead that Melissa’s only income is a taxable pension of $18,000 and $12,000 in Social Security benefits. She is considering selling land for $10,000 that she purchased as an investment in 2008 for $3,000. Her marginal tax rate on ordinary income is 15%. What would be the effective tax rate on the gain from the sale of the land?
Donna does not think she has an income tax problem but would like to discuss her situation with you just to make sure she will not get hit with an unexpected tax liability. Base your suggestions on the following relevant financial information:
a. Donna’s share of the SAT Partnership income is $150,000, but none of the income can be distributed because the partnership needs the cash for operations.
b. Donna’s Social Security benefits totaled $8,400, but Donna loaned the cash received to her nephew.
c. Donna assigned to a creditor the right to collect $1,200 of interest on some bonds she owned.
d. Donna and her husband lived together in California until September, when they separated. Donna has heard rumors that her husband has had substantial gambling winnings since they separated.
Cecil C. Seymour is a 66 year old widower. He had income for 2012 as follows:
Pension from former employer
$36,000
Interest income from Alto National Bank
5,500
Interest income on City of Alto bonds
4,500
Dividends received from IBM
2,000
Collections on annuity contract he purchased
from Great Life Insurance
5,400
Social Security benefits
12,000
Rent income on townhouse
7,600
The cost of the annuity was $54,000, and Cecil was expected to receive a total of 240 monthly payments of $450. Cecil has received 22 payments through 2012. Cecil’s 40 year old daughter, Sarah C. Seymour, borrowed $60,000 from Cecil on January 2, 2012. She used the money to start a new business. Cecil does not charge her interest because she could not afford to pay it, but he does expect to eventually collect the principal. Sarah is living with Cecil until the business becomes profitable. Except for housing, Sarah provides her own support from her business and $1,600 in dividends on stocks that she inherited from her mother.
Other relevant information is presented below:
• Cecil’s Social Security number: 123–45–6785
• Address: 3840 Springfield Blvd., Alto, GA 30510
• Sarah’s Social Security number: 123–45–6784
• Expenses on rental townhouse:
Utilities
$2,800
Maintenance
1,000
Depreciation
2,000
Real estate taxes
750
Insurance
700
• State income taxes paid: $3,500
• County personal property taxes paid: $2,100
• Payments on estimated 2012 Federal income tax: $5,900
• Charitable contributions of cash to Alto Baptist Church: $6,400
• Federal interest rate: 6%
• Sales taxes paid: $912
Compute Cecil’s 2012 Federal income tax payable (or refund due).
Your client was the beneficiary of an annuity contract purchased by her stepmother. When the stepmother died, the insurance company paid the client $400,000 and sent her a Form 1099 indicating that the taxable portion (i.e., the amount in excess of the investment in the contract) was $50,000. However, according to the client, her father fraudulently convinced her that he was the intended beneficiary. She gave her father a check equal to the amount she had received from the insurance company. She did not report any of the annuity proceeds in her income tax return. She later discovered the fraud and filed a lawsuit to collect from her father. The IRS has examined your client’s return and has taken the position that she must include the $50,000 in her gross income. Evaluate the IRS’s position.
Dolly is a college student who works as a part time server in a restaurant. Her usual tip is 20% of the price of the meal. A customer ordered a piece of pie and said that he would appreciate prompt service. Dolly abided with the customer’s request. The customer’s bill was $8, but the customer left a $100 bill on the table and did not ask for a receipt. Dolly gave the cashier $8 and pocketed the $100 bill. Dolly concludes that the customer thought that he had left a $10 bill, although the customer did not return to correct the apparent mistake. The customer had commented about how much he appreciated Dolly’s prompt service. Dolly thinks that a $2 tip would be sufficient and that the other $98 is like “found money.” How much should Dolly include in her gross income?
Andrea entered into a § 529 qualified tuition program for the benefit of her daughter, Joanna. Andrea contributed $15,000 to the fund. The fund balance had accumulated to $25,000 by the time Joanna was ready to enter college. However, Joanna received a scholarship that paid for her tuition, fees, books, supplies, and room and board. Therefore, Andrea withdrew the funds from the § 529 plan and bought Joanna a new car.
a. What are the tax consequences to Andrea of withdrawing the funds?
b. Assume instead that Joanna’s scholarship did not cover her room and board, which cost $7,500 per academic year. During the current year, $7,500 of the fund balance was used to pay for Joanna’s room and board. The remaining amount was left in the § 529 plan to cover her room and board for future academic years. What are the tax consequences to Andrea and to Joanna of using the $7,500 to pay for the room and board?
Harry was experiencing financial difficulties and could not make the mortgage payments on his property. The mortgage holder agreed to reduce the debt principal by $50,000 because the real estate market was depressed. Assuming that Harry is not bankrupt or insolvent, would the tax consequences differ under the following circumstances? Explain.
• The mortgage is held by the person who sold him the property.
• The mortgage is on farmland that was held by a bank that loaned the money so that
Harry could purchase the land.
• The mortgage is on his personal residence and is held by the financial institution that made the loan for the purchase of his residence.
• Harry’s debt was reduced because the mortgage holder, a bank, held a drawing that Harry won; the prize was a $50,000 reduction in his mortgage.
Determine the gross income of the beneficiaries in the following cases:
a. Justin lost his job when his employer moved the plant to China. His employer gave Justin $15,000 to help him in his transition to a new job, even though the employer was not legally obligated to make the payment.
b. Trina was injured while working. She collected $1,200 in workers’ compensation and $1,500 on a loss of income policy she had purchased.
c. Coral Corporation collected $1 million on a key person life insurance policy when its chief executive died. The corporation had paid the premiums on the policy of $77,000.
d. Juan collected $50,000 on a life insurance policy when his wife, Leona, died. The policy was provided by Leona’s employer, and the premiums were excluded from Leona’s gross income as group term life insurance.
e. Juan in part (d) collected Leona’s accrued vacation pay of $6,000 from her employer.
Laura was recently diagnosed with cancer and has begun chemotherapy treatments. A cancer specialist has stated that Laura has less than one year to live. She has incurred a lot of medical bills and other general living expenses and is in need of cash. Therefore, she is considering selling stock that cost $35,000 and has a fair market value of $50,000. This amount would be sufficient to pay her medical bills. However, she has read about a company (the Vital Benefits Company) that would purchase her life insurance policy for $50,000. She has paid $30,000 in premiums on the policy.
a. Considering only the tax effects, would selling the stock or selling the life insurance policy result in more beneficial tax treatment?
b. Assume that Laura is a dependent child and that her mother owns the stock and the life insurance policy, which is on the mother’s life. Which of the alternative means of raising the cash would result in more beneficial tax treatment?
Donald was killed in an accident while he was on the job in 2012. At the time of his death, he had $40,000 in an accrued bonus that was paid to his wife, Darlene. His employer had provided Donald with group term life insurance of $240,000 (twice his annual salary), which was payable to his widow, Darlene, in a lump sum. Premiums on this policy totaling $4,500 had been included in Donald’s gross income under § 79. Donald’s employer also paid Darlene an amount equal to Donald’s three months’ salary of $30,000, which is what the employer does for all widows and widowers of deceased employees. Donald had purchased a life insurance policy (premiums totaled $70,000) that paid $200,000 in the event of accidental death. The proceeds were payable to Darlene, who elected to receive installment payments as an annuity of $20,000 each year for a 25 year period. She received her first installment this year. From the above information, what is Darlene’s gross income in 2012?
Ray and Carin are partners in an accounting firm. The partners have entered into an arm’s length agreement requiring Ray to purchase Carin’s partnership interest from Carin’s estate if she dies before Ray. The price is set at 120% of the book value of Carin’s partnership interest at the time of her death. Ray purchased an insurance policy on Carin’s life to fund this agreement. After Ray had paid $45,000 in premiums, Carin was killed in an automobile accident, and Ray collected $800,000 of life insurance proceeds. Ray used the life insurance proceeds to purchase Carin’s partnership interest.
a. What amount should Ray include in his gross income from receiving the life insurance proceeds?
b. The insurance company paid Ray $16,000 interest on the life insurance proceeds during the period Carin’s estate was in administration. During this period, Ray had left the insurance proceeds with the insurance company. Is this interest taxable?
c. When Ray paid $800,000 for Carin’s partnership interest, priced as specified in the agreement, the fair market value of Carin’s interest was $1 million. How much should Ray include in his gross income from this bargain purchase?
Sally was an all state soccer player during her junior and senior years in high school. She accepted an athletic scholarship from State University. The scholarship provided the following:
Tuition and fees
$15,000
Housing and meals
6,000
Books and supplies
1,500
Transportation
1,200
a. Determine the effect of the scholarship on Sally’s gross income.
b. Sally’s brother, Willy, was not a gifted athlete, but he received $8,000 from their father’s employer as a scholarship during the year. The employer grants the children of all executives a scholarship equal to one half of annual tuition, fees, books, and supplies. Willy also received a $6,000 scholarship (to be used for tuition) as the winner of an essay contest related to bioengineering, his intended field of study. Determine the effect of the scholarships on Willy’s and his father’s gross income.
Adrian was awarded an academic scholarship to State University for the 2012– 2013 academic year. He received $6,000 in August and $7,000 in December 2012. Adrian had enough personal savings to pay all expenses as they came due. Adrian’s expenditures for the relevant period were as follows:
Tuition, August 2012
$3,600
Tuition, January 2013
3,700
Room and board
August–December 2012
3,000
January–May 2013
2,400
Books and educational supplies
August–December 2012
1,100
January–May 2013
1,200
Determine the effect on Adrian’s gross income for 2012 and 2013.
Leigh sued an overzealous bill collector and received the following settlement:
Damage to her automobile that the collector attempted to repossess
$ 3,300
Physical damage to her arm caused by the collector
15,000
Loss of income while her arm was healing
6,000
Punitive damages
80,000
a. What effect does the settlement have on Leigh’s gross income?
b. Assume that Leigh also collected $25,000 of damages for slander to her personal reputation caused by the bill collector misrepresenting the facts to Leigh’s employer and other creditors. Is this $25,000 included in Leigh’s gross income? Explain.
Determine the effect on gross income in each of the following cases:
a. Eloise received $150,000 in settlement of a sex discrimination case against her former employer.
b. Nell received $10,000 for damages to her personal reputation. She also received $40,000 in punitive damages.
c. Orange Corporation, an accrual basis taxpayer, received $50,000 from a lawsuit filed against its auditor who overcharged for services rendered in a previous year.
d. Beth received $10,000 in compensatory damages and $30,000 in punitive damages in a lawsuit she filed against a tanning parlor for severe burns she received from using its tanning equipment.
e. Joanne received compensatory damages of $75,000 and punitive damages of $300,000 from a cosmetic surgeon who botched her nose job.
Rex, age 55, is an officer of Blue Company, which provides him with the following nondiscriminatory fringe benefits in 2012:
• Hospitalization insurance premiums for Rex and his dependents. The cost of the coverage for Rex is $2,900 per year, and the additional cost for his dependents is $3,800 per year. The plan has a $2,000 deductible, but his employer contributed $1,500 to
Rex’s Health Savings Account (HSA). Rex withdrew only $800 from the HSA, and the account earned $50 of interest during the year.
• Long term care insurance premiums for Rex, at a cost of $12,600 per year.
• Insurance premiums of $840 for salary continuation payments. Under the plan, Rex will receive his regular salary in the event he is unable to work due to illness. Rex collected $4,500 on the policy to replace lost wages while he was ill during the year.
• Rex is a part time student working on his bachelor’s degree in engineering. His employer reimbursed his $5,200 tuition under a plan available to all full time employees.
Determine the amount Rex must include in gross income.
The UVW Union and HON Corporation are negotiating contract terms. Assume that the union members are in the 28% marginal tax bracket and that all benefits are provided on a nondiscriminatory basis. Write a letter to the UVW Union members explaining the tax consequences of the options discussed below. The union’s address is 905 Spruce Street, Washington, D.C. 20227.
a. The company would impose a $100 deductible on medical insurance benefits. Most employees incur more than $100 each year in medical expenses.
b. Employees would get an additional paid holiday with the same annual income (the same pay but less work).
c. An employee who did not need health insurance (because the employee’s spouse works and receives family coverage) would be allowed to receive the cash value of the coverage.
Does the taxpayer recognize gross income in the following situations?
a. Ava is a filing clerk at a large insurance company. She is permitted to leave the premises for her lunch, but she always eats in the company’s cafeteria because doing so is much less expensive than purchasing a comparable meal at a nearby restaurant. On average, she pays $3 for a lunch that would cost $8 at a restaurant. However, if the prices in the cafeteria were not so low and the food was not so delicious, she would probably bring her lunch at a cost of $2 per day.
b. Scott is a resident adviser (RA) in a college dormitory and is provided with lodging in the dormitory. He is not required to pay the $300 per month that a room costs other students. In addition, he is paid $100 per month.
c. Ira recently moved to accept a job. For the first month on the new job, Ira was searching for a home to purchase or rent. During this time, his employer permitted Ira to live in an apartment the company maintains for customers during the buying season. The month that Ira occupied the apartment was not during the buying season, however, and the apartment would not otherwise have been occupied.
Bertha is considering taking an early retirement offered by her employer. She would receive $3,000 per month, indexed for inflation. However, she would no longer be able to use the company’s health facilities, and she would be required to pay her hospitalization insurance premiums of $8,000 each year. Bertha and her husband will file a joint return and take the standard deduction. She currently receives a salary of $55,000 a year. If she retires, she will spend approximately $300 less each month for commuting and clothing. Bertha and her husband have other sources of income and are in and will remain in the 25% marginal tax bracket. She currently pays Social Security and Medicare taxes of 5.65% on her salary, but her retirement pay would not be subject to this tax. According to Bertha, she and her husband could live well if her after tax retirement income was at least 50% of her current income. Provide Bertha with information she will need to make her decision.
Bluebird, Inc., does not provide its employees with any tax exempt fringe benefits. The company is considering adopting a hospital and medical benefits insurance plan that will cost approximately $9,000 per employee. To adopt this plan, the company may have to reduce salaries and/or lower future salary increases. Bluebird is in the 35% (combined Federal and state rates) bracket. Bluebird is also responsible for matching the Social Security and Medicare taxes withheld on employees’ salaries (at the full 7.65% rate for 2012). The hospital and medical benefits insurance plan will not be subject to the Social Security and Medicare taxes, and the company is not eligible for the small business credit for health insurance. The employees generally fall into two marginal tax rate groups:
Income Tax
Social Security and Medicare Tax
Total
.15
.0565
. 2065
.35
.0145
. 3645
The company has asked you to assist in its financial planning for the hospital and medical benefits insurance plan by computing the following:
a. How much taxable compensation is the equivalent of $9,000 of exempt compensation for each of the two classes of employees?
b. What is the company’s after tax cost of the taxable compensation computed in part (a)?
c. What is the company’s after tax cost of the exempt compensation?
d. Briefly explain your conclusions from the preceding analysis.
John and Janet Baker are husband and wife and maintain a household in which the following persons live: Calvin and Florence Carter and Darin, Andrea, and Morgan Baker.
• Calvin and Florence are Janet’s parents, who are retired. During the year, they receive $19,000 in nontaxable funds (e.g., disability income, interest on municipal bonds and Social Security benefits). Of this amount, $8,000 is spent equally between them for clothing, transportation, and recreation (e.g., vacation). The remaining balance of $11,000 is invested in tax exempt securities. Janet paid $1,000 for her mother’s dental work and paid the $1,200 premium on an insurance policy that her father owned on his own life. Calvin incurred his own medical expenses, but he insisted on paying for them with his own funds.
• Darin is the Bakers’ 18 year old son who is not a student but operates a pool cleaning service on a part time basis. During the year, he earns $14,000 from the business; Darin places the cash in a savings account for later college expenses.
• Andrea is the Bakers’ 19 year old daughter who does not work or go to school. Tired of the inconvenience of borrowing and sharing the family car, she purchased a Camaro during the year for $21,000. Andrea used funds from a savings account that she had established several years ago with an inheritance from her paternal grandfather.
• Morgan is the Bakers’ 23 year old daughter. To attend graduate school at a local university, she applied for and obtained a student loan of $20,000. She uses the full amount to pay her college tuition. The Bakers’ fair rental value of their residence, including utilities, is $14,000, while their total food expense for the household is $10,500.
a. How many dependency exemptions can the Bakers claim for the year? Explain.
b. From a planning standpoint, how might the Bakers have improved the tax result?
Dana, an accountant, reports her income by the cash method. In 2012, she per formed an audit for Orange Corporation and billed the client for $5,000, which was collected in 2013. In 2012, Dana also performed an audit for Blue Corporation. Because of Blue’s precarious financial position, Dana required Blue to issue an $8,000 secured negotiable note in payment of the fee. The note had a fair market value of $6,000. Dana collected $8,000 on the note in 2013. Dana’s gross income for the two years is as follows:
Determine the taxpayer’s current year (1) economic income and (2) gross income for tax purposes from the following events:
a. Sam’s employment contract as chief executive of a large corporation was terminated, and he was paid $500,000 not to work for a competitor of the corporation for five years.
b. Elliot, a six year old child, was paid $5,000 for appearing in a television commercial.
His parents put the funds in a savings account for the child’s education.
c. Valery found a suitcase that contained $100,000. She could not determine who the owner was.
d. Winn purchased a lottery ticket for $5 and won $750,000.
e. Larry spent $1,000 to raise vegetables that he and his family consumed. The cost of the vegetables in a store would have been $2,400.
f. Dawn purchased an automobile for $1,500 that was worth $3,500. The seller was in desperate need of cash.
A taxpayer is considering three alternative investments of $10,000. Assume that the taxpayer is in the 28% marginal tax bracket for ordinary income and 15% for qualifying capital gains in all tax years. The selected investment will be liquidated at the end of five years. The alternatives are:
• A taxable corporate bond yielding 5% before tax, and the interest can be reinvested at 5% before tax.
• A Series EE bond that will have a maturity value of $12,200 (a 4% before tax rate of return).
• Land that will increase in value.
The gain on the land will be classified and taxed as a long term capital gain. The income from the bonds is taxed as ordinary income. How much must the land increase in value to yield a greater after tax return than either of the bonds?
Given: Compound amount of $1 and compound value of annuity payments at the end of five years:
Determine the taxpayer’s gross income for tax purposes in each of the following situations:
a. Deb, a cash basis taxpayer, traded a corporate bond with accrued interest of $300 for corporate stock with a fair market value of $11,000 at the time of the exchange. Deb’s cost of the bond was $10,000. The value of the stock had increased to $12,000 by the end of the year.
b. Deb needed $10,000 to make a down payment on her house. She instructed her broker to sell some stock to raise the $10,000. Deb’s cost of the stock was $3,000. Based on her broker’s advice, instead of selling the stock, she borrowed the $10,000 using the stock as collateral for the debt.
c. Deb’s boss gave her two tickets to the Rabid Rabbits rock concert because she met her sales quota. At the time she received the tickets, they had a face price of $200 and were selling on eBay for $350 each. On the date of the concert, the tickets were selling for $400 each. Deb and her son attended the concert.
Selma operates a contractor’s supply store. She maintains her books using the cash method. At the end of the year, her accountant computes her accrual basis income that is used on her tax return. For 2012, Selma had cash receipts of $1.5 million, which included $300,000 collected on accounts receivable from 2011 sales. It also included the proceeds of a $100,000 bank loan. At the end of 2012, she had $350,000 in accounts receivable from customers, all from 2012 sales.
a. Compute Selma’s accrual basis gross receipts for 2012.
b. Selma paid cash for all of the purchases. The total amount paid for merchandise in 2012 was $1.2 million. At the end of 2011, she had merchandise on hand with a cost of $100,000. At the end of 2012, the cost of merchandise on hand was $300,000.
Compute Selma’s gross income from merchandise sales for 2012.
Your client is a new partnership, ARP Associates, which is an engineering consulting firm. Generally, ARP bills clients for services at the end of each month. Client billings are about $50,000 each month. On average, it takes 45 days to collect the receivables. ARP’s expenses are primarily for salary and rent. Salaries are paid on the last day of each month, and rent is paid on the first day of each month. The partnership has a line of credit with a bank, which requires monthly financial statements. These must be prepared using the accrual method. ARP’s managing partner, Amanda Sims, has suggested that the firm should also use the accrual method for tax purposes and thus reduce accounting fees by $600. Assume that the partners are in the 35% (combined Federal and state) marginal tax bracket. Write a letter to your client explaining why you believe it would be worthwhile for ARP to file its tax return on the cash basis even though its financial statements are prepared on the accrual basis. ARP’s address is 100 James Tower, Denver, CO 80208.
Trip Garage, Inc. (459 Ellis Avenue, Harrisburg, PA 17111), is an accrual basis taxpayer that repairs automobiles. In late December 2012, the company repaired Samuel Mosley’s car and charged him $1,000. Samuel did not think the problem had been fixed and refused to pay; thus, Trip refused to release the automobile. In early January 2013, Trip made a few adjustments and convinced Samuel that the automobile was working properly. At that time, Samuel agreed to pay only $900 because he did not have the use of the car for a week. Trip said “fine,” accepted the $900, and released the automobile to Samuel. An IRS agent thinks Trip, as an accrual basis taxpayer, should report $1,000 of income in 2012, when the work was done, and then deduct a $100 loss in 2013. Prepare a memo to Susan Apple, the treasurer of Trip, with the recommended treatment for the disputed income.
Freda is a cash basis taxpayer. In 2012, she negotiated her salary for 2013. Her employer offered to pay her $21,000 per month in 2013 for a total of $252,000. Freda countered that she would accept $10,000 each month for the 12 months in 2013 and the remaining $132,000 in January 2014. The employer accepted Freda’s terms for 2013 and 2014.
a. Did Freda actually or constructively receive $252,000 in 2013?
b. What could explain Freda’s willingness to spread her salary over a longer period of time?
c. In December 2013, after Freda had earned the right to collect the $132,000 in 2014, the employer offered $133,000 to Freda at that time, rather than $132,000 in January 2014. The employer wanted to make the early payment so as to deduct the expense in 2013. Freda rejected the employer’s offer. Was Freda in constructive receipt of the income in 2013? Explain.
Troy, a cash basis taxpayer, is employed by Eagle Corporation, also a cash basis taxpayer. Troy is a full time employee of the corporation and receives a salary of $60,000 per year. He also receives a bonus equal to 10% of all collections from clients he serviced during the year. Determine the tax consequences of the following events to the corporation and to Troy:
a. On December 31, 2012, Troy was visiting a customer. The customer gave Troy a $10,000 check payable to the corporation for appraisal services Troy performed during 2012. Troy did not deliver the check to the corporation until January 2013.
b. The facts are the same as in (a), except that the corporation is an accrual basis taxpayer and Troy deposited the check on December 31, but the bank did not add the deposit to the corporation’s account until January 2013.
c. The facts are the same as in (a), except that the customer told Troy to hold the check until January 2013 when the customer could make a bank deposit that would cover the check.
Fran, Gary, and Heidi each have a one third interest in the capital and profits of the FGH Partnership. Each partner had a capital account of $50,000 at the beginning of the tax year. The partnership profits for the tax year were $240,000. Changes in their capital accounts during the tax year were as follows:
Fran
Gary
Heidi
Total
Beginning balance
$ 50,000
$ 50,000
$ 50,000
$150,000
Withdrawals
(25,000)
(35,000)
(10,000)
(70,000)
Additional
contributions
–0–
–0–
5,000
5,000
Allocation of profits
80,000
80,000
80,000
240,000
Ending balance
$105,000
$ 95,000
$125,000
$325,000
In arriving at the $240,000 of partnership profits, the partnership deducted $1,800 ($600 for each partner) in premiums paid for group term life insurance on the partners. Fran and Gary are 39 years old, and Heidi is 35 years old. Other employees are also eligible for group term life insurance equal to their annual salary. These premiums of $10,000 have been deducted in calculating the partnership profits of $240,000. Compute each partner’s gross income from the partnership for the tax year.
In 2012, Alva received dividends on her stocks as follows:
Amur Corporation (a French corporation whose stock is traded
on an established U.S. securities market)
$55,000
Blaze, Inc., a Delaware corporation
25,000
Grape, Inc., a Virginia corporation
12,000
a. Alva purchased the Grape stock four years ago, and she purchased the Amur stock two years ago. She purchased the Blaze stock 15 days before it went ex dividend and sold it 20 days later at a $22,000 loss. Alva had no other capital gains and losses for the year. She is in the 35% marginal tax bracket. Compute Alva’s tax on her dividend income for 2012.
b. Alva’s daughter, who is 25 and not Alva’s dependent, had taxable income of $6,000, which included $1,000 of dividends on Grape, Inc. stock. The daughter had purchased the stock two years ago. Compute the daughter’s tax liability on the dividends.
c. Alva can earn 5% before tax interest on a corporate bond or a 4% dividend on a preferred stock. Assuming that the appreciation in value is the same, which investment produces the greater after tax income?
d. The same as part (c), except Alva’s daughter is to make the investment.
Liz and Doug were divorced on July 1 of the current year after 10 years of marriage. Their current year’s income received before the divorce was as follows:
Doug’s salary
$41,000
Liz’s salary
55,000
Rent on apartments purchased by Liz 15 years ago
8,000
Dividends on stock Doug inherited from his mother 4 years ago
1,900
Interest on a savings account in Liz’s name funded with her salary
2,400
Allocate the income to Liz and Doug assuming that they live in:
Nell and Kirby are in the process of negotiating their divorce agreement. What should be the tax consequences to Nell and Kirby if the following, considered individually, became part of the agreement?
a. In consideration for her one half interest in their personal residence, Kirby will transfer to Nell stock with a value of $200,000 and $50,000 of cash. Kirby’s cost of the stock was $150,000, and the value of the personal residence is $500,000. They purchased the residence three years ago for $300,000.
b. Nell will receive $1,000 per month for 120 months. If she dies before receiving all 120 payments, the remaining payments will be made to her estate.
c. Nell is to have custody of their 12 year old son, Bobby. She is to receive $1,200 per month until Bobby (1) dies or (2) attains age 21 (whichever occurs first). After either of these events occurs, Nell will receive only $300 per month for the remainder of her life.
Karen and Al are in the process of negotiating a divorce. They have tentatively agreed on all of the terms, and Karen is to pay Al $240,000 over a three year period. Furthermore, the payments are to be spread over the three years in amounts that will qualify as alimony and minimize alimony recapture. Al wants to receive as much of the $240,000 as soon as possible because if he dies or remarries within the three years, the payments will cease. Which of the following two patterns of payments will result in the least alimony recapture in year 3?
Alicia and Rafel are in the process of negotiating a divorce agreement. They both worked during the marriage and contributed an equal amount to the marital assets. They own a home with a fair market value of $400,000 (cost of $300,000) that is subject to a mortgage for $250,000. They have lived in the home for 12 years. They also have investment assets with a cost of $160,000 and a fair market value of $410,000. Thus, the net worth of the couple is $560,000 ($400,000 − $250,000 + $410,000). The holding period for the investments is longer than one year. Alicia would like to continue to live in the house. Therefore, she has proposed that she receive the residence subject to the mortgage, a net value of $150,000. In addition, she would receive $17,600 each year for the next 10 years, which has a present value (at 6% interest) of $130,000. Rafel would receive the investment assets. If Rafel accepts this plan, he must sell one half of the investments so that he can purchase a home. Assume that you are counseling Alicia. Explain to Alicia whether the proposed agreement would be “fair” on an after tax basis.
Ridge is a generous individual. During the year, he made interest free loans to various family members when the Federal rate was 3%. What are the tax consequences of the following loans by Ridge:
a. On June 30, 2012, Ridge loaned $12,000 to his cousin, Jim, to buy a used truck. Jim’s only source of income was his wages on various construction jobs during the year.
b. On August 1, 2012, Ridge loaned $8,000 to his niece, Sonja. The loan was to enable her to pay her college tuition. Sonja had $1,200 interest income from CDs her parents had given her.
c. On September 1, 2012, Ridge loaned $25,000 to his brother, Al, to start a business. Al had $220 of dividends and interest for the year.
d. On September 30, 2012, Ridge loaned $150,000 to his mother so that she could enter a nursing home. His mother’s only income was $9,000 of Social Security benefits and $500 of interest income.
Tess retires after 30 years of service with her employer. She is 64 years old and has contributed $39,000 to her employer’s qualified pension fund. She elects to receive her retirement benefits as an annuity of $3,000 per month for the remainder of her life.
a. Assume that Tess retires in June 2012 and collects six annuity payments this year. What is her gross income from the annuity payments in the first year?
b. Assume that Tess lives 25 years after retiring. What is her gross income from the annuity payments in the twenty fourth year?
c. Assume that Tess dies after collecting 180 payments. She collected eight payments in the year of her death. What are Tess’s gross income and deductions from the annuity contract in the year of her death?
The LMN Partnership has a group term life insurance plan. Each partner has $150,000 of protection, and each employee has protection equal to twice his or her annual salary. Employee Alice (age 32) has $90,000 of insurance under the plan, and partner Kay (age 47) has $200,000 of coverage. Because the plan is a “group plan,” it is impossible to determine the cost of coverage for an individual employee or partner.
a. Assuming that the plan is nondiscriminatory, how much must Alice and Kay each include in gross income as a result of the partnership paying the insurance premiums?
b. Assume that the partnership is incorporated. Kay becomes a shareholder and an employee who receives a $75,000 annual salary. The corporation provides Kay with $150,000 of group term life insurance coverage under a nondiscriminatory plan. What is Kay’s gross income as a result of the corporation paying the insurance premiums?
The following amounts of tax are computed using the 2012 Tax Rate Schedules for a taxpayer (or taxpayers in the case of a joint return) with $60,000 of taxable income (see Appendix A).
Return to the facts of Example 11. Grace’s taxable income is $43,600. Now further E X A M P L E 4 0 assume that Grace reports the following: income tax withheld, $2,300; estimated tax payments, $3,600; and a credit for dependent care expenses, $200. Grace’s net tax payable is computed as follows.
Olaf and Olga have a child, Hans (age 10). In 2012, Hans received $3,000 of interest income and paid investment related fees of $200. Olaf and Olga had $70,000 of taxable income, not including their child’s investment income. The parents have no qualified dividends or capital gains. Olaf and Olga do not make the parental election.
Colin is in the 35% tax bracket and reports the following capital transactions.
Penguin Corporation stock (held for 8 months)
$1,000
Owl Corporation stock (held for 10 months)
(3,000)
Stamp collection (held for 5 years)
2,000
Land (held as an investment for 3 years)
4,000
The Penguin short term capital gain (STCG) of $1,000 is offset by the Owl short term capital loss (STCL) of $3,000. The remaining STCL of $2,000 then is applied against the collectible gain of $2,000. The end result is a net long term capital gain of $4,000 from the land sale, taxed at a 15% rate.
Imogene maintains a household that she shares with her son and mother. The son, Barry, is 23 years of age and a full time student in law school. The mother, Gladys, is 68 years old, and she is active in charitable causes. Barry works part time for a local law firm, while Gladys has income from investments. In resolving the support issue (or self support in the case of Barry), compare Imogene’s contribution with that made by Barry and Gladys. In this connection, what Barry and Gladys do with their funds becomes crucial. The funds that are used for nonsupport purposes (e.g., purchase of investments) or not used at all (e.g., deposited in a bank) should not be considered. To the extent possible, the parties should control how much Barry and Gladys contribute to their own support. Records should be maintained showing the amount of support and its source.
Marcie is divorced, and her married son, Jamie (age 25), and his wife, Audrey (age 18), live with her. During the year, Jamie earned $4,800 from a part time job and filed a joint return with Audrey to recover his withholdings. Audrey reports zero gross income. Marcie can prove that she provided more than 50% of Jamie and Audrey’s support. Marcie does not plan to claim Jamie as a dependent because Jamie earns too much gross income. She does not plan to claim Audrey as a dependent because Audrey signed the joint return with Jamie. In fact, Marcie plans to use single filing status, as none of the persons living in her household qualifies as her dependent. Comment on Marcie’s intentions based on the following assumptions.
a. All parties live in Indiana (a common law state).
b. All parties live in California (a community property state).
Compute taxable income in each of the following independent situations.
a. Drew and Meg, ages 40 and 41 respectively, are married and file a joint return. In addition to four dependent children, they have AGI of $65,000 and itemized deductions of $12,000.
b. Sybil, age 40, is single and supports her dependent parents, who live with her. Sybil also supports her grandfather, who lives in a nursing home. She has AGI of $80,000 and itemized deductions of $8,000.
c. Scott, age 49, is a surviving spouse. His household includes two unmarried stepsons who qualify as his dependents. He has AGI of $75,000 and itemized deductions of $10,100.
d. Amelia, age 33, is an abandoned spouse and maintains a household for her three dependent children. She has AGI of $58,000 and itemized deductions of $9,100.
e. Dale, age 42, is divorced but maintains the home in which he and his daughter, Jill, live. Jill is single and qualifies as Dale’s dependent. Dale has AGI of $64,000 and itemized deductions of $9,900.
Compute the taxable income for 2012 for Aiden on the basis of the following information. Aiden is married but has not seen or heard from his wife since 2010.
Salary
$ 80,000
Interest on bonds issued by City of Boston
3,000
Interest on CD issued by Wells Fargo Bank
2,000
Cash dividend received on Chevron common stock
2,200
Life insurance proceeds paid on death of Aunt Margie
(Aiden was the designated beneficiary of the policy)
200,000
Inheritance received on death of Aunt Margie
100,000
Jackson (a cousin) repaid a loan Aiden made to him in 2008
(no interest was provided for)
5,000
Itemized deductions (state income tax, property taxes on
Determine how many personal and dependency exemptions are available in each of the following independent situations. Specify whether any such exemptions would come under the qualifying child or the qualifying relative category.
a. Andy maintains a household that includes a cousin (age 12), a niece (age 18), and a son (age 26). All are full time students. Andy furnishes all of their support.
b. Jackie provides all of the support of a family friend’s son (age 20) who lives with her. She also furnishes most of the support of her stepmother, who does not live with her.
c. Raul, a U.S. citizen, lives in Costa Rica. Raul’s household includes his friend Helena, who is age 19 and a citizen of Costa Rica. Raul provides all of Helena’s support.
d. Karen maintains a household that includes her ex husband, her mother in law, and her brother in law (age 23 and not a full time student). Karen provides more than half of all of their support. Karen is single and was divorced last year.
Determine the number of personal and dependency exemptions in each of the following independent situations.
a. Marcus (age 68) and Alice (age 65 and blind) file a joint return. They furnish more than 50% of the support of a cousin, Ida, who lives with them. Ida (age 20) is a fulltime student and earns $3,500 during the year tutoring special needs children.
b. Penny (age 45) is single and maintains a household in which she and her nephew, Clint, live. Clint (age 18) earns $4,900 from doing yard work, but receives more than 50% of his support from Penny.
c. Trent (age 38) is single and lives alone. He provides more than 50% of the support of his parents (ages 69 and 70), who live in a nursing home.
d. Jack and Carol were divorced in 2007, and Carol has custody of their two children (ages 5 and 9). Jack furnishes more than half of their support, but the divorce decree is silent as to the dependency exemptions. Carol does not sign a Form 8332.
Wesley and Myrtle (ages 90 and 88, respectively) live in an assisted care facility and for years 2012 and 2013 received their support from the following sources.
Percentage of Support
Social Security benefits
16%
Son
20
Niece
29
Cousin
12
Brother
11
Family friend (not related)
12
a. Who is eligible to claim the Federal income tax dependency exemptions under a multiple support agreement?
b. Must Wesley and Myrtle be claimed as dependents by the same person(s) for both 2012 and 2013? Explain.
c. Who, if anyone, can claim an itemized deduction for paying the medical expenses of Wesley and Myrtle?
In each of the following independent situations, determine Winston’s filing status. Winston is not married.
a. Winston lives alone, but he maintains a household in which his parents live. The mother qualifies as Winston’s dependent, but the father does not.
b. Winston lives alone, but he maintains a household in which his married daughter, Karin, lives. Both Karin and her husband (Winston’s son in law) qualify as Winston’s dependents.
c. Winston maintains a household in which he and a family friend, Ward, live. Ward qualifies as Winston’s dependent.
d. Winston maintains a household in which he and his mother in law live. Winston’s wife died last year.
e. Same as (d), except that Winston’s wife disappeared (i.e., she did not die) two years ago.
Christopher died in 2010 and is survived by his wife, Chloe, and their 18 yearold son, Dylan. Chloe is the executor of Christopher’s estate and maintains the household in which she and Dylan live. All of their support is furnished by Chloe. Dylan saves his earnings. Dylan reports the following information.
Year
Earnings
Student?
2010
$5,000
Yes
2011
7,000
No
2012
6,000
Yes
What is Chloe’s Federal income tax filing status for:
Alexander (Alex) A. and Isabel P. Hill are married and live at 4692 Calhoun Drive, Charleston, South Carolina 29402. Alex is the director of the Tourist and Convention Bureau for the city of Charleston, while his wife is employed part time as a physical therapist by an orthopedic clinic.
During 2011, the Hills recorded the following receipts.
Salaries ($60,000 for Alex, $42,000 for Isabel)
$102,000
Interest income—
City of Columbia general purpose bonds
$3,000
Boeing Corporation bonds
2,100
Ally Bank certificate of deposit
900
6,000
Child support payments from John Morris
7,200
Annual gifts from parents
30,000
Settlement from Sumter Touring Company
80,000
Lottery winnings
900
Fees paid to Isabel for serving on a grand jury
1,300
Isabel previously was married to John Morris. When they divorced several years ago, Isabel was awarded custody of their two children, Emily and Jacob. (Isabel never issued a Form 8332 waiver.) Under the divorce decree, John is obligated to pay alimony and child support—the alimony payments were to terminate if Isabel remarried. In July, while going to lunch in downtown Charleston, Isabel was injured by a tour bus. As the driver was clearly at fault, the owner of the bus, Sumter Touring Company, paid her medical expenses (including a one week stay in a hospital). To avoid a lawsuit, Sumter also transferred to her $80,000 in settlement of the personal injuries she sustained.
The Hills incurred the following expenditures for 2011.
Medical expenses (not covered by insurance)
$8,900
Taxes—
Property taxes on personal residence
$3,800
State of South Carolina income tax (includes amount
withheld from wages during 2011)
3,900
7,700
Interest on home mortgage
6,200
Paid church pledge
3,800
Life insurance premiums (policy on Alex’s life)
1,500
Contribution to traditional IRA (on Isabel’s behalf)
5,000
Traffic fines
200
Contribution to the reelection campaign fund of the mayor
of Charleston
400
Funeral expenses for Wayne Boyle
5,900
Nonreimbursed expenses incurred by Isabel in connection
with her jury duty (e.g., transportation and parking)
120
Lottery losses (i.e., tickets purchased that did not win a prize)
1,100
The life insurance policy was taken out by Alex several years ago and designates Isabel as the beneficiary. As a part time employee, Isabel is excluded from coverage under her employer’s pension plan. Consequently, she provides for her own retirement with a traditional IRA obtained at a local trust company. Because the mayor evaluates Alex’s performance as Director of the Tourist and Convention Bureau, Alex felt compelled to make the political contribution. The Hills keep a record of their lottery activity and are able to substantiate their winnings and losses. The Hills’ household includes the following, for each of whom they provide more than half of the support.
Social Security Number
Birth Date
Alex Hill (age 42)
123–45–6786
12/16/1969
Isabel Hill (age 40)
123–45–6787
08/08/1971
Emily Morris (age 19)
123–45–6788
10/09/1992
Jacob Morris (age 17)
123–45–6789
05/03/1994
Walter Hill (age 75)
123–45–6785
06/15/1936
Emily graduated from high school on May 9, 2011, and is undecided about college. During 2011, she earned $9,500 (placed in a savings account) playing a piano in the lobby of a local hotel. Walter is Alex’s widower father who died on January 20, 2011. For the past few years, Walter qualified as a dependent of the Hills. Federal income tax withheld is $5,500 (Alex) and $3,400 (Isabel). The proper amount of Social Security and Medicare tax was withheld. Determine the Federal income tax for 2011 for the Hills on a joint return by completing the appropriate forms. They do not want to contribute to the Presidential Election Campaign Fund. If an overpayment results, it is to be refunded to them. Suggested software: H&R BLOCK At Home.
Logan B. Taylor is a widower whose wife, Sara, died on June 6, 2009. He lives at 4680 Dogwood Lane, Springfield, Missouri 65801. He is employed as a paralegal by a local law firm. During 2011, he reported the following receipts.
Salary
$ 80,000
Interest income—
Money market account at Omni Bank
$ 300
Savings account at Bosne State Bank
1,100
City of Springfield general purpose bonds
3,000
4,400
Inheritance from Daniel
60,000
Life insurance proceeds
200,000
Amount from sale of St. Louis lot
80,000
Proceeds from estate sale
$ 9,000
Federal income tax refund (for 2010 tax
overpayment)
700
Logan inherited securities worth $60,000 from his uncle, Daniel, who died in 2011. Logan also was the designated beneficiary of an insurance policy on Daniel’s life with a maturity value of $200,000. The lot in St. Louis was purchased on May 2, 2006, for $85,000 and held as an investment. As the neighborhood has deteriorated, Logan decided to cut his losses and sold the lot on January 5, 2011, for $80,000. The estate sale consisted largely of items belonging to Sara and Daniel (e.g., camper, boat, furniture, and fishing and hunting equipment). Logan estimates that the property sold originally cost at least twice the $9,000 he received and has declined or stayed the same in value since Sara and Daniel died.
Logan’s expenditures for 2011 include the following.
Medical expenses (including $10,500 for dental services)
$11,500
Taxes—
State of Missouri income tax (includes withholdings
during 2011)
$3,200
Property taxes on personal residence
4,500
7,700
Interest on home mortgage
4,600
Contribution to church (paid pledges for 2011 and 2012)
4,800
Logan and his dependents are covered by his employer’s health insurance policy. However, he is subject to a deductible, and dental care is not included. The $10,500 dental charge was for Helen’s implants. Helen is Logan’s widowed mother, who lives with him (see below). Logan normally pledges $2,400 ($200 per month) each year to his church. On December 5, 2011, upon the advice of his pastor, he prepaid his pledge for 2012.
Logan’s household, all of whom he supports, includes the following.
Social Security Number
Birth Date
Logan Taylor (age 48)
123 45 6787
08/30/1963
Helen Taylor (age 70)
123 45 6780
01/13/1941
Asher Taylor (age 23)
123 45 6783
07/18/1988
Mia Taylor (age 22)
123 45 6784
02/16/1989
Helen, Logan’s mother, receives a modest Social Security benefit. Asher, a son, is a full time student in dental school and earns $4,500 as a part time dental assistant. Mia, a daughter, does not work and is engaged to be married.
Part 1—Tax Computation Using the appropriate forms and schedules, compute Logan’s income tax for 2011. Federal income tax of $5,500 was withheld from his wages. If Logan has any overpayment on his income tax, he wants the refund sent to him. Assume that the proper amounts of Social Security and Medicare taxes were withheld. Logan does not want to contribute to the Presidential Election Campaign Fund. Suggested software: H&R BLOCK At Home.
Part 2—Follow up Advice In early 2012, the following events take place.
• Helen decides that she wants to live with one of her daughters and moves to Arizona.
• Asher graduates from dental school and joins an existing practice in St. Louis.
• Mia marries, and she and her husband move in with his parents.
• Using the insurance proceeds he received on Daniel’s death, Logan pays off the mortgage on his personal residence.
Logan believes that these events may have an effect on his tax position for 2012. Therefore, he requests your advice.
Write a letter to Logan explaining in general terms how the 2012 events will affect his Federal income tax liability. Assume that Logan’s salary and other factors not mentioned (e.g., property and state income taxes) will remain the same. Use the Tax Rate Schedules in projecting Logan’s tax for 2012.
PROJECTS WITH UNEQUAL LIVES Wisconsin Dairy Inc. is deciding on its capital budget for the upcoming year. Among the projects being considered are two machines, W and WW. W costs $500,000 and will produce expected after tax cash flows of $300,000 during the next 2 years. WWalso costs $500,000, but it will produce after tax cash flows of $165,000 during the next 4 years. Both projects have a 10% WACC.
a. If the projects are independent and not repeatable, which project(s) should the company accept?
b. If the projects are mutually exclusive but are not repeatable, which project should the company accept?
c. Assume that the projects are mutually exclusive and can be repeated indefinitely.
(1) Use the replacement chain method to determine the NPV of the project selected.
(2) Use the equivalent annual annuity method to determine the annuity of the project selected.
d. Could a replacement chain analysis be modified for use when the project’s cash flows are different each time it is repeated? Explain.
SCENARIO ANALYSIS Huang Industries is considering a proposed project whose estimated NPV is $12 million. This estimate assumes that economic conditions will be “average.” However, the CFO realizes that conditions could be better or worse, so she performed a scenario analysis and obtained these results:
Economic Scenario
Probability of Outcome
NPV
Recession
0.05
($70 million)
Below average
0.20
(25 million)
Average
0.50
12 million
Above average
0.20
20 million
Boom
0.05
30 million
Calculate the project’s expected NPV, standard deviation, and coefficient of variation.
NEW PROJECT ANALYSIS You must evaluate a proposed spectrometer for the R&D Department. The base price is $140,000, and it would cost another $30,000 to modify the equipment for special use by the firm. The equipment falls into the MACRS 3 year class and would be sold after 3 years for $60,000. The applicable depreciation rates are 33%, 45%, 15%, and 7% as discussed in Appendix 12A. The equipment would require an $8,000 increase in working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $50,000 per year in before tax labor costs. The firm’s marginal federal plus state tax rate is 40%.
a. What is the net cost of the spectrometer; that is, what is the Year 0 project cash flow?
b. What are the project’s annual net cash flows in Years 1, 2, and 3?
c. If the WACC is 12%, should the spectrometer be purchased? Explain.
NEW PROJECT ANALYSIS You must evaluate a proposal to buy a new milling machine. The base price is $108,000, and shipping and installation costs would add another $12,500. The machine falls into the MACRS 3 year class, and it would be sold after 3 years for $65,000. The applicable depreciation rates are 33%, 45%, 15%, and 7% as discussed in Appendix 12A. The machine would require a $5,500 increase in working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $44,000 per year. The marginal tax rate is 35%, and the WACC is 12%. Also, the firm spent $5,000 last year investigating the feasibility of using the machine.
a. How should the $5,000 spent last year be handled?
b. What is the net cost of the machine for capital budgeting purposes, that is, the Year 0 project cash flow?
c. What are the project’s annual net cash flows during Years 1, 2, and 3?
d. Should the machine be purchased? Explain your answer.
REPLACEMENT ANALYSIS The Dauten Toy Corporation uses an injection molding machine that was purchased 2 years ago. This machine is being depreciated on a straight line basis, and it has 6 years of remaining life. Its current book value is $2,100, and it can be sold for $2,500 at this time. Thus, the annual depreciation expense is $2,100/6 = $350 per year. If the old machine is not replaced, it can be sold for $500 at the end of its useful life.
Dauten is offered a replacement machine that has a cost of $8,000, an estimated useful life of 6 years, and an estimated salvage value of $800. This machine falls into the MACRS 5 year class; so the applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. The replacement machine would permit an output expansion, so sales would rise by $1,000 per year. Even so, the new machine’s greater efficiency would cause operating expenses to decline by $1,500 per year. The new machine would require that inventories be increased by $2,000, but accounts payable would simultaneously increase by $500. Dauten’s marginal federal plus state tax rate is 40%, and its WACC is 15%. Should the company replace the old machine?
REPLACEMENT ANALYSIS Mississippi River Shipyards is considering replacing an 8 year old riveting machine with a new one that will increase earnings before depreciation from $27,000 to $54,000 per year. The new machine will cost $82,500, and it will have an estimated life of 8 years and no salvage value. The new machine will be depreciated over its 5 year MACRS recovery period; so the applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. The applicable corporate tax rate is 40%, and the firm’s WACC is 12%. The old machine has been fully depreciated and has no salvage value. Should the old riveting machine be replaced by the new one? Explain your answer.
Q190
PROJECT RISK ANALYSIS The Butler Perkins Company (BPC) must decide between two mutually exclusive projects. Each costs $6,750 and has an expected life of 3 years. Annual project cash flows begin 1 year after the initial investment and are subject to the following probability distributions:
PROJECT A
PROJECT B
Probability
Cash Flows
Probability
Cash Flows
0.2
$6,000
0.2
$ 0
0.6
6,750
0.6
6,750
0.2
7,500
0.2
18,000
BPC has decided to evaluate the riskier project at 12% and the less risky project at 10%.
a. What is each project’s expected annual cash flow? Project B’s standard deviation (sB) is $5,798, and its coefficient of variation (CVB) is 0.76. What are the values of sA and CVA?
b. Based on the risk adjusted NPVs, which project should BPC choose?
c. If you knew that Project B’s cash flows were negatively correlated with the firm’s other cash flows whereas Project A’s flows were positively correlated, how might this affect the decision? If Project B’s cash flows were negatively correlated with gross domestic product (GDP) while A’s flows were positively correlated, would that influence your risk assessment? Explain.
UNEQUAL LIVES Haley’s Graphic Designs Inc. is considering two mutually exclusive projects. Both projects require an initial investment of $10,000 and are typical average risk projects for the firm. Project A has an expected life of 2 years with after tax cash inflows of $6,000 and $8,000 at the end of Years 1 and 2, respectively. Project B has an expected life of 4 years with after tax cash inflows of $4,000 at the end of each of the next 4 years. The firm’s WACC is 10%.
a. If the projects cannot be repeated, which project should be selected if Haley uses NPV as its criterion for project selection?
b. Assume that the projects can be repeated and that there are no anticipated changes in the cash flows. Use the replacement chain analysis to determine the NPV of the project selected.
c. Make the same assumptions as in Part b. Using the equivalent annual annuity (EAA) method, what is the EAA of the project selected?
EQUIVALENT ANNUAL ANNUITY A firm has two mutually exclusive investment projects to evaluate; both can be repeated indefinitely. The projects have the following cash flows:
Time
Size
IRR
0
$100,000
$70,000
1
30,000
30,000
2
50,000
30,000
3
70,000
30,000
4
—
30,000
5
—
10,000
Projects X and Y are equally risky and may be repeated indefinitely. If the firm’s WACC is 12%, what is the EAA of the project that adds the most value to the firm?
SCENARIO ANALYSIS Your firm, Agrico Products, is considering a tractor that would have a net cost of $36,000, would increase pretax operating cash flows before taking account of depreciation by $12,000 per year, and would be depreciated on a straight line basis to zero over 5 years at the rate of $7,200 per year beginning the first year. (Thus, annual cash flows would be $12,000 before taxes plus the tax savings that result from $7,200 of depreciation.) The managers are having a heated debate about whether the tractor would last 5 years. The controller insists that she knows of tractors that have lasted only 4 years. The treasurer agrees with the controller, but he argues that most tractors do give 5 years of service. The service manager then states that some last as long as 8 years. Given this discussion, the CFO asks you to prepare a scenario analysis to determine the importance of the tractor’s life on the NPV. Use a 40% marginal federal plus state tax rate, a zero salvage value, and a 10% WACC. Assuming each of the indicated lives has the same probability of occurring (probability = 1/3), what is the tractor’s expected NPV?
NEW PROJECT ANALYSIS Holmes Manufacturing is considering a new machine that costs $250,000 and would reduce pretax manufacturing costs by $90,000 annually. Holmes would use the 3 year MACRS method to depreciate the machine, and management thinks the machine would have a value of $23,000 at the end of its 5 year operating life. The applicable depreciation rates are 33%, 45%, 15%, and 7% as discussed in Appendix 12A. Working capital would increase by $25,000 initially, but it would be recovered at the end of the project’s 5 year life. Holmes’s marginal tax rate is 40%, and a 10%WACCis appropriate for the project.
a. Calculate the project’s NPV, IRR, MIRR, and payback.
b. Assume that management is unsure about the $90,000 cost savings—this figure could deviate by as much as plus or minus 20%. What would the NPV be under each of these situations?
c. Suppose the CFO wants you to do a scenario analysis with different values for the cost savings, the machine’s salvage value, and the working capital (WC) requirement. She asks you to use the following probabilities and values in the scenario analysis:
Scenario
Probability
Cost Savings
Salvage Value
WC
Worst case
0.35
$ 72,000
$18,000
$30,000
Base case
0.35
90,000
23,000
25,000
Best case
0.30
108,000
28,000
20,000
Calculate the project’s expected NPV, its standard deviation, and its coefficient of variation.
REPLACEMENT ANALYSIS The Erley Equipment Company purchased a machine 5 years ago at a cost of $90,000. The machine had an expected life of 10 years at the time of purchase, and it is being depreciated by the straight line method by $9,000 per year. If the machine is not replaced, it can be sold for $10,000 at the end of its useful life. A new machine can be purchased for $150,000, including installation costs. During its 5 year life, it will reduce cash operating expenses by $50,000 per year. Sales are not expected to change. At the end of its useful life, the machine is estimated to be worthless. MACRS depreciation will be used. The machine will be depreciated over its 3 year class life rather than its 5 year economic life; so the applicable depreciation rates are 33%, 45%, 15%, and 7%. The old machine can be sold today for $55,000. The firm’s tax rate is 35%. The appropriate WACC is 16%.
a. If the new machine is purchased, what is the amount of the initial cash flow at Year 0?
b. What are the incremental net cash flows that will occur at the end of Years 1 through 5?
c. What is the NPV of this project? Should Erley replace the old machine? Explain.
REPLACEMENT ANALYSIS The Bigbee Bottling Company is contemplating the replacement of one of its bottling machines with a newer and more efficient one. The old machine has a book value of $600,000 and a remaining useful life of 5 years. The firm does not expect to realize any return from scrapping the old machine in 5 years, but it can sell it now to another firm in the industry for $265,000. The old machine is being depreciated by $120,000 per year using the straight line method. The new machine has a purchase price of $1,175,000, an estimated useful life and MACRS class life of 5 years, and an estimated salvage value of $145,000. The applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. The machine is expected to economize on electric power usage, labor, and repair costs as well as to reduce the number of defective bottles. In total, an annual savings of $255,000 will be realized if the new machine is installed. The company’s marginal tax rate is 35%, and it has a 12% WACC.
a. What initial cash outlay is required for the new machine?
b. Calculate the annual depreciation allowances for both machines and compute the change in the annual depreciation expense if the replacement is made.
c. What are the incremental net cash flows in Years 1 through 5?
d. Should the firm purchase the new machine? Support your answer.
e. In general, how would each of the following factors affect the investment decision, and how should each be treated?
(1) The expected life of the existing machine decreases.
(2) The WACC is not constant but is increasing as Bigbee adds more projects to its capital budget for the year.
NEW PROJECT ANALYSIS AND UNEQUAL LIVES You must analyze a potential new product—a caulking compound that Cory Materials’ R&D people developed for use in the residential construction industry. Cory’s marketing manager thinks the company can sell 115,000 tubes per year for 3 years at a price of $3.25 each, after which the product will be obsolete. The required equipment would cost $150,000, plus another $25,000 for shipping and installation. Current assets (receivables and inventories) would increase by $35,000, while current liabilities (accounts payable and accruals) would rise by $15,000. Variable costs would be 60% of sales revenues, fixed costs (exclusive of depreciation) would be $70,000 per year, and fixed assets would be depreciated under MACRS with a 3 year life. (Refer to Appendix 12A for MACRS depreciation rates.) When production ceases after 3 years, the equipment should have a market value of $15,000. Cory’s tax rate is 40%, and it uses a 10% WACC for average risk projects.
a. Find the required Year 0 investment and the project’s annual net cash flows. Then calculate the project’s NPV, IRR, MIRR, and payback. Assume at this point that the project is of average risk.
b. Suppose you now learn that R&D costs for the new product were $30,000 and that those costs were incurred and expensed for tax purposes last year. How would this affect your estimate of NPV and the other profitability measures?
c. If the new project would reduce cash flows from Cory’s other projects and if the new project would be housed in an empty building that Cory owns and could sell, how would those factors affect the project’s NPV?
d. Are this project’s cash flows likely to be positively or negatively correlated with returns on Cory’s other projects and with the economy, and should this matter in your analysis? Explain.
e. Unrelated to the new product, Cory is analyzing two mutually exclusive machines that will upgrade its manufacturing plant. These machines are considered average risk projects, so management will evaluate them at the firm’s 10% WACC. Machine X has a life of 4 years, while Machine Y has a life of 2 years. The cost of each machine is $60,000; however, Machine X provides after tax cash flows of $25,000 per year for 4 years and Machine Y provides after tax cash flows of $42,000 per year for 2 years. The manufacturing plant is very successful, so the machines will be repurchased at the end of each machine’s useful life. In other words, the machines are “repeatable” projects.
(1) Using the replacement chain approach, what is the NPV of the better machine?
(2) Using the EAA approach, what is the EAA of the better machine?
f. Spreadsheet assignment: at instructor’s option Disregard Part e for the remaining parts of this problem. Construct a spreadsheet that calculates the caulking compound’s cash flows, NPV, IRR, payback, and MIRR.
g. The CEO expressed concern that some of the base case inputs might be too optimistic or too pessimistic. He wants to know how the caulking product’s NPV would be affected if these 6 variables were 20% better or 20% worse than the base case level: unit sales, sales price, variable costs, fixed costs, WACC, and equipment cost. Hold other things constant when you consider each variable and construct a sensitivity graph to illustrate your results.
h. Do a scenario analysis based on the assumption that there is a 25% probability that each of the 6 variables itemized in Part g will turn out to have their best case values as calculated in Part g, a 50% probability that all will have their base case values, and a 25% probability that all will have their worst case values. The other variables remain at base case levels. Calculate the caulking compound’s expected NPV, the standard deviation of NPV, and the coefficient of variation.
i. Does Cory’s management use the risk adjusted discount rate to adjust for project risk? Explain?
CAPITAL BUDGETING AND CASH FLOW ESTIMATION Allied Food Products is considering expanding into the fruit juice business with a new fresh lemon juice product. Assume that you were recently hired as assistant to the director of capital budgeting and you must evaluate the new project.
The lemon juice would be produced in an unused building adjacent to Allied’s Fort Myers plant; Allied owns the building, which is fully depreciated. The required equipment would cost $200,000, plus an additional $40,000 for shipping and installation. In addition, inventories would rise by $25,000, while accounts payable would increase by $5,000. All of these costs would be incurred at t = 0. By a special ruling, the machinery could be depreciated under the MACRS system as 3 year property. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The project is expected to operate for 4 years, at which time it will be terminated. The cash inflows are assumed to begin 1 year after the project is undertaken, or at t = 1, and to continue out to t = 4. At the end of the project’s life (t = 4), the equipment is expected to have a salvage value of $25,000. Unit sales are expected to total 100,000 units per year, and the expected sales price is $2.00 per unit. Cash operating costs for the project (total operating costs less depreciation) are expected to total 60% of dollar sales. Allied’s tax rate is 40%, and its WACC is 10%. Tentatively, the lemon juice project is assumed to be of equal risk to Allied’s other assets. You have been asked to evaluate the project and to make a recommendation as to whether it should be accepted or rejected. To guide you in your analysis, your boss gave you the following set of tasks/questions:
a. Allied has a standard form that is used in the capital budgeting process. Part of the table has been completed, but you must replace the blanks with the missing numbers. Complete the table using the following steps:
(1) Fill in the blanks under Year 0 for the initial investment outlay.
(2) Complete the table for unit sales, sales price, total revenues, and operating costs excluding depreciation.
(3) Complete the depreciation data.
(4) Complete the table down to after tax operating income and then down to the project’s operating cash flows.
(5) Fill in the blanks under Year 4 for the terminal cash flows and complete the project cash flow line.
Discuss working capital. What would have happened if the machinery had been sold for less than its book value?
b. (1) Allied uses debt in its capital structure, so some of the money used to finance the project will be debt.
Given this fact, should the projected cash flows be revised to show projected interest charges? Explain.
(2) Suppose you learned that Allied had spent $50,000 to renovate the building last year, expensing these costs. Should this cost be reflected in the analysis? Explain.
(3) Suppose you learned that Allied could lease its building to another party and earn $25,000 per year.
Should that fact be reflected in the analysis? If so, how?
(4) Assume that the lemon juice project would take profitable sales away from Allied’s fresh orange juice business. Should that fact be reflected in your analysis? If so, how?
c. Disregard all the assumptions from Part b and assume there is no alternative use for the building over the next 4 years. Now calculate the project’s NPV, IRR, MIRR, and payback. Do these indicators suggest that the project should be accepted? Explain.
d. If this project had been a replacement rather than an expansion project, how would the analysis have changed? Think about the changes that would have to occur in the cash flow table.
e. (1) What three levels, or types, of project risk are normally considered?
(2) Which type is most relevant?
(3) Which type is easiest to measure?
(4) Are the three types of risk generally highly correlated?
f. (1) What is sensitivity analysis?
(2) How would you perform a sensitivity analysis on the unit sales, salvage value, and WACC for the project? Assume that each of these variables deviates from its base case, or expected, value by plus or minus 10%, 20%, and 30%. Explain how you would calculate the NPV, IRR, MIRR, and payback for each case; but don’t do the analysis unless your instructor asks you to.
(3) What is the primary weakness of sensitivity analysis? What are its primary advantages?
g. Unrelated to the lemon juice project, Allied is upgrading its plant and must choose between two machines that are mutually exclusive. The plant is highly successful, so whichever machine is chosen will be repurchased after its useful life is over. Both machines cost $50,000; however, Machine A provides after tax savings of $17,500 per year for 4 years, while Machine B provides after tax savings of $34,000 in Year 1 and $27,500 in Year 2.
(1) Using the replacement chain method, what is the NPV of the better machine?
(2) Using the EAA method, what is the EAA of the better machine? Work out quantitative answers to the remaining questions only if your instructor asks you to. Also note that it will take a long time to do the calculations unless you are using an Excel model.
h. Assume that inflation is expected to average 5% over the next 4 years and that this expectation is reflected in the WACC. Moreover, inflation is expected to increase revenues and variable costs by this same 5%. Does it appear that inflation has been dealt with properly in the lemon juice project’s initial analysis to this point? If not, what should be done and how would the required adjustment affect the decision?
i. The lemon juice project’s expected cash flows, considering inflation (in thousands of dollars), are given in Table IC12 2. Allied’s WACC is 10%. Assume that you are confident about the estimates of all the variables
ALTERNATIVE DIVIDEND POLICIES Components Manufacturing Corporation (CMC) has an all common equity capital structure. It has 200,000 shares of $2 par value common stock outstanding. When CMC’s founder, who was also its research director and most successful inventor, retired unexpectedly to the South Pacific in late 2008, CMC was left suddenly and permanently with materially lower growth expectations and relatively few attractive new investment opportunities. Unfortunately, there was no way to replace the founder’s contributions to the firm. Previously, CMC found it necessary to plow back most of its earnings to finance growth, which averaged 12% per year. Future growth at a 6% rate is considered realistic, but that level would call for an increase in the dividend payout. Further, it now appears that new investment projects with at least the 14% rate of return required by CMC’s stockholders (rs = 14%) would amount to only $800,000 for 2009 compared to a projected $2,000,000 of net income. If the existing 20% dividend payout was continued, retained earnings would be $1.6 million in 2009; but as noted, investments that yield the 14% cost of capital would amount to only $800,000. The one encouraging point is that the high earnings from existing assets are expected to continue, and net income of $2 million is still expected for 2009. Given the dramatically changed circumstances, CMC’s management is reviewing the firm’s dividend policy.
a. Assuming that the acceptable 2009 investment projects would be financed entirely by earnings retained during the year and assuming that CMC uses the residual dividend model, calculate DPS in 2009.
b. What payout ratio does your answer to Part a imply for 2009?
c. If a 60% payout ratio is maintained for the foreseeable future, what is your estimate of the present market price of the common stock? How does this compare with the market price that should have prevailed under the assumptions existing just before the news about the founder’s retirement? If the two values of P0 are different, comment on why.
d. What would happen to the stock price if the old 20% payout was continued? Assume that if this payout is maintained, the average rate of return on the retained earnings will fall to 7.5% and the new growth rate will be as follows:
Indicate whether the following statements are true or false. If the statement is false, explain why.
a. If a firm repurchases its stock in the open market, the shareholders who tender the stock are subject to capital gains taxes.
b. If you own 100 shares in a company’s stock and the company’s stock splits 2 for 1, you will own 200 shares in the company following the split.
c. Some dividend reinvestment plans increase the amount of equity capital available to the firm.
d. The Tax Code encourages companies to pay a large percentage of their net income in the form of dividends.
e. If your company has established a clientele of investors who prefer large dividends, the company is unlikely to adopt a residual dividend policy.
f. If a firm follows a residual dividend policy, holding all else constant, its dividend payout will tend to rise whenever the firm’s investment opportunities improve.
RESIDUAL DIVIDEND MODEL Welch Company is considering three independent projects, each of which requires a $5 million investment. The estimated internal rate of return (IRR) and cost of capital for these projects are presented here:
Project H (high risk):
Cost of capital = 16%
IRR = 20%
Project M (medium risk):
Cost of capital = 12%
IRR = 10%
Project L (low risk):
Cost of capital = 8%
IRR = 9%
The company’s optimal capital structure calls for 50% debt and 50% common equity. Welch expects to have net income of $7,287,500. If Welch establishes its dividends from the residual model, what will be its payout ratio?
ALTERNATIVE DIVIDEND POLICIES Rubenstein Bros. Clothing is expecting to pay an annual dividend per share of $0.75 out of annual earnings per share of $2.25. Currently, Rubenstein Bros.’ stock is selling for $12.50 per share. Adhering to the company’s target capital structure, the firm has $10 million in assets, of which 40% is funded by debt. Assume that the firm’s book value of equity equals its market value. In past years, the firm has earned a return on equity (ROE) of 18%, which is expected to continue this year and into the foreseeable future.
a. Based on that information, what long run growth rate can the firm be expected to maintain?
b. What is the stock’s required return?
c. If the firm changed its dividend policy and paid an annual dividend of $1.50 per share, financial analysts would predict that the change in policy will have no effect on the firm’s stock price or ROE. Therefore, what must be the firm’s new expected long run growth rate and required return?
d. Suppose instead that the firm has decided to proceed with its original plan of disbursing $0.75 per share to shareholders, but the firm intends to do so in the form of a stock dividend rather than a cash dividend. The firm will allot new shares based on the current stock price of $12.50. In other words, for every $12.50 in dividends due to shareholders, a share of stock will be issued. How large will the stock dividend be relative to the firm’s current market capitalization?
e. If the plan in Part d is implemented, how many new shares of stock will be issued and by how much will the company’s earnings per share be diluted?
ALTERNATIVE DIVIDEND POLICIES In 2008, Keenan Company paid dividends totaling $3,600,000 on net income of $10.8 million. Note that 2008 was a normal year and that for the past 10 years, earnings have grown at a constant rate of 10%. However, in 2009, earnings are expected to jump to $14.4 million and the firm expects to have profitable investment opportunities of $8.4 million. It is predicted that Keenan will not be able to maintain the 2009 level of earnings growth—the high 2009 earnings level is attributable to an exceptionally profitable new product line introduced that year—and the company will return to its previous 10% growth rate. Keenan’s target capital structure is 40% debt and 60% equity.
a. Calculate Keenan’s total dividends for 2009 assuming that it follows each of the following policies:
(1) Its 2009 dividend payment is set to force dividends to grow at the long run growth rate in earnings.
(2) It continues the 2008 dividend payout ratio.
(3) It uses a pure residual dividend policy (40% of the $8.4 million investment is financed with debt and 60% with common equity).
(4) It employs a regular dividend plus extras policy, with the regular dividend being based on the long run growth rate and the extra dividend being set according to the residual policy.
b. Which of the preceding policies would you recommend? Restrict your choices to the ones listed but justify your answer.
c. Assume that investors expect Keenan to pay total dividends of $9,000,000 in 2009 and to have the dividend grow at 10% after 2009. The stock’s total market value is $180 million. What is the company’s cost of equity?
d. What is Keenan’s long run average return on equity?
e. Does a 2009 dividend of $9,000,000 seem reasonable in view of your answers to Parts c and d? If not, should the dividend be higher or lower? Explain your answer.
In this chapter’s opening vignette, we discussed Microsoft’s decision to establish a dividend payout policy in 2003. Let’s find out what has happened to Microsoft’s (MSFT) dividend policy since the time of this announcement. We can address this issue by relying on the data that are provided in Thomson ONE.
Discussion Questions
1. To get information about MSFT’s dividend policy, enter its ticker quote (MSFT O) and select OVERVIEW> FULL REPORTS>THOMSON FULL REPORTS>FULL COMPANY REPORT. Click on STOCK & EARNINGS DATA and scroll down to the “Annual Historical Data” section. What has happened to MSFT’s dividend per share, dividend yield, and dividend payout over the past 5 years? Provide an explanation for what took place.
2. Compare this information with other firms in the same industry. To see how MSFT stacks up against its peers, select COMPARABLES>OVERVIEWS>PER SHARE DATA to get MSFT’s peers’ last annual dividends. Accessing COMPARABLES>OVERVIEWS>ABSOLUTE RANKINGS will give their dividend yields. You can also get this information from the VALUATION COMPARISON in this same section. Has MSFT behaved differently from its peers, or have there been industry wide shifts?
3. Refer back to the FULL COMPANY REPORT used in Question 1. Manually plot earnings and dividends over time. In the text, we point out that dividends are often more stable than earnings. Do you see a similar pattern for MSFT? Explain.
4. In the “Interim Financial Data” section of the FULL COMPANY REPORT, identify the dividend declared date, ex date, and pay date. Explain the significance of those dates. Go back to “Overview” and access the “Interactive Price Chart.” Can you observe price shifts around these dates? Explain what price shifts you might expect to see.
5. Investors are more concerned with future dividends than historical dividends, so go to ESTIMATES and scroll down to the “Consensus Estimates” section. Click on the “Available Measures” menu to toggle between earnings per share and dividends per share. How do analysts expect MSFT’s payout policy to behave in the future?
6. Refer back to the FULL COMPANY REPORT and scroll down to the “5 Yr Annual Balance Sheet” section. Does it appear that MSFT has been repurchasing any stock, or has it been issuing new stock?
RATIO ANALYSIS The Corrigan Corporation’s 2007 and 2008 financial statements follow, along with some industry average ratios.
a. Assess Corrigan’s liquidity position and determine how it compares with peers and how the liquidity position has changed over time.
b. Assess Corrigan’s asset management position and determine how it compares with peers and how its asset management efficiency has changed over time.
c. Assess Corrigan’s debt management position and determine how it compares with peers and how its debt management has changed over time.
d. Assess Corrigan’s profitability ratios and determine how they compare with peers and how its profitability position has changed over time.
e. Assess Corrigan’s market value ratios and determine how its valuation compares with peers and how it has changed over time.
f. Calculate Corrigan’s ROE as well as the industry average ROE using the DuPont equation. From this analysis, how does Corrigan’s financial position compare with the industry average numbers?
g. What do you think would happen to its ratios if the company initiated cost cutting measures that allowed it to hold lower levels of inventory and substantially decreased the cost of goods sold? No calculations are necessary. Think about which ratios would be affected by changes in these two accounts.
Corrigan Corporation: Balance Sheets as of December 31
2007
Cash
$72,000
$65,000
Accounts receivable
439,000
328,000
Inventories
894,000
813,000
Total current assets
$1,405,000
$1,206,000
Land and building
$238,000.00
271,000
Machinery
132,000
133,000
Other fixed assets
$61,000.00
57,000
Total assets
$1,836,000
$1,667,000
Accounts and notes payable
432,000
$409,500
Accrued liabilities
$170,000.00
162,000
Total current liabilities
602,000
$571,500
Long term debt
$404,290.00
258,898
Common stock
575,000
575,000
Retained earnings
$254,710.00
261,602
Total liabilities and equity
$1,836,000
$1,667,000
Corrigan Corporation: Income Statements for Years Ending December 31
FINANCIAL STATEMENT ANALYSIS Part I of this case, presented in Chapter 3, discussed the situation of D’Leon Inc., a regional snack foods producer, after an expansion program. D’Leon had increased plant capacity and undertaken a major marketing campaign in an attempt to “go national.” Thus far, sales have not been up to the forecasted level, costs have been higher than were projected, and a large loss occurred in 2008 rather than the expected profit. As a result, its managers, directors, and investors are concerned about the firm’s survival. Donna Jamison was brought in as assistant to Fred Campo, D’Leon’s chairman, who had the task of getting the company back into a sound financial position. D’Leon’s 2007 and 2008 balance sheets and income statements, together with projections for 2009, are given in Tables IC 4 1 and IC 4 2. In addition, Table IC 4 3 gives the company’s 2007 and 2008 financial ratios, together with industry average data. The 2009 projected financial statement data represent Jamison’s and Campo’s best guess for 2009 results, assuming that some new financing is arranged to get the company “over the hump.”
Jamison examined monthly data for 2008 (not given in the case), and she detected an improving pattern during the year. Monthly sales were rising, costs were falling, and large losses in the early months had turned to a small profit by December. Thus, the annual data look somewhat worse than final monthly data. Also, it appears to be taking longer for the advertising program to get the message out, for the new sales offices to generate sales, and for the new manufacturing facilities to operate efficiently. In other words, the lags between spending money and deriving benefits were longer than D’Leon’s managers had anticipated. For these reasons, Jamison and Campo see hope for the company—provided it can survive in the short run.
Jamison must prepare an analysis of where the company is now, what it must do to regain its financial health, and what actions should be taken. Your assignment is to help her answer the following questions. Provide clear explanations, not yes or no answers.
a. Why are ratios useful? What are the five major categories of ratios?
b. Calculate D’Leon’s 2009 current and quick ratios based on the projected balance sheet and income statement data. What can you say about the company’s liquidity positions in 2007, in 2008, and as projected for 2009? We often think of ratios as being useful (1) to managers to help run the business, (2) to bankers for credit analysis, and (3) to stockholders for stock valuation. Would these different types of analysts have an equal interest in the company’s liquidity ratios?
c. Calculate the 2009 inventory turnover, days sales outstanding (DSO), fixed assets turnover, and total assets turnover. How does D’Leon’s utilization of assets stack up against other firms in the industry?
d. Calculate the 2009 debt and times interest earned ratios. How does D’Leon compare with the industry with respect to financial leverage? What can you conclude from these ratios?
e. Calculate the 2009 operating margin, profit margin, basic earning power (BEP), return on assets (ROA), and return on equity (ROE). What can you say about these ratios?
f. Calculate the 2009 price/earnings ratio and market/book ratio. Do these ratios indicate that investors are expected to have a high or low opinion of the company?
g. Use the DuPont equation to provide a summary and overview of D’Leon’s financial condition as projected for 2009. What are the firm’s major strengths and weaknesses?
h. Use the following simplified 2009 balance sheet to show, in general terms, how an improvement in the DSO would tend to affect the stock price. For example, if the company could improve its collection procedures and thereby lower its DSO from 45.6 days to the 32 day industry average without affecting sales, how would that change “ripple through” the financial statements (shown in thousands below) and influence the stock price?
Accounts receivable
$ 878
Debt
$1,545
Other current assets
1,802
Net fixed assets
817
Equity
1,952
Total assets
$3,497
Liabilities plus equity
$3,497
i. Does it appear that inventories could be adjusted? If so, how should that adjustment affect D’Leon’s profitability and stock price?
j. In 2008, the company paid its suppliers much later than the due dates; also, it was not maintaining financial ratios at levels called for in its bank loan agreements. Therefore, suppliers could cut the company off, and its bank could refuse to renew the loan when it comes due in 90 days. On the basis of data provided, would you, as a credit manager, continue to sell to D’Leon on credit? (You could demand cash on delivery—that is, sell on terms of COD—but that might cause D’Leon to stop buying from your company.) Similarly, if you were the bank loan officer, would you recommend renewing the loan or demand its repayment? Would your actions be influenced if in early 2009 D’Leon showed you its 2009 projections along with proof that it was going to raise more than $1.2 million of new equity?
k. In hindsight, what should D’Leon have done in 2007?
l. What are some potential problems and limitations of financial ratio analysis?
m. What are some qualitative factors that analysts should consider when evaluating a company’s likely future financial performance?
PROJECT AND RISK ANALYSIS As a financial analyst, you must evaluate a proposed project to produce printer cartridges. The equipment would cost $55,000, plus $10,000 for installation. Annual sales would be 4,000 units at a price of $50 per cartridge, and the project’s life would be 3 years. Current assets would increase by $5,000 and payables by $3,000. At the end of 3 years, the equipment could be sold for $10,000. Depreciation would be based on the MACRS 3 year class; so the applicable depreciation rates would be 33%, 45%, 15%, and 7%. Variable costs (VC) would be 70% of sales revenues, fixed costs excluding depreciation would be $30,000 per year, the marginal tax rate is 40%, and the corporate WACC is 11%.
a. What is the required investment, that is, the Year 0 project cash flow?
b. What are the annual depreciation charges?
c. What are the project’s annual net cash flows?
d. If the project is of average risk, what is its NPV? Should it be accepted?
e. Suppose management is uncertain about the exact unit sales. What would the project’s
NPV be if unit sales turned out to be 20% below forecast but other inputs were as forecasted? Would this change the decision? Explain.
f. The CFO asks you to do a scenario analysis using these inputs:
Probability
Unit Sales
VC%
Best case
25.00%
4,800
65%
Base case
50
4,000
70
Worst case
25
3,200
75
Other variables are unchanged. What are the expected NPV, its standard deviation, and the coefficient of variation?
g. The firm’s project CVs generally range from 1.0 to 1.5. A 3% risk premium is added to the WACC if the initial CV exceeds 1.5, and the WACC is reduced by 0.5% if the CV is 0.75 or less. Then a revised NPV is calculated. What WACC should be used for this project? What are the revised values for the expected NPV, standard deviation, and coefficient of variation? Would you recommend that the project be accepted? Why or why not?
Sonja and Sons, Inc., owns and operates a group of apartment buildings. Management wants to sell one of its older four family buildings and buy a new building. The old building, which was purchased 25 years ago for $100,000, has a 40 year estimated life. The current market value is $80,000, and if it is sold, the cash inflow will be $67,675. Annual net cash inflows from the old building are expected to average $16,000 for the remainder of its estimated useful life.
The new building will cost $300,000. It has an estimated useful life of 25 years. Net cash inflows are expected to be $50,000 annually.
Assume that (1) all cash flows occur at year end, (2) the company uses straight line depreciation, (3) the buildings will have a residual value equal to 10 percent of their purchase price, and (4) the minimum rate of return is 14 percent. Use Table 1 and Table 2.
1. Compute the present value of future cash flows from the old building. $
2. What will the net present value of cash flows be if the company purchases the new building? $
3. Should the company keep the old building or purchase the new one? SelectPurchase new buildingKeep the old buildingItem 3
Why? The input in the box below will not be graded, but may be reviewed and considered by your instructor.
Declining Market, Inc. is considering the problem of when to stop production of a particular product in its product line. Sales of the product in question have been declining, and all estimates are that they will continue to decline. Capital equipment used to manufacture the product is specialized but can be readily sold as used equipment. If the decision rule for this case says “Keep producing the product as long as its contribution to net earnings is positive” what, if anything, is wrong with that? [Contribution to new earnings, where t is the tax rate, is (1 t) (Sales Variance cost Depreciation on equipment used to manufacture product).]Declining Market, Inc. is considering the problem of when to stop production of a particular product in its product line. Sales of the product in question have been declining, and all estimates are th
The accountant of Latifa Shoe Co. has compiled the following information from the company’s records as a basis for an income statement for the year ended December 31, 2014.
Rent revenue
$30,900
Interest expense
19,900
Market appreciation on land above cost
32,900
Salaries and wages expense (selling)
116,700
Supplies expense (selling)
19,500
Income tax
39,300
Salaries and wages expense (administrative)
137,800
Other administrative expenses
53,600
Cost of goods sold
497,900
Net sales
981,900
Depreciation on plant assets (70% selling, 30% administrative)
66,900
Cash dividends declared
17,900
There were 19,700 shares of common stock outstanding during the year.
The debits to Work in Process—Roasting Department for St. Arbucks Coffee Company for July 2014, together with information concerning production, are as follows:
Work in process, July 1, 1,100 pounds, 40% completed
$5,104*
*Direct materials (1,100 X $4.00)
$4,400
Conversion (1,100 X 40% X $1.60)
$704
$5,104
Coffee beans added during July, 34,000 pounds
134,300
Conversion costs during July
57,086
Work in process, July 31, 1,800 pounds, 40% completed
NET INCOME AND CASH FLOW Last year Rattner Robotics had $5 million in operating income (EBIT). Its depreciation expense was $1 million, its interest expense was $1 million, and its corporate tax rate was 40%. At year end, it had $14 million in current assets, $3 million in accounts payable, $1 million in accruals, and $15 million in net plant and equipment. Assume that Rattner’s only noncash item was depreciation.
a. What was the company’s net income?
b. What was its net working capital (NWC)?
c. Rattner had $12 million in net plant and equipment the prior year. Its net working capital has remained constant over time. What is the company’s free cash flow (FCF) for the year that just ended?
d. If the firm had $4.5 million in retained earnings at the beginning of the year and paid out total dividends of $1.2 million, what were its retained earnings at the end of the year? Assume that all dividends declared were actually paid.
1. INCOME STATEMENT Little Books Inc. recently reported $3 million of net income. Its
EBIT was $6 million, and its tax rate was 40%. What was its interest expense?
2. INCOME STATEMENT Pearson Brothers recently reported an EBITDA of $7.5 million and net income of $1.8 million. It had $2.0 million of interest expense, and its corporate tax rate was 40%. What was its charge for depreciation and amortization?
3. STATEMENT OF STOCKHOLDERS’ EQUITY In its most recent financial statements,
Newhouse Inc. reported $50 million of net income and $810 million of retained earnings. The previous retained earnings were $780 million. How much in dividends were paid to shareholders during the year?
4. BALANCE SHEET Which of the following actions are most likely to directly increase cash as shown on a firm’s balance sheet? Explain and state the assumptions that underlie your answer.
a. It issues $2 million of new common stock.
b. It buys new plant and equipment at a cost of $3 million.
c. It reports a large loss for the year.
d. It increases the dividends paid on its common stock.
INCOME STATEMENT Hermann Industries is forecasting the following income statement:
Sales
$8,000,000
Operating costs excluding depr. & amort.
4,400,000
EBITDA
$3,600,000
Depreciation & amortization
800,000
EBIT
$2,800,000
Interest
600,000
EBT
$2,200,000
Taxes (40%)
880,000
Net income
$1,320,000
The CEO would like to see higher sales and a forecasted net income of $2,500,000. Assume that operating costs (excluding depreciation and amortization) are 55% of sales and that depreciation and amortization and interest expenses will increase by 10%. The tax rate, which is 40%, will remain the same. What level of sales would generate $2,500,000 in net income?
FINANCIAL STATEMENTS, CASH FLOW, AND TAXES Laiho Industries’ 2007 and 2008 balance sheets (in thousands of dollars) are shown.
2008
2007
Cash
$102,850
$89,725
Accounts receivable
103,365
85,527
Inventories
38,444
34,982
Total current assets
$244,659
$210,234
Net fixed assets
67,165
42,436
Total assets
$311,824
$252,670
Accounts payable
$30,761
$23,109
Accruals
30,477
22,656
Notes payable
16,717
14,217
Total current liabilities
$77,955
$59,982
Long term debt
76,264
63,914
Total liabilities
$154,219
$123,896
Common stock
100,000
90,000
Retained earnings
57,605
38,774
Total common equity
$157,605
$128,774
Total liabilities and equity
$311,824
$252,670
a. Sales for 2008 were $455,150,000, and EBITDA was 15% of sales. Furthermore, depreciation and amortization were 11% of net fixed assets, interest was $8,575,000, the corporate tax rate was 40%, and Laiho pays 40% of its net income in dividends. Given this information, construct the firm’s 2008 income statement.
b. Construct the statement of stockholders’ equity for the year ending December 31, 2008, and the 2008 statement of cash flows.
c. Calculate 2007 and 2008 net working capital and 2008 free cash flow.
d. If Laiho increased its dividend payout ratio, what effect would this have on corporate taxes paid? What effect would this have on taxes paid by the company’s shareholders?
FINANCIAL STATEMENTS AND TAXES Donna Jamison, a 2003 graduate of the University of Florida with 4 years of banking experience, was recently brought in as assistant to the chairperson of the board of D’Leon Inc., a small food producer that operates in north Florida and whose specialty is high quality pecan and other nut products sold in the snack foods market. D’Leon’s president, Al Watkins, decided in 2007 to undertake a major expansion and to “go national” in competition with Frito Lay, Eagle, and other major snack foods companies. Watkins believed that D’Leon’s products were of higher quality than the competition’s; that this quality differential would enable it to charge a premium price; and that the end result would be greatly increased sales, profits, and stock price.
The company doubled its plant capacity, opened new sales offices outside its home territory, and launched an expensive advertising campaign. D’Leon’s results were not satisfactory, to put it mildly. Its board of directors, which consisted of its president, vice president, and major stockholders (who were all local businesspeople), was most upset when directors learned how the expansion was going. Unhappy suppliers were being paid late; and the bank was complaining about the deteriorating situation, threatening to cut off credit. As a result, Watkins was informed that changes would have to be made—and quickly; otherwise, he would be fired. Also, at the board’s insistence, Donna Jamison was brought in and given the job of assistant to Fred Campo, a retired banker who was D’Leon’s chairperson and largest stockholder. Campo agreed to give up a few of his golfing days and help nurse the company back to health, with Jamison’s help.
Jamison began by gathering the financial statements and other data given in Tables IC 3 1, IC 3 2, IC 3 3, and IC 3 4. Assume that you are Jamison’s assistant. You must help her answer the following questions for campo.
a. What effect did the expansion have on sales, after tax operating income, net working capital (NWC), and net income?
b. What effect did the company’s expansion have on its free cash flow?
c. D’Leon purchases materials on 30 day terms, meaning that it is supposed to pay for purchases within 30 days of receipt. Judging from its 2008 balance sheet, do you think that D’Leon pays suppliers on time?
Explain, including what problems might occur if suppliers are not paid in a timely manner.
d. D’Leon spends money for labor, materials, and fixed assets (depreciation) to make products—and spends still more money to sell those products. Then the firm makes sales that result in receivables, which eventually result in cash inflows. Does it appear that D’Leon’s sales price exceeds its costs per unit sold? How does this affect the cash balance?
e. Suppose D’Leon’s sales manager told the sales staff to start offering 60 day credit terms rather than the 30 day terms now being offered. D’Leon’s competitors react by offering similar terms, so sales remain constant. What effect would this have on the cash account? How would the cash account be affected if sales doubled as a result of the credit policy change?
f. Can you imagine a situation in which the sales price exceeds the cost of producing and selling a unit of output, yet a dramatic increase in sales volume causes the cash balance to decline? Explain.
g. Did D’Leon finance its expansion program with internally generated funds (additions to retained earnings plus depreciation) or with external capital? How does the choice of financing affect the company’s financial strength?
h. Refer to Tables IC 3 2 and IC 3 4. Suppose D’Leon broke even in 2008 in the sense that sales revenues equaled total operating costs plus interest charges. Would the asset expansion have caused the company to experience a cash shortage that required it to raise external capital? Explain.
i. If D’Leon starts depreciating fixed assets over 7 years rather than 10 years, would that affect (1) the physical stock of assets, (2) the balance sheet account for fixed assets, (3) the company’s reported net income, and (4) the company’s cash position? Assume that the same depreciation method is used for stockholder reporting and for tax calculations and that the accounting change has no effect on assets’ physical lives.
j. Explain how earnings per share, dividends per share, and book value per share are calculated and what they mean. Why does the market price per share not equal the book value per share?
k. Explain briefly the tax treatment of (1) interest and dividends paid, (2) interest earned and dividends received, (3) capital gains, and (4) tax loss carry back and carry forward. How might each of these items affect D’Leon’s taxes?
RATIO ANALYSIS The following data apply to A.L. Kaiser & Company (millions of dollars):
Cash and equivalents
$100.00
Fixed assets
283.50
Sales
1,000.00
Net income
50.00
Current liabilities
105.50
Current ratio
3.00×
DSOa
40.55 days
ROE
12.00%
aThis calculation is based on a 365 day year.
Kaiser has no preferred stock—only common equity, current liabilities, and long term debt.
a. Find Kaiser’s (1) accounts receivable, (2) current assets, (3) total assets, (4) ROA, (5) common equity, (6) quick ratio, and (7) long term debt.
b. In Part a, you should have found that Kaiser’s accounts receivable (A/R) = $111.1 million. If Kaiser could reduce its DSO from 40.55 days to 30.4 days while holding other things constant, how much cash would it generate? If this cash were used to buy back common stock (at book value), thus reducing common equity, how would this affect (1) the ROE, (2) the ROA, and (3) the total debt/total assets ratio?
Indicate the effects of the transactions listed in the following table on total current assets, current ratio, and net income. Use (+) to indicate an increase, (−) to indicate a decrease, and (0) to indicate either no effect or an indeterminate effect. Be prepared to state any necessary assumptions and assume an initial current ratio of more than 1.0.
Total
Current
Effect
a. Cash is acquired through issuance of additional
Current
Ratio
on Net
common stock.
Assets
Income
b. Merchandise is sold for cash.
c. Federal income tax due for the previous year is paid.
d. A fixed asset is sold for less than book value.
e. A fixed asset is sold for more than book value.
f. Merchandise is sold on credit.
g. Payment is made to trade creditors for previous
purchases.
h. A cash dividend is declared and paid.
Total Current Assets
Current
Ratio
Effect on Net Income
i.
Cash is obtained through short term bank loans.
j.
Short term notes receivable are sold at a discount.
k.
Marketable securities are sold below cost.
l.
Advances are made to employees.
m.
Current operating expenses are paid.
n.
Short term promissory notes are issued to trade
creditors in exchange for past due accounts payable.
o.
10 year notes are issued to pay off accounts payable.
RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $200,000, a net income of $15,000, and the following balance sheet:
Cash
$ 10,000
Accounts payable
$ 30,000
Receivables
50,000
Other current liabilities
20,000
Inventories
150,000
Long term debt
50,000
Net fixed assets
90,000
Common equity
200,000
Total assets
$300,000
Total liabilities and equity
$300,000
The new owner thinks that inventories are excessive and can be lowered to the point where the current ratio is equal to the industry average, 2.5×, without affecting sales or net income. If inventories are sold off and not replaced (thus reducing the current ratio to 2.5×), if the funds generated are used to reduce common equity (stock can be repurchased at book value), and if no other changes occur, by how much will the ROE change? What will be the firm’s new quick ratio?
RATIO ANALYSIS Data for Barry Computer Co. and its industry averages follow.
a. Calculate the indicated ratios for Barry.
b. Construct the DuPont equation for both Barry and the industry.
c. Outline Barry’s strengths and weaknesses as revealed by your analysis.
d. Suppose Barry had doubled its sales as well as its inventories, accounts receivable, and common equity during 2008. How would that information affect the validity of your ratio analysis?
Barry Computer Company: Balance Sheet as of December 31, 2008 (In Thousands)
Cash
$ 77,500
Accounts payable
$129,000
Receivables
336,000
Notes payable
84,000
Inventories
241,500
Other current liabilities
117,000
Total current assets
$655,000
Total current liabilities
$330,000
Long term debt
256,500
Net fixed assets
292,500
Common equity
361,000
Total assets
$947,500
Total liabilities and equity
$947,500
Barry Computer Company:
Income Statement for Year Ended December 31, 2008 (In Thousands)
en Ham started his own consulting firm, Hambone Consulting, on May 1, 2010. The trial balance at May 31 is as follows.
HAMBONE CONSULTING Trial Balance May 31, 2010
Account
Number
Debit
Credit
101
Cash
$ 5,700
112
Accounts Receivable
6,000
126
Supplies
1,900
130
Prepaid Insurance
3,600
149
Office Furniture
10,200
201
Accounts Payable
$ 4,500
209
Unearned Service Revenue
2,000
301
K. Ham, Capital
17,700
400
Service Revenue
7,500
726
Salaries Expense
3,400
729
Rent Expense
900
$31,700
$31,700
In addition to those accounts listed on the trial balance, the chart of accounts for Hambone Consulting also contains the following accounts and account numbers: No. 150 Accumulated Depreciation—Office Furniture, No. 212 Salaries Payable, No. 229 Travel Payable, No. 631Supplies Expense, No. 717 Depreciation Expense, No. 722 Insurance Expense, and No. 736 Travel Expense.
Other data:
1. $900 of supplies have been used during the month.
2. Travel expense incurred but not paid on May 31, 2010, $250.
3. The insurance policy is for 2 years.
4. $400 of the balance in the unearned service revenue account remains unearned at the end of the month.
5. May 31 is a Wednesday, and employees are paid on Fridays. Hambone Consulting has two employees, who are paid $800 each for a 5 day work week.
6. The office furniture has a 5 year life with no salvage value. It is being depreciated at $170 per month for 60 months.
7. Invoices representing $1,200 of services performed during the month have not been recorded as of May 31.
Instructions
(a) Prepare the adjusting entries for the month of May. Use J4 as the page number for your journal.
(b) Post the adjusting entries to the ledger accounts. Enter the totals from the trial balance as beginning account balances and place a check mark in the posting reference column.
(c) Prepare an adjusted trial balance at May 31, 2010.
The Bonita Inn is trying to determine its break even point. The inn has 75 rooms that are rented at $56 a night. Operating costs are as follows.
Salaries $12,270 per month
Utilities 2,420 per month
Depreciation 1,300 per month
Maintenance 810 per month
Maid service 7 per room
Other costs 35 per room
Determine the inn’s break even point in (1) number of rented rooms per month and (2) dollars.
1. Break even point in rooms
2. Break even point $
SHOW SOLUTION
SHOW ANSWER
LINK TO TEXT
If the inn plans on renting an average of 50 rooms per day (assuming a 30 day month), what is (1) the monthly margin of safety in dollars and (2) the margin of safety ratio? (Round ratio to 1 decimal place, e.g. 10.5%.)
1. Margin of safety $
2. Margin of safety ratio
%
Exercise 6 3
Norton Company reports the following operating results for the month of August: Sales $310,000 (units 5,000); variable costs $223,700; and fixed costs $71,200.
Management is considering the following independent courses of action to increase net income.
Compute the net income to be earned under each alternative.
1. Increase selling price by 10% with no change in total variable costs or sales volume.
Net income $
2. Reduce variable costs to 51% of sales.
Net income $
3. Reduce fixed costs by $20,600.
Net income $
Which course of action will produce the highest net income?
Exercise 6 4
Comfi Airways, Inc., a small two plane passenger airline, has asked for your assistance in some basic analysis of its operations. Both planes seat 10 passengers each, and they fly commuters from Comfi’s base airport to the major city in the state, Metropolis. Each month 40 round trip flights are made. Shown below is a recent month’s activity in the form of a cost volume profit income statement.
Fare revenues (400 fares) $46,800
Variable costs
Fuel $14,780
Snacks and drinks 770
Landing fees 1,990
Supplies and forms 1,180 18,720
Contribution margin 28,080
Fixed costs
Depreciation 3,060
Salaries 15,470
Advertising 380
Airport hanger fees 1,790 20,700
Net income $7,380
(a) Calculate the break even point in (1) dollars and (2) number of fares. (Round answers to 0 decimal place, e.g. 1,225.)
1. Break even point $
2. Break even point
fares
(b) Without calculations, determine the contribution margin at the break even point.
Break even point $
(c) If fares were decreased by 10%, an additional 100 fares could be generated. However, total variable costs would increase by 20%. (Round answers to 0 decimal place, e.g. 1,225.)
(1) How much would net income be impacted by this change?
Net income to $
(2) Should the fare decrease be adopted?
Click if you would like to Show Work for this question: Open Show Work
Exercise 6 6
Yard Tools manufactures lawnmowers, weed trimmers, and chainsaws. Its sales mix and contribution margin per unit are as follows.
Sales Mix Contribution
Margin per Unit
Lawnmowers 20 % $40
Weed trimmers 50 % $24
Chainsaws 30 % $60
Yard Tools has fixed costs of $6,476,720.
Compute the number of units of each product that Yard Tools must sell in order to break even under this product mix.
Lawnmowers
units
Weed trimmers
units
Chainsaws
units
xercise 6 8
Express Delivery is a rapidly growing delivery service. Last year, 85% of its revenue came from the delivery of mailing “pouches” and small, standardized delivery boxes (which provides a 13% contribution margin). The other 15% of its revenue came from delivering non standardized boxes (which provides a 62% contribution margin). With the rapid growth of Internet retail sales, Express believes that there are great opportunities for growth in the delivery of non standardized boxes. The company has fixed costs of $12,990,000.
(a) What is the company’s break even point in total sales dollars? At the break even point, how much of the company’s sales are provided by each type of service? (Use Weighted Average Contribution Margin Ratio rounded to 4 decimal places e.g. 0.2552 and round final answers to 0 decimal places, e.g. 2,510.)
Total break even sales $
Sale of mail pouches and small boxes $
Sale of non standard boxes $
(b) The company’s management would like to hold its fixed costs constant, but shift its sales mix so that 62% of its revenue comes from the delivery of non standardized boxes and the remainder from pouches and small boxes. If this were to occur, what would be the company’s break even sales, and what amount of sales would be provided by each service type? (Use Weighted Average Contribution Margin Ratio rounded to 4 decimal places e.g. 0.2552 and round final answers to 0 decimal places, e.g. 2,510.)
Total break even sales $
Sale of mail pouches and small boxes $
Sale of non standardized boxes $
Exercise 6 9
Palmer Golf Accessories sells golf shoes, gloves, and a laser guided range finder that measures distance. Shown below are unit cost and sales data.
Pairs of
Shoes Pairs of
Gloves Range
Finder
Unit sales price $103 $32 $240
Unit variable costs 59 13 205
Unit contribution margin $44 $19 $35
Sales mix 33 % 42 % 25 %
Fixed costs are $668,750.
Calculate weighted average unit contribution margin. (Round answer to 2 decimal places e.g. 10.25.)
Weighted average unit contribution margin $
Exercise 6 11
Spencer Company manufactures and sells three products. Relevant per unit data concerning each product are given below.
Product
A B C
Selling price $21 $13 $16
Variable costs and expenses $7 $11 $14
Machine hours to produce 2 1 2
LINK TO TEXT
(1) Compute the contribution margin per unit of the limited resource (machine hours) for each product. (Round contribution margin per unit to 2 decimal places, e.g. 1.25.)
Product A Product B Product C
Contribution margin per unit of limited resource $
$
$
(2) Assuming 1,590 additional machine hours are available, which product should be manufactured?
xercise 6 12
Dalton Inc. produces and sells three products. Unit data concerning each product is shown below.
Product
D E F
Selling price $221.80 $360.50 $271.90
Direct labor costs 33.80 100.10 40.30
Other variable costs 110.00 91.00 151.00
The company has 2,200 hours of labor available to build inventory in anticipation of the company’s peak season. Management is trying to decide which product should be produced. The direct labor hourly rate is $13.
LINK TO TEXT
Determine the number of direct labor hours per unit. (Round answers to 1 decimal place, e.g. 1.5.)
Direct labor
Product D
hours per unit
Product E
hours per unit
Product F
hours per unit
Exercise 6 18
Langdon Company produced 10,200 units during the past year, but only 8,770 of the units were sold. The following additional information is also available.
Direct materials used $108,580
Direct labor incurred $30,060
Variable manufacturing overhead $23,540
Fixed manufacturing overhead $61,200
Fixed selling and administrative expenses $71,370
Variable selling and administrative expenses $8,410
There was no work in process inventory at the beginning of the year, nor did Langdon have any beginning finished goods inventory.
(a) What would be Langdon Company’s finished goods inventory cost on December 31 under variable costing? (Round intermediate calculations to 2 decimal places e.g. 10.25 and final answer to 0 decimal places, e.g. 2,510.)
Finished goods inventory cost $
(b) Which costing method, absorption or variable costing, would show a higher net income for the year? By what amount? (Round intermediate calculations to 2 decimal places e.g. 10.25 and final answer to 0 decimal places, e.g. 2,510.)
method would show a higher net income by $
Exercise 6 19
Creative Crates Co. produces wooden crates used for shipping products by ocean liner. In 2014, Creative incurred the following costs.
Wood used in crate production $55,400
Nails (considered insignificant and a variable expense) $520
Direct labor $39,980
Utilities for the plant:
$2,400 each month,
plus $0.48 for each kilowatt hour used each month
Rent expense for the plant for the year $23,560
Assume Creative used an average 700 kilowatt hours each month over the past year.
(a) What is Creative’s total manufacturing cost if it uses a variable costing approach?
Total manufacturing costs $
(b) What is Creative’s total manufacturing cost if it uses an absorption costing approach?
Total manufacturing costs $
Problem 6 2A
Lorge Corporation has collected the following information after its first year of sales. Sales were $1,940,800 on 121,300 units; selling expenses $291,120 (40% variable and 60% fixed); direct materials $619,843; direct labor $345,705; administrative expenses $339,640 (20% variable and 80% fixed); manufacturing overhead $436,680 (70% variable and 30% fixed). Top management has asked you to do a CVP analysis so that it can make plans for the coming year. It has projected that unit sales will increase by 10% next year.
Compute (1) the contribution margin for the current year and the projected year, and (2) the fixed costs for the current year. (Assume that fixed costs will remain the same in the projected year.)
(1) Contribution margin for current year $
Contribution margin for projected year $
(2) Fixed costs for current year $
SHOW SOLUTION
SHOW ANSWER
LINK TO TEXT
Compute the break even point in units and sales dollars for the first year. (Round contribution margin ratio to 2 decimal places e.g. 0.15 and final answers to 0 decimal places, e.g. 2,510.)
Break even point units
Break even point $
SHOW SOLUTION
SHOW ANSWER
LINK TO TEXT
The company has a target net income of $376,030. What is the required sales in dollars for the company to meet its target?
Sales dollars required for target net income $
SHOW SOLUTION
SHOW ANSWER
LINK TO TEXT
If the company meets its target net income number, by what percentage could its sales fall before it is operating at a loss? That is, what is its margin of safety ratio? (Round answer to 1 decimal place, e.g. 10.5%.)
Margin of safety ratio %
SHOW SOLUTION
SHOW ANSWER
LINK TO TEXT
The company is considering a purchase of equipment that would reduce its direct labor costs by $126,152 and would change its manufacturing overhead costs to 30% variable and 70% fixed (assume total manufacturing overhead cost is $436,680, as above). It is also considering switching to a pure commission basis for its sales staff. This would change selling expenses to 90% variable and 10% fixed (assume total selling expense is $291,120, as above). Compute (1) the contribution margin and (2) the contribution margin ratio, and recompute (3) the break even point in sales dollars. (Round contribution margin ratio to 0 decimal places, e.g. 25% and all other answers to 0 decimal places, e.g. 2,520.)
1. Contribution margin $
2. Contribution margin ratio %
3. Break even point $
SHOW SOLUTION
SHOW ANSWER
LINK TO TEXT
Problem 6 8A
Dilithium Batteries is a division of Enterprise Corporation. The division manufactures and sells a long life battery used in a wide variety of applications. During the coming year, it expects to sell 55,625 units for $31 per unit. Nyota Uthura is the division manager. She is considering producing either 55,625 or 89,000 units during the period. Other information is presented in the schedule.
Based on 55,625 units $8 per unit ($445,000 ÷ 55,625)
Based on 89,000 units $5 per unit ($445,000 ÷ 89,000)
Manufacturing cost per unit:
Based on 55,625 units $21 per unit ($13 variable + $8 fixed)
Based on 89,000 units $18 per unit ($13 variable + $5 fixed)
Variable selling and administrative expenses $3
Fixed selling and administrative expenses (total) $48,100
Prepare an absorption costing income statement, with one column showing the results if 55,625 units are produced and one column showing the results if 89,000 units are produced.
DILITHIUM BATTERIES DIVISION
Income Statement
For the Year Ended December 31, 2014
Absorption Costing
55,625
Produced 89,000
Produced
$ $
$ $
SHOW SOLUTION
SHOW ANSWER
LINK TO TEXT
Prepare a variable costing income statement, with one column showing the results if 55,625 units are produced and one column showing the results if 89,000 units are produced.
Assume that you are the president of Nuclear Company. At December 31, 2011, the end of the first year of operations, the following financial data for the company are available:
Cash $ 27,000
Receivables from customers (all considered collectable) 14,000
Inventory of merchandise (based on physical count and priced at cost) 92,000
Equipment owned, at cost less used portion 47,000
Payables to suppliers of merchandise 49,970
Salary payable for 2011 (on December 31, 2011, this was
Owed to an employee who was away because of an emergency and
Returned to work on January 10, 2012, at which time the payment was made)
3,000
Total sales revenue 160,000
Expenses, including the cost of the merchandise sold (excluding income taxes) 107,100
Income taxes expense (at 30% of pretax profit); all paid during 2011 ?
Windsor Essex Tool is a manufacturing company. It is organized as an Ontario corporation.
Journal entries for the month of December 2013 for each of the following transactions and events are to be prepared in proper form including explanation. In addition, any adjusting journal entries required at the end of December 2013 should also be prepared. If a journal entry is not required for certain items noted below you are to provide an explanation as to why you did not make an entry. You should cross reference each of your journal entries with the corresponding letter below that applies to the particular transaction or event you are journalizing.
Each journal entry is worth 1.5 marks (1/2 mark for fully correct debit entry, 1/ 2 mark for fully correct credit entry, 1/ 2 mark for reasonable explanation).
You are to assume that all journal entries made prior to December were properly prepared and that all adjustments needed on November 30 were properly prepared. All amounts are in Canadian dollars. The company uses the straight line method of depreciation.
The following general ledgers accounts should be used as required. You may not need to use all of the general ledgers accounts.
List of general ledger accounts for journal entry exercise
Accounts payable, accounts receivable, accumulated amortization building, accumulated amortization equipment, accumulated amortization land, amortization building, amortization equipment, amortization land, cash, cost of good sold, deferred (unearned) revenue, deposit on equipment, equipment, insurance expense, interest receivable, interest revenue, inventory tools for resale, investment in Cabana Bearing, loan payable, manufacturing supplies expense, manufacturing supplies inventory, note receivable, prepaid insurance, rent revenue, retained earnings, revenue sale of tools, share capital, utilities expense.
Please type your journal entries on the attached journal entry form to complete this assignment. Attach a cover sheet including your name and student ID number.
Accounting Information
The following transactions occurred December 1, 2013
a) At November 30 the company owned land and a building. The land cost
24,000 and now has a value of 32,000. The building’s cost of 88,800 is near its current value if sold. The building has an estimated useful life of 40 years with no residual value. It is currently 10 years old.
b) Purchased a used piece of equipment for 18,000 cash. If purchased new the equipment would have cost 26,000. The estimated useful life of the used equipment is 5 years and the value at the end of 5 years is expected to be 1,800.
c) The company rents excess space in its building to a tenant, Cabana Bearing. Windsor Essex Tool received three months advance rent from Cabana Bearing in the amount of 1,500.
d) Ordered manufacturing supplies inventory of 2,000. At November 30 an inventory of 8,000 of supplies was on hand and recorded on the books.
e) Invested in a 3 month note from the bank in the amount of 10,000 with an interest rate of 3% per annually.
The following transaction occurred December 8, 2013
f) The supplies ordered in d) were delivered.
The following transactions occurred December 15, 2013
g) Paid for the supplies received in f).
h) Sold and delivered a manufacturing tool to Ford at the price of 22,000 on account. The cost to build the tool over 4 months was 17,000 .
i) Windsor Essex Tool purchased a 10% interest in the common shares of Cabana Bearing for 10,000 cash.
j) Placed a deposit on a specialized piece of equipment to be built for Windsor Essex Tool at a price of 20,000. The deposit was 4,000.
The following items were noted at December 31, 2013
k) The company had purchased a one year fire insurance policy on July 1, 2013. The balance in the prepaid insurance account on November 30, 2013 for this policy was 7,000.
l) Per a physical count of supplies there are 1,000 of manufacturing supplies on hand.
m) The supplier in ( j ) above reported that the tool is one half built and will be delivered in early January.
The following item occurred on January 16, 2014
n) Received an invoice from Union Gas for natural gas used from December 16 to January 15 in the amount of 1,000.
The assignment form:
Windsor Essex Tool Journal Entries for the Month of December, 2013
Verne Cova Company has the following balances in selected accounts on December 31, 2014.
Accounts Receivable
$ 0
Accumulated Depreciation—Equipment
0
Equipment
7,000
Interest Payable
0
Notes Payable
10,000
Prepaid Insurance
2,100
Salaries and Wages Payable
0
Supplies
2,450
Unearned Service Revenue
30,000
All the accounts have normal balances. The information below has been gathered at December 31, 2014.
1.
Verne Cova Company borrowed $10,000 by signing a 12%, one year note on September 1, 2014.
2.
A count of supplies on December 31, 2014, indicates that supplies of $900 are on hand.
3.
Depreciation on the equipment for 2014 is $1,000.
4.
Verne Cova Company paid $2,100 for 12 months of insurance coverage on June 1, 2014.
5.
On December 1, 2014, Verne Cova collected $30,000 for consulting services to be performed from December 1, 2014, through March 31, 2015.
6.
Verne Cova performed consulting services for a client in December 2014. The client will be billed $4,200.
7.
Verne Cova Company pays its employees total salaries of $9,000 every Monday for the preceding 5 day week (Monday through Friday). On Monday, December 29, employees were paid for the week ending December 26. All employees worked the last 3 days of 2014.
Instructions
Prepare adjusting entries for the seven items described above.
Robson K (1992) Accounting Numbers As ‘Inscriptions’.
Research Question: Discuss what innovative competences the notion of ‘inscription’ allows for critical accounting research in comparison with other quantitative (based on representation) and qualitative research (based on interpretative, metaphor and rhetoric).
Document Preview:
ACCY312 Week 8 Tutorial Questions Based on paper: Robson, K 1992, ‘Accounting Numbers as “Inscription”: Action at a Distance and the Development of Accounting’, Accounting, Organizations and Society, vol. 17, no. 7, pp. 685 708. Questions: Robson (1992) presented a critical view of accounting numbers as inscriptions as contrast to representation or metaphor/rhetoric. Based on your understanding of the paper, 1) Explain what an inscription means and the main characteristics of it. 2) Discuss what innovative competences the notion of ‘inscription’ allows for critical accounting research in comparison with other quantitative (based on representation) and qualitative research (based on interpretative, metaphor and rhetoric). 3) By referring to a management accounting techniques such as budget, performance management and/or balanced scorecard, critically discuss how they can be viewed as inscriptions in enabling action at distance.
Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units):
Sales
$
25,400
Variable expenses
13,800
Contribution margin
11,600
Fixed expenses
7,772
Net operating income
$
3,828
Required:
If sales increase to 1,001 units, what would be the increase in net operating income?
An apartment block has seventy units of accommodation. It is estimated that it is possible to let them all if the rent is $2,000 per month, and for each $100 per month the rent is increased there would be one unit vacant. LG, the manager of the block, finds that a vacant unit costs $100 per month to maintain whereas an occupied one costs $300.
a. If profit from the lettings is measured as revenue minus maintenance costs, find an expression for profit in terms of the number of units let.
b. What rent should LG charge to maximize profit?
c. KA, a contractor, offers to be responsible for the maintenance of the entire block at a rate of $150 per unit, whether the units are occupied or not. Would it be more profitable for LG to employ KA?
2. XL Corp has estimated its demand and cost functions to be as follows:
P = 60 0:2Q
C = 200 + 4Q + 1.2Q 2
where Q is in units, P is in $ and C is in $.
a. Calculate the profit maximizing price and output.
b. Calculate the size of the profit.
c. Calculate the price elasticity of demand at the above price.
d. If there is a $14 tax placed on the good, so that the producer has to pay the government $14 for every unit sold, calculate the new profitmaximizing price and output.
e. What would happen to profit if the firm tried to pass on all the tax to the consumer in the form of a higher price? f. If fixed costs rise by $200 how would this affect the firm’s situation?
Lizzie’s Lingerie started selling robes for $36, adding a 50 per cent mark up on cost. Costs were estimated at $24 each: the $10 purchase price of each robe, plus $6 in allocated variable overhead costs, plus an allocated fixed overhead charge of $8. Customer response was such that when Lizzie’s raised prices from $36 to $39 per robe, sales fell from 54 to 46 robes perweek.
a. Estimate the optimal (profit maximizing) pricing strategy assuming a linear demand curve.
b. Estimate the optimal pricing strategy assuming a power demand curve.
c. Explain why there is a difference between the above two strategies.
d. Estimate the size of the profit at both prices, assuming a power demand curve.
e. Estimate the optimal price if the cost of buying the robes rises from $10 to $11, assuming a power demand curve.
2. Crystal Ball Corp. has estimated its demand and cost functions as follows:
Q = 80 5P
C = 30 + 2.2Q + 0.5Q 2
Where P is in $, Q is in thousands of units and C is in $,000.
a. Calculate the profit maximizing price and output.
b. Calculate the size of the above profit.
c. Calculate the price elasticity of demand at the above output; is demand elastic or inelastic here? What should it be?
d. Calculate the marginal cost at the above output.
e. If unit costs rise by $2 at all levels of output and the firm raises its price by the same amount, what profit is made?
f. What is the profit maximizing strategy given the above rise in costs?
g. How much profit is the firm forgoing by raising its price $2?
In each of the following questions, I have described transactions that were either “missed” or recorded incorrectly in the annual financial statements ending on December 31. Indicate the effects (both the direction and amount) on each account if the mistake(s) were corrected, using the following notation: increase (+), decrease ( ) or no effect (NE). Make sure you write down NE if you think there is no effect. Each transaction is independent (i.e., the first transaction does not affect the second, etc…). For each question be sure to show by what amounts the financial statements would be changed after the corrections are made for the forgotten or mistaken transactions. Ignore any effect of taxes. Example: A firm neglected to record a payment to a supplier of $10,000 for previously recorded accounts payable. If this mistake was corrected, the effects on the following accounts would be: Current Assets ( ) 10,000 Long term assets NECurrent Liabilities ( ) 10,000 Long term liabilities NECommon Stock NE Retained Earnings NENet Income NE a) The Company paid amounts totaling $122,000 to consultants throughout 2006 for an advertising campaign developed during the year. It is the Company’s policy to expense the costs of all advertisements as of the first date the advertisements take place. The Company launched the campaign on December 29, 2006. The accountant mistakenly capitalized all advertising costs in its balance sheet. If this mistake is corrected, what would be the correct amounts for the following? 2 Gross profit ? ____________________ Selling, general and administrative expenses? ____________________ Current assets? ____________________ Retained earnings? ____________________ Cash? ____________________ b) The Company reflected total salaries of $28,000 for the last two weeks in December as selling, general and administrative expenses. 70% of the salaries for this period related to workers at the production facility with the remaining 30% covering administrative and sales staff. All of the inventory in production during the last two weeks in December was still in the production line at December 31, 2006. If the salaries costs had been properly recorded, what would be correct amounts for the following line items? Current assets? ____________________ WIP inventory? ____________________ Cost of goods sold? ____________________ Net income? ____________________ Total shareholders’ equity? ____________________ c) The Company neglected to record sales commissions earned by sales staff during the fourth quarter of the current year (i.e., October December). The company’s sales commission agreements call for a commission of 3% of the gross profit on each sale to be paid to sales staff on the first day of the quarter following the quarter in which the sale occurs. Sales totaled $640,000 and cost of sales totaled $336,000 for the fourth quarter. Sales revenues and cost of sales were properly recorded. If the company had properly reflected this activity during 2006, what would be the correct amounts for the following items? Selling, general and administrative expenses? ____________________ Total shareholders equity? ____________________ Current liabilities? ____________________ Retained Earnings? ____________________
In each of the following questions, I have described transactions that were either “missed” or recorded incorrectly in the annual financial statements ending on December 31. Indicate the effects (both the direction and amount) on each account if the mistake(s) were corrected, using the following notation: increase (+), decrease ( ) or no effect (NE). Make sure you write down NE if you think there is no effect. Each transaction is independent (i.e., the first transaction does not affect the second, etc…). For each question be sure to show by what amounts the financial statements would be changed after the corrections are made for the forgotten or mistaken transactions. Ignore any effect of taxes. Example: A firm neglected to record a payment to a supplier of $10,000 for previously recorded accounts payable. If this mistake was corrected, the effects on the following accounts would be: Current Assets ( ) 10,000 Long term assets NECurrent Liabilities ( ) 10,000 Long term liabilities NECommon Stock NE Retained Earnings NENet Income NE a) The Company paid amounts totaling $122,000 to consultants throughout 2006 for an advertising campaign developed during the year. It is the Company’s policy to expense the costs of all advertisements as of the first date the advertisements take place. The Company launched the campaign on December 29, 2006. The accountant mistakenly capitalized all advertising costs in its balance sheet. If this mistake is corrected, what would be the correct amounts for the following? 2 Gross profit ? ____________________ Selling, general and administrative expenses? ____________________ Current assets? ____________________ Retained earnings? ____________________ Cash? ____________________ b) The Company reflected total salaries of $28,000 for the last two weeks in December as selling, general and administrative expenses. 70% of the salaries for this period related to workers at the production facility with the remaining 30% covering administrative and sales staff. All of the inventory in production during the last two weeks in December was still in the production line at December 31, 2006. If the salaries costs had been properly recorded, what would be correct amounts for the following line items? Current assets? ____________________ WIP inventory? ____________________ Cost of goods sold? ____________________ Net income? ____________________ Total shareholders’ equity? ____________________ c) The Company neglected to record sales commissions earned by sales staff during the fourth quarter of the current year (i.e., October December). The company’s sales commission agreements call for a commission of 3% of the gross profit on each sale to be paid to sales staff on the first day of the quarter following the quarter in which the sale occurs. Sales totaled $640,000 and cost of sales totaled $336,000 for the fourth quarter. Sales revenues and cost of sales were properly recorded. If the company had properly reflected this activity during 2006, what would be the correct amounts for the following items? Selling, general and administrative expenses? ____________________ Total shareholders equity? ____________________ Current liabilities? ____________________ Retained Earnings? ____________________
Several years ago Magdelena purchased a new residence for $300,000. Currently, the outstanding mortgage on the residence is $260.000. The current fair market value of the home is $330,000. Magdelena wants to borrow a sizeable sum of money to pay for the college education costs of her two children and believes the interest would be deductible if she takes out a home equity loan. For each of the following independent solutions below, determine the amount of the home equity loan on which Magdelena may deduct the interest as qualified residence interest.a. Magdelena borrows $50,000 as a home equity loan.b. Magdelena borrows $80,000 as a home equity loan.c. Alternatively, assume the current fair market value of her residence is $410,000 and she borrows $110,000 as a home equity loan.d. Alternatively, assume the current outstanding balance of the mortgage Magdelena incurred to purchase the home is $1,200,000, the home’s fair market value is $1,400,000, and she borrows $80,000 as a home equity loan.
Liquid Extracts Company produces a line of fruit extracts for home use in making wine, jams and jellies, pies, and meat sauces. Fruit enter the production process in pounds; the product emerges in quarts (1 pound of input equals 1 quart of output). On May 31,4,250 units were in process. All direct materials had been added, and the units were 70 percent complete for conversion costs. Direct materials costs of $4,607 and conversion costs of $3,535 were attached to the units in beginning work in process inventory. During June, 61,300 pounds of fruit were added at a cost of $71,108. Direct labor for the month totaled $19,760, and overhead costs applied were $31,375. On June 30, 3,400 units remained in process. All direct materials for these units had been added, and 50 percent of conversion costs had been incurred.
Required
1. Using the FIFO costing method, prepare a process cost report for June.
2. From the information in the process cost report, identify the amount that should be transferred out of the work in Process Inventory account, and state where those dollars should be transferred.
You are a member of a team involved in the audit of accounts receivable for ABC Distribution Company. A computer based sales system is used by the company. You are provided with two data tables: (See Appendix 1 for a definition of these tables)
ARSMAS.FIL Accounts Receivable Master File as at 30 June 2013.
ARSNAME.FIL Accounts Receivable Name and Address File as at 30 June 2013.
ARSMAS contains the accounts receivable master records as at 30 June 2013, after all transactions have been posted. ARSNAME contains the name and address information for each debtor.
You have been asked to use ACL audit software to analyse the ARSMAS and ARSNAME tables, and provide information to the audit team on issues to be taken into account when planning the audit. These 2 tables have been defined for you to use in ACL project ACL105 Foundations.
You are to produce an audit memorandum to the partner in charge dealing with each of the issues on the next page. Your memorandum should cover each issue and include (where appropriate) a summary of findings similar to:
Issue
Audit Objective
Number of items
Total book value
% of population
Materiality
For each issue, comment on what you found, its materiality, its implications for the client and the audit, and controls that may need review. In most cases, you will be recommending further investigation to resolve matters.You should support your findings with appropriately labelled and totalled reports generated with ACL. See Appendix 2 for information on generating reports.
Report headers should identify the client, the year end, your name and the title of the report. All reports should be sorted in a manner which focuses attention on the higher value items. Present your reports in the appendix accompanying your memorandum.
You may assume that materiality is 5 per cent of the current balance.
1. Mechanical Accuracy
(a) Total number of active debtors accounts (those with current balance > 0).
(b) Total current balance for the whole ARSMAS file.
(c) Stratification of current balance for the whole file and for each branch using the intervals: < $500, $500 1000, and > $1000.
(d) Summary of number of records and current balance for each branch (also with percentages).
2. Validity
(a) Identification of debtors with no name and address record. Report these debtors’ details by branch.
(b) Details of duplicate debtors records, summarised by branch.
(c) Full reconciliation of the record counts in the 2 files.
3. Valuation
(a) Aging analysis of debtors’ balances using days since last payment relative to 30 June 2013. Produce branch subtotals and analyse delinquent debtors.
(b) Balances exceeding credit limit, sorted in descending order on the amount of excess within branch. Show subtotals for each branch.
4. Analytical Review
(a) Comparison of current balances with opening balances highlighting debtors where the absolute change exceeds $500. Sort the report on the difference between the two balances within branch, with subtotals for each branch.
NOTE: Display last payment date as DD/MM/YY.
Include debtors’ names in all relevant reports.
APPENDIX 1
ARSMAS (Accounts Receivable Master File)
Record Layout
Field Description Name Start Length Type Decimals
1 Account Number ACCNO1 2 3 ASCII
2 Opening Balance OPENBAL 9 12 NUMERIC 2
3 Interest INTEREST 22 12 NUMERIC 2
4 Branch BRANCH 40 1 ASCII
5 Last Payment LASTPMT 46 8 DATE
(MMDDYYYY)
6 Current Balance CURRBAL 56 12 NUMERIC 2
7 Credit Limit CREDLIM 70 12 NUMERIC 2
ARSNAME (Accounts Receivable Name & Address File)
Record Layout
Field Description Name Start Length Type Decimals
1 Account Number ACCNO2 1 3 ASCII
2 Name NAME 4 17 ASCII
3 Address ADDRESS 21 25 ASCII
4 State STATE 46 2 ASCII
5 Post Code PCODE 48 5 ASCII
APPENDIX 2
ACL Assignment Submission Requirements
This project requires students to produce an audit memorandum to the audit partner addressing specified issues. This memorandum should be produced as an MS Word document. ACL reports should accompany this memorandum in an appendix. These reports should be files with filenames (reference numbers) corresponding to each issue. The memorandum and ACL report files should be submitted as instructed.
The ACL reports should be produced in a similar way as in ACL Workshop #2.4, but output in each case to an file (use the reference number as the filename, e.g. Q1a).
Use the following steps to produce an ACL report for each issue.
Create a new view called Qx (e.g. Q3b). To create a new view, right click on the source table in Project Navigator and select Properties > View. The names of existing views are displayed. Click on Add to create a new view. Specify the view name (e.g. Q3b) and select the columns for your new view.
Perform a join if required. Add any new columns as required. Remove any unwanted columns for your report. Use the mouse to drag the columns so they appear in the required order. If you plan to sort your report, make sure the main sorting column(s) is (are) positioned on the far left.
Make sure this new view is selected.
Define and set a filter if required.
Double click on each column heading (or click on Modify Column) in turn. If sorting is required, set the column as a Sort Key Column (ascending). If subtotalling is intended, set the column as a Break Column, with Suppress Duplicates. Change the formatting as required.
Now design the layout of the report (e.g. for Q3b).
Use the Change Font button to an appropriate font, e.g. Times Roman 9, bold for headings.
Use Data > Report to set:
Header: Client: ABC Distribution Company
Year End: 30 June 2013
Accounts Receivable Audit
Report Q3b: Balances Exceeding Credit Limits
Footer: Course Code, Student Number, your name
Select: Presort
Detailed (not summarized) report
Single spacing
Select Output To: File
Select File Type: HTML Text File
Click on Name: select the destination folder and enter the file name, e.g. Q3b
Click on OK to create the report.
Confirm that the report was generated by locating the file (Q3b) in the destination folder. Double click to open and, if you wish, print the report.
These specifications are stored with the view definition. Accordingly, this report can be generated again if needed.
Additional Notes
Students are expected to submit a good quality audit memorandum, suitable for submission to the partner in charge. They should address each issue, referring to their findings (e.g. number of items, total book value, materiality of findings) and reports located in the appendix.
Reports should be consistently labelled, identifying the client, year end, student name(s) and report title. Columns should be formatted (currency for dollar amounts). Reports should be sorted in descending book value sequence where relevant.
Materiality is 5 per cent of the total balance. Students should comment on the materiality of their findings, individually and in combination.
The memorandum should end with a summary of findings and an overall conclusion.
If any fields have faulty data, comment on this and the controls in the application.
Which of the following statements about the parol evidence rule is false?
A
Does not apply to subsequent agreements.
B
Does not apply to contemporaneous agreements.
C
The policy behind the rule is to give the writing a preferred status so as to render it immune to perjured testimony.
D
Bars the admissibility of extrinsic evidence of a contract term agreed to prior to a total integration regardless of whether the term is written or oral.
Two machines Machine M and Machine P are being considered in a replacement decision. Both machines have about the same purchase price and an estimated ten year life. The company uses a 12 percent minimum rate of return as its acceptance rejection standard. The estimated net cash inflows for each machine follow.
Year
Machine M
Machine P
1
$12,000
$17,500
2
12,000
17,500
3
14,000
17,500
4
19,000
17,500
5
20,000
17,500
6
22,000
17,500
7
23,000
17,500
8
24,000
17,500
9
25,000
17,500
10
20,000
17,500
Residual value
14,000
12,000
1. Compute the present value of future cash flows for each machine, using Table 1 and Table 2.
Eco Wet, Inc., a manufacturer of gears for lawn sprinklers, is thinking about adding a new fully automated machine. This machine can produce gears that the company now produces on its third shift. The machine has an estimated useful life of ten years and will cost $500,000. The residual value of the new machine is $50,000. Gross cash revenue from the machine will be about $420,000 per year, and related operating expenses, including depreciation, should total $400,000. Depreciation is estimated to be $80,000 annually. Management has decided that only capital investments that yield at least an 8 percent return will be accepted.
Using the accounting rate of return method, decide whether the company should invest in the machine. SelectYes, invest in the machineNo, do not invest in the machineItem 1
Round your accounting rate of return answer to one decimal place.
Multiple departments: overhead rates; under applied or over applied overhead
Winkle, Kotter, and Zale is a small law firm that contains 10 partners and 10 support persons. The firm employs a job order costing system to accumulate costs chargeable to each client, and it is organized into two departments the Research and Documents Department and the Litigation Department. The firm uses predetermined overhead rates to charge the costs of these documents to its clients. At the beginning of the current year, the firm’s management made the following estimates for the year: Department Research and documents Litigation Research hours 20,000 —— Direct attorney hours 9,000 16,000 Materials and supplies $18,000 $5,000 Direct attorney cost $430,000 $800,000 Department overhead cost $700,000 $320,000 The predetermined overhead rate in the Research and Documents Department is based on research hours, and the rate in the Litigation Department is based on direct attorney cost. The costs charged to each client are made up of three elements: materials and supplies used, direct attorney cost incurred, and an applied amount of overhead from each department in which work is performed on the case. Case 618 3 was initiated on February 10 and completed on June 30. During this period, the following costs and time were recorded on the case: Department Research and documents Litigation Research hours 18 —— Direct attorney hours 9 42 Materials and supplies $50 $30 Direct attorney cost $410 $2,100 Required: 1 Compute the predetermined overhead rates used during the year in the Research and Documents Department and the Litigation Department. 2. Using the rates you computed in (1) above, compute the total overhead cost applied to Case 618 3. 3. What would be the total cost charged to Case 618 3? Show computations by department and in total for the case. 4. At the end of the year, the firm’s records revealed the following actual cost and operating data for all cases handled during the year: Department Research and documents Litigation Research hours 23,000 —— Direct attorney hours 8,000 15,000 Materials and supplies $19,000 $6,000 Direct attorney cost $400,000 $775,000 Department overhead cost $770,000 $300,000
Determine the amount of under applied or over applied overhead cost in each department for the year.
ABC Company began operations in April, 2007 by selling common stockto owners in exchange for $70,000. During 2007, ABC Companyentered into the following transactions:
(1.) On April 23, ABC Company purchased inventory for $40,000cash.
(2.) On May 1, ABC Company purchased a three year insurance policyfro $18,000 cash.
(3.) On June 1, ABC Company received $45,000 cash from a customerfor services to be performed over the next 18 months.
(4.) On August 1, ABC Company sold one half of the inventorypurchased on April 23 to a customer for $35,000 cash.
Calculate the amount of net income that ABC Company would report inits 2007 income statement after all the above transactions arerecorded and all necessary adjusting entries are made at December31, 2007. Don’t use decimals in your answer.
Marlot Limited reported the following information on cash flow for the year 2012.
$
Cash flows from operations
4,00,000
Cash flows from investing activities
1,00,000
Cash flows from financing activities
3,01,000
Net cash flows
1000
Opening cash balance
1,60,000
Ending cash balance
1,61,000
A. Does Marlot Limited appear to be expanding or contracting its operations?
B. Describe the activities that could explain the use of cash flows for financing activities?
C. Using only the cash flow information presented, make an assessment of the condition of Marlot Limited. Is it growing. Mature/stable, or declining? State reasons for your answer including any assumptions you have made.
The Holmes Company has decided to distribute the costs of service departments. The producing departments areP1 and P2. The service departments are Si and S2, and the monthly data are:
Actual Factory Overhead Costs Before Distribution
Services provided by
Si
52
P1
Rs. 84,000
40%
50%
P2
Rs. 58,000
50%
30%
Si
Rs. 20,000
—
20%
52…..
Rs. 17,600
10%
Required: Calculate the Total Factory Overhead of producing department P1 and P1 after distribution of servicedepartment costs.
Rainbow Spray Paints, Inc. has used a traditional cost accounting system to apply quality control costs uniformly to all products at a rate of 16 percent of direct labour cost. Monthly direct labour cost for the enamel paint line isRs. 98,000. In an attempt to more equitably distribute quality control costs, Rainbow is considering activity basedcosting The monthly data shown in the following chart have been gathered for the enamel paint
Activity Cost Pool
Cost Driver
Pool Rates
Quantity of Driverfor Enamel Paint
Incoming material inspection
Type of material
Rs. 23.00 per type
24 types
In Process inspection
Number of units
Rs. 0.28 per unit
35,000 units
Product certification
Per order
Rs. 144.00 per order
50 orders
Required: Calculate the monthly quality control cost to be assigned to the enamel paint line under each of the following product costing systems.
a. Traditional system which assigns overhead on the basis of direct labour cost.
You are a member of a team involved in the audit of accounts receivable for ABC Distribution Company. A computer based sales system is used by the company. You are provided with two data tables: (See Appendix 1 for a definition of these tables)
ARSMAS.FIL Accounts Receivable Master File as at 30 June 2013.
ARSNAME.FIL Accounts Receivable Name and Address File as at 30 June 2013.
ARSMAS contains the accounts receivable master records as at 30 June 2013, after all transactions have been posted. ARSNAME contains the name and address information for each debtor.
You have been asked to use ACL audit software to analyse the ARSMAS and ARSNAME tables, and provide information to the audit team on issues to be taken into account when planning the audit. These 2 tables have been defined for you to use in ACL project ACL105 Foundations.
You are to produce an audit memorandum to the partner in charge dealing with each of the issues on the next page. Your memorandum should cover each issue and include (where appropriate) a summary of findings similar to:
Issue
Audit Objective
Number of items
Total book value
% of population
Materiality
For each issue, comment on what you found, its materiality, its implications for the client and the audit, and controls that may need review. In most cases, you will be recommending further investigation to resolve matters.You should support your findings with appropriately labelled and totalled reports generated with ACL. See Appendix 2 for information on generating reports.
Report headers should identify the client, the year end, your name and the title of the report. All reports should be sorted in a manner which focuses attention on the higher value items. Present your reports in the appendix accompanying your memorandum.
You may assume that materiality is 5 per cent of the current balance.
1. Mechanical Accuracy
(a) Total number of active debtors accounts (those with current balance > 0).
(b) Total current balance for the whole ARSMAS file.
(c) Stratification of current balance for the whole file and for each branch using the intervals: < $500, $500 1000, and > $1000.
(d) Summary of number of records and current balance for each branch (also with percentages).
2. Validity
(a) Identification of debtors with no name and address record. Report these debtors’ details by branch.
(b) Details of duplicate debtors records, summarised by branch.
(c) Full reconciliation of the record counts in the 2 files.
3. Valuation
(a) Aging analysis of debtors’ balances using days since last payment relative to 30 June 2013. Produce branch subtotals and analyse delinquent debtors.
(b) Balances exceeding credit limit, sorted in descending order on the amount of excess within branch. Show subtotals for each branch.
4. Analytical Review
(a) Comparison of current balances with opening balances highlighting debtors where the absolute change exceeds $500. Sort the report on the difference between the two balances within branch, with subtotals for each branch.
NOTE: Display last payment date as DD/MM/YY.
Include debtors’ names in all relevant reports.
APPENDIX 1
ARSMAS (Accounts Receivable Master File)
Record Layout
Field Description Name Start Length Type Decimals
1 Account Number ACCNO1 2 3 ASCII
2 Opening Balance OPENBAL 9 12 NUMERIC 2
3 Interest INTEREST 22 12 NUMERIC 2
4 Branch BRANCH 40 1 ASCII
5 Last Payment LASTPMT 46 8 DATE
(MMDDYYYY)
6 Current Balance CURRBAL 56 12 NUMERIC 2
7 Credit Limit CREDLIM 70 12 NUMERIC 2
ARSNAME (Accounts Receivable Name & Address File)
Record Layout
Field Description Name Start Length Type Decimals
1 Account Number ACCNO2 1 3 ASCII
2 Name NAME 4 17 ASCII
3 Address ADDRESS 21 25 ASCII
4 State STATE 46 2 ASCII
5 Post Code PCODE 48 5 ASCII
APPENDIX 2
ACL Assignment Submission Requirements
This project requires students to produce an audit memorandum to the audit partner addressing specified issues. This memorandum should be produced as an MS Word document. ACL reports should accompany this memorandum in an appendix. These reports should be files with filenames (reference numbers) corresponding to each issue. The memorandum and ACL report files should be submitted as instructed.
The ACL reports should be produced in a similar way as in ACL Workshop #2.4, but output in each case to an file (use the reference number as the filename, e.g. Q1a).
Use the following steps to produce an ACL report for each issue.
Create a new view called Qx (e.g. Q3b). To create a new view, right click on the source table in Project Navigator and select Properties > View. The names of existing views are displayed. Click on Add to create a new view. Specify the view name (e.g. Q3b) and select the columns for your new view.
Perform a join if required. Add any new columns as required. Remove any unwanted columns for your report. Use the mouse to drag the columns so they appear in the required order. If you plan to sort your report, make sure the main sorting column(s) is (are) positioned on the far left.
Make sure this new view is selected.
Define and set a filter if required.
Double click on each column heading (or click on Modify Column) in turn. If sorting is required, set the column as a Sort Key Column (ascending). If subtotalling is intended, set the column as a Break Column, with Suppress Duplicates. Change the formatting as required.
Now design the layout of the report (e.g. for Q3b).
Use the Change Font button to an appropriate font, e.g. Times Roman 9, bold for headings.
Use Data > Report to set:
Header: Client: ABC Distribution Company
Year End: 30 June 2013
Accounts Receivable Audit
Report Q3b: Balances Exceeding Credit Limits
Footer: Course Code, Student Number, your name
Select: Presort
Detailed (not summarized) report
Single spacing
Select Output To: File
Select File Type: HTML Text File
Click on Name: select the destination folder and enter the file name, e.g. Q3b
Click on OK to create the report.
Confirm that the report was generated by locating the file (Q3b) in the destination folder. Double click to open and, if you wish, print the report.
These specifications are stored with the view definition. Accordingly, this report can be generated again if needed.
Additional Notes
Students are expected to submit a good quality audit memorandum, suitable for submission to the partner in charge. They should address each issue, referring to their findings (e.g. number of items, total book value, materiality of findings) and reports located in the appendix.
Reports should be consistently labelled, identifying the client, year end, student name(s) and report title. Columns should be formatted (currency for dollar amounts). Reports should be sorted in descending book value sequence where relevant.
Materiality is 5 per cent of the total balance. Students should comment on the materiality of their findings, individually and in combination.
The memorandum should end with a summary of findings and an overall conclusion.
If any fields have faulty data, comment on this and the controls in the application.
(Please write in block letters here. This sheet will be the second page of your assignment following the Assignment Cover Sheet.)
Criteria
Unsatisfactory
Low Pass – Pass
Above Average
Excellent
Marks
Analysis and Judgment
Provided information from the case.
No logical argument was presented leading to a satisfactory conclusion.
Identified relevant information from the case.
There was some evidence of logical argument leading to a conclusion.
Identified and analysed relevant information from the case.
There was good evidence of logical argument leading to and supporting a conclusion.
Relevant information from the case was identified and analysed comprehensively.
Strong evidence was shown of a logical argument that led to and supported a conclusion.
/4
Communication
Failed to submit an audit memorandum.
Wrote in an unclear and unstructured manner with unsatisfactory spelling, punctuation, and grammar.
Did not acknowledge sources.
Submitted an audit memorandum and wrote in a clear and structured manner with satisfactory spelling, punctuation, and grammar.
Acknowledged sources.
Submitted an audit memorandum with Introduction, appropriate sections, and overall summary and conclusions. Wrote in a clear, logical and structured manner with good spelling, punctuation, grammar and referencing.
Submitted an audit memorandum with Introduction, appropriate sections, and overall summary and conclusions.
Wrote in a clear, logical and structured manner with correct spelling, punctuation, grammar and referencing.
/2
Technology Application
Demonstrated little competence in applying ACL software to produce professional quality, consistently presented and correct output to meet project objectives.
Demonstrated some competence in applying ACL software to produce professional quality, consistently presented and correct output to meet project objectives.
Demonstrated good competence in applying ACL software to produce professional quality, consistently presented and correct output to meet project objectives.
Demonstrated a high level of competence in applying ACL software to produce professional quality, consistently presented and correct output to meet project objectives.
This is Part 2 of Exam 1. Part 1 is a multiple choice exam is located on WileyPlus. Part 1 is a timed exam.
You should treat Part 2 (this part) like a Take home Exam. You can open it, save the document with your filename, work through the problems, add your answers to your saved document and then submit it via the LEO Assignments location for Exam 1 Part 2.
Part 2 of the Exam is worth 35 points. Each part is based on Chapters 2 and 3.
Directions: Please complete the following 4 parts. You can use the answer sheets at the end of this document to complete this Exam. Part 1 is for Lillian’s Cooking School. Part 2 is for Milly’s Spa. Parts 3 and 4 are for Lemond’s Plumbing.
Part 1. Writing journal entries (Chapter 2). 2 points per JE – 12 points.
Please write a journal entry for the following 8 transactions, for Lillian’s Cooking School. All of the events listed below occurred in October. On the answer sheet, be sure to number your journal entries. Write the debit entry first and the credit entry second.
1. Lillian purchased $700 in cooking supplies for Cash
2. Lillian’s accountant paid $550 of the balance due in Accounts Payable
3. Lillian sent out bills to three new clients who signed up for cooking class. The customers owe $1,200 for classes they took last week.
4. After getting an unexpected check from her favorite aunt, Lillian invested $5,000 in her business.
5. A new industrial quality stove (Cooking Equipment) was purchased for the business, for $3,200. Lillian signed a promissory note for the stove.
6. Employees were paid $2,800 for work done during October. Payday was October 14th.
7. Maxwell paid for his wife to attend cooking classes in November. On October 16th,he paid the Cooking School $1,000, for classes that were scheduled to begin on November 7th.
8. Lillian pays for her liability insurance 6 months in advance. On October 20th, she paid $3,000 for October through March of the following year.
Part 2. Prepare 6 adjusting journal entries (Chapter 3) 2 points per JE 8 points. Use the below answer sheets to prepare 6 adjusting journal entries for Milly’s Spa, for the month of August.
9. Prepaid rent includes monthly rent of $1,500 for each month for Milly’s Spa
Milly’s Spa used up $600 worth of spa supplies in August
Danisha paid $4,000 in June, to reserve spa treatments for all of the bridesmaids in her wedding. In August, the Spa provided the spa services to the bridesmaids.
Milly’s Spa owed $11,500 in Wages to employees at the end of August.
The business accrued $925 in interest in August, owed on a Note Payable. The interest will be paid when the note is repaid, next year.
Milly has many regular customers who come in for spa treatments each month. Milly’s accountant sent out bills totaling $39,200 for services rendered during the month of August.
Use the Adjusted Trial Balance below to complete parts 3 and 4.
Lemond’s Plumbing Services
January 31, 2014 Adjusted Trial Balance
Adjusted Trial Balances
1/31/2014
Account Name
DR
CR
Cash
$14,300
A/R
$1,500
Plumbing Supplies
$2,000
Unexpired Insurance (Prepaid)
$5,000
Prepaid Rent
$7,500
Vehicles
$56,575
Accumulated Depreciation Vehicles
$11,700
Plumbing Equipment
$13,400
Accumulated Depreciation
Plumbing Equipment
$2,700
Land
$18,500
Accounts Payable
$6,500
Interest Payable
$3,000
Unearned Plumbing Revenues
$4,200
Notes Payable (Due in two years)
$21,000
C. Lemond, Capital
$54,425
C. Lemond, Drawing
$4,000
Plumbing Revenues
$48,775
Rent Expense
$1,500
Insurance Expense
$1,000
Interest Expense
$1,100
Wages Expense
$24,100
Plumbing Supplies Expense
$75
Depreciation Expense Vehicles
$850
Depreciation Expense Plumbing Equipment
$900
TOTALS
$152,300
$152,300
Part 3. Income Statement – Ch. 3 (6 points). Using the Adjusted Trial Balance for Lemond’s Plumbing Services, prepare an Income Statement. Use the page set up for you at the end of this exam. Use the format shown for the Income Statement on Illustration 3 26.
Part 4. Balance Sheet – Ch. 3 (9 points). After completing the Owner’s Equity Statement, the Capital account, C. Lemond, Capital, has a balance of $69,675. Use the last page of this document to prepare a Balance Sheet. Use the format shown on Illustration 3 27 of your textbook.
Use these 2 pages for your answers
Parts 1 and 2 (Journal Entries)
JE #
Debit
Credit
Use this journal entry page to complete parts 1 and 2.
JE #
Debit
Credit
Use this page to complete the Income Statement (Part 3)
Lemond’s Plumbing Services
Income Statement for the Month Ended January 31, 2014
Charter Corporation, which began business in 2013, appropriately uses the installment sales method of accounting for its installment sales. The following data were obtained for sales during 2013 and 2014:
2013
2014
Installment sales
$
360,000
$
350,000
Cost of installment sales
234,000
245,000
Cash collections on installment sales during:
2013
150,000
100,000
2014
—
120,000
Required:
Prepare summary journal entries for 2013 and 2014 to account for the installment sales and cash collections. The company uses the perpetual inventory system.
Part One: Fringe Benefit Tax (10 Marks) Periwinkle Pty Ltd (Periwinkle) is a bathtub manufacturer which sells bathtubs directly to the public. On 1 May 2013, Periwinkle provided one of its employees, Emma, with a car as Emma does a lot of travelling for work purposes. However, Emma”s usage of the car is not restricted to work only. Periwinkle purchased the car on that date for $33,000 (including GST). For the period 1 May 2013 to 31 March 2014, Emma travelled 10,000 kilometres in the car and incurred expenses of $550 (including GST) on minor repairs that have been reimbursed by Periwinkle. The car was not used for 10 days when Emma was interstate and the car was parked at the airport and for another five days when the car was scheduled for annual repairs. On 1 September 2013, Periwinkle provided Emma with a loan of $500,000 at an interest rate of 4.45%. Emma used $450,000 of the loan to purchase a holiday home and lent the remaining $50,000 to her husband (interest free) to purchase shares in Telstra. Interest on a loan to purchase private assets is not deductible while interest on a loan to purchase income producing assets is deductible. During the year, Emma purchased a bathtub manufactured by Periwinkle for $1300. The bathtub only cost Periwinkle $700 to manufacture and is sold to the general public for $2,600. (a) Advise Periwinkle of its FBT consequences arising out of the above information, including calculation of any FBT liability, for the year ending 31 March 2014. You may assume that Periwinkle would be entitled to input tax credits in relation to any GST inclusive acquisitions. (b) How would your answer to (a) differ if Emma used the $50,000 to purchase the shares herself, instead of lending it to her husband?
Michael Burton has recently been hired as the CEO of Tesca Works, Inc. Previously he had been the marketing manager for a large manufacturing company and had established a reputation for identifying new consumer trends. Tesca Works Inc. is a California based generator manufacturing company. The company is well known for manufacturing large, heavy duty generators at a reasonable cost. One of its greatest achievements is that its generators can be easily modified or customized for different applications. Also, Tesca Works currently builds commercial appliances.
The company is considering an expansion of its current product line to include refrigerator and maybe, sometime in the future, consumer appliances. Mr. Burton felt that due to high energy prices, consumers will be more willing to consider purchasing new efficient appliances.
Profile of Tesca Works
Tesca Works, Inc. was established by the Smith brothers in 1880 as the Logging Saw Company. The firm started manufacturing large steam saws to serve the logging industry which processed lumber. Their customers were construction companies that provided housing for the population increase in California. The Smith brothers quickly realized that the times were changing. They started looking for the technologies that would keep them at the forefront of their field of business. In 1915, the Smith brothers decided that they needed to make generators as replacements for the saws. They realized that the logging industry was not viable anymore and that generators were starting to serve the same purpose.
The company started making generators in the early 1920’s. Tesca Works then opted to produce commercial appliances. It was an easy decision to make since the commercial appliances would use common parts with the company’s generators and the customers were local hospitals, schools, and governments. Starting in the 1950’s the commercial appliances business accounted for about 50% of Tesca Works’ revenues.
The Refrigerator
Mr. Burton arranged a meeting with the firm’s top management and the chief design and the chief manufacturing engineers to propose a new product. Mr. Burton presented an argument that more individuals in the United State and Canada would be willing to purchase newer appliances because people are becoming more environmentally conscious. The new appliances are more efficient and environmentally friendlier. Also, the recent increase in electricity costs seems to be long lasting. This is an opportunity to get people hooked on environmentally friendly appliances as he put it.
The proposal under consideration is for the introduction of a new, energy star refrigerator. To distinguish Tesca Works from other manufacturers, the proposal included details about the convenience, large shelves in the doors, high volume water and ice dispensers, efficiency, and quietness of operation that need to be developed.
Mr. Phillips and Mr. Lopez, the two engineers, enthusiastically and quickly pointed out that the needed technology could be based on the company’s generators. The framework currently used for building the generators can be modified to work for appliances at a low cost. The marketing vice president, Mr. Chen, pointed out that the marketing analysis could be done quickly and at a reasonable cost. At this point, Mr. Burton charged the participants in the meeting to produce a financial plan for the development and production of the refrigerator.
Consumer Appliances
Most people purchase appliances and keep them for a very long time or until they stop working. Some get them when they purchase a home and do not think about them.
Recently, most power companies started educating people about the efficiency of new appliances and began offering rebates on the most efficient consumer models. These approaches increased public interest. This renewed the public’s interest in low power consuming appliances.
The Decision
Three weeks later, the vice presidents presented the sales and cost forecasts shown in the exhibits. The information presented contains the cost of production, financing information, and warranty cost estimates. In addition, there were two options for the compressor in the refrigerators. The MC – 004 is more expensive to install, but has a lower warranty cost. The TS – L12 is cheaper to install, but has a higher warranty cost. Which compressor should be used?
The Analysis
Mr. Burton noticed that there is an abundance of enthusiasm about entering the refrigerator building business, but his cautious nature made him seek a more neutral analyst. This is your responsibility. You have been hired by Tesca Works to analyze the proposal to build the refrigerator and provide recommendations to Mr. Burton. The issues that need to be addressed in your report are the following:
How much importance should be given to the energy cost situation?
What is the project’s cost of equity?
Exhibit 1 Sales forecasts:
The forecasts are based on projected levels of demand. The firm could face weak, average, and strong demand. All the numbers are expressed in today’s dollars. The forecasted average inflation per year is 3.0%.
Demand level
Weak
Average
Strong
Probability
25%
45%
30%
Price per refrigerator
$1,375
$1,575
$1,600
Units sold per year
40,000
42,500
43,000
Labor cost per refrigerator
$250
Parts
$300
Selling General & Administrative
$10,000,000
Average warranty cost per year per refrigerator for the first five years is $75. The present value of this cost will be used as a cost figure for each refrigerator. Afterwards, the refrigerator owners will become responsible the repairs.
The refrigerators can be produced for eight years. Afterwards, the designs become obsolete.
Exhibit 2 Compressor costs:
Compressor choices:
Compressor model number
CM 004
TS L12
Price per compressor and installation
$280
$260
Average annual warranty cost per year for five years. Afterwards, the refrigerator owner will become responsible the repairs*.
$40
$50
The chosen compressor will be installed in every refrigerator and will become a cost figure for each unit produced. * The compressor manufacturers are not providing Tesca Works with any warranty. However, Tesca Works will provide warranty to its customers. After the initial five years, the refrigerator owners may purchase extended warranty from any insurance company that offers such packages.
Exhibit 3 Investment needs:
To implement the project, the firm has to invest funds as shown in the following table:
Year 0
Year 1
$14 million
Production and selling of commercial appliances starts
MACRS depreciation will be used.
To facilitate the operation of manufacturing the refrigerators, the company will have to allocate funds to net working capital (NWC) equivalent to 10% of annual sales. The investment in NWC will be recovered at the end of the project.
Exhibit 4 Financing
The following assumptions are used to determine the cost of capital. Historically, the company tried to maintain a debt to equity ratio equal to 0.50. This ratio was used because lowering the debt implies giving up the debt tax shield and increasing it makes debt service a burden on the firm’s cash flow. In addition, increasing the debt level may cause a reduced rating of the company’s bonds. The marginal tax rate is 35%. All the numbers are expressed in today’s dollars. The forecasted average inflation per year is 3.0%.
Cost of debt:
The company’s bond rating is roughly at the high end of the A range. Surveying the debt market yielded the following information about the cost of debt for different rating levels:
Bond rating
AA
A
BBB
Interest cost range
4.5% ~ 5.5%
5.25% ~ 6.5%
6.5% ~ 9%
The company’s current bonds have a rating of A.
Cost of equity:
The current 10 year Treasury notes have a yield to maturity of 3% and the forecast for the S&P 500 market premium is 6.5%. The company’s overall b is 1.3.
The ‘Integrated Financial Reporting’ framework is having a significant global impact on financial report preparation in recent years. Using the authoritive literature, discuss how the ‘Integrated Financial Reporting’ framework will improve corporate accountability to stakeholders. Provide examples to substantiate your discussion
Document Preview:
Question: The ‘Integrated Financial Reporting’ framework is having a significant global impact on financial report preparation in recent years. Using the authoritive literature, discuss how the ‘Integrated Financial Reporting’ framework will improve corporate accountability to stakeholders. Provide examples to substantiate your discussion. Key factors to keep in mind when writing your essay are: The essay should be approximately 1,500 words in length (excluding appendices, tables, diagrams and references) and conform to the marking guide provided. • Ensure that all in text references are accurate and comply with the Harvard referencing style. you use only credible sources appropriate to your level of studies. Wikipedia, for example, is not a credible source. A Reference list of works of all works cited in your essay must be provided. • Ensure you use accurate your spelling and grammar. It is often best to state things simply and clearly rather than using complicated language in the wrong context. • An essay should begin with an introduction, which outlines key arguments and defines key terms. Make it clear in the first paragraph how you are planning to address the question. • Each paragraph should contain a topic sentence (what summarises the main idea in this paragraph) and be followed by supporting sentences (and citations), which expand and provide more detail on the idea raised. A common student mistake is to write topic sentence after topic sentence. This makes essays seem like they are jumping from one idea to the next and will often attract feedback stating “no depth”. The supporting sentences are crucial to examine the initial idea in more detail and demonstrate an argument along with understanding. Ensure you examine each idea in enough detail – examine the idea fully before moving on. • Remember that the marker can only mark what you actually said on the paper, not what is in your head or what you “meant to say”. For this reason, it is…
Please help to calculate NCI and prepare consolidated statement for this question
Document Preview:
200109 Corporate Accounting Systems Consolidated Financial Statements with Non Controlling Interests Spring 2014 INSTRUCTIONS The assignment is to be submitted as an individual attempt. It must be prepared using Excel spreadsheet and be entirely your own work from this semester only – i.e. do not use or copy any file, in whole or in part, from any previous semester or from any other person. Each student must individually create a new excel file for this assignment and use their student number as the file name. The assignment cover sheet and marking guide can be found as the last two pages of this document. Print these pages and complete the appropriate details. Use the marking guide sheet to see what is expected and how your work will be marked. Significant emphasis is placed on the correctness of the journal entries so ensure you spend adequate time on these. Review your work before submission and consider how well have met the expected standards (performance levels) for the criteria identified. Your submission needs to be printed on A4 paper, single sided, and the pages must be stapled at the top left hand corner only. Do not bind your assignment, nor put it in a folder or a plastic sleeve. The first page must be the completed and signed cover sheet and the last page should be the marking sheet with your student ID and name shown. The marker will use the marking sheet to calculate your assignment result and provide you with feedback on the standard you achieved against each of the criteria. Assignments which do not have these two completed sheets attached will not be accepted. The printed assignment is to be submitted to your tutor during the first 10 minutes of your usual tutorial class in Week 10 beginning 29th September 2014. Submissions made during the tutorial, but after the 10 minute deadline, will be penalised by the deduction of 1 mark. Assignments not submitted at the registered tutorial class will be regarded as “late”. Students will need to contact…
The Queensland Health Payroll System project (2007 2011) has received adverse media attention relating to significant issues and failures during the project. Undertake some research and of this information systems project to undertake the following task:
Using the Systems Development Lifecycle process (figure 19.1 on page 612 of the Romney text) as a guide, identify 5 deficiencies in the Queensland Health Payroll System project, and provide recommendations on how these deficiencies may be overcome in future projects. Structure your answer using headings and subheadings to address each of the issues and recommendations that you identify. Ensure you provide referencing where appropriate.
Q 4: Rickard’s Rural – Prepare a 3D Bar Chart (5 marks)
Dashboards for Rickard’s Rural, an agricultural supply chain in the Central West of New South Wales
Using the data in the Agricultural Sales spreadsheet provided in the Resources section prepare the following Pivot Tables and Pivot Charts. Each Pivot Chart and its related pivot table should be on a worksheet together. Each worksheet tab should be labelled identifying the contents of the worksheet. The initial data should be labelled Data.
The sales in total for each product type for the quarter by each type of customer. Use a pie chart to show the percentage of each product type that is sold by cash for the quarter. Copy the results into a word document. Briefly state your findings from looking at the dashboard. (5 Marks)
The sales by cash and account for each month for each product type. Use a 3D bar chart to show the sales by cash for each month for each product type and the sales by account for each month for each product type. Copy the results into a word document. Briefly state your findings from looking at the dashboard. (5 Marks)
When submitting this part of the assignment, submit both the word file and the spreadsheet file.
Task specific outcome
HD
D
CR
P
Q1. Accurate entry of data using a tool to do accounting practices using correct accounting classifications
· Accurate entry · Correct accounting classifications ·Appropriate coding applied to new accounts
·Accurate entry ·Mostly correct accounting classifications ·Appropriate coding applied to new accounts
·Accurate entry ·Several incorrect accounting classifications ·Appropriate coding not applied to all new accounts
·Inaccurate entry ·Incorrectaccounting classifications ·Appropriate coding not applied to all new accounts
Q2. Use the SDLC to identify deficiencies in a system project and provide appropriate recommendations
· 5 relevant deficiencies are identified and thoroughly discussed · 5 appropriate recommendations are provided to overcome the identified deficiencies · Correct use of APA referencing
· 5 relevant deficiencies are identified and discussed · 5 appropriate recommendations are provided to overcome the identified deficiencies · Correct use of APA referencing
· 5 deficiencies are identified · 5 recommendations are provided · Mostly correct use of APA referencing
· less than 5 relevant deficiencies are identified · less than 5 recommendations are provided ·APA referencing not applied correctly
Task specific outcome
HD
D
CR
P
F
Q 3 In your submission you:
In your submission you:
In your submission you:
In your submission you:
In your submission you:
Effectively use Pivot Tables and Pivot Chart to prepare a dashboard for a business Weighting50%
Provide a Dashboard which clearly, effectively and logically displays the information required: Columns and Rows are clearly labelled and differentiated with excellent table design. Pie chart segments clearly differentiated by colour with percentages included in segments Logical, clear and well expressed statement of findings from the dashboard
Provide a Dashboard which logically displays the information required: a. Columns and Rows are clearly labelled and differentiated. b. Pie chart segments clearly differentiated. c. Logical and clear statement of findings from the dashboard.
Provide a Dashboard which displays the information: a. Columns and Rows are clearly labelled b. Pie chart segments clearly differentiated c. Some attempt at statement of findings from the dashboard.
Make little attempt to provide a coherent Dashboard
Use Pivot Tables and Pivot Charts to extract information from corporate data Weighting 50%
Accurately included the data in the Pivot Table Totalled columns and rows Accurately included data in the Pivot Chart
Had some difficulty in including all data in the Pivot Table Provided a Pivot Chart but not with the data required
Had difficulty in including data in the Pivot Table Provided a Pivot Chart but not with the data required
Make little attempt to provide a Pivot Chart and Table from the data provided
Q 4.In your submission you:
In your submission you:
In your submission you:
In your submission you:
In your submission you:
Effectively use Pivot Tables and Pivot Chart to prepare a dashboard for a business
Provide a Dashboard which clearly, effectively and logically displays the information required: Columns and Rows are clearly labelled and differentiated with excellent table design. Bar chart columns clearly differentiated by colour and labelled in a legend. Logical, clear and well expressed statement of findings from the dashboard
Provide a Dashboard which logically displays the information required: a. Columns and Rows are clearly labelled and differentiated. b. Bar chart columns clearly differentiated. c. Logical and clear statement of findings from the dashboard.
Provide a Dashboard which displays the information: a. Columns and Rows are clearly labelled b. Bar chart columns clearly differentiated c. Some attempt at statement of findings from the dashboard.
Make little attempt to provide a coherent Dashboard
Use Pivot Tables and Pivot Charts to extract information from corporate data
Accurately included the data in the Pivot Table Totalled columns and rows Accurately included data in the Pivot Chart
Had some difficulty in including all data in the Pivot Table Provided a Pivot Chart but not with the data required
Had difficulty in including data in the Pivot Table Provided a Pivot Chart but not with the data required
Make little attempt to provide a Pivot Chart and Table from the data provided
Power Brite Painting Company specializes in refurbishing exterior painted surfaces that have been hard hit by humidity and insect debris. It uses a special technique, called pressure cleaning, before priming and painting the surface. The refurbishing process involves the following steps:
Unskilled laborers trim all trees and bushes within two feet of the structure.
Skilled laborers clean the building with a high pressure cleaning machine, using about 6 gallons of chlorine per job.
Unskilled laborers apply a coat of primer.
Skilled laborers apply oil based exterior paint to the entire surface.
On average, skilled laborers work 12 hours per job, and unskilled laborers work 8 hours. The refurbishing process generated the following operating results during the year on 628 jobs:
Data on utilities for the year are as follows:
Required:
1. Classify the costs as variable, fixed, or mixed.
Skilled labor
Unskilled labor
Chlorine
Paint primer
Paint
Depreciation, paint spraying equipment
Lease payments on vans
Rent on storage building
Utilities
2. Using the high low method, separate mixed costs into their variable and fixed components. Use total hours worked as the basis. Round your answers to two decimal places.
Variable rate
$per hour worked
Monthly Fixed Cost
$
3. Compute the average cost per job for the year. Round your answer to two decimal places. (Hint: Divide the total of all costs for the year by the number of jobs completed.) $per job
4. Project the average cost per job for next year if variable costs per job increase 20 percent. Round your answer to two decimal places. $
Sunnyvale Corporation prepared the following balance sheet data for 2008 and 2007:
Dec 31, 2008
Dec 31, 2007
Cash and cash equivalents
$ 518,500
$ 675,000
Accounts receivable
360,000
345,000
Merchandise inventory
750,000
654,000
Prepaid insurance
4,500
6,000
Buildings and equipment
5,515,500
4,350,000
Accumulated depreciation—buildings and equipment
(2,235,000)
(1,995,000)
Total assets
$ 4,913,500
$ 4,035,000
Accounts payable
$ 613,500
$ 945,000
Salaries payable
75,000
105,000
Notes payable—bank (current)
150,000
600,000
Notes payable—bank (long term)
1,500,000
—
Common stock
2,400,000
2,400,000
Retained earnings (deficit)
175,000
(15,000)
Total liabilities and stockholders’ equity
$ 4,913,500
$ 4,035,000
Cash needed to purchase new equipment and to improve the company’s working capital position was raised by borrowing from the bank with a long term note. Equipment costing $75,000 with a book value of $15,000 was sold for $18,000; the gain on the sale was included in net income. The company paid cash dividends of $90,000 and reported earnings of $280,000 for 2008. There were no entries in the retained earnings account other than to record the dividends and net income for the year. Prepare a statement of cash flows for 2008 using the indirect method.
Cash Flow from Operations—Comparison of Indirect and Direct Methods
The statement of cash flows for Riker Company (prepared using the indirect method) follows.
Consider the following additional information:
(a) Sales for the year totaled $812,350. Cost of goods sold was $500,000. Operating expenses were $100,000. Interest expense was $23,000. Income tax expense was $40,430.
(b) Of the decrease in accounts payable, 80% is related to inventory purchases; the remaining
20% related to operating expenses.
(c) Depreciation and amortization are period costs; they do not enter into the computation of cost of goods sold.
Riker Company Statement of Cash Flows (Indirect Method) For the Year Ended December 31, 2008
Cash flows from operating activities:
Net income
$68,850
Adjustments:
Depreciation expense
$65,000
Amortization expense
10,000
Loss on sale of machine
7,400
Gain on retirement of long term debt
(2,330)
Increase in accounts receivable
(8,600)
Decrease in inventory
12,430
Decrease in prepaid operating expenses
1,680
Decrease in accounts payable
(2,400)
Increase in interest payable
500
Increase in income taxes payable
2,500
86,180
Net cash provided by operating activities
$155,030
Cash flows from investing activities:
Sale of machine
$12,000
Purchase of fixed assets
(78,000)
Net cash used in investing activities
(66,000)
Cash flows from financing activities:
Retirement of long term debt
($65,000)
Payment of dividends
(27,000)
Net cash used in financing activities
(92,000)
Net decrease in cash
($2,970)
Cash at beginning of year
5,320
Cash at end of year
$2,350
Instructions: Prepare the Operating Activities section of the statement of cash flows for Riker Company using the direct method.
The following schedule shows the account balances of Beneficio Corporation at the beginning and end of the fiscal year ended October 31, 2008.
Debits
October 31, 2008
October 31, 2007
Cash and Cash Equivalents
$ 222,000
$ 50,000
Investment Securities—Trading
10,000
40,000
Accounts Receivable
148,000
100,000
Inventories
291,000
300,000
Prepaid Insurance
2,500
2,000
Land and Building
195,000
195,000
Equipment
305,000
170,000
Discount on Bonds Payable
8,500
9,000
Treasury Stock (at cost)
5,000
10,000
Cost of Goods Sold
539,000
Selling and General Expenses
287,000
Income Taxes
35,000
Unrealized Loss on Trading Securities
4,000
Loss on Sale of Equipment
1,000
Total debits
$2,053,000
$876,000
Credits
October 31, 2008
October 31, 2007
Allowance for Bad Debts
$ 8,000
$ 5,000
Accumulated Depreciation—Building
26,250
22,500
Accumulated Depreciation—Equipment
39,750
27,500
Accounts Payable
55,000
60,000
Notes Payable—Current
70,000
20,000
Miscellaneous Expenses Payable
18,000
8,700
Taxes Payable
35,000
10,000
Unearned Revenue
1,000
9,000
Notes Payable—Long Term
40,000
60,000
Bonds Payable—Long Term
250,000
250,000
Deferred Income Tax Liability
47,000
53,300
Common Stock, $2 par
359,400
200,000
Retained Earnings Appropriated for
Possible Building Expansion
43,000
33,000
Unappropriated Retained Earnings
34,600
112,000
Paid In Capital in Excess of Par Value
116,000
5,000
Sales
898,000
Gain on Sale of Investment Securities
12,000
Total credits
$2,053,000
$876,000
The following information was also available:
(a) All purchases and sales were on account.
(b) Equipment with an original cost of $15,000 was sold for $7,000.
(c) Selling and general expenses include the following:
Building depreciation
$ 3,750
Equipment depreciation
25,250
Bad debt expense
4,000
Interest expense
18,000
(d) A 6 month note payable for $50,000 was issued toward the purchase of new equipment.
(e) The long term note payable requires the payment of $20,000 per year plus interest until paid.
(f) Treasury stock was sold for $1,000 more than its cost.
(g) During the year, a 30% stock dividend was declared and issued. At the time, there were 100,000 shares of $2 par common stock outstanding. However, 1,000 of these shares were held as treasury stock at the time and were prohibited from participating in the stock dividend. Market price was $10 per share after the stock dividend was issued.
(h) Equipment was overhauled, extending its useful life at a cost of $6,000. The cost was debited to Accumulated Depreciation—Equipment.
Instructions: Prepare a statement of cash flows for the year ended October 31, 2008, using the indirect method of reporting cash flows from operations.
Below are balance sheet and income statement data for Judy Maxwell Company. (Note: For the balance sheet data, the end of year information is in the left column.)
Balance Sheet
2008
2007
Cash
$ 228
$ 120
Investment securities (available for sale)
170
100
Accounts receivable
1,100
718
Paid in capital
4,000
3,500
Inventory
1,998
2,151
Prepaid selling and administrative expenses
97
108
Retained earnings (deficit)
784
(383)
Accumulated depreciation
1,400
1,090
Accounts payable
200
270
Unearned revenue
50
80
Income taxes payable
42
26
Other long term liabilities
289
90
Property, plant, and equipment
7,000
5,900
Long term debt
4,458
5,174
Accumulated other comprehensive income
70
0
Intangible assets
700
750
Income Statement (for 2008)
Sales
$22,680
Cost of goods sold
$14,800
Loss on sale of property, plant, and equipment
170
Selling and administrative expenses
3,330
Amortization expense
50
Depreciation expense
1,068
Income tax expense
1,200
Total expenses and losses
20,618
Net income
$2,062
Additional information for Judy Maxwell Company is as follows:
(a) Property, plant, and equipment with an original historical cost of $1,200 was sold during
2008.
(b) All accounts payable relate to inventory purchases.
(c) The “Other long term liabilities” item is Judy Maxwell’s pension liability. Pension expense is reported as part of selling and administrative expenses.
(d) During 2008, Judy Maxwell issued shares of common stock to an investor in exchange for property, plant, and equipment valued at $350.
(e) The accumulated other comprehensive income relates solely to the available for sale investment securities.
Instructions: Prepare a complete statement of cash flows for 2008 for Judy Maxwell Company. Use the direct method for reporting cash flows from operating activities.
Below are balance sheet and income statement data for Eunice Burns Company.
Balance Sheet
2008
2007
Cash
$ 357
$ 220
Accounts receivable
736
614
Allowance for bad debts
100
76
Investment securities (trading)
65
80
Inventory
1,023
1,506
Prepaid selling and administrative expenses
11
26
Investment securities (available for sale)
135
100
Property, plant, and equipment
7,700
6,650
Accumulated depreciation
1,400
1,090
Investment in Sub Company
170
0
Capitalized software development costs
92
0
Deferred income tax asset
104
82
Intangible assets
600
660
Accounts payable
200
270
Interest payable
50
80
Income taxes payable
42
26
Sales revenue received in advance
1,340
1,060
Dividends payable
189
90
Long term debt
1,958
2,774
Accrued pension cost
860
790
Convertible preferred stock
0
450
Common stock (no par)
3,088
2,232
Retained earnings
1,766
1,000
Income Statement (for 2008)
Sales
$22,680
Income from Sub Company
30
Gain on sale of property, plant, and equipment
120
Cost of goods sold
$14,800
Selling and administrative expenses
3,710
Pension expense
130
Interest expense
240
Depreciation expense
580
Amortization expense
88
Unrealized holding loss on investment securities
20
Income tax expense
1,200
Total expenses and losses
20,618
Net income
$ 2,062
Additional information for Eunice Burns Company is as follows:
(a) Bad debt expense of $160 is included in selling and administrative expenses.
(b) Property, plant, and equipment was sold during 2008 for $600 cash.
(c) All accounts payable relate to inventory purchases.
(d) During 2008, Eunice Burns capitalized $65 of interest associated with the construction of a building. None of the interest payable relates to this capitalized interest.
(e) On July 15, 2008, Eunice Burns repurchased shares of its own stock for $75. On December 19, 2008, Eunice Burns resold the shares for $50. Eunice Burns uses the cost method for accounting for treasury stock.
(f) On November 17, 2008, Eunice Burns declared and issued a 5% stock dividend. The number of shares of common stock outstanding increased from 100 to 105. After the stock dividend, the market price per share of common stock was $70.
(g) During the year, Eunice Burns capitalized $120 in expenditures for software. The capitalized costs are being amortized over the estimated useful life of the development costs.
(h) On January 1, 2008, Eunice Burns signed an agreement to lease a piece of equipment. The lease is being accounted for as a capital lease. The annual lease payment is $40. The present value of the minimum lease payments is $199. The leased asset has been included in property, plant, and equipment, and the lease liability is included in long term debt. The lease term is eight years, and the implicit interest rate is 12%.
(i) Eunice Burns uses the LIFO method of inventory valuation. During the year, Eunice Burns dipped into its LIFO layers. As a result, cost of goods sold was $116 lower than it otherwise would have been.
(j) On January 1, 2008, Eunice Burns purchased 30% of Sub Company for $150 cash. At the time, the book value of Sub’s net assets was $500. Net income for 2008 for Sub Company was $100.
(k) During the year, all of the convertible preferred stock was converted into shares of Eunice Burns common stock.
Instructions: Prepare a complete statement of cash flows for 2008 for Eunice Burns Company. Use the direct method for reporting cash flows from operating activities.
Case Scenario You are currently planning the audit of RC Pty Ltd. You have calculated the following ratios in order to assist you in identifying potential audit risk areas:
Ratio
Unaudited 30/6/X4
Audited 30/6/X3
Industry average
Cost of goods sold/sales (%)
73.27
79.34
69.24
Operating expenses/sales (%)
12.96
16.25
14.81
Selling and Administrative expenses/sales (%)
4.00
4.51
4.90
Interest expense/sales (%)
3.31
3.44
5.23
Total cost/sales (%)
92.99
97.40
93.25
Profit/sales (%)
4.47
3.91
5.15
Inventory turnover (times per year)
1.44
1.95
2.15
Accounts receivable turnover (days)
80.00
95.00
75.00
Current assets/current liabilities
1.37
1.20
1.45
Receivables/current liabilities
0.25
0.25
0.40
Profit/capital (% per year)
13.89
15.81
18.19
Times dividend earned
1.60
2.00
1.80
In addition you have the following information:
RC Pty Ltd is a large proprietary company involved in property development and residential construction in the Parramatta region. It experienced losses a few years ago but in recent years has improved its performance and returned to profitability.
Current year operating profit has increased by nearly 50% while sales have fallen slightly from last year’s levels.
Eight months ago, RC Pty Ltd became involved in a consortium building a large residential project on the out skirts of Parramatta. The project is expected to take 7 years to finish, with completed dwellings being sold in stages ‘off the plan’. Off the plan sales have become increasingly popular with consumers as only a small deposit is required to secure the property, with the balance not payable until completion (often up to 12 months later)
In order to finance participation in the residential project, RC Pty Ltd doubled its bank loan.
Industry average data was obtained from the Australian Bureau of Statistics, and is calculated using figures from all listed property development companies in Australia.
Your assistant has reviewed the data and made the following notes:
Cost of goods/sales, operating expenses/sales, and selling and admin expenses /sales have all fallen, indicating an improvement in management efficiency. In addition, these ratios are all lower than industry averages, indicating RC Pty Ltd has good cost control measures in place.
The inventory turnover ratio has fallen, indicating that inventory is held for less time than prior years. This should lessen our concerns regarding obsolescence.
Debtors are now being collected 15 days (or 16%) faster than the prior year, reducing cash flow concerns and lessening pressure on the provision for doubtful debts.
Current assets to current liabilities has increased, indicating an improvement in RC Pty Ltd’s liquidity position. In addition, this ratio is above industry average.
Required
Examine the validity of your assistant’s comments, and where appropriate provide an alternative interpretation and analysis.
Evaluate the implications of your analysis on the year end audit testing.
Adapted from the Professional Year Programme of The Institute of Chartered Accountants in Australia 2000 Accounting 2 Module
Question 2 (5 Marks)
Case Scenario
Your audit manager has asked you to do the following:
Select a sample of creditors from the year end creditors ledger:
Vouch each creditor’s balance to selected invoices and subsequent cash payments: and
Agree the total of the creditors’ ledger to the trial balance and general ledger.
Required
She now wants to see if you understand the reasoning behind these activities and asks you to prepare a memo that:
Identifies the audit assertion each of the above procedures is directed towards
Identifies any assertions that you consider should be further tested (do not consider disclosure issues).
In relation to the assertions identified in (2), she asks you to identify additional procedures you would perform to gather sufficient appropriate evidence.
Note: Please refer also to ASA 315(ISA 315) and ASA 500 (ISA 500)
Adapted from the Professional Year Programme of The Institute of Chartered Accountants in Australia 1999 Accounting 2 Module
Question 3 (7.5 Marks)
If the auditor concludes that unethical behaviour has occurred, they need to consider whether it is necessary to whistleblow on the offender and, if so to whom to report. Auditors in practice need to be able to make a judgement as to when to whistleblow. Completing the requirement below will help you make that judgement.
Required Develop a set of guidelines that you would use to determine if it was appropriate to whistleblow in a situation where you considered there may be unethical conduct. Explain in a paragraph the reason for each of the guidelines that you have developed.
Dickens Company is a small editorial services company owned and operated by Monica Baker. On October 31, 2014, the end of the current year, Dickens Company’s accounting clerk prepared the unadjusted trial balance shown below.
Dickens Company
Unadjusted Trial Balance
October 31, 2014
Debit Balances
Credit Balances
Cash .
7,500
Accounts Receivable .
38,400
Prepaid Insurance . .
7,200
Supplies
1,980
Land .
112,500
Building
150,250
Accumulated Depreciation—Building
87,550
Equipment . .
135,300
Accumulated Depreciation—Equipment
97,950
Accounts Payable . .
12,150
Unearned Rent
6,750
Capital Stock
75,000
Retained Earnings .
146,000
Dividends
15,000
Fees Earned .
324,600
Salaries and Wages Expense
193,370
Utilities Expense
42,375
Advertising Expense .
22,800
Repairs Expense
17,250
Miscellaneous Expense
6,075
750,000
750,000
The data needed to determine year end adjustments are as follows:
1. Unexpired insurance at October 31, $5,400.
2. Supplies on hand at October 31, $375.
3. Depreciation of building for the year, $6,000.
4. Depreciation of equipment for the year, $3,000.
5. Rent unearned at October 31, $1,350.
6. Accrued salaries and wages at October 31, $2,900.
7. Fees earned but unbilled on October 31, $18,600.
Instructions
1. Journalize the adjusting entries using the following additional accounts: Salaries and Wages Payable; Rent Revenue; Insurance Expense; Depreciation Expense—Building; Depreciation Expense—Equipment; and Supplies Expense.
2. Determine the balances of the accounts affected by the adjusting entries, and prepare an adjusted trial balance.
Shepherd Cycles sells a variety of bicycles. The business which uses the FIFO method, began the last quarter of 2013 (October 1 to December 31) with 20 “Iron Man 2” bicycles at a total cost of $122,000. During the quarter, the company completed the following transactions.
October 8 105 bicycles were purchased at a cost of $5,920 each but in addition there was a freight charge of $480 on each bicycle.
October 31 The sales for October were 85 bicycles which yielded total sales revenue of $761,600. ( 15 of these units were sold on account)
November 4 A new batch of 60 bicycles was purchased at a total cost of $408,000
November 10 5 of the bicycles purchased on November 4 were returned to the supplier, as they were defective.
November 30 During the month 57 bicycles were sold at a price of $9,520 each.
December 4 A customer, to whom 9 bicycles were sold during the first business day of November, returned 4 of the cycles. December 10 Owing to an increased demand, a further 115 bicycles were purchased at a cost of $7,600 each; these were subject to a trade discount of 5% each.
December 31 122 bicycles were sold during December at a unit selling price of $10,100.
Prepare a perpetual inventory record for this merchandise, to determine the company’s cost of goods sold for the quarter and the value of ending.
Given that selling & distribution and administrative costs for the quarter were $214,940 and$103,760 respectively, prepare an income statement for Shepherd Cycles for the quarter ended December 31, 2013.
Journalize the October transactions, assuming the company uses a: Periodic inventory system Perpetual inventory system
December 31 An actual count of inventory was carried out which revealed that there were 28 units of the merchandise in the store room.
Given the following Year 12 Financial Statement data for a footwear company: Income Statement Data
Year 12 (in 000s) Net Revenues from Footwear Sales $ 300,000 Operating Profit (Loss) 75,000 Net Profit (Loss) $ 45,500
Balance Sheet Data Cash on Hand 10,000 Total Current Assets $ 70,000 Total Assets 320,000 Overdraft Loan Payable 5,000 1 Year Bank Loan Payable 12,000 Current Portion of Long term Loans 20,000 Total Current Liabilities 58,500 Long Term Bank Loans Outstanding 100,000 Shareholder Equity: Year 11 Balance Year 12 Change Common Stock 10,000 0 10,000 Additional Capital 101,000 0 101,000 Retained Earnings 30,000 20,500 50,500 Total Shareholder Equity 141,000 +20,500 161,500
Other Financial Data Depreciation $12,500 Dividend payments $25,000
Based on the above figures and the formula for calculating the default risk ratio found on the Help screen for p. 5 of the Footwear Industry Report and p. 28 of the Players Guide, the companys default risk ratio in Year 12 was
This is for CGA advanced course assignment. please see the assignment. I am looking for a Good Solution. Memo for this Case. please let me know. I need this by tomorrow September 27 by 3.00 pm
Document Preview:
Module 3 assignment Note: Before you begin this assignment case, please click the Module 3 assignment link in the online course navigation pane for instructions on how to collaborate with your discussion group on the case analysis and response. (60 minutes) Mallory Music Boxes Inc. Mallory Music Boxes Inc. (MMB), a private family owned and operated business, specializes in the design and production of a wide variety of music boxes. The designs are exclusive to MMB and the company is noted for its handcrafted workmanship. MMB has built a reputation across Canada for its music boxes, due to the intricate box designs and the high quality of the components used to produce the music. Competitors enter and leave the market, but MMB’s good reputation enables it to maintain its market share. The music boxes are meticulously handcrafted by a staff of professional carpenters and are well known for their signature inlaid metal lids. Two types of musical movements are available for the music boxes — wind up movements and electronic touch button musical movements. Customers who prefer historical accuracy are the most frequent purchasers of the wind up option but most customers choose the electronic touch button models. The electronic touch button musical movements are manufactured in China and shipped to MMB. The wind up movements are produced in house and are used for smaller music boxes with more intricate designs. MMB has two separate divisions; Division A, which produces small music boxes with wind up movements, and Division B, which produces large music boxes with electronic touch buttons. Each division has a general manager in charge of production. Matthew Mallory, the President and CEO of MMB, is currently investigating the opportunity to add miniature clocks to the product offering. Initial market surveys indicate there is a strong demand for high quality miniature clocks and MMB expects to leverage its current reputation to…
Presented below are selected transactions of Molina Company. Molina sells in large quantities to other companies and also sells its product in a small retail outlet.
March 1
Sold merchandise on account to Dodson Company for $5,000, terms 2/10, n/30.
3
Dodson Company returned merchandise worth $500 to Molina.
9
Molina collected the amount due from Dodson Company from the March 1 sale.
15
Molina sold merchandise for $400 in its retail outlet. The customer used his Molina credit card.
31
Molina added 1.5% monthly interest to the customer’s credit card balance.
Prepare journal entries for the transactions above.
The first audit of the books for Hintze Corporation was made for the year ended December 31, 2008. In reviewing the books, the auditor discovered that certain adjustments had been overlooked at the end of 2007 and 2008 and that other items had been improperly recorded. Omissions and other failures for each year are summarized as follows:
2007
2008
Sales Salaries Payable
$2,100
$1,900
Interest Receivable
450
250
Prepaid Insurance
500
200
Advances from Customers
1,400
1,900
(Collections from customers had been included in sales but
should have been recognized as advances from customers
because goods were not shipped until the following year)
Equipment
1,100
900
(Expenditures had been recognized as repairs but should
have been recognized as cost of equipment; the depreciation
rate on such equipment is 10% per year, but depreciation in
the year of the expenditure is to be recognized at 5%)
Prepare journal entries to correct revenue and expense accounts for 2008,and record assets and liabilities that require recognition on the balance sheet as of December 31, 2008. Assume that the nominal accounts for 2008 have not yet been closed into the income summary account.
In early 2007, while reviewing Huffman Inc.’s 2006 financial records, the accountant discovered several errors. For each of the following errors, indicate the effect on net income (i.e., understatement, overstatement, or no effect) for both 2006 and 2007, assuming that no correction had been made and the company uses a periodic system for inventory.
(a) Certain items of ending inventory were accidentally not counted at the end of 2006.
(b) Machinery was sold in May 2006, but the company continued to deduct depreciation for the remainder of 2006, although the asset was removed from the books in May.
(c) The 2006 year end purchases of inventory were not recorded until the beginning of 2007, although the inventory was correctly counted at the end of 2006.
(d) Goods sold on account in 2006 were not recorded as sales until 2007.
(e) Insurance costs incurred but unpaid in 2006 were not recorded until paid in 2007.
(f) Interest revenue in 2006 was not recorded until 2007.
(g) The 2006 year end purchases were not recorded until the beginning of 2007. The inventory associated with these purchases was omitted from the ending inventory count in 2006.
(h) A check for January 2007 rent was received and recorded as revenue at the end of 2006.
(i) Interest accrued in 2006 on a note payable was not recorded until it was paid in 2007.
Change in Depreciation Estimates and Depreciation Method
Yuki, Inc., acquired the following assets on January 1, 2005.
Equipment, estimated useful life 5 years; residual value $13,000
$513,000
Building, estimated useful life 40 years; no residual value
900,000
The equipment has been depreciated using the sum of the years’ digits method for the first three years. In 2008, the company decided to change the method of depreciation to straight line. No change was made in the estimated service life or residual value. The company also decided to change the total estimated useful life of the building from 40 to 45 years with no change in the estimated residual value. The building is depreciated on the straight line method. The company has 200,000 shares of capital stock outstanding. Partial results of operations for 2008 and 2007 are as follows:
2008
2007
Income before depreciation
$890,000
$856,000
Instructions:
1. Compute depreciation expense for 2008.
2. Compute earnings per share for 2007 and 2008. (Ignore income tax effects.)
Barney Corporation began business on January 1, 2006. The company has released the following financial statements for 2006 and 2007 and has prepared the following proposed statements for 2008.
Barney Corporation
Comparative Balance Sheets
December 31
2008
2007
2006
Assets
Cash
$249,000
$219,000
$165,000
Capitalized exploration costs
60,000
45,000
30,000
Equipment
150,000
150,000
150,000
Accumulated depreciation—equipment
(45,000)
(30,000)
(15,000)
Total assets
$414,000
$384,000
$330,000
Liabilities and Stockholders’ Equity
Current liabilities
$177,000
$177,000
$147,000
Common stock
165,000
165,000
165,000
Retained earnings
72,000
42,000
18,000
Total liabilities and stockholders’ equity
$414,000
$384,000
$330,000
Sales
$315,000
$300,000
$255,000
Cost of goods sold
$240,000
$225,000
$189,000
Administrative expenses
12,500
23,500
28,000
Amortization of capitalized exploration costs
17,500
12,500
5,000
Depreciation expense—equipment
15,000
15,000
15,000
Total costs
$285,000
$276,000
$237,000
Net income
$ 30,000
$ 24,000
$ 18,000
Barney Corporation acquired the equipment for $150,000 on January 1, 2006, and began depreciating the equipment over a 10 year estimated useful life with no salvage value, using the straight line method of depreciation. The capitalized exploration costs reflect oil and gas drilling costs that Barney has capitalized under the full cost method. As of January 1, 2008, Barney has decided to make the following accounting changes.
(a) For justifiable reasons, Barney Corporation changed to the double declining balance method of depreciation for the equipment as of January 1, 2008.
(b) For justifiable reasons, Barney Corporation changed from the full cost to the successful efforts method of accounting for oil and gas drilling costs as of January 1, 2008. Under the successful efforts method, all drilling costs are expensed as incurred. This change is a change in accounting principle.
Instructions: In 3 year comparative format, prepare the balance sheets, statements of income, and statements of retained earnings that would be reported in 2008 for the years 2006, 2007, and 2008. Barney has not yet paid any dividends. Make sure to correctly treat the accounting changes mentioned above. (Ignore any income tax effects.)
Change in Depreciation Estimates and Depreciation Method
The following information relates to depreciable assets of Bright Electronics.
(a) Machine A was purchased for $45,000 on January 1, 2003. The entire cost was erroneously expensed in the year of purchase. The machine had a 15 year useful life and no residual value.
(b) Machine B cost $160,000 and was purchased January 1, 2004. The straight line method of depreciation was used. At the time of purchase, the expected useful life was 16 years with no residual value. In 2008, it was estimated that the total useful life of the asset would be only nine years and that there would be a $10,000 residual value.
(c) Building C was purchased January 1, 2005, for $800,000. The straight line method of depreciation was originally chosen. The building was expected to be useful for 20 years and to have zero residual value. On January 1, 2008, a change was made from the straight line depreciation method to the sum of the years’ digits method. Estimates relating to the useful life and residual value remained the same. Income before depreciation expense was $470,000 for 2008. Depreciation on assets other than those described totaled $40,000. (Note: Ignore all income tax effects.)
Instructions:
1. Compute total depreciation expense for 2008.
2. Prepare the statement of retained earnings for 2008. The beginning Retained Earnings balance, before considering items (a) through (c) above, was $770,000. For this problem, assume that only the statements for 2008 are presented, so any prior period adjustment to retained earnings is done as of January 1, 2008. Bright declared and paid dividends totaling $120,000 in 2008.
3. Make the January 1, 2008, correcting journal entry necessary with respect to item (a), the erroneous expensing of the machine cost.
Change in Accounting Estimates and Depreciation Method
Johnston Doors began operations on January 1, 2005. On that day, Johnston purchased the following assets, both of which were depreciated using the straight line method.
As of January 1, 2009, Johnston reviewed its accounting records and determined that the building should have a total useful life of 20 years. In addition, because of significant wear on the equipment, Johnston has decided to use the sum of the years’ digits method for depreciating equipment. Johnston also has found that its estimated bad debt expense has been consistently higher than actual bad debts. Management proposes lowering the percentage from 3% of credit sales to 2%. If 2% had been used since 2005, the balance in Allowance for Bad Debts at the beginning of 2009 would have been $3,200 rather than $6,900. Credit sales for 2009 totaled $250,000, and accounts written off as uncollectible during 2009 totaled $5,500.
Instructions: (Ignore income tax effects.)
1. What is the proper accounting treatment for each of the proposed changes?
2. Prepare the journal entries necessary to record the depreciation expense for 2009 for both the equipment and the building.
3. Prepare the journal entry to record the write off of accounts deemed uncollectible during 2009 and the adjusting entry at year end to record the bad debt expense for the period.
4. What adjustment is made to the allowance account at the beginning of 2009 as a result of changing the bad debt estimate percentage?
The following are two independent, unrelated sets of facts concerning accounting changes.
(a) Case 1: Runyon Development Company determined that the amortization rate on its patents is unacceptably low due to current advances in technology. The company decided at the beginning of 2008 to decrease the estimated useful life on all existing patents from 10 years to 7 years. Patents were purchased on January 1, 2003, for $3,000,000. The estimated residual value is $0.
(b) Case 2: Cartwright Corporation decided on January 1, 2008, to change its depreciation method for manufacturing equipment from an accelerated method to the straight line method. The straight line method is to be used for new acquisitions as well as for previously acquired equipment. As of January 1, 2008, the total historical cost of depreciable assets is $800,000; accumulated depreciation on those assets is $343,000. The expected remaining useful life of Cartwright’s depreciable assets as of January 1, 2008, is 10 years; the expected salvage value is $25,000.
Instructions: For each of the cases:
1. Identify the type of accounting change.
2. Explain how the accounting change should be reported in 2008.
3. Explain the effect of the change on the December 31, 2008, balance sheet and the 2008 income statement.
During 2008, All Seasons Company changed its inventory valuation method from LIFO to FIFO. The following information shows the effect of this change.
Net Income
Excess of LIFO Cost of
Computed
Goods Sold over
Income Effect
Year
Using LIFO
FIFO Cost of Goods Sold
(Net of Tax)
Prior to 2006
$72,000
$43,200
2006
$140,000
22,000
13,200
2007
130,000
24,000
14,400
2008
200,000
50,000
30,000
Instructions:
1. Before the change from LIFO to FIFO, the Retained Earnings balance on January 1, 2006, was $300,000. All Seasons Company does not pay any dividends. Prepare the comparative statement of retained earnings, reflecting the change to FIFO, for 2006, 2007, and 2008.
2. What additional information would you need to prepare all the necessary disclosures to include in the notes to the 2008 financial statements?
On January 1, 2008, Down Under, Inc. decided to change from the LIFO method of inventory valuation to the FIFO method. The net income (using LIFO) for the four years Down Under has been in business is as follows:
2005
$120,000
2007
$156,000
2006
138,000
2008
180,000
Analysis of the inventory records revealed that the following inventories were on hand at the end of each year as valued under both the LIFO and FIFO methods.
LIFO Method
FIFO Method
January 1, 2005
$ 0
$ 0
December 31, 2005
178,000
208,000
December 31, 2006
220,000
216,000
December 31, 2007
252,000
290,000
December 31, 2008
295,000
349,000
For simplicity, assume that Down Under’s sales for each year are $500,000. The income tax rate is 40%. Down Under has only two expenses—cost of goods sold and income tax expense.
Instructions:
1. Prepare the 3 year comparative income statement for 2008 which will include FIFO numbers for 2008 and retrospectively adjusted FIFO numbers for 2006 and 2007. Hint: You will have to work backwards to figure out income tax expense (using net income) and then calculate cost of goods sold using pretax income and sales.
2. Prepare the 3 year comparative retained earnings statement for Down Under for 2008. Note that the company started business on January 1, 2005. Dividends declared and paid have been as follows: 2005—$10,000; 2006—$15,000; 2007—$15,000; 2008—$25,000.
3. Prepare the year by year income statement note disclosure that Down Under must provide in the notes to its 2008 financial statements.
Hiatt Textile Corporation is planning to expand its current plant facilities and is in the process of obtaining a loan at City Bank. The bank has requested audited financial statements. Hiatt has never been audited before. It has prepared the following comparative financial statements for the years ended December 31, 2008 and 2007.
Hiatt Textile Corporation
Comparative Balance Sheets
December 31, 2008 and 2007
2008
2007
Assets
Current assets:
Cash
$ 602,500
$ 400,000
Accounts receivable
980,000
740,000
Allowance for bad debts
(92,500)
(45,000)
Inventory
517,500
505,000
Total current assets
$2,007,500
$1,600,000
Plant assets:
Property, plant, and equipment
$ 417,500
$ 423,750
Accumulated depreciation
(304,000)
(266,000)
Total plant assets
$ 113,500
$ 157,750
Total assets
$2,121,000
$1,757,750
Liabilities and Stockholders’ Equity
Liabilities:
Accounts payable
$ 303,500
$ 490,250
Stockholders’ equity:
Common stock, par value $25; authorized, 30,000 shares;
issued and outstanding, 26,000 shares
$ 650,000
$ 650,000
Retained earnings
1,167,500
617,500
Total stockholders’ equity
$1,817,500
$1,267,500
Total liabilities and stockholders’ equity
$2,121,000
$1,757,750
Hiatt Textile Corporation
Comparative Income Statements
For the Years Ended December 31, 2008 and 2007
2008
2007
Sales
$2,500,000
$2,250,000
Cost of goods sold
1,075,000
987,500
Gross margin
$1,425,000
$1,262,500
Operating expenses
$ 575,000
$ 512,500
General and administrative expenses
300,000
262,500
$ 875,000
$ 775,000
Net income
$ 550,000
$ 487,500
The following facts were uncovered during the audit.
(a) On January 20, 2007, Hiatt had charged a 5-year fire insurance premium to expense.
The total premium amounted to $15,500.
(b) Over the last two years, the amount of loss due to bad debts has steadily decreased.
Hiatt has decided to reduce the amount of bad debt expense from 2% to 1.5% of sales, beginning with 2008. (A charge of 2% has already been made for 2008.)
(c) The inventory account (maintained on a periodic basis) has been in error the last two years. The errors were as follows:
2007: Ending inventory overstated by $37,750
2008: Ending inventory overstated by $49,500
(d) A machine costing $75,000, purchased on January 4, 2007, was incorrectly charged to operating expense. The machine has a useful life of 10 years and a residual value of $12,500. The straight-line depreciation method is used by Hiatt.
Instructions:
1. Prepare the journal entries to correct the books at December 31, 2008. The books for
2008 have not been closed. (Ignore income taxes.)
2. Prepare a schedule showing the computation of corrected net income for the years ended December 31, 2007 and 2008, assuming that any adjustments are to be reported on the comparative statements for the two years. Begin your schedule with the net income for each year. (Ignore income taxes.)
Hinckley Company is in the process of adjusting its books at the end of 2008. Hinckley’s records reveal the following information:
(a) Hinckley failed to accrue sales commissions at the end of 2006 and 2007 as follows:
2006
$22,000
2007
14,250
In each case, the sales commissions were paid (and expensed) in January of the following year.
(b) Errors in ending inventories for the last three years were discovered to be as follows:
2006
$41,300 understated
2007
54,200 overstated
2008
15,000 understated
The incorrect amount has already been recorded for 2008.
Instructions:
1. Prepare the necessary journal entries at December 31, 2008, to record the preceding information. Assume that the books are still open for 2008.Ignore all income tax effects.
2. Assume that the unadjusted retained earnings balance at the beginning of 2008 was $1,265,000 and that the unadjusted net income for 2008 was $300,000. Also assume that dividends of $175,000 were declared during 2008. Prepare a statement of retained earnings for Hinckley Company for 2008, reflecting appropriate adjustments from (1). Assume that there are no income taxes.
1. On January 1, 2006, Frank Company purchased equipment for $200,000. The equipment has an 8 year expected useful life and a $10,000 expected residual value. Initially, Frank Company used double declining balance depreciation. On January 1, 2008, Frank Company changed to straight line depreciation. The expected useful life and residual value are unchanged. Compute depreciation expense for 2008.
(a) $28,125
(b) $17,083
(c) $12,813
(d) $23,750
2. Jean Company decided to change from LIFO to FIFO as of January 1, 2008. The change is being made for both book and tax purposes. LIFO and FIFO data for 2008 and preceding years are given below.
Net Income
Excess of LIFO Cost of
Computed
Goods Sold over
Income Effect
Year
Using LIFO
FIFO Cost of Goods Sold
(Net of Tax)
Prior to 2006
$12,500
$ 7,500
2006
$62,500
6,250
3,750
2007
54,500
7,500
4,500
2008
78,000
11,250
6,750
$37,500
$22,500
Using the provisions of FASB Statement No. 154, compute Jean Company’s net income for 2008. Remember that Jean Company switched to FIFO on January 1, 2008.
(a) $84,750
(b) $100,500
(c) $85,500
(d) $93,750
3. Goods sold FOB destination were shipped by Brook Company (the seller) on December 31, 2008. The sale was recorded in 2008, and the goods were not included in 2008 ending inventory. The shipment arrived on January 4, 2009. The goods cost $3,000, and the sales price was $4,400. As a result of this transaction, was net income overstated or understated, and by how much? Ignore income taxes.
An interesting phenomenon can sometimes occur when companies are in danger of not meeting their projected earnings goals. Management suddenly realizes that they have been far too conservative in their previous estimates associated with bad debts, estimated useful lives of equipment, and residual values, to name a few. With this newfound realization, management proceeds to revise these estimates to, as is often stated, “more closely reflect economic reality.” What is the primary difference in financial statement disclosure between a change in estimate and a change in principle? Why do you think managers who are in danger of not meeting their goals would prefer to revise an accounting estimate rather than change an accounting principle?
Hornberger Company has demonstrated a consistently increasing earnings trend over the past 10 years. Stockholders have come to expect this steady increase, and management has gone to great lengths to emphasize the smooth growth pattern associated with Hornberger’s earnings. At the year end board of directors meeting, you, as the chief financial officer, present to the board the preliminary results for the year just ended. These results indicate a slight decline in both income from operations and net income when compared to the previous year. The chairman of the board quickly reviews the firm’s earnings history and then suggests the following items for consideration.
(a) Increase the estimated useful life of the company’s plant facilities from 15 to 25 years.
(b) Change the firm’s estimate of bad debts from 4% of credit sales to 2.5% of credit sales.
(c) Change the firm’s amortization period for amortizable intangibles from the industry average of 10 years to 40 years.
These changes will result in income for the period that is slightly higher than that reported for the past year and will continue the upward trend. The board votes on the proposed changes and instructs you to revise the income statement to reflect the changed estimates. How would each of these changes be reported in the current year’s annual report to shareholders? Why would the chairman of the board suggest changing accounting estimates rather than accounting principles? As the accountant, do you have a responsibility to review management’s estimates for reasonableness and to evaluate the motives behind management’s decision to change an accounting estimate?
Airline A depreciates its airplanes over a 15 year period and estimates a salvage value of 10% of the cost of the plane. At the same time, Airline B depreciates identical airplanes over a 25 year period and provides for a 15% salvage value. These different assumptions resulted in markedly different operating results. For example, if one airplane costs $10 million, Airline A would depreciate $260,000 more per year for 15 years than would Airline B. Which company’s estimate of useful life more closely reflects reality? Would you feel comfortable as a passenger in an airplane that is 25 years old? Does the fact that Airline B subsequently went out of business provide any information as to why its estimates were so substantially different from those of financially sound Airline A?
Bausch & Lomb, maker of eye care products, found itself in the news because of certain procedures that were outside accepted accounting and business practices. The note below from its 1995 annual report provides information about the company’s problems.
Prior Period Adjustment
BAUSCH & LOMB INCORPORATED (DEC)
NOTES TO FINANCIAL STATEMENTS
Note 2. Restatement of Financial Information
The Company has restated its financial statements for the years ended December 31, 1994 and December 25, 1993. This action was taken as a result of an ongoing investigation which identified uncertainties surrounding the execution of a fourth quarter 1993 contact lens sales program and the improper recording of 1993 sunglass sales in Southeast Asia. In the fourth quarter of 1993 a marketing program was initiated to implement a business strategy to shift responsibility for the sale and distribution of a portion of the U.S. Traditional contact lens business to optical distributors. Subsequently, this strategy proved unsuccessful and, in the 1994 third quarter, led to the implementation of a new pricing policy for traditional contact lenses and a decision to accept on a one time basis returns from these distributors. The investigation of this marketing program disclosed instances where unauthorized terms may have been or were offered which were inconsistent with the stated terms and conditions of the program. The resulting uncertainties relating to the execution of this marketing program led to a decision to restate the 1993 financial statements to account for shipments under the program as consigned inventory and to record revenues when the products were sold by the distributors to their customers and to reverse the effect of subsequent product returns and pricing adjustments related to this program which had been previously recognized in 1994. The investigation of Southeast Asia sunglass sales disclosed that in certain instances distributor transactions recorded as revenues in 1993 had not actually resulted from a sale to those customers, and thus were improperly recorded. The 1993 financial statements have been restated to reverse the improperly recorded sales with a corresponding restatement of the 1994 financial statements to reverse the effect of sales returns previously recognized in that period. In the opinion of management, all material adjustments necessary to correct the financial statements have been recorded. The impact of these adjustments on the Company’s financial results as originally reported is summarized below:
1994
1993
Dollar Amounts in Thousands
(Except Per Share Data)
As Reported
As Restated
As Reported
As Restated
Net Sales:
Healthcare
$1,227,648
$1,249,923
$1,191,467
$1,169,192
Optics
622,904
642,763
680,717
660,858
Total
$1,850,552
$1,892,686
$1,872,184
$1,830,050
Business Segment Earnings:
Healthcare
$ 73,466
$ 91,541
$ 210,393
$ 192,318
Optics
64,148
72,075
87,456
79,529
Total
$ 137,614
$ 163,616
$ 297,849
$ 271,847
Net Earnings
$ 13,478
$ 31,123
$ 156,547
$ 138,902
Net Earnings Per Share
$ 023
$ 052
$ 260
$ 231
Retained Earnings At End of Year
$ 846,245
$ 846,245
$ 889,325
$ 871,680
Review this information to answer the questions that follow.
1. What exactly was the company doing that was wrong?
2. Compare the “As Reported” and “As Restated” columns to determine what income was included in both categories over the combined 2 year period. What did the company gain?
3. If this error had been uncovered in 1994 after the 1993 reporting year had been closed, what journal entry would have been made to correct the error?
4. When this error was uncovered in 1995 after the 1994 reporting year had been closed, what journal entry was made to correct the error?
Cendant Corporation was created through the merger of CUC International, Inc. and HFS Incorporated. The company provides travel service, real estate services, and membership basedconsumer services. In April 1998, Cendant discovered several accounting irregularitiesrelating to the CUC segment. Widespread fraud had been occurring in that segment.The 1997, 1996, and 1995 financial statements were restated as shown below. Review theinformation presented and answer the questions that follow.
3. RESTATEMENT (Partial)
As publicly announced on April 15, 1998, the Company discovered accounting irregularities in certain business units of CUC. The Audit Committee of the Company’s Board of Directors initiated an investigation into such matters (See Note 17). As a result of the findings of the Audit Committee investigation and Company investigation, the Company has restated previously reported annual results including the 1997, 1996, and 1995 financial information set forth herein. The 1997 annual results have also been restated for a change in accounting, effective January 1, 1997, related to revenue and expense recognition for memberships. While management has made all adjustments considered necessary as a result of the investigation into accounting irregularities and the preparation and audit of the restated financial statements for 1997, 1996, and 1995, there can be no assurances that additional adjustments will not be required as a result of the SEC investigation. The following statements of operations and balance sheets reconcile previously reported and restated financial information.
Year Ended December 31, 1997
Accounting Adjustments
As Previously
for Errors, Irregularities,
Reported
and Accounting Change
Net revenues
$5,3147
$(4325)
Expenses:
Operating
1,5555
1159
Marketing and reservation
1,2663
(1142)
General and administrative
7272
74
Depreciation and amortization
2568
163
Interest—net
663
(02)
Merger related costs and other unusual charges
1,1479
(4099)
Total expenses
5,0200
(3847)
Income from continuing operations before income taxes,
extraordinary gain and cumulative effect of
accounting change
2947
(478)
Provision for income taxes
2393
(471)
Income from continuing operations before extraordinary
gain and cumulative effect of accounting change
554
(07)
Loss from discontinued operations, net of taxes
—
—
Income before extraordinary gain and cumulative effect
of accounting change
554
(07)
Extraordinary gain, net of tax
—
112
Income before cumulative effect of accounting change
554
105
Cumulative effect of accounting change, net of tax
—
(2831)
Net income (loss)
$ 554
$(2726)
IMPROPER REVENUE RECOGNITION
The Company made adjustments to correct the misapplication of generally accepted accounting principles resulting in improper revenue recognition. These errors include: the understatement of estimated membership fees to be refunded to members; the immediate recognition of revenue which should have been deferred and recognized over the membership term; the recording of fictitious revenue; other accounting errors.
IMPROPER REVERSAL OF MERGER LIABILITIES
The Company recorded adjustments to correct the reduction of liabilities previously established primarily for merger transactions and a corresponding inappropriate entry to record revenue.
REVENUE ASSOCIATED WITH POOLED ENTITIES—NOT PREVIOUSLY RECORDED
The Company recorded adjustments to consolidate the financial statements of acquired entities which were accounted for as poolings of interest as required by generally accepted accounting principles. Previous consolidated financial statements did not reflect certain acquired company financial statements for periods required.
ELIMINATION OF INTERCOMPANY TRANSACTIONS AND CONTRA REVENUE
The Company made adjustments to eliminate intercompany revenue not previously eliminated and properly classify certain expenses as contra revenue resulting in reductions to revenue.
1. Under the heading “Improper Revenue Recognition,” the company identifies three ways in which revenue was overstated. What would have been the journal entries that were made (or weren’t made) to overstate revenues?
2. Determine the amount that should have been reported as “Income from continuing operations before income taxes, extraordinary gain and cumulative effect of accounting change.” How did this result differ from what was initially reported? Why was net income so much less than income from continuing operations?
3. From the information given here, can you tell what the accounting change was? How does the accounting change relate to Cendant’s accounting errors?
As stated in the chapter, most accounting related errors are detected and corrected in the current period. However, some errors may go undetected. Of those that go undetected, some will fix themselves over two periods, while other errors may remain undetected for years. The objective of this writing assignment is to have you think about what it is that is different between those errors that will counterbalance and those that carry over from period to period. In a short memo, identify these differences considering such issues as whether the accounts involved are balance sheet and/or income statement accounts, whether they are current and/or noncurrent accounts, and whether they involve revenue or expense accounts. Finally, provide a systematic method for analyzing an error to determine if it counterbalances or if a journal entry is necessary to correct the books.
The Debate (Restating Prior Years’ Financial Statements)
This chapter began with an illustration of the impact that Statement No. 106 had on the earnings of several companies. Recall that General Motors reported a $33 billion decline in income in 1992. One time “hits” such as this can make comparison of financial statements and ratios over time difficult. This debate relates to the different methods for dealing with changes in accounting principle by either making a cumulative adjustment or restating the financial statements. Divide your group into two teams.
• One team will argue that when a new standard is issued, all prior years’ financial statements being disclosed with the current year’s information should be restated to comply with the new standard. That is, the financial results of previous periods should be restated to reflect the new standard. This is the approach now required under FASB Statement No. 154.
• The other team will argue that a cumulative adjustment that summarizes the new standard’s effect on prior periods is sufficient. This is the approach that was required under APB Opinion No. 20.
Your company has recently decided to change its method of depreciating long term assets to be consistent with major competitors. While your company has used the straight line method in the past, most other companies in the industry use a declining balance method. Preliminary computations indicate that the effect of changing this accounting principle will be to reduce EPS by about 10% in the current year. Naturally, those to whom you report would like to know if there is any way to lessen the impact of this change. You know that other factors in computing depreciation expense are the estimates of useful life and salvage value. You reason that if the estimated useful life of all long term assets is reassessed with minor modifications being made to these estimated lives, then switching the depreciation method will not decrease net income this period.
1. Can the plan of reassessing the estimated lives of long term assets achieve the desired result of allowing the firm to change depreciation accounting methods to a declining balance method without reducing net income this period?
2. Will the firm have a higher cash inflow as a result of either the change in principle or the change in estimate?
3. Should the level of a company’s income determine the accounting methods that it uses and the accounting estimates that it makes? Why or why not?
After computing the current period’s basic and diluted EPS figures, you notice that while basic EPS continues its upward trend, diluted EPS has dropped slightly. In discussions with your manager regarding reasons for the decline, you identify numerous potentially dilutive securities that were considered in computing diluted EPS. Because the company has multiple dilutive securities, those securities were considered in turn, beginning with the convertible security that had the least favorable impact on EPS. As a result of considering the potentially dilutive securities in this order, convertible bonds that were potentially dilutive were not included in the computations because they became antidilutive after considering the effect of other convertible securities. Your manager takes the position that if a security is dilutive when compared to basic EPS, then it should be included in the diluted EPS computations. He maintains that each dilutive secuity should be considered independently of the others. Including these convertible bonds in the diluted EPS computations would result in maintaining an upward trend for diluted EPS.
1. Is there merit to your manager’s position? That is, does the approach he is advocating make some sense?
2. Do the accounting standards allow for this flexibility in interpretation?
3. Prepare your defense for when your manager insists that diluted EPS be computed using his approach. What will you say to convince him that his approach is not acceptable?
This assignment is an exercise in computing diluted EPS. In prior years, Skywalker has had a simple capital structure. That may change in 2009; Skywalker is considering the following actions at the beginning of 2009.
• Issue options granting top level managers the opportunity to purchase a total of 2,000,000 shares of Skywalker common stock for $25 per share.
• Exchange $600 million in existing long term debt (with an interest rate of 8%) for $600 million in 8% convertible bonds (600,000 bonds, each with a $1,000 face value). Without these changes, Skywalker expects to have net income of $15,890,000 in 2009; the net income forecast reflects the expectation that Skywalker will be subject to a 33% tax rate in 2009. (Note: This $15,890,000 forecasted net income for 2009 comes from the assumptions outlined in Chapter 13; all numbers in Chapter 13 are in millions of dollars.) As of the end of 2008, Skywalker had 10,000,000 common shares outstanding. Using these data, construct a spreadsheet to answer the following questions.
1. What is Skywalker’s basic EPS expected to be in 2009?
2. What is Skywalker’s diluted EPS expected to be in 2009 if the options and convertible bonds are issued on January 1, 2009, the average stock price is expected to be $20 per share during 2009, and each bond is convertible into 40 shares of common stock?
3. What is Skywalker’s diluted EPS expected to be in 2009 if the options and convertible bonds are issued on January 1, 2009, the average stock price is expected to be $40 per share during 2009, and each bond is convertible into 35 shares of common stock?
4. Assuming that Skywalker issues the options and convertible bonds on January 1, 2009, complete the following table.
Deferred Tax Impact of a Change in Depreciation Method
Refer to Practice 20 2. Assume that before 2008 the company used straight line depreciation for tax purposes while using double declining balance depreciation for book purposes. The change to straight line depreciation in 2008 is made for book purposes; the company continues to use straight line depreciation for tax purposes. The income tax rate is 40%. (1) Compute the amount of the deferred tax asset or liability that would be included in the December 31, 2007, balance sheet and (2) compute the amount of the deferred tax asset or liability that would be included in the December 31, 2008, balance sheet.
Practice 20 2
Change from Double Declining Balance to Straight Line Depreciation
On January 1, 2005, the company purchased equipment for $100,000. The equipment has a 10 year expected useful life and $0 residual value. Initially, the company used double declining balance depreciation. On January 1, 2008, the company changed to straight line depreciation. The expected useful life and residual value are unchanged. Compute depreciation expense for 2008. Ignore income taxes.
Change from LIFO to FIFO: First Year Retained Earnings
As of January 1, 2008, the company decided to change from the LIFO method of inventory valuation to the FIFO method. The change is being made for both book and tax purposes. Data for the past four years (including 2008) are as follows:
2008
2007
2006
2005
Sales
$2,000
$1,500
$1,200
$1,000
Cost of goods sold—LIFO
1,200
900
720
600
Ending inventory—LIFO
200
150
120
100
Ending income taxes payable—LIFO
n/a
240
192
160
Ending retained earnings—LIFO
1,668
1,188
828
540
Cost of goods sold—FIFO
1,170
880
710
595
Ending inventory—FIFO
300
220
170
140
The ending income taxes payable—LIFO amount is not given because, in 2008, income taxes payable will be computed using the newly adopted FIFO numbers. As you can see from the prior years, it is the practice of the company to pay all income taxes in the subsequent year. The company’s income tax rate is 40%, and the company has no expenses except for cost of goods sold and income tax expense. Compute the retrospectively recalculated Retained Earnings balance as of January 1, 2006, after the change to FIFO is made.
Change from LIFO to FIFO: Year by Year Retained Earnings Calculations
Refer to Practice 20 5. Compute (1) the retrospectively recalculated Retained Earnings balances as of December 31, 2006, and December 31, 2007, and (2) the Retained Earnings balance as of December 31, 2008, after the change to FIFO is made. Note that the company does not pay dividends.
Practice 20 5
Change from LIFO to FIFO: First Year Retained Earnings
As of January 1, 2008, the company decided to change from the LIFO method of inventory valuation to the FIFO method. The change is being made for both book and tax purposes. Data for the past four years (including 2008) are as follows:
2008
2007
2006
2005
Sales
$2,000
$1,500
$1,200
$1,000
Cost of goods sold—LIFO
1,200
900
720
600
Ending inventory—LIFO
200
150
120
100
Ending income taxes payable—LIFO
n/a
240
192
160
Ending retained earnings—LIFO
1,668
1,188
828
540
Cost of goods sold—FIFO
1,170
880
710
595
Ending inventory—FIFO
300
220
170
140
The ending income taxes payable—LIFO amount is not given because, in 2008, income taxes payable will be computed using the newly adopted FIFO numbers. As you can see from the prior years, it is the practice of the company to pay all income taxes in the subsequent year. The company’s income tax rate is 40%, and the company has no expenses except for cost of goods sold and income tax expense.
Change from LIFO to FIFO: Year by Year Income Taxes Payable Calculations
Refer to Practice 20 5. Compute TOTAL income taxes payable, after the change to FIFO is made, as of December 31, 2006, December 31, 2007, and December 31, 2008. Recall that the change to FIFO will necessitate the payment of any tax savings that had been created by the use of LIFO.
Practice 20 5
Change from LIFO to FIFO: First Year Retained Earnings
As of January 1, 2008, the company decided to change from the LIFO method of inventory valuation to the FIFO method. The change is being made for both book and tax purposes. Data for the past four years (including 2008) are as follows:
2008
2007
2006
2005
Sales
$2,000
$1,500
$1,200
$1,000
Cost of goods sold—LIFO
1,200
900
720
600
Ending inventory—LIFO
200
150
120
100
Ending income taxes payable—LIFO
n/a
240
192
160
Ending retained earnings—LIFO
1,668
1,188
828
540
Cost of goods sold—FIFO
1,170
880
710
595
Ending inventory—FIFO
300
220
170
140
The ending income taxes payable—LIFO amount is not given because, in 2008, income taxes payable will be computed using the newly adopted FIFO numbers. As you can see from the prior years, it is the practice of the company to pay all income taxes in the subsequent year. The company’s income tax rate is 40%, and the company has no expenses except for cost of goods sold and income tax expense.
Change from LIFO to FIFO: Income Statement Comparative Disclosure
Refer to Practice 20 5. Prepare the comparative note disclosure that would be provided in the notes to the 2008 financial statements with respect to the income statements for 2006, 2007, and 2008.
Practice 20 5
Change from LIFO to FIFO: First Year Retained Earnings
As of January 1, 2008, the company decided to change from the LIFO method of inventory valuation to the FIFO method. The change is being made for both book and tax purposes. Data for the past four years (including 2008) are as follows:
2008
2007
2006
2005
Sales
$2,000
$1,500
$1,200
$1,000
Cost of goods sold—LIFO
1,200
900
720
600
Ending inventory—LIFO
200
150
120
100
Ending income taxes payable—LIFO
n/a
240
192
160
Ending retained earnings—LIFO
1,668
1,188
828
540
Cost of goods sold—FIFO
1,170
880
710
595
Ending inventory—FIFO
300
220
170
140
The ending income taxes payable—LIFO amount is not given because, in 2008, income taxes payable will be computed using the newly adopted FIFO numbers. As you can see from the prior years, it is the practice of the company to pay all income taxes in the subsequent year. The company’s income tax rate is 40%, and the company has no expenses except for cost of goods sold and income tax expense.
Change from LIFO to FIFO: Impractical to Identify Yearly Differences
Refer to Practice 20 5. Assume that the detailed information listed in Practice 20 5 is not available. Instead, the company only knows that the beginning inventory for 2008 is $150 using LIFO and $220 using FIFO. Show the retained earnings computation for 2008 that would be included in the statement of stockholders’ equity for the year.
Practice 20 5
Change from LIFO to FIFO: First Year Retained Earnings
As of January 1, 2008, the company decided to change from the LIFO method of inventory valuation to the FIFO method. The change is being made for both book and tax purposes. Data for the past four years (including 2008) are as follows:
2008
2007
2006
2005
Sales
$2,000
$1,500
$1,200
$1,000
Cost of goods sold—LIFO
1,200
900
720
600
Ending inventory—LIFO
200
150
120
100
Ending income taxes payable—LIFO
n/a
240
192
160
Ending retained earnings—LIFO
1,668
1,188
828
540
Cost of goods sold—FIFO
1,170
880
710
595
Ending inventory—FIFO
300
220
170
140
The ending income taxes payable—LIFO amount is not given because, in 2008, income taxes payable will be computed using the newly adopted FIFO numbers. As you can see from the prior years, it is the practice of the company to pay all income taxes in the subsequent year. The company’s income tax rate is 40%, and the company has no expenses except for cost of goods sold and income tax expense.
On December 31, 2008, Large Company acquired Small Company for $100,000. This amount exceeded the recorded value of Small Company’s net assets by $20,000 on the acquisition date. The entire excess was attributable to a Small Company building that had a remaining useful life of 10 years as of the acquisition date. Information reported for the two companies for 2007 and 2008 was as follows:
2008
2007
Large Company:
Revenue
$700,000
$600,000
Net income
50,000
40,000
Small Company:
Revenue
$ 50,000
$ 80,000
Net income
8,000
15,000
Prepare the necessary pro forma information that would be included in the notes to Large Company’s 2008 financial statements. For simplicity, ignore income taxes.
Failure to Record Inventory Purchases and Inventory
Refer to Practice 20 12. Assume that in addition to failing to record the purchase, the company also failed to include the inventory in the ending inventory count. Make the correcting entry necessary the following May, assuming that the company uses (1) the periodic inventory method and (2) the perpetual inventory method. Ignore income taxes.
Practice 20 12
Failure to Record Inventory Purchases
The company purchased inventory for $10,000 on December 28. The inventory purchase was not recorded until the following January 5. However, the inventory was appropriately included in the inventory count on December 31. The error was not discovered until the following May when the books for the preceding year had already been closed. Make the correcting entry necessary the following May, assuming that the company uses (1) the periodic inventory method and (2) the perpetual inventory method. Ignore income taxes.
The company miscounted its total credit sales in the last two weeks of the year. The correct amount of credit sales for this period was $100,000. The error was not discovered until the following year when the books for the preceding year were already closed. Make the correcting entry necessary the following year, assuming the facts that follow. Ignore income taxes and assume (perhaps unreasonably) that no errors occurred in recording expenses associated with the sales.
(a) The incorrectly reported amount of credit sales was $75,000, and the error was found when the accounts were collected in cash.
(b) The incorrectly reported amount of credit sales was $75,000, and none of these credit sales had been collected in cash by the time the error was discovered.
(c) The incorrectly reported amount of credit sales was $110,000, and the error was found when the accounts were collected in cash.
(d) The incorrectly reported amount of credit sales was $110,000, and none of these credit sales had been collected in cash by the time the error was discovered.
Refer to Practice 20 21. Assume that the error was found in May 2008. Net income for 2008 (correctly stated) was $25,000. Dividends for 2008 were $10,000. The Retained Earnings balance as originally reported at the end of 2007 was $100,000. Prepare a statement of retained earnings for 2008.
Practice 20 21
Incorrect Capitalization
In January 2006, the company made $10,000 in expenditures. These expenditures should have been expensed immediately. Instead, the company recorded this $10,000 payment as a purchase of equipment with a useful life of 10 years and $0 expected salvage value. The company uses straight line depreciation. The company proceeded to depreciate this “equipment.” Make the necessary correcting entry, assuming that (1) the error was found in May 2008 after the 2007 books had been closed and (2) the error was found in May 2009 after the 2008 books had been closed. Ignore income taxes.
Albrecht Inc. began business in 2005. An examination of the company’s allowance for bad debts account reveals the following.
Estimated Bad Debts
Actual Bad Debts
2005
$11,000
$4,500
2006
13,000
6,800
2007
16,500
8,950
2008
No adjustment yet
9,500
In the past, the company has estimated that 3% of credit sales would be uncollectible. The accountant for Albrecht has determined that the percentage used in estimating bad debts has been inappropriate. She would like to revise the estimate downward to 1.5%. The company president has stated that if the previous estimates of bad debt expense were incorrect, the financial statements should be restated using the more accurate estimate.
1. Assuming that credit sales for 2008 are $650,000, provide the adjusting entry to record bad debt expense for the year.
2. What catch up entry, if any, would be made to correct the inaccurate estimates for previous years?
3. How would you respond to the president’s request to restate the prior years’ financial statements?
Modern Lighting Inc. has in the past depreciated its computer hardware using the straight line method, assuming a 10% salvage value and an expected useful life of five years. As a result of the rapid obsolescence associated with the computer industry, Modern Lighting has determined that it receives most of the benefit from its computer systems in the first few years of ownership. Therefore, as of January 1, 2008, Modern Lighting proposes changing to the sum of the years’ digits method for depreciating its computer hardware. The following information is available regarding all of Modern Lighting’s computer purchases:
Cost
2005
$45,000
2006
25,000
2007
30,000
1. Compute the depreciation taken by Modern Lighting during 2005, 2006, and 2007. Assume that all purchases were made at the beginning of the year.
2. Compute the amount of depreciation expense for 2005–2007, assuming the sum of the years’ digits had been used.
3. Compute the amount of depreciation expense for 2008.
Kamila Stores decided to change from LIFO to FIFO as of January 1, 2008. The change is being made for both book and tax purposes.
Net Income
Excess of LIFO Cost of
Computed
Goods Sold over
Income Effect
Year
Using LIFO
FIFO Cost of Goods Sold
(Net of Tax)
Prior to 2006
$12,500
$ 7,500
2006
$62,500
6,250
3,750
2007
54,500
7,500
4,500
2008
78,000
11,250
6,750
$37,500
$22,500
1. Using LIFO, the beginning retained earnings as of January 1, 2006, was $173,000.
Compute adjusted beginning retained earnings, using FIFO, as of January 1, 2006.
2. The 3 year comparative income statement for 2008 includes net income for 2006, 2007, and 2008. In that comparative income statement, prepared after the change for FIFO has been adopted, what amount of net income will be reported for each year?
Change in Accounting Principle without Detailed Prior Year Information
Refer to Exercise 20 29. Assume that the detailed information for 2006 and 2007 is not available. During 2008, dividends of $17,500 were paid (compared to dividends of $15,000 in both 2006 and 2007). Based on this information, prepare the retained earnings statement for 2008.
Exercise 20 29
Change in Accounting Principle
Kamila Stores decided to change from LIFO to FIFO as of January 1, 2008. The change is being made for both book and tax purposes.
Net Income
Excess of LIFO Cost of
Computed
Goods Sold over
Income Effect
Year
Using LIFO
FIFO Cost of Goods Sold
(Net of Tax)
Prior to 2006
$12,500
$ 7,500
2006
$62,500
6,250
3,750
2007
54,500
7,500
4,500
2008
78,000
11,250
6,750
$37,500
$22,500
1. Using LIFO, the beginning retained earnings as of January 1, 2006, was $173,000.
Compute adjusted beginning retained earnings, using FIFO, as of January 1, 2006.
2. The 3 year comparative income statement for 2008 includes net income for 2006, 2007, and 2008. In that comparative income statement, prepared after the change for FIFO has been adopted, what amount of net income will be reported for each year?
Changes in Accounting Estimates and Accounting Principles
Due to changing economic conditions and to making its financial statements more comparable to those of other companies in its industry, the management of Kelsea Inc. decided on January 1, 2008, to review its accounting practices. Kelsea decided to change its allowance for bad debts from 2% to 3.5% of its outstanding receivables balance. Kelsea decided to begin using the straight line method of depreciation on its building instead of the sum of the years’ digits method. The change will be effective as of January 1, 2008. Based on further information, it also was decided that the building has 10 more years of useful life as of January 2, 2008.Kelsea bought the building on January 1, 1998, at a cost of $550,000. At that time, Kelsea estimated it would have a 15 year useful life. The building has no expected salvage value. Prior years’ depreciation is as follows:
1998
$68,750
2003
$45,833
1999
64,167
2004
41,250
2000
59,583
2005
36,667
2001
55,000
2006
32,083
2002
50,417
2007
27,500
Kelsea determined that starting with the current year, it would depreciate the company’s printing press using hours of use as the depreciation base. The press, which had been purchased on January 1, 1995, at a cost of $930,000, was being depreciated for 25 years using the straight line method. No salvage value was anticipated. It is estimated that this type of press provides 200,000 total hours of use and, as of January 1, 2008, it had been used 76,000 hours. At the end of 2008, the plant manager determined that the press had been run 6,250 hours during the year. Ignore income taxes relating to this change.
1. Evaluate each of the foregoing changes and determine whether it is a change in estimate or a change in accounting principle.
2. Give the journal entries required at December 31, 2008, to account for bad debt expense and depreciation expense given the preceding changes. Kelsea’s receivable balance at December 31, 2008, was $345,000. Allowance for Bad Debts carried a $1,000 debit balance before adjustment.
The following errors in the accounting records of the Willis & Glassett Partnership were discovered on January 10, 2008.
Ending
Accrued Rent
Accrued Interest
Inventories
Depreciation
Revenue Not
Expense Not
Year of Error
Overstated
Understated
Recorded
Recorded
2005
$30,000
$ 7,000
2006
$12,000
21,000
2007
19,000
$3,000
The partners share net income and losses as follows: 60%, Willis; 40%, Glassett.
1. Prepare a correcting journal entry on January 10, 2008, assuming that the books were closed for 2007.
2. Prepare a correcting journal entry on January 10, 2008, assuming that the books are still open for 2007 and that the partnership uses the perpetual inventory system.
State the effect of each of the following errors made in 2007 on the balance sheets and the income statements prepared in 2007 and 2008.
(a) The ending inventory is understated as a result of an error in the count of goods on hand.
(b) The ending inventory is overstated as a result of the inclusion of goods acquired and held on a consignment basis. No purchase was recorded on the books.
(c) A purchase of merchandise at the end of 2007 is not recorded until payment is made for the goods in 2008; the goods purchased were included in the inventory at the end of 2007.
(d) A sale of merchandise at the end of 2007 is not recorded until cash is received for the goods in 2008; the goods sold were excluded from the inventory at the end of 2007.
(e) Goods shipped to consignees in 2007 were reported as sales; goods in the hands of consignees at the end of 2007 were not recognized for inventory purposes; sale of such goods in 2008 and collections on such sales were recorded as credits to the receivables established with consignees in 2007.
(f) The total of one week’s sales during 2007 was credited to Gain on Sale—Machinery.
(g) No depreciation is taken in 2007 for equipment sold in April 2007. The company reports on a calendar year basis and computes depreciation to the nearest month.
(h) No depreciation is taken in 2007 for equipment purchased in October 2007. The company reports on a calendar year basis and computes depreciation to the nearest month.
(i) Customer notes receivable are debited to the accounts receivable account.
Comparative statements for Bodie Corporation are as follows:
Bodie Corporation
Income Statements and Statement of Retained Earnings
For the Years Ended December 31
2007
2006
Sales
$4,600,000
$4,350,000
Cost of goods sold
2,346,000
2,305,500
Gross profit
$2,254,000
$2,044,500
Expenses
1,598,000
1,533,000
Net income
$ 656,000
$ 511,500
Beginning retained earnings
$1,441,000
$1,077,500
Net income
656,000
511,500
Dividends
(157,000)
(148,000)
Ending retained earnings
$1,940,000
$1,441,000
In 2007, Bodie Corporation discovers that ending inventory for 2006 was understated by $11,000. Prepare comparative income and retained earnings statements for 2006 and 2007. Ignore income tax effects, and assume that the 2007 books have not been closed.
Delgado Manufacturing Company reports long term liabilities and stockholders’ equity balances at December 31, 2008, as follows:
Convertible 5% bonds (par)
$ 800,000
Common stock, $25 par, 100,000 shares issued and outstanding
2,500,000
Additional information is determined as follows:
Conversion term of bonds—50 shares for each $1,000 bond
Income before extraordinary items—2008
$ 199,800
Extraordinary gain (net of tax)
43,520
Net income—2008
$ 243,320
Compute the basic and diluted EPS for the company for 2008, assuming that the income tax rate is 30%. No changes occurred in the debt and equity balances during 2008.
Outdoor Recreation Products Inc. had 50,000 shares of common stock outstanding at the end of 2007. During 2008 and 2009, the following transactions took place.
2008
Mar. 31 Sold 10,000 shares at $24.
Apr. 26 Paid cash dividend of $0.45 per share.
July 31 Paid cash dividend of $0.20 per share and issued a 5% stock dividend.
Nov. 1 Sold 12,000 shares at $25.
2009
Feb. 28 Purchased 8,000 shares of common stock to be held in treasury.
Mar. 1 Paid cash dividend of $0.50 per share.
Apr. 30 Issued 4 for 1 stock split.
Nov. 1 Sold 10,000 shares of treasury stock.
Dec. 20 Declared cash dividend of $0.15 per share.
Outdoor Recreation Products Inc. has a simple capital structure.
Instructions: Compute the weighted average number of shares for 2008 and 2009 to be used in the EPS computation at the end of 2009.
The following condensed financial statements for Tomac Corporation were prepared by the accounting department.
Tomac Corporation
Income Statement
For the Year Ended December 31, 2008
Sales
$12,000,000
Cost of goods sold
10,000,000
Gross profit on sales
$ 2,000,000
Expenses:
Selling expense
$500,000
Administrative expense
340,000
Interest expense
24,000
864,000
Income from continuing operations before income taxes
$ 1,136,000
Income taxes
446,000
Income from continuing operations
$ 690,000
Extraordinary loss, net of tax savings
(60,000)
Net income
$ 630,000
Tomac Corporation
Balance Sheet
December 31, 2008
Assets
$5,300,000
Liabilities:
Current liabilities
$1,450,000
6% bonds, due December 31, 2012
900,000
Stockholders’ equity:
Common stock, $10 par, 200,000 shares authorized, issued and outstanding
2,000,000
Additional paid-in capital
600,000
Retained earnings
350,000
Total liabilities and stockholders’ equity
$5,300,000
Instructions: Compute the basic EPS under each of the following independent assumptions (the company has a simple capital structure).
1. No change in the capital structure occurred in 2008.
2. On December 31, 2007, there were 120,000 shares outstanding. On May 1,2008,60,000 shares were sold at par, and on October 1, 2008, 20,000 shares were sold at par.
3. On December 31, 2007, there were 160,000 shares outstanding. On July 1, 2008, the company issued a 25% stock dividend.
Ugrumov Technology Co. provides the following data at December 31, 2008.
Operating revenue
$1,120,000
Operating expenses
$600,000
Income tax rate
30%
Common stock outstanding during the entire year
26,000 shares
On January 1, 2008, there were options outstanding to purchase 15,000 shares of common stock at $25 per share. The average market price during the year was $35 per share. The balance sheet reports $240,000 of 7% nonconvertible bonds at December 31, 2008. (Interest expense is included in operating expenses.)
Diluted Earnings per Share with Exercise of Stock Options
As of January 1, 2008, Anvil Corporation had 25,000 shares of $10 par common stock outstanding. The company had issued stock options in 2006 to its management personnel, permitting them to acquire 4,000 shares of common stock at $12 per share. At the time of the issuance, common stock was selling for $12 per share. The market price of common stock was $25 on September 1, 2008, and the average price for 2008 was $27. Income before extraordinary items for 2008 was $142,400. The company also had an extraordinary gain of $21,000,net of taxes. Terms of the options make them currently exercisable. On September 1, 2008, options to acquire 1,500 shares were exercised. The other 2,500 options are still outstanding at December 31, 2008.
Instructions: Compute basic and diluted EPS for the year ended December 31, 2008.
Diluted Earnings per Share—Conversion of Debentures
The following information relates to the December 31, 2007, balance sheet for Chiapucci Incorporated.
6% convertible 10 year debentures issued at par
$1,000,000
Common stock, $12 par, 110,000 shares issued and outstanding
$1,320,000
Retained earnings
842,000
Total stockholders’ equity
$2,162,000
The convertible debentures include terms stating that each $1,000 bond can be converted into 30 shares of common stock. The following events occurred during 2008.
(a) On August 31, 2008, the complete issue of convertible debentures was converted into common stock.
(b) Chiapucci reported net income of $540,000 in 2008. The company’s income tax rate was 30%.
(c) No other common stock transactions took place during the year other than the debenture conversion.
Instructions:
1. Compute basic and diluted EPS for the year ended December 31, 2008.
2. Assume that Chiapucci had a net loss of $220,000. Show why the convertible debentures are antidilutive under loss conditions.
Diluted Earnings per Share—Complex Capital Structure
Carrizo Corporation’s capital structure is as follows:
December 31,
2009
2008
Outstanding shares of:
Common stock
336,000
280,000
Nonconvertible, noncumulative preferred stock
10,000
10,000
10% convertible bonds
$1,000,000
$1,000,000
The following additional information is available.
(a) On September 1, 2009, Carrizo sold 56,000 additional shares of common stock.
(b) Net income for the year ended December 31, 2009, was $860,000.
(c) During 2009, Carrizo declared and paid dividends of $5 per share on its preferred stock.
(d) The 10% bonds are convertible into 40 shares of common stock for each $1,000 bond.
(e) Unexercised options to purchase 30,000 shares of common stock at $22.50 per share were outstanding at the beginning and end of 2009. The average market price of Carrizo’s common stock during 2009 was $36 per share.
(f) Warrants to purchase 20,000 shares of common stock at $38 per share were attached to the preferred stock at the time of issuance. The warrants, which expire on December 31, 2014, were outstanding at December 31, 2009.
(g) Carrizo’s effective income tax rate was 30% for 2008 and 2009.
Instructions:
1. For the year ended December 31, 2009, compute basic EPS.
1. Happy Valley Inc. began the year with 100,000 shares of common stock outstanding.
The following events occurred during the year relating to common stock:
• March 1—2 for 1 stock split
• June 1—10% stock dividend
• August 1—Sold 10,000 additional shares of stock
• November 1—2 for 1 stock split
What was the weighted average number of shares outstanding for the year?
(a) 390,833 shares
(b) 411,667 shares
(c) 438,333 shares
(d) 448,333 shares
2. Sunshine Company began the year with 10,000 shares of common stock outstanding.
On May 1, the company repurchased 2,000 shares of its own common stock. On November 1, the company performed a 3 for 1 stock split of its outstanding shares. Net income for the year was $17,500. During the year, the company declared and paid $2,500 in preferred stock dividends.
What would the company report as basic earnings per share for the year?
At December 31, 2008, Hemington Company had 320,000 shares of common stock outstanding. Hemington sold 80,000 shares on October 1, 2009. Net income for 2009 was $1,985,000; the income tax rate was 35%. In addition, Hemington had the following debt and equity securities on its books at December 31, 2008.
(a) 30,000 shares of $100 par, 8% cumulative preferred stock.
(b) 25,000 shares of 10% convertible cumulative preferred stock, par $100, sold at 110. Each share of preferred stock is convertible into three shares of common stock.
(c) $1,500,000 face value of 9% bonds sold at par.
(d) $2,500,000 face value of 7% convertible bonds sold to yield 8%. Unamortized bond discount is $150,000 at December 31, 2008. Each $1,000 bond is convertible into 22 shares of common stock. Also, options to purchase 20,000 shares of common stock were issued May 1, 2009. Exercise price is $20 per share; market value at date of option was $19; average market value May 1 to December 31, 2009, $25.
Instructions: For the year ended December 31, 2009, compute basic and diluted EPS.
Earnings per Share—Multiple Convertible Securities
Data for Dwight Powder Company at the end of 2009 follow. All bonds are convertible as indicated and were issued at their face amounts.
Description of Bonds
Amount
Date Issued
Conversion Terms
10 year, 61⁄2 % convertible bonds
$ 700,000
Jan 1, 2003
100 shares of common for each $1,000 bond
20 year, 7% convertible bonds
1,000,000
Jan 1, 2004
50 shares of common
for each $1,000 bond
25 year, 101⁄2 % convertible bonds
1,600,000
June 30, 2008
32 shares of common for each $1,000 bond
Additional information:
Common shares outstanding at December 31, 2008
700,000
Net income for 2009
$1,406,000
Income tax rate
30%
Instructions:
1. Compute basic and diluted EPS for 2009, assuming that no additional shares of common stock were issued during the year.
2. Compute basic and diluted EPS, assuming that the 10 year bonds were converted on July 1, 2009, and that net income for the year was $1,421,925 (reflects reduction in interest due to bond conversion).
Earnings per Share—Multiple Convertible Securities
Kishkumen Company had the following capital structure at December 31, 2008 and 2009:
2009
2008
Shares of stock outstanding:
Common stock
776,490
550,000
$7 convertible preferred stock
11,000
24,000
Bonds outstanding:
71⁄2 %, 10 year convertible bonds
$1,650,000
$2,200,000
The following additional information is available.
(a) The conversion terms of the preferred stock and bonds at January 1, 2009,were as follows:
Preferred stock, five shares of common for each share of preferred; convertible bonds, 38 shares of common for each $1,000 bond. These terms are to be adjusted for any issued stock dividends or stock splits.
(b) On May 1, 2009, Kishkumen sold an additional 70,000 shares of common stock, and on August 1, 2009, a 10% stock dividend on common shares was declared.
(c) On October 1, 2009, 13,000 shares of preferred stock were converted to 71,500 shares of common stock (5.5 shares common for each share of preferred). The preferred stock was issued at $100 par in 2005.
(d) On December 1, 2009, 25% of the convertible bonds were converted. The bonds were issued at par in 2008.
(e) On December 31, 2009, Kishkumen declared and paid a $7 per share dividend on outstanding preferred stock. Income for the year was $2,300,000.
(f) Stock options (issued and unexercised) to purchase 70,000 shares of common stock at $30 per share were outstanding at the beginning of 2009. Average market price for
2009 was $51.
(g) Stock warrants to purchase 50,000 shares of common stock at $45 per share were attached to the preferred stock. The warrants expire on December 31, 2013, and were outstanding at December 31, 2009.
(h) The effective tax rate was 30% for both years.
(i) On February 1, 2010, before the 2009 financial statements were issued, Kishkumen split its common stock 2 for 1.
Instructions: For the year ended December 31, 2009, compute basic and diluted EPS.
On January 1, 2006, Farnsworth Company had 1,000,000 shares of common stock and 100,000 shares of $8 cumulative preferred stock issued and outstanding. A principal goal of Farnsworth’s management is to maintain or increase EPS. On January 1, 2007, Farnsworth Company retired 50,000 shares of the preferred stock with excess cash and additional funds provided from the sale of a subsidiary. At the beginning of 2008, the company borrowed $5,000,000 at 10% and used the proceeds to retire 200,000 shares of common stock. Operating income, before interest and income taxes (income tax rate is 30%), is as follows:
2008
2007
2006
Operating income
$6,500,000
$7,000,000
$7,500,000
Did Farnsworth Company maintain its EPS even though income declined? What was the impact of the preferred and common stock transactions on EPS?
Tolman Yacht Company has just completed its determination of EPS for the year. As a result of issuing convertible securities during the year, Tolman’s capital structure is now defined as being complex. The basic EPS for this year is $2.90, but the diluted EPS is only $2.50; both figures are down from the prior year’s $3.25 basic EPS figure. Sung Wong and Martha Chou, two stockholders, have received their financial statements from Tolman and are discussing the EPS figures over lunch. The following dialogue ensues.
Wong: “I guess Tolman must be having trouble. I see its earnings per share is down significantly.”
Chou: “Maybe so, but this year there are two figures, where before there was only one.”
Wong: “Something to do with the convertible bonds and preferred stock issued during the year making it a complex capital structure. But both of the earnings per share figures are lower than the single figure the year before.”
Chou: “That’s true. But income for the current year is higher than last year. I’m confused.”
As you know, a firm with multiple potentially dilutive securities must individually determine the effect of each security’s incremental per share contribution and include those securities with the smallest incremental contribution to the point where diluted EPS is less than the next security’s incremental contribution. At that point, the remaining potentially dilutive securities become antidilutive because including them would cause diluted EPS to increase. Another option would be to (1) determine whether a security is potentially dilutive and then (2) include the effects of all potentially dilutive securities. While including those convertible securities that would have a large positive effect on EPS may cause diluted EPS to increase, at least one would not have to worry about a potentially dilutive security suddenly becoming antidilutive. Is there merit to this alternative? What reasons can you think of as to why the FASB does not allow this approach?
Deciphering Financial Statements (The Walt Disney Company)
Review the information relating to EPS found in The Walt Disney Company’s income statement and notes to the financial statements on the Internet.
Answer the following questions.
1. Using the information provided on the face of the income statement relating to net income and average number of shares outstanding, verify Disney’s reported EPS figure.
2. From the statement of cash flows, we see that Disney paid dividends of $430 million in 2004. Using the average number of Disney common shares outstanding from the EPS computation in (1), compute the approximate dividends paid per share. Using this number, compute the dividend payout ratio for Disney. Comment on your results.
3. Search the notes to determine whether Disney has effected any stock splits recently. How do stock splits affect the presentation of the prior year’s information?
McDonald’s Corporation is in the business of—wait, we all know what McDonald’s does. The company’s earnings per share information and an accompanying note relating to its computation of EPS follow.
McDonald’s Consolidated Earnings per Share
Years Ended December 31,
(In millions, except per share data)
2004
2003
2002
Net income
$2,2785
$1,4714
$8935
Net income per common share
$181
$116
$070
Net income per common share—diluted
$179
$115
$070
Dividends per common share
$055
$040
$024
PER COMMON SHARE INFORMATION
Diluted net income per common share is calculated using net income divided by diluted weighted average shares. Diluted weighted average shares include weighted average shares outstanding plus the dilutive effect of primarily stock based employee compensation calculated using the treasury stock method. The dilutive effect of stock options was (in millions of shares): 2004–14.0; 2003–6.7; 2002–8.4. Stock options that were not included in dilutive weighted verage shares because they would have been antidilutive were (in millions of shares): 2004–85.5; 2003–159.1; 2002–148.0.
Answer the following questions.
1. Compute the average number of shares outstanding used in McDonald’s computation of net income per common share for 2004, 2003, and 2002. Do the computation for both basic and diluted EPS.
2. Compute McDonald’s dividend payout ratio (based on basic EPS) for 2002 through 2004. Has the ratio increased or decreased by a significant amount over the 3 year period?
3. For each year in the 3 year period 2002–2004, compute the percentage of total stock options that were dilutive. Comment on why the percentage differs from year to year.
Cadbury Schweppes manufactures beverages and confectionary candies. Because the company is based in the United Kingdom, it is not required to comply with U.S.GAAP. However, the standards relating to EPS under which Cadbury Schweppes prepared its 2004 annual report are similar to the requirements of FASB Statement No. 128.
Earnings per Ordinary Share
(a) Basic Earnings per Share (“EPS”)
Basic EPS is calculated on the weighted average of 2,027 million shares (2003: 2,013 million shares; 2002: 2,003 million shares) in issue during the year.
(b) Underlying EPS
The reconciliation between Basic EPS and underlying EPS, and between the earnings figures used in calculating them, is as follows:
Earnings
EPS
2004
2003
2002
2004
2003
2002
£m
£m
£m
pence
pence
pence
Earnings/Basic EPS
4310
3663
5481
213
182
274
Goodwill/intangible amortisation
1389
1293
635
68
64
32
Operating exceptional items
1714
2237
530
84
111
26
Non operating exceptional items
(188)
48
(117)
(09)
03
(06)
Underlying earnings/Underlying EPS
6613
6434
6401
326
320
320
(c) Diluted EPS
Diluted EPS has been calculated based on the Basic EPS Earnings amount above. A reconciliation between the shares used in calculating Basic and Diluted EPS is as follows:
2004
2003
2002
million
million
million
Average shares used in Basic EPS calculation
2,027
2,013
2,003
Dilutive share options outstanding
14
6
14
Shares used in Diluted EPS calculation
2,041
2,019
2,017
Share options not included in the diluted EPS calculation because they were non dilutive in the period totaled 35 million in 2004 (2003: 77 million; 2002: 41 million), as the exercise price of these share options was below the average share price for the relevant year.
Review Cadbury Schweppes’ note disclosures and answer the following questions.
1. How does Cadbury Schweppes’“underlying EPS”differ from basic EPS? From diluted EPS?
2. For each year in the 3 year period 2002–2004, compute the percentage of total stock options that were dilutive.
Are Those Postretirement Benefits Really Accruable?
George Logan, controller of Dyatine, Inc., has just finished reading a Wall Street Journal article about accounting for postretirement health costs. Dyatine has informally agreed to pay the medical costs of its retirees and their spouses for as long as they live. Because the company has a young workforce, very little has been paid under this program. Last year, an analysis of the potential liability indicated that there would not be significant risk of payment for at least 10 years. No liability for future benefits has been accrued on Dyatine’s books. According to the article, however, this is not allowed under FASB Statement No.106. George has always believed that Dyatine was being generous with its employees and that if economic circumstances changed, the plan easily could be altered or terminated. George calls his CPA, Debra Adams, to ask her how she feels about the FASB standard. He is surprised to learn that Debra is very supportive of it. He asks for reasons, and Debra, in turn, asks George to support his position. Prepare a summary of the pros and cons surrounding the implementation of FASB Statement No. 106.
Deciphering Financial Statements (The Walt Disney Company)
Locate the information relating to pensions and other postretirement benefits found in
The Walt Disney Company’s annual report and answer the following questions.
1. What is Disney’s PBO in 2004?
2. By examining the change in Disney’s “Unrecognized net loss,” can you determine if
Disney’s actual return was greater than or less than its expected return?
3. Because of the high costs associated with medical benefits, Disney has elected to follow a strategy adopted by a number of firms. That strategy has been to not offer those benefits to new employees. In its 1994 annual report, Disney stated that “employees hired after January 1, 1994, are not eligible for postretirement medical benefits.” How might the financial accounting rules have caused Disney to make this change in policy in 1994?
4. Disney’s pension plan appears to be underfunded. Can you say the same about the status of its other postretirement benefits?
Northrop Grumman is a leading aerospace/defense company. The company has developed the F 16 fighter, the Apache helicopter, the AWACS early warning airborne radar, and the B 2 Stealth bomber. Grumman, one of the predecessor companies of Northrop Grumman, was the primary contractor for the Lunar Excursion Module (LEM) that landed Neil Armstrong on the moon in 1969. Information relating to Northrop Grumman’s pension and other postretirement benefit plans follows.
Medical and
Pension Benefits
Life Benefits
$ in millions
2004
2003
2004
2003
Change in benefit obligation
Benefit obligation at beginning of year
$16,872
$21,524
$ 2,986
$ 3,809
Service cost
564
491
56
52
Interest cost
1,050
1,022
175
176
Plan participants’ contributions
21
24
72
63
Special termination benefits
8
4
Plan amendments
84
50
(13)
(3)
Actuarial loss
1,555
205
198
124
Divestitures
(81)
(5,216)
(978)
Acquisitions/transfers
302
(90)
(17)
Settlements
(47)
Benefits paid
(1,029)
(1,091)
(259)
(244)
Benefit obligations at end of year
19,338
16,872
3,223
2,986
Change in plan assets
Fair value of plan assets at beginning of year
15,985
18,532
688
561
Gain on plan assets
2,076
3,023
71
131
Employer contributions
624
329
182
177
Plan participants’ contributions
21
24
72
63
Divestitures
(83)
(4,808)
Acquisitions/transfers
143
24
Settlements
(48)
Benefits paid
(1,029)
(1,091)
(259)
(244)
Other
(17)
Fair value of plan assets at end of year
17,720
15,985
754
688
Funded status
(1,618)
(887)
(2,469)
(2,298)
Unrecognized prior service cost
322
289
(10)
3
Unrecognized net transition asset
2
Unrecognized net loss
2,647
1,799
562
397
Net asset (liability) recognized
$ 1,353
$ 1,201
$(1,917)
$(1,898)
Amounts recognized in the statements of financial position
Prepaid benefit cost
$ 2,868
$ 2,918
$ 46
$ 44
Accrued benefit liability
(1,773)
(1,869)
(1,963)
(1,942)
Intangible asset
24
26
Accumulated other comprehensive loss
234
126
Net asset (liability) recognized
$ 1,353
$ 1,201
$(1,917)
$(1,898)
Based on this information, answer the following questions:
1. Is Northrop Grumman’s pension plan overfunded or underfunded? How can you tell?
2. In 2004, was the actual return on the pension fund more or less than the expected amount? Explain.
3. During 2004, Northrop Grumman acquired new subsidiaries that had pre existing defined benefit pension plans. Were those plans overfunded or underfunded?
4. Recreate the summary journal entry required to recognize Northrop Grumman’s additional minimum pension liability as of the end of 2004. For simplicity, assume that the entire amount was recognized in 2004.
5. Are Northrop Grumman’s medical and life benefits programs overfunded or underfunded? Explain.
Deciphering Financial Statements (Eli Lilly and Company)
Eli Lilly and Company is a pharmaceutical company that is working to develop products to aid in the fight of cancer, diabetes, and other debilitating diseases. The company employs about 44,500 workers, many of whom are covered by the company’s defined benefit retirement plans.
Defined Benefit
Retiree Health
Pension Plans
Benefits
2004
2003
2004
2003
Change in benefit obligation
Benefit obligation at beginning of year
$4,7031
$3,9882
$1,0396
$ 9116
Service cost
2388
1954
476
382
Interest cost
2864
2672
625
604
Actuarial loss
397
1058
1612
176
Benefits paid
(2594)
(2505)
(715)
(755)
Reduction in discount rate, foreign currency exchange
rate changes, and other adjustments
1821
3970
1490
873
Benefit obligation at end of year
5,1907
4,7031
1,3884
1,0396
Change in plan assets
Fair value of plan assets at beginning of year
3,7219
3,1774
5539
4150
Actual return on plan assets
4946
5802
587
753
Employer contribution
7840
1534
2043
1391
Benefits paid
(2573)
(2476)
(715)
(755)
Foreign currency exchange rate changes
and other adjustments
546
585
—
—
Fair value of plan assets at end of year
4,7978
3,7219
7454
5539
Funded status
(3929)
(9812)
(6430)
(4857)
Unrecognized net actuarial loss
2,3397
2,2965
9795
7282
Unrecognized prior service cost (benefit)
660
720
(1169)
(1326)
Net amount recognized
$2,0128
$1,3873
$ 2196
$ 1099
Amounts recognized in the consolidated balance sheet consisted
of Prepaid pension
$2,2538
$1,6133
$ 3104
$ 1923
Accrued benefit liability
(4644)
(4450)
(908)
(824)
Accumulated other comprehensive income
before income taxes
2234
2190
—
—
Net amount recognized
$2,1028
$1,3873
$ 2196
$ 1099
Defined Benefit
Retiree Health
Pension Plans
Benefits
(Percents)
2004
2003
2004
2003
Weighted-average assumptions as
of December 31
Discount rate for benefit obligation
59
62
60
62
Discount rate for net benefit costs
62
68
62
69
Rate of compensation increase for benefit obligation
56
53
—
—
Rate of compensation increase for net benefit costs
53
53
—
—
Expected return on plan assets for net benefit costs
920
927
925
925
In evaluating the expected return on plan assets, we have considered our historical assumptions compared with actual results, an analysis of current market conditions, asset allocations, and the views of leading financial advisers and economists. Our plan assets in our U.S. defined benefit pension and retiree health plans comprise approximately 85 percent of our worldwide benefit plan assets. Including the investment losses due to overall market condition in 2001 and 2002, our 10- and 20-year annualized rate of return on our U.S. defined benefit pension plans and retiree health benefit plan was approximately 10.3 percent and 11.9 percent, respectively, as of December 31, 2004. Health-care-cost trend rates were assumed to increase at an annual rate of 10 percent in 2005, decreasing 1 percent per year to 6 percent in 2009 and thereafter. If the health-care trend rates were to be increased by one percentage point each future year, the December 31, 2004, accumulated postretirement benefit obligation would increase by 13.9 percent and the aggregate of the service cost and interest cost components of 2004 annual expense would increase by 14.5 percent. A one-percentage-point decrease in these rates would decrease the December 31, 2004, accumulated postretirement benefit obligation by 12.2 percent and the aggregate of the 2004 service cost and interest cost by 12.6 percent.
Review Eli Lilly’s note disclosure on retirement benefits to answer the following questions.
1. Eli Lilly decreased its discount rate for its benefit obligation from 6.2% in 2003 to 5.9% in 2004. What effect would this have on net pension expense for 2004? What effect would it have on the prepaid/accrued pension cost reported in the balance sheet?
2. Overall, are Eli Lilly’s pension plans overfunded or underfunded? How do you know?
3. Review the components of Eli Lilly’s PBO to determine how accurate the actuaries were in estimating the PBO during 2003 and 2004.
4. Note that Eli Lilly’s expected long-term rate of return on plan assets is 9.2%. Can you think of where the company might be investing its plan assets in order to receive a return that high? (Note that typical bank certificates of deposit pay about 3%.)
In a recent meeting of the board of directors, concern was expressed regarding the escalating balance in Accrued Pension Liability and the liability associated with Postretirement Benefits Other Than Pensions. Following that meeting, you were asked to review the actuarial assumptions to determine if those balances and the expenses related to those balances can be reduced. Part of your analysis included reviewing the financial statements and notes of other companies. In a review of the financial statements of General Motors, you noted that they provide some sensitivity analysis relating to actuarial assumptions. Given the significant effect that a seemingly minor change can have on estimated obligations, you are tempted to contact the actuary and have her modify her original assumptions and recomputed your company’s future pension and other postretirement obligations with these new assumptions:
• Reduce the weighted average discount rate from 7% to 6%.
• Increase the expected long term rate of return on the pension fund from 10% to 11%.
• Decrease estimated increases in future compensation levels from 6% to 5%.
• Decrease estimated increases in future health care costs from 6% to 5%.
1. What effect would each of these changes have on the PBO associated with pensions or the APBO associated with the other postretirement benefits?
2. What effect would each of these changes have on the expense reported on the income statement associated with pensions and other postretirement benefits?
3. What constraints are there (or should there be) on a company’s ability to influence actuarial assumptions?
4. While changing the assumptions may change the reported liabilities associated with pensions and other postretirement benefits, have the future economic obligations actually been changed?
5. What factors would you need to consider before you placed the call to the actuary?
This assignment is a detailed examination of Skywalker’s pension related items. As of December 31, 2008, the $253 in “Other long term liabilities” reported by Skywalker (see Chapter 13) included an amount for a net pension liability. In addition, Skywalker’s $456 in “Other operating expenses” for 2008 included an amount for net pension expense. The following information relates to Skywalker’s pension plan as of December 31, 2008.
Fair value of pension fund assets
$200
Discount rate used in valuing the PBO
7%
Long term expected rate of return on pension fund assets
9%
Total annual pension payment earned by Skywalker’s employees so far
$50
Number of years that employees are expected to receive pension payments after retirement
30 years
Number of years until first pension payment is to be received
11 years
Construct a spreadsheet to calculate the following:
1. Given the information above, compute the net pension liability that Skywalker will report as of December 31, 2008. (Note: Be careful in computing the PBO; remember that the standard annuity formula yields the present value of the annuity one year before the first payment is received.)
2. Compute a forecast of Skywalker’s net pension liability as of December 31, 2009, and net pension expense for 2009 using the following information:
• By working an extra year in 2009, the total annual pension payment earned by Skywalker’s employees is expected to increase from $50 to $55.
• Skywalker’s employees will be one year closer to receiving the first pension payment.
• No pension benefits are expected to be paid to employees in 2009.
• Skywalker expects to contribute $50 to the pension plan during 2009.
• Skywalker’s best estimate is that the pension fund assets will earn in 2009 an amount equal to the long term expected rate of return.
3. Repeat (1) and (2) using the following information:
(a) The discount rate is 8%, and the long term expected rate of return on the pension fund assets is 12%.
(b) The discount rate is 5%, and the long term expected rate of return on the pension fund assets is 11%.
Refer to Practice 18–5. Assume that the options were issued on September 1 instead of being outstanding throughout the year. Compute diluted earnings per share, assuming that (1) the average stock price for the year and for the September 1–December 31 period was $4 and (2) the average stock price for the year and for the September 1–December 31 period was $13.
Practice 18–5
Diluted EPS and Stock Options
The company had 100,000 shares of common stock outstanding throughout the year. In addition, as of January 1, the company had issued stock options that allowed employees to purchase 40,000 shares of common stock. The option exercise price is $10 per share. The company has no other potentially dilutive securities. Net income for the year was $200,000. Compute diluted earnings per share, assuming that (1) the average stock price for the year was $16 and (2) the average stock price for the year was $7.
Convertible Preferred Stock Issued During the Year
Refer to Practice 18–7. Assume that the convertible preferred stock was issued on February 1.
Also assume that the issuance agreement stipulates that the preferred stockholders are entitled to their entire preferred dividend for the year even though the shares are issued on February 1. Compute diluted earnings per share, assuming that (1) each preferred share was convertible into five shares of common stock and (2) each preferred share was convertible into one share of common stock.
Practice 18–7
Diluted EPS and Convertible Preferred Stock
The company had 100,000 shares of common stock outstanding throughout the year. In addition, as of January 1, the company had issued 10,000 convertible preferred shares (cumulative, 5%, $100 par). The company has no other potentially dilutive securities. Net income for the year was $200,000. Compute diluted earnings per share, assuming that (1) each preferred share was convertible into four shares of common stock and (2) each preferred share was convertible into one share of common stock.
Refer to Practice 18–9. Assume that the convertible bonds were issued on October 1. Compute diluted earnings per share, assuming that (1) each bond was convertible into 50 shares of common stock and (2) each bond was convertible into 15 shares of common stock.
Practice 18–9
Diluted EPS and Convertible Bonds
The company had 100,000 shares of common stock outstanding throughout the year. In addition, as of January 1,the company had issued 500 convertible bonds ($1,000 face value, 10%). The company has no other potentially dilutive securities.Net income for the year was $200,000. The income tax rate is 40%. Compute diluted earnings per share, assuming that (1) each bond was convertible into 40 shares of common stock and (2) each bond was convertible into 10 shares of common stock.
Net income for the company for the year was $300,000, and 100,000 shares of common stock were outstanding during the year. The income tax rate is 30%. For each of the following potentially dilutive securities, perform the shortcut antidilution test to determine whether the security is dilutive. Assume that each of the securities was issued on or before January 1. Treat each security independently; in other words, when testing one security, assume that the others do not exist.
1. 10,000 convertible preferred shares (cumulative, 5%, $100 par). Each preferred share is convertible into three shares of common stock.
2. 500 convertible bonds ($1,000 face value, 10%). Each bond is convertible into 25 shares of common stock.
3. 20,000 convertible preferred shares (cumulative, 10%, $50 par). Each preferred share is convertible into two shares of common stock.
4. 2,000 convertible bonds ($1,000 face value, 8%). Each bond is convertible into 15 shares of common stock.
The company reported a net loss of $300,000 for the year and 100,000 shares of common stock were outstanding during the year. The income tax rate is 30%. For each of the following potentially dilutive securities, compute (1) basic EPS and (2) diluted EPS. Assume that each of the securities was issued on or before January 1. Treat each security independently; in other words, when doing the EPS computations for one security, assume that the others do not exist.
(a) 10,000 convertible preferred shares (cumulative, 5%, $100 par). Each preferred share is convertible into three shares of common stock.
(b) 500 convertible bonds ($1,000 face value,10%).Each bond is convertible into 25 shares of common stock.
(c) Stock options that allow employees to purchase 40,000 shares of common stock. The option exercise price is $10 per share. The average stock price for the year was $16.
The company reported net income of $300,000 for the year and 100,000 shares of common stock were outstanding during the year. The income tax rate is 40%. The company has the following potentially dilutive securities. Assume that each of the securities was issued on or before January 1. Compute (1) basic EPS and (2) diluted EPS.
(a) Stock options that allow employees to purchase 30,000 shares of common stock. The option exercise price is $10 per share. The average stock price for the year was $18.
(b) 10,000 convertible preferred shares (cumulative, 5%, $100 par). Each preferred share is convertible into four shares of common stock.
(c) 500 convertible bonds ($1,000 face value,10%).Each bond is convertible into 40 shares of common stock.
The company reported net income of $220,000 for the year and 100,000 shares of common stock were outstanding during the year. The income tax rate is 40%. The company has the following potentially dilutive securities. Assume that each of the securities was issued on or before January 1. Compute (1) basic EPS and (2) diluted EPS.
(a) Stock options that allow employees to purchase 30,000 shares of common stock. The option exercise price is $10 per share. The average stock price for the year was $7.
(b) 10,000 convertible preferred shares (cumulative, 5%, $100 par). Each preferred share is convertible into three shares of common stock.
(c) 500 convertible bonds ($1,000 face value,10%).Each bond is convertible into 50 shares of common stock.
The income statement for the company is as follows:
Sales
$1,000,000
Operating expenses
600,000
Operating income
$ 400,000
Interest expense
80,000
Income before income taxes
$ 320,000
Income tax expense (40%)
128,000
Income from continuing operations
$ 192,000
Extraordinary loss (net of taxes)
(50,000)
Discontinued operations (net of taxes)
(35,000)
Net income
$ 107,000
The company had 100,000 common shares outstanding for the entire year. In addition, for the entire year, the company had stock options outstanding that allow employees to purchase 50,000 shares of common stock. The option exercise price is $10 per share, and the average stock price for the year was $14. Compute and list all earnings per share numbers that the company is required to report.
Refer to Practice 18–16. Assume that the company issued 25,000 new shares of common stock on June 1 and that the company issued a 2 for 1 stock split on December 1.Compute (1) basic EPS and (2) diluted EPS. (Note: The shares in the option, convertible preferred, and convertible bond descriptions are in terms of January 1 shares. The number of shares in each case—and the exercise price in the case of the options—would be adjusted to reflect the December 1 2 for 1 split. The average stock price of $18 for the year does not reflect the 2 for 1 stock split.)
Practice 18–16
Multiple Potentially Dilutive Securities
The company reported net income of $300,000 for the year and 100,000 shares of common stock were outstanding during the year. The income tax rate is 40%. The company has the following potentially dilutive securities. Assume that each of the securities was issued on or before January 1. Compute (1) basic EPS and (2) diluted EPS.
(a) Stock options that allow employees to purchase 30,000 shares of common stock. The option exercise price is $10 per share. The average stock price for the year was $18.
(b) 10,000 convertible preferred shares (cumulative, 5%, $100 par). Each preferred share is convertible into four shares of common stock.
(c) 500 convertible bonds ($1,000 face value,10%).Each bond is convertible into 40 shares of common stock.
Compute the weighted average number of shares outstanding for Troy Company, which has a simple capital structure, assuming that the following transactions in common stock occurred during the calendar year.
Transactions involving the common stock account of Higrade Gas Company during the 2 year period 2008 to 2009 were as follows:
2008
Jan. 1 Had a balance of 200,000 shares of $10 par common stock.
Apr. 1 Converted $2,500,000 of convertible bonds with 50 shares issued for each $1,000 bond.
July 1 Declared a 10% stock dividend.
Oct. 1 Employees exercised options to purchase 7,000 shares for $20 a share.
2009
Apr. 1 Declared a 2 for 1 stock split.
Oct. 1 Sold 170,000 shares for $30 a share.
From the information given, compute the comparative number of weighted average shares outstanding for 2008 and 2009 to be used for basic EPS computations at the end of 2009.
At December 31,2008,Munter Corporation had 50,000 shares of common stock issued and outstanding, 30,000 of which had been issued and outstanding throughout the year and 20,000 of which had been issued on October 1, 2008. Income before income taxes for the year ended December 31, 2008, was $753,200. In 2008 and 2009, a dividend of $80,000 was paid on 80,000 shares of 10% cumulative preferred stock, $10 par. On April 1, 2009, there were 30,000 additional shares issued. Total income before income taxes for 2009 was $527,000, which included an extraordinary gain before income taxes of $37,000. Assuming a 30% tax rate, what is Munter’s basic earnings per common share for 2008 and for 2009, rounded to the nearest cent? Show computations in good form.
The income statement for Fignon Co. for the year ended December 31, 2008, reported the following.
Income from continuing operations before income taxes
$35,000
Income taxes
14,000
Income from continuing operations
$21,000
Loss from disposal of segment (net of income taxes)
(4,200)
Net income
$16,800
Compute basic EPS amounts for 2008 under each of the following assumptions (consider each assumption separately):
(a) The company has only one class of common stock with 20,000 shares outstanding.
(b) The company has shares outstanding as follows: preferred 8% stock, $15 par, cumulative, 5,000 shares; common, $12 par, 20,000 shares. Only the current year’s preferred dividends are unpaid.
(c) Same as (b) except that Fignon Co. also has preferred 7% stock, $10 par, noncumulative, 6,000 shares, and only $3,000 in dividends on the noncumulative preferred has been declared.
Kingston Corporation has basic earnings per common share of $1.54 for the year ended December 31, 2008. For each of the following independent examples, decide whether the convertible security would be dilutive or antidilutive in computing diluted EPS. Consider each example individually. The tax rate is 35%.
(a) 7 1/2% debentures, $500,000 face value are convertible into common stock at the rate of 25 shares for each $1,000 bond.
(b) $6 preferred stock (no par) is convertible into common stock at the rate of three shares of common stock for one share of preferred stock. There are 30,000 shares of preferred stock outstanding.
(c) Options to purchase 150,000 shares of common stock are outstanding. The exercise price is $22 per share; average market price is $27 per share.
(d) $800,000 of 11% debentures are convertible at the rate of 25 shares of common stock for each $1,000 bond.
(e) Preferred 7% stock, $100 par, 10,000 shares outstanding is convertible into 5 shares of common stock for each share of preferred stock.
Chateau Furniture and Cabinet Mfg. Co. computes the following balances for its defined benefit pension plan as of the end of its fiscal year.
(in thousands)
PBO
$1,625
ABO
1,380
FVPF
1,460
Market related value of the pension fund (5 year weighted average)
1,336
Accrued pension cost
61
Unrecognized prior service cost
295
Unrecognized net pension (gain)
(191)
1. According to FASB Statement No. 87, what is the amount of additional liability, if any, required to reflect the minimum pension liability?
2. Some FASB members believed that the minimum pension liability should consider expected future salary levels rather than the current levels. If this approach had been adopted in the standard, what additional liability adjustment, if any, would have been required?
From the following information for each of three independent cases, prepare the pension note disclosure that outlines the items that go into the computation of the net prepaid/ accrued pension cost reported in the balance sheet.
Joey Department Store’s employees are paid on the 6th and 22rd of each month for the period ending the last day of the previous month and the 15th of the current month, respectively. An analysis of the payroll on Monday, October 6, 2008, revealed the following data.
Federal
State
Gross
Income
Income
Net
Pay
FICA
Tax
Tax
Insurance
Pay
Office staff salaries
$15,450
$ 810
$ 2,400
$ 450
$ 410
$11,380
Officer salaries
31,000
286
6,300
1,000
500
22,914
Sales salaries
20,000
834
4,200
690
480
13,796
Totals
$66,450
$1,930
$12,900
$2,140
$1,390
$48,090
It is determined that for the September 30 pay period, no additional employees exceeded the wage base for FICA purposes than had done so in prior pay periods. All of the officer salaries, 75% of the office staff salaries, and 40% of the sales salaries for the payroll period ending September 30 were paid to employees who had exceeded the wage base for unemployment taxes. Assume the unemployment tax rates in force are as follows: federal unemployment tax, 0.8%, and state unemployment tax, 5.4%.
Instructions: Prepare the adjusting entries that would be required at September 30, the end of Joey’s fiscal year, to reflect the accrual of the payroll and any related payroll taxes. Separate salaries and payroll tax expense accounts are used for each of the three employee categories: office staff, officer, and sales salaries.
Bags, Inc., a manufacturer of suitcases, has 10 employees; five are paid on a salary basis, and five are hourly employees. The employees and their compensation are as follows:
Annual Salary
Ken Scott (president)
$91,500
Tatia Furgins
57,000
Jennifer Poulins
48,750
Robyn Meek
23,800
Kyle Roberts
13,900
Rate per Hour
Richard Dean (50 hours per week)
$1400
Denise Ray (40 hours per week)
1150
Dale Frank (40 hours per week)
975
Bryan Leslie (30 hours per week)
450
Albert Lamb (20 hours per week)
365
The salaried employees are covered by a comprehensive medical and dental plan. The cost of the plan is $45 per employee and is deducted from each paycheck. The hourly employees are covered only by a medical plan. The cost is calculated at 3.5% of gross pay and is deducted from each check. The FICA rate is 7.65%, and FUTA is 6.2%, with the maximum credit for state unemployment allowed. The state unemployment tax is 5.4%. No employee has reached the FICA, FUTA, or SUTA salary limits. In addition, each of the hourly employees, except Albert, belongs to the Suitcase Workers of America Union. Union dues are $5.65 per month and are deducted and paid on behalf of the hourly employees. The income tax withholding rate is 28% for employees with annual incomes above $29,500 and 15% for employees with annual incomes of $29,500 or less. Hourly employees are paid weekly on Friday, January 6, 13, 20, and 27. Salaried employees are paid twice a month, on January 13 and 27. Assume that payroll taxes and all employee withholdings and deductions are paid on the 15th and the last day of each month.
Instructions: Make all entries related to Bags, Inc.’s, payroll for January 6, January 13, and January 15.
Ludwig Electronics Inc. has a plan to compensate its employees for certain absences. Each employee can receive five days’ sick leave each year plus 10 days’ vacation. The benefits carry over for two additional years, after which the provision lapses on a FIFO flow basis. Thus, the maximum accumulation is 45 days. In some cases, the company permits vacations to be taken before they are earned. Payments are made based on current compensation levels, not on the level in effect when the absence time was earned.
Days Accrued
Daily Rate
Days Earned
Days Taken
Days Accrued
Daily Rate
Employee
Jan 1, 2008
Jan 1, 2008
2008
2008
Dec 31, 2008
Dec 31, 2008
A
20
$68
15
13
22
$70
B
15
74
15
15
15
76
C
25
62
7
32
0
Terminated,
June 15—
Rate $64
D
– 5
56
15
20
–10
$58
E
40
78
15
5
50
82
F
Hired July 1
60
8
2
6
60
Instructions:
1. How much is the liability for compensated absences at December 31, 2008?
2. Prepare a summary journal entry to record compensation absence payments during the year and the accrual at the end of the year. Assume that the payroll liability account is charged for all payments made during the year for both sick and vacation leaves. The average rate of compensation for the year may be used to value the hours taken except for Employee C, who took leaves at the date of termination. The end of year rate should be used to establish the ending liability.
Entries to Record Accrual and Funding of Pension Costs
United Rental Company reported the following information related to its pension plan for the years 2008–2011. The fund is administered by a separate outside trustee.
Pension Expense
Benefit Payments
Actual Return on
Year
Accrual
Contribution
to Retirees
the Pension Fund
2008
$720,400
$675,000
$350,000
$320,000
2009
810,100
700,000
350,000
350,000
2010
695,700
725,000
300,000
410,000
2011
790,000
680,000
375,000
505,000
Instructions:
1. Prepare the required summary journal entries for each year to record applicable pension items.
2. Assuming that United had an accrued pension liability of $41,000 at January 1, 2008, compute the prepaid/accrued pension account balance at December 31, 2011.
3. Assuming that the fair value of the pension fund at January 1, 2008, was $3,200,000, compute the fair value of the pension fund at December 31, 2011.
Computation of Prior Service Cost Funding and Amortization
Staybrite Electronics Co. amended its pension plan effective January 1, 2008. The increase in the PBO occurring as a result of the plan amendment is $6,290,000. Staybrite arranged to fund the prior service cost by equal annual contributions over the next 15 years at 10% interest. The first payment will be made December 31, 2008. The company decides to amortize the prior service cost on a straight line basis over the average remaining service life of its employees. The company has 225 employees at January 1, 2008, who are entitled to the benefits of the amendment. It is estimated that, on the average, 15 employees will retire each year.
Instructions:
1. Compute the amount Staybrite will pay each year to fund the prior service cost arising from the plan’s amendment.
2. Compute Staybrite’s annual prior service cost amortization based on average remaining years of employee service.
McGrath Financial Corp. has a defined benefit pension plan. As of January 1, 2008, the following balances were computed for the pension plan:
Unrecognized pension gain
$ 420,000
Fair value of the pension fund
3,300,000
Market related value of the pension fund (5 year weighted average)
2,850,000
PBO
3,900,000
ABO
3,500,000
It was anticipated that the pension plan would earn 12% of the market related value of the pension fund in 2008. The actual return on the pension fund was $315,000. The company has elected to amortize the unrecognized pension gains and losses over 10 years.
Instructions:
1. Compute the amount of gain or loss deferral for 2008.
2. Compute the amount of amortization of unrecognized pension gain or loss for 2008.
3. If net periodic pension expense, exclusive of the gain or loss component, is $534,000, what is the net periodic pension expense after including the gain or loss component?
4. What is the unrecognized pension gain or loss that McGrath will carry forward to 2009?
Computation, Recording, and Funding of Pension Expense
Averon Industrial, Inc., computed the following components of pension expense for the years 2008–2010:
Components of Pension Expense
(in thousands)
2008
2009
2010
Service cost
$330
$415
$580
Interest cost
150
170
220
Actual return on the pension fund
35
50
40
Expected return on the pension fund
30
45
50
Amortization of unrecognized pension (gain) or loss—
above corridor amount
(20)
(10)
18
Amortization of unrecognized prior service cost
70
90
90
Amount contributed to fund
520
580
750
Instructions:
1. Compute the net periodic pension expense for the years 2008–2010.
2. Prepare the journal entries to record the computed pension expense in (1) and the funding of the pension plan.
3. If the prepaid pension cost balance at January 1, 2008,was $75,000, compute the balance of the prepaid/accrued pension cost account at December 31, 2010.
Computing and Recording Additional Pension Liability
The following balances relate to the defined benefit pension plan of Cameron Industries:
Dec 31, 2008
Dec 31, 2009
Fair value of the pension fund
$149,000
$160,000
Market related value of the pension fund
(5 year weighted average)
145,000
152,000
PBO
173,200
191,600
ABO
159,100
172,900
Prepaid/(accrued) pension cost
4,200
(1,950)
Unrecognized prior service cost
8,200
6,300
Unrecognized net pension loss
20,200
23,350
Instructions:
1. Determine the additional pension liability, if any, at December 31, 2008, and December 31, 2009.
2. Prepare journal entries for the additional pension liability adjustment, if any, at December 31, 2008, and December 31, 2009. Assume that the company had not previously recognized additional pension liability under FASB Statement No. 87.
At the end of 2006, Garns Corporation recorded an additional pension liability of $800,000 for the first time, the offset being charged to Deferred Pension Cost. Minimum pension liability computations for 2007–2010 indicated the following additional pension liability amounts:
December 31, 2007
$ 850,000
December 31, 2008
1,000,000
December 31, 2009
500,000
December 31, 2010
550,000
No plan amendments occurred during these years. The amount of the unrecognized prior service cost is as follows:
December 31, 2007
$1,200,000
December 31, 2008
900,000
December 31, 2009
600,000
December 31, 2010
300,000
Instructions: For each of the four years, prepare the journal entry to adjust the minimum pension liability account to the balance indicated above.
The following information relates to the pension plan of Circle Manufacturing Company at December 31, 2008:
(in thousands)
Balances at December 31, 2008:
PBO
$12,950
Fair value of the pension fund
11,600
ABO
11,800
Unrecognized prior service cost
0
Unrecognized net pension loss (arose in 2008)
220
Accrued pension cost
1,130
2008 activity:
Service cost
$ 950
Interest cost
1,300
Actual return on the pension fund
1,020
Expected return on the pension fund
1,110
Amortization of prior service cost
80
Instructions: Prepare the pension note at December 31, 2008, that discloses the component parts of pension expense as well as the items that combine to yield the net amount reported in the balance sheet.
Comprehensive Computation of Pension Cost Components
The actuaries for Interconnect Cable Company provided its accountants with the following information related to the company’s pension plan:
(in thousands)
December 31, 2007:
Increase in PBO arising from plan’s amendment
$ 684
January 1, 2008:
PBO
$2,700
ABO
$2,420
Fair value of the pension fund
$1,860
Market related value of the pension fund (5 year weighted average)
$1,600
Accrued pension cost
$ 226
Settlement discount rate
10%
Average service life for amortization of gain and prior service costs
14 years
Unamortized pension gain—prior year
$ 70
Expected rate of return
9%
For Year 2008:
Benefit payments to retirees
$ 173
Contributions to pension plan
290
December 31, 2008:
PBO
$2,917
Fair value of pension plan assets
2,137
Instructions: Based on the data provided, prepare a pension work sheet for Interconnect Cable Company for 2008. The 5 year weighted average value of plan assets is used in computing the expected return.
Pension Cost Components and Reconciliation of Funded Status
As of January 1, 2008, information related to the defined benefit pension plan of Leffingwell Company was as follows:
PBO
$1,615,000
Fair value of pension assets
1,513,500
Unrecognized prior service cost
105,000
Unrecognized net pension gain or loss
0
Pension data for the years 2008 and 2009 are listed as follows:
2008 Pension plan information:
Service cost as reported by actuaries
$ 87,000
Contributions to pension plan
$ 120,000
Benefits paid to retirees
$ 132,000
Actual return on pension plan assets
$ 26,350
Amortization of prior service cost
$ 21,000
Actuarial change increasing PBO
$ 80,000
Settlement interest rate
110%
Long term expected rate of return on pension plan assets
100%
ABO, December 31, 2008
$1,530,000
2009 Pension plan information:
Service cost as reported by actuaries
$ 115,000
Contributions to pension plan
$ 125,000
Benefits paid to retirees
$ 140,000
Actual return on pension plan assets
$ 180,000
Amortization of prior service cost
$ 18,667
Settlement interest rate
110%
Long term expected rate of return on pension plan assets
100%
ABO, December 31, 2009
$1,850,000
As of January 1, 2009, the remaining expected service life of employees was 5.0 years. Also, Leffingwell uses the fair market value of pension plan assets at the beginning of the year as the market related value of pension plan assets.
Instructions:
1. For both 2008 and 2009, prepare the pension note that discloses the component parts of pension expense as well as the items that combine to yield the net amount reported in the balance sheet.
2. Prepare the journal entries for recording net pension expense and pension funding for 2008 and 2009.
3. Compute any additional liability to be recorded for each of the years. Prepare the necessary journal entry.
1. The following information pertains to Kane Co.’s defined benefit pension plan:
Prepaid pension cost (net asset), January 1, 2009
$ 2,000
Service cost
19,000
Interest cost
38,000
Expected return on plan assets
22,000
Amortization of unrecognized prior service cost
52,000
Employer contributions
40,000
In its December 31, 2009, balance sheet, what amount should Kane report as accrued pension cost (net liability)?
(a) $45,000
(b) $49,000
(c) $67,000
(d) $87,000
2. An employer’s obligation for postretirement health benefits that are expected to be provided to or for an employee must be fully accrued by the date the:
(a) Employee is fully eligible for benefits.
(b) Employee retires.
(c) Benefits are utilized.
(d) Benefits are paid.
3. The following data relate to Nola Co.’s defined benefit pension plan as of December 31,
2009:
Unfunded accumulated benefit obligation
$140,000
Unrecognized prior service cost
45,000
Accrued pension cost
80,000
What amount should Nola report as excess of additional pension liability over unrecognized prior service cost in its statement of stockholders’ equity?
You plan to retire at age 65.You anticipate needing $5,000 per month ($60,000 per year) after you retire. You expect to live for 20 years after you retire. You will work for 40 years, from age 25 to 65.Your average salary per working year will be $100,000.You estimate that you can earn an average of 8% per year on your investments. This considers inflation by using a “real” interest rate (nominal rate of 11% less an expected inflation rate of 3%). Assume that all cash flows occur at the end of the year and ignore income taxes. Before doing any calculations, estimate what fraction of your annual income you will need to save to have $60,000 per year for each year of your retirement life. After you make your estimate, compute what percentage of your annual salary during your 40 working years you must invest to be able to withdraw $60,000 per year for the 20 years after you retire. What if you wait until you are 30 to start saving? 35? 40? Was your initial guess too high or too low?
In 1999, IBM got into trouble with its employees when the company tried to switch from a defined benefit to a defined contribution (called “cash balance”) plan. IBM is just one of many companies that have switched from defined benefit to defined contribution plans.
Consider the following questions:
1. Defined contribution plans are much more popular among employees now than they were 30 years ago. Why do you think that is?
2. Why do companies want to switch from a defined benefit to a defined contribution plan?
3. IBM had to revise its plan for switching to a defined contribution plan after it was threatened with an age discrimination lawsuit by its older employees. Why do you think older employees would be opposed to the switch?
Refer to Practice 17 6 and Practice 17 7. Assume that as of January 1, 2008 Wu Company changed the discount rate it uses to compute the PBO from 8% to 12%. Assume that before this change, Wu Company had the following pension related balances:
Projected benefit obligation (PBO)
$(26,169)
Fair value of pension fund
23,000
Unrecognized net pension (gain)/loss
1,100
Unrecognized prior service cost
2,000
Compute (1) the prepaid/accrued pension cost balance that would be reported in the balance sheet before the change to 12%, (2) the PBO balance after the change to 12%, (3) interest cost for 2008, and (4) the prepaid/accrued pension cost balance that would be reported in the balance sheet immediately after the change to 12% (before the impact of any other 2008 transactions).
On January 1 of Year 1, the company had a projected benefit obligation (PBO) of $10,000 and a pension fund with a fair value of $9,200.Unrecognized prior service cost was $2,000; it was being amortized on a straight line basis over the 5 year average remaining life of the affected employees. The balance in the unrecognized (or deferred) pension gain was $700. The following information relates to the pension plan during the year:
Service cost
$1,200
Actual return on the pension fund
$1,550
Benefits paid to retirees
$300
Contribution to the pension fund
$1,050
Discount rate for PBO
8%
Expected return on pension fund
11%
Enter all of the pension information, including the beginning balances, in a pension work sheet. Use the work sheet to display the computation of pension expense for the year as well as the ending balances for all pension related items.
The company had the following pension related balances as of January 1:
Projected benefit obligation (PBO)
$(20,000)
Fair value of pension fund
23,000
Unrecognized net pension loss
3,100
Unrecognized prior service cost
1,000
The average remaining service life of employees working on January 1 is six years. Compute the amount of the unrecognized net pension loss that should be amortized during the year.
Reconciliation of Beginning and Ending PBO Balances
On January 1 of Year 1, the company had a projected benefit obligation (PBO) of $10,000 and a pension fund with a fair value of $9,200.Unrecognized prior service cost was $2,000; it was being amortized on a straight line basis over the 5 year average remaining life of the affected employees. The balance in the unrecognized (or deferred) pension gain was $700. The following information relates to the pension plan during the year:
Service cost
$1,200
Actual return on the pension fund
$1,550
Benefits paid to retirees
$300
Contribution to the pension fund
$1,050
Discount rate for PBO
8%
Expected return on pension fund
11%
Prepare the note disclosure necessary to reconcile the beginning balance in the PBO and the ending balance in the PBO.
Reconciliation of Beginning and Ending Pension Fund Balances
Refer to Practice 17 19. Prepare the note disclosure necessary to reconcile the beginning balance in the pension fund and the ending balance in the pension fund.
Practice 17 19
Reconciliation of Beginning and Ending PBO Balances
On January 1 of Year 1, the company had a projected benefit obligation (PBO) of $10,000 and a pension fund with a fair value of $9,200.Unrecognized prior service cost was $2,000; it was being amortized on a straight line basis over the 5 year average remaining life of the affected employees. The balance in the unrecognized (or deferred) pension gain was $700. The following information relates to the pension plan during the year:
Service cost
$1,200
Actual return on the pension fund
$1,550
Benefits paid to retirees
$300
Contribution to the pension fund
$1,050
Discount rate for PBO
8%
Expected return on pension fund
11%
Prepare the note disclosure necessary to reconcile the beginning balance in the PBO and the ending balance in the PBO.
Aggie Co. sells agricultural products. Aggie pays its salespeople a salary plus a commission.
The salary is the same for each salesperson, $1,000 per month. The commission varies by length of employment and is a percentage of the company’s total gross sales. Each salesperson starts with a commission of 1.0%,which is increased an additional 0.5% for each full year of employment with Aggie, to a maximum of 5.0%. The total gross sales for the month of January were $120,000. Aggie has six salespeople as follows:
Number of Years Employment
Frank
10
Sally
9
Tina
8
Barry
6
Mark
3
Lisa
075
Assume that the FICA rate is 7.65%, the FUTA rate is 6.2%, and the state unemployment rate is 5.4%. (Assume that the federal government allows the maximum credit for state unemployment tax paid.) The federal income tax withholding rate is 30%. Compute the January salaries and commissions expense, and make any necessary entries to record the payroll transactions including cash payment of all the taxes payable.
General Aviation Company employs six people. Each employee is entitled to three weeks’ paid vacation every year the employee works for the company. The conditions of the paid vacation are (a) for each full year of work, an employee will receive three weeks of paid vacation (no vacation accrues for a portion of a year), (b) each employee will receive the same pay for vacation time as the regular pay in the year taken, and (c) unused vacation pay can be carried forward. Based on the following data, compute the liability for vacation pay as of December 31, 2008.
Francisco Company has established a defined benefit pension plan for its lone employee, Derrald Ryan. Annual payments under the pension plan are equal to 3% of Derrald’s highest lifetime salary multiplied by the number of years with the company. Derrald’s salary in 2007 was $75,000. Derrald is expected to retire in 20 years, and his salary increases are expected to average 4% per year during that period. As of the beginning of 2008, Derrald had worked for Francisco Company for 12 years.
1. What is the amount of the annual pension payment that should be used in computing Francisco’s accumulated benefit obligation (ABO) as of January 1, 2008?
2. What is the amount of the annual pension payment that should be used in computing Francisco’s projected benefit obligation (PBO) as of January 1, 2008?
Computing the Amount of Prepaid/Accrued Pension Cost
Using the information given for the following three independent cases, compute the amount of prepaid/accrued pension cost that would be reported on the balance sheet. Clearly indicate whether the amount would be shown as an asset or as a liability.
Amount of Funding and Amortization of Prior Service Cost
Da Vinci Inc. has a workforce of 400 employees. A new pension plan is negotiated on January 1, 2008, with the labor union. Based on the provisions of the pension agreement, prior service cost related to the new plan amounts to $4,823,000. The cost is to be funded evenly with annual contributions over a 10 year period, with the first payment due at the end of 2008. The cost is to be amortized over the average remaining service life of the covered employees. The interest rate for funding purposes is 12%. It is anticipated that, on the average, 10 employees will retire each year over the next 40 years.
1. Compute the annual amount Da Vinci will pay to fund its prior service cost.
2. Compute the amount of amortization of prior service cost for 2008, 2010, and 2015.
Rasband Photography has a pension plan covering its 100 employees. Rasband anticipates a 11% return on its pension fund. The fund trustee furnishes Rasband with the following information relating to the pension fund for 2008:
January 1
FVPF
$1,500,000
Market related value of the pension fund
(5 year weighted average)
1,350,000
During year
Actual return on the pension fund
110,000
December 31
FVPF
1,620,000
Market related value of the pension fund
(5 year weighted average)
1,480,000
Compute the difference between the actual and expected return on the pension fund. How should the difference be treated in determining pension expense for 2008? Rasband bases expected return on the market related value of the pension fund.
Amortization of Unrecognized Gain on the Pension Fund
Melba Enterprises has an unrecognized gain of $425,000 relating to its pension plan as of January 1, 2008. Management has chosen to amortize this deferral on a straight line basis over the 10 year average remaining service life of its employees, subject to the limitation of the corridor amount. Additional facts about the pension plan as of January 1, 2008, are as follows:
PBO
$2,050,000
ABO
1,900,000
Fair value of the pension fund
1,500,000
Market related value of the pension fund (5 year weighted average)
1,350,000
Compute the minimum amortization of unrecognized gain to be recognized by Melba in 2008.
The gain or loss component of pension expense consists of (1) a deferral of the difference between actual and expected return on the pension fund and (2) amortization of unrecognized pension gains and losses. Determine the proper addition (deduction) to pension expense related to the gain or loss component under each of the following independent conditions.
A
B
C
D
(1) Actual return on the pension fund
$200,000
$200,000
$500,000
$500,000
(2) Expected return on the pension fund
$180,000
$230,000
$400,000
$550,000
(3) Unrecognized (gain) loss at beginning of year
$200,000
$275,000
$(100,000)
$(75,000)
(4) Average service life of employees used for amortization
The accountants for Eden Financial Services provide you with the following detailed information at December 31, 2008. Based on these data, prepare the journal entries related to the accrual and funding of pension expense for 2008.
Service cost
$ 52,000
Actual return on pension plan assets
81,000
Interest cost
59,000
Excess of expected return over actual return on pension plan assets
15,000
Amortization of deferred pension loss from prior years
Fredco’s defined benefit pension plan had a PBO of $10,000,000 at the beginning of the year. This was based on a 10% discount rate (settlement interest rate). The fair value of pension plan assets at the beginning of the year was $10,400,000. These assets were expected to earn a long term rate of return on the fair value of 8%. During the year, service cost was $750,000. At the beginning of the year, unrecognized prior service cost was $25,000; this entire remaining amount will be amortized this period. There was no unrecognized net pension gain (loss) at the beginning of the year. The actual return on pension plan assets for the year was $900,000. The ABO was $9,500,000 at the beginning of the year. Compute Fredco’s net periodic pension expense for the year.
Burbank Power Co. has had a retirement program for its employees for several years. The following information relates to the plan for 2008.
Balances at December 31, 2008:
PBO
$1,023,000
ABO
945,000
FVPF
880,000
Market related value of the pension fund (5 year weighted average)
820,000
Prepaid pension cost
35,000
Unrecognized prior service cost
139,000
Unrecognized net pension loss
48,700
In prior years, no additional liability was required. Compute the minimum pension liability, if any, for 2008, and prepare any necessary journal entries to record the minimum liability.
The financial history below shows the income and losses for Steele and Associates for the 10 year period 1999–2008. Assume that no adjustments to taxable income are necessary for purposes of the NOL carryback and that the company elects to use the carryback provisions of the tax code.
Taxable and Pretax
Financial Income
Year
(before NOL)
Income Tax Rate
Income Tax Paid
1999
$ 8,800
50%
$ 4,400
2000
12,300
50
6,150
2001
14,800
44
6,512
2002
(24,250)
44
0
2003
7,200
44
3,168
2004
(21,750)
46
0
2005
16,600
46
?
2006
32,000
40
12,800
2007
(58,700)
40
0
2008
65,000
40
?
Instructions:
1. Given the foregoing information, compute the amount of income tax refund for each year as a result of each NOL carryback and the amount of the carry forward (if any).
2. How would the NOL carry forward as of December 31, 2007, be reflected in the 2007 financial statements?
3. Calculate the amount of income tax paid, showing the benefit of the NOL carry forward, for the years 2005 and 2008.
4. For 2008, give the entry (or entries) to record income taxes, assuming that the deferred tax asset stemming from the 2007 NOL carry forward was fully recognized in 2007.
1. At December 31, 2008, Bren Co. had the following deferred income tax items:
• A deferred income tax liability of $15,000 related to a noncurrent asset
• A deferred income tax asset of $3,000 related to a noncurrent liability
• A deferred income tax asset of $8,000 related to a current liability
Which of the following should Bren report in the noncurrent section of its December 31, 2008, balance sheet?
(a) A noncurrent asset of $3,000 and a noncurrent liability of $15,000.
(b) A noncurrent liability of $12,000.
(c) A noncurrent asset of $11,000 and a noncurrent liability of $15,000.
(d) A noncurrent liability of $4,000.
2. For the year ended December 31,2008,Grim Co.’s pretax financial statement income was $200,000 and its taxable income was $150,000. The difference is due to the following:
Interest on municipal bonds
$70,000
Premium expense on keyman life e insurance
(20000)
Total
$50,000
Grim’s enacted income tax is 30%. In its 2008 income statement, what amount should Grim report as current provision for income tax expense?
Hurst Inc. is a new corporation that has just completed a highly successful first year of operations. Hurst is a privately held corporation, but its president, Byron Hurst, has indicated that if the company continues to do as well for the next four or five years, it will go public. By all indications, the company should continue to be highly profitable on both a short term and a long term basis. The controller of the new company, Lori James, plans on using the MACRS method of depreciating Hurst’s assets and using the installment sales method of recognizing income for tax purposes. For financial statement presentation, straight line depreciation will be used, and all sales will be fully recognized in the year of sale. There are no other differences between book and taxable income. Hurst has hired your firm to prepare its financial statements. You are now preparing the income statement. The controller wants to show, as income tax expense, the amount of the tax liability actually due. “After all,” James reasons, “that’s the amount we’ll actually pay, and in light of our plans for continued expansion, it’s highly unlikely that the temporary differences will ever reverse.” Draft a memo to the controller outlining your reaction to the plan. Give reasons in support of your decision.
Primrose Company appropriately uses the asset and liability method for interfered income tax allocation. Primrose reports depreciation expense for certain machinery purchased this year using MACRS for income tax purposes and the straight line basis for accounting purposes. The tax deduction is the larger amount this year. Primrose received rent revenues in advance this year. These revenues are included in this year’s taxable income. However, for accounting purposes, they are reported as unearned revenues, a current liability.
1. What is the theoretical basis for deferred income taxes under the asset and liability concept as specified by FASB Statement No. 109?
2. How would Primrose determine and account for the income tax effect for depreciation and rent? Why?
Tyler Dee is the controller for Martinez Company, a major employer in the area. Tyler has just come from a meeting of a local civic group. The meeting was an opportunity for Tyler to present and explain Martinez’s financial statements for the fiscal year recently ended. A significant amount of time was spent discussing the large deferred tax liability reported by Martinez. Several members of the civic group questioned Tyler about the nature of this liability. In particular, Tyler was asked why the liability wasn’t discounted to reflect the time value of money. Tyler had no real answer, except to mumble something like, “That’s just the way the standard is written.” How might Tyler have better explained the lack of discounting of deferred taxes?
When the corporate tax rate was lowered from 46% to 34% in 1986, most firms that had adopted the asset and liability method of deferred tax accounting reported one time gains as a result of the revaluation of their deferred tax items. In fact, one writer claimed that this lowering of income tax rates “freed a large chunk of money that had been accumulated to pay deferred taxes at the former higher rate.” In early 1993, Congress was considering raising the corporate income tax rate. One proposal was to raise the top corporate rate from 34% to 36%. Accounting experts pointed out that the increase in the tax rate would cause some firms to report one time losses and other firms to report one time gains.
1. Why did the lowering of tax rates in 1986 result in most firms reporting gains, whereas an increase in tax rates in 1993 would cause some firms to report gains and some firms to report losses?
2. Comment on the writer’s statement that the lowering of income tax rates “freed a large chunk of money.”
The president of Cardassia has recently been doing some recreational reading and came across an article on the adoption of FASB Statement No.109 in the United States. The president liked the article so much that she has decided to adopt Statement No.109 as the standard for deferred tax accounting in Cardassia. You have been hired as the government minister in charge of accounting, taxation, and nuclear waste disposal for the country of Cardassia. It is your duty to figure out how to implement Statement No.109.You note that the accounting rules and tax code in Cardassia are very similar to those in the United States except that Cardassian income tax law does not allow the carryback or carryforward of net operating losses. How will this difference in Cardassian tax law affect the accounting for deferred tax liabilities? deferred tax assets?
Deciphering Financial Statements (The Walt Disney Company)
The 2004 financial statements for The Walt Disney Company can be found on the Internet.
1. Using the financial statements and information contained in the notes, determine how much income tax expense Disney reported for the fiscal year ended September 30, 2004.
2. Referring to the note on income taxes, how much of the tax expense relates to current items, and how much relates to deferred items?
3. Disney notes that its effective income tax rate for 2004 was 32.0%. Using information from the income statement, determine how that number was computed.
4. Note that Disney has a valuation allowance of $74 million. In the journal entry establishing this allowance account, what would have been the debit and the credit?
5. Why was Disney’s effective income tax rate lower than the U.S. federal income tax rate of 35.0% in 2004? [Hint: Look at Note 7 (Income Taxes).]
6. Explain why the effective income tax rate differs from company to company?
7. Do differences in effective tax rates reflect the impact of temporary book tax differences or permanent book tax differences? Explain.
8. How much cash did Disney pay for income taxes during 2004?
9. In the Operating Activities section of Disney’s 2004 statement of cash flows, a subtraction of $78 million is shown and labeled as “Deferred income taxes.” Why is this amount subtracted?
Deciphering Financial Statements (Sara Lee Corporation)
Sara Lee Corporation owns the following brands: Ball Park franks, Sara Lee bakery goods, Kiwi shoe care products, Hanes and Hanes Her Way, L’eggs, and about a hundred other products. Information relating to the company’s deferred taxes is shown below.
Sara Lee Corporation and Subsidiaries
Income Taxes
Current and deferred tax provisions (benefits) were:
2004
2003
2002
Current
Deferred
Current
Deferred
Current
Deferred
United States
$(164)
$ 33
$154
$(149)
$ 82
$(150)
Foreign
296
97
111
133
150
85
State
11
(3)
(12)
26
22
(14)
$ 143
$127
$253
$ 10
$254
$ (79)
Cash paid for income taxes was $184 million in 2004, $265 million in 2003, and $266 million in 2002. Based on this information, answer the following questions:
1. Provide the journal entry(ies) made by Sara Lee to record the 2004 income tax expense of $270 million. Remember to allocate the expense between current and deferred.
2. Provide the journal entry made by Sara Lee to record the payment of income taxes during the year.
Deciphering Financial Statements (Berkshire Hathaway, Deferred Taxes, and Other
Comprehensive Income)
Consider the excerpts from the 2004 financial statements of Berkshire Hathaway shown below and on the next page to answer the following questions.
1. What was Berkshire Hathaway’s comprehensive income in 2004?
2. Make one summary journal entry to record the sale, redemption, and maturity of all securities (both equity securities and fixed maturity securities) during 2004.
3. Look at the statement of changes in stockholders’ equity. What is the purpose of the “Reclassification adjustment for appreciation included in net earnings”?
4. What journal entry did Berkshire Hathaway make to recognize the change in the market value of its available for sale investment securities during 2004? Ignore the reclassification mentioned in (3).
From the statement of cash flows:
2004
2003
2002
Cash flows from investing activities:
$(5,924)
$ (9,924)
$(16,288)
Purchases of securities with fixed maturities
(2,032)
(1,842)
(1,756)
Purchases of equity securities
4,560
17,165
9,108
Proceeds from sales of securities with fixed maturities
Proceeds from redemptions and maturities
of securities with fixed maturities
5,637
9,847
6,740
Proceeds from sales of equity securities
2,610
3,159
1,340
Finance loans and other investments purchased
(6,314)
(2,641)
(2,281)
Principal collections on finance loans and other investments
2,736
4,140
5,226
Acquisitions of businesses, net of cash acquired
(414)
(3,213)
(2,620)
Additions of property, plant and equipment
(1,201)
(1,002)
(928)
Other
563
243
148
Net cash flows from investing activities
$221
$15,932
($1,311)
From the statement of changes in
stockholders’ equity:
year ended December 31
2004
2003
2002
Class A & B Common Stock
Balance at beginning and end of year
$ 8
$ 8
$ 8
Capital in Excess of Par Value
Balance at beginning of year
$26,151
$26,028
$25,607
Common stock issued in connection with
business acquisitions
—
—
324
Exercise of stock options issued in connection
with business acquisitions and SQUARZ
warrant premiums
117
123
97
Balance at end of year
$26,268
$26,151
$26,028
Retained Earnings
Balance at beginning of year
$31,881
$23,730
$19,444
Net earnings
7,308
8,151
4,286
Balance at end of year
$39,189
$31,881
$23,730
Accumulated Other Comprehensive Income
Unrealized appreciation of investments
$ 2,599
$10,842
$ 2,860
Applicable income taxes
(905)
(3,802)
(1,029)
Reclassification adjustment for appreciation
included in net earnings
(1,569)
(2,922)
(638)
Applicable income taxes
549
1,023
223
Foreign currency translation adjustments
140
267
272
Applicable income taxes
134
(127)
(65)
From the statement of changes in
stockholders’ equity:
2004
2003
2002
Minimum pension liability adjustment
(38)
1
(279)
Applicable income taxes
3
(3)
29
Other
(34)
6
7
Other comprehensive income
879
5,285
1,380
Accumulated other comprehensive income at
beginning of year
19,556
14,271
12,891
Accumulated other comprehensive income at end of year
$20,435
$19,556
$14,271
Comprehensive Income
Net earnings
$ 7,308
$ 8,151
$ 4,286
Other comprehensive income
879
5,285
1,380
Total comprehensive income
$ 8,187
$13,436
$ 5,666
From Note 7 to the financial statements:
Investment gains (losses) from sales and redemptions of investments are summarized below (in millions):
2004
2003
2002
Fixed maturity securities—
Gross gains from sales and other disposals
$ 883
$2,559
$927
Gross losses from sales and other disposals
(63)
(31)
(8)
Equity securities—
Gross gains from sales
769
850
392
Gross losses from sales
(1)
(167)
(66)
Losses from other than temporary impairments
(19)
(289)
(607)
Foreign currency forward contracts
1,839
825
297
Life settlement contracts
(207)
—
—
Other investments
295
382
(17)
$3,496
$4,129
$918
From Note 14 to the financial statements:
The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred
tax liabilities at December 31, 2004 and 2003, are shown below (in millions):
As discussed in the chapter, deferred taxes in the United Kingdom have historically been computed in a slightly different manner than in the United States. The concept underlying this “crystallisation” approach is that if a liability is deferred indefinitely, then the present value of that liability is zero. No deferred tax liability is recognized if the accumulated deferred tax amount is expected to increase each year, thus delaying indefinitely the ultimate liquidation of this obligation.
In one page or less,address the following questions regarding how crystallisation relates to accounts payable.
1. How might this same concept be applied to the recognition of a liability for accounts payable? That is, if accounts payable are expected to increase each year, should the crystallization concept apply to this liability?
You have just completed a preliminary draft of the year end financial statements and notes and have distributed it to members of the board of directors for the upcoming board meeting. At the meeting, board members will have an opportunity to analyze, ask questions, and offer suggestions regarding the content of the statements and the accompanying notes. According to your computations, the company will be reporting yet another loss—the third in as many years. The company has taken full advantage of the carryback provisions of the tax law. With this year’s loss, the company will carry forward some of the loss. As a result, you have correctly recorded a deferred tax asset. However, because of continued losses, you have used a valuation allowance account to reduce the amount of the deferred tax asset. At the board meeting, initial questions focus on the company’s profitability or lack thereof. Following this discussion, an astute member of the board questions the use of a valuation allowance account. She asks for your reasoning as to why a valuation allowance account is being used. You explain that if losses continue, the entire amount of the deferred asset may not be realized and that it is your professional opinion that sufficient evidence exists to justify the use of a valuation allowance account. Immediately, the board begins to question your assumption of future losses. “Of course we will be profitable next year,” says one board member. “We have a plan to turn this company around,” says another. You overhear another whisper to his colleague, “If the accountants don’t think we are going to make money in the future, why are they staying? They should get a job with a company that they think is going to be profitable.” You have heard this talk about a turnaround in prior years, yet management seems unsuccessful in implementing desired changes. In past years, you have always had prior years’ profits against which you could offset losses. But now the accounting department, of which you are the head, has openly questioned management’s intentions to report profits in the future. Now the board is questioning your loyalty to the company as well as your judgment.
1. What other factors might be considered when valuing the deferred tax asset account?
2. As the accountant, is it your place to question management’s ability to turn a company around?
3. What effect did the journal entry involving the valuation allowance account have on this year’s income statement? Did net income go up or down? With this journal entry, are you contributing to the company’s loss?
This assignment is based on the spreadsheet prepared in (1) of the cumulative spreadsheet assignment for Chapter 13. Review that assignment for a summary of the assumptions made in preparing a forecasted balance sheet, income statement, and statement of cash flows for 2009 for Skywalker Company. This assignment involves computations related to deferred income taxes and the amount of cash paid for income taxes. Skywalker would like to estimate the amount of cash it will pay for income taxes in 2009. The only difference between financial accounting income and taxable income for Skywalker is in the area of depreciation. Skywalker uses straight line depreciation for financial reporting purposes and an accelerated method for tax reporting. This difference has created a deferred tax liability, which is included in the “Other long term liabilities” reported in Skywalker’s balance sheet. The following information is available as of December 31, 2008:
Accumulated depreciation, financial accounting records
$2700
Accumulated depreciation, tax records
$5000
Expected future income tax rate
330%
Construct a spreadsheet that will allow you to answer the following questions.
1. Given this information, what is Skywalker’s deferred tax liability as of December 31,
2008? (Carry calculations to two decimal places.)
2. In 2009, it is expected that depreciation expense for income tax purposes will be 1.5 times as much as depreciation expense computed for financial reporting purposes. Estimate the amount of cash that Skywalker will pay for income taxes in 2009. Report your answer with two decimal places, and assume the following:
(a) Amortization expense is the same for book and for tax purposes.
(b) All current income taxes are paid in cash during the year.
(c) These calculations do not impact the overall total forecast for “Other long term liabilities” for 2009; the balance is still expected to increase at the same rate as sales.
3. Repeat (2), assuming the following:
(a) Depreciation expense for income tax purposes will be the same as depreciation expense computed for financial reporting purposes.
(b) Depreciation expense for income tax purposes will be 2.0 times as much as depreciation expense computed for financial reporting purposes.
4. Comment on what implicit assumption underlies your answer to (3b).
During Year 1 (the first year of the company’s existence), employees of the company earned vacation days as follows:
Average Wage
Vacation Days
Vacation Days
Employee
per Day
Earned This Year
Taken This Year
1
$160
10
10
2
200
15
10
3
250
20
5
(1) Make the journal entry necessary at the end of Year 1 to record the unused vacation days earned during the year and (2) make the journal entry necessary in Year 2 to record the use of all of these vacation days. Assume that all employees received a 10% pay raise in Year 2.
The company has decided to restructure operations at one of its stores. As part of this restructuring, the company has determined that the store facility is impaired. The store originally cost $3,000,000 and has accumulated depreciation of $1,300,000. The fair value of the store is determined to be $800,000. In addition, 32 employees at the store are being terminated. As part of the severance package, each employee is entitled to job training benefits (costing $500 per employee), supplemental health care and life insurance benefits for six months (costing $3,300 per employee), and two months’ salary (averaging $5,000 per employee). Make the journal entry or entries necessary to record this restructuring.
Computing the Accumulated Benefit Obligation (ABO)
Wu Company has established a defined benefit pension plan for its lone employee, Ronald Dalton. Annual payments under the pension plan are equal to Ronald’s highest lifetime salary multiplied by (2% x number of years with the company). As of the beginning of 2008, Ronald had worked for Wu Company for 10 years. His salary in 2007 was $50,000. Ronald is expected to retire in 25 years and his salary increases are expected to average 3% per year during that period. Ronald is expected to live for 15 years after retiring and will receive the first annual pension payment one year after he retires. Compute Wu Company’s accumulated benefit obligation (ABO) as of January 1, 2008, assuming (1) an 8% discount rate and (2) a 12% discount rate.
Refer to Practice 17 6. Compute Wu Company’s projected benefit obligation (PBO) as of January 1, 2008, assuming (1) an 8% discount rate and (2) a 12% discount rate.
Practice 17 6
Computing the Accumulated Benefit Obligation (ABO)
Wu Company has established a defined benefit pension plan for its lone employee, Ronald Dalton. Annual payments under the pension plan are equal to Ronald’s highest lifetime salary multiplied by (2% x number of years with the company). As of the beginning of 2008, Ronald had worked for Wu Company for 10 years. His salary in 2007 was $50,000. Ronald is expected to retire in 25 years and his salary increases are expected to average 3% per year during that period. Ronald is expected to live for 15 years after retiring and will receive the first annual pension payment one year after he retires. Compute Wu Company’s accumulated benefit obligation (ABO) as of January 1, 2008, assuming (1) an 8% discount rate and (2) a 12% discount rate.
Refer to Practice 17 8. Compute pension expense for the year.
Practice 17 8
Simple Computation of the Net Pension Asset or Liability
On January 1 of Year 1, the company had a projected benefit obligation (PBO) of $10,000 and a pension fund with a fair value of $9,200. There was no unrecognized prior service cost, nor were there deferred pension gains or losses. The following information relates to the pension plan during the yea
Service cost
$1,200
Actual return on the pension fund
$250
Benefits paid to retirees
$100
Contribution to the pension fund
$1,050
Discount rate for PBO
9%
Expected return on pension fund
10%
Compute (1) the pension related amount that should be reported on the company’s balance sheet on January 1 of Year 1, (2) the PBO as of December 31, and (3) the fair value of the pension fund as of December 31.
Refer to Practice 17 8. Make all formal journal entries necessary with respect to the pension plan for the year.
Practice 17 8
Simple Computation of the Net Pension Asset or Liability
On January 1 of Year 1, the company had a projected benefit obligation (PBO) of $10,000 and a pension fund with a fair value of $9,200. There was no unrecognized prior service cost, nor were there deferred pension gains or losses. The following information relates to the pension plan during the yea
Service cost
$1,200
Actual return on the pension fund
$250
Benefits paid to retirees
$100
Contribution to the pension fund
$1,050
Discount rate for PBO
9%
Expected return on pension fund
10%
Compute (1) the pension related amount that should be reported on the company’s balance sheet on January 1 of Year 1, (2) the PBO as of December 31, and (3) the fair value of the pension fund as of December 31.
Refer to Practice 17 8. Enter all of the pension information, including the beginning balances, in a pension work sheet. Use the pension work sheet to display the computation of pension expense for the year as well as the ending balances for all pension related items.
Practice 17 8
Simple Computation of the Net Pension Asset or Liability
On January 1 of Year 1, the company had a projected benefit obligation (PBO) of $10,000 and a pension fund with a fair value of $9,200. There was no unrecognized prior service cost, nor were there deferred pension gains or losses. The following information relates to the pension plan during the yea
Service cost
$1,200
Actual return on the pension fund
$250
Benefits paid to retirees
$100
Contribution to the pension fund
$1,050
Discount rate for PBO
9%
Expected return on pension fund
10%
Compute (1) the pension related amount that should be reported on the company’s balance sheet on January 1 of Year 1, (2) the PBO as of December 31, and (3) the fair value of the pension fund as of December 31.
Indicate which of the following items are temporary differences and which are nontaxable or nondeductible. For each temporary difference, indicate whether the item considered alone would create a deferred tax asset or a deferred tax liability.
(a) Tax depreciation in excess of book depreciation, $150,000.
(b) Excess of income on installment sales over income reportable for tax purposes, $130,000.
(c) Premium payment for life insurance policy on president, $95,000.
(d) Rent collected in advance of period earned, $75,000.
(e) Warranty provision accrued in advance of period paid, $40,000.
(f) Interest revenue received on municipal bonds, $30,000.
Using the information given in Exercise 16–23 and assuming pretax financial income of $3,100,000, calculate taxable income.
Exercise 16–23
Identification of Temporary Differences
Indicate which of the following items are temporary differences and which are nontaxable or nondeductible. For each temporary difference, indicate whether the item considered alone would create a deferred tax asset or a deferred tax liability.
(a) Tax depreciation in excess of book depreciation, $150,000.
(b) Excess of income on installment sales over income reportable for tax purposes, $130,000.
(c) Premium payment for life insurance policy on president, $95,000.
(d) Rent collected in advance of period earned, $75,000.
(e) Warranty provision accrued in advance of period paid, $40,000.
(f) Interest revenue received on municipal bonds, $30,000.
Teancum Inc. began operating on January 1, 2008. At the end of the first year of operations, Teancum reported $600,000 income before income taxes on its income statement but only $510,000 taxable income on its tax return. Analysis of the $90,000 difference revealed that
$50,000 was a permanent difference and $40,000 was a temporary tax liability difference related to a current asset. The enacted tax rate for 2008 and future years is 35%.
1. Prepare the journal entries to record income taxes for 2008.
2. Assume that at the end of 2009, the accumulated temporary tax liability difference related to future years is $80,000. Prepare the journal entry to record any adjustment to deferred tax liabilities at the end of 2009.
Loft house Machinery Co. includes a 2 year warranty on its machinery sales. At the end of
2008, an analysis of the warranty records reveals an accumulated temporary difference of $120,000 for warranty expenses; book expenses related to warranties have exceeded tax deductions allowed. The enacted income tax rate for 2008 and future years is 40%. Management concludes that it is more likely than not that Loft house will have future income to realize the future tax benefit from this temporary difference. They also conclude that 20% of the warranty liability is current and 80% is noncurrent.
1. How would the deferred tax information be reported on the Loft house balance sheet at December 31, 2008?
2. If management assumed that only 70% of the tax benefit from the temporary difference could be realized, how would the deferred tax information be reported on the balance sheet at December 31, 2008? (Recall that the valuation allowance is allocated proportionately between the current and noncurrent portions of the deferred tax asset.)
Fulton Company computed a pretax financial loss of $15,000 for the first year of its operations ended December 31, 2008. This loss did not include $25,000 in unearned rent revenue that was recognized as taxable income in 2008 when the cash was received.
1. Prepare the journal entries necessary to record income tax for the year. The income tax rate is 40%. Assume it is more likely than not that future taxable income will be sufficient to allow for the full realization of any deferred tax assets and that unearned rent revenue is a current liability.
2. If future taxable income from operations was not expected to be sufficient to allow for the full realization of any deferred tax assets, what other sources of income may be considered to determine the need for a valuation allowance?
Goshute Company computed pretax financial income of $50,000 for the year ended December 31, 2008. Taxable income for the year was $15,000. Accumulated temporary differences as of December 31, 2007, were $120,000. A deferred tax liability of $48,000 was included on the December 31, 2007, balance sheet. Accumulated temporary differences as of December 31, 2008, are $155,000. The differences are related to noncurrent items.
1. Prepare the journal entries necessary to record income tax for 2008. The enacted income tax rate is assumed to be 40% for 2008 and future years.
2. On January 1, 2009, the income tax rate is changed to 32% for 2009 and all future years. Prepare the necessary journal entry, if any.
Pro Tech Tronics Company computed pretax financial income of $35,000 for the first year of its operations ended December 31, 2008. Unearned rent revenue of $55,000 had been recognized as taxable income in 2008 when the cash was received but had not yet been recognized in the financial accounting records. The unearned rent is expected to be recognized on the books in the following pattern.
2009
$15,000
2010
20,000
2011
12,000
2012
8,000
Total
$55,000
The enacted tax rates for this year and the next four years are as follows:
2008
34%
2009
34
2010
30
2011
30
2012
37
Prepare the journal entries necessary to record income taxes for 2008. Assume that there will be sufficient income in each future year to realize any deductible amounts.
Fibertek, Inc., computed a pretax financial income of $40,000 for the first year of its operations ended December 31, 2008. Included in financial income was $25,000 of nondeductible expenses, $22,000 gross profit on installment sales that was deferred for tax purposes until the installments were collected, and $18,000 in bad debt expense that had been accrued on the books in 2008. The temporary differences are expected to reverse in the following patterns:
Year
Gross Profit on Collections
Bad Debt Write Offs
2009
$ 5,000
$ 6,000
2010
7,000
12,000
2011
4,000
2012
6,000
Totals
$22,000
$18,000
The enacted tax rates for this year and the next four years are as follows:
2008
40%
2009
35
2010
32
2011
30
2012
32
Prepare the journal entries necessary to record income taxes for 2008. Assume that there will be sufficient income in each future year to realize any deductible amounts. For classification purposes, the bad debt write offs are considered to be associated with a current asset, and the receivable for installment sales is classified as both current and noncurrent, depending on the expected timing of the receipt.
Energizer Manufacturing Corporation reports taxable income of $829,000 on its income tax return for the year ended December 31, 2008, its first year of operations. Temporary differences between financial income and taxable income for the year are as follows:
Tax depreciation in excess of book depreciation
$ 80,000
Accrual for product liability claims in excess of actual claims (estimated
product claims payable is a current liability)
125,000
Reported installment sales income in excess of taxable installment sales
income (installments receivable is a current asset)
265,000
The enacted income tax rate is 40% for 2008 and all future years. Prepare the journal entries necessary to record income taxes for 2008.
Computation of Deferred Asset and Liability Balances
Beck Engineering reported taxable income of $30,000 for 2008, its first fiscal year. The enacted tax rate for 2008 is 35%. Enacted tax rates and deductible amounts for 2009–2011 are as follows:
Enacted Tax Rate
Deductible Amount
2009
34%
$ 8,000
2010
30
12,000
2011
32
16,000
1. Prepare the journal entries necessary to record income taxes for 2008. Assume that there will be sufficient income in each future year to realize any deductible amounts. For classification purposes, assume that all deductible amounts relate to noncurrent items.
2. Repeat (1), assuming that it is more likely than not that taxable income for all future periods will be zero or less.
Computation of Deferred Asset and Liability Balances
Dixon Type and Supply Company reported taxable income of $75,000 for 2008, its first fiscal year. The enacted tax rate for 2008 is 40%. Enacted tax rates and deductible amounts for 2009–2012 are as follows:
Enacted Tax Rate
Deductible Amount
2009
35%
$14,000
2010
32
24,000
2011
30
16,000
2012
32
40,000
1. Prepare the journal entries necessary to record income taxes for 2008. Assume that there will be sufficient income in each future year to realize any deductible amounts. For classification purposes, assume that all deductible amounts relate to noncurrent items.
2. Repeat (1), assuming it is more likely than not that taxable income for all future periods will be zero or less.
Net Operating Loss (NOL) Carryback and Carry forward
The following historical financial data are available for the Bradshaw Manufacturing Company.
Year
Income
Tax Rate
Tax Paid
2005
$175,000
40%
$ 70,000
2006
230,000
42
96,600
2007
310,000
35
108,500
In 2008, Bradshaw suffered an $820,000 net operating loss due to an economic recession.
The company elects to use the carryback provision in the tax law.
1. Using the information given, calculate the refund due arising from the loss carryback and the amount of the loss available to carry forward to future periods. Assume that the enacted tax rate is 34% for 2008 and all future years.
2. Prepare the entry necessary to record the loss carryback and carry forward. Assume that there will be sufficient taxable income in the carry forward period to realize all benefits from NOL carry forwards.
3. Using the answers from (1) and (2), prepare the bottom portion of the 2008 income statement reflecting the effect of the loss carryback and carry forward.
Net Operating Loss (NOL) Carryback and Carry forward
The following historical financial data are available for Lexis Company.
Year
Income
Tax Rate
Tax Paid
2005
$500,000
35%
$175,000
2006
150,000
30
45,000
2007
30,000
30
9,000
In 2008, Lexis Company suffered a $1 million net operating loss. The company will use the carryback provision of the tax law.
1. Using the information given, calculate the refund due for the loss carryback and the amount of the loss available to carry forward to future periods. Assume that the enacted tax rate for 2008 and all future years is 40%.
2. Prepare journal entries to record the loss carryback and carry forward. Assume that it is more likely than not that future taxable income will be sufficient to allow for the full realization of any deferred tax assets.
3. Evaluate the reasonableness of the assumption in (2).
Joyce Smithers Inc. reported the following amounts related to income taxes on its 2008 income statement.
Income tax expense—current
$32,000
Income tax expense—deferred
(8,000)
Smithers also reported the following amounts on its December 31, 2007 and 2008, balance sheets:
2008
2007
Deferred tax liability.
$26,000
$34,000
Income taxes payable
10,000
4,000
If Smithers uses the indirect method of reporting cash flows, what information concerning income taxes would it include in its statement of cash flows and related disclosure?
Duval Motors reported the following amounts related to income taxes on its 2008 income statement.
Income tax benefit from NOL carryback
$15,000
Income tax benefit from NOL carry forward
31,000
Duval also reported the following on its December 31, 2007 and 2008, balance sheets.
2008
2007
Deferred tax asset—NOL carry forward
$31,000
$ 0
Income tax refund receivable
15,000
5,000
1. If Duval uses the indirect method of reporting cash flows, what information concerning income taxes would Duval include in its statement of cash flows and related disclosure?
2. If Duval uses the direct method of reporting cash flows, what information concerning income taxes would Duval include in its statement of cash flows and related disclosure?
A. J. Johnson & Co. recorded certain revenues on its books in 2008 and 2009 of $15,400 and $16,600, respectively. However, such revenues were not subject to income taxation until 2010. The company records reveal pretax financial income and taxable income for the 3 year period as follows:
Financial Income
Taxable Income
2008
$44,200
$28,800
2009
38,200
21,600
2010
21,100
53,100
Assume that Johnson’s tax rate is 40% for all periods.
Instructions: Prepare the journal entries necessary at the end of each year to record income taxes.
Tristar Corporation reported taxable income of $1,996,000 for the year ended December 31, 2008. The controller is unfamiliar with the required treatment of temporary and permanent differences in reconciling taxable income to pretax financial income and has contacted your firm for advice. You are given company records that list the following differences.
Tax depreciation in excess of book depreciation
$275,000
Proceeds from life insurance policy upon death of officer
125,000
Interest revenue on municipal bonds
98,000
Instructions:
1. Compute pretax financial income.
2. Given an income tax rate of 40%, prepare the journal entry or entries to record income taxes for the year.
3. Prepare a partial income statement beginning with Income from continuing operations before income taxes.
Stratco Corporation computed a pretax financial income of $40,000 for the first year of its operations ended December 31, 2008. Included in financial income was $50,000 of nontaxable revenue, $20,000 gross profit on installment sales that was deferred for tax purposes until the installments were collected, and $50,000 in warranties payable that had been recognized as expense on the books in 2008 when product sales were made. The temporary differences are expected to reverse in the following pattern:
Year
Gross Profit on Collections
Warranty Payments
2009
$ 5,000
$ 9,000
2010
7,000
16,500
2011
2,000
20,500
2012
6,000
4,000
Totals
$20,000
$50,000
The enacted tax rates for this year and the next four years are as follows:
2008
40%
2009
35
2010
32
2011
30
2012
30
Instructions:
1. Prepare journal entries to record income taxes payable and deferred income taxes. Assume that there will be sufficient income in each future year to realize any deductible amount.
2. Prepare the income statement for Stratco beginning with Income from continuing operations before income taxes for the year ended December 31, 2008.
Cheng Company computed taxable income of $11,000 for the first year of its operations ended December 31, 2008. Tax depreciation exceeded depreciation for financial reporting purposes by $24,000. Receipt of $13,000 cash was reported as revenue for tax purposes but is reported as a current liability, Unearned Revenue, for financial reporting. The enacted tax rate for 2008 and all future years is 35%.
Instructions:
1. Prepare the journal entries to record income taxes for 2008. Assume that it is more likely than not that future taxable income will be sufficient to allow for the full realization of any deferred tax assets.
2. Repeat (1), assuming that it is more likely than not that future taxable income will be zero, exclusive of the expected reversal of the depreciation temporary difference.
Today a business can lease cars, buildings, equipment, and machinery. You name it, you can probably lease it. Bill Roloson, a farmer from Canada, can verify that almost anything can be leased. Bill is in the horse racing and horse breeding businesses. When his stallion, Rebel Blue Chip, died in 1993, he began searching for a replacement to sire future winners. His search led him to the stallion Hunterstown, a horse that had been put out to pasture in 1990 because of lameness. Roloson contacted Hunterstown’s owner, Gertrude Seiling, and arranged to lease the horse for stud for five years. Upon arrival at Prince Edward Island in Canada, the horse was given a workout. Much to Roloson’s surprise, Hunterstown’s lameness seemed to have healed. Instead of using Hunterstown for breeding, Roloson wanted to begin racing the stallion again. The lease agreement with Seiling was renegotiated to cover race earnings, and Hunterstown began winning races. Roloson then faced the decision of continuing to race the horse or take the horse back to Prince Edward Island for stud duty. Roloson stated, “We’d planned to bring him back for at least a month . . . , but that’s up in the air, depending on how he’s racing.”
1. Can the lease of an animal be capitalized?
2. In this instance, what would be Hunterstown’s expected useful life? Would your answer vary depending upon whether Hunterstown was used for breeding or for racing?
3. When circumstances changed and the lease for the horse was renegotiated, could that affect whether the horse was capitalized? How?
Recognizing Profits on a Sale Leaseback Transaction
John Carson, president of Carson Enterprises, recently arranged a financing deal with a group of foreign investors whereby he sold his movie company for $13,000,000 and immediately leased the company back, recognizing a $4,000,000 profit on the sale. Mr. Carson has just entered your office to tell you, his accountant, the good news. After hearing the details of the transaction, you tell Mr. Carson that he must defer recognizing the gain immediately and instead recognize it piecemeal over the term of the lease agreement. Mr. Carson counters that if he had simply sold the company to the investors, he would be able to book the profits. He asks you: “What difference does it make if I lease the company back or not? Shouldn’t the sale and the lease be treated as two separate transactions?” How do you respond?
Safeway is a large U.S. supermarket chain. Safeway leases the majority of its store locations. Disclosure regarding these leases follows.
Safeway—Lessee Disclosures
Note E: Lease Obligations
Approximately two thirds of the premises that the Company occupies are leased The Company had approximately
1,600 leases at year end 2004, including approximately 230 that are capitalized for financial reporting purposes Most
leases have renewal options, some with terms and conditions similar to the original lease, others with reduced rental
rates during the option periods Certain of these leases contain options to purchase the property at amounts that
approximate fair market value
As of year end 2004, future minimum rental payments applicable to no cancelable capital and operating leases with
remaining terms in excess of 1 year were as follows (in millions):
Capital Operating
Leases Leases
2005
$ 1116
$ 4059
2006
1055
3968
2007
1024
3809
2008
990
3625
2009
960
3283
Thereafter
9021
2,7786
Total minimum lease payments
$1,4166
$4,6530
Less amounts representing interest
(7198)
Present value of net minimum lease payments
$ 6968
Less current obligations
(428)
Long term obligations
$ 6540
Future minimum lease payments under noncancelable capital and operating lease agreements have not been reduced by minimum sublease rental income of $161.5 million. Amortization expense for property under capital leases was $43.4 million in 2004, $35.4 million in 2003 and $42.4 million in 2002. Accumulated amortization of property under capital leases was $230.9 million at year end 2004 and $181.6 million at year end 2003. The following schedule shows the composition of total rental expense for all operating leases (in millions). In general, contingent rentals are based on individual store sales.
2004
2003
2002
Property leases:
$4,069
$4,114
$3,887
Minimum rentals
207
256
170
Contingent rentals
(281)
(314)
(313)
Less rentals from subleases
$3,995
$4,056
$3,744
Equipment leases
241
252
256
$4,236
$4,308
$4,000
From this information, answer the following questions.
1. Does Safeway have any leases that include bargain renewal options? Are these leases accounted for as capital leases?
2. At the beginning of 2004, Safeway’s assets leased under capital leases had a recorded historical cost of $696.8 million. What average useful life is Safeway using to amortize its leased assets? Ignore the possibility of new capital leases signed or old capital leases expired during the year.
3. In addition to the minimum lease payments, Safeway must also make additional lease payments if store sales exceed certain specified amounts. Do these extra payments constitute a large portion of periodic operating lease expense?
4. Estimate the present value of the minimum lease payments for the operating leases. Use the following two techniques:
(a) Assume that the same ratio between present value and total gross amount of future minimum lease payments that holds for the capital leases also holds for the operating leases.
(b) Assume that the minimum operating lease payment stream can be approximated by a $358 million per year annuity for 13 years. Use a 10% discount rate. Comment on whether your two answers are in approximate agreement.
The franchise arrangement between McDonald’s and its franchisees is summarized in the following note from McDonald’s 2004 annual report.
Individual franchise arrangements generally include a lease and a license and provide for payment of initial fees as well as continuing rent and service fees to the Company based upon a percent of sales, with minimum rent payments that parallel the Company’s underlying leases and escalations (on properties that are leased). McDonald’s franchisees are granted the right to operate a restaurant using the McDonald’s system and, in most cases, the use of a restaurant facility, generally for a period of 20 years. Franchisees pay related occupancy costs including property taxes, insurance and maintenance. In addition, franchisees outside the U.S. generally pay a refundable, non interest bearing security deposit. Foreign affiliates and developmental licensees pay a royalty to the company based on percent of sales. The results of operations of restaurant businesses purchased and sold in transactions with franchisees, affiliates and others were not material to the consolidated financial statements for periods prior to purchase and sale. Revenues from franchised and affiliated restaurants consisted of:
(In millions)
2004
2003
2002
Rents and service fees
$4,8048
$4,3021
$3,8550
Initial fees
361
430
511
Revenues from franchised and affiliate restaurants
$4,8409
$4,3451
$3,9061
Future minimum rent payments due to the Company under franchise arrangements are:
Owned
Leased
(In millions)
Sites
Sites
Total
2005
$ 1,0634
$ 8117
$ 1,8751
2006
1,0389
7903
1,8292
2007
1,0067
7721
1,7788
2008
9722
7513
1,7235
2009
9330
7229
1,6559
Thereafter
7,2417
5,5317
12,7734
Total minimum payments
$12,2559
$9,3800
$21,6359
Instructions: From this information, answer the following questions.
1. McDonald’s arrangement with its franchisees is that the franchisees agree to pay a minimum rent plus additional amounts if sales are above a certain level. Compare the minimum amount to be received from rent payments in 2005 with the total amount received from franchised and affiliated restaurants in 2004.How significant are these additional amounts?
2. As indicated in the franchise note, McDonald’s owns some of its sites and leases others. An important comparison is the relationship between future minimum lease payments McDonald’s must make and future minimum payments to be received from franchisees.
The future payments (in millions of dollars) McDonald’s must make on its leased restaurant sites are summarized as follows.
In millions
Restaurant
2005
$9960
2006
9452
2007
8852
2008
8287
2009
7735
Thereafter
6,5906
Total minimum payments
$11,0192
Comparing the payments to be made for leased sites and the minimum payments (plus percent rent) to be collected from franchisees for leased sites, it looks as if McDonald’s is almost guaranteed to make money every year on its leased sites. What would have to happen for McDonald’s to lose money on these leased sites?
Writing Assignment (All leases are sales type leases!)
You are the accountant for Clear Water Bay Company, an equipment manufacturer. In order to help customers finance their purchases, Clear Water Bay often leases, rather than sells, the equipment. Clear Water Bay structures the lease agreements so that most of its equipment leases are classified as operating leases. This is because customers strongly prefer this treatment in order to keep the lease obligations off their balance sheets. This treatment does result in a delay in Clear Water Bay’s ability to report profits from the sales, but this delay has been viewed as part of the cost of keeping customers happy. The president of Clear Water Bay just returned from a week long accounting and finance seminar at a prominent university. She is excited about the session she attended on the accounting for leases. She was told, or thinks she was told, that there is no need for Clear Water Bay to report its leasing arrangements as operating leases—according to U.S. GAAP, lessors can always classify a lease as a sales type lease even when the lessee classifies the same lease as an operating lease. The president tells you to get to work restating Clear Water Bay’s most recent financial statements to reflect reclassification of all Clear Water Bay’s leases from operating leases to sales type leases. Write a memo to the president clarifying the accounting rules governing sales type and operating leases. Carefully explain the circumstances in which the same lease can be classified as a sales type lease by the lessor and an operating lease by the lessee.
To help you become familiar with the accounting standards, this case is designed to take you to the FASB’s Web site and have you access various publications. In this chapter, we discussed issues relating to leases. For this case, we will use Statement of
Financial Accounting Standards No.13,“Accounting for Leases.” Open FASB Statement No.13.
1. In paragraph 11, the procedures relating to the period over which assets that are being accounted for as capital leases should be amortized are discussed. Summarize the amortization procedures to be used for capital leases.
2. Paragraph 16b details the disclosure requirements associated with operating leases. What are those disclosure requirements?
Ethical Dilemma (Using operating leases to fool the bank)
You are the chief financial officer for RAM Solutions, a small but rapidly growing retail computer hardware chain. You are trying to figure out how to finance the new buildings that are scheduled to be purchased this year. The difficulty is that RAM has an existing loan with Commercial Security Bank (CSB) that requires RAM to maintain an interest coverage ratio (Operating income/Interest expense) of 2.0 or greater. Forecasts for next year are as follows:
Forecasted operating income
$15,000,000
Forecasted interest expense (assuming no new borrowing)
7,000,000
Cost of purchasing new buildings
50,000,000
If you borrow the $50 million needed to finance the new buildings, the increased interest expense will cause you to be in violation of the interest coverage constraint. The controller has suggested an accounting solution to this dilemma: lease the new buildings, carefully constructing the lease agreements so that the leases will be accounted for as operating leases. The leasing arrangements will be economically similar to purchase of the buildings with borrowed money, but the annual payments will be reported as rent expense instead of interest expense. Accordingly, the interest coverage loan covenant will be completely sidestepped. You personally negotiated the loan with Commercial Security Bank, and you know that the intent of the loan covenant was to prevent RAM from incurring large fixed obligations that might endanger the repayment of the CSB loan. Operating lease payments are fixed obligations, just like interest payments, and you are uneasy about using this accounting trick to get around the loan covenant. However, there does not seem to be any other solution. What should you do?
This assignment is based on the spreadsheet prepared in (1) of the cumulative spreadsheet assignment for Chapter 13. Review that assignment for a summary of the assumptions made in preparing a forecasted balance sheet, income statement, and statement of cash flows for 2009 for Skywalker Company. This assignment involves revisiting assumptions (q) and (u) in the Chapter 13 assignment. Skywalker would like to know how its forecasted financial statements would look if it decided to lease all new property, plant, and equipment under operating leases. Before 2009, all of Skywalker’s property, plant, and equipment purchases had been 100% financed using long term debt. This same assumption underlies the forecast prepared in (1) of the Chapter 13 assignment.
1. Using the same instructions given in (1) of the Chapter 13 spreadsheet assignment, forecast the following values for 2009:
Forecasted balance sheet for 2009:
(a) Property, plant, and equipment
(b) Accumulated depreciation
(c) Long term debt
Forecasted income statement for 2009:
(d) Depreciation and amortization expense
(e) Other operating expenses
(f) Interest expense
(g) Income tax expense
(h) Net income
Forecasted statement of cash flows for 2009:
(i) Cash from operating activities
(j) Cash from investing activities
(k) Cash from financing activities
Financial ratios for 2009:
(l) Debt ratio (Total liabilities/Total assets)
(m) Asset turnover (Sales/Total assets)
2. Repeat (1), but now assume that all new property, plant, and equipment expected to be acquired during 2009 will be acquired under an operating lease arrangement. Assume that the annual operating lease payment for property, plant, and equipment is 15% of the purchase price of the asset and that the new property, plant, and equipment that Skywalker will lease in 2009 will be not all be leased at the start of the year but will be added evenly throughout the year. Mathematically, this is the same as assuming that new assets leased during the year are leased, on average, for half the year.(Note: Operating lease payments are classified in the income statement as “Other operating expenses.”) Under this leasing arrangement, the forecasted balance in long term debt at the end of 2009 should be the amount forecasted previously (assuming an 80% debt ratio), less the amount of recognized long term debt that can be avoided through the leasing arrangement.
3. Comment on the differences between the numbers in (1) and (2).
The company reported pretax financial income in its income statement of $50,000. Among the items included in the computation of pretax financial income were the following:
Interest revenue from municipal bonds
$10,000
Nondeductible expenses
17,000
Warranty expenses (not deductible until actually provided;
none provided this year)
8,000
The income tax rate is 30%. Compute the following: (1) financial income subject to tax, (2) taxable income, (3) income tax expense, and (4) net income.
The company started business on January 1 and had revenues of $60,000 for the year. In addition to income tax expense, the company’s only other expenses are as follows:
• Bad debt expense of $10,000. Tax rules do not allow any deduction until the bad debts are actually written off. During the year, bad debts totaling $2,000 were written off.
• Postretirement health care benefit expense of $15,000. Tax rules do not allow any deduction until the actual retiree health care expenditures are made. No expenditures were made during the year. The income tax rate is 35% for the current year and all future years. Assume that the company is more likely than not to be profitable in future years. Prepare the journal entry or entries necessary to record income tax expense for the year.
On January 1, the company purchased investment securities for $1,000. The securities are classified as trading. By December 31, the securities had a fair value of $700 but had not yet been sold. On January 1, the company also purchased a piece of equipment for $10,000. The equipment has a 4 year useful life and $0 residual value. The company uses straight line depreciation for financial accounting purposes. Assume that the depreciation deduction for income tax purposes is $3,300 in the first year of the life of the equipment. Excluding the trading securities and the depreciation, income before taxes for the year was $4,000. Assume that there are no other book tax differences. The income tax rate is 40% for the current year and all future years. Prepare the journal entry or entries necessary to record income tax expense for the year. State any assumptions you must make.
Refer to Practice 16–8. The company had no taxable income in past years. Analysis of prospects for the future indicates that it is more likely than not that total taxable income in the foreseeable future will be no more than $400. Assume that the income tax expense journal entry required in Practice 16–8 has already been made. Make any necessary adjusting entry.
Practice 16–8
Deferred Tax Asset
On January 1, the company purchased investment securities for $1,000. The securities are classified as trading. By December 31, the securities had a fair value of $100 but had not yet been sold. Excluding the trading securities, income before taxes for the year was $5,000. Assume that there are no other book tax differences. The income tax rate is 45% for the current year and all future years. Assume that the company has been profitable in past years and is more likely than not to be profitable in future years. Prepare the journal entry or entries necessary to record income tax expense for the year.
Refer to Practice 16–9. The company had no taxable income in past years. Analysis of prospects for the future indicates that it is more likely than not that total taxable income in the foreseeable future will be no more than $20,000. Assume that the income tax expense journal entry required in Practice 16–9 has already been made. Make any necessary adjusting entry.
Practice 16–9
Deferred Tax Asset
The company started business on January 1 and had revenues of $60,000 for the year. In addition to income tax expense, the company’s only other expenses are as follows:
• Bad debt expense of $10,000. Tax rules do not allow any deduction until the bad debts are actually written off. During the year, bad debts totaling $2,000 were written off.
• Postretirement health care benefit expense of $15,000. Tax rules do not allow any deduction until the actual retiree health care expenditures are made. No expenditures were made during the year. The income tax rate is 35% for the current year and all future years. Assume that the company is more likely than not to be profitable in future years. Prepare the journal entry or entries necessary to record income tax expense for the year.
Refer to Practice 16–14. Assume that the net operating loss in 2008 was $100,000 instead of $50,000. Make the journal entry necessary to record (1) any net operating loss (NOL) carryback in 2008 and (2) any net operating loss (NOL) carry forward created in 2008. The enacted tax rate for future years is 40%. State any assumptions you must make.
Practice 16–14
Net Operating Loss Carryback
Taxable income and income tax rates for 2006–2008 for the company have been as follows:
Taxable
Income Tax
Total
Year
Income
Rate
Tax Paid
2006
$ 40,000
30%
$12,000
2007
30,000
35
10,500
2008
(50,000)
40
0
Make the journal entry necessary to record any net operating loss (NOL) carryback in 2008.
Refer to Practice 16–5. Assume that the enacted tax rates are as follows:
2008
40%
2009
35
2010
35
2011
35
2012
30
For simplicity, assume that temporary differences reverse in a FIFO pattern; that is, assume that the first temporary difference created is the first to reverse. Prepare the journal entry or entries to record income tax expense in 2008.
Practice 16–5
Deferred Tax Liability
On January 1, 2008, the company purchased a piece of equipment for $30,000. The equipment has a 5 year useful life and $0 residual value. The company uses straight line depreciation for financial accounting purposes. Assume that the depreciation deduction for income tax purposes is as follows: 2008 = $10,000; 2009 = $8,000; 2010 = $6,000; 2011 = $4,000; and 2012 = $2,000. Assume that revenue in each year 2008–2012 is $20,000, that the revenue is the same for both tax and financial reporting purposes, and that the only expenses are depreciation and income taxes. The income tax rate is 40% in all years. Prepare the journal entry or entries to record income tax expense in each year 2008–2012.
On January 1, 2008, Skull Valley Motors leased a Lincoln Navigator to T.K. “Pusan Boots” Denny. The lease is a 3 year lease requiring a payment of $695 at the end of each month for 36 months. The cash price of the Navigator was $46,000. Skull Valley Motors expects to be able to sell the Navigator for $30,652 when it is returned at the end of the 3 year lease term.
1. What interest rate (compounded monthly) was used in the computation of the $695 monthly payment amount?
2. On December 31,2010, Skull Valley Motors learned that the Navigator could be sold for only $25,000 at auction instead of the anticipated $30,652. With this actual residual value, what rate of return (compounded monthly) did Skull Valley earn on this 3 year Navigator lease?
3. Assume that Skull Valley did not know about the decline in residual value until the Navigator was sold at auction for $25,000 in 2010. How much net profit, in total, was recognized during the 3 year life of the lease, excluding the final sale of the Navigator at auction? How much gain or loss was recognized when the Navigator was sold for $25,000 at auction?
4. Refer to (2). If the rate of return on the lease is so low, why would Skull Valley Motors continue in the leasing business at all?
Aldridge Enterprises has a long standing policy of acquiring company equipment by leasing. Early in 2008, the company entered into a lease for a new milling machine. The lease stipulates that annual payments will be made for five years. The payments are to be made in advance on December 31 of each year. At the end of the 5 year period, Aldridge may purchase the machine. Company financial records show the incremental borrowing rate to be less than the implicit interest rate. The estimated economic life of the equipment is 12 years. Aldridge uses the calendar year for reporting purposes and straight line depreciation for other equipment. In addition, the following information about the lease is also available:
Annual lease payments
$55,000
Purchase option price
$25,000
Estimated fair market value of machine after 5 years
$75,000
Incremental borrowing rate
10%
Date of first lease payment
Jan 1, 2008
Instructions:
1. Compute the amount to be capitalized as an asset for the lease of the milling machine.
2. Prepare a schedule that shows the computation of the interest expense for each period.
3. Give the journal entries that would be made on Aldridge’s books for the first two years of the lease.
4. Assume that the purchase option is exercised at the end of the lease. Give the Aldridge journal entry necessary to record the exercise of the option. The actual fair market value of the milling machine at the end of the lease is $95,000. On the date the purchase option is exercised, the undiscounted sum of future cash flows expected from the machine is $125,000.
Entries for Capital Lease—Lessee; Guaranteed Residual Value
For some time, Ulrich Inc. has maintained a policy of acquiring company equipment by leasing. On January 1, 2008, Ulrich entered into a lease with Riverbottoms Fabricators for a new concrete truck that had a selling price of $315,000. The lease stipulates that annual payments of $61,800 will be made for six years. The first lease payment is made on January 1, 2008, and subsequent payments are made on December 31 of each year. Ulrich guarantees a residual value of $33,535 at the end of the 6 year period. Ulrich has an incremental borrowing rate of 11%, and the implicit interest rate to Riverbottoms is 10% after considering the guaranteed residual value. The economic life of the truck is eight years. Ulrich uses the calendar year for reporting purposes and straight line depreciation to depreciate other equipment.
Instructions:
1. Compute the amount to be capitalized as an asset on the lessee’s books for the concrete truck. Ulrich knows that Riverbottoms’ implicit interest rate is 10%.
2. Prepare a schedule showing the reduction of the liability by the annual payments after considering the interest charges.
3. Give the journal entries that would be made on Ulrich’s books for the first two years of the lease.
4. Assume that the lessor sells the truck for $24,000 at the end of the 6 year period to a third party. Give the Ulrich journal entries necessary to record the payment to satisfy the residual guarantee and to write off the leased equipment accounts.
Accounting for Direct Financing Lease—Lessee and Lessor
Trost Leasing Company buys equipment for leasing to various manufacturing companies. On October 1, 2007, Trost leases a press to Shumway Shoe Company. The cost of the machine to Trost was $196,110, which approximated its fair market value on the lease date. The lease payments stipulated in the lease are $33,000 per year in advance for the 10 year period of the lease. The payments include executory costs of $3,000 per year. The expected economic life of the equipment is also 10 years. The title to the equipment remains in the hands of Trost Leasing Company at the end of the lease term, although only nominal residual value is expected at that time. Shumway’s incremental borrowing rate is 10%, and it uses the straight line method of depreciation on all owned equipment. Both Shumway and Trost have fiscal years ending September 30, and lease payments are made on this date.
Instructions:
1. Prepare the entries to record the lease and the first lease payment on the books of the lessor and lessee, assuming the lease meets the criteria of a direct financing lease for the lessor and a capital lease for the lessee.
2. Compute the implicit rate of interest of the lessor.
3. Give all entries required to account for the lease on both the lessee’s and lessor’s books for the fiscal years 2008, 2009, and 2010.
Pinnacle Controls Corporation is in the business of leasing new sophisticated satellite systems. As a lessor of satellites, Pinnacle Controls purchased a new system on December 31, 2008. The system was delivered the same day (by prior arrangement) to Kerry Investment Company, a lessee. The corporation accountant revealed the following information relating to the lease transaction:
Cost of system to Pinnacle Controls
$630,000
Estimated useful life and lease term
7 years
Expected residual value (unguaranteed)
$35,000
Pinnacle Controls’ implicit rate of interest
11%
Kerry’s incremental borrowing rate
13%
Date of first lease payment
Dec 31, 2008
Additional information is as follows:
(a) At the end of the lease, the system will revert to Pinnacle Controls.
(b) Kerry is aware of Pinnacle Controls’ rate of implicit interest.
(c) The lease rental consists of equal annual payments.
(d) Pinnacle Controls accounts for leases using the direct financing method. Kerry intends to record the lease as a capital lease. Both the lessee and the lessor report on a calendar year basis and elect to depreciate all assets on the straight line basis.
Instructions:
1. Compute the annual lease payment under the lease. (Round to the nearest dollar.)
2. Compute the amounts of the lease payments receivable that Pinnacle Controls should recognize at the inception of the lease.
3. What are the total expenses related to the lease that Kerry should record for the year ended December 31, 2009?
Aquatran Incorporated uses leases as a method of selling its products. In early 2008, Aquatran completed construction of a passenger ferry for use between Manhattan and Staten Island. On April 1, 2008, the ferry was leased to the Manhattan Ferry Line on a contract specifying that ownership of the ferry will transfer to the lessee at the end of the lease period. Annual lease payments do not include executory costs. Other terms of the agreement are as follows:
Original cost of the ferry
$1,500,000
Fair market value of ferry at lease date
$2,107,102
Lease payments (paid in advance)
$ 225,000
Estimated residual value
$ 78,000
Incremental borrowing rate—lessee
10%
Date of first lease payment
April 1, 2008
Lease period
20 years
Instructions:
1. Compute the amount of financial revenue that will be earned over the lease term and the manufacturer’s profit that will be earned immediately by Aquatran.
2. Give the entry to record the signing of the lease on Aquatran’s books. Compute the implicit rate of interest on the lease.
3. Give the journal entries necessary on Aquatran’s books to record the lease for the first three years, exclusive of the initial entry. Aquatran’s accounting period is the calendar year.
4. Indicate the balance of Lease Payments Receivable at December 31, 2010.
Universal Enterprises adopted the policy of leasing as the primary method of selling its products. The company’s main product is a small jet airplane that is very popular among corporate executives. Universal constructed such a jet for Executive Transport Services (ETS) at a cost of $8,329,784. Financing of the construction was at a 13% rate. The terms of the lease provided for annual advance payments of $1,331,225 to be paid over 20 years with the ownership of the airplane transferring to ETS at the end of the lease period. It is estimated that the plane will have a residual value of $800,000 at that date. The lease payments began on October 1, 2008.Universal incurred initial direct costs of $150,000 in finalizing the lease agreement with ETS. The sales price of similar airplanes is $11,136,734.
Instructions:
1. Compute the amount of manufacturer’s profit that will be earned immediately by Universal.
2. Prepare the journal entry to record the lease on Universal’s books at October 1, 2008.
3. Prepare the journal entries to record the lease on Universal’s books for the years 2008–2010 exclusive of the initial entry. Universal’s accounting period is the calendar year.
4. How much revenue did Universal earn from this lease for each of the first three years of the lease?
Alta Corporation entered into an agreement with Snowfire Company to lease equipment for use in its ski manufacturing facility. The lease is appropriately recorded as a purchase by Alta and as a sale by Snowfire. The agreement specifies that lease payments will be made on an annual basis. The cost of the machine is reported as inventory on Snowfire’s accounting records. Because of extensive changes in ski manufacturing technology, the machine is not expected to have any residual value. Alta uses straight line depreciation and computes depreciation to the nearest month. After three years,Alta purchases the machine from Snowfire. Annual lease payments do not include executory costs. Other terms of the agreement are as follows:
Machine cost recorded in inventory
$3,700,000
Price at purchase option date
$3,250,000
Lease payments (paid in advance)
$710,000
Contract interest rate
10%
Contract date/first lease payment
Oct 1, 2008
Date of Alta purchase
Oct 1, 2011
Lease period
8 years
Instructions: Prepare journal entries on the books of both the lessee and the lessor as follows:
1. Make entries in 2008 to record the first lease payment, and make adjustments necessary at December 31, the end of each company’s fiscal year.
2. Record all entries required in 2009.
3. Prepare the entries in 2011 to record the sale (on Snowfire’s books) and purchase (on
Alta’s books), assuming that no previous entries have been made during the year in connection with the lease.
Accounting for Leases—Lessee and Lessor with Third Party Guarantee
Atwater Equipment Co. manufactures, sells, and leases heavy construction equipment. England Construction Company, a regular customer, leased equipment on July 1, 2008, that had cost Atwater $252,000 to manufacture. The lease payments are $63,161, beginning on July 1, 2008, and continuing annually with the last payment being made on July 1, 2012. If England were to purchase the equipment outright, the fair market value would be $291,881. Because of the heavy wear expected on construction equipment, the lease contains a guaranteed residual value clause wherein the lessee guarantees a residual value on June 30, 2013, of $65,000. England contracted with Weather top Financial Services to serve as a third party guarantor of the residual value. Atwater’s implicit interest rate is 12%, which is lower than England’s incremental borrowing rate of 14%.
Instructions:
1. Assuming that the equipment reverts to Atwater upon completion of the lease term and that the equipment has an expected useful life of 10 years, prepare the entries that should be made on the books of both Atwater and England in recording the lease on July 1, 2008. (Note: England knows the implicit interest rate for the lease.)
2. Prepare the journal entries that should be made by Atwater and England on July 1, 2009. Ignore fiscal year considerations.
3. What financial statement disclosure should be made by Weather top in its role as a third party guarantor?
/(
)
Acct 305.docx
Individual As….pdf
(16.12)
Finance Quiz ….png
Screen Shot 2….png
Screen Shot 2….png
?
MSAS670 XBRL ….xls
image 9.jpeg
ACL Data 02 1….zip
ACC539 Saasu ….ppt
image 3.jpeg
image 4.jpeg
image 5.jpeg
image 6.jpeg
image 7.jpeg
$ 868
$ 813
$2,062