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Acct 504 mart perfect education acct504mart.com

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Case Study 1 (Part A)Analyze the impact of business transactions on accounts; record (journalize and post) transactions in the books; construct and use a trial balance) During the first month of operation of Gordon Construction, Inc., completed the following transactions: Compare and contrast sole proprietorships, partnerships, and corporations.

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Acct 504 mart perfect education acct504mart.com

  1. 1. ACCT 504 Case Study 1 (Gordon Construction) FOR MORE CLASSES VISIT www.acct504mart.com Case Study 1 (Part A)Analyze the impact of business transactions on accounts; record (journalize and post) transactions in the books; construct and use a trial balance) During the first month of operation of Gordon Construction, Inc., completed the following transactions: Compare and contrast sole proprietorships, partnerships, and corporations. Sole proprietorships means that a business that owned by one person. That includes and not limited to all profits and losses, debts and unlimited liability, all will come from the solely one owner and not a group or in this case a partner or co-owner etc. Partnerships are seen much differently than sole proprietorships. Partnerships is a business that owned by more that one person/s. This is the number one difference from being a sole proprietorship or sole owner. Basically, two or more people come together and split the cost, debts, and liability. Corporations is an business that has separate entity owned by stockholders. The huge difference between corporations and the other two is that they are owned by stockholders. Stockholders make decisions that is first best for their company, secondly the company that they have together. Why would a entrepreneur want to choose one over the other? An Entrepreneur is a person that wants to start a business with their vision and have more power of the decision making. The best choice for an entrepreneur is to choose sole proprietorship out of all the three choices. The first and most important reason is because it is
  2. 2. much easier to start a business as sole proprietorships. Sole proprietorship takes all the profit that and doesn't have to split it between any other owners or corporations. If I was to start a new business which one would I choose? In this case it depends on the type of business. My case I will be opening a hair salon and I would prefer sole partnerships. i choose that because I want to be in control and I don't want to split the profit. -------------------------------------------------- ACCT 504 Case Study 2 (Williams Oil) FOR MORE CLASSES VISIT www.acct504mart.com Case study (Learning Objectives 2, 4: Explain the components of internal control; evaluate internal controls) Each of the following situations reveals an internal control weakness Current assets When it comes to a company's classified balance sheets you will find current assets sheet. Current assets is cash or cash equilivants that the company will use. What you will find on a current asset sheet is Cash and equilvants, Short term investments, Accounts receivables, and other assets. Long-term investments Long-term investments when it comes to balance sheet are investments that the company intends to hold onto. The investments that are listed are as follows, bonds, stocks and cash. You will also find short-term investments in the company. The difference between
  3. 3. short-term and long-term investments is that the short-term investments will be sold and the long-term investments normally the company will choose to keep it. Property, plant, and equipment Property, plant, and equipment are what the company calls "fixed assets". Property, plant and equipment are assets that can not be easily converted into cash. These are basically items such as company car (used to deliver products), computers and copier machine, and freezer used for restaurants. Intangible assets Intangible assets are non-monetary items that can not be seen or touched. For example, trademarks, copywriters, patents and goodwill. Intangible assets are normally listed in the separate assets. references http://www.investopedia.com/terms/i/intangibleasset.asp -------------------------------------------------- ACCT 504 Case Study 3 (Wang Appliance Store) FOR MORE CLASSES VISIT www.acct504mart.com Construct and use a cash budget) Nathan Farmer, chief financial officer of Wang Appliance Store, is responsible for the company?s budgeting process. Farmer?s staff is preparing the Wang cash budget for 2014. A key input to the budgeting process is last year?s
  4. 4. statement of cash flows, which follows (amounts in For Discussion Question 1: Post your response to the following: When reviewing a financial report, why should information be reliable, relevant, consistent, and comparable? In other words, why are these accounting characteristics important? What kinds of problems could be created if a financial report is not reliable, relevant, consistent, or comparable? It is extremely vital that the company has accurate financial reporting. This information determines whether or not to invest in your company's stock. This information will help them decide if it is profitable to invest or not to invest in your company based what is in your financial history. The information must be relevant because it will help the company, investors and lenders make decisions. It helps answer questions like, "how stable is your company", or "what future does this company have". The information should be reliable. In other words the information that is reported must be able to be verified, backed up with truthful information. Comparable occurs when different companies use the same accounting principles. This makes it much easier to compare results between company's. Consistency happens when the company uses the same accounting method every year. When the financial statements are reported each year, it paints a financial picture of where the company is headed now and in the future. What kinds of problems will occur if the information does not include these things? Falsified or manipulated statements doesn't only effect the company
  5. 5. but it also to name a few effects the lenders, creditors, investor's, etc. This will result in the company not having a faithful representation. Another response The main objective of generating financial information is providing useful information that can be used in decision-making... only if this information is relevant, reliable, comparable, and consistent, can it be useful for decision makers. (Kieso, 2003). Relevance gives a basis for making decisions that will impact the future of a business, and it confirms and corrects expectations from the past. If the information makes a difference in making decisions, it is relevant. Reliability means that the information can be depended on and it can be proven to be free of error, and the information is factual. The information cannot favor one set of users over another. CPAs audit financial statements to ensure reliability. Comparability is also an important characteristic of financial reporting... this happens when different businesses use similar accounting principles, making it much easier for one to compare companies, and the method used in a business must be disclosed to the users of the information to enable the users to convert the information as accurately as possible. Consistency simply means that the business uses the same accounting principles on a yearly basis... consistently. This helps decision makers analyze a company's trends. A company can change the methods used if they can justify the change, showing that the new method is more useful for analysis. If the method is changed, it must be disclosed in the notes that go with the statements to show
  6. 6. users a lack of consistency. These characteristics are very important to a business... decisions cannot be made based on incorrect information, and everyone involved in a business venture of any kind, whether they be management, owners, or investors and creditors, as well as consumers, etc. must be able to rely on the financial information provided in order to make any type of decision. Without this information, it is difficult to imagine any business succeeding, even for a short time. Examples of problems that could occur without reliable, relevant, consistent, or comparable information includes not being able to get loans or investments; management could make decisions that cause irreparable damage to entire operations, consumers could easily lose faith and cut their ties... the possibilities are endless for companies that lack these qualities in their financial reporting. DQ2 For Discussion Question 2: Post your response to the following: How does information from financial reports influence business decisions? Why is it important for business managers to understand the information found on financial reports? How does information from financial reports influence business decisions?
  7. 7. Once the information from the financial reports have been posted then a team will review the company's financial history to see what decision were profitable or not. The decisions that were made previous to the financial reports being posted will show which way the company needs to go to continue to remain #1. Why is it important for business managers to understand the information found on financial reports? IT is extremely important for he business managers to understand the information found on the financial reports. The business managers are going to be the people that are going to make decisions for the company. They need to know how to interpret the financial reports and come up with different strategies that will continue to make the company money. Another response The information from financial reports influences business decisions because it shows where the company stands. The managers use the information from the financial report compared to the current year from the previous year, whether the company growths or losses. It is very important for business managers to understand the information found on financial reports because the information from the financial reports enables business managers to see how to improve and keep the business afloat. It also gives business managers an insight what came in and went out and the total operating cost of the company as well as cutting cost in a certain areas. The information from the
  8. 8. financial reports helps the manager manages the business accurately. -------------------------------------------------- ACCT 504 Course Project Analysis of Nike, Inc. and Under Armour, Inc. FOR MORE CLASSES VISIT www.acct504mart.com Course Project: A Financial Statement Analysis A Comparative Analysis of Nike, Inc. and Under Armour, Inc. Below is the link for the financial statements for Nike, Inc. for the fiscal year ending 2014. First, select 2014using the drop-down arrow labeled Year, and then select Annual Filings using the drop-down arrow labeled All. You should select the 10k dated 7/15/2014,and choose to download in PDF, Word, or Excel format. Internal Cash Control By Kamilah Crooms Accounting 220 Jess Stern
  9. 9. Internal Cash Control The accounting department receives from sales invoices once a month. Most of the information is missing on the invoices. The accounting department relies on each department within the company and all the information has to be submitted completely and in a timely matter. In this scenario most of the information that has been turned in has information that is missing on the invoices. I would say that the internal controls that are not being followed are Documentation procedures. Company documentation is very important and must be turned in complete. These documents show proof of delivery or proof of services to the customer. Any incomplete documents can be very costly and can cause a delay in the company being paid for any services rendered. For example, one of the requirements in a transportation department is to make sure that the drivers verify the load and sign for the load prior to leaving the yard, these documents says that the load left in good condition. Well, it so happened that we allowed a driver to leave without signing the paperwork. This caused a delay in accounting because we had to get signatures from the driver and the customer which took a month later to complete. Rob, Sue, and Bob use the same cash register at the donut shop.
  10. 10. Rob, Sue, and Bob all use one register has often turned into not the best decision ideally for the company. It can increase the risk for the drawer being short and it will be hard for the company to find out which employee or employees had shorted the register. The internal controls that are not being followed are Establishment of responsibility. Happens when the company assigns one person to be in control of a specific job or have authority to make decisions (pg 161 Internal Control and Cash). When the company signs one person to be responsible over the register it will allow the company to hold that one person responsible for any shortages. Sam does the ordering of materials at the beginning of every month and pays the bill. In this case Sam is ordering materials and paying all the bills. This process is actually known as related activities (pg 162 Internal Control and Cash). This occurs when one person is doing two different responsibilities just like Sam. The internal Control that is not being applied is Segregation of Duties. It is better for the two to be a separate responsibility because it will minimize the billing errors. Bank reconciliations are done by the person who is responsible for all cash responsibilities.
  11. 11. The problem with this scenario is that the same person is responsible for all cash responsibilities, why is this person doing the only one that does this job? Having one person take on such a major responsibility increases the chances of embezzlement and thief. The internal control that is not being applied is rotating employees’ duties and requiring employees to take vacations. One person should not be completely in control of one job, the company should encourage vacations or switching positions to prevent incorrect handling of the company’s valuable information. New checks came in and are left on the shelf with other supplies. This is a tough scenario because there are all sorts of internal controls that are not being used in this case. I would say in my opinion that the first internal control that comes to my mind that is not being applied is bonding of employees who handle cash. Every employee that works near or with expensive equipment should be held reliable or responsible for the company’s assets. Bonding of employees who handle cash protects the company by insuring that the employee is or isn’t a risky applicant (background checks) or reassuring that the employee that they will be prosecuted to the fullest extinct if they are found guilty of thief. For example, I had worked at Mc Donald’s and there were my shift managers and one employee that were caught with stealing money from the company. This situation had happen
  12. 12. very differently. The armor truck dropped off a deposit that belonged to another company (armors mistake) but they signed it. Those employees thought that nothing was going to be traced back to them but the little did they know, all evidence traced back to them. They each received jail time, and felony records. Everyone has access to the computer system and the last audit was seven years ago by the former accountant This scenario has two things that are going on at the same time. I will first start off with the computer system and how everyone has access to the computer. The internal control that is not being applied is Physical, Mechanical, and Electronic Controls. This allows the company to control assets through physical or electronic based systems or programs. It is extremely important for a company to invest in computer or informational protection for the company and for their employees. Today’s technology age most companies are investing in a computerized program. This will help protect from internal errors and external protection. For example, all companies invest in a virus protection this will ensure that the company’s information is protected and not in the wrong hands. Invest idle cash
  13. 13. Invest idle cash occurs when any excess funds or cash needs to be invested. The money should be highly invest and risk free. For example, a major company should make investments with their assets into profitably investments and risk free. Plan the timing of major expenditures This is when a company sets aside money for major cash needs. We live in a world that things happen daily. A good company would set aside emergency funds. For example, during a terrible thunderstorm, the winds practically ripped off the roofing shingles off a commercial business. The company will be able to use the money for emergency. Delay payment of liabilities Delay payment of liabilities is when a company pays bills not too soon and not late. This allows the company to have money available for bills that that really need to be paid allowing excess funds to be free for other uses. Keep inventory levels low This occurs when the company keeps the inventory low so that it will bring in more profits. For example, if the managers at a fast-food over plan and fix too many hamburgers and the customers don’t buy it, then the food will go bad and the company will lose profit. Increase the speed of collection on receivables
  14. 14. This occurs when money is owed to the company, the company cannot claim these until the funds have been received. Some companies offer incentives to encourage customers to pay early or on time. For example, my job encourages their customers by letting them know that there will be a price increase on or after a certain date and this really works because the customers want to pay at a lower price. References:
  15. 15. http:yourdictionary.com /accounting_statements.org Retrieved 2/13/2010 Thomas, Y. 2005-08-27 “Accounting 101 pg. 52 Statements -------------------------------------------------- ACCT 504 Course Project Oracle and Microsoft Corporation (Devry) FOR MORE CLASSES VISIT www.acct504mart.com Course Project Financial Statement Analysis Project -- A Comparative Analysis of Oracle Corporation and Microsoft Corporation Here is the link for the financial statements for Oracle Corporation for the fiscal year ending 2007 Axia College Material Appendix B Cash Management Matrix
  16. 16. Directions: Using the matrix, list how each of the principles of internal control works, and give an example for each. Next, list how each of the principles of cash management works, and give an example for each. Principles of Internal Control How it Works Example Establishment of responsibility Happens when the company assigns one person to be in control of a specific job or have authority to make decisions. My job, Our Sales department is the only one that can waive a restocking fee. It allows the Sales team to be in control of the customers returns Segregation of duties This is when the company has more than one person to control a task or job A church- You have people who count the offering and then you have someone who writes down and logs in what was received Documentation procedures Evidence or proof of all company transactions My job we deliver ship shingles to our customers, and we make the driver sign prior to leaving and we make the customer sign a “Proof Of Delivery” form Physical, mechanical, and electronic controls Allows the company to control assets through physical or electronic based systems or programs. Our job has a system called Cisco and this tracks the employees breaks and lunches. Also, monitors how
  17. 17. long the CSR have been ready or working. Physical control would be the security guard, they require identification prior to entry. Independent internal verification Any information that can be reviewed , compare, and reconciliation by a employee My job has a way of tracking our inventory and when someone says that they were shorted on their order we can go back and track the inventory and compare the numbers in the system and a physical count to determine if the numbers were incorrect Other controls Bonding of employees, company protects against abuse of assets. Our company fired a girl just recently because she had used the company card business card for personal us that was not work related. Principles of Cash Management How it Works Example
  18. 18. Invest idle cash Occurs when any excess funds or cash needs to be invested, My father’s company makes wise investments and it turns around in his favor Plan the timing of major expenditures A company wants to make sure that there is money set aside for major cash needs During the recession profits dropped lower than expected so some companies pulled from these funds Delay payment of liabilities When a company pays the bills at an appropriate time not late and not too soon. Ok, when times are tough at home and bills are due I organize the bills by which bills needs to be paid the soonest, because if I pay the bills too early I will cut off my excess funds that could be used for something else Keep inventory levels low Happens when a company keeps the inventory low so that it will continue to bring profit See’s Chocolate factory has to make sure that they are not over producing or making too much or else the sit and the company will lose money Increase the speed of collection on receivables Money that is owe to the company by other people or customers is money that can not be counted towards the When a customer places a order for a product and has not paid yet, the company can not count the money as
  19. 19. companies funds their’s until it is received. -------------------------------------------------- ACCT 504 Entire Course (Devry) FOR MORE CLASSES VISIT www.acct504mart.com ACCT 504 Week 1-7 All Discussion Questions ACCT 504 Week 3 Case Study 1 Flower Landscaping Corporation ACCT 504 Week 4 Midterm Exam Set 1 Income statement is a financial statement that shows how much money is coming from product sales and services prior to any expenses being taken out. Both internal and external users such as managers and investors are able to access this. For example, if a investor wanted to see if the company made money or lost money they would use this financial statement report. Balance sheet shows what condition the company is currently in. whereas the other financial statements only came monthly or annually. For example, what if the management planning team wanted to see the company's current assets, ownership equity and liabilities? All they have to do is run the balance sheet report. CVP income statement or Cost Volume statement reports or monitors the effects of the changes in cost and volume when it comes to the company profits. For example, I work at a manufacturing plant for roofing shingles. The CVP analyst studies the cost which includes but
  20. 20. not limited too, manufacturing, material, labor cost. This financial statement report would help the management team budget the cost of manufacturing goods. Statement of cash flow tracks the movement of cash coming in or out of the business. This financial statement will show if the company made cash or not, or if the net income increased or decreased. For example, the owner or the management department will use this to determine if the company has earned enough money to be able to for any expenses. Retained earnings statements is a percentage that is kept by the company to be reinvested or to be used to pay debts. For example, if a company was looking to expand their business by purchasing top of the line equipment they can use this statement to see how much money the company has put away. References: http://www.investopedia.com/terms/r/retainedearnings.asphttp://finan cial- Retrieved 2/18/2010 statements.suite101.com/article.cfm/financial_statements_the_p_l. Retrieved 2/18/2010 -------------------------------------------------- ACCT 504 Final Exam (3 different finals) (Devry) FOR MORE CLASSES VISIT www.acct504mart.com 1. (TCO A) Which one of the following is an advantage of corporations relative to partnerships and sole proprietorships? (Points : 5)
  21. 21. Discussion Question 1: Post your response to the following: How would you describe the difference between financial and managerial accounting? What are the distinguishing features of managerial accounting? There are many differences between financial and managerial accounting. The financial accounting statements are available to external users such as employees, stockholders, creditors, investors, etc. This is available to them so that they can monitor the company's performances quarterly or annually. Managerial accounting provides financial information for managers and other internal people or department. Managerial accounting is confidential so it is only observed by internal users such as management, owner, and will provided to external users such as the public. Management uses this for budgeting purposes or to monitor profit loss/gain within the company. Managerial accounting can be available to them as often as needed. Managerial accounting statements is a great way for management to make decisions based on what has been reported. Another response The differences between managerial accounting and financial accounting are distinct. Managerial accounting reports are for those in managerial and decision making positions. The managers use the financial report to answer questions, which would advance the company and its employees. The manager would want to know if certain investments should be made and should the company advance an employee's salary. The manager needs the report to decide if a factory is built or if a certain stock is brought. The financial accountant has the job of showing the external users such as creditors and stockholders a picture of the company's stability. The manager's purpose is to manage by making stable plans, delegate duties, motivate the workers, and control the atmosphere. Distinguishing features of managerial accounting are the fact no cpa will audit the report, and there is no specific frequency of the report.
  22. 22. The reports are done in a need to know basis and for a specific reason, which is for business purposes. The reports are detailed and pertain to specific business decisions. The financial accountant need only be concerned with the company's finances. DQ2 Discussion Question 2: Post your response to the following: Select a management function (planning, directing and motivating, or controlling) and explain how that function relates to business as a whole. Next, select a different function listed by a classmate. Discuss with your classmate how the functions you each selected complement each other. The management functions that I choose was controlling. Controlling job is to make sure that the each department/person is keeping the company's activities or plans on track and in order to achieve that they must work closely with Management planning function. Controlling continually compares the company's performance to make sure that the planned standards are being met. In my opinion this is known as the "dirty work". Controlling operations have to know what to look for and how to keep track of all the company's activities. They have to take actions and quickly correct any errors and make sure that the company goals are being achieved in a timely matter or the time that it was planned. If there are errors it is job of the controlling operations to take quick action. The controlling operations not only correct errors after it happens but they also are in charge of foreseeing any potential errors and act quickly to get that resolved. Another response I chose Controlling as part of the management function. The controlling function relates to business as a whole because it helps
  23. 23. monitoring the firm’s performance to make sure the planned goals are being met. Managers need to pay attention to costs versus performance of the organization. let say, if the company has a goal of increasing sales by 10% over the next two months, the manager may check the progress toward the goal at the end of month one. If they are not reaching the goal the manager must decide what changes are needed to get back on track. -------------------------------------------------- ACCT 504 Midterm Exam (4 Sets, 2017) FOR MORE CLASSES VISIT www.acct504mart.com This Tutorial contains 4 Set of Midterm Exam 1. Question : (TCOs A and E) Your friend, Ellen, has hired you to evaluate the following internal control procedures. Explain to your friend whether each of the numbered items below is an internal control strength or weakness. You must also state which internal control procedure relates to each of the internal controls. Cost, Volume, and Profit Formulas By Kamilah Crooms
  24. 24. Due February 28, 2010 Explain the components of cost-volume-profit analysis. The components of cost volume-profit analysis consist of Level or volume of activity, Unit Selling Price, Variable Cost per unit, total fixed costs, and Sales mix. What does each of the components mean? Level or volume of activity is the activity that causes change or behavior when it comes to the cost. Unit selling Price is the cost for the product basically how much each unit is selling for. The Variable Cost per unit is something that can change depending on the activity. The total fixed cost does stay the same as activities change but differ per unit. The Sales mix is basically what the name says. It’s a mixture of sale items when more than one product sold the sales will remain the consistent. Based on the formulas you have reviewed, what happens to contribution margin per unit when unit selling prices increase?
  25. 25. Contribution margin is the amount of revenue left over after subtracting the variable cost. So basically Unit sales price subtracting or minus variable cost. Illustrate your explanation with an example from a fictitious company of how an increase in unit selling prices might affect contribution margin. Kelly’s Sweetheart Flowers The owner of Kelly’s Sweetheart Flowers is selling their bouquet of flowers for $10 per unit. The Variable Cost per unit is $4.00. The contribution margin will be ($10-$4) = $6. If the sells price increases to say $15, then the contribution margin will be ($15-$6) = $9 per unit. When fixed costs decrease, what does this do for sales? Illustrate your explanation with an example from a fictitious company. Kelly’s Sweetheart Flowers When the fixed cost decreases, the contribution margin ratio the net income and sales will increase.
  26. 26. For example, The flowers are $10 per unit. The variable cost per unit is $4.00. The contribution margin will be ($10-$4) = $6. The fixed cost is $3. We subtract Contribution margin – Fixed Cost= Net income. The net income is $3.00. Define contribution ratios The contribution margin ratio is the contribution margin per unit margin divided by the unit selling price. What happens to contribution ratios as one of the components changes? Shown in the example above, if one or more of the components changes is will cause the net income to increase or decrease. Reference
  27. 27. statements.suite101.com/article.cfm/cost_volume_profits*the_p_l. Retrieved 2/28/2010 //http:yourdictionary.com /CVP.org Retrieved 2/26/2010 Thomas, Y. 2005-08-27 “Accounting 101 pg. 52 Statements -------------------------------------------------- ACCT 504 Week 1-7 All Discussion Questions (Devry) FOR MORE CLASSES VISIT www.acct504mart.com Week 1DQ 1 - Financial Reporting Environment and GAAP Week 1DQ 2 - Details of Financial Statements and Ratios Week 2DQ 1 - Accounting EquationAccounting Cycle Week 2DQ 2 - Accrual Accounting and Adjusting Entries 7 How should mixed costs be classified in CVP analysis? What approach is used to effect the appropriate classification? According to our class materials all mixed cost must be classified into their fixed and variable and variable elements. The method that can be used to determine is called the high/low method. To determine the variable cost the analysis takes the total cost and divide it with the low activity level. To get the fixed cost then the company would have to subtract the total variable with either the high or low activity level. 9. Cost volume profit CVP analysis is based entirely on unit costs. Do you agree? Explain. In my opinion when it comes to making financial decisions for the company, often times more than one method is used. Cost volume profit is also based on Volume or level activities, unit selling prices, variable cost per unit, total fixed and sales mix. 14. You can find the break point in dollars by drawing a horizontal line to the vertical axis. I you want to find the break even point in
  28. 28. units it will be a vertical line from the break even point to the horizontal axis. -------------------------------------------------- ACCT 504 Week 2 Homework (E2-17A, E2-18A, E3-22A, E3-23A) FOR MORE CLASSES VISIT www.acct504mart.com This Tutorial contains Excel Files which can be used to solve for any values (your Question may have different company name or values, but that can be solved using Excel file) E2-17A Dr Anna Grayson opened a medical practice specializing in physical therapy. During the first month of operation (May), the business, titled. Anna Grayson, Professional Corporation (P.C.), experienced the following events Axia College Material Appendix C Budgets Matrix Directions: Using the matrix, define each of the budgets listed and briefly describe its uses. Budget Definition Describe its uses
  29. 29. Sales budget Estimate of the expected sales for the period. All of the other budgets depend on the sales budget. This is where all the other budgets will start from The sales budget shows dollars and units. This will allow management to see how many units will be produced for the period Production budget A production of units needed to be produced in order to meet the projected sales Shows management how many units will be produced during each budget period and what amount is needed to fulfill inventory demands Direct materials budget Is the estimated quantity or cost of the raw materials that is needed in order to produce the units required to fulfill inventory Shows management how much raw materials that is already on hand and or that needs to be ordered to meet inventory demands. Direct labor budget A estimate of cost and quantity of direct labor needed in order to meet production Shows how many hours, how many laborers needed to produce the units for that budget period. Management will decide what will be
  30. 30. the right amount of laborers needed and if the company will be able to meet the budget Manufacturing overhead budget An estimated expected amount of manufacturing cost for the budget period This list all overhead cost involving cash disbursement in a quarter Selling and administrative expense budget Anticipated selling and administrative expenses in the budget period Shows area of budget expenses that are not listed other than manufacturing. Expenses such as marketing, promotion cost etc for the budget period Budgeted income statement Estimate of expected profitability of operations in a budget period Is a very important tool because it shows the company estimated profit for the budget period. Cash budget A projection of expected cash flows in and out of the business. Cash budget helps management keep a tally or total of all cash balances. --------------------------------------------------
  31. 31. ACCT 504 Week 3 Case Study 1 (Melvin Plumbing Corporation) **New** FOR MORE CLASSES VISIT www.acct504mart.com MAKE SURE TO COMPLETE ALL REQUIREMENTS WHICH ARE LISTED BELOW. There are 10 sheets in the Workbook, including this one. All of the information that you need for the project is located in this Workbook. Requirement #1: During its first month of operation, the Melvin Plumbing Corporation, which specializes in residential plumbing, completed the following transactions Discussion Question 1: Post your response to the following: You know how important it is to create budgets for your household. How does budgeting help management make good business decisions? Budgeting is a very important skill that can be applied to everyday life and also when it comes to making good business decisions. I really like the way our class resources says about Budgeting. Budgeting is used as a planning tool used by management to make good decision for the company. If a company is successful than more than likely that means that the management team is very good at managing the company finances. Budgeting helps management plan ahead, defines what is most important, shows warning signs, reach a company target without over or under budgeting and etc. Another response
  32. 32. In a business, a budget helps a business make good decisions because they are used by the company to plan for future events and coordinate the events and duties in the company. They also gives objectives used to evaluate the performance of the company on each level which can help to make future decisions that will not hurt the company based on the projected objectives. It can also be used to alert the company of possible problems or negative trends in the company that need to be addressed so that there is a clear picture of the overall health of the company before decisions are made. The budget helps the company to be able to make an informed decision when making one. It is there in order to make sure that making a decision like taking on another company will not hurt the company and is something that the compnay can sustain based on the budget. DQ2 Discussion Question 2: Post your response to the following: What are some of the different types of budgets? Describe in detail one type of budget covered in the text. Describe what the budget is used for and what information it provides a business. Then, as you respond to your classmates, discuss how the budget you described relates to the budgets they described. Discuss how a business benefits from each of the budgets.
  33. 33. There are many different types of budgetting. For example, there sales budget which allows management to see how many units that need to be produced, production budget which will allows everyone to see how many units are going to be produced in or needed to be produced in order to meet the inventory for that budget period. One budget that I can describe in detail is called the direct labor budget and this budget shows how many people, hours is needed in order to meet the required budget for that period. This will give management an idea of how much money is needed such as paying the cost of labor. The company benefits by each of these budgets because it will help manage just how much money it will cost the company during this period. Management can also see if there are different ways to cost the company out of pocket cost down during this period. Another response I chose to write about the Production Budget. The Production Budget shows the cost of each unit needed to produce an item or manufacture a product. The formula used by the Production Budget : Budget sales units + Desired ending finished goods units - Beginning finished goods units = Required production units. An example would be, every Easter the bakeries in the Bronx loads up on Hot Cross Buns. My mother and grandmother would buy these tasty sweet breads,and eat them for breakfast. I personally would like to eat them every week but, they are only sold during the Easter season. Maybe, it has something to do with the glazed cross on the top.
  34. 34. Every Easter Holiday, there appears these Hot Cross Buns and the bakeries production department allows for the purchases for items needed to make the buns. After Easter has gone, Hot Cross Buns are not included in the budget. -------------------------------------------------- ACCT 504 Week 3 Case Study 1 Flower Landscaping Corporation (Devry) FOR MORE CLASSES VISIT www.acct504mart.com The Entire Case Study is due Sunday at MidnightMountain time at the end of Week 3. This Case Study is worth 100 points or 10% of your final course grade. What is a Flexible budget? A Flexible budget is a budget that change or is flexible during different levels or activity. Unlike the static budget which is a budget based on one activity level, the flexible budget is based off of more than one activity level. The steps to development a flexible budget is : a) Identify the activity index, and the range of activity b) Find out what the variable cost, and determine the variable cost per unit c) Find out what the fixed cost and determine the budgeted amount for each unit
  35. 35. d) Organize the budget for selected additionalactivity within the appropriate range The information found on a flexible budget cannot begin with the master budget. The flexible budget uses the same guidelines the original budget. The budget consists of Sales, Cost of Goods Sold, Selling Expenses, General and Administrative Expenses, Income Taxes, and finally the Net Income. The information on the budget is a great tool to be used for evaluation performances. The flexible budget can be used for monthly comparison purposes. Also during the process that management is identifying the activity index and the range of activity it will allow them to see the cost of direct labor hours for that budget period. -------------------------------------------------- ACCT 504 Week 3 Quiz FOR MORE CLASSES VISIT www.acct504mart.com Q -1 Other comprehensive income A. includes extraordinary gains and losses. B. affects earnings per share. C. includes unrealized gains and losses on available-for-sale investments. D. has no effect on income tax. Q-2 Use the following data of TortoiseTortoise Sales, Inc.: Unit Total Units Units Cost Cost Sold Beginning inventory 16 $3 $48 Purchase on Apr 25 25 6 150 Purchase on Nov 16 11 8 88 Sales 40 ? ? Capstone Discussion Question: Post your response to the following:
  36. 36. Think back over what you have studied and learned in this course. Do you have a new perception of or appreciation for the field of accounting and how it contributes to business? Explain. To be perfectly honest with you I truly had no clue what accounting did for a company and how important it was. I always thought that accounting only dealt with payroll. In fact accounting does much more that just payroll and monitor company supplies (coffee, paper, pens & pencils). The accounting sets budgets for the entire company, monitors outflow and inflow of profits, plans budgets for each department, and much more. When I first begun this class I was really nervous, I truly thought that I was going to have a hard time understanding the accounting but I happy to say that I was wrong. I understood every part of this course. On a personal note I would like to thank you Jess. If it wasn't for your pep talk I probably would had gave up. You are truly a great instructor. I wish you all the best! God Bless Another response Accounting has taken a whole new meaning to me in my vocabulary. Prior to this course, I just took accounting as a calculator and crunching numbers. I now have a new respect for accounting and all the aspects that are involved. I never once took into consideration profit, sales, revenue, and balance sheets also being included with accounting. There is so much more involved with accounting, and had I not taken this course I would have never known. Accounting is a very important part of running a business. I feel that it is imperative to all people thinking of opening a business should take some type of
  37. 37. accounting class to become more aware of how to run the accounting part of a business. -------------------------------------------------- ACCT 504 Week 4 Quiz FOR MORE CLASSES VISIT www.acct504mart.com Q -1 Anderson Company had the following information in 20142014. Accounts receivable 12/31/14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,000 Allowance for uncollectible account 12/31/14 (before adjustment). . . . . . . 850 Credit sales during 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,000 Business Plan By Kamilah T. Crooms
  38. 38. The name of my business is called DestinyWear. DestinyWear is a urban fashion clothing company for woman, men and youth.
  39. 39. DestinyWear specializes in making clothing for every occasion. My name is Kamilah Crooms and I am the owner and CEO of DestinyWear.My goal is to ensure that my company will be succesfull in all areas and in each department. In order for me to make sure that the company was going to begin in the right direction I had to priortize what was most important in establishing my business plan. The main priority is that I had to first choose the appropriate business structure, a high demanding product, and most of all an outstanding accounting team. Business Structure Upon establishing DestinyWear I had to decide which business struture that I felt was best for me to pursue. I decided that as a Entreprenuer the best choice for me abd the direction of the company would be for me to be sole proprietorship. Sole proprietorship allowed me to be the sole owner of DestinyWear. The first and most important reason that I wanted sole proprietorship is because it is much easier to start a business as sole proprietorships. Sole
  40. 40. proprietorship takes all the profit that and doesn't have to split it between any other owners or corporations. I also want the power to make and change decisions along the way without having to first consult anyone else. DestinyWear Products DestinyWear products will range from jeans, shirts, accessories and shoes. The company will first start off with its most profitable product and that will be the DestinyWear designer jeans line. The jeans line has over twenty different jeans designs from straight leg, baggy, cargo, overalls, shorts and much more. The jeans line will provide services within the United States and Canada and will eventually service International customers. The DestinyWear jeans line will have its own building. In this building the bottom floor will consist of the factory and the top floor will have the different departments such as management, marketing and most importantly the accounting department. DestinyWear Accounting Department
  41. 41. The accounting plays a major role in establishing my company DestinyWear. The accounting department does more than managing and reporting the company’s financial documents it is the greatest tool in establishing my business. The key to a powerful accounting department here at DestinyWear is applying the principles of internal control. These principles consist of establishment of responsibilities, segregation of responsibilities, documentation procedures, Physical, mechanical, and electronic controls, Independent internal verification and other controls such as Bonding of employees. In order to ensure that this business plan works DestinyWear has to hire nothing but the best qualified employees. DestinyWear Accounting Staff DestinyWear accounting team of fine employees will all be hired through the company. There are several requirements that have to be met in order for myself as the owner and Human Resource department to even consider the applicant for accounting. We looked for characteristics, education and work history experience. The first and far most important qualifying requirements are education. The applicant has to have a Bachelor BA/BS in accounting degree a plus if he or she has a master’s. The second requirement is experience. The applicant must have the minimum of five years of experience working in accounting. He or She must have knowledge and employment experience of working with financial statements, cash management and internal control. Employees must be experienced in Invest idle cash, planning the timing of major expenditures, delay payment of liabilities keeping inventory levels low, and increasing the speed of collection on receivables. In the category of experience we had to hire applicants
  42. 42. according to the position that had to be filled in accounting. For example, if a position in accounting such as management or supervisory needed to be filled, then we would look for years of experience in management or supervisory positions. I personally prefer that every employee have some type of management experience. Last but not least, the employees characteristics. It is a must that every accounting staff member has and applies professionalism, great ethic and moral skills, accuracy, and most importantly punctuality, and reaching company deadlines. These characteristics are very important to have at DestinyWear. DestinyWear Accounting Management Team The DestinyWear accounting management team will be reporting to me and to the other head staff each week to report updates and any new changes. The management team is responsible to have all the different types of budgeting reports that includes Sales, Labor, etc. Management must follow the responsibility reporting system for each department. The managers will use the company’s financial information to predict outcomes of the business. I require a report from each responsibility center, cost center, profit center and investment center to be reported each month. Management is responsible to ensure that the company does not over or under budget and if any changes it must be reported immediately. Conclusion DestinyWear will be a very successful team not only because of the products that we produce but because of having a great
  43. 43. accounting team. With the help of accounting team I DestinyWear products will be in every wardrobe in America. REFERENCES  //http:yourdictionary.com /CVP.org Retrieved 3/20/2010  Thomas, Y. 2005-08-27 “Accounting 101 pg. 52 Statements. March 19, 2010  Drucker, P. Managing in the next society 2002. retrieved march 19,2010  -------------------------------------------------- ACCT 504 Week 5 Case Study 2 Internal Control - LJB Company (Devry) FOR MORE CLASSES VISIT www.acct504mart.com Case Study 2 - Internal Control- Due by Sunday of week 5 LJB Company, a local distributor, has asked your accounting firm to evaluate their system of internal controls because they are planning to go public in the future. The President wants to be aware of any new regulations required of his company if they go public so he met with a colleague of yours at a local restaurant. The President of the
  44. 44. company explained the current system of internal controls to your colleague. Costco Wholesale Corporation If we look at the financial statements of the company we can find that the company is financially strong. Its strength are: 1. It has enough amount of current asset to repay its current liability. The current ratio of the company 8.18 indicates that the company has $8.18 liquid asset to repay its $1 of current liability. 2. The operating cost of the company is increasing because the company is able to reduce its expenses. 3. Cash from operating activity has increased for the company. Apart from this strength the company also has some weakness in its financial statement: (i) Increasing inventory indicates that the company inventory conversion period is increasing. (ii) The cash from investing activity shows that the company cash outflow is more in the short term investment i.e. in non operating activity. (iii) The overall has for the year 2008 has declined for the company. Net Income: If we look at the trend in net income of the company we can find that the company net income looks fluctuating but it has improved it net income in 2008 as compared to 2007. Debt ratio as a percentage of total assets:
  45. 45. If we look at the debt ratio as percent of total asset we can find that the debt ratio is declining in 2008 as compared to 2007 i.e. the company is increasing equity to finance debt. Debt as a percentage of total equity: As we can see that the debt as percent of total equity is declining in 2008 as compared to 2007 i.e. the company is increasing equity in its capital structure. As we can see that there is nothing negative in 2008 for the company and this is the reason it has positive trend as compared to 2007. Hence there is no need to correct anything for the company. -------------------------------------------------- ACCT 504 Week 5 Course Project Draft Spreadsheet (Devry) FOR MORE CLASSES VISIT www.acct504mart.com ACCT 504 Week 5 Course Project Draft Spreadsheet (Devry) Week 1 DQ 1 Due Tuesday, Day 2 Go to the U.S. Securities and Exchange Commission’s Web site at http://www.sec.gov and the Financial Accounting Standards Board’s Web site athttp://www.fasb.org. Identify the mission and main activities of each organization. Then, analyze the similarities and differences between the roles of each entity. Which entity has
  46. 46. more influence over financial statement reporting? Explain your answer. According to the SEC website their mission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. The SEC also requires public companies to disclose meaningful financial and other information to the public. This provides a common pool of knowledge for all investors to use to judge for themselves whether to buy, sell, or hold a particular security. The SEC is concerned primarily with promoting the disclosure of important market-related information, maintaining fair dealing, and protecting against fraud. According to the FASB website the mission of the FASB is to establish and improve standards of financial accounting and reporting that foster financial reporting by nongovernmental entities that provides decision-useful information to investors and other users of financial reports. Since 1973, the Financial Accounting StandardsBoard (FASB) has been the designated organization in the private sector for establishing standards of financial accounting that govern the preparation of financial reports by nongovernmental entities The major difference in the SEC and the FASB is that the SEC deals with reporting of financial statements for all industries while the FASB deals mainly with the private nongovernmental entities. Both are concerned with the fairness of financial reports and work in the interest of the public. I believe that the SEC has more influence over financial statement reporting because they can bring civil action against companies and individuals for violations of securities laws. Although according to the FASB website, “the Commission’s policy has been to rely on the private sector for this function to the extent that the private sector demonstrates ability to fulfill the responsibility in the public interest.
  47. 47. Response 2 Go to the U.S. Securities and Exchange Commission’s Web site at http://www.sec.gov and the Financial Accounting Standards Board’s Web site athttp://www.fasb.org. Identify the mission and main activities of each organization. Then, analyze the similarities and differences between the roles of each entity. Which entity has more influence over financial statement reporting? Explain your answer. U.S. Securities and Exchange Commission (SEC) According to the SEC’s website “The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation”(U.S. Securities and Exchange Commission, 2010, Para. 1). The main activities of the SEC are to interpret federal securities laws; issue new rules and amend existing rules; oversee the inspection of securities firms, brokers, investment advisers, and ratings agencies; oversee private regulatory organizationsin the securities, accounting, and auditing fields; and coordinate U.S. securities regulation with federal, state, and foreign authorities. (U.S. Securities and Exchange Commission, 2010) Financial Accounting Standards Board (FASB) According to the FASB’s website “The mission of the FASB is to establish and improve standards of financial accounting and reporting that foster financial reporting by nongovernmental entities that provides decision-useful information to investors and other users of financial reports. That mission is accomplished through a comprehensive and independent process that encourages broad participation, objectively considers all stakeholder views, and is subject to oversight by the Financial Accounting Foundation’s Board of Trustees” (Financial Accounting Standards Board, n.d., Para. 3). The main activities of the FASB are to identify financial reporting issues based on requests/recommendations from stakeholders or through other means. The FASB Chairman decides whether to add a project to the technical agenda, after consultation with FASB Members and others as appropriate, and subject to oversight by the
  48. 48. Foundation'sBoard of Trustees. The Board deliberates at one or more public meetings the various reporting issues identified and analyzed by the staff. The Board issues an Exposure Draft to solicit broad stakeholder input. (In some projects, the Board may issue a Discussion Paper to obtain input in the early stages of a project) The Board holds a public roundtable meeting on the Exposure Draft, if necessary. The staff analyzes comment letters, public roundtable discussion, and any other information obtained through due process activities. The Board redeliberates the proposed provisions, carefully considering the stakeholder input received, at one or more public meetings. The Board issues an Accounting Standards Update describing amendments to the Accounting Standards Codification (Financial Accounting Standards Board, n.d.). Both the SEC and the FASB have the same goals of fairness, accuracy, and understandability of financial accounting and reporting. Both agenecys accomplish these goals in the best interest of the overall public. The differences between the SEC and the FASB is that the FASB regulates financial reporting in the private sector of businesses (but are subject to the rules and regulations of the SEC) and the SEC deals with regulating the financial reporting of publicly held corporations. I believe that the SEC has the greatest influence over financial statements reporting because they have the final approval on all changes of the rules and regulations. The Sec can also bring civil or administrative enforcement actions against individuals and companies in violation of the securities laws. References Financial Accounting Standards Board. (n.d.). Facts about FASB. Retrieved July 15, 2010, from Financial Accounting Standards Board:http://www.fasb.org/facts/index.shtml#mission
  49. 49. U.S. Securities and Exchange Commission. (2010, May 3). The Investors Advocate: How the SEC Protects Investors, Maintains Market Integrity, and Facilitates Capital Formation. Retrieved July 15, 2010, from U.S. Securities and Exchange Commission: http://www.sec.gov/about/whatwedo.shtml Week 1 DQ 2 Due Thursday, Day 4 Search the Internet or the Online Library for information about the Sarbanes-Oxley Act. A useful guide to some of these provisions is located at http://www.soxlaw.com. Summarize at least two provisions of the law, and discuss your interpretation of these provisions with your classmates. Do you think this law will make financial statements more reliable? Also, discuss how Sarbanes-Oxley establishes boundaries to ensure ethical practices. What does the law allow or prohibit, and why? The Sarbanes-Oxley act has many provisions to give companies guidelines for responsible, and ethical financial reporting. One of those provisions is listed in Section 302 of the act. The provision is that periodic statutory financial reports be certified that signing officers have reviewed the reports, the report does not contain any untrue, or misleading information. The financial statements fairly
  50. 50. present the financial condition. The signing officers are responsible for internal controls. A list of all deficiencies in internal controls, and a list of fraud involving employees, and anything that could negatively affect the internal controls. Another provision pertains to the "management assessment of internal controls". This provision ensures that information is published in annual reports regarding the adequacy of internal controls, structure and procedures. The Sarbanes-Oxley act is designed to help companies promote ethical accounting procedures. The act gives guidelines as to how financial statements are reported. The act requires verification that officers within the company have checked the information in the reports for accuracy and true. The act also requires that the companies have internal controls in place to ensure ethical reporting practices. The main thing that the Sarbanes-Oxley promotes is transparency in reporting. Response 2 Section 802 of the Sarbanes-Oxley Law defines the penalties that may be assessed against individuals who failed to comply with the Act. An individual could be subject to 20 years in jail for altering, destroying, mutilating, concealing, falsifying records, documents or tangible objects. Guilt is define by the intent to impede a legal investigation. This part of the law gets to the heart of how Arthur Anderson reacted by destroying documents important to Worldcom. The law further defines that any accountant who knowingly violates their ethics by wilfully violates the requirements of maintenance of all audit or review papers. These papers are subject to review up to five years. The second Section that I reviewed was the Section 302. This actually is my favorite part of the law because it directly holds the officers and directors accountable for the accuracy of reporting in their financial statements. It defines that the management must review and
  51. 51. understand the financial statements and sign that they are true and accurate. It also holds the management accountable for the internal controls, requiring any deficiencies to be reported. In the past directors of companies relied heavily on the internal officers, management, to report the company performance without questioning the accuracy or taking their role on oversight committees seriously. They could hide behind a veil of trust of the key leaders. This Section clearly puts the responsibility for the Board to remain independent of the executives and function more effectively on the respective oversight committees they serve. The example I would share is what happened in WorldCom. The company leaders shared what they wanted to with the Board, who trusted implicitly the top leaders. Had they questioned their legal representation or auditors, they potentially could have uncovered the fraud that was committed by the creation of shell companies, with WorldCom employees as stockholders. I would love to think this law would protect the investing community. Financial reporting has improved to some extent. Unfortunately the scams still continue. Example would be Barney Madoff or what happened in the financial mortgage industry. These unethical practices were conducted after Sarbanes Oxley was implemented. Madoff was able to provide false financial information to investors. Financial industry was allowed to get to aggressive in underwriting and product suite. Fines and penalties are deterrents. Ethics still must be inherent in an individual and company. Laws and requirements are a guide. There will never be enough auditors, inspectors or oversight boards to catch all of the fraud in the corporate community. The law prohibits falsifying information, failing to notify of material changes, and destruction of records. --------------------------------------------------
  52. 52. ACCT 504 Week 5 Homework (E7-15A, E7-19A, E8-20A, E9-23A, E9-29A) FOR MORE CLASSES VISIT www.acct504mart.com The units-of-production method tracks the wear and tear on the van most closely. Requirement 3. Which method would Tasteful's prefer to use for income tax purposes? Explain in detail why Tasteful's prefers this method. Lucent Technologies Axia College of University of Phoenix
  53. 53. Lucent Technologies is a company based on networking for service providers, government, and enterprises worldwide (Lucent Technologies, n.d., Para 1). The products and services they work with are separated into three categories; service and maintenance, wireless mobility networking, and wire line networking. Lucent Technologies is backed by Bell Labs, which does research and development in networking technologies. During the years of 2001 to 2003 this company has experienced a decrease in demand because of other companies’ loss or capital used toward spending. This is mainly due to a downturn in the economy. As an investor this information is necessary to know because it explains the decrease or increase in sections of the balance sheet. In order to compare the growth or decline of the company’s profit, an investor must change a balance sheet into a common-size balance sheet. First when looking at the balance sheet an investor will see that the amount of paid in capital has increased from the year of 2003 to 2004, the assets have increased, but the liabilities have decreased. When running a debt/asset ratio it is noticed that this ratio drops from 1.2 in 2003 to 1.0 in 2004. This shows the company’s risk is low when concerning financial leverage, usually when the debt ratio is less than one percent it is financed mainly by company equity, so this company is close to being debt free from creditors. After changing the balance sheet to a common-size balance sheet there are several factors an investor will look at. The current assets have dropped to .48 from .49 in 2004. This does not show harm to the company because only the accounts receivable dropped while the rest of the current assets increased. This means the company is not in as much danger of default on money owed to it. It does have a rise in marketable securities. The one concern in the assets is the increase of
  54. 54. prepaid cost of pensions and goodwill. Goodwill can be used for tax breaks but prepaid pensions cannot benefit the company. When looking at the liabilities section an investor will see a drop in pension and liabilities and an increase in long term debt, both of these could be affected because of the drop in the economy. Long term liabilities are often increased to help a company control interest rate increases so as an investor cutting back on pension liabilities cuts back cost to the company and watching interest rate increase show the company is concerned with its earning and investors. This would be encouraging or an investor. The stockholders deficit shows a drop in accumulated deficits from -1.43 to -1.22 and total deficits of -.26 to -.08. This shows the company is working to control any money loss and turning it to the company’s advantage. Overall it shows the company is still earning a profit although small. With an increase of assets and a drop in liabilities the company is showing it is working in a low risk capital. After reviewing this information, a creditor or investor must be able to compare this company to the industry totals. By comparing how this company compares to other companies similar to it, a person can see if it is competitive and worth taking a risk. Running ratios will also show if the company is capable of paying off any debts it has or if it can acquire the needed cash in case of emergencies. Overall as an investor, I would say this company would be worth investing in.
  55. 55. Reference Axia College. (2007). Understanding Financial Statements. Retrieved May 10, 2010 from Axia College, Week 2 Assignment, ACC/230. -------------------------------------------------- ACCT 504 Week 6 Case Study 3 - Cash Budgeting - LBJ Company (Devry) FOR MORE CLASSES VISIT www.acct504mart.com ACCT504 Case Study 3 on Cash Budgeting The cash budget was covered during Week 4 when we covered TCO D and you read Chapter 7. There is also a practice case study to work on. Your Professor will provide the solution to the practice case study at the end of Week 5. Differentiating Depreciation Methods There is one main difference between straight line depreciation and accelerated depreciation. Straight line is decided by taking the cost of the assets, figuring out the salvage cost when the use of the asset is finished and how many years of use the asset has. A person then takes the cost minus salvage and divides the remainder by the number of years of use. This amount is the depreciation expense subtracted each
  56. 56. year from the cost. The accelerated depreciation does not have the same amount of deprecation subtracted each year. It does have the cost minus salvage value to figure out the amount to use but is then divided out differently. A person takes the sum of the years of a product’s useful life, such as three years is 3 + 2 + 1 = 6, then a person would divide the depreciation amount by 3/6 the first year, 2/6 the second and finally 1/6 for the final year. So the amount of depreciation expense is larger to smaller with accelerated and equal amounts for straight line. The advantages of straight line method are it is easier and faster to figure. The advantage of accelerated method is it is more accurate when figuring depreciation expense. The accelerated method has an advantage and disadvantage concerning taxes. A company can use the accelerated method to take advantage of bigger tax breaks at the beginning of an assets life, but since this amount drops during the lifespan if the company needs added tax breaks it will not receive them from these assets in the future. With the straight line method the amount of tax breaks are even through the life of the product. Most companies choose this form of depreciation for reporting purpose on taxes but will use the accelerated method to figure taxable income. As mentioned before the advantage of straight line depreciation is it is easier to figure and uses the same total each year for deduction of depreciation expense but the disadvantage is that if use for taxable income and reporting a company does not get a bigger tax break at the beginning of the assets life when they have just put out the cost for the item and may need a bigger tax break. -------------------------------------------------- ACCT 504 Week 6 Homework (E10-19A, E10-25A, E12- 16A, E12-20A)
  57. 57. FOR MORE CLASSES VISIT www.acct504mart.com This Tutorial contains Excel Files which can be used to solve for any values (your Question may have different company name or values, but that can be solved using Excel file)E10-19A Army Navy Sporting Goods is authorized to issue 10,000 shares of common stock. During a two-month period, Army Navy completed these stock-issuance transactions: Preparing an Income Statement Coyote, Inc. Company Multi-Step Income Statement 200x 201x 202x Net Sales 1,833,000$ Cost of Goods Sold 1,072,000 Gross Profit 761,000 - - Selling and Administrative Expenses 454,000 Advertising Depreciation and Amortization 14,000 Repairs and Maintenance Operating Profit 293,000 - - Other Income (Expense) Interest Income 13,000 Interest Expense (16,000) Earnings Before Interest and Taxes 290,000 - - Income Taxes 116,000 Net Earnings 174,000$ -$ -$
  58. 58. The companies’ net income is profitable when the sales exceedthe cost of goods sold. In this, the gross profit is $761k. This is beneficial to the company. Though we took the cost of goods away from the net sales there are still other areas which need to take a piece of the pie. For this company, once the SG&A and depreciation are taken out, the company still contains a profit of $290k. But the buck does not stop there.Once the interest income and interest expense are adjusted the balance before earnings and taxes is $290k. After taxes are taken out, the company is left with a net profit of $174k. In this case I think the company has achieved success with a net profit of $174k. If the company were unable to be profitable, the company would eventually go out of business. We would be able to tell if the company was not profitable by looking at each section individually. The cost of goods sold is what stands out for me. If we pay more to make the product then we are actually sellingit for, there is no profit to be made. So, I think it should all start there. -------------------------------------------------- ACCT 504 Week 7 Course Project JCP Kohls (Devry) FOR MORE CLASSES VISIT www.acct504mart.com ACCT 504 Week 7 Course Project JCP Kohls (Devry) Week3 DQ 1 Due Tuesday,Day 2
  59. 59. Postyour answertoProblem3.5 on p. 109 (Ch.3). How mightthe informationcontainedwithinthe stockholderequitystatementbe usedformanagementandinvestordecision-making?Provide specificexamplesof situationsinwhichthe stockholderequityinformationmightbe used. The statementof stockholders’equityprovidesthe changesinthe equityaccountsduringthe accountingperiodmore indepththanthe balance sheet.The informationfoundonthe statementof stockholders’equityincludesretainedearnings,commonandpreferredstock,andadditional paidin capital.Managementusesthe statementof stockholders’equitytoensure theyare reachingtheir goal of maximizingshareholder'sequity. The use of marketratioshelpwiththe analysisof the statementof stockholders’equity,suchasearningspershare,price-to-earnings,dividendpayout, and dividendyield.These ratioswill helpbothmanagementandinvestorsinanalyzingthe company. For example,if Iwere lookingtoinvestinacompany’sstocksI wouldutilizeall of the financial ratios, as well asthe marketratios.The earningspershare ratioiscalculatedbefore the price toearnings ratio,P/E, because the earningspershare ratio isusedinthe second.If a companypaysdividends, the dividendpayoutratiowill come inhandy.Ittellsus“The percentage of earnings paidto shareholdersin dividends”(Investopedia,2010, p. 1). References Investopedia.(2010). Dividend PayoutRatio.RetrievedAugust3,2010, from Investopedia:http://www.investopedia.com/terms/d/dividendpayoutratio.asp Response 2 Explainwhat can be found on a statementof stockholders’equity. The majorelementsof stockholders'equityinclude capital stock,paid-incapital,retainedearnings, treasurystock,unrealizedlossonlong-terminvestments,andforeigncurrencytranslationgainsand losses. How might the informationcontainedwithin the stockholderequity statementbe used for managementand investordecision-making?Provide specificexamplesofsituationsinwhich the stockholderequityinformationmight be used. Managementmaylookat the stockholder’sequitystatementretainedearningssectiontodetermine if companyshouldborrowmoneyforcapital investmentsorfinance itthroughvariousformsof
  60. 60. equity.Itmayalsobe usedbythe stockholdertoevaluate the compensationpaidtothe company officers.Investorsmayalsolookatthe statementforcumulativenetunrealizedgainsandlosses before purchasingstockinthe company.Investorsare alsointerestedinthe paidincapital because theycan compare it to the additional paidincapital and the differencebetweenthe twovalueswill equal the premiumpaidby investors overand above the par value of the shares. DQ 2 Week3 DQ 2 Due Thursday, Day 4 Provide anexample fromthe textorthe Internetthatdemonstratesasituationinwhicha company’snetprofitsappearedgoodinthe statements,butthe grossoroperatingprofitspresented a differentpicture.Discusshowthismighthave occurred. Respondtothe followingquestion, addressedinProblem3.6on p.109 (Ch.3): “Why isthe bottom-line figure,netincome,not necessarilyagoodindicatorof a firm’sfinancial success?”Lookforindicatorslike liquidityor solvencytoanswerthisdiscussionquestion. An example thatdemonstratesthe situationisEnron.Enron’sfinancialstatementsdidnotshow all the expensesandcosts.Insteadof showingthemonthe income statementtheymade entriessothe cost and expenseswouldpostinthe balance sheet.The same wasdone withthe revenues.Thisway it wouldbe lessexpensesandthe netprofitappearedgood.Manydebtsandlosseswere not reportedinthe financial statements. Fromthe third quarterof 2000 throughthe thirdquarterof 2001, the directorsfraudulentlyusedreserveaccountswithinEnronWholesale tomaskthe extent and volatilityof itswindfall tradingprofits,particularlyitsprofitsfromtheCalifornia energymarkets; avoidreportinglarge lossesinotherareasof itsbusiness;andpreservethe earningsforuse inlater quarters.By early2001, Enron Wholesale'sundisclosedreserveaccountscontainedover$1 billionin earnings.The headof the companyimproperlyusedhundredsof millionsof dollarsof these reserves to ensure thatanalysts'expectationswere met.Inaddition,Skillingandothersimproperlyusedthe reservestoconceal hundredsof millionsof dollarsinlosseswithinEnron'sEESbusinessunitfrom the investingpublic.Thiswouldshow the creditorsthatEnronwas makingprofitsanditsposition was solid. The net income isnotnecessarilyagoodindicatorof a firm’sfinancial successbecausethe income statementonlyshowsthe profitorlossat a periodof time anddoesnot show the whole picture of
  61. 61. the company.The Balance Sheet,Statementof cashflow,Statementof shareholders’equityandthe Income Statementall togethergive the real picture of the business.Eachone of themshows differentaspectsof the business.These statementsshow where the incomeisactuallycomingfrom; isit fromsalesor fromloansthe companyisborrowing?If the companyissellingabuildingorany otherassetbut that doesnotmeanthat it issellingmore productsandmakingprofit.Lookingatthe Income Statementsthe companymightbe makingprofitbutatthe same time itisextremely leveraged. Response 2 A company’snetincome isnotthe whole picture,justpartof it. There are lotsof thingsthat contribute tothe net income that maynot be significativetothe company’ssuccess.If the value of a dollarhasa suddenchange thatcan affectthe bottomline if the companyhappenstoholdthe mediumof exchange thatcanbenefitbythe change thatmightoccur. The companycan falsely inflate the bottomline.A company’snetincomeiscoupledwithliabilities,cashflow,andselects financial ratios.Lookingatitthisway isa much betterwayof seeingwhatthe company’ssuccessis like.A companycan change up manythingsto make itlooklike theirincome isbetter.These things that can be changedare single salesevents,cashinfusion,orfalse financial statements.Some things like debtthata companyhas, the company’scashon hand,theircapital assetsconditions,oreven theirsalestrends.Tofigure the successof the company,youmust lookat the whole picture.One thingcannot tell youall the factsof the company’saffairs.Youcannottell the netincome of the companyjustfrom the bottomline.Lookat all the financial records. Response 3 Provide anexample fromthe textorthe Internetthatdemonstratesasituationinwhicha company’snetprofitsappearedgoodinthe statements,butthe grossoroperatingprofitspresented a differentpicture.Discusshowthismighthave occurred. Respondtothe followingquestion, addressedinProblem3.6on p.109 (Ch.3): “Why isthe bottom-line figure,netincome,not necessarilyagoodindicatorof a firm’sfinancial success?”Lookforindicatorslike liquidityor solvencytoanswerthisdiscussionquestion. Netincome isnotnecessarilyagoodindicatorof a firm’sfinancial successbecause theyhave ways to manipulate itbyincreasingtheirrevenuesorhidingsome of theirexpenses.Forinvestorstrying to decide where toinvesttheirmoney,theyneedtolookmore intoassessinghow the company came upwiththe numberstheypresented. An example of thissituationiswhenLaribeeWire ManufacturingCo.exaggeratedinrecordingtheir inventoryvalue whichallowedtheminacquiringloansfromsix bankstotalingtoabout$130 million
  62. 62. usingitas collateral.Atthe same time,theyreported$3 millioninnetincome forthe period,butin actualitytheylost$6.5 million. Thiscompanyshoweda highernetincome byreportingfake inventoryinwhichitsvalue was overstatedandtransferredovertotheirincome statement.Whenthe banksassessedtheirfinancial statements,itwasenoughtoswaythemintolendingthe loanstheyneeded. Reference: Investopedia. (2010). Spotting CreativeAccounting On TheBalanceSheet.Retrieved fromhttp://www.investopedia.com/search/searchresults.aspx?q=Spotting+Creative+Accounting+On+ The+Balance+Sheet&submit=Search c