Daisey Company is a very profitable small business

Resources: Financial Accounting: Tools for Business Decision Making

Scenario: Daisey Company is a very profitable small business. It has not, however given much consideration to internal control.  For example, in an attempt to keep clerical and office expenses to a minimum, the company has combined the jobs of cashier and book-keeper. As a result, Bret Turrin handles all cash receipts, keeps the accounting records, and prepares the monthly bank reconciliations.

The balance per the bank statement on October 31, 2017, was $18,380. Outstanding checks were No. 62 for $140.75, No. 183 for $180, No. 284 for $253.25, No. 862 for $190.71, No. 863 for $226.80, and No. 864 for $165.28. Included with the statement was a credit memorandum of $185 indicating the collection of a note receivable for Daisey Company by the bank on October 25.

This memorandum has not been recorded by Daisey.

The company’s ledger showed one Cash account with a balance of $21,877.72. The balance included undepositied cash on hand. Because of the lack of internal controls, Bret took for personal use all of the undeposited receipts in excess of $3,795.51. He then prepared the following bank reconciliation in an effort to conceal his theft of cash:
Cash balance per books, October 31           $21,877.72
Add: Outstanding checks
No. 862     $190.71
No. 863     226.80
No. 864     165.28     482.79
22,360.51
Less: Undeposited receipts           3,795.51
Unadjusted balance per bank, October 31           18,565.00
Less: Bank credit memorandum           185.00
Cash balance per bank statement, October 31           $18,380.00

Prepare a 1,050-word bank reconciliation report (hint: deduct the amount of the theft from the adjusted balance per books) including the following:

  Indicate the three ways that Bret attempted to conceal the theft and the dollar amount involved in each method.
What principles of internal control were violated in this case?

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Doering Company, a U.S. corporation with customers in several foreign

Doering Company, a U.S. corporation with customers in several foreign countries, had the following selected transactions for 2015 and 2016.

2015
Apr. 8  Sold merchandise to Salinas & Sons of Mexico for $24,234 cash. The exchange rate for pesos is $0.1080 on this day.

July 21  Sold merchandise on credit to Sumito Corp. in Japan. The price of 2.9 million yen is to be paid 120 days from the date of sale. The exchange rate for yen is $0.0081 on this day.

Oct. 14  Sold merchandise for 18,300 pounds to Smithers Ltd. of Great Britain, payment in full to be received in 90 days. The exchange rate for pounds is $1.5125 on this day.

Nov.18  Received Sumito’s payment in yen for its July 21 purchase and immediately exchanged the yen for dollars. The exchange rate for yen is $0.0076 on this day.

Dec.20  Sold merchandise for 18,300 ringgits to Hamid Albar of Malaysia, payment in full to be received in 30 days. On this day, the exchange rate for ringgit is $0.6825.

Dec. 31  Recorded adjusting entries to recognize exchange gains or losses on Doering’s annual financial statements. Rates for exchanging foreign currencies on this day follow.

Pesos (Mexico) $ 0.1092
Yen (Japan) 0.0080
Pounds (Britain) 1.5179
Ringgits (Malaysia) 0.6780

2016

Jan. 12  Received full payment in pounds from Smithers for the October 14 sale and immediately exchanged the pounds for dollars. The exchange rate for pounds is $1.5258 on this day.

 Jan. 19  Received Hamid Albar’s full payment in ringgits for the December 20 sale and immediately exchanged the ringgits for dollars. The exchange rate for ringgits is $0.6744 on this day.

1. Prepare journal entries for the Doering transactions and adjusting entries

Sold merchandise to Salinas & Sons of Mexico for $24,234 cash. The exchange rate for pesos is $0.108 on this day.

Sold merchandise on credit to Sumito Corp. in Japan. The price of 2.9 million yen is to be paid 120 days from the date of sale. The exchange rate for yen is $0.0081 on this day.

Sold merchandise for 18,300 pounds to Smithers Ltd. of Great Britain, payment in full to be received in 90 days. The exchange rate for pounds is $1.5125 on this day

Received Sumito’s payment in yen for its July 21 purchase and immediately exchanged the yen for dollars. The exchange rate for yen is $0.0076 on this day.

Sold merchandise for 18,300 ringgits to Hamid Albar of Malaysia, payment in full to be received in 30 days. On this day, the exchange rate for ringgit is $0.6825.

Record adjusting entry to recognize exchange gains or losses related to pounds (Britain), The exchange rate for pounds (Britain) is $1.5179 on December 31, 2015.

Record adjusting entry to recognize exchange gains or losses related to ringgits (Malaysia), The exchange rate for ringgits (Malaysia) is $0.678 on December 31, 2015.

Received full payment in pounds from Smithers for the October 14 sale and immediately exchanged the pounds for dollars. The exchange rate for pounds is $1.5258 on this day.

Received Hamid Albar’s full payment in ringgits for the December 20 sale and immediately exchanged the ringgits for dollars. The exchange rate for ringgits is $0.6744 on this day.

2. Compute the foreign exchange gain or loss to be reported on Doering’s 2015 income statement November 18 December 31 December 31 Total

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Melanie Vail Corp. sponsors a defined benefit pension plan for its employees

Melanie Vail Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2015, the following balances relate to this plan.

Plan assets

$480,000

Projected benefit obligation

625,000

Accumulated OCI (PSC)

100,000

As a result of the operation of the plan during 2015, the following additional data are provided by the actuary.

Service cost for 2015

$90,000

Settlement rate

9%

Actual return on plan assets in 2015

57,000

Amortization of prior service cost

19,000

Expected return on plan assets

52,000

Unexpected loss from change in projected benefit obligation, due to change in actuarial predictions

76,000

Contributions in 2015

99,000

Benefits paid retirees in 2015

85,000

1. Use the attached Excel spreadsheet to prepare a pension worksheet. On the pension worksheet, compute pension expense, pension asset/liability, projected benefit obligation, plan assets, prior service cost, and net gain or loss.

2. Compute the same items as in (#1), assuming that the settlement rate is now 7% and the expected rate of return is 10%.

3. Prepare the journal entry using the spreadsheet Journal Entries to record pension expense in 2015. You need to prepare journal entries for only #1 above.

4. Indicate the reporting of the 2015 pension amounts in the income statement and balance sheet using the spreadsheet Pensions. You need to show financial statements’ presentations for only #1 above.

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ACC 291 Week 1 – Columbia Sportswear Company vs VF Corporation

ACC 291 Week 1 Comparative Analysis Problem

 Columbia Sportswear Company vs VF Corporation

Purpose of Assignment

The purpose of this assignment is to help you understand the basics of financial statement analysis using financial ratios on the assets section of the balance sheet, data interpretation, and how ratios are used to gain insight about the management of receivable.

Assignment Steps

Resources: Financial Accounting: Tools for Business Decision Making

Develop an 875-word analysis providing conclusions concerning the management of accounts receivable based on the financial statements of Columbia Sportswear Company presented in Appendix B and the financial statements of VF Corporation presented in Appendix C, including the following:

Based on the information contained in these financial statement, compute the following 2014 values for each company:
Accounts receivable turnover (For VF, use “Net sales” and assume all sales were credit sales)
Average collection period for accounts receivable
What conclusions concerning the management of accounts receivable can be drawn from this data?

Use the Week 1 Excel® spreadsheet to show your work and submit with your analysis.

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It takes Cookie Cutter Modular Homes, Inc., about six days

It takes Cookie Cutter Modular Homes, Inc., about six days to receive and deposit checks from customers. Cookie Cutter’s management is considering a lockbox system to reduce the firm’s collection times. It is expected that the lockbox system will reduce receipt and deposit times to three days total. Average daily collections are $126,000, and the required rate of return is 4 percent per year. Assume 365 days per year.

a. What is the reduction in outstanding cash balances as a result of implementing the lockbox system?

b. What is the daily dollar return that could be earned on these savings? (Round your answer to 2 decimal places. (e.g., 32.16))

c-1 What is the maximum monthly charge Cookie Cutter should pay for this lockbox system if the payment is due at the end of the month? (Round your answer to 2 decimal places. (e.g., 32.16))

c-2 What is the maximum monthly charge Cookie Cutter should pay for this lockbox system if the payment is due at the beginning of the month? (Round your answer to 2 decimal places. (e.g., 32.16))

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Garage, Inc., has identified the following two mutually exclusive

Garage, Inc., has identified the following two mutually exclusive projects:  

YearCash Flow (A) Cash Flow (B)0–$29,700  –$29,700 1 15,100   4,650 2 13,000   10,150 3 9,550   15,900 4 5,450   17,500

a-1 What is the IRR for each of these projects? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

a-2 Using the IRR decision rule, which project should the company accept?

a-3 Is this decision necessarily correct?   YesNo

b-1 If the required return is 12 percent, what is the NPV for each of these projects? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

b-2 Which project will the company choose if it applies the NPV decision rule?   Project AProject B

c. At what discount rate would the company be indifferent between these two projects? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

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Coronado Company issues 11,200 shares of restricted stock to its CFO

Coronado Company issues 11,200 shares of restricted stock to its CFO, Mary Tokar, on January 1, 2017. The stock has a fair value of $560,000 on this date. The service period related to this restricted stock is 5 years. Vesting occurs if Tokar stays with the company until December 31, 2021. The par value of the stock is $10. At December 31, 2017, the fair value of the stock is $321,000.

(a) Prepare the journal entries to record the restricted stock on January 1, 2017 (the date of grant), and December 31, 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.)

(b) On July 25, 2021, Tokar leaves the company. Prepare the journal entry to account for this forfeiture. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.)

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Bailey Corp. just completed the most profitable year in its 25-year history

Bailey Corp. just completed the most profitable year in its 25-year history.  Reported earnings of $1,020,000 on sales of $8,000,000 resulted in a very healthy profit margin of 12.75%.  Each year before releasing the financial statements, the board of directors meets to decide on the amount of dividends to declare for the year.  For each of the past nine years, the company has declared a dividend of $1 per share of common stock, which has been paid on January 15 of the following year.

 Presented here is the income statement for the year and the comparative balance sheets as of the end of the last two years.

                                                                         For the Year Ended

____________________________________December 31, 2011

Sales revenue                                                       $8,000,000

Cost of goods sold                                                 4,500,000

    Gross profit                                                      $3,500,000

Operating expenses                                                1,450,000

    Income before interest and taxes                     $2,050,000

Interest expense                                                        350,000

    Income before taxes                                        $1,700,000

Income tax expense (40%)                                        680,000

    Net income                                                       $1,020,000

                                                                         _____December 31____

______________________________________2011_________2010___

Cash                                                                $480,000           $450,000

Accounts Receivable                                        250,000             200,000

Inventory                                                          750,000             600,000

Prepaid Expenses                                                60,000               75,000

  Total Current Assets                                  $1,540,000        $1,325,000

Land                                                            $3,255,000         $2,200,000

Plant and Equipment                                    4,200,000           2,500,000

Accumulated Depreciation                         (1,250,000)         (1,000,000)

Long Term Investments                                  500,000               900,000

Patents                                                            650,000               750,000

  Total Long-Term Assets                          $7,355,000          $5,350,000

            Total Assets                                   $8,895,000          $6,675,000

 

Accounts Payable                                      $   350,000         $    280,000

Other Accrued Liabilities                               285,000               225,000

Income Taxes Payable                                    170,000               100,000

Dividends Payable                                                     0               200,000

Notes Payable Due Within Next Year            200,000                          0

  Total Current Liabilities                           $1,005,000         $    805,000

Long Term Notes Payable                         $   300,000         $    500,000

Bonds Payable                                             2,200,000            1,500,000

  Total Long-Term Liabilities                     $2,500,000          $2,000,000

Common Stock, $10 par                            $2,500,000          $2,000,000

Retained Earnings                                        2,890,000            1,870,000

  Total Stockholders’ Equity                      $5,390,000          $3,870,000

            Total Liabilities & Stock Equity   $8,895.000          $6,675,000

 Additional information follows:

 All sales are on account, as are all purchases.

  1. Land was purchased through the issuance of bonds.  Additional land (beyond the amount purchased through the issuance of bonds) was purchased for cash.
  2. New plant and equipment were acquired during the year for cash.  No plant assets were retired during the year.  Depreciation expense is included in operating expenses.
  3. Long-term investments were sold for cash during the year.
  4. No new patents were acquired, and none were disposed of during the year.  Amortization expense is included in operating expenses.  Patents were credited to reflect the amortization charge.
  5. Notes payable due within the next year represents the amount reclassified from long-term to short-term.
  6. Fifty thousand shares of common stock were issued during the year at par value.

As Bailey’s controller, you have been asked to recommend to the board whether to declare a dividend this year and, if so, whether the precedent of paying a $1 per share dividend can be maintained.  The president is eager to keep the dividend at $1 in view of the successful year jut completed.  He is also concerned, however, about the effect of a dividend on the company’s cash position.  He is particularly concerned about the large amount of notes payable that comes due next year.  He further notes the aggressive growth pattern in recent years, as evidenced this year by large increases in land and plant and equipment.

 Required:

1. Prepare in good form a Statement of Cash Flows using both the direct and indirect methods.

2. What do you recommend to the board of directors concerning the declaration of a cash dividend?  Should the $1 per share dividend be declared?  Should a smaller amount be declared?  Should no dividend be declared?  Support your answer with necessary computations.  From a cash flow perspective, include in your response your concerns about the following year.  Be sure to use proper grammar and punctuation.

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Sam, the youngest of four, will graduate in industrial engineering this June

Sam, the youngest of four, will graduate in industrial engineering this June. His future plans have not solidified yet, but his parents clearly believe that he will be self-supporting. In fact, they are planning on selling their home, taking a world cruise, and investing for their retirement. Sam has been asked by his parents to spend part of his semester break/holidays helping them analyze a 4-plex that they are considering buying. The building is part of a rental complex with cooperative management of the pool and parking areas. The complex is about 5 years old, and it appears stable and desirable.

 Sam realizes that other investments might be more appropriate, but they are not interested in his general advice. Rather, they have asked him to calculate the highest price that they could afford to offer (the asking price is $160,000). Also, they have asked him to ignore the impact of inflation and taxes for this preliminary financial analysis since their future financial position and the future tax laws are both unclear.

They have developed some information, but they suspect some may be missing. Since they are gone for the evening, and Sam wants to ski tomorrow, he plans on “guesstimating” any missing numbers.

 This will give his parents a preliminary estimate, and it will involve them in the iterations to a sufficiently accurate answer. Financing for the purchase will come in two pieces. The 20% down payment will be part of the proceeds from the sale of their home, while the other 80% will be financed with a 9%,  Cases in Engineering Economy 2nd by Peterson & Eschenbach 74 20-year mortgage.

 In discussing this interest rate, his parents also mentioned that their longterm investments in the stock market had averaged an annual rate of return of about 11%. The annual operating costs for the 4-plex, as reported by the current owner, have been about $350 for water and sewer, $150 for lawn mowing, and a $700 assessment from the cooperative pool/parking authority. The renters pay for their own electricity and natural gas. Property taxes are calculated at 1.8% of the assessed value, and properties are assessed at 100% of market prices with biannual adjustments by the city. The city currently appraises the property at $103,000 for the building and $41,000 for the land. Insurance for fire and liability is 1% of the building’s value. Rents for these and other similar units in the cooperative have been fairly stable at $550/month or $500/month for long-term leases.

Suggestions to the Student

1. Real estate deals usually have substantial transaction costs. Realtor’s fees average 6% and are paid by the seller. Loan origination fees, title insurance fees, etc., will often cost the buyer 1.5%. These closing costs must be apportioned between the buyer and the seller—for the property purchase and for its later sale. How much occurs now and how much at the problem’s horizon?

2. What horizon should be used? What happens to the property at the problem’s horizon?

3. How should the property’s value at the horizon be determined? What is it?

4. Are there other costs or possibilities that must be allowed for? What are they?

5. What is the maximum purchased price that can be justified?

6. Which variables represent the bulk of the “risk”? What risks are not addressed?

Your calculation.

One paragraph on the excel sheet to describe the approach you are taking, assumptions made, and your final recommendation.

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Jean, Aldrin and Sanal are executive directors and equal shareholders of ‘Grand Rialto

Jean, Aldrin and Sanal are executive directors and equal shareholders of ‘Grand Rialto Pty Ltd’ (Rialto), an Australian east coast residential development company which builds townhouses in the trendy inner suburbs of Brisbane, Melbourne, and Sydney. Jeans works in sales and marketing, and Aldrin and Sanal in legal and finance respectively. Aldrin and Sanal are also non-executive directors and equal shareholders in a business consultancy company called ‘A&S Consultants Pty Ltd’ (AS).

Rialto has never distributed a dividend despite it being very profitable. Jean wants to buy a 2017 Jaguar F Type sports car, but his salary package is not enough to buy the sports car. At the next director’s meeting he puts a motion to the board to distribute a $100,000 dividend to each shareholder. However, both Aldrin and Sanal vote against a dividend distribution and tell Jean that the business is still growing and in need of funds. Jean wants to see the most recent financial statements, but Sanal claims that the statements have not yet been finalised.

Jean really wants the sports car so he offers Aldrin and Sanal his shares for a reasonable $100,000. The shareholder’s agreement limits the sale of shares to existing shareholders at a reasonable price. However, Aldrin and Sanal decline Jean’s offer and pass a motion at a shareholders meeting that Jean be dismissed as a director because he is acting in an erratic manner and not fit to be a director.

As Jean begins to clear out his desk, Richelle, the bookkeeper, hands Jean the most recent financial statements that show that AS has been paid $300,000 in consultancy fees in the last 3 months. Jean is furious over his dismissal and the AS payment because he believes that the payment is unreasonably excessive.

Solve the issues as to whether Jean has any rights, obligations, and remedies in the circumstances.

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