Lesson 1 Discussion: Accounting – MBADM 811 Discussion Group 5

From Section Merge: MBADM 811 FA18 Merged Course (Sections 001, 002, 003)

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Lesson 2 Exercise 2: Income Statement Transactions

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Lesson 2 Exercise 3: Debits and Credits

 

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Lesson 2 Exercise 4: Journal Entries

 

Lesson 1 Exercise 3: Balance Sheet Items

 

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Lesson 1 Exercise 4: Retained Earnings

 

Lesson 1 Exercise 1: Financial Statement Users

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Lesson 2 Discussion: Ethics and Integrity – MBADM 811 Discussion Group 5

From Section Merge: MBADM 811 FA18 Merged Course (Sections 001, 002, 003)

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In such a large corporation such as Lockheed Martin, ethics and integrity hold as major principals which employees are expected to carry out each and every day. Our value statement – Do What’s Right, Respect Others, and Perform with Excellence, are the key components that have contributed to the success of the company.

No matter what area of the business, I have always felt supported to voice my values and speak up in a professional and safe environment. I am lucky to work in an environment where I do not have to question the motives or actions of my peers. In today’s evolving environment, it is crucial for organizations to openly convey their ethical policies and effectively communicate them to their employees. One way in which my corporation educates their employees on ethics & integrity is by hosting an annual training session where our immediate teams are asked to watch videos and discuss the situation in an interactive setting. The videos are based on real-life events that have previosuly occurred in my company which makes this training truly valuable. I have learned that sometimes ethics can conflict with priorities but it is important to take a step back and understand our corporate policies.

 

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Accrual vs. Cash

 

Team Assignment 1 – Accrual Accounting vs. Cash Flows

 

Mountain View Apartments (MVA), Inc.’s records show the following information as of December 31, the end of the current year:

Rent

1. MVA collected $500,000 rent in cash from tenants during the current year for occupancy during the current year.
2. $10,000 of tenants’ current-year December rent will be collected in January of next year.
3. Some tenants prepaid their January rent in December of the current year, in the amount of $14,000.

Salaries

1. In January of the current year, MVA paid employees $6,000 for work done in the prior year.
2. During the current year, MVA paid employees $70,000 for work done in the current year.
3. At the end of the current year, MVA owed employees $3,000 for work performed in December that will be paid in January of next year.

Supplies

1. MVA keeps certain maintenance supplies on hand. The amount of supplies on hand on January 1 of the current year was $7,000, and an additional $8,000 of supplies were purchased during the current year.
2. At the end of the current year, $2,000 of supplies remained on hand.

In the table below, enter the amounts for the ending balances (December 31, current year) of each account, the revenues and expenses to be reported on the current year income statement, the assets and liabilities to be reported on the current year balance sheet, and the amounts to be reported as cash flows for the current year. Assume that appropriate end-of-year adjusting journal entries have been correctly recorded in the books. Show cash inflows as positive amounts and cash outflows as negative amounts. Enter n/a for areas where an amount is not applicable.

Account	December 31 Balance	Amount Reported on Income Statement	Amount Reported on Balance Sheet		Amounts Reported on Cash Flow Statement
Rent Receivable	10000	n/a	10000		Cash received from rents:  514000
Maintenance Supplies	2000	n/a	2000		Cash paid for salaries:  -76000
Unearned Rent Revenue	14000	n/a	14000		Cash paid for supplies:  -8000
Salaries Payable	3000	n/a	3000
Rent Revenue	510000	510000	n/a
Salaries Expense	73000	73000	n/a
Maintenance Supplies Expense	13000	13000	n/a

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Instructions

Click the button to begin the exam and start the timer. The time limit is 2 hours. While working on the exam, you may go back to previous questions and change your answers. Once you submit the exam, you cannot re-open it to make changes.

This is a closed-book, closed-notes, no-collaboration exam. Remember your academic integrity pledge! You are on your honor to ensure your exam results reflect your own knowledge. Do not share or ask for any information about the exam questions once the exam opens. Items you are allowed to use are a calculator and plain scratch paper. Items you are not allowed to use are cell phones, calculators that store information, the internet, books, and notes.

Read each question carefully, and choose the best answer.

This quiz was locked 16 Sep 2018 at 23:59.

Attempt history

	Attempt	Time	Score
LATEST	Attempt 1	37 minutes	29 out of 30

 

 

Lesson 5 Discussion: Contingencies – MBADM 811 Discussion Group 5
From Section Merge: MBADM 811 FA18 Merged Course (Sections 001, 002, 003)
23 23 unread replies. 37 37 replies.

As mentioned in a previous lesson, the notes to the financial statements expand on balance sheet or income statement information and reveal much more detail. For this discussion, read “Note N, Contingent Obligations and Contingencies,” in TJX Companies’ note disclosures:

TJX Companies Notes to the Financial Statements (Links to an external site.)

Please give your opinion about whether this note provides useful information to users of the financial statements. Please make substantive comments about the type and amount of information provided, and whether it improves your understanding of TJX’s financial position. Also, respond to one or more of your classmates by adding a related thought or by agreeing or disagreeing with their assessment. Provide reasoning to support your position.

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The details within Note N of TJX Companies’ note disclosures outlines useful information to users of the financial statements. It provides insight to contingent obligations the company has related to leases and assigned or sublet properties that a general consumer would not have been aware of as it is unrelated to general operating functions. The note conveys the extent of involvement in each case and the impact on the organizations financial condition, if it can be estimated. Notably, the approximation of $42.6 million in undiscounted obligations. This piece of data is important as it may affect the evaluation of TJX Companies’ investment risk. Furthermore, the contingencies section highlighting certain legal proceedings, lawsuits, disputes and claims, notably surrounding compensation, does have the potential to draw inferences surrounding financial statement elements such as Wages Payable, and Wages Expenses. While these items are pending, if TJX was found liable of these practices mentioned, this has an impact on Income Statement and Balance Sheet items for analysis.

 

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Lesson 7 Discussion: Noncurrent Assets Disclosures – MBADM 811 Discussion Group 5
From Section Merge: MBADM 811 FA18 Merged Course (Sections 001, 002, 003)
36 36 unread replies. 38 38 replies.

On the balance sheet, the information that management communicates about noncurrent assets is limited to a few lines of numbers, showing a high-level summary of the value of these accounts. Additional information about specific noncurrent assets and related items such as depreciation can be found dispersed throughout the note disclosures. Look at the note disclosures for TJX Companies:

TJX Companies Notes to the Financial Statements (Links to an external site.)

As you peruse the notes, look for additional insight concerning noncurrent assets. In your discussion post, share what you’ve found and how it helped you better understand TJX’s financial information – or whether it raised more questions in your mind. Please add any insights from your own experience with long-term assets, and reply to at least one classmate’s post. Try to keep the discussion related to noncurrent assets, but if other people’s posts have already covered the interesting points, feel free to discuss the disclosures for other topics.

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I found the additional notes to be insightful, and they did help me to better understand TJX’s financial picture. The first piece of insight I noticed concerning noncurrent assets is the not regarding “Depreciation and Amortization.” This note gives important information for the various types of noncurrent assets (buildings; leasehold costs and improvements; and furniture, fixtures and equipment) regarding the depreciation/amortization method used and the length of the useful life used in the respective calculations. This is important information for stakeholders viewing the financial statements in understanding the value of these assets. The note then continues to provide specific figures for depreciation and amortization expense for the fiscal years of 2014 through 2016. Another important note related to noncurrent assets was the note concerning “Long-Lived Assets.” This note breaks out the value of TJX’s carrying value by geographic location and provides a much greater level of financial detail than is presented on the balance sheet. The “Goodwill and Tradenames” note also provides the financial statement user with a breakdown of the goodwill amounts for TJX and its acquisitions over the years. The “Impairment of Long-Lived Assets, Goodwill, and Tradenames” note that follows this basically states that they continually evaluate for impairment at a minimum of once a year. It was also useful to know that they have had no impairments to their Goodwill over the last three fiscal years.

 

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Team Assignment #2 – Inventory Methods

 

Change from FIFO to LIFO  

In its 2008 financial statements, Seneca Foods Corporation reported a change in its inventory method from first-in, first-out (FIFO) to last-in, first-out (LIFO). This change had a profound effect on Seneca’s earnings for the year ended March 31, 2008, as shown in its income statements:

Note the decrease in net earnings from 2007 to 2008.

Public companies usually publish a press release to announce quarterly and annual net earnings, highlighting and/or explaining the results of operations. Seneca’s 2008 press release said, in part:

The current year’s net earnings were $8,019,000, compared with $32,067,000 last year. These results reflect the Company’s decision to implement the LIFO (last-in, first-out) inventory valuation method effective December 30 (beginning of fourth quarter). The effect of this change was to reduce annual pretax earnings by $28,165,000 and net earnings by $18,307,000 below that which would have been reported using the Company’s previous inventory method. The Company believes that in this period of significant inflation, the use of the LIFO method better matches current costs with current revenues. This change also results in cash savings of $9,858,000 by reducing the Company’s income taxes, based on statutory rates. If the Company had remained on the FIFO (first-in, first-out) inventory valuation method, the pretax results, less non-operating gains and losses, would have been an all-time record of $42,644,000, up from $40,009,000 in the prior year.

Review what you have learned about the effects of LIFO and FIFO on net income, and use the above information to answer the following questions. Please answer in complete sentences and show your calculations for numerical answers.

1. Seneca’s reasoning for making the change to LIFO is that it matches current costs with current revenues. Explain what is meant by this statement.

LIFO means using the newest inventory costs as the cost of product sold expense.  In an inflationary environment the cost of product sold expense is higher using LIFO.  By using this method, there is less pretax income reported.  Whether or not revenue is comparably inflated, the net income decreases with higher expenses.  With inflation, LIFO creates higher expenses than FIFO.

 

2. Seneca states that pretax earnings were reduced by $28,165,000 using LIFO compared to FIFO. Which line item in the income statement contains the $28,165,000 difference? Which balance sheet account was also affected by the same amount? Explain the relationship between these two accounts.

Cost of product sold contains the $28,165,000 difference on the income statement.  Inventory was affected on the balance sheet. Cost of product sold is related to inventory because the value of the inventory is evaluated by the same method, FIFO or LIFO, as the cost of product sold.

3. Explain why a period of significant inflation results in tax savings upon switching from FIFO to LIFO.

Inflation means that LIFO inventory expenses are higher than FIFO inventory expenses because the most recently purchased inventory is the most expensive.  This decreases operating income.  Taxes are levied on earnings before income taxes.  When operating income is lower, less taxes are due, resulting in tax savings.  Regardless of the revenue, FIFO would show higher profit.

4. Seneca’s press release claims a cash savings of $9,858,000 on income taxes based on statutory rates. Show how this amount was calculated, assuming the applicable corporate tax rate in 2008 was 35%.

Pretaxed earnings reduction x tax rate = cash savings from tax savings

$28,165,000 x 0.35 = $9,857,750

This statement rounds numbers to the nearest thousand, which is why $9,857,750 became $9,858,000.

5. If you were shareholders of Seneca Foods in 2008, how would you react to the decrease in net income from the prior year, and to Seneca’s explanation?

As shareholders, we accept Seneca’s explanation given the tax savings but would have further inquiries.  How long do they see the inflationary period lasting?  Will they plan to continue using LIFO for future statements?  At higher cost of goods sold, the companies’ liabilities can increase.

6. We can assume that Seneca’s top management gave careful thought and consideration to the change from FIFO to LIFO. Do you think their decision was based primarily on matching current costs with current revenues, or on achieving tax savings? Why?

We think it was primarily based on achieving tax savings because the most immediate result of changing to LIFO is the income tax savings.  It is also because they changed to this accounting method in the last quarter, closest to when the financial statements are being prepared, that income tax savings may have been top management’s focus.

7. Under international accounting standards (IFRS), the LIFO method is not permitted. Why do you think this is true? How would domestic companies react if U.S. accounting standards were changed to conform to IFRS standards regarding inventory cost methods?

LIFO creates distortions in a company’s performance and gives them the ability to dodge income taxes. Most governments probably view it in their best interest to not allow it because they want more income tax money during periods of inflation.  Given that the IFRS is an international organization, they would want to remove potentially exploitative methodologies.  For example, with LIFO, there is the chance for LIFO liquidations.  Also, preventing LIFO should lead to companies using similar methods of income evaluation, for example FIFO or averaging, and thus make their financial statements more comparable.  Even in the US, companies using LIFO are required to put a statement in their notes about their FIFO inventories, if they are significantly different than LIFO.

American companies probably would not react well to additional government regulation. Companies using LIFO would look for other areas to offset the loss in savings.  Companies currently not using LIFO would be mostly unaffected.

 

Exam 2

Instructions

Click the button to begin the exam and start the timer. The time limit is 2 hours. While working on the exam, you may go back to previous questions and change your answers. Once you submit the exam, you cannot re-open it to make changes.

For this exam, you may refer to your text book and notes, and you may use a calculator and plain scratch paper as needed. Use of the internet and collaboration with other people are NOT allowed. As always, remember your academic integrity pledge! You are on your honor to ensure your exam results reflect your own knowledge. Do not share or ask for any information about the exam questions once the exam opens.

Read each question carefully, and choose the best answer.

This quiz was locked 21 Oct 2018 at 23:59.

Attempt history

	Attempt	Time	Score
LATEST	Attempt 1	40 minutes	28 out of 30

Correct answers are no longer available.

Score for this quiz: 28 out of 30

Submitted 17 Oct 2018 at 3:19

This attempt took 40 minutes.

 

Question 1

1 / 1 pts

A company reported the following information for its most recent year of operation: inventory purchases, $100,000; beginning inventory, $20,000; and cost of goods sold, $110,000. How much was the company’s ending inventory?

 

$10,000

 

$15,000

 

$20,000

 

$30,000

 

Question 2

1 / 1 pts

On January 1, 2016, Wasson Company purchased a delivery vehicle costing $40,000. The vehicle has an estimated 6-year life and a $4,000 residual value. Wasson uses the units-of-production depreciation method and estimates that the vehicle will be driven 100,000 miles over its 6-year life. What is the vehicle’s book value as of December 31, 2017, assuming the vehicle was driven 10,000 miles during 2016 and 18,000 miles during 2017?

 

$29,920

 

$28,800

 

$25,920

 

$24,800

 

Question 3

1 / 1 pts

Metro Music collected $8,000 in advance from customers for music lessons in the first quarter of the year. By the end of the quarter, $7,000 worth of the lessons had been provided. What journal entry would Metro record at the end of the quarter related to these music lessons?

 

Debit Cash $1,000; Credit Unearned Revenue $1,000

 

Debit Unearned Revenue $7,000; Credit Service Revenue $7,000

 

Debit Cash $7,000; Credit Service Revenue $7,000

 

Debit Unearned Revenue $1,000; Credit Service Revenue $1,000

 

Question 4

1 / 1 pts

Binz Company sells garbage bins and provides cleaning services to office clients. On June 1, Binz entered into a contract with a client that included delivery of 100 garbage bins and 5 years of cleaning services. The garbage bins were delivered to the client the same day. Which of the following is true?

 

Revenue for the garbage bins and the cleaning services must be recognized on June 1.

 

Revenue for the garbage bins is recognized on June 1, and revenue for the cleaning service is recognized over the 5 years as those services are performed.

 

Binz Company should not recognize any revenue until the end of year 5.

 

Revenue for the garbage bins is recognized on June 1, and no revenue will be recognized for the cleaning services until the end of year 5.

 

Question 5

1 / 1 pts

Phipps Company borrowed $25,000 cash on October 1, 2016, and signed a nine-month, 8% interest-bearing note payable. Interest is to be paid at maturity. Assume that no adjusting entries have been made for accrued interest during the year. What amount of accrued interest payable should be reported on the December 31, 2016 balance sheet?

 

$250

 

$300

 

$500

 

$750

 

Question 6

1 / 1 pts

RJ Corporation has provided the following information about one of its inventory items:

Date	Transaction	Number of Units	Cost per Unit
1/1	Beginning Inventory	400	$3,200
6/6	Purchase	800	$3,600
9/10	Purchase	1,200	$4,000
11/15	Purchase	800	$4,200

During the year, RJ sold 3,000 units.

What was ending inventory using the average cost flow assumption under a periodic inventory system?

 

$840,000

 

$640,000

 

$880,000

 

$770,000

 

Question 7

1 / 1 pts

Which of the following describes an accrued liability?

 

It is an expense that has been incurred but not yet paid

 

It is an expense that has been both incurred and paid

 

It is a liability where the cash flow has taken place but the revenue has not yet been earned

 

It is an expense that has been prepaid but not yet consumed

 

Question 8

1 / 1 pts

Which of the following statements is correct when inventory unit costs are increasing?

 

LIFO will result in higher net income and lower inventory valuation than will FIFO

 

LIFO will result in lower net income and a higher inventory valuation than will FIFO

 

FIFO will result in lower net income and a lower inventory valuation than will LIFO

 

FIFO will result in higher net income and a higher inventory valuation than will LIFO

 

Question 9

1 / 1 pts

Young Company is involved in a lawsuit. When would the lawsuit be recorded as a liability on the balance sheet?

 

When the loss is probable, regardless of whether the loss can be reasonably estimated

 

When the loss is reasonably possible and the amount can be reasonably estimated

 

When the probability of loss is remote and the amount can be reasonably estimated

 

When the loss is probable and the amount can be reasonably estimated

 

Question 10

1 / 1 pts

Which of the following investment securities held by Zinger Inc. are not reported at fair value in its balance sheet?

 

Debt securities held as trading securities

 

Debt securities held as available for sale securities

 

Equity securities held as long-term investments

 

Debt securities held to maturity

 

Question 11

1 / 1 pts

Wilmington Company reported pretax income of $25,000 during 2016 and $30,000 during 2017. After the 2017 financial statements were prepared, it was discovered that the ending inventory for 2016 was understated by $2,000, and was not corrected. Ending inventory in 2017 was correct. Which of the following is one effect of the error?

 

Pretax income in 2017 was understated.

 

Pretax income in 2016 was understated.

 

Beginning inventory in 2017 was overstated.

 

COGS in 2016 was understated.

 

Question 12

1 / 1 pts

Dover Corporation has provided the following information for the year just ended:
•  Cash sales totaled $125,000
•  Credit sales totaled $279,000
•  Cash collections from customers for services that have not been provided yet totaled $38,000
•  There was an $11,000 gain from the sale of property and equipment
•  Interest income totaled $8,000

How much did net income increase due to these items?

 

$144,000

 

$450,000

 

$423,000

 

$412,000

 

Question 13

1 / 1 pts

Salvia Company recently purchased a truck. The price negotiated with the dealer was $40,000. Salvia also paid sales tax of $2,000 on the purchase, shipping and preparation costs of $3,000, and insurance for the first year of operation of $4,000. What amount should Salvia capitalize as the cost of the truck?

 

$42,000

 

$45,000

 

$40,000

 

$43,000

 

Question 14

1 / 1 pts

Phillips Corporation purchased 1,000,000 shares (10%) of MN Corporation’s common stock on June 30, 2017 for $42 per share. On December 20, 2017, MN paid a $4,000,000 cash dividend to its shareholders. On December 31, 2017, MN’s stock was trading at $45 per share.

What value will be reported on Phillips’ balance sheet at December 31, 2017 for the investment in MN?

 

$45,000,000

 

$46,800,000

 

$42,000,000

 

$47,200,000

 

Question 15

1 / 1 pts

Colby Corporation has provided the following information for the year just ended:

• Operating revenues from customers were $199,700.
• Operating expenses for the store were $111,000.
• Interest expense was $9,200.
• Gain from sale of plant and equipment was $3,300.
• Dividend payments to Colby’s stockholders were $7,700.
• Income tax expense was $36,000.
• Prepaid rent was $5,000.

What was Colby’s net income?

 

$39,100

 

$52,700

 

$48,300

 

$46,800

 

Question 16

1 / 1 pts

Which of the following would not be a component of the balance in the inventory account?

 

Costs to prepare the inventory for sale

 

Costs related to selling the inventory

 

Costs to inspect the inventory

 

Costs to ship the inventory from the manufacturer (freight-in)

 

Question 17

1 / 1 pts

Failure to make a necessary adjusting entry for accrued interest on a note payable would result in which of the following?

 

Net income would be overstated and assets would be understated

 

Net income and liabilities would both be understated

 

Liabilities and assets would both be understated

 

Net income would be overstated and liabilities would be understated

 

Question 18

1 / 1 pts

The following transactions occurred during July:
•  Received $900 cash for services that were provided to a customer July 2
•  Received a $2,200 cash contribution from the owner of the business on July 6
•  Received $750 from a customer July 11, in payment of his account receivable which arose from sales in June
•  Provided services to a customer on credit for $375 on July 15
•  Borrowed $6,000 from the bank by signing a promissory note on July 20
•  Received $1,250 cash from a customer on July 25 for services to be provided in August
What was the amount of revenue recognized in July on an accrual basis?

 

$ 1,275

 

$ 3,275

 

$ 900

 

$ 2,525

 

Question 19

1 / 1 pts

Carter Company sold an asset for $10,000 cash at the end of the eighth year of its estimated 10-year life. The original cost was $50,000 with an estimated residual value of $5,000. The asset was being depreciated using the straight-line method. What was the gain or loss on the disposal?

 

$5,500 gain

 

$4,000 loss

 

$10,000 gain

 

$1,000 loss

 

Question 20

1 / 1 pts

Earnings quality refers to:

 

The ability of reported earnings to predict a company’s future earnings

 

The ability of management to budget for expenditures in the following year

 

The ability of management to quickly collect cash from customers

 

The ability of management to sell its inventory for a profit

 

Question 21

1 / 1 pts

If a repair expense is incorrectly capitalized, instead of recorded as repairs and maintenance expense, which of the following statements is true?

 

The current year’s net income will be higher and future depreciation expense will be higher

 

The current year’s net income will be higher and future depreciation expense will be lower

 

The current year’s net income will be lower and future depreciation expense will be lower

 

The current year’s net income will be lower and future depreciation expense will be higher

 

Question 22

1 / 1 pts

Barrington Company must write down its inventory from its cost of $260,000 to its net realizable value of $248,000 at December 31, 2016. The write-down will result in which of the following in 2016?

 

Ending inventory will increase by $12,000

 

Liabilities will increase by $12,000

 

Cost of goods sold will decrease by $12,000

 

Gross profit will decrease by $12,000

 

IncorrectQuestion 23

0 / 1 pts

Hill Inc. purchased an asset on January 1 of the current year. Hill chose an accelerated depreciation method to depreciate the asset, instead of the straight-line method. Which of the following is correct?

 

The book value of the asset at the end of the current year will be higher than it would be under the straight-line method.

 

Net income will be higher in the current year under the accelerated method than under the straight-line method.

 

Depreciation expense will be higher in the current year under the accelerated method than under the straight-line method.

 

The balance in the accumulated depreciation account will be lower at the end of the current year than it would be under the straight-line method.

 

Question 24

1 / 1 pts

Gilman Company purchased 40% of the common stock of Burke Corporation on January 1, 2017, for $4,000,000. The records of Burke Corporation showed the following on December 31, 2017:
•  2017 net income: $575,000
•  Dividends declared and paid to shareholders during 2017: $30,000
•  Market price per share: $42

What is the value of the investment in Burke on Gilman Company’s December 31, 2017 balance sheet?

 

$3,800,000

 

$4,218,000

 

$4,124,000

 

$4,000,000

 

Question 25

1 / 1 pts

Which of the following describes a revenue or expense to be recognized in the current period’s income statement?

 

Cash collected from an account receivable

 

Wages owed to employees who worked during the period

 

Inventory purchased to sell to customers

 

Cash received from a client before the service is provided

 

Question 26

1 / 1 pts

In accounting for long-term assets, which of the following best describes the objective of depreciation?

 

To allocate the cost of a tangible asset to the periods in which its use contributes to earning revenue

 

To record the amount of deterioration of a tangible asset

 

To ensure the value of the asset on the balance sheet is the current market value

 

To ensure the asset is not used for more than its useful life

 

IncorrectQuestion 27

0 / 1 pts

When SB Corporation purchased Banner Corporation in the current year, SB recorded $1,500,000 of goodwill. How should SB account for the goodwill after the acquisition?

 

The goodwill should be amortized straight-line over its estimated useful life.

 

The goodwill should remain on SB’s books as a long-term asset, and should not be amortized because it has an indefinite life.

 

The value of the goodwill should be increased each year by the amount of net income earned by Banner.

 

The goodwill should be written down each year by the amount of net income earned by Banner.

 

Question 28

1 / 1 pts

Rosco Works, Inc. estimated that $5,000 of the $98,000 balance in accounts receivable would be uncollectible. The allowance for doubtful accounts (ADA) already had a $400 credit balance at year-end. What adjustment to ADA is needed to ensure that accounts receivable is presented at the appropriate value on the balance sheet?

 

$400 debit

 

$5,400 debit

 

$5,000 credit

 

$4,600 credit

 

Question 29

1 / 1 pts

On January 2, 2017, Dooley Corporation purchased 12% of Roller Corporation’s common stock for $50,000. On December 15, 2017, Roller paid a cash dividend of $10,000 to its shareholders. Roller’s net income for the year ended December 31, 2017 was $60,000. What journal entry will Dooley post to recognize revenue from Roller?

 

Debit Cash $8,400; Credit Investment Revenue $8,400

 

Debit Cash $1,200 and Investment in Roller $7,200; Credit Investment Revenue $8,400

 

Debit Cash $7,200; Credit Investment Revenue $7,200

 

Debit Cash $1,200; Credit Investment Revenue $1,200

 

Question 30

1 / 1 pts

Purdum Farms borrowed $10 million by signing a five-year note on December 31, 2016. Repayments of the principal are paid annually in installments of $2 million each. Purdum Farms made the first payment on December 31, 2017 and then prepared its 2017 year-end financial statements. What amount should be reported as current liabilities in connection with the note at December 31, 2017?

 

$10 million

 

$0

 

$8 million

 

$2 million

 

 

Lesson 9 Discussion: Nonfinancial Indicators – MBADM 811 Discussion Group 5

From Section Merge: MBADM 811 FA18 Merged Course (Sections 001, 002, 003)

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An organization’s business strategy is crucial to influencing and generating success due to the required alignment with business objectives. Without a strategy that supports the vision, recognizing strengths and weaknesses, market competition, and resource allocation, the management of financial assets can be easily misaligned resulting in business failure. While most organizations publicly articulate the organizational vision and mission, the specific business strategy to achieve these goals tend to be exclusive to internal members. This information has merit in influencing the investment decisions of stakeholders, however due to the sensitivity of business strategy in maintaining or driving a competitive advantage for business sustainability, I do feel it is a matter of balancing the timing of sharing this type of information with the general public. If the information is publicly known too far in advance of implementation, while investors may appreciate the insight, competition has the potential to undercut the organization in the marketplace having negative implications.

 

 

An important nonfinancial success driver that I’ve been close to is innovation. My role as a research and development scientist has been in the front end innovation group. This group is responsible for devising and testing new innovative ways to improve our products. We’re not the biggest group in the company, but we have a diverse range of skills and experience that enable us to challenge each other and encourage outside-the-box thinking. I understand that not all companies can afford to support a group within R&D that doesn’t have an immediate return on investment to the company. My company has this liberty because we’re a multi-billion dollar consumer product company. However, a small company doesn’t need to support an entire innovation group to be innovative. It starts with the mindset of the individuals shaping the vision of the company. Quantifying innovation can be difficult, meaning a company needs to carefully detail how they’re resourcing their innovation plans. Investors are often excited to hear about a company’s innovation plans because it shows they’re thinking towards to future and have plans to grow. Simply, when a company grows, investors usually get a strong return on investment. The importance of innovation is highlighted when you look at the company’s that failed due to a lack of innovation and/or a more innovative alternative took over their market. The list is long and contains numerous large companies, Kodak, Polaroid, Blockbuster, Borders, etc… The fact is, if a company doesn’t innovate or plans for future growth, then they will become stagnant and more vulnerable to outside competition.

 

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Lesson 10 Discussion: Pension Plan Poll – MBADM 811 Discussion Group 5

From Section Merge: MBADM 811 FA18 Merged Course (Sections 001, 002, 003)

27 27 unread replies. 31 31 replies.

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Team Assignment #3 – Long-Term Debt

 

At the end of 2000, Nittany, Inc. issued zero-coupon bonds that mature in 2020. The face value of the bonds was $1.8 billion, and they sold for $968 million on the issue date. The effective market interest rate was 3.149% on that date. At the end of 2005, Nittany repurchased $257 million in face value of the notes for a purchase price of $127 million, resulting in a gain on the early extinguishment of debt.

Review what you have learned about bonds as well as the explanation of zero coupon bonds on p. 525 of your text, and answer the following questions, expressing all numbers in millions (for example, the face amount of the notes is $1,800). Please answer in complete sentences and show your calculations for numerical answers and journal entries.

1. What journal entry did Nittany, Inc. enter to record the issuance of the bonds, assuming the issue date was 12/31/2000?

Cash                                                               968

Discount on Bonds Payable                       832

Bonds Payable                                                         1,800

2. Prepare an amortization schedule for the bonds. Assume interest is calculated annually, and use the effective interest method.

Below is the amortization schedule for period 2000 – 2020.  The yearly amortization of bond discount equals the interest expense.  The ending price in each year represents the beginning price in addition to the interest expense.

Period	Beginning Price	Interest Expense					Bond Discount Bal.	Bonds  Payable	Ending price
2000									968.00
2001	968.00	968	*	0.03149	=	30.48	801.52	1,800.00	998.48
2002	998.48	998.5	*	0.03149	=	31.44	770.08	1,800.00	1,029.92
2003	1,029.92	1030	*	0.03149	=	32.43	737.64	1,800.00	1,062.36
2004	1,062.36	1062	*	0.03149	=	33.45	704.19	1,800.00	1,095.81
2005	1,095.81	1096	*	0.03149	=	34.51	669.68	1,800.00	1,130.32
2006	1,130.32	1130	*	0.03149	=	35.59	634.09	1,800.00	1,165.91
2007	1,165.91	1166	*	0.03149	=	36.71	597.37	1,800.00	1,202.63
2008	1,202.63	1203	*	0.03149	=	37.87	559.50	1,800.00	1,240.50
2009	1,240.50	1240	*	0.03149	=	39.06	520.44	1,800.00	1,279.56
2010	1,279.56	1280	*	0.03149	=	40.29	480.15	1,800.00	1,319.85
2011	1,319.85	1320	*	0.03149	=	41.56	438.58	1,800.00	1,361.42
2012	1,361.42	1361	*	0.03149	=	42.87	395.71	1,800.00	1,404.29
2013	1,404.29	1404	*	0.03149	=	44.22	351.49	1,800.00	1,448.51
2014	1,448.51	1449	*	0.03149	=	45.61	305.88	1,800.00	1,494.12
2015	1,494.12	1494	*	0.03149	=	47.05	258.83	1,800.00	1,541.17
2016	1,541.17	1541	*	0.03149	=	48.53	210.30	1,800.00	1,589.70
2017	1,589.70	1590	*	0.03149	=	50.06	160.24	1,800.00	1,639.76
2018	1,639.76	1640	*	0.03149	=	51.64	108.60	1,800.00	1,691.40
2019	1,691.40	1691	*	0.03149	=	53.26	55.34	1,800.00	1,744.66
2020	1,744.66	1800	–	1744.66	=	55.34	0.00	1,800.00	1,800.00

3. What amount of interest expense for the bonds did Nittany report on its income statement in 2001?

Based on the amortization schedule, the amount of interest expense for 2001 is 30.48 million

4. Interest expense is deductible on the corporate tax return. Assuming a corporate tax rate of 35% in 2001, how much did Nittany save in taxes by deducting the interest expense? What was the after-tax interest cost in 2001?

 

0.35 * 30.48 = 10.67

$10.67 million (rounded to the nearest ten thousandth) was saved in taxes by deducting the interest expense.

30.48 – 10.67 = 19.81

$19.81 million was the after-tax interest cost

 

5. At the end of 2005, what was the book value of the bonds before the repurchase transaction? Show the two accounts and balances that are combined to determine the book value.

Bonds payable – Discount on Bonds = Book Value

1,800 – 669.68 = 1,130.32

The book value of the bonds was $1130.32 million from the amortization table.

6. Prepare the journal entry to record the repurchase of some of the debt at the end of 2005. [Repurchasing some of the bonds before the maturity date is called “early extinguishment” of the debt. The company makes a payment to the bondholders, who relinquish the bonds and their right to collect the face value at maturity, and the debt is removed from the books. To record the early extinguishment, the company makes a journal entry to remove the appropriate book value and decrease cash by the amount paid to the bondholders. If those two amounts are not equal, a gain or loss is recorded to balance the journal entry. Look at your answer to #5, and note that a portion of each account related to this debt must be removed from the books. The journal entry is analogous to the entry you would use to remove a long-term asset from the books when it is sold.]

 

Bond payable recalled/Bond Payable * Discount on Bond Payable at time of Recall = Discount on Bond Payable Recalled

257/1800*669.68 = 95.62

Gain on Bond Call = Repurchased Face Value – (Discount on Bond Payable Recalled + Purchase Price)

Gain on Bond Call = 257 – (95.62 + 127) = 34.38

 

Debit     | Credit

Bonds Payable                                             257        |

Discount on Bond Payable                        |95.62

Gain on Bond Call                                        |34.38

Cash                                                               |127

7. Why might company managers choose to issue zero-coupon bonds instead of interest-bearing bonds? Why might they decide to repurchase some of the bonds before the maturity date?

Issuing zero coupon bonds means the company doesn’t have to pay a set amount every period; instead they pay at maturity.   They might decide to repurchase the bond if current market interest rates are lower than when they were sold.  This allows the company to reissue the bonds at a lower interest rate and presents the opportunity for current gains.

 

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Lesson 13 Discussion: Importance of Cash Flows – MBADM 811 Discussion Group 5

From Section Merge: MBADM 811 FA18 Merged Course (Sections 001, 002, 003)

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A story that comes to mind that demonstrates the importance of both having cash on hand and accrual accounting is one about a wedding gift. A few years ago I gave a check as a wedding gift to a distant relative. For whatever reason, this couple did not cash my wedding gift check for almost 3 months. This demonstrated the importance of accrual accounting; specifically, the need to recognize the expense at the time I gave the check so I would account for the money not being available right away. It also demonstrates that it’s always good to have ample cash as a buffer in the checking account, above and beyond that required for the normal recurring expenses, to cover for instances like these where the amounts might be much less and it’s possible I wouldn’t even notice that they haven’t been cashed for some time.

Answer

As cash flow is a key indicator of a corporation’s financial health, it is important to ensure that there is a positive cash flow by taking in more cash than sending out. Positive cash flows result in having an ongoing ability to sustain a company’s operations while fostering long-term growth and profitability. An example of how strong cash flows can aid in a company’s future success is investing in research and development or new and innovative technologies. By utilizing cash in a proactive way, a company can mitigate risk associated in operating in a reactive manner to ensure continued success.

 

 

Lesson 14 Discussion: Financial Statement Analysis – MBADM 811 Discussion Group 5

From Section Merge: MBADM 811 FA18 Merged Course (Sections 001, 002, 003)

30 30 unread replies. 31 31 replies.

 

An additional resource used to analyze a company’s financial position is the 10-K form. This form is a required report submitted on an annual basis to the SEC and outlines a corporations performance. Specifically, it includes information pertaining to the history, risks, legal disclosures, audited financial statements, and more in order to analyze their financial condition in an organized fashion. I found it very useful that this form is broken down into key sections in which it can be easier to compare against other corporations.

After reviewing Apple, Inc.’s 2017 10-K form, I learned a great deal about their financial position. Specifically, in Part II, Apple disclosed a presentation of financial data for the past five years. This made it very easy for me to compare their past financial results against their latest performance. It was interesting to see that Apple’s net sales and net income peaked in 2015 and slowly decreased in 2016 and 2017. The management discussion and analysis presented in this form provided an adequate overview of the companies financial and operational position. Overall, I believe this form provides an accurate depiction of the corporation for financial analysts on an annual basis.

https://www.sec.gov/Archives/edgar/data/320193/000032019317000070/a10-k20179302017.htm (Links to an external site.)

 

 

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The first company I worked for after I graduated with my B.S. degree was Cerner Corporation. Cerner produces software for hospitals, clinics and health systems that enables them to conduct healthcare more effectively through online and electronic means (Electronic Medical Records, etc.).

It was very interesting and eye opening to review Cerner’s 10-K form (annual report) for 2017, since I am very familiar with the history of the company, its founders and the competition it faces in the industry.

One thing that I found very interesting was how Cerner’s revenue was broken down by source for the years 2015-2017. Cerner categorized it’s revenue into two areas: Revenues by “solutions and services” and revenues by “segment: Domestic and Global”. The thing I found intriguing about these numbers was the consistency between the three years. The numbers for all revenue sources were either an identical percentage or nearly identical in every category from 2015, 2016 and 2017.

That tells me that Cerner’s business model and how it conducts its operations to generate revenue are remarkably consistent from year to year. It also shows that Cerner is concentrating on its core services and markets and isn’t expanding it’s reach into other areas of revenue generation within the market. If it were, then I would expect the percentages in one segment to decrease while another would increase, but they stay nearly the same from year to year.

Even the percentage of revenue from Domestic sources vs. Global sources remains nearly the same with little or no variation from year to year in each category. Therefore Cerner is also remaining static with respect to its global and domestic offerings, with its footprint also remaining static in those markets (no growth or decline).

Source: https://www.cerner.com/about/investor-relations/annual-reports

 

 

Lesson 15 Discussion: Learning Reflection – MBADM 811 Discussion Group 5

From Section Merge: MBADM 811 FA18 Merged Course (Sections 001, 002, 003)

11 11 unread replies. 27 27 replies.

 

In taking this course while working in a corporate environment, I quickly learned the manner in which financial accounting provides strategic insight into business decisions and direction beyond traditional financial statements. From reading through my organizations 10-K form to learning about leases, I immediately identified workplace correlations that enhanced my investment in continuing to maintain awareness surrounding my organizations financial data. The 10-K form provided insight into leadership risk evaluation, which had direct insights to business direction. Furthermore, in learning about lease reporting in financial statements, I realized and understood the underlying cause of our IT departments’ recent urgency towards demanding the return of leased equipment, even shutting down devices for colleagues whom delayed returns. By leveraging the lessons learned throughout this course, I will be able to further my workplace contributions due to my recognition of the interrelationships present between leadership decision-making, sustainability, and organization finances.

 

 

Looking back at my first discussion board post, I have really come a long way! Starting with a very limited knowledge of accounting based largely on what I learned in a course in high school, I feel like I now have an excellent, well-rounded view of accounting. While my involvement in accounting work is limited due to my role in marketing and business development, I had an experience recently where I was able to complete a task that normally I would have had to reach out to someone else for. In responding to a large proposal, the client was requesting a table of financial information to be completed. The specific information requested was coming from a variety of places on the income statement, balance sheet, and disclosure notes, and of course the table didn’t identify this. Before taking this course, I would have promptly sent this off to someone in our finance department and then waited several days before I got anything back – but now, I was able to grab our firm’s audited financial statements and take care of it myself. It feels good to be able to look over our financial statement documents and be able to understand, interpret, and derive meaning from them, versus just looking at them like they are a foreign language.

 

 

 

Deanna, I have had similar experiences at work where I have been able to take lessons learned and apply it in the workplace. For example, as a buyer in our Supply Chain Management organization, I often am asked to review the performance based payments that are made to our supply base. This task can be very tedious as we must verify that the supplier completed the task adequately as outlined in our contracts. One step of the process is to send the payments to our accounts payable team for verification. With a better understanding of cashflows, it has made this task much easier for me to accomplish. I am excited to apply accounting principles in my role so early on in the OMBA program and believe the financial accounting concepts will help me along my professional career.

 

 

Reflecting on my first discussion post, it is surprising to see how much my view on accounting has changed since taking my very first accounting course in my undergraduate program. As a young freshman back in 2012, it was difficult for me to understand the accounting principles and grasp how it relates in the workplace. This semester I have learned the importance of the lessons learned and can truly understand how they correlate to my professional career. One of the biggest takeaways I took from this course includes the information that can be obtained from financial statements. From a managerial standpoint, business leaders can learn where their risks rely and where they can improve in order to effectively manage their business. For investors, they can understand the financial state of an organization at which their investments reside. With a better understanding of financial accounting, I believe I am more equipped to enhance my career.

 

 

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Instructions

Click the button to begin the exam and start the timer. The time limit is 2 hours. While working on the exam, you may go back to previous questions and change your answers. Once you submit the exam, you cannot re-open it to make changes.

For this exam, you may refer to your text book and notes, and you may use a calculator and plain scratch paper as needed. Use of the internet and collaboration with other people are NOT allowed. As always, remember your academic integrity pledge! You are on your honor to ensure your exam results reflect your own knowledge. Do not share or ask for any information about the exam questions once the exam opens.

Read each question carefully, and choose the best answer.

This quiz was locked 11 Dec 2018 at 23:59.

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