In April 2010, a gold mining company, Cahaya Emas was formed.
Cahaya Emas had convinced numerous mining experts that they had
rights to one of the largest gold deposits ever discovered. The
gold mine, located on a remote island in the East Coast of
Peninsula Malaysia, supposedly had so much gold that the actual
price of gold on the open market dropped significantly due to the
anticipation of an increased gold supply. Within a few months,
thousands of Malaysian – big-time investors, pension and mutual
fund, managers and many small investors, including factory workers
– got caught up in “Gold fever”. The company’s stock price shot
from pennies to more than $250 per share before a 10-for-1 stock
split was announced. Thousands of investors believed they were on
the verge of becoming millionaires.
Two years later, the president and CFO, who are also the founder of
the company were found committing financial statement fraud which
went on for about two years. The president and the CFO were the
fraud perpetrators. Kate, the accountant was aware of the financial
statement fraud being committed by the management of her company,
but she never reported it.
As is the case with many frauds of this type, numerous class-action
lawsuits were filed against Cahaya Emas management, alleging that
they misled the shareholders.
REQUIRED:
A. Discuss some of the possible reasons for Kate’s
hesitance to come forward to report the financial statement
fraud.
B. What were some of the perpetrators’ motivations to
commit financial statement fraud?
In: Accounting
The comparative balance sheet for company “Delta” in € for years
2017 and 2018 is
given below:
Comparative Balance Sheet of “Delta” |
|||||
Assets |
2018 |
2017 |
Liabilities & |
2018 |
2017 |
Fixed assets: |
Stockholders' equity: |
1,900,000 |
1,600,000 |
350,000 |
400,000 |
The income statement of company “Delta” for 2018 is also given below:
Income Statement of “Delta” for 2018 |
|
Sales |
6,500,000 |
Required:
1. Prepare the cash flow statement using the indirect method. For
your answer you need to consider that company “Delta” has
repurchased shares and it has decreased respectively its share
capital.
2. Which is the dividend payout ratio for “Delta” for year 2018? If the company increases the dividend payout ratio by 10%, what would the effect be to the retained earnings?
3. Is the increase of the dividend payout ratio a good signal and what is the impact on the free cash flows? What do you think that an analyst should consider when the dividend payout ratio increases? (max: 200 words)
4. What inferences can you draw from the analysis of “Delta” cash flows? Explain briefly (max: 300 words)
In: Accounting
You are an audit manager currently finalizing your 31 December
2013 audits. The following independent and material matters have
come to your attention:
1. The audit of the statutory records of Whale Ltd, a
reporting entity, revealed the following problems:
• Failure to update the members’ register for changes
in shareholders;
• Failure to obtain written consent from directors to
act;
• Directors’ minutes not prepared in respect of the
current year;
• Failure to hold the AGM in respect of the previous
financial year.
The company made no comment in respect of either the failure to
keep properly updated statutory registers or the holding of the
AGM.
2. Shark Ltd, a reporting entity, uses the last-in first-out basis in respect of valuation of closing inventory, which is one of the most significant balance sheet accounts. The difference between first-in first-out and last-in-first-out has a material effect on the closing inventory balance.
3. ABC Ltd (ABC) is a holding company with a number
of wholly owned subsidiaries. One of these, FX Ltd (FX), is a
self-sustaining foreign subsidiary with manufacturing and
distribution facilities throughout South-East Asia. The group
accounts of ABC and its subsidiaries consist of the consolidated
accounts of ABC and its subsidiaries and exclude the accounts of
FX, which are attached separately.
The consolidated accounts include a note stating that the directors
believe that it is misleading to consolidate FX as its operations
are very different from those of the rest of the group and carried
out under substantially different conditions. The note includes
details of inter-company balances and transactions.
REQUIRED:
Critically discuss in relation to each of the above circumstances
the audit and internal control issues to be considered and their
likely impact on the audit report to be issued.
In: Accounting
In: Accounting
Discuss the importance of auditing as it relates to the accounting profession and the business community. (2) Discuss the effects of technology as it relates to the future of the profession.
please cite references. thanks
what information needed? It is simply what is the importance of auditing as it relates to the profession and the business community.
In: Accounting
Federal Semiconductors issued 9% bonds, dated January 1, with a face amount of $860 million on January 1, 2018. The bonds sold for $786,215,929 and mature on December 31, 2037 (20 years). For bonds of similar risk and maturity the market yield was 10%. Interest is paid semiannually on June 30 and December 31. Federal determines interest at the effective rate. Federal elected the option to report these bonds at their fair value. On December 31, 2018, the fair value of the bonds was $770 million as determined by their market value in the over-the-counter market. Assume the fair value of the bonds on December 31, 2019 had risen to $776 million. Required: Complete the below table to record the following journal entries. 1. & 2. Prepare the journal entry to adjust the bonds to their fair value for presentation in the December 31, 2018, balance sheet, and adjust the bonds to their fair value for presentation in the December 31, 2019, balance sheet. Federal determined that one-half of the increase in fair value was due to a decline in general interest rates.
In: Accounting
Write between 500 to 1000 words about the differences between S.A.P and Sage
In: Accounting
Financial Statement Analysis The financial statements for Nike, Inc., are available at the Appendix C link above. The following additional information (in millions) is available: Accounts receivable at May 31, 2011: $3,138 Inventories at May 31, 2011: 2,715 Total assets at May 31, 2011: 14,998 Stockholders' equity at May 31, 2011: 9,843 Determine the following measures for the fiscal years ended May 31, 2013 (fiscal 2012), and May 31, 2012 (fiscal 2011). Do not round interim calculations. Round the working capital amount in part (a) to the nearest dollar. Round all other final answers to one decimal place. When required, use the rounded final answers in subsequent computations. Fiscal Year 2012 Fiscal Year 2011 a. Working capital (in millions) $ $ b. Current ratio c. Quick ratio d. Accounts receivable turnover e. Number of days' sales in receivables days days f. Inventory turnover g. Number of days' sales in inventory days days h. Ratio of liabilities to stockholders' equity i. Ratio of sales to assets j. Rate earned on total assets, assuming interest expense is $23 million for the year ending May 31, 2013, and $31 million for the year ending May 31, 2012 % % k. Rate earned on stockholders' equity % % l. Price-earnings ratio, assuming that the market price was $61.66 per share on May 31, 2013, and $53.10 per share on May 31, 2012 m. Percentage relationship of net income to sales % %
In: Accounting
Amber Mining and Milling, Inc., contracted with Truax Corporation to have constructed a custom-made lathe. The machine was completed and ready for use on January 1, 2018. Amber paid for the lathe by issuing a $500,000, three-year note that specified 4% interest, payable annually on December 31 of each year. The cash market price of the lathe was unknown. It was determined by comparison with similar transactions that 10% was a reasonable rate of interest. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1-a. Complete the table below to determine the price of the equipment. 1-b. Prepare the journal entry on January 1, 2018, for Amber Mining and Milling’s purchase of the lathe. 2. Prepare an amortization schedule for the three-year term of the note. 3. Prepare the journal entries to record (a) interest for each of the three years and (b) payment of the note at maturity.
In: Accounting
Direct materials |
4 yards per unit at $3 per yard |
Direct labor |
2 hours per unit at $10 per hour |
Variable mfg OH |
2 direct labor hours per unit at $4 per hour |
Rain Gear actually produced and sold 30,000 units for the year. During the year, the company purchased and used 130,000 yards of material for $429,000. A total of 65,000 labor hours were worked during the year at a cost of $637,000. Variable overhead costs totaled $231,000 for the year.
In: Accounting
The following information is computed from Katy Inc.'s annual report for 2018.
2018 |
2017 |
|
Current assets |
$ 2,731,020 |
$ 2,364,916 |
Property and equipment, net |
10,960,286 |
8,516,833 |
Intangible assets, at cost less applicable |
||
amortization |
294,775 |
255,919 |
$13,986,081 |
$11,137,668 |
|
Current liabilities |
$ 3,168,123 |
$ 2,210,735 |
Deferred federal income taxes |
160,000 |
26,000 |
Mortgage note payable |
456,000 |
- |
Stockholders' equity |
10,201,958 |
8,900,933 |
$13,986,081 |
$11,137,668 |
|
Net sales |
$33,410,599 |
$25,804,285 |
Cost of goods sold |
(30,168,715) |
(23,159,745) |
Selling and administrative expense |
(2,000,000) |
(1,500,000) |
Interest expense |
(216,936) |
(39,456) |
Income tax expense |
(400,000 ) |
(300,000 ) |
Net income |
$ 624,948 |
$ 805,084 |
Note: One-third of the operating lease rental charge was $100,000
in 2018 and $50,000 in 2017. Capitalized interest totaled $30,000
in 2018 and $20,000 in 2017.
Required:
a. |
Based on the above data for both years, compute: |
|
1. |
times interest earned |
|
2. |
debt ratio |
|
3. |
debt/equity ratio |
|
b. |
Comment on the firm's long-term borrowing ability based on the analysis. |
|
In: Accounting
Terri computed the pre-determined overhead rate. She estimated that 440,000 direct labor hours were going to be used for the upcoming year. Her boss wanted her to change the estimate to 420,000 direct labor hours even though he knows that this amount is probably going to be wrong. 1) What is the effect of changing the estimated direct labor hours on the pre-determined overhead rate computation? 2) Should Terri change the estimated direct labor hours to 420,000? Why or why not?
In: Accounting
Denver Inc purchased a 5 year asset in November for $20,000. This is the only asset the company placed in service during that year. Neither the straight line method nor the 150% declining balance method was elected. The company elects out of bonus depreciation an the Section 179 expense deduction. Denver Inc sold the asset in September of Year 3. What is the depreciation in the year of sale? A. $2,350, B. $2,850, C. $3,250, D. $3,450
In: Accounting
A partially completed pension spreadsheet showing the relationships among the elements that constitute Carney, Inc.’s defined benefit pension plan follows. At the end of 2018, Carney revised its pension formula and incurred a prior service cost of $100 million. At the end of 2019, the pension formula was amended again, creating an additional prior service cost of $200 million. At the beginning of 2020, $400 million prior service cost was incurred. At the beginning of 2021, $300 million prior service cost was incurred. In 2018 - 2021, the actuary’s discount rate remained 10%, and the average remaining service life of the active employee group remained 10 years. The expected rate of return on assets was 10% in 2019, and increased by 1% each year.
2020 spreadsheet
2020 Pension spreadsheet ($ in millions) |
(PBO) |
Plan Assets |
Prior Service Cost–AOCI |
Net Loss (Gain) –AOCI |
Pension Expense |
Cash |
Net Pension (Liability) / Asset |
Balance, Jan. 1, 2020 |
-20550 |
22450 |
290 |
-3100 |
1,900 |
||
Service cost |
-900 |
900 |
-900 |
||||
Interest cost |
-2095 |
2095 |
-2095 |
||||
Prior Service Cost |
-400 |
400 |
-400 |
||||
Expected return on assets |
2,470 |
-2,470 |
2,470 |
||||
Adjust for: Gain (loss) on assets |
449 |
-449 |
449 |
||||
Amortization of: "Prior service cost-AOCI" |
-29 |
29 |
|||||
Amortization of: "Net Loss (Gain)-AOCI" |
-105 |
105 |
|||||
Gain (Loss) on PBO |
-400 |
400 |
-400 |
||||
Cash funding |
1200 |
-1,200 |
1,200 |
||||
Retiree benefits |
1,100 |
-1100 |
|||||
Bal., Dec. 31, 2020 |
-23245 |
25469 |
661 |
-3254 |
659 |
2,224 |
2021 Pension spreadsheet ($ in millions) |
(PBO) |
Plan Assets |
Prior Service Cost–AOCI |
Net Loss (Gain) –AOCI |
Pension Expense |
Cash |
Net Pension (Liability) / Asset |
Balance, Jan. 1, 2021 |
2,224 |
||||||
Service cost |
(1,095) |
||||||
Interest cost |
|||||||
Prior Service Cost |
|||||||
Expected return on assets |
|||||||
Adjust for: Gain (loss) on assets |
|||||||
Amortization of: "Prior service cost-AOCI" |
|||||||
Amortization of: "Net Loss (Gain)-AOCI" |
|||||||
Gain (Loss) on PBO |
|||||||
Cash funding |
1,300 |
||||||
Retiree benefits |
1,200 |
(1,200) |
|||||
Bal., Dec. 31, 2021 |
442 |
3,176 |
In: Accounting
Joe has an annual income of $80,000. His employer pays all of
his health insurance premiums.
Joe expects to incur $2,000 in unreimbursed medical expenses for
the year. He pays an average
federal tax rate of 22%. In addition, his state has a flat 3%
income tax rate. Thus, his total
income taxes paid will be equal to 25% of his taxable income. Joe
expects to deduct $15,000
from his annual income for income tax purposes.
a. How much income tax will Joe pay in total (state plus
federal)?
b. How much FICA (payroll) tax will Joe pay? How much will his
employer pay? What
fraction of the total payroll tax can be attributed to
Medicare?
c. Joe decides to redirect $2,000 of his salary to a flexible
spending account. This
contribution is considered a salary reduction, which means it
reduces both the payroll
taxes and the income taxes Joe needs to pay. What are the total
taxes Joe needs to pay
now? How much money has he saved?
In: Accounting