Read the Case: Lehman Brothers: Subprime Accounting? and respond to questions 4 and 7. 4. Assume that Lehman's accounting for the Repo 105 transactions met the requirements of GAAP. However, also assume that the entire purpose of the transaction was to intentionally manage the amount of debt shown on the balance sheet. Do you agree with Lehman Brothers and EY that the financial statements are presented fairly in this situation? 7. EY did not modify the 2007 audit opinion of Lehman Brothers for going-concern uncertainty, yet the entity filed for bankruptcy less than a year later. In your opinion, is this indicative of audit failure? Why or why not?

The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall Inc. common stock was $ 65 on December 31, 20Y2.

Required:

Determine the following measures for 20Y2, rounding to one decimal place, except for dollar amounts, which should be rounded to the nearest cent. Use the rounded answer of the requirement for subsequent requirement, if required. Assume 365 days a year.

Maryville Cleaners has the opportunity to invest in one of two dry cleaning machines. Machine A has a four-year expected life and a cost of $30,000. It will cost an additional $6,500 to have the machine delivered and installed, and the expected residual value at the end of four years is $4,000. Machine B has a four-year expected life and a cost of $55,000. It will cost an additional $7,000 to have machine delivered and installed, and the expected residual value at the end of four years is $6,000. The company has a required rate of return of 14 percent. Additional cash flows related to the machines are as follows:

Machine A

Machine B

Required

1. Compute the payback period for each of the two machines.
2. Compute the net present value for each of the two machines.
3. Determine the internal rate of return for each of the two machines.
4. Which machine purchase do you recommend that the company pursue based on the results of your calculations?

Required:

Transaction takes place when one party exchanges or promise to exchange good or service with another party for money. Identify the difference between revenue expenditure and capital expenditure and provide the examples

1. Going concern is a basic underlying assumption in accounting. Explain why the going concern basis is important in understanding financial statement; Support your answer with evidences

Four drive theory is conceptually different from the Maslow’s needs hierarchy (as well as ERG theory) in
several ways. Describe these differences. At the same time, needs are based on drives, so the four drives
should parallel the seven needs that Maslow identified (five in the hierarchy and two additional needs).
Map Maslow’s needs onto the four drives in four-drive theory.

1. There are different basis approaches to valuing inventory that are allowed by GAAP, explain the principal’s methods of valuation required by IAS2 inventories, provide some evidence which could be applied in annual reports

1. Management makes many judgements and estimates in preparing accounts, some of which will have a significant effect on the reported results and financial position. Give examples of estimates and assumptions could be reported in consolidated financial statements.

The receivables allowance reduces the reported trade receivables balance to reflect uncertainties over collectability. Explain the concept of allowances for irrecoverable receivable and describes the allowances for receivables information which could be given in annual report.

3-IAS 16 Property, Plant and Equipment sets out the requirements for the recognition of the assets, the determination of their carrying amounts, and the depreciation charges and impairment losses in relation to them. Discuss the importance of two models under IAS 16 PPE and Identify the depreciation methods

1-A stakeholder is a party that has an interest in a company and can either affect or be affected by the business. Discuss at least two types of stakeholder

1. PEST analysis (political, economic, socio-cultural and technological) describes a framework of macro-environmental factors used in the environmental scanning component of strategic management. Give examples and discuss the impact of each of the elements in the PEST analysis

Fuji Limited (“Fuji”) manufactures and sells dairy products made of soya beans. One of its main business is supplying packaged doufu to supermarket chains in Hong Kong. The sales and cost data of package doufu are as follows:
Unit selling price $20
Unit variable cost $10
Total fixed cost $200,000
Breakeven sales $400,000 or 20,000 units
Average monthly sales 30,000 units
Fuji’s raw material supplier has just announced a price increase in soya beans due to severe supply shortage. The higher cost is expected to increase the variable cost of packaged doufu by $3 per unit.
The Management is considering the following two independent options:
1 Increase unit selling price by $3 and sales volume is expected to decrease by 15%.
2 Invest in a new machine to semi-automate the production process; this will reduce the existing variable costs by 15%, increase the fixed cost by 30% and increased both the sales volume and selling price by 5%.
Required:
a Prepare a cost-volume-profit (CVP) income statement for each of the option.
b Based on your answer in (a), advise the management which option is a better choice. Explain your answers.