Problem 7-22A Cash Budget with Supporting Schedules [LO7-2, LO7-4, LO7-8] Garden Sales, Inc., sells garden supplies. Management is planning its cash needs for the second quarter. The company usually has to borrow money during this quarter to support peak sales of lawn care equipment, which occur during May. The following information has been assembled to assist in preparing a cash budget for the quarter: a. Budgeted monthly absorption costing income statements for April–July are: April May June July Sales $ 660,000 $ 780,000 $ 269,000 $ 440,000 Cost of goods sold 462,000 546,000 188,300 308,000 Gross margin 198,000 234,000 80,700 132,000 Selling and administrative expenses: Selling expense 84,000 113,000 31,500 44,000 Administrative expense* 47,000 78,200 29,800 42,000 Total selling and administrative expenses 131,000 191,200 61,300 86,000 Net operating income $ 67,000 $ 42,800 $ 19,400 $ 46,000 *Includes $18,500 of depreciation each month. b. Sales are 20% for cash and 80% on account. c. Sales on account are collected over a three-month period with 10% collected in the month of sale; 70% collected in the first month following the month of sale; and the remaining 20% collected in the second month following the month of sale. February’s sales totaled $165,000, and March’s sales totaled $265,000. d. Inventory purchases are paid for within 15 days. Therefore, 50% of a month’s inventory purchases are paid for in the month of purchase. The remaining 50% is paid in the following month. Accounts payable at March 31 for inventory purchases during March total $120,400. e. Each month’s ending inventory must equal 20% of the cost of the merchandise to be sold in the following month. The merchandise inventory at March 31 is $92,400. f. Dividends of $33,000 will be declared and paid in April. g. Land costing $41,000 will be purchased for cash in May. h. The cash balance at March 31 is $55,000; the company must maintain a cash balance of atleast $40,000 at the end of each month. i. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $200,000. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter. Required: 1. Prepare a schedule of expected cash collections for April, May, and June, and for the quarter in total. 2. Prepare the following for merchandise inventory: a. A merchandise purchases budget for April, May, and June. b. A schedule of expected cash disbursements for merchandise purchases for April, May, and June, and for the quarter in total. 3. Prepare a cash budget for April, May, and June as well as in total for the quarter. (Cash deficiency, repayments and interest should be indicated by a minus sign.)

CASE 3.9

Walmart de Mexico

Sam Walton was born on March 29, 1918, in Kingfisher, Oklahoma, a small town 50 miles northwest of Oklahoma City. Sam’s father, a farmer, struggled to support his family during the Great Depression. The Walton family hopscotched around the country before finally settling in Missouri where Sam graduated from high school. After obtaining a degree in economics from the University of Missouri, Sam went to work as a management trainee with J.C. Penney Company at a monthly salary of $75. Following the outbreak of World War II, Sam enlisted in the U.S. Army and served until 1945.

Upon returning to civilian life, Sam Walton borrowed money from his father-in-law to purchase a small retail store in northern Arkansas. Walton purchased additional stores in Arkansas, Kansas, and Missouri over the following years. In 1962, Walton opened the first store branded as a “Wal-Mart” in Rogers, Arkansas, 10 miles from Bentonville, which would become the company’s corporate headquarters. Walmart expanded its operations across the continental United States over the next three decades. In 1992, the year Sam Walton died, Walmart surpassed Sears to become the largest retailer in the United States.

By 2012, Walmart employed over two million people, making it the world’s largest private employer. In that same year, four members of Sam Walton’s family ranked among the top 10 of the Forbes 400, the 400 wealthiest individuals in the United States.1 Those individuals, with a collective wealth of more than $100 billion, included his three surviving children and the widow of his son, John Walton, a former Green Beret who was awarded the Silver Star for heroism during the Vietnam War.

The Lowest Prices Anytime, Anywhere!

Walmart’s incredible growth was due to the hypercompetitive business model developed by Sam Walton. The central tenet of Walton’s business plan was the motto that he adopted for his company, “The Lowest Prices Anytime, Anywhere!” Walton reasoned that if he undercut the prices charged by his competitors, his company would generate sufficient sales volume to realize significant economies of scale. The most important of those economies of scale would be purchasing merchandise in bulk quantities at discounted wholesale prices that were not available to other retailers.

Walton’s simple business plan worked to perfection as Walmart routinely dominated the geographical markets that it entered. The ultimate result of Walmart’s alleged “predatory” business model was to drive large numbers of small retailers, including pharmacies, groceries, and general merchandise stores, out of business. In an op-ed piece written for the New York Times, Robert Reich, former Secretary of the U.S. Department of Labor, observed that Walmart “Turns main streets into ghost towns by sucking business away from small retailers.”2

In the early 1990s, Walmart became an international company when it opened retail outlets in Mexico and Canada. After replicating its successful business model in those countries, Walmart extended its operations outside of North America. Within two decades, approximately one-fourth of the company’s sales were produced by its 6,000 retail stores in more than two dozen countries scattered around the globe.

To date, Mexico has easily been Walmart’s most successful international venture. Walmart quickly seized control of the retail industry in that country by taking away large chunks of a market share previously held by domestic retailers that had operated in the country for decades. By 2012, Walmart’s Mexican subsidiary, Walmart de Mexico, was Mexico’s largest retailer and that nation’s largest private employer.

Bribery Allegations

In April 2012, an article published by the New York Times, “Vast Mexico Bribery Case Hushed Up by Wal-Mart After Top-Level Struggle,” reported that Walmart had routinely bribed government officials to obtain building permits and other business licenses required by Mexican law. A former Walmart de Mexico officer testified that the bribes allowed the Mexican subsidiary “to build hundreds of new stores so fast that competitors would not have time to react.”3 The Pulitzer Prize-winning article in the New York Times, which was the culmination of an 18-month long investigation, insisted that the bribes violated the Foreign Corrupt Practices Act of 1977 (FCPA). The article also accused Walmart’s senior management of concealing those bribes from U.S. law enforcement authorities.

Walmart’s senior executives learned of the bribes being paid by their company’s Mexican subsidiary in late 2005 and immediately launched an investigation. “Wal- Mart dispatched investigators to Mexico City, and within days they unearthed evidence of widespread bribery. . . . They also found documents showing that Wal-Mart de Mexico’s top executives not only knew about the payments but had taken steps to conceal them from Wal-Mart’s headquarters in Bentonville, Ark.”4

Following the discovery of the bribes, Walmart’s senior executives disagreed on how to address the problem. The New York Times article reported that Walmart’s management ultimately decided to resolve the matter quietly and internally. That goal was achieved by placing the Walmart de Mexico executive who had allegedly authorized the bribes in charge of the ongoing investigation of them. The investigation ended shortly thereafter. The subsequent internal report noted that “There is no clear evidence or clear indication of bribes paid to Mexican government authorities with the purpose of wrongfully securing any licenses or permits.”5

The former FBI agent who served as Walmart’s director of corporate investigations found the internal report inadequate. “The report was nonetheless accepted by Wal- Mart’s leaders as the last word on the matter.”6 Walmart’s senior executives informed the U.S. Department of Justice that their company may have violated the FCPA only after they had learned of the ongoing investigation by the New York Times.

The author of the New York Times article charged that Walmart’s “relentless pursuit of growth” had compromised its commitment to the “highest moral and ethical standards.”7 A follow-up article in the New York Times in December 2012, “How Wal-Mart Used Payoffs to Get Its Way in Mexico,” described the methods used by

Walmart de Mexico to gain an unfair advantage over its competitors. That article also dismissed the suggestion that Walmart was a “victim” of a corrupt business culture in Mexico that obligated companies to bribe governmental officials.

The Times’ investigation reveals that Wal-Mart de Mexico was not the reluctant victim of a corrupt culture that insisted on bribes as the cost of doing business. Nor did it pay bribes merely to speed up routine approvals. Rather, Wal-Mart de Mexico was an aggressive and creative corrupter, offering large payoffs to get what the law other-wise prohibited. It used bribes to subvert democratic governance—public votes, open debates, transparent procedures. It used bribes to circumvent regulatory safeguards that protect Mexican citizens from unsafe construction. It used bribes to outflank rivals. 8

After reporting the potential FCPA violations to the U.S. Department of Justice in December 2011, Walmart instructed its audit committee to use “all resources necessary” to “aggressively” investigate the company’s “FCPA compliance” not only in Mexico but worldwide. The audit committee hired KPMG and a major law firm to assist in the forensic investigation.10 Walmart’s board also created a network of international “FCPA compliance directors” that would report to a Bentonville-based “Global FCPA Compliance Officer.” In an April 2012 press release that addressed the bribery allegations made by the New York Times, Walmart officials declared that “We will not tolerate non-compliance with the FCPA anywhere or at any level of the company.”11

Since 2012, Walmart officials have discussed the status of the ongoing internal and external FCPA investigations in their company’s periodic registration statements filed with the SEC. Those disclosures have consistently warned the investing and lending community that it is “probable” that Walmart will eventually incur a loss stemming from the alleged FCPA violations but that the amount of the loss can- not be “reasonably estimated.” Nevertheless, company management reports that the expected loss is unlikely to have a “material adverse” effect on Walmart’s operations. The company also regularly discloses the cumulative cost that it has incurred in connection with its internal FCPA investigation. By early 2016, that figure had topped $600 million. Finally, the company’s interim reports on the FCPA matter reveal that potential FCPA violations have been uncovered within the company’s operations in countries other than Mexico, including Brazil, China, and India.

There has been widespread speculation in the business press concerning the ultimate outcome of the joint SEC and U.S. Department of Justice investigation of Walmart’s alleged FCPA violations. Much of that speculation has focused on the magnitude of the monetary fines the federal agencies might levy on Walmart. Many observers believe that those fines could surpass the $450 million in FCPA-related fines imposed on the German engineering and electronics firm Siemens AG in 2008.

The FCPA: From Watergate to Walmartgate

Walmart’s widely publicized FCPA problems refocused attention on the origins and nature of that federal statute. The FCPA was a by-product of the scandal-ridden Watergate era of the 1970s. During the Watergate investigations, the Office of the Special Prosecutor uncovered large bribes, kickbacks, and other payments made by U.S. corporations to officials of foreign governments to initiate or maintain business relationships.

Widespread public disapproval compelled Congress to pass the FCPA, which criminalizes most such payments.12 The FCPA also requires U.S. companies to maintain internal control systems that provide reasonable assurance of discovering improper foreign payments. In a 1997 Accounting and Auditing Enforcement Release, the Securities and Exchange Commission (SEC) highlighted the importance and need for the accounting and internal control requirements embedded in the FCPA.

The accounting provisions [of the FCPA] were enacted by Congress along with the anti-bribery provisions because Congress concluded that almost all bribery of foreign officials by American companies was covered up in the corporations’ books and that the requirement for accurate records and adequate internal controls would deter bribery.13

In the two decades following the passage of the FCPA, the SEC seldom charged U.S. companies with violating its provisions. In fact, in 1997 when the SEC filed FCPA- related charges against Triton Energy Ltd., an international oil and gas exploration company, more than 10 years had elapsed since the federal agency’s prior FCPA case. At the time, the SEC conceded that the filing of the FCPA charges against Triton Energy was intended to send a “message” to U.S. companies that “it’s not O.K. to pay bribes as long as you don’t get caught.”14 At the same time, an SEC spokesperson predicted that his agency would be filing considerably more FCPA charges in the future.15

The SEC was true to its word. By 2015, the SEC was investigating potential FCPA violations by 74 public companies. Those companies included such prominent firms as Bristol-Myers Squibb, Cisco Systems, Halliburton, United Technologies, and Wynn Resorts. The World Bank has reinforced the need for the SEC and other global law enforcement agencies to rein in corporate bribery since it estimates that more than $1 trillion in bribes are paid annually in the U.S. alone.16

The FCPA is not without its critics. Many corporate executives have complained that the federal statute places U.S. multinational companies at a significant competitive disadvantage to multinational firms based in countries that have do not have a comparable law. Those same executives also find the recent “overzealousness” in prosecuting alleged FCPA violators inappropriate. “We are seeing companies getting scooped up in aggressive enforcement actions and investigations. A culture of overzealousness has grabbed the Justice Department. The last time I checked, we were not living in a police state.”17 In response to that complaint, a representative of the U.S. Department of Justice observed, “This is not the time for the United States to be condoning corruption. We are a world leader and we want to do everything to make sure that business is less corrupt, not more.”18

To date, the FCPA has not had a significant impact on the auditors of SEC registrants. An audit firm has been named in only one FCPA complaint filed by the SEC. In that case, a representative of KPMG’s Indonesian affiliate was charged with paying a bribe to a governmental official to reduce the tax bill of its client. The KPMG affiliate settled the charge by agreeing to a cease and desist order but was not fined.19 As the FCPA complaint against Walmart unfolded, a reporter for the Reuters international news service noted that it was unlikely that Ernst & Young, Walmart’s longtime auditor, would become a target of that investigation.

In fact, the FCPA has created a new revenue stream for the major accounting firms that serve as the auditors of most SEC registrants. For example, Deloitte’s website lists “Foreign Corrupt Practices Act Consulting” as an ancillary service that it provides to public companies.

Our Foreign Corrupt Practices Act (FCPA) Consulting practice helps organizations navigate FCPA risk and respond to potential violations. Utilizing the network of Deloitte member firms and their affiliates including their forensic resources in the United States, Canada, Europe, Russia, Africa, Latin America, and Asia, we have worked on a variety of FCPA engagements including investigations, acquisition due diligence, and compliance program implementation and assessments in over fifty countries for some of the world's leading companies

1. Identify control activities that Walmart could have implemented for Walmart de Mexico and its other foreign subsidiaries to minimize the likelihood of illegal payments to government officials. Would these control activities have been cost-effective?

2. What responsibility, if any, does an accountant of a public company have when he or she discovers that the client has violated a law? How does the accountant’s position on the company’s employment hierarchy affect that responsibility, if at all? What responsibility does an auditor of a public company have if he or she discovers illegal acts by the client? Does the auditor’s position on his or her firm’s employment hierarchy affect this responsibility?

3. Does an audit firm of an SEC registrant have a responsibility to apply audit procedures intended to determine whether the client has complied with the FCPA? Defend your answer.

4. If the citizens of certain foreign countries believe that the payment of bribes is an acceptable business practice, is it appropriate for U.S. companies to challenge that belief when doing business in those countries? Defend your answer.

#1) The owners’ equity accounts for Trans World International are shown here: Common stock ($1 par value) $ 85,000 Capital surplus 227,000 Retained earnings 750,000 ________________________________________ ________________________________________ ________________________________________ ________________________________________ Total owners’ equity $ 1,062,000 ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________ Requirement 1: Assume Trans World stock currently sells for $28 per share and a stock dividend of 20 percent is declared. (a) How many new shares will be distributed? New shares issued (b) Show the new balance for each equity account. Common stock $ Capital surplus Retained earnings ________________________________________ ________________________________________ ________________________________________ ________________________________________ Total owners’ equity $ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________ Requirement 2: Now assume that instead Trans World declares a stock dividend of 24 percent. (a) How many new shares will be distributed? New shares issued (b) Show the new balance for each equity account. Common stock $ Capital surplus Retained earnings ________________________________________ ________________________________________ ________________________________________ ________________________________________ Total owners’ equity $ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ #2) The company with the common equity accounts shown here has declared a 13 percent stock dividend at a time when the market value of its stock is $43 per share. Common stock ($1 par value) $ 470,000 Capital surplus 1,555,000 Retained earnings 3,878,000 ________________________________________ ________________________________________ Total owners’ equity $ 5,903,000 ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________ Required: Show the new equity account balances after the stock dividend distribution. Common stock $ Capital surplus Retained earnings ________________________________________ Total owners’ equity $ ________________________________________________________________________________ ________________________________________

Q1. Accounting in the financial institutions has special characteristics compared to the non-financial institutions, discuss this statement and explain characteristics of balance sheets, income statement and cash flow statement in banks.

Q2. Regulations require banks to do detailed disclosure on the quality of assets, discuss this statement and explain the kind of disclosure on quality of loans done by banks working in Saudi Arabia.

Q3. In thrift banks in USA, the structure of income has been changed because the intermediation role is no longer the main source of income, discuss this statement and explain the structure of income of banks in Saudi Arabia.

Accounting for Financial Institution

According to the monetary approach to exchange rate determination, how would an increase in foreign real income affect the value of domestic currency? In your explanation, discuss both the quantity theory and PPP

1)What is Balance scorecard (BSC)?

2)Any differences of BSC from one university to another? Discuss why or why not.

3)If our vice-chancellor wants to improve the university’s goal and performance, what are the characteristics that he has to take to achieve the goals (base on BSC). Give specific examples.

The financial statements of Morgan Ltd appear below:

Morgan LTD

Comparative Statement of Financial Position

31 December 2018

________________________________________________________________________________________

Assets                                                                                                         2018                    2017   

Cash ..................................................................................................     $ 25,000              $ 40,000

Marketable securities ...........................................................................         15,000                 60,000

Accounts receivable (net) .....................................................................         50,000                 30,000

Inventory ............................................................................................       150,000                170,000

Property, plant and equipment (net) ......................................................       160,000                200,000

      Total assets ..................................................................................     $400,000              $500,000

Liabilities and equity

Accounts payable ................................................................................     $ 20,000              $ 30,000

Short-term notes payable .....................................................................         40,000                 90,000

Bonds payable ....................................................................................         80,000                160,000

Ordinary shares ..................................................................................       170,000                145,000

Retained earnings ...............................................................................         90,000                  75,000

      Total liabilities and equity................................................................     $400,000              $500,000

Morgan LTD

Income Statement

For the Year Ended 31 December 2018

Net sales ............................................................................................                                 $360,000

Cost of sales .......................................................................................                                   184,000

Gross profit .........................................................................................                                   176,000

Expenses

      Interest expense ............................................................................        $24,000

      Selling expenses ...........................................................................         30,000

      Administrative expenses ................................................................          20,000

            Total expenses ........................................................................                                     74,000

Profit before income taxes ...................................................................                                   102,000

Income tax expense ............................................................................                                     30,000

Profit ..................................................................................................                                 $ 72,000

Additional information:

a.     Cash dividends of $57,000 were declared and paid in 2018.

b.     Weighted-average number of shares of ordinary shares outstanding during 2018 was 60,000 shares.

c.     Market value of ordinary shares on 31 December 2018 was $18 per share.

d.     Net cash provided by operating activities for 2018 was $63,000.

Required

Using the financial statements and additional information, compute the following ratios for Morgan Ltd for 2018. Show all computations.

1.     Current ratio

2.     Return on ordinary shareholders’ equity

3.     Price-earnings ratio

4.     Acid-test/Quick ratio

5.     Receivables turnover

Statement of Cash Flows—Indirect Method

The comparative balance sheet of Merrick Equipment Co. for December 31, 20Y9 and 20Y8, is as follows:

Additional data obtained from an examination of the accounts in the ledger for 20Y9 are as follows:

1. Equipment and land were acquired for cash.
2. There were no disposals of equipment during the year.
3. The investments were sold for $81,060 cash.
4. The common stock was issued for cash.
5. There was a $64,270 credit to Retained Earnings for net income.
6. There was a $36,180 debit to Retained Earnings for cash dividends declared.

Required:

Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.

SawPro Company, owned and operated by Heather Moore, opened for business in 2015. The company sells a single model of commercial grade chain saws that it purchases from the manufacturer. Heather’s customers, primarily businesses offering landscaping and tree-services, purchase saws on account, with payment typically due within thirty-days.  

The following transactions occurred during the calendar year ending December 31, 2018:

1. Acquired equipment that automated sharpening chain saw blades. Instead of paying cash, Heather signed an agreement with a lease financing company. The equipment was delivered, installed, and ready for service on March 1, 2018. Terms of the lease require twenty-four equal monthly payments of $270, with the first payment due at signing on March 1st. The annual rate is 4.75 percent. Heather made all payments on the dates required. The fair value of the equipment is $6,500 with an expected service life of thirty months. Heather has the option to purchase the equipment for $250 at the end of the lease term; she expects to exercise that option. (Note: use the old rule percent’s to determine whether the lease is financing or operating).

Post a journal entry of this transaction!

Answer in ~ 600-700 words

Explain the Australian dividend imputation credit system and how it applies in Australia. Include an analysis of how the receipt of franking credits will result in differing returns for Australian resident and international investors.

Select a large U.S. public corporation you are familiar with or which interests you. It should be on the Fortune 500 list. Using the company's most recent annual report (or Form 10-K) from the company's Investor Relations web page and other credible internet sources, develop a short (1.5 to 2 page) profile of the corporation. Obtain and attach a PDF version of the most recent annual report (or Form 10-K) from the company's web site. Include the following information:

1. Name of the corporation and location of corporate headquarters.
2. State of incorporation.
3. The stock exchange on which the company's stock is traded.
4. Nature of its operations.
5. The fiscal year end date of the annual report you used.
6. Total assets on the balance sheet.
7. Total revenues on the recent income statement.
8. Net income on the income statement.
9. The basic earnings per share reported on the recent income statement.
10. The depreciation method used by the corporation.
11. The inventory method used by the corporation. If the company does not report inventory on its balance sheet, state that in your report.
12. Description of classes of stock (e.g. common, preferred, Class A, etc.) and the number of shares authorized, issued and outstanding for each class, from the balance sheet or notes.
13. Market price of the stock on 1/31/19 (Yahoo finance or other stock quote site).
14. High and low prices of stock for the past 12 months (Yahoo finance or other stock quote site).
15. Dividends paid for each of share of stock during the year covered by the annual report from the income statement or notes.
16. The name of the Registered Public Accounting Firm who audited the company's financial statements.
17. Discuss something that you found interesting in the annual report, that you didn't know before.
18. If you had $10,000 to invest, would you invest in the stock of the corporation you chose. Provide your opinion and support your opinion with evidence from your research.

Please include the links for the cited info, annual report & try to do a more recent report.

Schrader Cellars uses the FIFO method in its two department process costing system: Fermenting (grape sorting is part of the fermentation process) and Packaging. Direct materials (grapes) are added at the beginning of the fermenting process and at the end of the packaging process (bottles). Conversion costs are added evenly throughout each process. Data from the month of december for the Fermenting Department are below:

Beginning work in process inventory:

            Units in beginning work in process inventory            3,000 gallons

            Materials costs                                                            $122,000

            Conversion costs                                                         $7,000

            Percentage complete with respect to materials           100%

            Percentage complete with respect to conversion        50%

Units started into production during the month                      5,000 gallons

Materials costs added during the month                                 $250,000

Conversion costs added during the month                             $30,000

Ending work in process inventory:

            Units in ending work in process                                 2,000 gallons

            Percentage complete with respect to materials           100%

            Percentage complete with respect to conversion        75%

REQUIRED:

1. Prepare a FIFO production report for the Fermentation Department for Schrader Cellars for the month ended December 31, 2018.

Schrader Cellars uses the FIFO method in its two department process costing system: Fermenting (grape sorting is part of the fermentation process) and Packaging. Direct materials (grapes) are added at the beginning of the fermenting process and at the end of the packaging process (bottles). Conversion costs are added evenly throughout each process. Data from the month of december for the Fermenting Department are below:

Beginning work in process inventory:

            Units in beginning work in process inventory            3,000 gallons

            Materials costs                                                            $122,000

            Conversion costs                                                         $7,000

            Percentage complete with respect to materials           100%

            Percentage complete with respect to conversion        50%

Units started into production during the month                      5,000 gallons

Materials costs added during the month                                 $250,000

Conversion costs added during the month                             $30,000

Ending work in process inventory:

            Units in ending work in process                                 2,000 gallons

            Percentage complete with respect to materials           100%

            Percentage complete with respect to conversion        75%

REQUIRED:

1. Prepare a FIFO production report for the Fermentation Department for Schrader Cellars for the month ended December 31, 2018.