Part C

Question 1

Mr. Kenny is an accountant at AF Textile, and he plays squash with Mr. Zuni, the CEO of AF Textile. The CEO wanted to decrease net income with the objective to pay lesser tax. Mr. Kenny was eager to get into Mr. Zuni’s elite social circle; he boasted to Mr. Zuni that he knew some accounting tricks that could decrease company income by simply disclosing company’s capital expenditure as their revenue expenditure. At the end of the year, Mr. Kenny changed the debits from “capital expenditures” to “revenue expenditure” on several transactions. Later, Mr. Zuni achieved his objective of paying lesser tax, and the manipulations were never discovered.

Required:

Differentiate between Capital Expenditure and Revenue Expenditure. (4 marks)

How did the change in journal entries affect the net income and net assets of the company at year-end?                                 (3 marks)

You have been asked to do a training session on improving interviewing skills. List five things you have experienced and know about good communication in interview situations, from an interviewer or from an interviewee perspective. From that list, formulate an outline for a training session.

Naa Tetterley Company Ltd engaged your firm to prepare a Cash Budget for them. They informed you that:
a. They have two bills payable of $55,000 and $60,000 with due dates of 31st July and 30th September, 2020 respectively.
These bills will be paid on their due dates
b. The Company wishes to arrange with its bankers for any necessary re-financing in advance, which will ensure a minimum end of month cash balance of $25,000
You are also given the following information: i. The projected sales and purchases:
SALES     ($)         PURCHASES ($)

June 65,000              July.    57,000

July 90,000              August. 45,000

August 65,000          September.    51,000

September 68,000        October.    42,000

October 75,000

ii. The cash balance on 1st July, 2020 will be $18,000

iii. All sales are on terms of a 2% discount allowed on any payment made by the tenth of the month following the sale. Past experience indicates that 70% of the sales are collected within the first 10 days; 20% during the remainder of the first month; and 8% in the second month following the sale. 2% of the sales are considered irrecoverable.

iv. All payments for purchases qualify for 2% discount. Two-thirds of the invoices will be paid in the month of the purchase, and one-third in the month following the purchase.

v. Operating expenses are expected at $6,000 for July 2020. This will increase by 10% per month for the subsequent months.

vi. The company will receive $1,500 monthly from property rentals. This amount will be paid half-a-month in arrears.

vii. An amount of $2,500 will be realised in July from the sale of obsolete equipment.

viii. The company will buy a new plant for $42,000 on 1st June, 2020. The payment for this amount will be spread over 6 monthly equal instalments, starting from August, 2020.

ix. The company anticipates receiving interest on investment of $10,000 every month.

Required:
a. Prepare the Cash Budget for the three months ending 30th September, 2020

b. Outline any four benefits and four limitations respectively of a Cash Budget.          

The personnel office at a large electronics firm regularly schedules job interviews and maintains records of the interviews. From the past records, they have found that the length of a first interview is normally distributed, with mean μ = 36 minutes and standard deviation σ = 9 minutes. (Round your answers to four decimal places.)

1.What is the probability that a first interview will last 40 minutes or longer?

2. Twelve first interviews are usually scheduled per day. What is the probability that the average length of time for the twelve interviews will be 40 minutes or longer?

Shamrock Corporation is preparing the comparative financial statements for the annual report to its shareholders for fiscal years ended May 31, 2020, and May 31, 2021. The income from operations for the fiscal year ended May 31, 2020, was $1,818,000 and income from continuing operations for the fiscal year ended May 31, 2021, was $2,424,000. In both years, the company incurred a 10% interest expense on $2,424,000 of debt, an obligation that requires interest-only payments for 5 years. The company experienced a loss from discontinued operations of $575,000 on February 2021. The company uses a 20% effective tax rate for income taxes. The capital structure of Shamrock Corporation on June 1, 2019, consisted of 1,037,000 shares of common stock outstanding and 19,100 shares of $50 par value, 6%, cumulative preferred stock. There were no preferred dividends in arrears, and the company had not issued any convertible securities, options, or warrants. On October 1, 2019, Shamrock sold an additional 511,000 shares of the common stock at $20 per share. Shamrock distributed a 20% stock dividend on the common shares outstanding on January 1, 2020. On December 1, 2020, Shamrock was able to sell an additional 785,000 shares of the common stock at $22 per share. These were the only common stock transactions that occurred during the two fiscal years.

Determine the weighted-average number of shares that Shamrock Corporation would use in calculating earnings per share for the fiscal year ended:

Prepare, in good form, a comparative income statement, beginning with income from operations, for Shamrock Corporation for the fiscal years ended May 31, 2020, and May 31, 2021. This statement will be included in Shamrock’s annual report and should display the appropriate earnings per share presentations. (Round earnings per share to 2 decimal places, e.g. $1.55.)

Problem 3.  You currently make $100,000 a year and expect your salary increase by 10% a year for 20 years.   You are considering an MBA which will cost you $120,000 for the entire education. If you take the MBA, you will have to pay the full tuition today (all upfront) and you will make zero earnings at the end of years 1 and 2.  However, after graduation you’ll have an opportunity to join a premier investment bank, which promises $130,000 a year, which will grow by 15% for 18 years after graduation.  Is the MBA a good deal? Assume a constant discount rate of 15%.  What if rates fall to 10%?  What if rates rise to 17%, how does your answer change?  Show your detailed spreadsheet calculations (Alt#2). Note: salary is paid at the end of each year.

Read:

A Guide to the Good Life:  Irvine, William B.. A Guide to the Good Life: The Ancient Art of Stoic Joy (pp. 159-172). Oxford University Press. Kindle Edition.

by William B. Irvine

Chapters 13 & 14

Answer:

In what way is anger beneficial?

What is Seneca's general advice about how to prevent ourselves from becoming angry?

List three pieces of more specific advice given about how to avoid anger.

According to the Stoics, what is a major reason that people are unhappy?

Why is the pursuit of fame in tension with being free?

Describe one piece of advice given by the Stoics for overcoming our obsession with what others think of us.

Patagonia

Patagonia sells rugged clothing and gear to mountain climbers, skiers, and other extreme-sport enthusiasts. The company is also well known for its environmental stands and its commitment to product quality. Patagonia has never owned a fabric mill or a sewing shop. Instead, to make a ski jacket, for example, it buys fabric from a mill, and zippers and facings from other manufacturers, and then hires a sewing shop to complete the garment. To meet its own environmental standards and ensure product quality, it works closely with each partner to make sure the jacket meets its rigid standards.

As a result of these standards, Patagonia does as much business as it can with as few partners as possible and chooses its relationships carefully. The first thing the company looks for in a partner is the quality of its work. It doesn’t look for the lowest-cost provider, who might sew one day for a warehouse store such as Costco and try to sew the next day for Patagonia. Contractors that sew on the lowest-cost basis, the company reasons, wouldn’t hire sewing operators of the skill required or welcome Patagonia’s oversight of its working conditions and environmental standards. What Patagonia looks for, more than anything, is a good fit between itself and the companies it partners with. It sees its partners as an extension of its own business, and wants partners that convey Patagonia’s own sense of product quality, business ethics, and environmental and social concern.

Once a relationship is established, Patagonia doesn’t leave adherence to its principles to chance. Its production department monitors its partners on a consistent basis. The objective is for both sides to prosper and win. In fact, in describing the company’s relationship with its partners, Patagonia founder Yvon Chouinard says, “We become like friends, family—mutually selfish business partners; what’s good for them is good for us.”

Build-A-Bear Workshop

A similar set of beliefs and actions describe Build-A-Bear Workshop. Build-A-Bear lets its customers, who are usually children, design and build their own stuffed animals, in a sort of Santa’s workshop setting. Like Patagonia, Build-A-Bear is a very socially conscious organization, and looks for partners that reflect its values. Affirming this point, Maxine Clark, the company’s founder, said, “The most successful corporate partnerships are forged between like-minded companies with similar cultures that have come together for a common goal, where both sides benefit from the relationship.”

Also similar to Patagonia, Build-A-Bear thinks of its partners as good friends. Reflecting on her experiences in this area, Clark said, “I tend to think of partners as good business friends—companies and people who would do everything they could to help us succeed and for whom I would do the same.” In a book she wrote about founding and building Build-A-Bear into a successful company, Clark attributes having good partners to careful selection. She also likens business partnership to a marriage, which has many benefits but also takes hard work: “Good business partnerships are like successful marriages. To work, they require compatibility, trust and cooperation. Both parties need to be invested in one another’s well-being and strive for a common goal.”

Both Patagonia and Build-A-Bear make extensive use of partnerships and are leaders in their respective industries.

Questions for Critical Thinking

1. 1. To what extent do you believe that Patagonia and Build-A-BearWorkshop’s ethical cultures drive their views on partnering?

2. 2. Assume you were assigned the task of writing a code of conduct for Patagonia. Write the portion of the code of conduct that deals with business partnership relationships.

3. 3. What similarities do you see between the partnership philosophies of Patagonia and Build-A-Bear Workshop?

4. 4. Spend some time studying Patagonia by looking at the company’s website and its Facebook page, and via other Internet searches. Describe Patagonia’s general approach to business ethics, social responsibility, and environmental concerns. What, if anything, can start-ups learn from Patagonia’s philosophies and its experiences?

1. When the price of a soda from the campus vending machine was $0.50 per can, 100 cans were sold each day. After the price increased to $0.60 per can, sales dropped to 80 cans per day. Over this range, the absolute price elasticity of demand for soft drinks was approximately equal to

   	A.	1.00
   	B.	2.00
   	C.	1.47
   	D.	1.22

1 points   

QUESTION 9

1. Luna is a manufacturer of fashion jewelry. The CEO of Luna makes sure that the company frequently introduces new styles of jewelry to suit changes in tastes and stay a step ahead of her competitors. Which of the following success drivers of performance is the CEO using?

   	A.	cost competitiveness
   	B.	innovation
   	C.	service
   	D.	quality