How will a MBA benefit a employee and its impact on a company?

Trillium Construction Company is a publicly traded company that began a long-term government contract on July 1, 2019 to build a housing complex for the price of $8,000,000. The construction was expected to take 24 months to complete.

a.       For the year ended December 31, 2019, Trillium incurred construction costs of $1,300,000 and it was estimated that an additional $3,900,000 in costs would needed to complete the contract. Trillium billed the government $2,000,000 during the first year and collected $1,000,000 by December 31, 2019. Trillium uses the percentage-of-completion method of revenue recognition. Calculate the gross profit to be recognized for the year ended December 31, 2019.

b.       Then, for the year ended December 31, 2020, Trillium incurred construction costs of $3,180,000 and at that point, it was estimated that an additional $1,120,000 in costs would be needed to complete the contract. Trillium billed the government $4,000,000 during the second year and collected $4,500,000 by December 31, 2020. Continuing to use the percentage-of-completion method of revenue recognition, calculate the revenue recognized for the year ended December 31, 2020.

c.       The CEO of Trillium has heard that the completed-contract method is easier to use than the percentage-of-completed method.   Briefly explain to the CEO (approximately 1 or 2 sentences) why Trillium should or should not adopt the completed contract method.

During 2020, E Inc. reported $1,100,000 net income. Included in this amount was $120,000 of life insurance proceeds received upon the death of E’s CEO, $90,000 of interest income from investments in municipal bonds and life insurance premiums of $10,000 that E had paid for the policy on its CEO. E uses straight-line depreciation for book purposes and MACRS for tax. For 2020, E’s tax depreciation expense exceeded its financial depreciation expense by $50,000. This difference is expected to reverse in 2021. During 2020, E paid $90,000 estimated taxes and its tax rate for all years is 20%.

INSTRUCTIONS: A. Determine the current and deferred income tax expense that E will report on its 2020 income statement. B. Determine the deferred tax asset / liability that E will report on its 2020 balance sheet. C. Prepare the journal entry to record 2020 tax expense.

Objective Of The Assignment

To prepare a memorandum to the chief executive officer (CEO) as to why the accrual basis of accounting and recording financial transactions using other aspects of Generally Accepted Accounting Principles is preferred (not just mandatory) as opposed to the cash basis of accounting.

In actual business, critical issues and problems are communicated in writing, particularly to create accountability for the positions taken and solutions arrived at. The communication includes relevant background information and rationale and other support for the conclusion(s) reached.

Background Information For the Assignment

Huntington Consulting, Inc. (the Company) has a year-end of December 31 and has long used the cash basis of accounting. Its founder and CEO, Carl Singer, has always believed that you record revenues and issuance of capital stock when cash is received, and assets and expenses when paid for. You are the new controller and have responsibilities overall accounting and financial reporting. You have decided to communicate to Carl Singer, CEO, why the accrual accounting method is preferable to the cash basis.

Instructions

Write a memorandum using the following heading and write to Mr. Singer as to why the Company should use the accrual method of accounting (as opposed to the cash basis method):

To:            Carl Singer, CEO

From:      “Your Name”

Subject: Why the Company Should Use the Accrual Method of Accounting

The memo should not exceed a full page using single space, but if it is longer, that is fine. In your memo, address why the accrual basis of accounting is preferred [to the cash basis] and include the importance of accounting periods, matching, and using classified financial statements (i.e., balance sheet for this assignment). Also, include why the financial statements prepared under the accrual method will help make better management decisions.

To make this easier, include the following accounts to make your points:

• Accounts Receivable
• Prepaid Insurance
• Equipment (in this case, laptop computers and other computer equipment)
• Accrued liabilities (i.e., salaries & wages and interest on a loan with the bank)
• Unearned Revenue

Stora Enso is a Finnish pulp and paper manufacturing company. It discloses in its 1999 consolidated Annual Report, the following items:

Excerpted from the Consolidated balance sheet

In the notes to its financial statements, the Stora Enso provides explanations relating to these two items:

Excerpts from the notes

In addition, the company explains in the notes that “associated companies (voting rights between 20% and 50%) are consolidated using the equity method” and “the income statements of foreign subsidiaries are translated into Euros using the average rate for the accounting period. The balance sheets of foreign subsidiaries are translated using the rate prevailing on the balance sheet day.”

Pechiney, a French group operating worldwide in aluminum and packaging materials, discloses in its 1999 Annual Report the following note:

Required

1. A) Using the Stora Enso data

1. Associated companies: explain the computation of the historical cost at year-end and the meaning of each component of this computation.
2. Where will be found, other than in the notes, the carrying value of associated companies at year-end?
3. Other companies: explain the computation of carrying amount at year-end and the meaning of each component of this computation.
4. Double-check the carrying value of other companies at year-end. What is the usefulness to an investor or shareholder of the 1999 figure of €280.4 millions shown both in the balance sheet and in the notes?

1. B) Comparison: notes 12 and 14 in Stora Enso’s annual report and note 7 in Pechiney’s annual report have the same purpose. Compare and contrast the computations and reporting choices made by each company.

The CEO of California Life Insurance Company is intentional to craft and clearly define the firm’s strategy as one that will result in nothing less than 60% of market share in the group benefits sector of the U.S. life insurance industry. Which of the following reasons why firms need strategy is present in this scenario?

a. Strategy as target

b. Strategy as philanthropy

c. Strategy as decision support

d. Strategy as coordinating device

On January 1, 2019, Aspen Company acquired 80 percent of Birch Company's voting stock for $482,000. Birch reported a $542,500 book value, and the fair value of the noncontrolling interest was $120,500 on that date. Then, on January 1, 2020, Birch acquired 80 percent of Cedar Company for $144,000 when Cedar had a $150,000 book value and the 20 percent noncontrolling interest was valued at $36,000. In each acquisition, the subsidiary's excess acquisition-date fair over book value was assigned to a trade name with a 30-year remaining life.

These companies report the following financial information. Investment income figures are not included.   

Assume that each of the following questions is independent:

1. If all companies use the equity method for internal reporting purposes, what is the December 31, 2020, balance in Aspen's Investment in Birch Company account?

2. What is the consolidated net income for this business combination for 2021?

3. What is the net income attributable to the noncontrolling interest in 2021?

4. Assume that Birch made intra-entity inventory transfers to Aspen that have resulted in the following intra-entity gross profits in inventory at the end of each year:

What is the accrual-based net income of Birch in 2020 and 2021, respectively?

1. A U.S. company sells to customers in Canada and buys from suppliers in Singapore. At December 31, 2019, the company’s year-end, the following items are reported on its balance sheet:

Accounts receivable (C$2,500,000)..…………………… $2,125,000

Accounts payable(S$1,400,000)………………………….. 1,061,200

On January 22, 2020, when the spot rate is $0.845/C$, the company collects C$1,000,000 from customers. It collects the remaining C$1,500,000 on February 16, 2020, when the spot rate is $0.856. On February 23, 2020, when the spot rate is $0.762, the company pays suppliers S$800,000. On March 6, 2020, when the spot rate is $0.768, the company pays suppliers the remaining S$600,000. Using the attached T-account template, record the 12/31/19 balances (labeled “BAL”) and then prepare the necessary entries to recognize the above transactions.