3. John Deere is operated as a C corporation. The company received an order for a $12,000 tractor from a customer on June 30, 2020 and delivered the tractor to the customer on July 31, 2020. The company sent the customer a bill saying they had to pay for the tractor by no later than January 31, 2021. John Deere uses a calendar year tax period. Based on phone calls with the customer in December of 2020, the customer explained that it may have to file bankruptcy proceedings but was trying to work its way out of financial hardship before taking that option. The customer said that at worst it would be able to pay at least $9,000 of the bill. On January 15, 2021, John Deere received a check from the customer for $9,000 and was informed it would receive no additional payment based on the outcome of the bankruptcy case. In addition to the transaction above, the following occurred:

• A different customer paid for the same type of tractor (at $12,000) on November 1, 2020 and scheduled delivery for January 15, 2021. John Deere included the income in its 2020 financial accounting statements.
• The company both incurred and paid expenses for the following in 2020:
  • Wages:                                                                               $3,000
  • Rental costs for a warehouse:                                            $4,000
  • Repairs:                                                                              $2,000
• The company both incurred and paid expenses for the following in 2021:
  • Wages:                                                                               $4,000
  • Rental costs for a warehouse:                                            $4,000
  • Repairs:                                                                              $3,000

1. (9 points) Assuming the local John Deere’s operates on a calendar year-end under the accrual method and prefers to defer income whenever possible, what amount of net profit (loss) for tax purposes in 2020?
   
2. (9 points) Assuming the local John Deere’s operates on a calendar year-end under the accrual method and prefers to defer income whenever possible, what amount of net profit (loss) for tax purposes in 2021?
   
3. (9 points) Assuming the local John Deere’s operates on a calendar year-end under the cash method and prefers to defer income whenever possible, what amount of net profit (loss) for tax purposes in 2020?
   
4. (9 points) Assuming the local John Deere’s operates on a calendar year-end under the cash method and prefers to defer income whenever possible, what amount of net profit (loss) for tax purposes in 2021?
   
   
   
   (8 points) How should the sum of the 2020 and 2021 accrual method net profit (loss) total relate to the sum of the 2020 and 2021 cash method net profit (loss) total (i.e. how should the sum of your answers in a. and b. relate to the sum of your answers in c. and d.)?
5. Circle the best answer below.
   i. The sum of the two years for the accrual method should be greater than the sum of the
       two years under the cash method.
   ii. The sum of the two years for the accrual method should be less than the sum of the
       two years under the cash method.
   iii. The sum of the two years for the accrual method should be equal to the sum of the
       two years under the cash method.
   

Consider each of the following independent and material situations. In each case:

• the financial report date is 31 December 2019;

• the field work was completed on 12 February 2020;

• the directors declaration and the audit report were signed on 19 February 2020; and

• the completed financial report accompanied by the signed audit report were mailed to shareholders on 18 March 2020

A. You are an auditor pf PP Limited (PP), a company specialising in industrial property development. On 10 February 2020, you become aware that a major overseas investor has informed the management of PP of their intention to withdraw their investment in a proposed major development. On the basis of its discussions with the investor and previously pledged funds from them, PP has incurred substantial costs in feasibility studies, structural engineering reports and architectural plans. A significant portion of these costs has been capitalised. The management is dependent on finding a new investor to be able to meet these expenses and to continue with the project.

B. You are the auditor of XY Limited (XY), a manufacturing client. XY has plans to upgrade its manufacturing process and plans to finance this by a sale of property which is superfluous to its needs, situated next to its head office. The property has been subdivided for the purposes of the sale and placed on the market in December 2019. On 25 January 2020, the state government approved a plan for the construction of an express freeway. The plan will result in the appropriation of a portion of the property owned by XY and subdivided for the purpose of sale. Construction of the freeway will begin in late 2020. No estimate of the compensation payment is available.

C. You are an auditor of Q limited (Q), a major public company involved in the property development industry. Prior to signing your audit report you sought a letter of comfort from Q’s bankers that the bank would continue to support Q by providing finance over the coming year. The bank agrees that it would continue to provide finance. It was your view that without such support Q had severe cash flow problems and the financial report would need to be modified with respect to a going concern assumption. On 15 March 2020, the company’s bankers wrote to you advising that the company had breached its loan covenant with the bank in February 2020 and that the loan facility was now due and payable and would not be renewed.

D. You are the auditor of Turbo Limited (Turbo), a professional services client. On 15 January 2020, Turbo settled and paid a personal injury claim to a former employee as the result of an accident that occurred in September 2017. The company had not previously recorded a liability for the claim. E. You are the auditor of Charge Limited (Charge), an automobile parts manufacturer. On 2 February 2020, Charge agreed to purchase for cash the outstanding shares of Electronic Fuel Injection Limited. The acquisition is likely to double the sales volume of Charge.

Required: For each of the events A to E:

2. Determine whether additional audit evidence needs to be obtained. If so, describe the nature of the audit evidence to be obtained and the audit procedures used to obtain it.

Consider each of the following independent and material situations. In each case:

• the financial report date is 31 December 2019;

• the field work was completed on 12 February 2020;

• the directors declaration and the audit report were signed on 19 February 2020; and

• the completed financial report accompanied by the signed audit report were mailed to shareholders on 18 March 2020

A. You are an auditor pf PP Limited (PP), a company specialising in industrial property development. On 10 February 2020, you become aware that a major overseas investor has informed the management of PP of their intention to withdraw their investment in a proposed major development. On the basis of its discussions with the investor and previously pledged funds from them, PP has incurred substantial costs in feasibility studies, structural engineering reports and architectural plans. A significant portion of these costs has been capitalised. The management is dependent on finding a new investor to be able to meet these expenses and to continue with the project.

B. You are the auditor of XY Limited (XY), a manufacturing client. XY has plans to upgrade its manufacturing process and plans to finance this by a sale of property which is superfluous to its needs, situated next to its head office. The property has been subdivided for the purposes of the sale and placed on the market in December 2019. On 25 January 2020, the state government approved a plan for the construction of an express freeway. The plan will result in the appropriation of a portion of the property owned by XY and subdivided for the purpose of sale. Construction of the freeway will begin in late 2020. No estimate of the compensation payment is available.

C. You are an auditor of Q limited (Q), a major public company involved in the property development industry. Prior to signing your audit report you sought a letter of comfort from Q’s bankers that the bank would continue to support Q by providing finance over the coming year. The bank agrees that it would continue to provide finance. It was your view that without such support Q had severe cash flow problems and the financial report would need to be modified with respect to a going concern assumption. On 15 March 2020, the company’s bankers wrote to you advising that the company had breached its loan covenant with the bank in February 2020 and that the loan facility was now due and payable and would not be renewed.

D. You are the auditor of Turbo Limited (Turbo), a professional services client. On 15 January 2020, Turbo settled and paid a personal injury claim to a former employee as the result of an accident that occurred in September 2017. The company had not previously recorded a liability for the claim. E. You are the auditor of Charge Limited (Charge), an automobile parts manufacturer. On 2 February 2020, Charge agreed to purchase for cash the outstanding shares of Electronic Fuel Injection Limited. The acquisition is likely to double the sales volume of Charge.

Required: For each of the events A to E:

3. If no action is taken by management, determine the most appropriate audit report to be issued.

Question 1: On January 1 2020 Potter Company purchased 100 of the 1000 shares of Voldomort Company for $800. Potter has no significant influence over Voldomort

On July 1, 2020 Voldomort declared and paid a $1 per share dividend

On December 31st Voldomort's stock was selling for $9 per share; Voldomort reported income of $4000

On January 1 2021 Potter Company purchased 300 shares of Voldomort Company for $2700. Potter now has two seats on the Voldomort Board of Directors

On March 1, Voldomort had a two for one stock split.

On July 1, Voldomort declared and paid a $1 per share dividend

On December 31st Voldomort reported income of $5000 and its stock was selling for $7 per share

On July 1, 2022 Voldomort announced that it will not pay a dividend in 2022.

On December 31st Voldomort reported a loss of $2000 and its stock was selling for $5 per share

On January 3rd 2023 Potter sold all of its shares in Voldomort at $5.50 per share

Discussion Post: Economic exposure of firms (Foreign firms)

Many MNCs based outside of the US have suffered from the decrease in value of the USD relative to other currencies. Search the internet for examples of this. Report the company, what the effect was, if the company reacted (or plans to react) to reduce/eliminate their exposure to USD.

Don’t forget to include your source.

The Cordis Building Works Company modifies and builds portable offices and homes based on customized plans using everything from shipping containers, to modular homes. The company has been in business for 35 years and has prided itself on providing a very competitive salary and great benefits as well as retaining most of its original employees since they began. While they originally began the company doing creative designs and one of a kind housing and office buildings, much of the routine work in the factory is now done robotically. They still need a supervisor and technicians to keep the operations running as well as the construction crew who actually deliver and construct the products on site. Now the designs might be modified a bit but are already in their computer and ready to produce with some small modifications when needed. There are two main engineers, one who predominantly works on high-end mansions, and the other who predominantly works on corporate office projects back at the main offices.

The CEO and President (i.e., the husband and wife team who are the founders), are the ones that meet with prospective corporate clients and negotiate the prices and building parameters. While the company used to construct low income housing as well, the clients are now almost exclusively, wealthy private clients or corporate titans. The CEO and the company president are beginning to think about retirement. They want to keep the company running but they cannot understand why the two engineers seem unmotivated when they are receiving such competitive salaries, and great benefits with three weeks’ vacation a year. In addition, the production line has had more problems of late and the supervisor seems to be coming in late several times a week as have the technicians. They are worried about the future of the company they built.

Checklist: Minimum Submission Requirements

Summarize the problems at the company that are possibly affecting employee motivation and performance.
Analyze motivation theories as provided in your text and Learning Activities (providing proper attribution) to explain the engineers’ lack of motivation.
Analyze motivation theories as provided in your text and Learning Activities (providing proper attribution) to explain the supervisor’s, technicians’, and construction crew’s lack of motivation.
Explain how the CEO and president might better motivate employees to improve performance.

Review the case of Paradise Hills Medical Center, below. The CEO has asked you for a recommendation. What will you tell him? PARADISE HILLS Medical Center is a 500-bed teaching hospital in a major metropolitan area of the South. It is known throughout a tri-state area for its comprehensive oncology program and serves as a regional referral center for thousands of patients suffering from various forms of malignant disease. Paradise Hills is affiliated with a major university and has residency programs in internal medicine, surgery, pediatrics, obstetrics/gynecology, psychiatry, radiology, and pathology, all fully accredited by the Accrediting Commission for Graduate Medical Education. In addition, Paradise Hills also has an oncology an oncology fellowship program, a university-affiliated nursing program, as well as training programs for radiology technicians and medical technologists. All of these teaching programs are highly regarded and attract students from across the nation. Paradise Hills enjoys an enviable reputation throughout the area. It is known for its high-quality care, its state-of-the-art technology, and its competent, caring staff. While Paradise Hills is located within a highly competitive healthcare community, it boasts a strong market share for its service area. Indeed, its oncology program enjoys a 75 percent market share and its patients provide significant referrals to the surgery, pediatrics, and radiology programs as well. Paradise Hills is a financially strong institution with equally strong leadership. Its past successes, in large part, can be attributed to its aggressive, visionary CEO and his exceptionally competent management staff. But all is not as well as it seems to be at Paradise Hills. While the oncology program still enjoys a healthy market share, it has been slowly but steadily declining from its peak of 82 percent two years ago. In addition, the program's medical staff are aging and some of its highest admitting physicians are contemplating retirement. The oncology fellowship program was established a few years ago in anticipation of this, but unfortunately, thus far the graduates of this program have not elected to stay in the community. Of most concern to the CEO and his staff is the fact that the hospital's major competitor has recently recruited a highly credentialed oncology medical group practice from the Northeast and has committed enormous resources to strengthening its own struggling oncology program. Last week the board of trustees for Paradise Hills had its monthly meeting with a fairly routine agenda. However, during review of a standard quality assurance report, one of the trustees asked for clarification of a portion of the report indicating that 22 oncology patients had received radiation therapy dosages in excess of what had been prescribed for them. The board was informed that the errors had occurred due to a flaw in the calibration of the equipment. The board was also informed that the medical physicist responsible for the errors had been asked to resign his position. The question was then asked if the patients who were recipients of the excessive radiation had been told of the error. The CEO responded that it was the responsibility of the medical staff to address this issue and it was their decision that the patients not be informed of the errors. The board did not concur that the responsibility for informing the patients of the errors rested solely with the medical staff and requested that the administrative staff review the hospital's ethical responsibility to these patients, as well as its liability related to this incident, and report back to the board within two weeks. The CEO and his management staff responsible for the radiology department and the oncology program met with the medical staff department chairmen for internal medicine and radiology, the program medical directors for oncology and radiation therapy, and the attending oncologists. The CEO reported on the board discussion related to the incident and the board's request for a review of the actions taken, specifically the decision to not inform the affected patients. The physicians as a whole agreed that the adverse effects of the accidental radiation overdose on the patients were unknown. Therefore, they argued the patients should not be told of the incident. These are cancer patients and they don't want or need any more bad news, the oncologists argued. “Let's face it, these patients are terminal.” “Informing the patients of this error will only confuse them and destroy their faith and trust in their physicians and in the hospital,” they added. Furthermore, they claimed, informing the patients of the errors may unnecessarily frighten them to the extent that they may refuse further treatment and that would be even more detrimental to them. Besides, argued the physicians, advising the patients of potential ill effects just might induce these symptoms through suggestion or excessive worry. Every procedure has its risks, insisted the chairman for radiology, and these patients signed an informed consent. Physicians know what is best for their patients, the attending oncologists maintained, and they will monitor these patients for any ill effects. The department chairman for internal medicine volunteered that, in his opinion, this incident is clearly a patient-physician relationship responsibility and not the business of the hospital. Besides, added the chairman of radiology, informing the patients would “just be asking for malpractice litigation.” The medical director for the oncology program then suggested that the board of trustees and the management staff “think long and hard” about the public relations effect of this incident on the oncology program. “Do you really think patients will want to come to Paradise Hills if they think we're incompetent?”, he asked. The CEO conceded that he supported the position of the medical staff in this matter and he, too, was especially concerned about preserving the image of the oncology program, but “his hands were tied” since the board clearly considered this an ethical issue and one that would be referred to the hospital's ethics committee for its opinion. The physicians noted that if indeed it was the subsequent recommendation of the ethics committee that these patients be informed, then realistically, that responsibility would rest with the patient's primary care physician and not with any of them. Reference: Perry, F. (2002). The Tracks We Leave, Chicago, IL: Health Administration Press, pp. 1-3

You are interviewing for a promotion to a senior management position. You have done well on the interview and are down to the final question. Interviewer: our company is quite concerned with how psychological biases lead to poor investment decisions.

Prompt: If you are promoted, discuss 2-3 specific practices you will put into place to help debias the decision-making process of your division. How will these practices improve investment decisions?

We are now 10^th August 2020, and the dispute over Numbers R’ US is now settled. The ads from Sparkling Ads are proving very good and customers are rushing in. The firm keeps on growing. Their revenue is now reaching $49 million. They have had to employ many more employees. The works force is now 150 employees. Tom and Michael are wondering whether it is time to change business structure. They will be happy to provide the capital but as the dispute with Sparkling Ads has shown, they are currently very vulnerable. They have the following requirements:

1. They want to minimise their income tax.
2. They want to be able to protect assets. They have recently bought a new office space and upgraded their offices to the new brand new fully furnished floor in an office tower on Grenfell Street. The total of their gross assets is $10 million.
3. As the profits grow, they want to be sure the profits can be retained for business development and further expansion.

1. What business structure would you recommend? What would be the advantages and disadvantages of relevant business structures in this context? (10 marks)

On 26^th August 2020, Numbers R’Us is incorporated. The same day, Chidi come into the office and is hit by an office trolley full of new computer equipment. He falls to the floor and his leg is badly injured. He will require surgery and rehabilitation.

Is Chidi entitled to worker’s compensation? Justify your answer.