2. Case Background Introduction:

    The project company is ValueVehicle (VV), which is a hypothetical electrical vehicle manufacturer. VV is a public listed company and is required to comply with all regulations from SEC and GAAP. Your group is the accounting department, and you are responsible for disclosing financial information to the SEC and the public.

    (1) Company necessary financial information

VV (formerly ValueVehicle, Inc.) is an American electric vehicle and clean energy company based in Fayetteville, North Carolina. VV's current products include electric cars (the Model 100, Model 101, and Model 102). VV was founded in July 2008. After 12 years in the market, VV earned its fame as the electric passenger car manufacturer, with a market share of 14% of the plug-in segment and 21% of the battery-electric part.

VV started its IPO in 2012 and became a public company, and it has 2 million outstanding shares. The stock market price is $100 per share on December 1, 2020. The primary financial statues (on December 1, 2020) are illustrated as follows:  

Total assets: $2 billion. Current assets: $50 million (including finished products inventory $30 million). Long-term liability: $50 million.  Current liability: $10 million. Common stock: $10 million (VV has no dilutive shares, bonds, or preferred shares).

The profit goal in 2020 is to earn $10 million net income, which also means that the targeted EPS is $5 per share. By November 30, 2020, VV has achieved $8 million net income (after tax and interest). To achieve the targeted goal, VV needs to have $2 million net income (after tax and interest, the income tax rate is 21%) in December 2020. The transactions of this month are illustrated as follows. Your team is required to record these transactions based on your professional judgment.

   (2) Please recognize the following detailed transactions and complete the journal entries. You need to make the necessary argument if the journal entries have several options.

   A. From December 1 through December 20, VV has had 1.2 million dollars transactions with a gross margin of 40%.

   B. Dealer X planned to sign a $1 million sales contract with VV in February 2021 (the gross margin is projected as 40% based on the current product information). Recently, dealer X discussed an alternative that they can sign the contract before December 31, 2020. The condition is that VV can offer a 20% discount on the sales price. VV can choose to provide the discount in December 2020, reject this contract, and wait for the deal in February 2021.

   C. Dealer Y proposed to sign a $1 million sales contract with VV before December 31, 2020, with two conditions: (1) Dealer Y can return the cars unconditionally if they cannot sell the cars before June 2021. (2) VV needs to offer a 10% discount on the sales price. The gross margin is projected as 40% based on the current product price (without the 10% discount). There is no publicly available information about how many cars Dealer Y can sell by June 2021. The representative of dealer Y predicts 10% of the cars cannot be sold by June 2021. VV can choose to offer the contract or reject this deal.

   D. On December 1, 2020, the accounting department receives the latest report from the Pilot Automation System department. The report claims that a new wireless operating system had achieved technological feasibility. VV has spent $800,000 on this system in 2020. The technological feasibility judgment is based on the company's own engineer expert group. There is no official technical criterion currently available for technological feasibility. The original goal for this Pilot Automation System is a patent, but the management now considering this system as internally developed software. VV spends $300,000 this month after passing the technological feasibility. Based on this condition, you are required to judge whether this system is a patent or software and decide to capitalize the $300,000 (the capitalization can be amortized within ten years) or record as an R&D expense.

   E. On December 10, you checked and found that VV had four debt investments in the market. The category and the fair value are listed as follows:

Company  Amount  MarketingValue (12/10/20)  Category     MaturityDate

AA       $1 million   $1.2 million        Held-to-maturity    June 2022

BB       $1 million   $1.3 million        Held-to-maturity    June 2022

CC       $1 million   $0.8 million        Trading security     July 2022

DD     $1 million   $0.9 million   Available-for-sale security  May 2022

  The CEO suggests re-categorize these investments and recognize some of the gains and losses. Please claim your decisions and explain the reasons for your argument.    

   F. VV bought $20 million in equity securities from JJ Company. The investment is 19% of the voting common stock of JJ Company, but the CFO is selected from VV. VV has some impacts on JJ Company’s decision-making. VV uses an equity approach to record this investment. The balance of the JJ investment in December 2020 is $20 million. Some managers argue that the impact is not significant and want to change the accounting approach to use fair value and recognize the investment gains. JJ Company has zero net income in 2020, but JJ’s stock price has increased to $21.4 million. Do you agree with the change and recognize the $1.4 million gains? Please clarify your reasons for your judgment.  

   G. On December 22, the accounting team is required to make a financing decision for the 2021 annual budget. VV has a $5 million budget shortage that needs financing. You have three options available for the demanding $5 million. First, VV can borrow the money from a local bank with a 12% annual interest. Second, sell $5 million treasury stocks. Third, initiate $5 million non-participatory preferred stocks with a 12% dividend ratio. Please select one option and clarify your reasons.

   H. VV decides to initiate a one million dollars stock-based compensatory plan for the C-level managers. Your team is required to make a selection from two alternatives: the first is to use compensatory stock options; the second is to use a restricted stock plan. What is your preference, and explain why you choose your selection?

    I. The administrative and selling expense in December 2020 is $300,000. Please include the eight businesses above and compute your net income and EPS. Remember to pay income tax for December income (tax rate is 21%).  

J. If your net income from the computation above is less than $2 million, you cannot meet the market expectation. You are required to explore possible solutions to help achieve this goal. Please propose one potential accounting-related business activity to meet your goal. The proposed solution needs to comply with the official regulations from GAAP, SEC, etc. Please explain your proposed transaction and present the journal entry for your transaction.

Here is a hinted example. One financial consultant advises you to sell one building to your business partners. Then you can lease back to use the following three years. The building's original value is $3 million, and the current value is $2 million (the depreciation is $1 million). The fair value of the fixed assets is $2.9 million. The lease can be operating lease for three years, and each year from 2021 is $0.3 million. The sale can add $0.9 million gains for 2020 annual net income. The journal entry is:      

            Dr: Sales                    2.9 m

              Accumulated depreciation      1 m

                  Cr: Fixed asset-building        3 m

                   Gains of fixed asset sales      0.9m  

For the publicly traded U.S. company Apple (AAPL), analyze the current economic environment of the company and industry. Explain how things such as tax rates, unemployment, and government fiscal policies have affected the company's economic decisions. Explain the role of the Central Bank in the economic environment.

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

Milligan Companies, Inc (MCI)is a private company which owns five auto parts stores Houghton. MCI has gone from two auto parts stores to five stores in the last three years, and it plans on continued growth. Sheila and Walter own the majority of the stock. Sheila is the chairman of the board and the CEO. Walter is the COO as well as the CFO. Shares not owned by Sheila and Walter are owned by friends and family who helped get MCI started. Sheila started the company with one store after working in an auto parts store. To date, she has funded growth from an inheritance and investments from a few friends. They are thinking about expanding by several more stores in the near future.
MCI employs 20 full time staff. These workers are employed in store management, parts delivery and accounting. About 40% of MCI is retail walk-in business and the other 60% is regular customers where MCI delivers parts and bills these customers on account. During peak periods, MCI also uses part-time employees.
Your accounting firm ACC4100, is conducting the annual audit for the year ended December 31, 2020. Your audit team discovers numerous misstatements, mostly caused by human error and weak internal control. In aggregate, the misstatements are material, but management agrees to make your recommendation adjustments. Also, during 2020, MCI changed its method of valuing inventory from a weighted-average method to FIFO. When Sheila opened the first store, she thought the easiest way to value inventory was to use an average cost for each category of items. As the company grew, they never revised this practice. Now that the company is significantly larger with multiple stores, Sheila realize they need to be more focused on tracking inventory costs because of the impact of their profit margin.   The change was made to FIFO because it is more commonly used in the industry.
Your team concludes fieldwork on March 1, 2021 and Sheila is planning to provide the auditing financial statements and audit report to its lenders on March 6, 2023
A.      Does KCI have a justified change in accounting principle? If so, how should the change be presented in the financial statements?
B.      Assuming KCI has a justified change in accounting principle and has accounted for the change properly, draft the report that the CPA will issue.
C.      If management does not make agree to make the adjustments to correct the financial statements, and does not properly present the change in accounting principle in the financial statements. What reporting options does the CPA firm have?

Cheyenne Company purchases an oil tanker depot on January 1, 2020, at a cost of $648,500. Cheyenne expects to operate the depot for 10 years, at which time it is legally required to dismantle the depot and remove the underground storage tanks. It is estimated that it will cost $79,920 to dismantle the depot and remove the tanks at the end of the depot’s useful life.

Prepare the journal entries to record the depot and the asset retirement obligation for the depot on January 1, 2020. Based on an effective-interest rate of 6%, the present value of the asset retirement obligation on January 1, 2020, is $44,627.

Prepare any journal entries required for the depot and the asset retirement obligation at December 31, 2020. Cheyenne uses straight-line depreciation; the estimated salvage value for the depot is zero.

On December 31, 2029, Cheyenne pays a demolition firm to dismantle the depot and remove the tanks at a price of $84,200. Prepare the journal entry for the settlement of the asset retirement obligation.

You are an associate at ABC LLP, a forensic accounting firm. Your company is retained by the Law Firm that is representing a client. The client, the former CFO of the Public Company, is being investigated by the SEC and FBI for running a large accounting fraud scheme and funneling money to his own account after allegedly falsely invoicing sales during 2013 and 2014. The Auditing Firm, which was recently terminated, audited the Public Company and issued opinion letters in connection with the Public Company’s 2013 and 2014 annual reports.

You are just getting up to speed on the case, but the ABC Partner asked for you to help analyze the issue in connection with the Law Firm.

Assume that you are in a meeting with the Law Firm about advising the CFO on options for defending an SEC investigation / FBI investigation. Describe to the group your understanding of:

a. Advice of Counsel Defense

b. Good Faith Defense

c. Fifth Amendment (testimonial and document)

You are an associate at ABC LLP, a forensic accounting firm. Your company is retained by the Law Firm that is representing a client. The client, the former CFO of the Public Company, is being investigated by the SEC and FBI for running a large accounting fraud scheme and funneling money to his own account after allegedly falsely invoicing sales during 2013 and 2014. The Auditing Firm, which was recently terminated, audited the Public Company and issued opinion letters in connection with the Public Company’s 2013 and 2014 annual reports.

You are just getting up to speed on the case, but the ABC Partner asked for you to help analyze the issue in connection with the Law Firm.

Assume that you are in a meeting with the Law Firm about advising the CFO on options for defending an SEC investigation / FBI investigation. Describe to the group your understanding of:

a. Advice of Counsel Defense

b. Good Faith Defense

c. Fifth Amendment (testimonial and documen

Ultimate Office Products was an old, established manufacturing company in the turbulent office products industry. Discount merchandisers and office product superstores were spreading rapidly and altering the traditional distribution channels once dominated by wholesalers and smaller retail stores. The growing power of the superstores was forcing manufacturers to improve customer service. The traditional manufacturers were being challenged by new companies more willing to cut prices and use technologies favored by the superstores, such as electronic orders and billing. Ultimate Office Products was losing market share and profits were declining.

Richard Kelly was the director of information systems, a newly created position in the company. When the CEO met with Richard to discuss his new responsibilities and objectives, she explained that it was essential to speed up order processing and improve customer service. Richard knew that the order processing system used by the company was obsolete. He prepared a plan to automate the system and got approval from the CEO for it. Then, he purchased new computer workstations and a software package to support them. The software would enable customers to make electronic orders, and it would improve order processing, billing, and inventory control. However, months after the equipment and software arrived, it was still waiting to be used. The managers from sales, production, accounting, shipping, and customer service could not agree about the requirements of the new system, which was necessary to get it operating. These managers were Richard’s peers, and he had no direct authority over them. Even though he encouraged cooperation, meetings among the managers usually ended with heated accusations about who was responsible for the company’s problems. Most of the managers disagreed about the reason for the delays in filling orders, and some questioned the need for an expensive new system. Meanwhile, the CEO was becoming impatient about the lack of progress. She made it clear that, after spending a small fortune on new technology, she expected Richard to find a way to resolve the problem. Richard decided it was time to take a different approach.

His first step was to gather more information about the reasons for delays in processing and filling orders. He began by having his staff map the workflow from the time orders were received until the filled orders were shipped. As he suspected, many unnecessary activities created bottlenecks that could be eliminated to speed up the process. The problems extended across functional boundaries and required changes in all departments. The preliminary results were presented to the CEO, who agreed on the need for dramatic improvements and authorized Richard to begin reengineering the process. Despite having the support of the CEO, Richard knew that widespread commitment would be needed for major changes to be successful. Richard met with the department managers to get their assistance in forming some cross-functional task forces. Although he knew that one task force would probably be enough to determine what changes were needed, he wanted to involve more people in the change process so that they would understand and support it. An outside consultant was secured to advise the task forces in their work. Each task force examined a different aspect of the problem. They analyzed processes, met with key customers to learn what they wanted, and visited other companies to learn how they processed orders more efficiently. As people began working together to understand the system, they began to realize how serious the problems were. The participants were able to put aside their functional biases and cooperate in finding ways to improve efficiency and customer service. Each team made recommendations to the steering committee, composed of Richard and the department managers. The CEO also attended these meetings to emphasize their importance. When one of the department managers opposed a change, everyone in the meeting looked at the CEO, who made it clear that she supported the task force recommendation. Within a year, the company eliminated many of the steps formerly required to process an order, and the average number of days to fill an order was reduced by nearly half. Many more orders were being made electronically, and most mistakes in the billing process were eliminated. As people discovered that they could actually change things for the better, many of them volunteered to serve on teams that would continue to look for ways to improve quality and customer service.

Questions

a.     Why did Richard fail in his first attempt to implement change?
b.     Identify subsequent actions by Richard that were more effective for implementing change in the organization.
c.     Evaluate the change leadership provided by the CEO.

Business Analytics -MBA

What is machine learning? How does it differ from statistically learning? Give an example of each.

Are both still relevant and important when making business decisions? Explain your answer.

Write your responses in detail with EXAMPLES. Be sure to identify the source of your example in your posting. Your initial post should be of minimum of 300 words.

Business Analytics -MBA What is machine learning? How does it differ from statistically learning? Give an example of each. Are both still relevant and important when making business decisions? Explain your answer. Write your responses in detail with EXAMPLES. Be sure to identify the source of your example in your posting. Your initial post should be of minimum of 300 words.