Corporate Social Responsibility (CSR)

Mars Dump is a multinational company that is caught by the Emissions Trading Scheme (ETS).

Details of ETS are as follows:

It is a cap and trade scheme in which permits are traded in an active market. Its annual compliance period is from 1 July of the current period to 30 June of the following year.

Each participating company receives an allocation of free permits each year based on their reporting carbon emissions from the previous period. In the case of Mars Dump Ltd, permits to emit 36 000 tonnes of carbon dioxide equivalents have been issued on the first day of the current period (i.e. 1 July 2019) when the market price of a permit was $25 per tonne of carbon dioxide equivalents.

During the 2019/2020 financial year, Mars Dump emitted 37 000 tonnes of carbon dioxide equivalents, which exceeded its permitted emissions of 36 000 tones. This occurred despite the managers of Mars Dump estimating that it had emitted 19 000 tonnes of carbon dioxide equivalents by 31 March 2020 and was therefore on target to emit 36 000 tonnes by 30 June 2020. The market price of a permit is $27 on 31 March 2020. As a result of exceeding allowed emission levels, on 30 June 2020, Mars Dump purchased 1 000 permits at a market price of $33 per tonne. Mars Dump uses the cost model in accordance with AASB 138, and amortises any deferred income arising from the permits using the proportion of actual emissions to estimated total emissions.

Required

1. How can stakeholder theory be used to explain companies voluntarily undertaking corporate social responsibility reporting? Discuss.                                                                           
2. “There is no mandatory reporting of corporate social responsibility in Australia.” What is your understanding of this phrase? Explain.                                                              

Your Task

You will engage in a negotiation for the sale and purchase of a commercial asset such as a business or a piece of real estate.

Assessment Description

You may be nominated to represent the vendor and will receive email instructions from the vendor company CEO including:

1. Appointment to represent the company as their agent for the sale of the commercial asset;

2. Specific details about the commercial asset;

3. Information about the status of current negotiations with an alternative potential purchaser;

4. Information about a new potential purchaser;

5. Contact details of the agent appointed to represent the purchaser.

Alternatively, you may be nominated to represent the purchaser and will receive email instructions from the purchaser company CEO including:

1. Appointment to represent the company as their agent for the purchase of the commercial asset;

2. Specific details about the commercial asset;

3. Information about alternative assets the company is considering purchasing instead;

4. Information about the vendor;

5. Contact details of the agent appointed to represent the vendor.

Stage 1: Pre-negotiation

1. What is your client’s BATNA? What is your client’s reservation value?

2. What is the other party’s BATNA? What is the other party’s reservation value?

3. What is the ZOPA range? What is your strategy for claiming the greater proportion of the ZOPA? Include at least fifteen academic references in your answers to the above questions with a minimum of five references coming from academic journals.

You must answer the following questions:

Stage 2: Negotiation You must:

1. Enter negotiations with your counterpart for the sale and purchase of the commercial asset;

2. Maintain a communications log that captures the date, method, items discussed, and outcomes of each communication. Attach copies of any communications that confirm agreed price

Stage 3: Post negotiation

You must prepare a 1 page letter to your client advising the outcome of the negotiation.

What are the Journal Entries for March thru December?

January

1. On January 1^st, The Board of Directors issued 250,000 additional shares (par of $.25) to raise capital for the New Year. Assume no change in price from Dec 31, 2018.

2. Purchased a truck for $240,000 cash on the 1^st of January. The truck will be depreciated over a 5 year period. You decide to use the 200% declining-balance depreciation method because it is determined that the truck will be more productive when it is newer. The truck has an estimated salvage value of $25,000.[Adjusting Entry Required]

3. Purchased new office equipment for $97,000 with cash from California Furniture on January 1, 2019. The new furniture will be depreciated over a ten-year period on a straight-line basis. The cabinet has an estimated salvage value of $5,000.[Adjusting Entry Required]

4. On January 1^st, a 5 year, $138,000 long-term note payable was taken from a local bank.

5. On January 5^th you receive payment from interest earned and accrued in 2018.

6. On January 22^nd you purchased 8,500 additional units of inventory at a cost of $76.50 per unit. You paid 45% in cash and purchased the remainder on account.

7. On January 25^th you pay $289,000 cash toward your accounts payable.

February

8. Paid cash for $52,300 worth of radio advertising on February 1^st. This gives you radio advertising space until January 31^st, 2020.[Adjusting Entry Required]

9. February 13^th you collect $356,000 of account payments from customers.

March

10. Purchased a parcel of land on March 1, 2019 for $990,000 by paying $480,000 in cash and signing a short-term note payable with the seller for $510,000. You must repay the $510,000 in exactly one year on March 1, 2020. You agree to pay the seller 5 percent interest (annual rate) on a quarterly basis (June 1, September 1, December 1, 2019, and March 1, 2020).[Adjusting Entry Required]

11. On March 19^th you purchased $29,000 of office supplies from Super Office Supplies with cash.

12. On March 20^th you received a payment of $41,000 for 200 hours of service to be performed in the future.

April

13. April 21^st, your customers bought 15,000 units of your product for $122 per unit (you decide what your company sells). The cost of this product is determined by the method of inventory valuation used by your company. Customers paid you 60% in cash and the remainder was on account.

14. On April 27^nd you purchased 9,250 units at a cost of $78.5 per unit. You paid 65% in cash and purchased the remainder on account.

15. On April 29^th you pay $546,000 cash toward your accounts payable.

May

16. On May 1^st you pay all dividends owed to your owners.

June

17. Leased additional warehouse space from Leasing Solutions for two years on June 1^st due to expiration of the previous rental contract. $105,000 cash was paid for the new contract on this date which covers the rental fee for two years. There is no value left in the previous contract. [Adjusting Entry Required]

18. Wage expenses from January 1 – June 30 are $506,000. Pay this in full including your beginning balance in wages payable.

19. On June 19^th, $134,000 of prepaid insurance was used.

20. On June 26^th a customer that previously bought your product on account has filed for bankruptcy. He owed you $47,500. You expect to collect $0.

July

21. Your company issued 1,000, 2.9% bonds (face value of each bond is $1,000) at 96.8229 on July 1^st, 2019. The bonds are due on July 1, 2024, with interest payable each January 1 and July 1. The market rate at the time of the bond issuance was 3.6 Percent. Use the effective-interest method to calculate both the interest expense and the amortization of the bond discount when each interest payment is made.[Adjusting Entry Required]

August

22. Purchased a Patent (Intangible Asset) for $97,000 on August 1^st. The patent will be amortized over a 10 year period on a straight-line basis.[Adjusting Entry Required]

23. On August 6^th, a piece of land that was originally purchased for $1,150,000 was sold for $2,000,000 cash.

24. August 15^th, your customers bought 9,000 units of your product at $128 per unit. The cost of this product is determined by the method of inventory valuation used by your company. Customers paid you 60% in cash and the remainder was on account.

25. Received on August 25^th a $164,000 cash payment from a customer paying on their account.

September

26. $49,000 cash was paid for an investment in Company X's marketable securities on September 3^rd.   

27. On September 12^th, a piece of equipment was sold for $760,000 cash. The equipment was originally purchased for $530,000. At the time of the sale, it had been depreciated by $75,000.

28. Purchased and used $11,900 worth of fuel for the delivery truck on September 18^th.

October

29. Your top sales officer met with a new customer to discuss a potential future contract. She informs you that the customer is considering signing the $280,000 deal, which would become effective February 2020.

30. On October 1^st, you purchased 11,250 units at the increased price of $80 per unit. The purchase was made on account.

31. On October 10^th you paid your supplier $95,000 cash for inventory purchased on account.

November

32. November 1^st, the CEO, in an effort to adjust ratios, ordered the repurchasing of the company’s own stock. The quantity of stock repurchased was 150,000 shares.

33. Purchased a two-year building insurance policy on November 1^st for $391,000 cash.[Adjusting Entry Required]

34. On November 17^th a customer pays you $736,000 for work that you will finish in January of 2020.

35. November 19^th, your customers bought 8,650 units of your product at $136 per unit. The cost of this product is determined by the method of inventory valuation used by your company. Customers paid you 45% in cash and the remainder was on account.

36. An employment contract is signed with a new regional manager. You have offered him $190,000 per year. He will not begin working for the company until March 2020.

December

37. Wages earned from July 1^st through December 31^st was $552,000. Wages earned between Dec. 15^thand Dec 31^st amounting to $34,000 was not paid this until Jan 7th.

38. At the end of the year, $54,000 cash was paid to the local bank for the long-term note payable taken out on January 1, 2019. $46,000 of this was applied to the loan principal. The remaining amount was the accumulated interest due for 2019.

39. On December 31^st, the marketable (trading) securities you purchased on September 3, 2019 transaction now has a fair market value of $35,000.

40. On December 31^st, $579,000 depreciation expense for the year was calculated for equipment purchased before January 1, 2019.

41. On December 31^st, you declare dividends of $.24 per share to be paid at a later date.

42. On December 31^st, the utility bill was paid for the year. The amount was $54,000 and you paid in cash.

43. On December 31^st, you pay in cash recurring interest on the long-term note acquired prior to the year 2017. HINT: See prior year financial statements.

44. On December 31^st, your company earned interest on the average 2019 cash balance which will be paid January 5^th, 2020. The average interest rate for the year was 4.0%. Note: Compute the average cash using only the beginning and ending balance.

45. By December 31^st, 147 of the prepaid service hours from March 20, 2019 were completed.

46. A count of office supplies indicated that $26,800 of office supplies had been used by December 31^st.

47. Since the inception of your company, you have been able to collect 89% of your ending accounts receivable balance from customers that bought your product on account. Based on this information, adjust your allowance for bad debt account. NOTE: Use your 2019 ending accounts receivable balance to make this calculation

Prepare Journal Entries for the following below

January

1. On January 1^st, The Board of Directors issued 250,000 additional shares (par of $.25) to raise capital for the New Year. Assume no change in price from Dec 31, 2018.

2. Purchased a truck for $240,000 cash on the 1^st of January. The truck will be depreciated over a 5 year period. You decide to use the 200% declining-balance depreciation method because it is determined that the truck will be more productive when it is newer. The truck has an estimated salvage value of $25,000.[Adjusting Entry Required]

3. Purchased new office equipment for $97,000 with cash from California Furniture on January 1, 2019. The new furniture will be depreciated over a ten-year period on a straight-line basis. The cabinet has an estimated salvage value of $5,000.[Adjusting Entry Required]

4. On January 1^st, a 5 year, $138,000 long-term note payable was taken from a local bank.

5. On January 5^th you receive payment from interest earned and accrued in 2018.

6. On January 22^nd you purchased 8,500 additional units of inventory at a cost of $76.50 per unit. You paid 45% in cash and purchased the remainder on account.

7. On January 25^th you pay $289,000 cash toward your accounts payable.

February

8. Paid cash for $52,300 worth of radio advertising on February 1^st. This gives you radio advertising space until January 31^st, 2020.[Adjusting Entry Required]

9. February 13^th you collect $356,000 of account payments from customers.

March

10. Purchased a parcel of land on March 1, 2019 for $990,000 by paying $480,000 in cash and signing a short-term note payable with the seller for $510,000. You must repay the $510,000 in exactly one year on March 1, 2020. You agree to pay the seller 5 percent interest (annual rate) on a quarterly basis (June 1, September 1, December 1, 2019, and March 1, 2020).[Adjusting Entry Required]

11. On March 19^th you purchased $29,000 of office supplies from Super Office Supplies with cash.

12. On March 20^th you received a payment of $41,000 for 200 hours of service to be performed in the future.

April

13. April 21^st, your customers bought 15,000 units of your product for $122 per unit (you decide what your company sells). The cost of this product is determined by the method of inventory valuation used by your company. Customers paid you 60% in cash and the remainder was on account.

14. On April 27^nd you purchased 9,250 units at a cost of $78.5 per unit. You paid 65% in cash and purchased the remainder on account.

15. On April 29^th you pay $546,000 cash toward your accounts payable.

May

16. On May 1^st you pay all dividends owed to your owners.

June

17. Leased additional warehouse space from Leasing Solutions for two years on June 1^st due to expiration of the previous rental contract. $105,000 cash was paid for the new contract on this date which covers the rental fee for two years. There is no value left in the previous contract. [Adjusting Entry Required]

18. Wage expenses from January 1 – June 30 are $506,000. Pay this in full including your beginning balance in wages payable.

19. On June 19^th, $134,000 of prepaid insurance was used.

20. On June 26^th a customer that previously bought your product on account has filed for bankruptcy. He owed you $47,500. You expect to collect $0.

July

21. Your company issued 1,000, 2.9% bonds (face value of each bond is $1,000) at 96.8229 on July 1^st, 2019. The bonds are due on July 1, 2024, with interest payable each January 1 and July 1. The market rate at the time of the bond issuance was 3.6 Percent. Use the effective-interest method to calculate both the interest expense and the amortization of the bond discount when each interest payment is made.[Adjusting Entry Required]

August

22. Purchased a Patent (Intangible Asset) for $97,000 on August 1^st. The patent will be amortized over a 10 year period on a straight-line basis.[Adjusting Entry Required]

23. On August 6^th, a piece of land that was originally purchased for $1,150,000 was sold for $2,000,000 cash.

24. August 15^th, your customers bought 9,000 units of your product at $128 per unit. The cost of this product is determined by the method of inventory valuation used by your company. Customers paid you 60% in cash and the remainder was on account.

25. Received on August 25^th a $164,000 cash payment from a customer paying on their account.

September

26. $49,000 cash was paid for an investment in Company X's marketable securities on September 3^rd.   

27. On September 12^th, a piece of equipment was sold for $760,000 cash. The equipment was originally purchased for $530,000. At the time of the sale, it had been depreciated by $75,000.

28. Purchased and used $11,900 worth of fuel for the delivery truck on September 18^th.

October

29. Your top sales officer met with a new customer to discuss a potential future contract. She informs you that the customer is considering signing the $280,000 deal, which would become effective February 2020.

30. On October 1^st, you purchased 11,250 units at the increased price of $80 per unit. The purchase was made on account.

31. On October 10^th you paid your supplier $95,000 cash for inventory purchased on account.

November

32. November 1^st, the CEO, in an effort to adjust ratios, ordered the repurchasing of the company’s own stock. The quantity of stock repurchased was 150,000 shares.

33. Purchased a two-year building insurance policy on November 1^st for $391,000 cash.[Adjusting Entry Required]

34. On November 17^th a customer pays you $736,000 for work that you will finish in January of 2020.

35. November 19^th, your customers bought 8,650 units of your product at $136 per unit. The cost of this product is determined by the method of inventory valuation used by your company. Customers paid you 45% in cash and the remainder was on account.

36. An employment contract is signed with a new regional manager. You have offered him $190,000 per year. He will not begin working for the company until March 2020.

December

37. Wages earned from July 1^st through December 31^st was $552,000. Wages earned between Dec. 15^th and Dec 31^st amounting to $34,000 was not paid this until Jan 7th.

38. At the end of the year, $54,000 cash was paid to the local bank for the long-term note payable taken out on January 1, 2019. $46,000 of this was applied to the loan principal. The remaining amount was the accumulated interest due for 2019.

39. On December 31^st, the marketable (trading) securities you purchased on September 3, 2019 transaction now has a fair market value of $35,000.

40. On December 31^st, $579,000 depreciation expense for the year was calculated for equipment purchased before January 1, 2019.

41. On December 31^st, you declare dividends of $.24 per share to be paid at a later date.

42. On December 31^st, the utility bill was paid for the year. The amount was $54,000 and you paid in cash.

43. On December 31^st, you pay in cash recurring interest on the long-term note acquired prior to the year 2017. HINT: See prior year financial statements.

44. On December 31^st, your company earned interest on the average 2019 cash balance which will be paid January 5^th, 2020. The average interest rate for the year was 4.0%. Note: Compute the average cash using only the beginning and ending balance.

45. By December 31^st, 147 of the prepaid service hours from March 20, 2019 were completed.

46. A count of office supplies indicated that $26,800 of office supplies had been used by December 31^st.

47. Since the inception of your company, you have been able to collect 89% of your ending accounts receivable balance from customers that bought your product on account. Based on this information, adjust your allowance for bad debt account. NOTE: Use your 2019 ending accounts receivable balance to make this calculation.

In 2008, the Board of Directors and shareholders of Anheuser Busch agreed to be acquired by a Belgian Brewer (InBev). Prior to the merger, InBev made many pledges to AB regarding how the company would operate after the merger, how its employees would be treated, and so on. With some stipulations, the U.S. Government agreed to allow the merger.

Since the merger, InBev has laid off a significant number of Anheuser Busch employees, most of whom worked at the St. Louis headquarters. Where the merger created duplication of job duties, those being terminated have to-date been from AB, not InBev. There is a great deal of speculation and trepidation around the St. Louis area about the long-term fate of the remaining employees, as well as worry about how the new company will view the many and varied civic contributions the company has made to St. Louis and the many other U.S. areas in which it has operations.

View 1 - AB acted as a well-managed business that takes the actions necessary to remain competitive in a very competitive market. If AB had not approved the merger, its profits and stock price would have fallen, and investment capital would have fled the company. As difficult as the decision was, AB operates in a very competitive environment and owes its stockholders the best return it can provide.

View 2 - The decision to sell the company was both short-sighted and, ultimately, a bad business decision. Any short term benefits AB stockholders reaped from the merger will be more than offset by U.S. job losses, lower tax revenues for States and the U.S. Government, and damage to the U.S. communities in which the company operates. Employees whose employers are loyal to them during difficult times repay that loyalty to the company through hard work. Employees who view themselves as economic pawns to be added or discarded as needed will feel only a marginal commitment to the new AB and their work performance will reflect the negative opinion they hold of their employer.

Let's hear your thoughts. Don't just tell us what you think personally, but bring Managerial Economic theory to bear on this issue.

Boyle Company purchased a property (including land and building). The company acquired the property in exchange for a 15-year mortgage for $1,800,000. Their insurance company appraised the components as follows:

Land $400,000

Building $1,400,000

Parking Lot $200,000

What should be the cost basis for the building?

Question 1

The capabilities of computer systems have advanced rapidly over the past several decades. In many organizations, the entire data has been computerised and all the information is available only in digital media. In this changed scenario, auditors have to adapt their methodology to changed circumstances. The approach of auditors to evaluate internal controls has changed accordingly. The continual development is changing the way organization works. Many companies have introduced Information Technology (IT) audit function because it is considered to be a valuable element of management control which provides assurance to the business audit committee and management and adds to the organization’s credibility with investors and creditors. Management is responsible for establishing and maintaining a system of internal financial controls and in some cases, may be required by regulators to provide written certification of the adequacy of the controls. Legal and regulatory requirements are changing fast and companies must make sure they are aware of the latest rules. Presence of controls in a computerized system is significant from the audit point of view
The Business and Financial Educational Services provider Company Limited is an organizations that do not have an IT audit function. The company is considering to establish one. They are work shopping their company size and type of business, source of capital and risk factors that warrant such an investment. They agree that the potential benefits of the IT audit function should be assessed and compared against the estimated costs. IT audit function should ensure the establishment and compliance to IT Controls in the organizations computer system. They are undecided on the decision to establish an IT audit function. They think the decision should involve the CEO, CFO, and audit committee. The following is a list of criteria they are considering:
1. The audit committee wants to get independent and objective assurance on the adequacy of internal controls from someone other than the CEO or CFO.
2. The CEO wants to get independent and objective assurance on the adequacy of internal controls from someone other than the CFO or line managers.
3. The CFO wants to get independent and objective assurance on the adequacy of internal controls from someone other than the line managers.
4. The organization gets too large or geographically dispersed for frequent and economical first-hand monitoring of controls by the audit committee, CEO or CFO.

Required:
a. You are an IT Audit consultant who is familiar with the works of the company and is well connected to the company. In a meeting with the CEO, CFO, and audit committee the CEO has asked that you name and explain the broad categories of IT Audit controls (if any) that must be put in place in their work environment.
b. Carefully consider the scenarios in the submissions provided and write out your report to be submitted to the Audit committee. From your submissions the Audit committee decided to fully contract you to support the management of the company to develop and put in place some General IT control tools. You decided to constitute and hold a sub-project committee
meeting to discuss the details on the following.
i. IT policies and standards.
ii. Physical controls (access and environment).
iii. Logical access controls.
iv. Business continuity
v. Disaster recovery controls.

QUESTION 2
In accounting, the financial transactions are recorded, processed and presented to generate financial statements that is useful to the readers, in making decisions. It is often said that both
manual and computerized accounting systems are based on the same principles, conventions and concept of accounting and auditing. However, they differ in their mechanism (devices, instruments and tools used). The manual auditor uses pen and paper, to record and document transactions. Whereas computerized auditing makes use of computers and internet, to document transactions electronically. Auditors should adequately document the audit evidence in working papers, including the basis and extent of the planning, work performed and the findings of the audit.
Documentation includes a record of:
1. The planning and preparation of the audit scope and objectives
2. The audit programme
3. The evidence collected on the basis of which conclusions are arrived at.
4. All work papers including general file pertaining to the organization and system
5. Points discussed in interviews clearly stating the topic of discussion, person interviewed,
position and designation, time and place.
6. Observations as the auditor watched the performance of work. The observations
may include the place and time, the reason for observation and the people involved.
7. Reports and data obtained from the system directly by the auditor or provided by the
audited staff. The auditor should ensure that these reports carry the source of the report,
the date and time and the conditions covered.
8. At various points in the documentation the auditor may add his comments and clarifications
on the concerns, doubts and need for additional information. The auditor should come
back to these comments later and add remarks and references on how and where these
were resolved.

Required;

It is the practice that the report should be timely, complete, accurate, objective, convincing, and as clear and concise as the subject permits. Briefly explain what the following headings entails with relevant examples how an IT Audit report can be broadly structured under the following headings:
i. IT Audit Report.
ii. Introduction.
iii. Objectives.
iv. Scope and Methodology.
v. Audit Results.
vi. Findings.
vii. Conclusions.
viii. Recommendations.
ix. Noteworthy Management Accomplishments.
x. Limitations that were faced.

QUESTION 3
You are a manager in the audit department of Huntsman & Co, a firm of Chartered Certified Accountants, responsible for the audit of several companies and for evaluating the acceptance
decisions in respect of potential new audit clients. One of your audit clients is Redback Sports Co, which operates a chain of sport and leisure centres across the country. The client invited you into a meeting with the CEO and CFO. According to the CEO of the company “the incessant development of information technology is changing the way their organization works in many ways. The pen and paper of manual transactions have made way for the online data entry of computerized applications; the locks and keys of filing cabinets have been replaced by passwords and identification codes that restrict access to electronic files. The implementation of innovative technology is helping their organizations to improve the efficiency of their business processes and considerably increase their data processing and transmission capacity, but has also introduced new vulnerabilities that need to be controlled”. The CFO was concerned about the new vulnerabilities. He is asking how these vulnerabilities could be controlled You quickly responded by saying that assessing the adequacy of each control requires new methods of auditing. With the increase in the investment and dependence on computerized systems by the company, it has become imperative for audit to change the methodology and approach to audit because of the risks to data integrity, abuse, privacy issues etc. An independent audit is required to provide assurance that adequate measures have been designed and are operated to minimize the exposure to various risks.

Required:

i. The CEO is asking if there is any difference between your regular Audit periodically conducted and an IT Audit. You are required to identify, name and explain the core
differences between your Internal Audits periodically conducted and an IT Audit.

ii. Explain 5 objectives of an IT Audit to Redback Sports Co.
iii. Explain 5 benefits that Redback Sports Co. may derive from an effective IT Audit.
iv. The CFO of Redback Sports Co. is asking that you explain the processes to follow to undertake an effective IT Audit for the company and how long you think it will take them to be ready for your audit. Name and explain the Phases of the Audit Process.

Imagine that you are the CEO of Moet Hennessy Louis Vuitton SE (LVMH).  You have just received share price valuation estimates for a potential buyout target, Rimowa, from two of your top financial analysts. Both analysts used the discounted cash flow (DCF) model to estimate the share price resulting in a valuation of $50, by the first analyst and $60, by the second analyst.  

You made a buyout offer of $55 a share and Rimowa’s CEO rejected it.  The German luxury luggage brand Rimowa is crucial to LVHM’s strategic expansion into brands that have heritage and a unique position.  As the CEO of LVHM what would you do to meet LVHM’s strategic objectivewhile minimizing the costto acquire Rimowa?  Briefly defend your recommendation.