14

Which of the following does NOT decrease the threat of entry in an industry?

High switching costs

Large economies of scale

Brand loyalty

Threat of competitor retaliation

None of these

15

Which of the following is the most important reason a strategic analyst should always do an industry structure analysis when evaluating a single firm’s strategy?

Helps identify all the competitors trying to take profits from the firm.

Helps identify the ways the firm should try to change the industry structure through its strategy.

None of these.

Helps identify if it is impossible for the firm to gain a competitive advantage in the future.

Helps identify opportunities for the firm in the future

16

Which of the following best describes the halo effect?

A CEO is considered effective if he or she is very popular with shareholders.

A CEO is considered effective because they have achieved the highest position in the organization.

A CEO is considered effective because they follow the practices of other successful firms.

A CEO is considered effective if the firm is performing well.

None of these

Case study:

'Got away lightly': Barclays CEO fined $1.1m after trying to expose whistleblower

Barclays' chief executive officer Jes Staley was fined 642,430 pounds ($1.1 million) by British regulators for his attempts to uncover a whistleblower.

"Mr. Staley breached the standard of care required and expected of a chief executive in a way that risked undermining confidence in Barclays' whistle-blowing procedures," Mark Steward, executive director of enforcement and market oversight at the Financial Conduct Authority, said in an emailed statement Friday.

"Whistleblowers play a vital role in exposing poor practice and misconduct in the financial services sector."

The fine is the third-biggest ever imposed by the FCA on an individual. Last month, the regulator indicated it would stop short of the more serious accusation of acting with a lack of integrity, which would have cost Staley his job. Compliance professionals were split on whether Staley, who retains the support of his board, got away with the equivalent of a slap on the wrist.

"In terms of the level of the fine, he did indeed get away lightly," said Tom Kirchmaier, professor of governance at Copenhagen Business School.

"He would have known that this is very much not what is expected from a CEO, and so the fine is not much more than a very light warning."

The fine is equivalent to about 15 percent of his reported 2016 compensation, according to data compiled by Bloomberg. Barclays, in a separate statement, said it cut Staley's 2016 bonus by 500,000 pounds. "I have consistently acknowledged that my personal involvement in this matter was inappropriate," Staley said.

The FCA and Prudential Regulation Authority also said Barclays's whistle-blowing systems and controls will be subject to "enhanced monitoring and scrutiny," the first time such measures have been imposed on a financial firm.

The scandal has been the first test of the FCA's Senior Managers and Certification Regime, which requires officials to be directly accountable for misconduct on their watch. Regulators have placed whistle-blowing, and the protection of those raising the alarm, at the heart of efforts to avoid misconduct and scandals since the financial crisis.

"A CEO should set an example for the firm's employees. Clearly, Mr. Staley has failed in this regard," said Nicky Morgan, a UK lawmaker and chair of Parliament's Treasury Committee, which frequently grills financial industry leaders after scandals. "In our next evidence session with the FCA, we'll ask why it believes that the fines are appropriate."

The whistle-blowing controversy dates back to June 2016, when Barclays's board received an anonymous letter raising concerns about the recruitment of one of Staley's former colleagues at JPMorgan Chase, Tim Main. The contact flagged issues of a personal nature regarding Main and Staley's role in dealing with those concerns at JPMorgan.

After learning about the matter, Staley twice attempted to identify the whistle-blower, despite being informed that it was inappropriate for him to do so. Barclays's own investigation had found Staley "honestly, but mistakenly, believed" his actions were permitted.

Staley agreed to settle at an early stage of the investigation, qualifying for a 30 percent reduction to the combined FCA and PRA fine, the regulators said.

Using the news article provided below as a base, and referring to other appropriate literature, discuss
and critically evaluate the following:
1. Determine the facts of the case. Who is a whistleblower?
2. Identify and discuss why the Barclays CEO was trying to expose whistleblower.
3. Describe an accounting theory that may help to explain the CEO’s conduct leading to the whistleblowing. Critically link that theory with CEO’sbehaviour.
4. Using a second accounting theory, explain how your chosen theory may apply to whistleblowing. How is this theory related to whistleblower behavior

5. Using a third accounting theory, explain the regulator’s quest to make the CEO accountable.

6. Compare, contrast and critically evaluate the three theories you have chosen.  

STRIK-IT-RICH GOLD MINING COMPANY The Strik-it-Rich Gold Mining Company is a U.S. multinational firms and considering investing in a project in Germany. The cost of the investment project is €100 million. This cost occurs at the beginning of the year. The returning cash flow of this project is €120 million. Assume the returning cash flows happen at the end of the year. The firm’s cost of capital in the U.S. is 10%. The current exchange rate is S0($/€) = $1.20/€. Strik-it-Rich’s management is, however, concerned with the possibility that the exchange rate may change quit a bit because of the potential withdrawal of the United Kingdom from the European Union. The firm estimates that the exchange rate at the end of the year could either be S0($/€) = $1.00 or S0($/€) = $1.40.

(4) Instead of using call option contracts, the mining company can also use the real option. The exchange rate should become clear within a year. If the company has the option to delay this expansion plan for a year, please find the NPV after the company delays the expansion. Assume the exchange rate would not change in the next year.

Elijah did not request a tax-filing extension, and he waited until June 21,2017, to file his former 1040 for tax year 2016. His balance due is $88.Elijah is subject to failure -to -file and failure -to -pay penalties totaling

Ayayai Corporation is a privately owned company that uses ASPE. On January 1, 2020 Ayayai’s nancial records indicated the following information related to the company’s dened benet pension plan:
Dened Benet Obligation   $1,350,000 Pension Plan Assets   1,500,000
Ayayai Corporation’s actuary provided the following information on December 31, 2020:
Current year service cost   $83,000 Prior service cost, granted Jan 1, 2020   170,000 Employer contributions for the year   83,000 Benets paid to retirees   25,000 Expected return on assets   5% Actual return on assets   6% Discount rate   5%
Prepare a pension worksheet for Ayayai Corporation for 2020.

Headings:
Annual Pension Expense Cash
Net Dened Liability/ Asset
Dened Benet Obligation Plan Assets
Balance, January 1, 2020

Data lines under the headings of the form:
Current Service Cost
Past Service Cost
Net Interest/Finance Cost
Asset Remeasurement Gain/Loss
Employer Contributions to Pension Fund
Benets Paid to Retirees from Pension Fund
Pension Expense Entry - 2020
Net Funding Entry
Balance, December 31, 2020
  
Prepare pension plan journal entries for Ayayai Corporation for 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)
Account Titles and Explanation Debit Credit
(To record pension expense)
(To record payment to the pension fund)

Pitino acquired 80 percent of Brey's outstanding shares on January 1, 2019, in exchange for $369,000 in cash. The subsidiary's stockholders' equity accounts totaled $353,000, and the noncontrolling interest had a fair value of $92,250 on that day. However, a building (with a ten-year remaining life) in Brey's accounting records was undervalued by $19,000. Pitino assigned the rest of the excess fair value over book value to Brey's patented technology (five-year remaining life).

Brey reported net income from its own operations of $67,000 in 2019 and $83,000 in 2020. Brey declared dividends of $18,000 in 2019 and $22,000 in 2020.

Brey sells inventory to Pitino as follows:

At December 31, 2021, Pitino owes Brey $19,000 for inventory acquired during the period.

The following separate account balances are for these two companies for December 31, 2021, and the year then ended.

Note: Parentheses indicate a credit balance.

1. What was the annual amortization resulting from the acquisition-date fair-value allocations?

2. Were the intra-entity transfers upstream or downstream?

3. What intra-entity gross profit in inventory existed as of January 1, 2021?

4. What intra-entity gross profit in inventory existed as of December 31, 2021?

5. What amounts make up the $59,540 Equity Earnings of Brey account balance for 2021?

6. What is the net income attributable to the noncontrolling interest for 2021?

7. What amounts make up the $456,000 Investment in Brey account balance as of December 31, 2021?

8. Prepare the 2021 worksheet entry to eliminate the subsidiary’s beginning owners’ equity balances.

9. Without preparing a worksheet or consolidation entries, determine the consolidation balances for these two companies.

I ONLY NEED QUESTIONS 7,8, AND 9

Read and complete the Capstone exercise on page 177 and answer all of the questions associated with the case.

In 1885, Binney & Smith had a product line of ONE—An-DuSeptic dustless chalk. While promoting this product to teachers across the United States, the company founders discovered that teachers were importing expensive wax crayons from Europe. In the early 1900s, nearly 20 years after starting the company, Binney & Smith introduced a new product, eight colored crayons packaged in a green and yellow box. Crayola Crayons remain a staple in American classrooms today. The size of the boxes and the selection of colors have changed over the decades, but the basic product remains essentially the same. (The “Big Box” with a mind-boggling 96 crayons was introduced in 1993.) In 1964, Binney & Smith acquired Permanent Pigments, an acrylic paint manufacturer, and in 1977, it acquired the rights to Silly Putty. In 1984, the Binney & Smith company became a wholly owned subsidiary of Hallmark Cards, Inc. In 2007, the Binney & Smith corporate name was changed to Crayola because of the brand familiarity. The name Crayola has a 99% recognition among U.S. consumers. Eighty percent of all the crayons sold in the United States today have the Crayola brand name. Crayola products are sold in 80 different countries and packaged in 12 languages. The name change also reflected the company’s new direction. For nearly 100 years, Crayola targeted children and their parents with a product line of back-to-school products. The products had expanded from crayons to water paints, markers, chalk, colored pencils, and poster paints. However, in an effort to expand the market and generate revenues throughout the year, Crayola entered the toy industry. Bath tub art, glow stations, Color Explosion products, Mess-Free Art, flavored drinking water, and even a colorful computer keyboard and mouse are just some of the products added to the Crayola line. Today in any big box store, Crayola will have shelf space in both the art and school supply aisle AND the toy section.

1. How would you define the attributes and benefits of Crayola products?

2. Define the core, actual, and augmented product benefits.

3. Where was Crayola in the product life cycle before it entered the toy market? Where do you think they are now? Explain.

4. Do you see the move from school supply products to toys as product development? Explain.

5. Describe the Crayola product portfolio strategy.