The DeVille Company reported pretax accounting income on its income statement as follows: 2019 2020 2021 2022 Pretax accounting income $350,000 270,000 340,000 380,000 Included in the income of 2019 was an installment sale of property in the amount of $50,000. However, for tax purposes, DeVille reported the income in the year cash was collected. Cash collected on the installment sale was $20,000 in 2020, $25,000 in 2021, and $5,000 in 2022. Included in the income of 2020 was $20,000 fine paid for violation of federal law. The enacted tax rate for 2019 and 2020 was 30%, but during 2020, new tax legislation was passed reducing the tax rate to 20% beginning in 2021.

1. Prepare the year-end journal entries to record income taxes for 2019.

2. Prepare the year-end journal entries to record income taxes for 2020.

Provide Explanation for each part

What are the main business environment factors in HVAC - variable frequency drives market in US.

1. Political/Legislative factors

2. Distribution factors - from EU to US

3. Technological factors - difference between US and EU

Problem 6-18A Alternative cost flows—periodic LO8

Synergy Company began 2020 with 20,000 units of Product X in its inventory that cost $7.70 per unit, and it made successive purchases of the product as follows:

The company uses a periodic inventory system. On December 31, 2020, a physical count disclosed that 16,000 units of Product X remained in inventory.

Required:
1. Calculate the number and total cost of the units available for sale during 2020.

2. Prepare calculations showing the amounts that should be assigned to the 2020 ending inventory and to cost of goods sold, assuming:

a. FIFO

b. Weighted average cost basis. (Round the "Average cost per unit" answer to 2 decimal places.)

5. Explain the Principal-Agent problem in private enterprises. Cite an example or two to show the seriousness of the problem in even some of the biggest North American businesses. How does a Japanese CEO differ from his North American counterpart?

Is it better for a firm's actual stock price in the market to be under, over, or equal to its intrinsic value? Would your answer be the same from the standpoints of stockholders in general and a CEO who is about to exercise a million dollars in options and then retire? Explain.

Is it better for a firm's actual stock price in the market to be under, over, or equal to its intrinsic value? Would your answer be the same from the standpoint of stockholders in general and a CEO who is about to exercise a million dollars in options and then retire? Explain.

Nike

Nike hit the ground running in 1962. Originally known as Blue Ribbon Sports, the company focused on providing high quality running shoes designed for athletes by athletes. Founder Philip Knight believed high-tech shoes could be sourced from overseas at competitive prices. Nike’s commitment to designing innovative footwear for serious athletes, helped it build a cult following among US consumers. Nike believed in a ‘pyramid of influence’ in which the preferences and testimonial of top athletes influenced the product and brand choices of others. From the start its marketing and advertising campaigns featured accomplished athletes: in 1985 basketballer Michael Jordan was signed up, albeit then as a rookie.

In 1988 the ‘Just Do It’ campaign was launched. The campaign subtly challenged a generation of athletic enthusiasts to chase their goals. It was a natural manifestation of Nike’s attitude to self-empowerment through sports.

Nike began expanding overseas. In Europe it found that its US-style ads were seen as too aggressive. To authenticate its brand in Europe it focused on soccer and became active as a sponsor of youth leagues, local clubs and national teams. Further pursuing its strategy of professional endorsements, Nike decided to sponsor the Brazilian soccer team, which turned in to a big break when they won the World Cup in 1994. In 2007, Nike acquired Umbro a British maker of soccer-related footwear, apparel and equipment. This acquisition helped to boost Nike’s presence in soccer.

Continuing overseas expansion, China became a focus during the 2008 Olympics in Beijing. Although Adidas was the official sponsor, Nike received special permission from the International Olympic Committee to run Nike ads featuring Olympic athletes during the games and sponsored most of the Chinese teams. Some believed Nike’s marketing strategy during the Olympics was more effective than Adidas’s Olympic sponsorship.

Through the 1990s Nike moved into baseball, football, cycling, volleyball, hiking, soccer and then golf. During this time it developed a repeatable growth strategy[1]. Athletic shoes continued to be the core starting point but Nike then quickly moved into adjacent segments: into apparel and then equipment.

Internally Nike marketers adopted the three-word brand mantra: authentic athletic performance, to guide their marketing efforts. Its entire marketing program must reflect these brand values. Nike has expanded its brand meaning form ‘running shoes’ to ‘athletic shoes’ to ‘athletic shoes and apparel’ to ‘all things associated with athletics including equipment’. However it is always guided by the brand mantra. For example, as Nike rolled out its successful apparel line, the product had to be innovative enough through material, cut and/or design, to truly benefit top athletes.

Expanding into new categories and then new segments required the company to forge new distribution channels and lock in suppliers. Nike has pursued a selective distribution strategy. It pulled its product from the retail chain Sears when they acquired discount chain Kmart, to make sure Kmart did not carry the brand.

Expanding into new product categories meant new endorsements including Tiger Woods for golf. In tennis, John McEnroe was its first brand star in 1986. More recently Nike has aligned with Maria Sharapova, Roger Federer and Rafael Nadal. Some called the 2008 Wimbledon final between Federer and Nadal – both dressed in swooshes from head to toe – a 5-hour commercial valued at $10.6 million.

Nike has an unfortunate history of associating with some athletes who attract adverse publicity. In the 6 months following Tiger Woods highly publicised personal scandal, Nike lost over 100,000 customers[2] and although several sponsors cut ties with Woods, Nike did not. Nike did however terminate is contract with disgraced cyclist Lance Armstrong once the doping evidence became ‘seemingly insurmountable’. Oscar Pistorius is the latest example of a Nike endorsement that could turn sour.

Nike has also attracted adverse publicity regarding its offshore facilities; centring on working conditions and low wages, with media accusations of exploitation. Whilst Nike has assumed a policy of reformation for its abuses, the issue became, and continues to be, a recurring public relations nightmare for Nike.

NikeiD (rebranded as Nike by You) is a service provided by Nike allowing customers to customise and design their own Nike merchandise. This was launched in 1999 through the Nike website. Delivery is offered too many countries but not currently to Australia and New Zealand; here on-line local companies may act as local distributors for customised Nike products.

Basketball superstars have continued to feature in Nike’s promotions. In addition it formed a partnership with Foot Locker to create a new chain of stores in the US, House of Hoops by Footlocker, which offers only basketball products by Nike sub-brands such as Converse and Jordan.

Recently, Nike’s lead in the running category has grown to 60% market share, thanks in part to its exclusive partnership with Apple. Nike+ technology includes a sensor that runners put into their running shoes and a receiver, which fits into an iPod, iTouch, or iPhone. Then the athlete goes for a run or hits the gym, the receiver captures his or her mileage, calories burned, and pace, and stores it until the information is downloaded. Nike+ is now considered the world’s largest running club.

In 2008 and 2009, Nike+ hosted the Human Race 10K, the largest and only global virtual race in the world. The event, designed to celebrate running, drew 780,000 participants in 2008 and surpassed that number in 2009. To participate, runners register online, gear up with Nike+ technology, and hit the road on race day, running any 10K route they choose at any time during the day. Once the data is downloaded from the Nike+ receiver, each runner’s official time is posted and can be compared to the times of runners from around the world.

Like many companies, Nike is trying to make its companies and products more eco-friendly. However Nike does not focus on promoting this. As one brand consultant explained: ‘Nike has always been about winning. How is sustainability relevant to its brand?’ Nike executives agree that promoting an eco-friendly message would distract from its high-tech image, so efforts like recycling old shoes into new shoes are kept quiet.

As of 2020 Nike continues to dominate the athletic footwear market with a 50% world market share. Swooshes abound on everything from wristwatches to skateboards to swimming caps. The company’s long term strategy focuses on basketball, running, soccer/football, women’s fitness, men’s training and sports culture. As a result of its successful expansion across geographical markets and product categories, Nike is the top athletic apparel and footwear manufacturer in the world, with annual corporate revenues exceeding $39 billion.

These questions are compulsory and relate to the Nike case (on pages 3 and 4 of exam). Read the case and answer the following questions.

1. Evaluate all aspects of Nike’s marketing strategy. Within your evaluation, explain fully the reasons for success – or failure. Conclude your evaluation with a summary bullet point list of i) strengths, and ii) weaknesses.
2. You are contemplating accepting a consultancy with Nike’s rival Adidas to help them hone their marketing strategy to compete with Nike
3. 1. You have a meeting scheduled with two of Adidas’s senior accountants who are suspicious of the value of marketing. You have been asked to present to them: Your ‘Top 5’ - that is 5 key marketing points that should contribute to marketing success with a brief explanation of each. (5 marks)
4. 2. In light of your evaluation of Nike’s marketing strategy, outline some marketing strategy recommendations, with rationale, that Adidas may consider.

Be the Banker, Smith Carson Limited

Smith Carson Limited, located in Ottawa, ON, is a thriving t-shirt manufacturer that is also involved in screen printing. It has a strong balance sheet with moderate debt, reflecting the conservative nature of its management. Total revenues are CAD 25 million.

The company supplies two major Canadian retailers that make up about 60% of its annual turnover.  The remainder of its sales are spilt between the export market (25%) and smaller independent retailers/single outlets (15%).

Smith Carson’s CFO requested a meeting with your bank, which began with a discussion of the following 2 new business opportunities.

1.Smith Carson currently purchases a large volume of raw materials from the Hong Kong and Singapore. Smith Carson normally does its own manufacturing but it has now found a very reliable supplier in Singapore, Fabrics R Us Inc. Fabrics R Us has much cheaper labour costs and are able to produce a lower cost, high quality Tshirt. Smith Carson is interested in sourcing from Fabrics R Us on a trial basis.

2.Following a recent business trip to HK, Smith Carson identified a company called Top Brands Corp in Bristol, which indicated that they are prepared to buy high quality shorts from Smith Carson.

As a result of these 2 opportunities, it is now Smith Carson’s intention to sell Top Brands, the shirts manufactured by Fabrics R Us.

Smith Carson still plans to take delivery of the shirts so that they can screen print designs on them before shipping to Top Brands.

Sales contracts and purchase orders are close to being signed between Smith Carson and the two foreign companies.  The basic terms of sale are that Fabrics R Us will supply on a prices basis of $1 per shirt CIF Toronto Port and Top Brands will purchase the shirts for $7 FOB Toronto port.

The initial contract will be for 200 shirts, with many future contracts to follow if all goes well.

Smith Carson wants to take advantage of this opportunity given the huge profit margin and it hopes to develop these two relationships into ongoing sales. There are a number of issues closing, and Smith Carson’s current Bank is unable to come to an acceptable solution.

1-

As this is Fabrics R Us’ first transaction with Smith Carson, it prefers payment in advance, particularly as the good are being shipped by air. Its reasoning is that since Smith Carson is shown as consignee, once shipped the goods will no longer be under Fabric R Us’ control.

However to make this transaction more appealing, Fabrics R Us is prepared to ship the t-shirts so that they arrive 30 days after the signing of the contracts provided that at that time, they have an assurance of getting guaranteed immediate sight payment of 100% of CIF value ($200,000) before letting the goods leave their control. Fabrics R Us will ship the full 200,000 shirts in one shipment.

2-

Top Brands is an extremely credit worthy company that normally imports on open account. Its other suppliers are in the practice of giving them N45 credit terms. To help close this deal Smith Carson will have to do the same. In accordance with Top Brands expected credit terms, this 6 week credit period will be calculated from the time Smith Carson makes shipment of the goods.

3-

At your meeting you obtain the following information. Screen printing, packing and shipment of the t-shirts to Bristol will take a maximum of 50 days from receipt of the shirts from Fabrics R Us.

Smith Carson is mainly concerned with cash flow. Given the industry most of Smith Carson’s sales are sold on terms unfavorable to their cash flow. This causes financial stress on the mgmt of Smith Carson. While they generally have enough money to meet current contracts, this new foreign export contract will stretch their cash flow too far. Smith Carson is looking to you to help complete this very important transaction.

TASK 1: Using the table below, and for each commercial contract, identify which methods of payment could be used in the contract between Smith Carson& Fabrics R Us and between Smith Carson& Top Brands Corp. Once you have completed the charts, discuss what risk your bank could be exposed to and then decide what payment term you (as the bank manager) are comfortable authorizing for Smith Carson and why.

TASK 2: Construct a timeline for the transaction. Starting at contract signing, continuing for the period covering Smith Carson’s inventory and ending with Top Brands pays out. - How many days will this transaction take from production to payment? - If you were to issue a sight or usance LC, how many days will Smith Carson be waiting for payment?

At the beginning of 2020, Braun Corporation had the following stockholders’ equity balances in its general ledger:
Common Stock, $10 Par Value $400,000

Paid-In Capital in Excess of Par: Common $600,000

Paid-In Capital, Treasury Stock $5,000

Paid-In Capital, Stock Options    $200,000

Retained Earnings    $1,200,000

Treasury Stock (5,000 shares) $(100,000)

_____________________________________

Total Stockholders’ Equity $2,305,000

The paid-in capital from stock options relates to options granted on 1/1/12 to the CEO as incentive compensation. As of 1/1/20, the remaining expected benefit period is four years; expense has been and will be recorded evenly over the benefit period.
The following events were among the many occurring in 2020:
a. January 2: Purchased 5,000 shares of its common stock for $16 per share. Braun uses the cost method of accounting for treasury stock transactions.
b. February 1: Declared and distributed a 10% stock dividend on common stock outstanding when the market price of the stock was $13 per share.
c. April 1: Issued 20,000 shares of $50 par, noncumulative, convertible 6% preferred stock for $60 per share, where one share of preferred stock is convertible into two shares of common stock.
d. July 1: 2,000 shares of treasury stock that had been purchased in a prior year for $21 per share were re-issued for $12 per share.
e. August 1: Holders of 8,000 shares of the preferred stock converted their shares into common stock when the market value of the common stock was $22 per share. Braun uses the book value method of accounting for conversions.
f. October 1: Declared and paid a cash dividend of $3 per share on the outstanding common stock.
g. November 1: Corrected an error that was made several years ago, when land that had been purchased for $60,000 was inadvertently expensed.
h. December 1: Declared and distributed a property dividend of land to preferred shareholders. The land had a fair value of $75,000 and a carrying value of $80,000.
i. December 31: Recorded 2020 compensation expense related to the stock options.

The 2020 Final Net Income, including the effects of any net income items listed above (and the 2020 tax effects on net income items), was $1,000,000. There were 500,000 shares authorized for both preferred and common stock.

Required: 1. All journal entries for the items (a. through i.) above.
2. The 12/31/20 Stockholders’ Equity section.

At December 31, 2020, Cord Company's plant asset and accumulated depreciation and amortization accounts had balances as follows

Depreciation methods and useful lives:
Buildings—150% declining balance; 25 years.
Equipment—Straight line; 10 years.
Automobiles and trucks—200% declining balance; 5 years, all acquired after 2017.
Leasehold improvements—Straight line.
Land improvements—Straight line.

Depreciation is computed to the nearest month and residual values are immaterial. Transactions during 2021 and other information:

1. On January 6, 2021, a plant facility consisting of land and building was acquired from King Corp. in exchange for 35,000 shares of Cord's common stock. On this date, Cord's stock had a fair value of $60 a share. Current assessed values of land and building for property tax purposes are $255,000 and $595,000, respectively.
2. On March 25, 2021, new parking lots, streets, and sidewalks at the acquired plant facility were completed at a total cost of $252,000. These expenditures had an estimated useful life of 12 years.
3. The leasehold improvements were completed on December 31, 2017, and had an estimated useful life of eight years. The related lease, which would terminate on December 31, 2023, was renewable for an additional four-year term. On April 30, 2021, Cord exercised the renewal option.
4. On July 1, 2021, equipment was purchased at a total invoice cost of $335,000. Additional costs of $11,000 for delivery and $60,000 for installation were incurred.
5. On September 30, 2021, Cord purchased a new automobile for $13,500.
6. On September 30, 2021, a truck with a cost of $25,000 and a book value of $11,000 on date of sale was sold for $12,500. Depreciation for the nine months ended September 30, 2021, was $2,475.
7. On December 20, 2021, equipment with a cost of $22,000 and a book value of $3,225 at date of disposition was scrapped without cash recovery

For each asset category, prepare a schedule showing depreciation or amortization expense for the year ended December 31, 2021. (Do not round intermediate calculations. Round your final answers to nearest whole dollar.)