The two discussion questions for this week are as follows:

1. In thinking about overcoming the negative publicity and securities fraud fines related to revenue fraud, some companies succeed and move on, while others fail following the fraud. What forces might influence corporate “survivability” in the face of financial reporting fraud related to revenue?
2. How would you feel entrusting the care of your elderly relative to a company that was previously involved in fraudulent financial reporting?
   1. Would you be able to trust that company to care for your relative?
   2. Do you think that the company has moved on and is now a reliable caregiver that you could trust?

Revenues are normally recognized when the company transfers promised goods or services in the amount the company expects to receive. The amount recorded is the cash-equivalent sales price. The following transactions occurred in September:

1. A popular ski magazine company receives a total of $13,345 today from subscribers. The subscriptions begin in the next fiscal year. Answer from the magazine company's standpoint.
2. On September 1 of the current year, a bank lends $2,500 to a company; the note principal and $300 ($2,500 × 12 percent) annual interest are due in one year. Answer from the bank's standpoint.
3. Fucillo Automotive Group (offering a wide variety of car and truck brands) sells a Ford F-150 truck with a list, or “sticker,” price of $21,750 for $19,750 cash.
4. Macy's department store orders 1,140 men’s shirts for $17 each for future delivery from PVH Corp., manufacturer of IZOD, ARROW, Van Heusen, Calvin Klein, and Tommy Hilfiger apparel. The terms require payment in full within 30 days of delivery. Answer from PVH Corp.'s standpoint.
5. PVH Corp. completes production of the shirts described in (d) and delivers the order. Answer from PVH's standpoint.
6. PVH Corp. receives payment from Macy's for the events described in (d) and (e). Answer from PVH's standpoint.
7. A customer purchases a ticket from American Airlines for $650 cash to travel the following January. Answer from American Airlines's standpoint.
8. Ford Motor Company issues $20.9 million in new common stock.
9. Michigan State University receives $19,030,000 cash for 73,000 five-game season football tickets.
10. Michigan State plays the first football game referred to in (i).
11. Precision Builders signs a contract with a customer for the construction of a new $1,670,000 warehouse. At the signing, Precision receives a check for $194,000 as a deposit on the future construction. Answer from Precision's standpoint.
12. A customer orders and receives 16 personal computers from Dell; the customer promises to pay $9,300 within three months. Answer from Dell's standpoint.
13. Sears, a retail store, sells a $260 lamp to a customer who charges the sale on his Sear's credit card. Answer from Sears's standpoint.

Required:

For each of the transactions, if revenue is to be recognized in September, indicate the revenue account title and amount. (If revenue is not recognized choose "None". Round "Interest revenue" answer to 2 decimal places.)

Revenue Account Affected Amount of revenue earned in September

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

• This Individual Case Study Assignment should be around 1,000 words in total and should be submitted in the form of a business report (approximately 500 words for each part).

Individual Case Study Assignment Part A

BLC Ltd. is a medium-sized UK manufacturing company based in Liverpool.

The company is seeking to expand its operations with the establishment of an office block to house the marketing and human resources staff in Manchester. The company has narrowed the choice to two alternatives with the following net cash flow information being available:

Items to keep in mind:

• The company’s current cost of capital is 10%.
• For this assignment, ignore taxation.

Required

As the company accountant is currently on holiday, you are required to:

• By calculating net present value, internal rate of return and payback, advise the company which option they should take.

• Critically evaluate the other qualitative factors that might be taken into account in this decision.

Individual Case Study Assignment Part B

BLC Ltd. has revenue of £500 million and sells all of its goods on credit to a variety of different wholesale customers. At the moment the company offers a standard credit period of 30 days. However, 70% of its customers (by revenue) take an average of 70 days to pay, while the other 30% of customers (by revenue) pay within 30 days. The company is considering offering a 2% discount for payment within 30 days and estimates that 80% of customers (by revenue) will take up this offer (including those that already pay within 30 days).

The Managing Director has asked the credit controller if the cost of this new policy would be worth offering. The company has a £80 million overdraft facility that it regularly uses to the full limit due to the lateness of payment and the cost of this overdraft facility is 15% per annum.

The credit controller also estimates that bad debt level of 2% of revenue would be halved to 1% of revenue as a result of this new policy.

Required

1. Calculate the approximate equivalent annual percentage cost of a discount of 2%, which reduces the time taken by credit customers to pay from 70 days to 30 days.
2. Calculate the value of trade receivables under the existing scheme and the proposed scheme at the year-end.
3. Evaluate the benefits and costs of the scheme and explain with reasons whether the company should go ahead and offer the discount. You should also consider other factors in this decision. (Hint: You need to work out the cost of the discount compared to the interest on the overdraft saved and bad debt reduction.)

On February 1, 2021, Cromley Motor Products issued 7% bonds, dated February 1, with a face amount of $60 million. The bonds mature on January 31, 2025 (4 years). The market yield for bonds of similar risk and maturity was 8%. Interest is paid semiannually on July 31 and January 31. Barnwell Industries acquired $60,000 of the bonds as a long-term investment. The fiscal years of both firms end December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

1. Prepare the journal entries by Cromley to record all subsequent events related to the bonds through January 31, 2023. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Enter your answers in whole dollars.)

2. Prepare the journal entries by Barnwell to record all subsequent events related to the bonds through January 31, 2023. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Enter your answers in whole dollars.)

Roberds Tech is a for-profit vocational school. The school bases its budgets on two measures of activity (i.e., cost drivers), namely student and course. The school uses the following data in its budgeting:

In March, the school budgeted for 1,840 students and 81 courses. The school's income statement showing the actual results for the month appears below:

Required:

Prepare a flexible budget performance report showing both the school's activity variances and revenue and spending variances for March. Label each variance as favorable (F) or unfavorable (U). (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Roberds Tech is a for-profit vocational school. The school bases its budgets on two measures of activity (i.e., cost drivers), namely student and course. The school uses the following data in its budgeting:

In March, the school budgeted for 1,840 students and 81 courses. The school's income statement showing the actual results for the month appears below:

Required:

Prepare a flexible budget performance report showing both the school's activity variances and revenue and spending variances for March. Label each variance as favorable (F) or unfavorable (U). (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

A company that holds the DVD distribution rights to movies previously released only in theaters has the business objective of developing estimates of the sales revenue of DVDs. Toward this goal, a company analyst plans to use box office gross to predict DVD sales revenue. For 43 movies, the analyst collects the box office gross (in $millions) in the year that they were released and the DVD revenue (in $millions) in the following year and stores these data here.

What are the values for

(1) the proportion of variation in DVD sales revenue that is explained by box office gross ,

(2) the sum of squares Y ,

(3) the sum of squares predicted ,

(4) the sum of squares error ,

(5) the intercept A ,

(6) the slope b ,

(7) the predicted sales revenue (in $millions) for a movie DVD that had a box office gross of $100 million

(8) the standard error of estimate ? Hint: Use PHStat to obtain all the values and answers should be accurate to 4 decimal places.

Washington County’s Board of Representatives is considering the construction of a longer runway at the county airport. Currently, the airport can handle only private aircraft and small commuter jets. A new, long runway would enable the airport to handle the midsize jets used on many domestic flights. Data pertinent to the board’s decision appear below.

In addition to the preceding data, two other facts are relevant to the decision. First, a longer runway will require a new snowplow, which will cost $140,000. The old snowplow could be sold now for $13,500. The new, larger plow will cost $10,000 more in annual operating costs. Second, the County Board of Representatives believes that the proposed long runway, and the major jet service it will bring to the county, will increase economic activity in the community. The board projects that the increased economic activity will result in $92,000 per year in additional tax revenue for the county.

In analyzing the runway proposal, the board has decided to use a 10-year time horizon. The county’s hurdle rate for capital projects is 18 percent.

1. Prepare a net-present-value analysis of the proposed long runway. (Round your "Annuity discount factor" to 3 decimal places. Negative amounts should be indicated by a minus sign.)

2. Should the County Board of Representatives approve the runway considering NPV? Yes or No

Below is the Income statement for Company X

1)Forecast the firm’s Earnings per share and cash flow per share by filling in the box below.

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Dividends & Splits

Start with the most recent income statement and common size it. For the forecast period, adjust the numbers for future growth and decline in sales. Other items in income statement should be based on adjustments to past ratios.