• Imagine you are the chief financial officer (CFO) of a corporation with plans to complete the acquisition of a key subsidiary this year. Your chief executive officer (CEO) has requested a presentation to the board of directors describing the methods available to account for the acquisition internally and the best method for the company during the acquisition year. Please assess the value of each method identified in your presentation to the board and support your recommendation with examples. Respond to at least one other student.

a) There are different rules for different investments. Would it not be easier if there were just one way to record investments? What is the value-added by the separation if you were the manager reviewing the financial statements? Is there an ethical implication to this evaluation?

b) The CEO of the company asks the question: Is vertical or horizontal analysis better? How do you respond? Which ratios would you identify as the top three that would supplement the analysis? Is there an ethical reasoning that supports your choices?

Case study: the right portfolio

After working as a securities broker for 20 years, Simon Eckstein decided to lead a less hectic life. He set up an investment consulting firm 2 years ago and has rapidly built his reputation as the best consultant on securities investment in the area. Today, 5 clients called on Simon for his advice on their investment plans. The first is a 35-year-old divorced woman who has 2 teenage sons and wants to invest $50,000. the second and the third are a couple, both having retired and planning to invest $60,000. The fourth is an university freshman, a 19-year-old boy. He lost his parents in a car accident last year and received $2,000,000 from the insurance company. He plans to use some of the compensation to pull himself through the university and the rest to invest. The last is a single woman, 27 years old, working as an accountant for a local department store with an annual salary of 26,000. Her planned investment is $40,000.

(1) What do you think should be appropriate investment goals for the five clients If you were Simon?

(2) What kind of portfolio investment would you suggest for each of them?

HARLAND CORP has been in existence for 45 years. Over the past, 6 years the stock price has stagnated and remained between $22.15 and $22.82. The CEO, who started the company, believes that the stock price needs to be higher, and the best way to do that is to pay a dividend to increase the demand for the stock. The company has never paid a dividend in their history. The CEO needs to determine what type of dividend policy to follow, and how much the first dividend should be, so he comes to you for advice. He provides you with the following historical information as it relates to the company’s earnings per share (as an aside, dividends per share should not exceed EPS unless the firm is liquidating):

YEAR                                                      EPS

                2017                                                       $2.36

                2016                                                       $2.12

                2015                                                       $0.81

                2014                                                       $2.01

                2013                                                       $2.09

                2012                                                       $2.44

                2011                                                       $2.31

                2010                                                       $2.01

You are to prepare a brief memo (1 page, single-spaced) as to what dividend policy you recommend, why you recommend it, what initial dividend amount you recommend, and why you recommend that amount.

3 types of dividend are Dividend policy does no matter (Miller and Modigliani), Dividend policy matter (the bird in the hand). Dividend policy matter (the tax)

HARLAND CORP has been in existence for 45 years. Over the past, 6 years the stock price has stagnated and remained between $22.15 and $22.82. The CEO, who started the company, believes that the stock price needs to be higher, and the best way to do that is to pay a dividend to increase the demand for the stock. The company has never paid a dividend in their history. The CEO needs to determine what type of dividend policy to follow, and how much the first dividend should be, so he comes to you for advice. He provides you with the following historical information as it relates to the company’s earnings per share (as an aside, dividends per share should not exceed EPS unless the firm is liquidating):

YEAR                                                      EPS

                2017                                                       $2.36

                2016                                                       $2.12

                2015                                                       $0.81

                2014                                                       $2.01

                2013                                                       $2.09

                2012                                                       $2.44

                2011                                                       $2.31

                2010                                                       $2.01

You are to prepare a brief memo (1 page, single-spaced) as to what dividend policy you recommend, why you recommend it, what initial dividend amount you recommend, and why you recommend that amount.

3 types of dividend policy (Stable dividend policy, constant dividend policy, and residual dividend policy)

10.An unethical act:

A.Is always illegal as well

B.Is not necessarily illegal

C.Must, at minimum, violate a government regulation

D.Is determined for the accounting profession by the FASB

11.You are an Accountant for a growing tech company and ready for IPO. During year end you are responsible for accruing revenues to prepare the financial statement. Accrual entries are subjective as it’s an estimate of what is anticipated to be received. CEO or company is counting on you to do the “right thing” so to meet analysts’ expectations. If you applied utilitarian method to make your decision which one of the following most closely applies ?

A.Accrue revenue. While it’s technically not proper GAAP accounting, it will benefit the shareholders and CEO.

B.None of the above

C.Accrue revenue because it’s the right thing to do.

D.Don’t accrue revenue because it won’t benefit anyone

12.The AICPA’s Code of Professional Conduct establishes:

A.The rules for resolving technical judgments in achieving a fair presentation of financial statements.

B.The normative rules of ethical behavior that guide professional accountants.

C.The rules of conduct for conducting audits, but no other forms of attestation.

D.The rules of conduct for structuring and conducting audits and other attestation engagements.

From Dunkin Donuts to Just Dunkin! The famous American Donut’s brand is rebranding and closing stores across the world including Oman as its outlets have shut down for good. The demand for donuts in America is decreasing as customers preferring more healthy food with less sugar and fat.

The company’s brand CEO Mr. David Hoffmann said, “the rebranding comes as an effort to reshape the company’s strategic goals and focusing on drinks more than donuts.” While analyzing the company’s different products, the managers noticed that 60% of its revenue is coming from drinks like coffee while demand for donuts is declining.

The company redesigned its brand, and its stores making them look simpler. The company is also introducing new coffee experiences like nitro, cold brew, black...etc. The company will also introduce digital menu and drive through to fit the customers on the go lifestyle. The company will also reduce its employees as the new digital menus will eliminate the need of human employees, reducing the company’s costs.

Questions:

1. Develop Integrated Marketing Communication for the new brand “Dunkin” . (250 words)
2. Do you agree or disagree with the company’s rebranding strategy? Support your opinion based on your knowledge of the factors influencing the buyer behavior. (250 words)
3. Discuss the role technology plays in Dunkin donuts new strategy. (250 words)

The accounting profit before tax of Subang Ltd for the year ended 30 June 2020 was $320,000.

It included the following revenue and expense items:

Legal expenses 62 500

Interest expense 10 000

Bad debt expense 15 000

Depreciation expense – Plant & equipment 26 250

Entertainment Expense 2 500 Audit fee 40 000 Interest revenue 15 000 Rent revenue 10 000 Exempt income 37 500 Additional information: 1. Interest receivable at 30 June 2020 is $12,500 (2019: $15,000). Interest payable at 30 June 2020 is $500 (2019: $3,000). Interest is assessable on receipt and deductible when paid. 2. The company raised an accrual liability of $17 500 for audit work performed and not paid by 30 June 2020 (2019: $15,000). Fees for audit work are not deductible unless the audit work has been performed and paid. 3. Rent revenue relates to a contract where the annual rent is received in advance. The unearned revenue liability at 30 June 2020 is $10,000 (2019: $7,500). Rent is assessable when received. 4. Legal expenses include $25,000 related to capital transactions that are not deductible. 5. The bad debts expense relates to an account that has been written off. 6. Plant and equipment is as follows: 30 June 2020 30 June 2019 Plant & Equipment $175 000 $75 000 Accumulated depreciation 48 750 22 500 126 250 52 500 Question 1 is continued on the next page ACCY200 (MT) / Page 4 of 6 Question 1 continued 7. Tax depreciation for 30 June 2020 is $35,000. The tax written down value of plant and equipment at 30 June 2020 is $110,000 (2019: $45,000). 8. The deferred tax balances at 30 June 2019 are; deferred tax liability $6,750 and deferred tax asset $12,300. 9. The company tax rate is 30%. Required: a) Prepare the current tax worksheet and the journal entry to recognise the current tax as at 30 June 2020. b) Prepare the deferred tax worksheet and any necessary journal entries to adjust deferred tax accounts for 30 June 2020.