You purchased a machine for $500,000 (installed), and you depreciated it using a 5 year MACRS. This machine generates $200,000 in annual revenue. In year 4, you sold the machine for $250,000. You received a loan for $400,000 on a 5 year loan at 5% (note, you must pay the remaining balance of this loan at the end of year 4 from the proceeds of the sale). In addition, you invested $80,000 in working capital initially. Your company is in a 35% tax bracket. MARR =15.36% Generate your cash flow analysis using Actual Dollars. In other words, inflate your revenue, salvage value, expenses and Working Capital accordingly. What is your Market NPW??inflation rate =3%?

Discussion: What constraints and qualitative characteristics in the conceptual framework are raised in the article below? Please discuss.

SOURCE: CPA JOURNAL
Tallying the Cost of the Sarbanes-Oxley Act
By Jill M. D’Aquila

Although the Sarbanes-Oxley Act (SOA) was enacted two years ago, some of its provisions are still being implemented. One such provision is SOA section 404, which requires companies to file a management assertion and auditor attestation on the effectiveness of internal controls over financial reporting, starting with fiscal years ending on or after November 15, 2004. Section 404 is just one of several provisions of the Sarbanes-Oxley Act related to internal control.

The new provisions that emphasize the importance of internal control have obvious benefit. Internal control is defined by the Committee of Sponsoring Organizations (COSO) as a process designed to provide reasonable assurance regarding the reliability of financial reporting, among other things. A standard rule of thumb for internal control, however, is that the benefits should outweigh the costs. While it is too soon to determine with certainty the full costs associated with Sarbanes-Oxley compliance, they will certainly be considerable.

Audit fees are expected to increase approximately 38% during the first year of compliance with section 404, according to a survey of public companies by Financial Executives International (FEI) in January 2004.

The survey also reveals that total costs of first-year compliance with section 404 could exceed $4.6 million for each of the largest U.S. companies (companies with over $5 billion in revenues). Medium-sized and smaller companies will also incur significant additional costs to comply with section 404, the survey finding an average projected cost of almost $2 million. Interestingly, the projected costs are higher than originally anticipated based on an FEI survey conducted the previous year.

This projected increase is consistent with PricewaterhouseCoopers’ June 2003 survey of 136 U.S.-based multinational corporations, which revealed that the number of senior executives describing SOA compliance as costly had nearly doubled since its enactment, from 32% to 60%.

In a speech to the National Press Club in July 2003, SEC Chairman William H. Donaldson said, “These are landmark rules; they will require hard work and significant expenditures in the short run by corporations,

but in the long term they will result in sounder processes and more reliable financial reporting.” On the other hand, almost half of the Pricewater-houseCoopers survey respondents believe SOA is a “well-meaning attempt, but will impose unnecessary costs on companies.” To consider the cost-benefit relationship, it is helpful to determine the areas where the costs of the compliance may be borne.

Direct Costs

Accounting and audit fees. Probably the most obvious costs are accounting and auditing fees. The projected $2 million first-year cost of compliance with section 404 reported by FEI in January 2004 is based on the following estimates (the lower and upper ranges represent annual revenues of less than $25 million and over $5 billion, respectively):

• Approximately 12,000 hours of internal work, ranging from 1,150 to 35,000 hours;
• 3,000 hours of external work, ranging from 846 to 6,197 hours;
• Additional audit fees of $590,000, ranging from $52,000 to $1.5 million.

Barry S. Augenbraun, senior vice president and corporate secretary of Raymond James Financial, Inc., a worldwide financial services firm, stated:

In our own case, informal conversations with our outside auditors as we began preparations to comply with the requirements of Section 404 of [SOA] indicated that we could anticipate the costs for the “attest” report to add anywhere from 20% to 30% to our audit fees. The expansion of that engagement to a comprehensive audit will likely significantly increase that cost. Furthermore, it is likely that the costs that will be incurred by our internal staff will equal or exceed the payment to our outside auditors. Additional audit cost is not a “free good.” It adversely impacts the profitability—and therefore the competitiveness—of American companies, and can adversely affect the functioning of our business system at a time when American business is already under significant pressure.

A specific accounting-related function that is taking on new meaning is the internal audit, given the heightened focus on internal controls. A nationwide survey of 300 CFOs at publicly held companies, conducted by Protiviti Independent Risk Consulting in 2003, indicates that many companies are hiring additional personnel or either outsourcing or co-sourcing a number of important internal audit functions. Approximately 38% of CFOs surveyed indicate that they do not have an internal audit department. Even those who have an internal audit department indicate they are looking outside the company to perform some of the work.

The PricewaterhouseCoopers survey noted above indicated an approximate 3 to 1 ratio of internal to external new compliance costs. The following aspects of compliance were rated as at least somewhat costly:

• Documentation (mentioned by 74% of respondents);
• Legal requirements (72%);
• Detailed policy development (65%);
• Self-assessment (62%);
• Attest requirements and certifications (59%);
• Staff training (56%); and
• Technology (41%).

Documentation—the most frequently cited aspect of compliance—has been a big focus for Christopher Baudouin, of Jupitermedia Corp.:

Documenting internal control is the major thing. Initially, there’s work being done writing manuals. Of course, we will have to continually update them and maintain them. We are careful how we allocate manpower within the department. We have increased the staff. We’ve also purchased software to assist us. The cost of the audit will increase since there will be more testing.

Boards of directors and audit committees. A 2004 PricewaterhouseCoopers survey of CFOs and managing directors indicated that boards and board audit committees had increased the time and effort spent on corporate governance over the past year. Directors are expected to have more input on company issues. Approximately half of audit committees are holding longer meetings and are meeting more frequently. Compensation paid to board members is rising, but only modestly. In fact, only 29% of boards that reported spending more time were rewarded with increased compensation. Only 10% of boards plan to increase compensation over the next year.

More important than the modest increase in compensation, other costs, such as liability insurance and outside consulting fees, are also rising. Liability insurance, which insures against personal liability for a wrongful act, will increase with the escalation of claims over the last few years. Boards are hiring outside lawyers and consultants for advice on their expanded role. In fact, new SEC requirements specifically give audit committees the authority to engage independent counsel and other advisors that they determine necessary to carry out their duties. The 2004 PricewaterhouseCoopers survey reported that 31% of audit committees have engaged outside advisors to assist in meeting new requirements. Similarly, KPMG Audit Committee Roundtable discussions with approximately 2,400 audit committee members and other executives in 2003 disclosed that 44% of audit committee members had or would retain external advice over the next year.

Indirect Costs

Going public. According to a study conducted last year by the law firm Foley & Lardner, senior management of public middle-market companies expect costs directly associated with going public to increase by almost 100% as a result of new compliance provisions. Not surprisingly, the number of companies going private in the one-year period after the enactment of SOA has increased. Although the absolute dollar costs are higher for large companies, the cost burden appears to fall disproportionately on smaller companies. If young, growing companies must seek alternative sources of financing to going public, their cost of capital will likely rise.

Decision-making and productivity. Will companies become more cautious and risk-adverse in the post-SOA environment? If it takes longer to review major decisions, will companies be less likely to make deals? Will the increased focus on compliance affect productivity? The answer to all of these questions: Probably. If employees are spending additional hours on things such as fine-tuning internal controls, evaluating and reevaluating financial reports, and compiling more information for their board of directors, other important activities are likely to suffer.

The “independent” director. A more indirect cost associated with directors may stem from the new emphasis on the role of the “independent director.” SOA section 301, which is also effective starting in 2004, stipulates that all audit committee members be independent, defined as “not receiving, other than for service on the board, any consulting, advisory, or other compensatory fee from the issuer, and as not being an affiliated person of the issuer, or any subsidiary thereof.” In addition, a majority of the board of directors must be independent. The benefit of independent board members is their objectivity in providing general oversight of the company. Independent directors are in a sense, however, part-timers; their knowledge of the company is more limited than that of the senior executives they oversee. They also lack direct access to financial information, which they must obtain from management. Some audit committees are hiring individuals who can help them more fully understand company dealings.

Small and mid-sized companies, which often lack internal audit departments or in-house counsel, will most likely feel the costs of SOA compliance more than large companies. For example, while the Protiviti survey indicates that 38% of CFOs polled report they do not have an internal audit department, only 9% of CFOs working for large companies (more than $500 million in annual revenues) do not have an internal audit department. Smaller companies will have to hire more staff or outsource such services. According to the Price-waterhouseCoopers 2003 survey, 58% of executives at smaller companies (annual revenues of under $1 billion) believe compliance is costly, versus 38% of executives at larger companies (annual revenues of over $1 billion).

Costs and Benefits

COSO’s Internal Control—Integrated Framework suggests that companies consider the relative costs and benefits when establishing internal controls. In the section on cost/benefit relationships, COSO states the following: “The challenge is to find the right balance. Excessive control is costly and counterproductive.” Much of the accounting profession believes that changes were needed. When asked if the benefits of Sarbanes-Oxley are worth the cost, Frank Brown, partner and leader of global assurance and business advisory services at PricewaterhouseCoopers, notes that “Five years from now, if there’s an improvement in confidence by the market, improvement of the veracity of financial info, etc., then any costs will be worth it.” Time will tell.

Jill M. D’Aquila, PhD, CPA, is an associate professor of accounting at Iona College, New Rochelle, N.Y

A fear of being perceived as incompetent or embarrassed publicly because of perceived incompetence may be an indication of an individual's lack of __________ . A leader's ability to include all members of a team, even drawing out quieter members, and showing that everyone's input is valued is a leadership concept referred to as ______________.

Analyze and evaluate sensitivity analysis for different financial models, including the Yield Curve and its usefulness in predicting recessions. Did the Yield Curve from 2004 through 2007 predict the Great Recession of 2008 – 2010? Based on the current Yield Curve, detail your prediction for the U.S. economy for the next two years.

WH Corporation issued bonds on January 1, 2004. The bonds have a coupon rate of 8.0%, with interest paid semiannually. The face value of the bonds is $1,000 and the bonds mature on January 1, 2024. What is the yield to maturity for an SWH Corporation bond on January 1, 2018 if the market price of the bond on that date is $986?

Please answer the following using the information given, Thanks!

Introduction:

The Nimble Storage is a hybrid growing data storage System Company situated in Silicon Valley. The CEO of the company is Suresh Vasudevan, and the Vice President of the HR department is Paul Whitney. The company's purpose of developing the hybrid system, which is used in flash memory (It is a storage memory that leads to rapid access to random data) and hard disk to increase the performance of the company at the competitive prices offered to the customers in order to give the efficient and the flash storage platform.

The case analyzes the past performance of the company and the talented hiring of the personnel by Whitney, where the founder and CEO of the company plan to transfer the storage world into the hybrid storage system and wanted to achieve the goal to make a billion dollar company within three years. For this purpose, Suresh Vasudevan aimed to focus on both short term and long term key people initiative to measure the results. The company decided to launch the new leadership program named "LEAD" for the sustainable future growth of the company and also effects on the people initiatives to go forward in future.

The objective of the case is to make quantitative and qualitative analysis by identifying the issues, providing solutions to the problems, and providing an alternative for the growth and evaluating and choosing the best alternative and provide an implementation plan.

Define the issues/Problem statement:

The company has finished its second full fiscal year of storage on January 31, 2013, which provided the great opportunity for reproducing its core values, reviewed the success over the last years and also the strong personnel who made it possible. The company always aims to deliver the world’s most efficient way of data storage by target the broad range of enterprise applications with the goal of optimizing in many factors such as performance efficiency, capacity efficiency, data protection and dramatic simplicity.

Problems/Issues and its solutions:

In order to stabilize the performance, the company faced many potential problems and issues in producing the product and also HR-related issues faced by Whitney.

The first problem was related to the health of the customers' network that led to the unusual high temperature in the data center. The company is now organizing the data center in order to convince the customers to the belief that will help to solve the range of problems in one single platform.

The second problem was the business team was not effective due to lack of motivation and employee turnover, it as one of the biggest challenge that company was facing in last nine months. So, the business wanted to improve its values by making the business by conducting two ways process with the two-sided as the same coin. It would result in the powerful feedback and result oriented of employees, which will result in employee retention and run the business with the order of framework and program perspective.

The company was facing the hiring issue as they wanted to maintain its culture and status quo, the company needed to change the paid time off/personal time off PTO policy in fifteen days, the company wanted to increase the length of services, and they tested the idea but not preferred by the company. Therefore, the employees wanted a favor, and the company made the PTO flexible and unlimited sick leaves and holidays for employee retention.

Suresh Vasudevan had talked about the cultural openness and transparency in sharing the information to the tons of people via any social website, such as Facebook and Google. The company estimates that the openness will be challenging to measure as the hidden information would be exposed publicly.

Analyses Nimble Storage’s mission statement

The HR practice of Nimble cannot be called as a best global practice because, It lacked in various scale on the HR operation and management. In global HR practice, employees concern and issues are solved on the earliest date. Most of the companies have pro-active HR policy due to which new people wants to be associated with the company. The policy consists of standard leave policy, motivating employees and changing the organization culture according to the need of the time. All these are lacks in the company.

From the case we cannot inferred the facilities provided to the global employees by the company. In geocentric perspective the gaps are in HR operation of the company which believes in status quo. In rapidly changing world order it won't work, and organization should be dynamic to deal with the challenges. The company also changed the leave policy and make favorable for employees because it had more attrition rate and wanted to retain the employees.

Global companies are using HRIS (Human Resources Information System) and this company should also use this. From the text of the case nowhere it is mentioned about the technological tools for HR so we can assume that it is not present in that scale in the company. HRIS promote transparency and openness in the system and employee will have access to the relevant data they should know.

Nimble is a leader in predictive flash storage solutions; they take advantage of flash, cloud and big data analytics to deliver data velocity to their customers. Their employees are committed to their vision and are passionate about the work they do (Bahrami, 2015). The annual goal is to become a billion dollar company in three years by selling hybrid storage platform to efficiently store and use data, hire and retain right manpower without disturbing the culture of the organization.

The three major problems are:

Health of customers network

Employee retention

Employee motivation

Employee Retention and motivation are taken care of by multiple measures by launching a LEAD leadership program to achieve a sustainable future growth of the company and encourages people to move forward in the future. They have also made PTO flexible and have allowed unlimited sick leaves and holidays for employee retention and motivation.

Customer network and storage issues are resolved by predictive flash hybrid platform. The hybrid storage system makes organizations more competitive by using flash memory which gives rapid access to random data and hard disk to increase the performance of the company by giving efficient and flash storage.

The company is trying present itself as a global organization by introducing openness and transparency but is still limited by its conservative culture in hiring and fear of their information being exposed.

“Geocentric focus is when the company focuses on global advantages, global communication, and global hiring off manpower based on their skill sets rather than country of origin. management looks at opportunities on a global scale. Instead of focusing on the way that business gets done in a given country, it looks at how to conduct business anywhere in the world, based on common ways of communicating (Lander, n.d)”. Nimble wants to transfer the world storage to the hybrid storage system and wanted to achieve the goal to become a billion-dollar company within 3 years. The hybrid storage system makes organizations more competitive by using flash memory which gives rapid access to random data and hard disk to increase the performance of the company by giving efficient and flash storage platforms. The target is to focus on a broad range of enterprise applications with the goal to optimize in many areas as follows:

Performance efficiency

Capacity efficiency

Data protection

Dramatic simplicity

The geocentric approach to business will give the following advantages:

Putting the best people with best skills suited for the profile irrespective if they are based out of Taiwan or California

Improve the global image of the organization

Give access to more qualified and suitable manpower

Flexibility to manage customers across different time zones as if we have clients in Asia we can have customer service employees based out of remote locations in Asia.

The geocentric approach means a global approach and a global advantage to the business. The company can have the following advantages:

Best skilled and suitable resources across the globe

The benefit of cross cultural thinking and exposure and can target customers across the globe

Address customer requirement in their time zone

Customers might feel more comfortable with customer service executives from the same region

The ideas generated will be global and can address many regional problems.

To summarize everything, a global or geocentric approach will be useful to get a flexible, multicultural and multi dimension vision to your business. We can see examples of giants like Google and Facebook who have used geocentric approach to make success of their business.

In order tackle the global business proposition, there are two important staffing approaches i.e. ethnocentric and geocentric approach. Since Nimble storage is aspiring to provide solutions to organizations all across the world, the company has to move from ethnocentric staffing to geocentric staffing. But there are challenges in the transition.

Ethnocentric staffing is a practice of appointing staff from the company’s home country with a belief that native employees would be more aligned to the interests of the company headquarters. “Ethnocentric staffing means you hire management that is the same nationality as the parent company (Johnston, n.d)”. The advantages of this practice are that there will be alignment in the interests and viewpoints of the head office. Communication with a same culture employee is easier than with an employee from different culture. There are disadvantages to the practice, that the company may not be able to understand the local market and culture. Second disadvantage is that employee from the parent company can be costlier than an employee from the host country. Finally, high ration of expatriates from the parent company can give wrong messages to the local employees and customers.

Geocentric staffing is more suitable to companies aiming to serve global customers. The Nimble storage must move to geocentric staffing. In geocentric staffing practice, the performance of the job candidate is considered rather than the cultural orientation. For multinational operation, geocentric staffing is preferred. There are many benefits to Nimble Storage by adopting geocentric staffing, i.e. the company can integrate global operations at lesser cost, can derive benefits from the diversity of employees, improved management of the local issues, better market penetration in each region of operations, etc.

There are risks in managing geocentric staff. For example, from a political angle when one nation dominates the other in economic and political dimension, the staffing pattern can have tremendous influence on the organization. Some staff may feel they are treated in discriminate manner and compensation is disproportionate to others in international locations. The perception of disparity of employee treatment can lead to distrust and negative consequences of employee hostility.

Questions:

a. Determine gaps in the organization’s current practices within the global market that are relevant to the human resources team of the organization.

b. Illustrate the potential gains for the organization regarding their business practices if they adopt a more geocentric focus. Be sure to support your response with examples. What will be the benefit for the business of the organization should they adopt a more global approach?

Pharoah Hardware Store completed the following merchandising transactions in the month of May. At the beginning of May, the ledger of Pharoah showed Cash of $5,000 and Owner’s Capital of $5,000.

Pharoah Hardware’s chart of accounts includes the following: No. 101 Cash, No. 112 Accounts Receivable, No. 120 Inventory, No. 126 Supplies, No. 201 Accounts Payable, No. 301 Owner’s Capital, No. 401 Sales Revenue, No. 412 Sales Returns and Allowances, No. 414 Sales Discounts, and No. 505 Cost of Goods Sold.

Instructions.

-Journalize the transactions using a perpetual inventory system.

-Enter the beginning cash and capital balances and post the transactions.

-Prepare an income statement through gross profit for the month of May 2020.

Renner Hardware Store completed the following merchandising transactions in the month of May. At the beginning of May, the ledger of Renner showed Cash of $4,610 and Owner’s Capital of $4,610.

Renner Hardware’s chart of accounts includes the following: No. 101 Cash, No. 112 Accounts Receivable, No. 120 Inventory, No. 126 Supplies, No. 201 Accounts Payable, No. 301 Owner’s Capital, No. 401 Sales Revenue, No. 412 Sales Returns and Allowances, No. 414 Sales Discounts, and No. 505 Cost of Goods Sold.

Journalize the transactions using a perpetual inventory system. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

UPDATED , NEED ASAP

Renner Hardware Store completed the following merchandising transactions in the month of May. At the beginning of May, the ledger of Renner showed Cash of $4,610 and Owner’s Capital of $4,610.

Renner Hardware’s chart of accounts includes the following: No. 101 Cash, No. 112 Accounts Receivable, No. 120 Inventory, No. 126 Supplies, No. 201 Accounts Payable, No. 301 Owner’s Capital, No. 401 Sales Revenue, No. 412 Sales Returns and Allowances, No. 414 Sales Discounts, and No. 505 Cost of Goods Sold.

Journalize the transactions using a perpetual inventory system. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

P5-2B

Boone Hardware Store completed the following merchandising transactions in

the month of May. At the beginning of May, the ledger of Boone showed Cash of

$5,000 and Owner's Capital of $5,000.

May

1

Purchased merchandise on account from Adewale's Wholesale Supply

$4,200, terms 2/10, n/30.

2

Sold merchandise on account $2,100, terms 1/10, n/30. The cost of the

merchandise sold was $1,300.

5

Received credit from Adewale's Wholesale Supply for merchandise

returned $300.

9

Received collections in full, less discounts, from customers billed on

sales of $2,100 on May 2.

10

Paid Adewale's Wholesale Supply in full, less discount.

11

Purchased supplies for cash $400.

12

Purchased merchandise for cash $1,400.

15

Received refund for poor quality merchandise from supplier on cash

purchase $150.

17

Purchased merchandise from Agbaje Distributors $1,300, FOB

shipping point, terms 2/10, n/30.

19

Paid freight on May 17 purchase $130.

24

Sold merchandise for cash $3,200. The merchandise sold had a cost of

$2,000.

25

Purchased merchandise from Somerhalder, Inc. $620, FOB destination,

terms 2/10, n/30.

27

Paid Agbaje Distributors in full, less discount.

29

Made refunds to cash customers for defective merchandise $70. The

returned merchandise had a fair value of $30.

31

Sold merchandise on account $1,000 terms n/30. The cost of the

merchandise sold was $560.

Boone Hardware's chart of accounts includes the following: No. 101 Cash, No.

112 Accounts Receivable, No. 120 Inventory, No. 126 Supplies, No. 201

Accounts Payable, No. 301 Owner's Capital, No. 401 Sales Revenue, No. 412

Sales Returns and Allowances, No. 414 Sales Discounts, and No. 505 Cost of

Goods Sold.

Instructions

(a)

Journalize the transactions using a perpetual inventory system.

(b)

Enter the beginning cash and capital balances and post the transactions.

(Use J1 for the journal reference.)

(c)

Prepare an income statement through gross profit for the month of May

2012.