What does the case teach about strategies that enterprises must adapt to in a competitive market?

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Vizio and the Market for Flat Panel TVs Operating sophisticated tooling in environments that must be kept absolutely clean, fabrication centers in South Korea, Taiwan, and Japan produce to exacting specifications sheets of glass twice as large as kingsize beds. From there, the glass panels travel to Mexican plants located alongside the U.S. border. There they are cut to size, combined with electronic components shipped in from Asia and the United States, assembled into finished flat panel TVs, and loaded onto trucks bound for retail stores in the United States, where consumers spend over $35 billion a year on flat panel TVs.

The underlying technology for flat panel displays was invented in the United States in the late 1960s by RCA. But after RCA and rivals Westinghouse and Xerox opted not to pursue the technology, the Japanese company Sharp made aggressive investments in flat panel displays. By the early 1990s Sharp was selling the first flat panel screens, but as the Japanese economy plunged into a decade-long recession, investment leadership shifted to South Korean companies such as Samsung. Then the 1997 Asian crisis hit Korea hard, and Taiwanese companies seized leadership. Today, Chinese companies are starting to elbow their way into the flat panel display manufacturing business.

As production for flat panel displays migrates its way around the globe to low-cost locations, there are clear winners and losers. U.S. consumers have benefited from the falling prices of flat panel TVs and are snapping them up. Efficient manufacturers have taken advantage of globally dispersed supply chains to make and sell low-cost, high-quality flat panel TVs. Foremost among these has been the California-based company Vizio, founded by a Taiwanese immigrant. In just six years, sales of Vizio flat panel TVs ballooned from nothing to over $3.1 billion by 2013. In early 2009, the company was the largest provider to the U.S. market with a 21.7 percent share. Vizio, however, has fewer than 500 employees. These focus on final product design, sales, and customer service. Vizio outsources most of its engineering work, all of its manufacturing, and much of its logistics. For each of its models, Vizio assembles a team of supplier partners strung across the globe. Its 42-inch flat panel TV, for example, contains a panel from South Korea, electronic components from China, and processors from the United States, and it is assembled in Mexico. Vizio's managers scour the globe continually for the cheapest manufacturers of flat panel displays and electronic components. They sell most of their TVs to large discount retailers such as Costco and Sam's Club. Good order visibility from retailers, coupled with tight management of global logistics, allows Vizio to turn over its inventory every three weeks, twice as fast as many of its competitors, which allows major cost savings in a business where prices are falling continually. On the other hand, the shift to flat panel TVs has caused pain in certain sectors of the economy, such as those firms that make traditional cathode ray TVs in high-cost locations. In 2006, for example, Japanese electronics manufacturer Sanyo laid off 300 employees at its U.S. factory, and Hitachi closed its TV manufacturing plant in South Carolina, laying off 200 employees. Sony and Hitachi both still make TVs, but they are flat panel TVs assembled in Mexico from components manufactured in Asia.

At the beginning of 2018, Whispering Winds Company acquired equipment costing $83,600. It was estimated that this equipment would have a useful life of 6 years and a salvage value of $8,360 at that time. The straight-line method of depreciation was considered the most appropriate to use with this type of equipment. Depreciation is to be recorded at the end of each year.

During 2020 (the third year of the equipment’s life), the company’s engineers reconsidered their expectations, and estimated that the equipment’s useful life would probably be 7 years (in total) instead of 6 years. The estimated salvage value was not changed at that time. However, during 2023 the estimated salvage value was reduced to $5,000.

Indicate how much depreciation expense should be recorded each year for this equipment, by completing the following table.

Sully Company’s January 1, 2020 balance sheet is as follows:

Assets Liabilities & Equity

Cash, receivables $ 3,000,000 Current liabilities $ 2,000,000

Inventories 4,000,000 Long-term liabilities 6,500,000

Equity method investments 1,000,000 Capital stock 2,000,000

Land, buildings & equipment 5,500,000 Retained earnings 3,500,000

Accumulated other comprehensive loss (400,000)

_________ Treasury stock (100,000)

Total assets $13,500,000 Total liabilities & equity $13,500,000

On January 1, 2020, Pronto Corporation acquired Sully’s assets and liabilities for $50 million in cash. Sully’s cash and receivables, and current liabilities were reported at values approximating fair value. However, its inventories were overvalued by $2,000,000, and its equity method investments were undervalued by $3,000,000. Its land, buildings & equipment were overvalued by $2,500,000, and its long-term liabilities were undervalued by $500,000. The accountants identified the following possible intangible assets attributed to Sully but not currently recorded on its balance sheet:

Fair Value

Skilled workforce $7,000,000

Favorable leases 5,000,000

Developed technology 2,000,000

Prospective customer contracts 1,500,000

Synergies on future projects 3,000,000

Required

Prepare Prance’s journal entry to record the acquisition.

Woody and Ruby are married and filing a joint return. They have combined wages of $135,000 in 2020. The couple's 2020 stock transactions are detailed in the following table. In addition, they have $6,200 of qualifying dividends.

Which of the following statements is true?

Which of the following statements is true?

Intermediate Accounting: RESEARCH PAPER You are going to choose a publicly traded company (Yum Brands). Publicly traded companies who have their shares listed on stock exchanges are required to file regular financial statements and disclosures with regulators, such as the securities and exchange commission (SEC) in the United States. Among the most widely read of these are a company's annual report, which tells investors and analysts how the company has performed over the previous fiscal year (FY), how its businesses look going forward and summarizing corporate financials for use in fundamental or ratio analysis through scrutinizing the balance sheet, income statement, and statement of cash flows. Here are topics to summarize in each paragraph: 1. Introduce to the FASB’s Conceptual Framework and FASB’s GAAP Codification, if any in their reports including their accounting principles or concepts. 2. Explain their annual Income Statement. Give a full summary of their earnings and operating expenses. Do they have Other Revenue and Gains or Other Expenses or Interest? Do they have discounting Operation or Extraordinary Items? Explain. You will find their information at the end of their Income Statement or Footnotes. What is their EPS? 3. Explain their annual Balance Sheet? Give a full summary of Assets, Liabilities, and Stockholder’s Equity. How many shares outstanding are stated? Do they have additional information at the bottom of the Balance Sheet? 4. Explain their Cash Flow Statement. Give a full summary of their cash flows. Are they using the indirect or direct method to calculate their results? 5. Conclusion 6. 2020: Was the company affected the Covid-19? Explain. No website restrictions, Report should be organized: introduction/problem, facts/findings, summary/conclusion. Thank you.

Change in Estimate versus Error Correction- LandCo is a lawn service company which provides grounds and maintenance services to a range of corporate customers. Customers are expected to pay on the first of each month, in advance of receiving services. One of LandCo’s corporate customers is an eldercare facility whose grounds the company has maintained for many years. The customer has not paid for the last three months of service (from October – December 2019); nevertheless, to maintain a positive relationship, LandCo continued to provide mowing and weed control services to the eldercare facility during that time. LandCo ceased providing services in January 2020 and found out in that same month that the eldercare facility filed for bankruptcy in September. LandCo now believes that collection of the missed payments is extremely unlikely.

LandCo has already issued financial statements to lenders (for the period ending 12/31/2019) which reflected revenue and a corresponding account receivable related to this customer of $10,000 per month for services provided. Those financial statements also reflected the company’s standard allowance (reserve) amount on receivables, of 4% of sales. In total, LandCo’s average monthly sales amount to $500,000.

Required:

1- Evaluate whether receipt of this information indicates you have a change in estimate or the customer's bankruptcy results in this event being considered an error in previously issued financial statements. Describe the accounting treatment required by the Codification for each alternatives with draft journal entries.

2- Research US accounting standards to determine the proper treatment for the service receivable/customer bankruptcy on LandCo’s financial statements, assuming it is headquartered in the United States.

3- Research international accounting standards to determine the proper treatment for LandCo’s transactions, assuming it is headquartered in France.

On 1 July 2018, Parent Ltd acquired all the shares of Son Ltd, on a cum-div. basis, for $2,057,000. At this date, the equity of Son Ltd consisted of:

Share capital – 500 000 shares $ 1,000,000

Retained earnings 500,000

Son Ltd also reported a dividend payable of $100,000 and a recorded goodwill of $50, 000 at the acquisition date. The dividend payable was subsequently paid in September 2018.

At the acquisition date, all the identifiable assets and liabilities of Son Ltd were recorded at amounts equal to fair value except for the following:

Of the inventory on hand in Son Ltd at 1 July 2018, 60 percent was sold in August 2018 and the remainder was sold in June 2019. It was estimated that the plant has a further 5-year life with zero residual value.

Son Ltd was involved in a court case that could potentially result in the company paying damages to customers. At the acquisition date, Parent Ltd calculated the fair value of this liability to be $50,000, even though Son Ltd had not recorded any provision for damages (liability). On 29 June 2020 Son Ltd reassessed the liability in relation to the court case as the chance of winning the case had improved. The fair value on 29 June 2020 was considered to be $30,000.

The company applies the partial goodwill method. The income tax rate is 30%.

During the period 1 July 2018 to 30 June 2020, the following intragroup transactions have occurred between Parent Ltd and Son Ltd:

(T1) On 1 January 2019, Parent Ltd acquired furniture for $100,000 from Son Ltd. The furniture had originally cost Son Ltd $150,000 and had a carrying amount at the time of sale of $80,000. The sale was made on credit. At 30 June 2019, $60,000 was outstanding. At 30 June 2020, $20,000 was still not paid and outstanding. Both entities apply depreciation on a straight-line basis. At 1 January 2019, the furniture had a further five years of useful life, with zero residual value.

(T2) On 1 March 2019, Son Ltd sold inventory costing $12,000 to Parent Ltd for $16,000. On 1 October 2019, Parent Ltd sold half of these inventory items back to Son Ltd for $6,000. Of the remaining inventory kept by Parent Ltd, half was sold in March 2020 to Dingo Ltd at a profit of $400.

Required:
a) Prepare the acquisition analysis at 1 July 2018.

b) Prepare the consolidation worksheet entries at 30 June 2020. Your answer should include: 1. BCVR entries,

2. Pre-acquisition entries, and
3. Intragroup transaction adjustment entries (T1 to T2).

c) The adjusting consolidation entries at 30 June 2019 for the last intragroup transaction (T2) is provided below.

Explain why the above entries are made for the intragroup transaction (T2) as at 30 June 2019, noting the adjustments to each account separately.

d) Critically analyze the accounting treatment of acquisition related costs in a business combination. For your critical analysis, you could compare with how acquisition related costs are accounted for when a company purchases property plant and equipment. [word limit: 150 words]

On October 20, 2020, Kevin Mason, President of Tropicane Juice is reviewing the financial statements of Sunnydee, a potential acquisition candidate for the company. Tropicane is an American company, which produces and distributes juice throughout North America. It is in juice production and is interested in getting into the Canadian market. Sunnydee is a Canadian company that produces similar juice products and sells these across Canada. Tropicane is a public company and Sunnydee is a private company. Sunnydee is owned by the local area farmers and was originally started as a co-operative. Of the 1,000,000 shares outstanding, 600,000 are owned by the founder of the company, Mr. S. The rest are owned by various employees. Sunnydee has a perpetual debt with a par value of $5 million and coupon rate of 6 percent. However, interest rates have decreased and now the debt has a 4 percent yield-to-maturity. Annual before-tax before-interest operating cash flows for the year just ended were $3 million. The corporate tax rate was 20 percent. Assume perpetual operating cashflows for Sunnydee’s future cashflows. Tropicane has return on equity of 12.24%, debt-to-equity ratio of 40%, and yield to maturity of 3% on its outstanding debt.

a) What do you think is the maximum acquisition price that Mr. Mason is willing to pay for acquiring Sunnydee?

b) Compute weighted average cost of capital for Sunnydee.

In the context of this course, you will be asked to address the issues/questions below for Marriott International, Inc. (MAR), www.marriott.com. When addressing the issues/questions, be sure to do so in the context of this course and Marriott. You have been appointed as the special assistant to the Chief Executive Officer (CEO), Arne Sorenson, who has asked you to address the following five situations:

(a) A fellow MBA alum from Lynn University, who now works in Admission at Lynn University would like to give each MBA student a benefit, which is programmed into the Lynn University ID card. This benefit would allow the student one night each month, depending on availability, for a room at the Marriott Courtyard for $40. Normally the room rate is $100 and the full cost of a night’s stay is $50. Discuss whether or not this would be feasible, i.e. Marriott is able to do this transaction without it being a donation.

(b) Marriott currently buys its ice machines from a manufacturer in China. A representative from a company in Vietnam is offering to sell them for 20% less than cost from the manufacturer in China. Discuss the issues that you would consider in deciding whether or not to accept this offer.

(c) The CEO wishes to develop an incentive plan for the hotel managers.

Before this is put into place, the CEO wishes you to make sure that budgeting

in the hotels is done correctly. He has asked you to submit a document discussing

the key points that you have learned in MBA 640. Be as thorough as possible.

(d) Marriott has only used absorption costing. The CEO has asked you

to explain the merits of using variable costing under certain circumstances.

(e) The CEO has asked you to explain how target costing/pricing would be used in

Marriott’s pricing policies.

On 1 July 2018, Parent Ltd acquired all the shares of Son Ltd, on a cum-div. basis, for $2,057,000. At this date, the equity of Son Ltd consisted of:

Share capital – 500 000 shares: $ 1,000,000

Retained earnings: 500,000

Son Ltd also reported a dividend payable of $100,000 and a recorded goodwill of $50, 000 at the acquisition date. The dividend payable was subsequently paid in September 2018.

At the acquisition date, all the identifiable assets and liabilities of Son Ltd were recorded at amounts equal to fair value except for the following:

Of the inventory on hand in Son Ltd at 1 July 2018, 60 percent was sold in August 2018 and the remainder was sold in June 2019. It was estimated that the plant has a further 5-year life with zero residual value.

Son Ltd was involved in a court case that could potentially result in the company paying damages to customers. At the acquisition date, Parent Ltd calculated the fair value of this liability to be $50,000, even though Son Ltd had not recorded any provision for damages (liability). On 29 June 2020 Son Ltd reassessed the liability in relation to the court case as the chance of winning the case had improved. The fair value on 29 June 2020 was considered to be $30,000.

The company applies the partial goodwill method. The income tax rate is 30%.

During the period 1 July 2018 to 30 June 2020, the following intragroup transactions have occurred between Parent Ltd and Son Ltd:

(T1) On 1 January 2019, Parent Ltd acquired furniture for $100,000 from Son Ltd. The furniture had originally cost Son Ltd $150,000 and had a carrying amount at the time of sale of $80,000. The sale was made on credit. At 30 June 2019, $60,000 was outstanding. At 30 June 2020, $20,000 was still not paid and outstanding. Both entities apply depreciation on a straight-line basis. At 1 January 2019, the furniture had a further five years of useful life, with zero residual value.

(T2) On 1 March 2019, Son Ltd sold inventory costing $12,000 to Parent Ltd for $16,000. On 1 October 2019, Parent Ltd sold half of these inventory items back to Son Ltd for $6,000. Of the remaining inventory kept by Parent Ltd, half was sold in March 2020 to Dingo Ltd at a profit of $400.

The adjusting consolidation entries at 30 June 2019 for the last intragroup transaction (T2) is provided below.

Explain why the above entries are made for the intragroup transaction (T2) as at 30 June 2019, noting the adjustments to each account separately.