How can you tell what kind of market structure something is by only looking at a graph that shows demand, marginal revenue (in the short and logn run) and marginal cost and average cost? What do you look for to determine the type of market structure that it is?

Common objectives to go global include all of the following except

Group of answer choices

Increasing revenue through access to new markets

Increasing production capacity

Reducing direct cost using cheaper resources and labor

Desire to limit product variations

Is all of this correct?

Journal Entries

Cash	4000
Common Stock		4000
Cash	5000
Notes Payable		5000
Rent Expense	900
Cash		900
Supplies	450
Accounts Payable		450
Equipment	7200
Cash		7200
Equipment	2850
Cash		1350
Accounts Payable		1500
Prepaid Advertising	375
Advertising Expense	125
Cash		500
Insurance Expense	225
Cash		225
Cash	2625
Service Revenue		2625
Cash	5125
Unearned Service Revenue		5125
Accounts Recievable	1500
Service Revenue		1500
Accounts Payable	600
Cash		600
Cash	1300
Accounts Recievable		1300
Dividends	1000
Cash		1000

Adjusting Entries and Closing Entries

	ADJUSTING ENTRIES
A1	Interest Expense	42
	Interest Payable		42
A2	Supplies Expense	250
	Supplies		250
A3	Depreciation Expense	167
	Accumulated Depreciation-Equipment		167
A3b	Depreciation Expense	40
	Accumulated Depreciation-Equipment		40
A4	Unearned Revenue	1000
	Service Revenue		1000
A5	Accounts Recievable	330
	Service Revenue		330
A6	Salaries and Wages Expense	2060
	Salaries and Wages Payable		2060
A7	Utility Expense	150
	Utilities Payable		150
A8	Income Tax Expense	167
	Income Tax Payable		167
	CLOSING ENTRIES
C1	Service Revenue	5455
	Income Summary		5455
C2	Income Summary	4126
	Salaries and Wages Expense		2060
	Depreciation Expense		207
	Insurance Expense		225
	Utilities Expense		150
	Income Tax Expense		167
	Interest Expense		42
	Supplies Expense		250
	Rent Expense		900
	Advertising Expense		125
C3	Income Summary	1354
	Retained Earnings		1354
C4	Retained Earnings	1000
	Dividends		1000

Worksheet

JACKSON TUTORING SERVICES, INC. WORKSHEET 1/31/2018
	Unadjusted				Adjusted
	Trial Balance		Adjusting Entries		Trial Balance		Income Statement		Balance Sheet
Account Title	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit
Cash	6,275				6,275				6,275
Supplies	450			250	200				200
Accounts Rec.	200		330		530				530
Prepaid Advertising	375				375				375
Equipment	10,050				10,050				10,050
Accum. Depr.				207		207				207
Notes Payable		5,000				5,000				5,000
Interest Payable				42		42				42
Unearned Revenue		5,125	1,000			4,125				4,125
Accounts Payable		1,350				1,350				1,350
Utilities Payable				150		150				150
Inc. Taxes Payable				167		167				167
Sal. & Wages Pay.				2,060		2,060				2,060
Common Stock		4,000				4,000				4,000
Dividends	1,000				1,000
Retained Earnings										329
Service Revenue		4,125		1,330		5,455		5,455
Sal. & Wages Exp.			2,060		2,060		2,060
Depr. Exp.			207		207		207
Insurance Expense	225				225		225
Utilities Expense			150		150		150
Income Tax Exp.			167		167		167
Interest Exp.			42		42		42
Suppies Expense			250		250		250
Rent Expense	900				900		900
Advertising Exp.	125				125		125
	19,600	19,600	4,206	4,206	22,556	22,556	4,126	5,455	17,430	17,430
								1,329

Post Closing Trial Balance

JACKSON TUTORING SERVICES, INC.
Post-Closing Trial Balance
31-Jan-18
	Account Title		Debit	Credit
	Cash		$6,275
	Equipment		10050
	Supplies		200
	Prepaid Advertising		375
	Accounts Recievable		530
	Accumulated Depreciation			207
	Accounts Payable			1350
	Notes Payable			5000
	Interest Payable			42
	Salaries and Wages Payable			2060
	Income Tax Payable			167
	Utilities Payable			150
	Unearned Revenue			4125
	Common Stock			4000
	Retained Earnings			$329
			$17,430	$17,430
	Totals

These are the journal entries and the adjusting journal entries

Issued common stock in exchange for $4,000 cash.
Borrowed $5,000 by issuing a 2-year, 10% note payable to SunTrust Bank.
Paid $900 for January rent.
Purchased supplies on account for $450 from Traveler's Supply Company.
Purchased equipment for $7,200 cash from DSI Computer Company. The equipment has a 3 year life and a $1,200 salvage value.
Purchased additional equipment from Bebo's Office Supply Co., paying cash of $1,350 and putting $1,500 on account. The equipment has a 5 year life and $450 salvage value.
Paid $125 for advertisements to run in the current month and $375 for ads to run in February-April.
Paid the January insurance premium of $225.
Performed services for $2,625 cash.
Received cash advance of $5,125 for services to be performed on a 5- month contract beginning in January.
Performed services and billed customers $1,500.
Made a $600 payment on account to Traveler's Office Supply Company .
Collected $1,300 from customers on account.
Declared and paid dividends of $1,000 cash.
Journalize transactions 1-14 on page 1 of the general journal. Label the entries 1-14.
Post the journal entries to the ledger t-accounts using Excel formulas. Include the journal entry number as a posting reference.
Prepare a worksheet formatting the cells in Excel and using the following information:
1	Accrue interest expense on the note assuming that the date of the loan was January 2 (use 30/360 and round to the nearest dollar).
2	Supplies on hand at January 31 total $200.
3	Assume that all of the equipment was purchased at the beginning of January. Record January depreciation expense using the straight-line method (round to the nearest dollar).
4	The cash advance is earned ratably over the 5-month period.
5	The company has earned $330 of revenue that has not yet been billed to customers.
6	Jackson pays its employees on the first of every month. Salaries earned during the month of January total $2,060.
7	On January 29, Jackson received the current month's utility bill for $150. The bill is due on February 16.
8	Jackson estimates that the company will pay an income tax rate of 11%.

1) The account title used for recording the payment of rent in advance for an office building is ________.

A) Prepaid Rent

B) Rent Payable

C) Rent Revenue

D) Rent Expense

  

2) Which of the following is an asset account?

A) Wages Payable

B) Notes Payable

C) Unearned Revenue

D) Accounts Receivable

  

3) A customer's promise to pay in the future for services or goods sold is called a(n) ________.

A) Accounts Receivable

B) Accounts Payable

C) Unearned Revenue

D) Notes Payable

  

4) Which of the following is classified as an asset account?

A) Prepaid Insurance

B) Notes Payable

C) Dividends

D) Unearned Revenue

  

5) ________ represents a debt owed for renting a building.

A) Prepaid Rent

B) Rent Payable

C) Rent Revenue

D) Rent Expense

  

6) Which of the following is a liability account?

A) Prepaid Advertising

B) Cash

C) Building

D) Unearned Rent

  

7) Which of the following is a liability account?

A) Accounts Payable

B) Prepaid Expense

C) Salaries Expense

D) Service Revenue

  

8) A liability created when a business receives cash from customers in advance of providing services or delivering goods is called a(n) ________.

A) notes receivable

B) unearned revenue

C) accrued liability

D) service revenue

  

9) Which of the following is a liability account?

A) Service Revenue

B) Building

C) Prepaid Rent

D) Unearned Revenue

  

  

10) Explain the difference between Accounts Receivable and Accounts Payable.

Answer:   

  

  

  

  

  

  

  

  

11) Saturn, Inc. paid the rent for the current month in cash. Which of the following accounts will be used to record the transaction?

A) Prepaid Rent

B) Rent Payable

C) Rent Revenue

D) Rent Expense

  

12) Amounts earned from delivering goods or services to customers are called ________.

A) notes receivable

B) unearned revenues

C) equity

D) revenues

  

13) Which of the following is provided in a typical chart of accounts?

A) Account balance

B) Account number

C) Dates of transactions

D) Transaction amounts

  

14) A listing of all accounts in numerical order is called a(n) ________.

A) Ledger

B) Journal

C) Income statement

D) Chart of accounts

  

15) Both the chart of accounts and the ledger ________.

A) provide the balance of each account at a specific point in time

B) list the account names and numbers of the business

C) fulfill the task of showing all of the increases and decreases in each account

D) All of the statements are correct.

  

16) Regarding T-accounts, which of the following statements is correct?

A) A T-account is a more detailed form of an account in the journal.

B) The right side of a T-account is a debit for asset accounts and a credit for equity accounts.

C) Debits are posted on the right side of the vertical line.

D) A T-account is a summary device with credits posted on the right side of the vertical line.

  

17) Which of the following accounts decreases with a debit?

A) Accounts Receivable

B) Notes Payable

C) Cash

D) Rent Expense

  

18) "All debits are increases and all credits are decreases." Is this a correct statement? Explain your answer.

Answer:   

  

  

  

  

19) Which of the following accounts decreases with a credit?

A) Cash

B) Common Stock

C) Accounts Payable

D) Unearned Revenue

  

20) Which of the following accounts increases with a debit?

A) Prepaid Rent

B) Interest Payable

C) Accounts Payable

D) Common Stock

  

21) Which one of the following account groups will decrease with a debit?

A) assets and expenses

B) revenues and expenses

C) liabilities and revenues

D) assets and liabilities

  

22) Which of the following statements is true of expenses?

A) Expenses increase equity, so an expense account's normal balance is a credit balance.

B) Expenses decrease equity, so an expense account's normal balance is a credit balance.

C) Expenses increase equity, so an expense account's normal balance is a debit balance.

D) Expenses decrease equity, so an expense account's normal balance is a debit balance.

  

23) Which one of the following account groups normally has a credit balance?

A) assets and liabilities

B) equity and assets

C) liabilities and revenues

D) assets and expenses

  

24) Which one of the following account groups normally has a debit balance?

A) assets and expenses

B) revenues and expenses

C) liabilities and revenues

D) assets and liabilities

  

25) Accounts Receivable is a(n) ________ account and has a normal ________ balance.

A) liability; debit

B) asset; debit

C) liability; credit

D) asset; credit

  

26) Accounts Payable is a(n) ________ account and has a normal ________ balance.

A) liability; debit

B) asset; debit

C) liability; credit

D) asset; credit

  

27) Prepaid Rent is a(n) ________ account and has a normal ________ balance.

A) asset; debit

B) liability; credit  

C) liability; debit

D) asset; credit

  

28) For Office Supplies, the category of account and its normal balance is ________.

A) liabilities and a debit balance

B) assets and a debit balance

C) liabilities and a credit balance

D) assets and a credit balance

  

29) The Salaries Payable account is a(n) ________.

A) liability account with a normal debit balance

B) asset account with a normal debit balance

C) liability account with a normal credit balance

D) asset account with a normal credit balance

  

30) For expenses, the category of account and its normal balance is ________.

A) equity and a credit balance

B) assets and a debit balance

C) assets and a credit balance

D) equity and a debit balance

  

31) The Accounts Receivable account of Brownstone, Inc. has the following postings:

Accounts Receivable

23,000	3,000
2,000

  

  

Calculate the ending balance of the account.

A) $28,000 debit

B) $25,000 debit

C) $3,000 credit

D) $22,000 debit

  

32) The Accounts Payable account of Waterford, Inc. has the following postings:

Accounts Receivable

17,000	27,000
8,000	12,000

Calculate the ending balance of the account.

A) $12,000 credit

B) $14,000 debit

C) $14,000 credit

D) $8,000 debit

  

33) A business purchases $3,500 of office supplies for cash. Which of the following sets of ledger accounts reflects the posting of this transaction?

A)  

Office Supplies

3,500

Accounts Payable

3,500

B)  

Office Supplies

3,500

Cash

3,500

C)  

Office Supplies

3,500

Accounts Payable

3,500

  

D)  

Office Supplies

3,500

Cash

3,500

  

34) When is a trial balance usually prepared?

A) after each entry is journalized

B) before the financial statements are prepared

C) after the financial statements are prepared

D) at the beginning of an accounting period

At June 30, 2017, the end of its most recent fiscal year, Blue Computer Consultants’ post-closing trial balance was as follows:

		Debit		Credit
Cash		$6,380
Accounts receivable		1,460
Supplies		840
Accounts payable				$490
Unearned service revenue				1,370
Common stock				4,400
Retained earnings				2,420
		$8,680		$8,680

The company underwent a major expansion in July. New staff was hired and more financing was obtained. Blue conducted the following transactions during July 2017, and adjusts its accounts monthly.

July	1		Purchased equipment, paying $4,400 cash and signing a 2-year note payable for $24,400. The equipment has a 4-year useful life. The note has a 6% interest rate which is payable on the first day of each following month.
	2		Issued 24,400 shares of common stock for $61,000 cash.
	3		Paid $4,200 cash for a 12-month insurance policy effective July 1.
	3		Paid the first 2 (July and August 2017) months’ rent for an annual lease of office space for $4,900 per month.
	6		Paid $4,600 for supplies.
	9		Visited client offices and agreed on the terms of a consulting project. Blue will bill the client, Connor Productions, on the 20th of each month for services performed.
	10		Collected $1,460 cash on account from Milani Brothers. This client was billed in June when Blue performed the service.
	13		Performed services for Fitzgerald Enterprises. This client paid $1,370 in advance last month. All services relating to this payment are now completed.
	14		Paid $490 cash for a utility bill. This related to June utilities that were accrued at the end of June.
	16		Met with a new client, Thunder Bay Technologies. Received $14,600 cash in advance for future services to be performed.
	18		Paid semi-monthly salaries for $13,400.
	20		Performed services worth $34,200 on account and billed customers.
	20		Received a bill for $2,700 for advertising services received during July. The amount is not due until August 15.
	23		Performed the first phase of the project for Thunder Bay Technologies. Recognized $12,200 of revenue from the cash advance received July 16.
	27		Received $18,300 cash from customers billed on July 20.

Adjustment data:

1.		Adjustment of prepaid insurance.
2.		Adjustment of prepaid rent.
3.		Supplies used, $1,550.
4.		Equipment depreciation, $600 per month.
5.		Accrual of interest on note payable.
6.		Salaries for the second half of July, $13,400, to be paid on August 1.
7.		Estimated utilities expense for July, $980 (invoice will be received in August).
8.		Income tax for July, $1,460, will be paid in August.

The chart of accounts for Blue Computer Consultants contains the following accounts: Cash, Accounts Receivable, Supplies, Prepaid Insurance. Prepaid Rent, Equipment, Accumulated Depreciation—Equipment, Accounts Payable, Notes Payable, Interest Payable, Income Taxes Payable, Salaries and Wages Payable, Unearned Service Revenue, Common Stock, Retained Earnings, Dividends, Income Summary, Service Revenue, Supplies Expense, Depreciation Expense, Insurance Expense, Salaries and Wages Expense, Advertising Expense, Income Tax Expense, Interest Expense, Rent Expense, Supplies Expense, and Utilities Expense.

**********Prepare a post-closing trial balance*******

Here is some of the info I have already thus far its a comprehensive problem so these are from the other steps

S No	Date	Account	Debit	Credit
1	Jul 1	Equipment	28800
1	Jul 1	Cash		4400
1	Jul 1	Note Payable 6%		24400
2	Jul 2	Cash	61000
2	Jul 2	Common Stock 24400 Share		61000
3	Jul 3	Prepaid Insurance	4200
3	Jul 3	Cash		4200
4	Jul 3	Prepaid Rent (4900*2)	9800
4	Jul 3	Cash		9800
5	Jul 6	Supplies	4600
5	Jul 6	Cash		4600
6	Jul 9	No Entry
6	Jul 9
7	Jul 10	Cash	1460
7	Jul 10	Accounts Receivable		1460
8	Jul 13	Unearned Service Revenue	1370
8	Jul 13	Service Revenue		1370
9	Jul 14	Accounts Payable	490
9	Jul 14	Cash		490
10	Jul 16	Cash	14600
10	Jul 16	Unearned Service Revenue		14600
11	Jul 18	Salaries Expense	13400
11	Jul 18	Cash		13400
12	Jul 20	Accounts Receivable	34200
12	Jul 20	Service Revenue		34200
13	Jul 20	Advertising Expense	2700
13	Jul 20	Accounts Payable		2700
14	Jul 23	Unearned Service Revenue	12200
14	Jul 23	Service Revenue		12200
15	Jul 27	Cash	18300
15	Jul 27	Accounts Receivable		18300
		Adjusting Entries
1	Jul 31	Insurance Expense	350			4200/12
1	Jul 31	Prepaid Insurance		350
2	Jul 31	Rent Expense	4900
2	Jul 31	Prepaid Rent		4900
3	Jul 31	Supply Expense	1500
3	Jul 31	Supplies		1500
4	Jul 31	Depreciation Expense-Equipment	600
4	Jul 31	Accumulated Depcreciation		600
5	Jul 31	Interest Expense	122			24400*6%*1 month
5	Jul 31	Interes Payable		122
6	Jul 31	Salaries Expense	13400
6	Jul 31	Salaries Payable		13400
7	Jul 31	Utilities Expense	980
7	Jul 31	Accounts Payable		980
8	Jul 31	Income Tax Expense	1460
8	Jul 31	Income Tax Payable		1460

	Unadjusted		Adjusted Entries		Adjusted-post closing
Unadjusted Trial Balance	Debit	Credit	Debit	Credit	Debit	Credit				Net Income Statement
Accounts Receivable	15900				15900
Cash	64850				64850					Service Revenue	47770
Prepaid Rent	9800			4900	4900					Less:
Equipment	28800				28800					Advertising Expense	2700
Accumulated Depreciation				600	-600					Salary Expense	26800
Prepaid Insurance	4200			350	3850					Insurance Expense	350
Supplies	5440			1500	3940					Supply Expense	1500
Note Payable 6%		24400				24400				Depreciation Expense	600
Common Stock 24400 Share		65400				65400				Rent Expense	4900
Salary Payable				13400		13400				Interest Expense	122
Interes Payable				122		122				Utility Expense	980
Income Tax Payable				1460		1460
Accounts Payable		2700		980		3680				Net Income before tax	9818
Unearned Service Revenue		2400				2400				Income Tax	1460
Advertising Expense	2700				2700					Net Income	8358
Salaries Expense	13400		13400		26800
Service Revenue		47770				47770				Balance Sheet
Insurance Expense			350		350					Common Stock 24400 Share	65400	Accounts Receivable	15900
Supply Expense			1500		1500					Retained Earning (2420+8358)	10778	Cash	64850
Depreciation Expense			600		600					Note Payable 6%	24400	Prepaid Rent	4900
Retained Earning		2420				2420				Salary Payable	13400	Equipment	28800
Interst Expense			122		122					Interes Payable	122	Accumulated Depreciation	-600
Utility Expense			980		980					Income Tax Payable	1460	Prepaid Insurance	3850
Income Tax Expense			1460		1460					Accounts Payable	3680	Supplies	3940
Rent Expense			4900		4900					Unearned Service Revenue	2400
Total	145090	145090	23312	23312	161052	161052					121640		121640

Analyzing, Forecasting, and Interpreting Both Income Statement and Balance Sheet
Following are the income statements and balance sheets of Best Buy Co., Inc.

Income Statement, Fiscal Years Ended ($ millions)	Feb. 26, 2011	Feb. 27, 2010
Revenue	$ 50,272	$ 49,694
Cost of goods sold	37,611	37,534
Restructuring charges - cost of goods sold	24	--
Gross profit	12,637	12,160
Selling, general and administrative expenses	10,325	9,873
Restructuring charges	198	52
Goodwill and tradename impairment	--	--
Operating income	2,114	2,235
Other income (expenses)
Investment income and other	51	54
Interest expense	(87)	(94)
Earnings before income tax expense and equity in income of affiliates	2,078	2,195
Income tax expense	714	802
Equity in income of affiliates	2	1
Net earnings including noncontrolling interests	1,366	1,394
Net (earnings) attributable to noncontrolling interests	(89)	(77)
Net earnings attributable to Best Buy Co., Inc.	$ 1,277	$ 1,317

Balance Sheet ($ millions)	Feb. 26, 2011	Feb. 27, 2010
Assets
Cash and cash equivalents	$ 1,103	$ 1,826
Short-term investments	22	90
Receivables	2,348	2,020
Merchandise inventories	5,897	5,486
Other current assets	1,103	1,144
Total current assets	10,473	10,566
Property and equipment
Land and buildings	766	757
Leasehold improvements	2,318	2,154
Fixtures and equipment	4,701	4,447
Property under capital lease	120	95
Gross property and equipment	7,905	7,453
Less accumulated depreciation	4,082	3,383
Net property and equipment	3,823	4,070
Goodwill	2,454	2,452
Tradenames, Net	133	159
Customer Relationships, Net	203	279
Equity and Other Investments	328	324
Other assets	435	452
Total assets	$ 17,849	$ 18,302
Liabilities and Equity
Accounts payable	$ 4,894	$ 5,276
Unredeemed giftcard liabilities	474	463
Accrued compensation and related expenses	570	544
Accrued liabilities	1,471	1,681
Accrued income taxes	256	316
Short-term debt	557	663
Current portion of long-term debt	441	35
Total current liabilities	8,663	8,978
Long-term liabilities	1,183	1,256
Long-term debt	711	1,104
Best Buy Co., Inc. Shareholders' Equity
Preferred stock, $ 1.00 par value: Authorized-400,000 shares; Issued and outstanding-none	--	--
Common stock $0.10 par value: Authorized-1.0 billion shares; Issued and outstanding-392,590,000 and 418,815,000 shares, respectively	39	42
Additional paid-in capital	18	441
Retained earnings	6,372	5,797
Accumulated other comprehensive income	173	40
Total Best Buy Co., Inc. shareholders' equity	6,602	6,320
Noncontrolling interests	690	644
Total equity	7,292	6,964
Total liabilities and shareholders' equity	$ 17,849	$ 18,302

Forecast Best Buy's fiscal 2012 income statement using the following relations (assume "no change" for accounts not listed).

Revenue growth	4.5%
Cost of good sold/Revenue	74.8%
Restructuring charges - cost of good sold	$--
Selling, general and administrative expenses/Revenue	20.5%
Restructuring charges	$--
Goodwill and trademark impairment	$--
Investment income and other	$51
Investment impairment	$--
Interest expense	$87
Income tax expense/Pretax income	34.4%
Equity in income of affiliates	$2
Net earnings attributable to noncontrolling interests/Net earnings including noncontrolling interests	7.5%

• Round all answers to the nearest whole number.

• Do not use negative signs with your answers in the income statement.

Income Statement, Fiscal Years Ended ($ millions)	2012 Estimated
Revenue	Answer
Cost of goods sold	Answer
Restructuring charges - cost of goods sold	Answer
Gross profit	Answer
Selling, general and administrative expenses	Answer
Restructuring charges	Answer
Goodwill and tradename impairment	Answer
Operating income	Answer
Other income/expenses
Investment income and other	Answer
Interest expense	Answer
Earnings before income tax expense and equity in income of affiliates	Answer
Income tax expense	Answer
Equity in income of affiliates	Answer
Net earnings including noncontrolling interests	Answer
Net earnings attributable to noncontrolling interests	Answer
Net earnings attributable to Best Buy Co., Inc.	Answer

Forecast Best Buy's fiscal 2012 balance sheet using the following relations (assume "no change" for accounts not listed). Assume that all capital expenditures are purchases of property and equipment.

Short-term investments	No change
Receivables/Revenue	4.7%
Merchandise inventories/Revenue	11.7%
Other current assets/Revenue	2.2%
CAPEX (Increase in gross Property and equipment)/Revenue	1.5%
Goodwill	No change
Amortization expense for Tradenames	$25
Amortization expense for Customer relationships	$38
Equity and Other Investments	No change
Other Assets/Revenue	0.9%
Accounts payable/Revenue	9.7%
Unredeemed gift card liabilities/Revenue	0.9%
Accrued compensation and related expenses/Revenue	1.1%
Accrued liabilities/Revenue	2.9%
Accrued income taxes/Revenue	0.5%
Long-term liabilities	No change
Noncontrolling interests	*
Depreciation/Prior year gross PPE	12.0%
Amortization/Prior year intangible asset balance	18.7%
Dividends/Net income	18.6%
Long-term debt payments required in fiscal 2013	$37
*increase by net income attributable to noncontrolling interests and assume no dividends

• Round all answers to the nearest whole number.

• Do not use negative signs with your answers in the balance sheet.

Balance Sheet ($ millions)	2012 Estimated
Assets
Cash and cash equivalents	Answer
Short-term investments	Answer
Receivables	Answer
Merchandise inventories	Answer
Other current assets	Answer
Total current assets	Answer
Property and equipment
Gross property and equipment	Answer
Less accumulated depreciation	Answer
Net property and equipment	Answer
Goodwill	Answer
Tradenames, Net	Answer
Customer Relationships, Net	Answer
Equity and Other Investments	Answer
Other assets	Answer
Total assets	Answer
Liabilities and equity
Accounts payable	Answer
Unredeemed gift card liabilities	Answer
Accrued compensation and related expenses	Answer
Accrued liabilities	Answer
Accrued income taxes	Answer
Short-term debt	Answer
Current portion of long-term debt	Answer
Total current liabilities	Answer
Long-term liabilities	Answer
Long-term debt	Answer
Best Buy Co., Inc. Shareholders' Equity
Preferred stock, $1.00 par value: Authorized - 400,000 shares; Issued and outstanding - none	Answer
Common stock, $0.10 par value: Authorized - 1.0 billion shares; Issued and outstanding - 392,590,000 and 418,815,000 shares, respectively	Answer
Additional paid-in capital	Answer
Retained earnings	Answer
Accumulated other comprehensive income	Answer
Total Best Buy Co., Inc. shareholders' equity	Answer
Noncontrolling interests	Answer
Total equity	Answer
Total liabilities and Equity	Answer

b. What does the forecasted adjustment to balance the accounting equation from part a reveal to us about the forecasted cash balance and related financing needs of the company? Explain.

Best Buy will generate sufficient cash for the coming year. The cash balance decreases fairly significantly, we could adjust marketable securities, increasing total assets.

Best Buy will generate sufficient cash for the coming year. The cash balance increases fairly significantly, we could adjust marketable securities, leaving total assets unchanged.

Best Buy will not generate sufficient cash for the coming year. The cash balance decreases fairly significantly, we could adjust marketable securities, leaving total assets unchanged.

Best Buy will not generate sufficient cash for the coming year. The cash balance decreases fairly significantly, we could adjust short-term debt, increasing total assets.

Question 1

Partially correct

Mark 12.65 out of 43.00

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Question text

Analyzing, Forecasting, and Interpreting Both Income Statement and Balance Sheet
Following are the income statements and balance sheets of Best Buy Co., Inc.

Income Statement, Fiscal Years Ended ($ millions)	Feb. 26, 2011	Feb. 27, 2010
Revenue	$ 50,272	$ 49,694
Cost of goods sold	37,611	37,534
Restructuring charges - cost of goods sold	24	--
Gross profit	12,637	12,160
Selling, general and administrative expenses	10,325	9,873
Restructuring charges	198	52
Goodwill and tradename impairment	--	--
Operating income	2,114	2,235
Other income (expenses)
Investment income and other	51	54
Interest expense	87	94
Earnings before income tax expense and equity in income of affiliates	2,078	2,195
Income tax expense	714	802
Equity in income of affiliates	2	1
Net earnings including noncontrolling interests	1,366	1,394
Net (earnings) attributable to noncontrolling interests	89	77
Net earnings attributable to Best Buy Co., Inc.	$ 1,277	$ 1,317

Balance Sheet ($ millions)	Feb. 26, 2011	Feb. 27, 2010
Assets
Cash and cash equivalents	$ 1,103	$ 1,826
Short-term investments	22	90
Receivables	2,348	2,020
Merchandise inventories	5,897	5,486
Other current assets	1,103	1,144
Total current assets	10,473	10,566
Property and equipment
Land and buildings	766	757
Leasehold improvements	2,318	2,154
Fixtures and equipment	4,701	4,447
Property under capital lease	120	95
Gross property and equipment	7,905	7,453
Less accumulated depreciation	4,082	3,383
Net property and equipment	3,823	4,070
Goodwill	2,454	2,452
Tradenames, Net	133	159
Customer Relationships, Net	203	279
Equity and Other Investments	328	324
Other assets	435	452
Total assets	$ 17,849	$ 18,302
Liabilities and Equity
Accounts payable	$ 4,894	$ 5,276
Unredeemed giftcard liabilities	474	463
Accrued compensation and related expenses	570	544
Accrued liabilities	1,471	1,681
Accrued income taxes	256	316
Short-term debt	557	663
Current portion of long-term debt	441	35
Total current liabilities	8,663	8,978
Long-term liabilities	1,183	1,256
Long-term debt	711	1,104
Best Buy Co., Inc. Shareholders' Equity
Preferred stock, $ 1.00 par value: Authorized-400,000 shares; Issued and outstanding-none	--	--
Common stock $0.10 par value: Authorized-1.0 billion shares; Issued and outstanding-392,590,000 and 418,815,000 shares, respectively	39	42
Additional paid-in capital	18	441
Retained earnings	6,372	5,797
Accumulated other comprehensive income	173	40
Total Best Buy Co., Inc. shareholders' equity	6,602	6,320
Noncontrolling interests	690	644
Total equity	7,292	6,964
Total liabilities and shareholders' equity	$ 17,849	$ 18,302

Forecast Best Buy's fiscal 2012 income statement using the following relations (assume "no change" for accounts not listed).

Revenue growth	6%
Cost of good sold/Revenue	74.8%
Restructuring charges - cost of good sold	$--
Selling, general and administrative expenses/Revenue	20.5%
Restructuring charges	$--
Goodwill and trademark impairment	$--
Investment income and other	$51
Investment impairment	$--
Interest expense	$87
Income tax expense/Pretax income	34.4%
Equity in income of affiliates	$2
Net earnings attributable to noncontrolling interests/Net earnings including noncontrolling interests	6.5%

• Round all answers to the nearest whole number.

• Do not use negative signs with your answers in the income statement.

Income Statement, Fiscal Years Ended ($ millions)	2012 Estimated
Revenue	Answer
Cost of goods sold	Answer
Restructuring charges - cost of goods sold	Answer
Gross profit	Answer
Selling, general and administrative expenses	Answer
Restructuring charges	Answer
Goodwill and tradename impairment	Answer
Operating income	Answer
Other income/expenses
Investment income and other	Answer
Interest expense	Answer
Earnings before income tax expense and equity in income of affiliates	Answer
Income tax expense	Answer
Equity in income of affiliates	Answer
Net earnings including noncontrolling interests	Answer
Net earnings attributable to noncontrolling interests	Answer
Net earnings attributable to Best Buy Co., Inc.	Answer

Forecast Best Buy's fiscal 2012 balance sheet using the following relations (assume "no change" for accounts not listed). Assume that all capital expenditures are purchases of property and equipment.

Short-term investments	No change
Receivables/Revenue	4.7%
Merchandise inventories/Revenue	11.7%
Other current assets/Revenue	2.2%
CAPEX (Increase in gross Property and equipment)/Revenue	1.5%
Goodwill	No change
Amortization expense for Tradenames	$25
Amortization expense for Customer relationships	$38
Equity and Other Investments	No change
Other Assets/Revenue	0.9%
Accounts payable/Revenue	9.7%
Unredeemed gift card liabilities/Revenue	0.9%
Accrued compensation and related expenses/Revenue	1.1%
Accrued liabilities/Revenue	2.9%
Accrued income taxes/Revenue	0.5%
Long-term liabilities	No change
Noncontrolling interests	*
Depreciation/Prior year gross PPE	12.0%
Amortization/Prior year intangible asset balance	18.7%
Dividends/Net income	18.6%
Long-term debt payments required in fiscal 2013	$37
*increase by net income attributable to noncontrolling interests and assume no dividends

• Round all answers to the nearest whole number.

• Do not use negative signs with your answers in the balance sheet.

Balance Sheet ($ millions)	2012 Estimated
Assets
Cash and cash equivalents	Answer
Short-term investments	Answer
Receivables	Answer
Merchandise inventories	Answer
Other current assets	Answer
Total current assets	Answer
Property and equipment
Gross property and equipment	Answer
Less accumulated depreciation	Answer
Net property and equipment	Answer
Goodwill	Answer
Tradenames, Net	Answer
Customer Relationships, Net	Answer
Equity and Other Investments	Answer
Other assets	Answer
Total assets	Answer
Liabilities and equity
Accounts payable	Answer
Unredeemed gift card liabilities	Answer
Accrued compensation and related expenses	Answer
Accrued liabilities	Answer
Accrued income taxes	Answer
Short-term debt	Answer
Current portion of long-term debt	Answer
Total current liabilities	Answer
Long-term liabilities	Answer
Long-term debt	Answer
Best Buy Co., Inc. Shareholders' Equity
Preferred stock, $1.00 par value: Authorized - 400,000 shares; Issued and outstanding - none	Answer
Common stock, $0.10 par value: Authorized - 1.0 billion shares; Issued and outstanding - 392,590,000 and	Answer
418,815,000 shares, respectively
Additional paid-in capital	Answer
Retained earnings	Answer
Accumulated other comprehensive income	Answer
Total Best Buy Co., Inc. shareholders' equity	Answer
Noncontrolling interests	Answer
Total equity	Answer
Total liabilities and Equity	Answer

b. What does the forecasted adjustment to balance the accounting equation from part a reveal to us about the forecasted cash balance and related financing needs of the company? Explain.

Best Buy will generate sufficient cash for the coming year. The cash balance decreases fairly significantly, we could adjust marketable securities, increasing total assets.

Best Buy will generate sufficient cash for the coming year. The cash balance increases fairly significantly, we could adjust marketable securities, leaving total assets unchanged.

Best Buy will not generate sufficient cash for the coming year. The cash balance decreases fairly significantly, we could adjust marketable securities, leaving total assets unchanged.

Best Buy will not generate sufficient cash for the coming year. The cash balance decreases fairly significantly, we could adjust short-term debt, increasing total assets.

Background

Helio, Inc. (the Company) is a medical device company founded in 2013 in Provo, Utah that specializes in the development and manufacturing of cutting-edge medical devices designed for all types of joint replacement surgeries. In January 2015, the FDA approved Helio’s premier product, a hinged titanium axle designed to provide physicians with more precise placement of joints during joint replacement surgery.

In early 2016, approximately one year after the new product’s approval, the Company hired a new senior vice president (SVP) of sales to oversee sales, physician training, product delivery, and customer service. The broad set of responsibilities allowed the charismatic SVP to significantly influence the Company’s revenue generation. The hiring of the new SVP was also done in large part to help guide the company’s development of an important new sales channel: third-party distributors that are each strategically located in close proximity to key hospitals in regions around the country.

The move to hire the SVP was in direct response to overwhelming disappointment about the first year’s sales volume for the new surgical implant, which was lagging significantly behind expectations. Reports from the field led management to recommend the new sales channel to the board of directors that overwhelmingly approved the new strategy, the execution of which was being led by the new SVP.

Execution of strategy

To help execute the new strategy, the SVP hired five regional sales managers who would become his trusted cohorts. Together, they set aggressive sales targets for the Company’s surgical implants. The sales targets focused on achieving a growth pattern that was characterized by a record high sales volume for each successive quarter in each region. In fact, it is fair to say that the sales targets were intentionally created at almost unreachable levels to remove any question about possible weakness in demand for the Company’s new product.

The strategy focused on the development of a new sales channel with third-party distributors. Each of the distributors had already established close relationships with the physicians that were actually using the product during surgical procedures. To help pay for the launch of their new product, along with the execution of the new strategy, the Company was also working hard to raise a significant amount of new investment capital to fund the resulting increased operating costs. In order to be successful in attracting the new investment capital, top management made it clear to the SVP how important it was to report strong sales for its premier product, the surgical implant for titanium joints. The SVP, in turn, passed along the same message to the regional sales managers.

© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 741662

1

Management control philosophy

The upper management team of Helio can be described as being aggressive in business practices and often emphasizes speed and efficiency when implementing their decisions. Management rarely hires external consultants because they are of the opinion that consultants are too expensive and often follow a conservative approach. The upper management team meets regularly with its key managers. In general, the upper management team has cooperated with the audit team in order to provide fair and adequate financial reporting, but there have been disagreements in the past. The Company has a strict policy for following all established internal control procedures.

Incentive compensation

Top management focuses significant attention on achieving short-term performance measures based on the audited financial statements when determining compensation and making promotion decisions. Revenue earned is the most important criterion in performance assessment throughout the organization. As part of the launch of its new surgical implant, a new bonus plan was established to provide additional incentives for the entire organization to focus on this new opportunity, with revenue earned as the key criterion used to determine incentive compensation.

Preliminary results

Despite the SVP’s optimism about sales in 2017, internal reports have indicated that the actual sales volume of the surgical implant was well below budget each quarter. The SVP responded to these reports by repeatedly communicating his disappointment to the regional sales managers. Furthermore, he consistently warned that if the team could not boost sales, the Company would likely not be able to raise additional investment capital and would then be forced to significantly downsize its headcount.

Unfortunately, boosting revenue of the new surgical implants was not as simple as merely shipping the product to distributors. The distributors were hesitant to purchase product until the sale to the final customer was finalized as the distributors did not want to be stuck with the inventory on their own balance sheets. Further, the terms of the sales do not include any refund or rebate conditions. In addition, the Company has no intention of changing those terms and accepting any return. Therefore, any sale to distributors are final.

By the end of 2017, the Company had signed on a total of 73 distributors to sell its surgical implants in more than 20 different states throughout the United States. Each distributor was independently owned and operated but the company routinely shared best practices among its network. The SVP monitored sales closely from the distributor network through his regional sales managers. In fact, he even maintained a monthly sales report from each of the 73 distributors.

The Company invoices customers when the goods are shipped, and invoicing triggers the recording of revenue. The Company does not include freight costs in sales revenue but does offset shipping costs with any freight charged to customers.

The following relevant financial data is taken from the Company’s unaudited trial balance, which was used to produce the unaudited financial statements:

© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 741662

Sales revenue, year ended 12/31/2017	$84,867,855
Gross accounts receivable, 12/31/2017	$11,988,886

2

Audit approach

Your audit team is currently in the midst of year-end testing in the revenue and accounts receivable cycle for the audit of the calendar year 2017 financial statements. Your testing will focus on the existence/occurrence, cutoff, and accuracy assertions for sales revenue, as well as the existence and valuation assertions for accounts receivable. The audit team has assessed the risk of material misstatement (RMM) for each relevant assertion in order to determine the nature, timing, and extent of the procedures to be performed at Helio.

Other members of the audit team have already completed a walk-through of the revenue and accounts receivable processes, identified “what could go wrongs” within the process, and identified the controls that have been placed in operation to mitigate the risks. Based on the work performed, the team decided to test the operating effectiveness of certain key controls during interim testing. The results are found below.

Tests of controls – Revenue and accounts receivable cycle – Interim

Four key application controls were tested at interim. The information technology (IT) auditors tested the general controls (GITCs) over program changes, access to programs, and computer operations that are relevant to the revenue and accounts receivable cycle. The GITCs were found to be effective. In addition, the IT auditors tested the system to make sure that proper segregation of duties occurred throughout the period and were operating effectively.

The first control is an automated three-way sales match. The control matches the details from 1) an approved sales order; 2) relevant shipping documents; and 3) the sales invoice before revenue is recorded. A test of the control’s operating effectiveness was conducted at the interim. No exceptions

new customers, including the new distributors. A test of the control’s operating effectiveness was conducted at interim. No exceptions were noted.

The third control is an automated sales authorization control. When a sales order is entered into the system, the amount of the sale is added to the existing accounts receivable balance for that customer. The sum is then compared to the customer’s credit limit. A test of the control’s operating effectiveness was conducted at interim. No exceptions were noted.

The fourth control is a monthly review of the adequacy of the allowance for doubtful accounts, completed by the controller. A test of the control’s operating effectiveness was conducted at interim. No exceptions were noted.

© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 741662

were noted.

The second control requires the credit department at Helio to conduct a detailed credit check for all

3

Roll-forward period

By the end of the third quarter of 2017, sales revenue for the company’s premier surgical implant was still lagging far behind expectations. To help ensure that Helio delivered impressive fourth quarter revenue numbers, the entire sales team, led by the SVP and the regional sales managers, began to exert pressure on a number of distributors in an attempt to improve sales in 2017. This effort seemed to be paying off as the sales team successfully persuaded more than a dozen distributors to purchase product in advance of final customer demand.

These circumstances presented a problem for the Company, because the distributors began to ask for concessions from Helio. For example, in order to persuade the distributors, the Company agreed to hold the inventory in their own warehouse.

The SVP’s actions led to a dramatic increase in revenue for the fourth quarter of 2017. In fact, sales increased year-over-year by 214 percent for the fourth quarter alone. The upward trajectory of sales revenue helped the Company raise the much-needed investment capital as Helio issued more than 10 million shares of common stock for $40 million in early 2018.

1. [5 points] Based on your understanding of fraud risk assessment and material:
   • Identify at least three (3) specific fraud risk factors related to Helio.

Assume the following data relating to the financials for the Candy Company (K).

Company Balance Sheet

Total Assets                             $9,800,000

Debt $2,700,000

Company Income Statement

Revenue $15,200,000

Profit Margin 6%

Required:

Based on the above data, calculate the ROE for Candy Co.