This week we learned about the Foreign Corrupt Practices Act (FCPA). In that learning we saw that a key to reducing the penalty is through keeping books and records that are clean and transparent. Consider this case:

A USA public company doing business in Freedonia (a made up name from another Marx Brothers movie!) is compelled to bribe local officials in order to be the first to receive a business license for a certain type of industry there. The competition is fierce, but local government officials have unabashedly spread the word that under the table bribery payments to them from the USA company can seal the deal and that's why the USA company is feeling the pressure to participate in the bribe. This would be a violation of the FCPA.

The USA company participates in the fraud, bribing the government officials sufficiently to get the license first, before their competition. The payments are on the books, but hidden, so to speak, in order to get the tax deduction. The payments are cleverly disguised in the expense accounts to appear as normal expenditures.

You are the USA government investigator searching for the fraud after the US government has been tipped off that the fraud happened in Freedonia.

1. What income statement expense accounts would you research for evidence of bribery payments being made even though not so indicated as bribery payments?
2. What type of evidence would you be looking to gather to prove the case?
3. Company officials of the USA company did not want to have all the bribery expenditures traceable directly to them. How else could they disguise the actual payments from the company?
4. Given from your answers above, that the financial statements are obviously misstated, why it is that we don't often see public companies reissue their financials when these FCPA frauds are caught or admitted to?   
5. The USA company hires you to institute policies and procedures to prevent the company and its employees from participating in bribery/corruption schemes in the future. Describe what you advise the company to do.

1.

Which statement concerning lower-of-cost-or-net-realizable-value (LCNRV) is incorrect?

LCNRV is an example of a company choosing the accounting method that will be least likely to overstate assets and income.

The LCNRV basis is justified because of a decline in the selling price of the inventory item.

LCNRV is applied after one of the cost flow assumptions has been applied.

Under the LCNRV basis, market does not apply because assets are always recorded and maintained at cost.

2.

Ayayai Corp. sells six different products. The following information is available on December 31:

When applying the lower-of-cost-or-net-realizable-value rule to each item, what will Ayayai total ending inventory balance be?

$312000

$300975

$300700

$300300

3. Use the following information regarding Skysong, Inc. and Kingbird, Inc. to answer the question “Which amount is equal to Skysong, Inc.'s "days in inventory" for 2022 (to the closest decimal place)?” (Use 365 days for calculation.)

35.8 days

34.4 days

39.7 days

42.9 days

4.

Use the following information regarding Cullumber Company and Oriole Company to answer the question “Which of the following is Cullumber Company's "cost of goods sold" for 2021 (to the closest dollar)?”

$264034

$263120

$248132

$247940

5.

Use the following information regarding Crane Company and Cullumber to answer the question “Which of the following is Cullumber's "cost of goods sold" for 2022 (to the closest dollar)?”

$260913

$240100

$172620

$240100

6.

The difference between ending inventory using LIFO and ending inventory using FIFO is referred to as the

inventory reserve.

LIFO reserve.

FIFO reserve.

periodic reserve.

7.

The LIFO reserve is

the amount used to adjust inventory to historical cost.

the difference between the value of the inventory under LIFO and the value under average cost.

the difference between the value of the inventory under LIFO and the value under FIFO.

an amount used to adjust inventory to the lower of cost or market.

8.

Ayayai Corp. reported ending inventory at December 31, 2022 of $984000 under LIFO. It also reported a LIFO reserve of $172000 at January 1, 2022, and $246000 at December 31, 2022. Cost of goods sold for 2022 was $4018000. If Ayayai Corp. had used FIFO during 2022, its cost of goods sold for 2022 would have been

$4092000.

$4264000.

$3772000.

$3944000.

The following events occurred during 2021 for various audit clients of your firm. Consider each event to be independent and the effect of each event to be material.

1.) A manufacturing company recognized a loss on the sale of investments.

2.) An automobile manufacturer sold all of the assets related to its financing component. The operations of the financing business is considered a component of the entity.

3.) A company changed its depreciation method from the double-declining-balance method to the straight-line method.

4.) Due to obsolescence, a company engaged in the manufacture of high-technology products incurred a loss on inventory write-down.

5.) One of your clients discovered that 2020’s depreciation expense was overstated. The error occurred because of a miscalculation of depreciation for the office building.

6.) A cosmetics company decided to discontinue the manufacture of a line of women’s lipstick. Other cosmetic lines will be continued. A loss was incurred on the sale of assets related to the lipstick product line. The operations of the discontinued line is not considered a component of the entity.

Required: Determine whether each of the above events would be reported as income from continuing operations, income from discontinued operations, or not reported in the current year’s income statement.

Additionally: There is a component required for discontinued operations. Please review your answer using the component requirement. If an item is in continuing operations, please state the line where it would be reported. (This is what I need assistance with)

Assume that at maximum hourly productions levels, the United States can produce either 8 yards of fabric or 4 bushels of wheat, whereas Japan can produce either 5 yards of fabric or 6 bushels of wheat. Based on this information,

Mr. Chai sells various types of toys throughout Malaysia, three of the accounts in the ledger of Mr. Chai indicted the following:

Balance at 1 January 2020:

1. Insurance paid in advance RM562
2. Wages outstanding RM306
3. Rent rreceivable, received in advance RM36

During 2020, Mr. Chai:

1. Paid for insurance RM1019 by bank standing order
2. Paid RM15000 wages in cash
3. Received RM2600 rent by cheque from the Ferdy

At 31 December 2020:

1. Insurance prepaid was RM345
2. Wages accrued amounted to RM419
3. Rent receivable was RM106

Required:

1. Prepare the prepaid insurance, accrued wages and rent receivable accounts for the year ended 31 December 2020
2. Prepare the income statement extract showing clearly the amounts of insurance expense, wages expense and rent revenue for the year ended 31 December 2020
3. Explain the effects on the financial statements of accounting for:

1. The expenses accrued at year end
2. The income received in advance at year end

4. Explain the purpose of accounting for:

1. The expenses accrued at year end
2. The income received in advance at year end

Consider the new product offerings, brand identity, financial health, and global economy. Do you think will Apple or Samsung will enjoy the largest per cent revenue increase (not dollars) in total sales in 2020? What about 2021? Which company will have the lowest per cent revenue increase? What are the company and product strengths of Apple and Samsung? Please explain your reasons why for both opinions.

Read the Point and Counterpoint arguments and answer the question listed below:

Which argument do you agree with (point or counterpoint)? Explain your reasoning. One page

Point

Not everything we secretly want we admit to wanting. Money is one example. One psychologist found that few people would admit to wanting money, but they thought everyone else wanted it. They were half right - everyone wants money. And everyone wants power.

Harvard psychologist David McClelland was justifiably famous for his study of underlying motives. McClelland would measure people's motivation for power from his analysis of how people described pictures (called the Thematic Apperception Test, or TAT). Why didn't he simply ask people how much they wanted power? Because he believed that many more people really wanted power than would admit, or even consciously realize. And that is exactly what he found.

Why do we want power? Because it is good for us. It gives us more control over our own lives. It gives us more freedom to do as we wish. There are few things worse in life than feeling helpless, and few better than feeling in charge of your destiny.

Take Steve Cohen, founder of SAC Capital Advisors and the most powerful man on Wall Street. He buys Picassos, he lives in a mansion, he has white-gloved butlers, he travels the world first class. People will do almost anything to please him, or to even get near him. One writer notes, "Inside his offices, vast fortunes are won and lost. Careers are made and unmade. Type A egos are inflated and crushed, sometimes in the space of hours." All of this is bad for Steve Cohen, how?

Research shows that people with power and status command more respect from others, have higher self-esteem (no surprise there), and enjoy better health than those of less stature.

Usually, people who tell you power doesn't matter are those who have no hope of getting it. Being jealous, like wanting power, is one of those people just won't admit to.

Counterpoint

Of course it is true that some people desire power, and often behave ruthlessly to get it. For most of us, however, power is not high on our list of priorities, and for some people, power is actually undesirable.

Research shows that most individuals feel uncomfortable when placed in powerful positions. One study asked individuals, before they began work in a four-person team, to "rank, from 1 (highest) to 4 (lowest), in terms of status and influence within the group, would you like to achieve." You know what? Only about one-third (34 percent) of participants chose the highest rank. In a second study, researchers studied employees participating in Amazon's Mechanical Turk online service. They found, when employees were asked about their reasons for belonging to the three groups (which would be a workplace, a volunteer group, a congregation, etc.) that were most important in their life, that the main reason people want power is to earn respect. If they can get respect without gaining power, that is what most preferred. In a third study, the authors found that individuals preferred power only when they had high ability - in other words, where their influence helped their groups.

This interesting research suggests that we often confuse the desire for power with other things—like the desire to be respected and to help our groups and organizations succeed. In these cases, power is something most of us seek for more benevolent ends—and only in cases when we think the power does good.

Another study found that the majority of people want respect from their peers, not power. Cameron Anderson, the author of this research, sums it up nicely: "You don't have to be rich to be happy, but instead be a valuable contributing member to your groups," he comments. "What makes a person high in status in a group is being engaged, generous with others, and making self-sacrifices for the greater good."

Oh, and about Stevie Cohen...you realize that he is being investigated by the SEC? The SEC investigator: Preet Bharara, the same one who got Rajat Gupta.

Sources: B. Burrough and B. McLean, "The Hunt for Steve Cohen," Vanity Fair (June 2013), downloaded May 13, 2013, from http://www.vanityfair.com/; C. Anderson, R. Willer, G. J. Kilduff, and C. E. Brown, "The Origins of Deference: When Do People Prefer Lower Status?" Journal of Personality and Social Psychology 102 (2012), pp. 1077--1088; C. Anderson, M. W Kraus, A. D. Galinsky, and D. Keltner, "The Local-Ladder Effect: Social Status and Subjective Well-Being," Psychological Science 23(7), 2012, pp. 764--771; and S. Kennelly, "Happiness Is About Respect, Not Riches," Greater Good (July 13, 2012), downloaded May 4, 2013, fromhttp://greatergood.berkeley.edu/

3. Apple’s Worldwide Revenues from 2004 to 2019 is as follows:
Year Worldwide Revenue in Billions
2004 8.2
2005 13.9
2006 19.3
2007 24.6
2008 37.5
2009 42.9
2010 65.2
2011 108.2
2012 156.5
2013 170.9
2014 182.8
2015 233.72
2016 215.64
2017 229.23
2018 265.6
2019 260.17

a. Enter the data above into the tab labeled Apple. Graph the data in Excel and use your graph to determine what kind of time series pattern exist. Put your answer in your spreadsheet.
b. Make the following forecasts for 2020. For all of them, use Mean Squared Error to determine which of the forecasts is the best. Make sure your answers are clearly labeled.
i. Naïve forecast from one prior time period
ii. Calculate a 4-period moving average
iii. Calculate a 3-period moving average with the following weights for time t: time period t-1=0.8, t-2 = 0.15, t-3=.05
c. In the tab called Apple Smoothing, use the data from 3. to forecast 2020 using an alpha equal to 0.7, 0.8, and 0.9. Using MSE, which one offers the best estimate for 2020?
d. In the tab called Apple Regression, use the information from 3. and run a regression to determine your forecast for 2020
i. Put your regression output in F1 of the same workbook.
ii. Calculate what your forecast is for 2020 in F21.
iii. How does well does this regression equation predict revenue? Write your answer in F22. In addition, explain what your numerical answer means in words.

Silly Inc. reported income from continuing operations before taxes during 2020 of $802,600. Additional transactions occurring in 2020 but not considered in the $802,600 are as follows.

Prepare an income statement for the year 2020 starting with income from continuing operations before taxes. Compute earnings per share as it should be shown on the face of the income statement. Common shares outstanding for the year are 128,830 shares. (Assume a tax rate of 30% on all items, unless indicated otherwise.) (Round earnings per share to 2 decimal places, e.g. 1.48 and all other answers to 0 decimal places, e.g. 5,275.)