Accounting Cycle Review 11-01 a,b, c1-c3

Morgan Company’s balance sheet at December 31, 2019, is presented below.

During January 2020, the following transactions occurred. (Morgan Company uses the perpetual inventory system.)

Adjustment data:

1. Prepare an adjusted trial balance at January 31, 2020. (Round answers to 0 decimal places, e.g. 5,275.)
2. Prepare an income statement. (Round answers to 0 decimal places, e.g. 5,275.)

3. Prepare an owner’s equity statement for the month ending January 31, 2020. (Round answers to 0 decimal places, e.g. 5,275.)
4. Prepare a classified balance sheet as of January 31, 2020. (List current assets in order of liquidity. Round answers to 0 decimal places, e.g. 5,275.)

Review the provisions of the Sarbanes-Oxley Act of 2002 to address the accounting scandals in the late 1990s and early 2000s (Enron, WorldCom, etc.)BELOW:

Identify the provisions that you believe made the most significant impact. What other provisions could have been included in the Act to strengthen the responsible stewardship and integrity of the accounting profession? Conversely, what existing provisions in the Act do you believe (if any) are unnecessary or over-regulate the profession?

As a result of corporate accounting scandals, such as those at Enron and WorldCom, the U.S. Congress enacted the Sarbanes-Oxley Act of 2002 (SOX). The purpose of SOX is to restore trust in publicly traded corporations, their management, their financial statements, and their auditors. SOX enhances internal control and financial reporting requirements and establishes new regulatory requirements for publicly traded companies and their independent auditors. Publicly traded companies have spent millions of dollars upgrading their internal controls and accounting systems to comply with SOX regulations.

As shown in Exhibit 1-10, SOX requires the company’s CEO and CFO to assume responsibility for their company’s financial statements and disclosures. The CEO and CFO must certify that the financial statements and disclosures fairly present, in all material respects, the operations and financial condition of the company. Additionally, they must accept responsibility for establishing and maintaining an adequate internal control structure and procedures for financial reporting. The company must have its internal controls and financial reporting procedures assessed annually.

Some Important Features of SOX

SOX also requires audit committee members to be independent; that is, they may not receive any consulting or advisory fees from the company other than for their service on the board of directors. In addition, at least one of the members should be a financial expert. The audit committee oversees not only the internal audit function but also the company’s audit by independent CPAs.

To ensure that CPA firms maintain independence from their client company, SOX does not allow CPA firms to provide certain nonaudit services (such as bookkeeping and financial information systems design) to companies during the same period of time in which they are providing audit services. If a company wants to obtain such services from a CPA firm, it must hire a different firm to do the nonaudit work. Tax services may be provided by the same CPA firm if pre-approved by the audit committee. The audit partner must rotate off the audit engagement every five years, and the audit firm must undergo quality reviews every one to three years.

SOX also increases the penalties for white-collar crimes such as corporate fraud. These penalties include both monetary fines and substantial imprisonment. For example, knowingly destroying or creating documents to “impede, obstruct, or influence” any federal investigation can result in up to 20 years of imprisonment.

SOX also contains a “clawback” provision in which previously paid CEO’s and CFO’s incentive-based compensation can be recovered if the financial statements were misstated due to misconduct. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 further strengthens the clawback rules, such that firms must recover all incentive compensation paid to any current or former executive, in the three years preceding the restatement, if that compensation would not have been paid under the restated financial statements. In other words, executives will not be allowed to profit from misstated financial statements, even if the misstatement was not due to misconduct.

Assume you just graduated from a university with an MBA and were hired by a small American company generating 100% of its $20 million revenue from domestic sales. Your job as International Sales Director is quite simple: to make sure international sales generate as much revenue as domestic sales within five years.

Where do you start?

What are some of your first initiatives? Why?

The comparative balance sheets for 2021 and 2020 are given below for Surmise Company. Net income for 2021 was $80 million.

Required:
Prepare the statement of cash flows of Surmise Company for the year ended December 31, 2021. Use the indirect method to present cash flows from operating activities because you do not have sufficient information to use the direct method. You will need to make reasonable assumptions concerning the reasons for changes in some account balances. A spreadsheet or T-account analysis will be helpful. (Hint: The right to use a building was acquired with a seven-year lease agreement. Annual lease payments of $8 million are paid at January 1 of each year starting in 2021.) (Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Amounts to be deducted should be indicated with a minus sign.)

3. Suppose you are the manager of an airline company. As a recent MBA graduate, you decided to use all the knowledge you have acquired to improve the firm’s pricing decisions. To begin with, you search for a market survey company to find out the demand curve for flights. The market survey company sent you back a report stating that there are two distinct segments of consumers - tourists and business travelers – and that their demand curves are given by the following equations:

Market Demand for Tourists: Q = 500 – 2P + 2I

Market Demand for Business Travelers: Q = 1000 – P + I

Where Q is the quantity demanded (in thousands of tickets), P is the price for a ticket, and I is the median income of each segment of consumers.

Currently, the price for tourists is $200 and the price for business travelers is $500. Moreover, the median income of tourists is $50 and the median income of business travelers is $100.

a) Using the point slope elasticity formula, what is the price elasticity of demand for airline tickets at the current price and income level for each group of consumer? Hint: to answer this question you will need to accurately determine the slope of the two demand curves given the level of income for each group and find the quantity each group demands at the current price for the group given the income that each group has.

b) Based on your result in (a), do you think you should raise or lower the price paid by tourists? What about the price paid by business travelers?

c) To verify your answer in (b), set a new price for tourists that is $50 higher or lower than the original price of $200 and a new price for business travelers that is $50 higher or lower than the original price of $500. Make your determination of whether to raise or lower the price based on your answers in (b). Relative to the revenue accrued in each market segment with the original prices, what happens to the revenue accrued by the airline in each market segment with the new prices? Hint: If the revenue does not increase then you need to redo this problem by moving the price in the opposite direction!

d) Using the two-point elasticity formula (the arc elasticity formula), what is the price elasticity of demand when you go from the original price to the new price? In doing this problem hold income constant.

Assume today is March 16, 2016. Natasha Kingery is 30 years old and has a Bachelor of Science degree in computer science.
She is currently employed as a Tier 2 field service representative for a telephony corporation located in Seattle,
Washington, and earns $38,000 a year that she anticipates will grow at 3% per year. Natasha hopes to retire at age 65 and
has just begun to think about the future.
Natasha has $75,000 that she recently inherited from her aunt. She invested this money in 30-year Treasury Bonds. She is
considering whether she should further her education and would use her inheritance to pay for it.
She has investigated a couple of options and is asking for your help as a financial planning intern to determine the financial
consequences associated with each option. Natasha has already been accepted to both of these programs, and could start
either one soon.
One alternative that Natasha is considering is attaining a certification in network design. This certification would
automatically promote her to a Tier 3 field service representative in her company. The base salary for a Tier 3
representative is $10,000 more than what she currently earns and she anticipates that this salary differential will grow at a
rate of 3% a year as long as she keeps working. The certification program requires the completion of 20 Web- based courses
and a score of 80% or better on an exam at the end of the course work. She has learned that the average amount of time
necessary to finish the program is one year. The total cost of the program is $5000, due when she enrolls in the program.
Because she will do all the work for the certification on her own time, Natasha does not expect to lose any income during
the certification.
Another option is going back to school for an MBA degree. With an MBA degree, Natasha expects to be promoted to a
managerial position in her current firm. The managerial position pays $20,000 a year more than her current position. She
expects that this salary differential will also grow at a rate of 3% per year for as long as she keeps working. The evening
program, which will take three years to complete, costs $25,000 per year, due at the beginning of each of her three years in
school. Because she will attend classes in the evening, Natasha doesn’t expect to lose any income while she is earning her
MBA if she chooses to undertake the MBA.
1. Determine the interest rate she is currently earning on her inheritance by going to Yahoo! Finance
(http://finance.yahoo.com) and typing the word “Treasury” in the search field and picking the 30 year yield
(ticker: ^TYX) off the dynamic menu that appears. Then go to “Historical Prices” (located in the left column) and
enter the appropriate date, March 16, 2016 to obtain the closing yield or interest rate that she is earning. Use this
interest rate as the discount rate for the remainder of this problem.
2. Create a timeline in Excel for her current situation, as well as the certification program and MBA degree options,
using the following assumptions:
Salaries for the year are paid only once, at the end of the year.
The salary increase becomes effective immediately upon graduating from the MBA program or being certified.
That is, because the increases become effective immediately but salaries are paid at the end of the year, the first
salary increase will be paid exactly one year after graduation or certification.
3. Calculate the present value of the salary differential for completing the certification program. Subtract the cost of
the program to get the NPV of undertaking the certification program.
4. Calculate the present value of the salary differential for completing the MBA degree. Calculate the present value of
the cost of the MBA program. Based on your calculations, determine the NPV of undertaking the MBA.
5. Based on your answers to Questions 3 and 4, what advice would you give to Natasha? What if the two programs
are mutually exclusive? That is, if Natasha undertakes one of the programs there is no further benefit to
undertaking the other program. Would your advice be different?

Caring for Kids Ltd (CFK) is listed on the Australian Securities Exchange. The company provides childcare services for pre-school children. CFK has undertaken significant expansion of its operations over the past two years. This strategy has resulted in the acquisition of a total of 200 new centres with childcare licences in Australia, New Zealand and the Page 259 United Kingdom. The expansion strategy has been funded mainly from borrowings that have been sourced in both local and foreign currency. CFK’s board consists of five directors: three non-executive directors, the CEO and CFO. None of the three non-executive directors have any formal qualifications or background in business. The board has expressed concern about the pace of expansion, due to CFK’s accounting system failing to effectively integrate the acquired companies’ complex information systems.

Based on the background information, identify four inherent risk factors for CFK and explain their impact on the financial report.

Kaizen Automotive, a Japanese automaker, has a production facility in Ohio that employees over 600 workers. In December 2013, it announces an executive position has opened at the facility and solicits applications. Among the finalists for the position is June, a Japanese citizen and graduate of MIT with four year's experience in automotive production. Another candidate is John, an African American who is also an MIT graduate and holds an MBA from Harvard. John has over ten year's automotive manufacturing experience. In very short order, Kaizen announces that June is the successful candidate and offers her the position. John files a charge with the EEOC alleging that he was not selected for the position because of his race and national origin. Kaizen states that it lawfully considered June's Japanese citizenship pursuant to a treaty permitting it to favor Japanese applicants. The subsequent EEOC investigation reveals that a Treaty of Friendship, Commerce and Navigation exists and that Kaizen has never promoted an American citizen to an executive level position in its U.S operations.

a. Does John have a viable Title VII complaint? Why or why not?

b. If June had been a U.S. citizen of Japanese ancestry, would the outeome be changed?

c. If June had been a Chinese citizen, would the outeome be changed?

What’s the best company culture. How will that organization ensure that the company culture continues through the years?

also, what is the role of the individual in the organization? Consider everyone from the janitor to the CEO.?