Pitman Company is a small editorial services company owned and operated by Jan Pitman. On October 31, 2019, the end of the current year, Pitman Company's accounting clerk prepared the following unadjusted trial balance:

The data needed to determine year-end adjustments are as follows:

Required:

Unexpired insurance at October 31, $5,090.

Supplies on hand at October 31, $620.

Depreciation of building for the year, $3,360.

Depreciation of equipment for the year, $2,920.

Unearned rent at October 31, $1,880.

Accrued salaries and wages at October 31, $3,290.

Fees earned but unbilled on October 31, $19,310.

1. Journalize the adjusting entries using the following additional accounts: Salaries and Wages Payable; Rent Revenue; Insurance Expense; Depreciation Expense—Building; Depreciation Expense—Equipment; and Supplies Expense.

2. Determine the balances of the accounts affected by the adjusting entries, and prepare an adjusted trial balance. If an amount box does not require an entry, leave it blank.

question 2

Adjusting Entries and Errors

At the end of August, the first month of operations, the following selected data were taken from the financial statements of Tucker Jacobs, an attorney:

In preparing the financial statements, adjustments for the following data were overlooked:

Required:

Unbilled fees earned at August 31, $6,090.

Depreciation of equipment for August, $2,700.

Accrued wages at August 31, $1,950.

Supplies used during August, $1,710.

1. Journalize the entries to record the omitted adjustments.

2. Determine the correct amount of net income for August and the total assets, liabilities, and owner’s equity at August 31. In addition to indicating the corrected amounts, indicate the effect of each omitted adjustment by completing the columnar table below. Use the minus sign to indicate decreases. If an effect is zero, enter "0". Adjustment (a) is presented as an example.

question 3

Adjusting Entries

Good Note Company specializes in the repair of music equipment and is owned and operated by Robin Stahl. On November 30, 2019, the end of the current year, the accountant for Good Note prepared the following trial balances:

Required:

Journalize the seven entries that adjusted the accounts at November 30. None of the accounts were affected by more than one adjusting entry.

7. FX Exposure Management at BMW

BMW Group, owner of the BMW, Mini and Rolls-Royce brands, has been based in Munich since its founding in 1916. But by 2011, only

17 per cent of the cars it sold were bought in Germany. In recent years, China has become

BMW’s fastest-growing market, accounting for 14 per cent of BMW’s global sales volume in

2011. India, Russia and eastern Europe have also become key markets.

The rapid globalization of its operations posed several new financial challenges. Despite rising sales revenues, BMW was conscious that its profits were often severely eroded by changes in exchange rates.   The company’s own calculations in its annual reports suggest that the negative effect of exchange rates totalled C2.4bn between 2005 and 2009. BMW did not want to pass on its exchange rate costs to consumers through price increases. Its rival Porsche had done so at the end of the 1980s in the US and sales had plunged.

To address the issues, BMW took a two-pronged approach to managing its foreign exchange exposure.   One strategy was to use a “natural hedge” – meaning it would develop ways to spend money in the same currency as where sales were taking place, meaning revenues would also be in the local currency. However, not all exposure could be offset in this way, so BMW decided it would also use formal financial hedges.   To achieve this, BMW set up regional treasury centres in the US, the UK and Singapore.

BMW implemented its new FX risk management strategy in several ways.   Regarding the natural hedge strategy it again followed a two-pronged implementation strategy.   The first involved establishing factories in the markets where it sold its products. The second involved making more purchases denominated in the currencies of its main markets. BMW now has production facilities for cars and components in 13 countries. In 2000, its overseas production volume accounted for 20 per cent of the total. By 2011, it had risen to 44 per cent. In the 1990s, BMW had become one of the first premium carmakers from overseas to set up a plant in the US – in Spartanburg, South Carolina. In 2008, BMW announced it was investing $750m to expand its Spartanburg plant. This would create 5,000 jobs in the US while cutting 8,100 jobs in Germany. This also had the effect of shortening the supply chain between Germany and the US market. The company boosted its purchasing in US dollars generally, especially in the North American Free Trade Agreement region. Its office in Mexico City made $615m of purchases of Mexican auto parts in 2009, expected to rise significantly in following years.

Since BMW’s fastest growing markets are in Asia it also had to rethink its Asian strategy in light of risk management needs. A joint venture with Brilliance China Automotive was set up in Shenyang, China, where half the BMW cars for sale in the country are now manufactured. The carmaker also set up a local office to help its group purchasing department to select competitive suppliers in China. By the end of 2009, Rmb 6bn worth of purchases were from local suppliers. Again, this had the effect of shortening supply chains and improving customer service. At the end of 2010, BMW announced it would invest 1.8bn rupees in its production plant in Chennai, India, and increase production capacity in India from 6,000 to 10,000 units. It also announced plans to increase production in Kaliningrad, Russia.

Meanwhile, the overseas regional treasury centres were instructed to review the exchange rate exposure in their regions on a weekly basis and report it to a group treasurer, part of the group finance operation, in Munich. The group treasurer team then consolidates risk figures globally and recommends actions to mitigate foreign exchange risk.

Using operating strategy to address FX risk brought other benefits. By moving production to foreign markets the company not only reduces its foreign exchange exposure but also benefits from being close to its customers. In addition, sourcing parts overseas, and therefore closer to its foreign markets, also helps to diversify supply chain risks.

(a) What is the nature of BMW’s FX exposure?   What fundamental financial principle should BMW use to neutralize the impact of FX rate movements on their results?

(b) How did BMW decide to tackle the problem? Do you see any problems with BMW’s approach and implementation?

(c) What differences if any exist in BMW’s approach to FX exposure management in North

America and Asia?

(d) Why did BMW decide to consolidate FX risk management globally in its Munich group treasury?   What principle are they implementing and what are its advantages for the group?

(e) BMW’s and Western Mining’s pursued to very different strategies to address FX expo- sure. What are their respective FX risk management strategies? Why did each company choose their respective strategy?

Ben & Jerry’s Homemade

JERRY: What’s interesting about me and my role in the company is I’m just this guy on the street. A person who’s fairly conventional, mainstream, accepting of life as it is.

BEN: Salt of the earth. A man of the people.

JERRY: But then I’ve got this friend, Ben, who challenges everything. It’s against his nature to do anything the same way anyone’s ever done it before. To which my response is always, “I don’t think that’ll work.”

BEN: To which my response is always, “How do we know until we try?”

JERRY: So I get to go through this leading-edge, risk-taking experience with Ben—even though I’m really just like everyone else.

BEN: The perfect duo. Ice cream and chunks. Business and social change. Ben and Jerry.

—Ben & Jerry’s Double-Dip

As Henry Morgan’s plane passed over the snow-covered hills of Vermont’s dairy land, through his mind passed the events of the last few months. It was late January 2000. Morgan, the retired dean of Boston University’s business school, knew well the trip to Burlington. As a member of the board of directors of Ben & Jerry’s Homemade for the past 13 years, Morgan had seen the company grow both in financial and social stature. The company was now not only an industry leader in the super-premium ice cream market, but also commanded an important leadership position in a variety of social causes from the dairy farms of Vermont to the rainforests of South America.

Increased competitive pressure and Ben & Jerry’s declining financial performance had triggered a number of takeover offers for the resolutely independent-minded company. Today’s board meeting had been convened to consider the pending offers. Morgan expected a lively debate. Cofounders Ben Cohen and Jerry Greenfield knew the company’s social orientation required corporate independence. In stark contrast, chief executive Perry Odak felt that Ben and Jerry’s shareholders would be best served by selling out to the highest bidder.

Ben & Jerry’s Homemade

Ben & Jerry’s Homemade, a leading distributor of super-premium ice creams, frozen yogurts, and sorbets, was founded in 1978 in an old gas station in Burlington, Vermont. Cohen and Greenfield recounted their company’s beginnings:

One day in 1977, we [Cohen and Greenfield] found ourselves sitting on the front steps of Jerry’s parents’ house in Merrick, Long Island, talking about what kind of business to go into. Since eating was our greatest passion, it seemed logical to start with a restaurant. . . . We wanted to pick a product that was becoming popular in big cities and move it to a rural college town, because we wanted to live in that kind of environment. We wanted to have a lot of interaction with our customers and enjoy ourselves. And, of course, we wanted a product that we liked to eat. . . . We found an ad for a $5 ice- cream-making correspondence course offered through Penn State. Due to our extreme poverty, we decided to split one course between us, sent in our five bucks, read the material they sent back, and passed the open-book tests with flying colors. That settled it. We were going into the ice cream business.

Once we’d decided on an ice cream parlor, the next step was to decide where to put it. We knew college students eat a lot of ice cream; we knew they eat more of it in warm weather. Determined to make an informed decision (but lacking in technological and financial resources), we developed our own low-budget “manual cross-correlation analysis.” Ben sat at the kitchen table, leafing through a U.S. almanac to research towns that had the highest average temperatures. Jerry sat on the floor; reading a guide to American colleges, searching for the rural towns that had the most college kids. Then we merged our lists. When we investigated the towns that came up, we discovered that apparently someone had already done this work ahead of us. All the warm towns that had a decent number of college kids already had homemade ice-cream parlors. So we threw out the temperature criterion and ended up in Burlington, Vermont. Burlington had a young population, a significant college population, and virtually no competition. Later, we realized the reason why there was no competition. It’s so cold in Burlington for so much of the year, and the summer sea- son is so short, it was obvious (to everyone except us) that there was no way an ice cream parlor could succeed there. Or so it seemed.

By January 2000, Cohen and Greenfield’s ice cream operation in Burlington, Ben & Jerry’s Homemade, had become a major premium ice cream producer with over 170 stores (scoop shops) across the United States and overseas, and had developed an important presence on supermarket shelves. Annual sales had grown to $237 mil- lion, and the company’s equity was valued at $160 million (Exhibits 1 and 2). The company was known for such zany ice cream flavors as Chubby Hubby, Chunky Monkey, and Bovinity Divinity. Exhibit 3 provides a selected list of flavors from its scoop-shop menu.

Ben & Jerry’s Social Consciousness

Ben & Jerry’s was also known for its emphasis on socially progressive causes and its strong commitment to the community. Although unique during the company’s early years, Ben & Jerry’s community orientation was no longer that uncommon. Companies such as Patagonia (clothing), Odwalla (juice), The Body Shop (body-care products), and Tom’s of Maine (personal-care products) shared similar visions of what they termed “caring capitalism.”

Ben & Jerry’s social objective permeated every aspect of the business. One dimension was its tradition of generous donations of its corporate resources. Since 1985, Ben & Jerry’s donated 7.5% of its pretax earnings to various social foundations and community-action groups. The company supported causes such as Greenpeace International and the Vietnam Veterans of America Foundation by signing petitions and recruiting volunteers from its staff and the public. The company expressed customer appreciation with an annual free cone day at all of its scoop shops. During the event, customers were welcome to enjoy free cones all day.

Although the level of community giving was truly exceptional, what really made Ben & Jerry’s unique was its commitment to social objectives in its marketing, operations, and finance policies. Cohen and Greenfield emphasized that their approach was fundamentally different from the self-promotion-based motivation of social causes supported by most corporations.

At its best, cause-related marketing is helpful in that it uses marketing dollars to help fund social programs and raise awareness of social ills. At its worst, it’s “greenwashing”—using philanthropy to convince customers the company is aligned with good causes, so the company will be seen as good, too, whether it is or not. . . . They understand that if they dress themselves in that clothing, slap that image on, that’s going to move product. But instead of just slapping the image on, wouldn’t it be better if the company actually did care about its consumers and the community?

An example of Ben & Jerry’s social-value-led marketing included its development of an ice cream flavor to provide demand for harvestable tropical-rainforest products. The product’s sidebar described the motivation:

This flavor combines our super creamy vanilla ice cream with chunks of Rainforest Crunch, a cashew & Brazil nut buttercrunch made for us by our friends at Community Products in Montpelier, Vermont. The cashews & Brazil nuts in this ice cream are harvested in a sustainable way from tropical rainforests and represent an economically viable long-term alternative to cutting these trees down. Enjoy!

—Ben & Jerry

Financing decisions were also subject to community focus. In May of 1984, Ben & Jerry’s initiated its first public equity financing. Rather than pursue a broad traditional public offering, the company issued 75,000 shares at $10.50 a share exclusively to Vermont residents. By restricting the offering to Vermonters, Cohen hoped to offer those who had first supported the company with the opportunity to profit from its success. To provide greater liquidity and capital, a traditional broad offering was later placed and the shares were then listed and traded on the NASDAQ. Despite Ben & Jerry’s becoming a public company, Cohen and Greenfield did not always follow traditional investor-relations practices. “Chico” Lager, the general manager at the time, recalled the following Ben Cohen interview transcript that he received before its publication in the Wall Street Transcript:

TWST: Do you believe you can attain a 15% increase in earnings each year over the next five years?

COHEN: I got no idea.

TWST: Umm-hmm. What do you believe your capital spending will be each year over the next five years?

COHEN: I don’t have any ideas as to that either.

TWST: I see. How do you react to the way the stock market has been treating you in general and vis-à-vis other companies in your line?

COHEN : I think the stock market goes up and down, unrelated to how a com- pany is doing. I never expected it to be otherwise. I anticipate that it will continue to go up and down, based solely on rumor and whatever sort of manipulation those people who like to manipulate the market can accomplish.

TWST : What do you have for hobbies?

COHEN : Hobbies. Let me think. Eating, mostly. Ping-Pong.

TWST : Huh?

COHEN : Ping-Pong.

Solutions to corporate operating decisions were also dictated by Ben & Jerry’s interest in community welfare. The disposal of factory wastewater provided an example.

In 1985, when we moved into our new plant in Waterbury, we were limited in the amount of wastewater that we could discharge into the municipal treatment plant. As sales and production skyrocketed, so did our liquid waste, most of which was milky water. [We] made a deal with Earl, a local pig farmer, to feed our milky water to his pigs. (They loved every flavor except Mint with Oreo Cookies, but Cherry Garcia was their favorite.) Earl’s pigs alone couldn’t handle our volume, so eventually we loaned Earl $10,000 to buy 200 piglets. As far as we could tell, this was a win-win solution to a tricky environmental problem. The pigs were happy. Earl was happy. We were happy. The community was

happy.

Ben & Jerry’s social orientation was balanced with product and economic objectives. Its mission statement included all three dimensions, and stressed seeking new and creative ways of fulfilling each without compromising the others:

Product: To make, distribute, and sell the finest quality all-natural ice cream and related products in a wide variety of innovative flavors made from Vermont dairy products.

Economic: To operate the company on a sound financial basis of profitable growth, increasing value for our shareholders, and creating career opportunities and financial rewards for our employees.

Social: To operate the company in a way that actively recognizes the central role that business plays in the structure of society by initiating innovative ways to improve the quality of life of the broad community—local, national, and international.

Management discovered early on that the company’s three objectives were not always in harmony. Cohen and Greenfield told of an early example:

One day we were talking [about our inability to make a profit] to Ben’s dad, who was an accountant. He said, “Since you’re gonna make such a high-quality product . . . why don’t you raise your prices?” At the time, we were charging fifty-two cents a cone. Coming out of the ’60s, our reason for going into business was that ours was going to be “ice cream for the people.” It was going to be great quality products for everybody— not some elitist treat. . . . Eventually we said, Either we’re going to raise our prices or we’re going to go out of business. And then where will the people’s ice cream be? They’ll have to get their ice cream from somebody else. So we raised the prices. And we stayed in business.

At other times, management chose to sacrifice short-term profits for social gains. Greenfield tells of one incident with a supplier:

Ben went to a Social Ventures Network meeting and met Bernie Glassman, a Jewish-Buddhist former nuclear-physicist monk. Bernie had a bakery called Greyston in inner-city Yonkers, New York. It was owned by a nonprofit religious institution; its purpose was to train and employ economically disenfranchised people [and] to fund low-income housing and other community-service activities. Ben said, “We’re looking for someone who can bake these thin, chewy, fudgy brownies. If you could do that, we could give you some business, and you could make us the brownies we need, and that would be great for both of us.” . . . The first order we gave Greyston was for a couple of tons. For us, that was a small order. For Greyston, it was a huge order. It caused their system to break down. The brownies were coming off the line so fast that they ended up getting packed hot. Then they needed to be frozen. Pretty soon, the bakery freezer was filled up with these steaming 50-pound boxes of hot brownies. The freezer couldn’t stay very cold, so it took days to freeze the brownies. By the time they were frozen, [they] had turned into 50-pound blocks of brownie. And that’s what Greyston shipped to us. So we called up Bernie and we said, “Those two tons you shipped us were all stuck together. We’re shipping them back.” Bernie said, “I can’t afford that. I need the money to meet my payroll tomorrow. Can’t you unstick them?” And we said, “Bernie, this really gums up the works over here.” We kept going back and forth with Greyston, trying to get the brownies right. Eventually we created a new flavor, Chocolate Fudge Brownie, so we could use the brownie blocks.

Asset Control

The pursuit of a nonprofit-oriented policy required stringent restrictions on corporate control. For Ben & Jerry’s, asset control was limited through elements of the company’s corporate charter, differential stock-voting rights, and a supportive Vermont legislature.

Corporate Charter Restrictions

At the 1997 annual meeting, Ben & Jerry’s shareholders approved amendments to the charter that gave the board greater power to perpetuate the mission of the firm. The amendments created a staggered board of directors, whereby the board was divided into three classes with one class of directors being elected each year for a three-year term. A director could only be removed with the approval of a two-thirds vote of all shareholders. Also, any vacancy resulting from the removal of a director could be filled by two-thirds vote of the directors who were then in office. Finally, the stock- holders increased the number of votes required to alter, amend, repeal, or adopt any provision inconsistent with those amendments to at least two-thirds of shareholders. See Exhibit 4 for a summary of the current board composition.

Differential Voting Rights

Ben & Jerry’s had three equity classes: class A common, class B common, and class A preferred. The holders of class A common were entitled to one vote for each share held. The holders of class B common, reserved primarily for insiders, were entitled to 10 votes for each share held. Class B common was not transferable, but could be converted into class A common stock on a share-for-share basis and was transferable thereafter. The company’s principals—Ben Cohen, Jerry Greenfield, and Jeffrey Furman—effectively held 47% of the aggregate voting power, with only 17% of the aggregate common equity outstanding. Non-board members, however, still maintained 51% of the voting power (see Exhibit 5). The class A preferred stock was held exclusively by the Ben & Jerry’s Foundation, a community-action group. The class A preferred gave the foundation a special voting right to act with respect to certain business combinations and the authority to limit the voting rights of common stockholders in

certain transactions such as mergers and tender offers, even if the common stock-

holders favored such transactions.

Vermont Legislature

In April 1998, the Vermont Legislature amended a provision of the Vermont Business Corporation Act, which gave the directors of any Vermont corporation the authority to consider the interests of the corporation’s employees, suppliers, creditors, and customers when determining whether an acquisition offer or other matter was in the best interest of the corporation. The board could also consider the economy of the state in which the corporation was located and whether the best interests of the company could be served by the continued independence of the corporation.

Those and other defense mechanisms strengthened Ben & Jerry’s ability to remain an independent, Vermont-based company, and to focus on carrying out the threefold corporate mission, which management believed was in the best interest of the company, its stockholders, employees, suppliers, customers, and the Vermont community at large.

The Offers

Morgan reviewed the offers on the table. Discussion with potential merger partners had been ongoing since the previous summer. In August 1999, Pillsbury (maker of the premium ice cream Haagen-Dazs) and Dreyer’s announced the formation of an ice cream joint venture. Under past distribution agreements, Pillsbury-Dreyer’s would become the largest distributor of Ben & Jerry’s products. In response, the Ben & Jerry’s board had authorized Odak to pursue joint-venture and merger discussions with Unilever and Dreyer’s. By December, the joint-venture arrangements had broken down, but the discussions had resulted in takeover offers for Ben & Jerry’s of between $33 and $35 a share from Unilever, and an offer of $31 a share from Dreyer’s. Just yesterday, Unilever had raised its offer to $36, and two private investment houses, Meadowbrook Lane Capital and Chartwell Investments, had made two separate additional offers. The offer prices represented a substantial premium over the pre-offer announcement share price of $21.7 See Exhibit 6 for a comparison of investor-value measures for Ben & Jerry’s and the select competitors.

Dreyer’s Grand Ice Cream

Dreyer’s Grand Ice Cream sold premium ice cream and other frozen desserts under the Dreyer’s and Edy’s brands and some under non-branded labels. The Dreyer’s and

Edy’s lines were distributed through a direct store-delivery system. Total sales were over $1 billion, and company stock traded at a total capitalization of $450 million. Dreyer’s was also involved in community-service activities. In 1987, the company established the Dreyer’s Foundation to provide focused community support, particularly for youth and K–12 public education.

Unilever

Unilever manufactured branded consumer goods, including foods, detergents, and other home- and personal-care products. The company’s ice cream division included the Good Humor, Breyers, Klondike, Dickie Dee, and Popsicle brands, and was the largest producer of ice cream in the world. Good Humor-Breyers was headquartered in Green Bay, Wisconsin, with plants and regional sales offices located throughout the United States. Unilever had a total market capitalization of $18 billion.

Meadowbrook Lane Capital

Meadowbrook Lane Capital was a private investment fund that portrayed itself as socially responsible. The firm was located in Northampton, Massachusetts. The Meadowbrook portfolio included holdings in Hain Foods, a producer of specialty health- oriented food products. Meadowbrook proposed acquiring a majority ownership interest through a tender offer to Ben & Jerry’s shareholders.

Chartwell Investments

Chartwell Investments was a New York City private-equity firm that invested in growth financings and management buyouts of middle-market companies. Chartwell proposed investing between $30 million and $50 million in Ben & Jerry’s in exchange for a convertible preferred-equity position that would allow Chartwell to obtain majority representation on the board of directors.

Morgan summarized the offers as follows:

Bidder                         Offering Price             Main Proposal

Dreyer’s Grand           $31 (stock)                 • Maintain B&J management team

• Operate B&J as a quasi-autonomous business unit

• Encourage some social endeavors

Unilever          $36 (cash)                   • Maintain select members of B&J management team

• Integrate B&J into Unilever’s frozen desserts division

• Restrict social commitments and interests

Meadowbrook Lane    $32 (cash)       • Install new management team

• Allow B&J to operate as an independent company controlled under the Meadowbrook umbrella

• Maintain select social projects and interests

Chart well        Minority interest          • Install new management team

• Allow B&J to continue as an independent company

Conclusion Henry Morgan doubted that the social mission of the company would survive a takeover by a large traditional company. Despite his concern for Ben & Jerry’s social interests, Morgan recognized that, as a member of the board, he had been elected to represent the interests of the shareholders. A financial reporter, Richard McCaffrey, expressed the opinion of many shareholders: Let’s jump right into the fire and suggest, depending upon the would-be acquiring company’s track record at creating value, that it makes sense for the company [Ben & Jerry’s] to sell. Why? At $21 a share, Ben & Jerry’s stock has puttered around the same level, more or less, for years despite regular sales and earnings increases. For a company with a great brand name, about a 45% share of the super-premium ice cream market, successful new- product rollouts, and decent traction in its international expansion efforts, the returns should be better. Some of the reasons for underperformance, such as the high price of cream and milk, aren’t factors the company can control. That’s life in the ice cream business. But Ben & Jerry’s average return on shareholders’ equity, a measure of how well it’s employing shareholders’ money, stood at 7% last year, up from 5% in 1997. That’s lousy by any measure, although it’s improved this year and now stands at about 9%. This isn’t helped by the company’s charitable donations, of course, but if you’re an investor in Ben & Jerry’s you knew that going in—it’s an ironclad part of corporate culture, and has served the company well. Still, Ben & Jerry’s has to find ways to create value.8 The plane banked over icy Lake Champlain and began its descent into Burlington as Morgan collected his thoughts for what would undoubtedly be an emotional and spirited afternoon meeting.

Provide a two page report on asset control devices utilized by Ben & Jerry’s. Be certain to discuss the impact these devices have on a company. Include your opinion on whether these controls should be used by Ben & Jerry’s and provide explanation. What is the company’s Return on Assets and Return on Equity? Calculate an expected rate of return.

Strategy Exercise: Read the following vignette and develop some suggestions for the company based on the material you read in this chapter.

Twisted is a small company with big dreams. The shopping mall-oriented hot pretzel company has successfully grown its revenues by a rate of 10 percent annually over the last 10 years. Twisted wants to sustain its growth rate in the years ahead. The company has traditionally hired new store managers from outside of the company. However, in the last few years, it has had a difficult time recruiting enough of these people. The CEO feels that there are probably a large number of employees who might make good managers. However, the company has no good internal assessment systems in place to identify them. The CEO asks your group to help the firm identify internal managerial talent so it can continue to pursue its growth strategy. What methods would you suggest for doing so?

You are the auditor of Safe Storage Pty Ltd, which is involved in the manufacture of steel storage drums. One of the directors of Safe Storage has requested that you perform a review of the internal controls within the purchases and payments cycle of the company’s operations. From your discussions with management and staff you ascertain that the company is a small operation, operates from one location in Perth, and only has the following staff:

• five directors (one of whom, the CEO, is responsible for the day-to-day operations of the company)
• a warehouse manager
• an assistant to the warehouse manager
• a secretary/receptionist
• an accounts receivable clerk
• a banking clerk
• an accounts payable clerk
• three machinery operators who are involved in the manufacturing process.

The warehouse manager is able to order from any supplier and will usually telephone a number of suppliers to obtain quotes. The warehouse manager will then order from one of these suppliers by telephone and confirm the order by facsimile. The only documentation kept is the facsimile confirmation of order, which is kept by the warehouse manager.

Once an order has been confirmed, the warehouse manager will complete a purchase order (PO). The warehouse manager keeps one copy of the PO and the other is forwarded to the accounts payable clerk, who files it in date order.

When goods are received at the warehouse, the warehouse manager checks the goods received to the delivery note attached to the goods and signs the delivery note as evidence of this check. The delivery note comprises two copies, one of which is retained by the person delivering the goods and the other by the warehouse manager.

The warehouse manager forwards a copy of the signed delivery note to the accounts payable clerk, who posts a journal entry to the creditors ledger for the amount shown on the delivery note. The clerk then stamps the delivery note ‘entered’ and files the delivery notes by supplier.

REQUIRED

1. Describe the strengths and weaknesses in Safe Storage’s internal control for the purchasing area.
2. How will your assessment of internal controls affect your audit approach for Safe Storage?

Dr. Morrison is interested in how noise affects student’s learning research methods. She has a group of students work an APA style while listening to background noise, and then she has another group of students work on an APA style but with no background noise. Dr. Morrison then compares the two sets of test scores to each other.

A)Group of answer choices

B)Independent samples t test

C)One sample t test

D)Related samples t test

Dr. Camille Saroyan is a forensic pathologist who specializes in identifying cause of death when the cause is unknown. She wants to know if the best interns for her lab come from private universities or public universities. Dr. Saroyan creates two matched groups of potential interns. She matches the interns on board scores, gender, and GPA. The only difference between the two groups is whether they went to school at a private university or a public university. Dr. Saroyan has all the interns examine the same cases and scores them on how well they do at determining cause of death.

A)Group of answer choices

B)Related samples t test

C)Independent Samples t test

D)One sample t test

E)ANOVA

Joanna Gaines has a daughter (Alex) in the 8^th grade. Her daughter’s class just recently finished taking a national achievement test. Joanna thinks that her daughter’s class is better than the 8^th grade class at the school across town. Joanna asks the school to compare the scores from the two classes to each other.

A)Group of answer choices

B)Independent samples t test

C)One sample t test

D)Related samples t test

Garrett, Cody, Tyler, Coby, and Cory are interested in the effect of morphine on the amount of pain reported by sports injury patients. These “dudes” randomly assign the sports injury patients to one of three groups (morphine, half the normal dose of morphine, or a normal dose of morphine) and then has each of the 3 groups rate the amount of pain they experience.

A)Group of answer choices

B)ANOVA

C)Independent samples t test

D)Related samples t test

E)One sample t test

ANOVA

2. Write a one page summary paper on "Why the Federal Reserve did not act as the lender of last resort for all the banks that failed during the Great Depression?"

3. Do a comparison on the wages earned in the 1970's to wages earned today, by converting the 1970 wages to wages today.

CHECK FIGURE: 2. Adjusted Trial Balance debits ? $572,520 Problem 3-6A Adjusting entries; adjusted trial balance LO4,6 PacRim Careers provides training to individuals who pay tuition directly to the business. The business also offers extension training to groups in off-site locations. Additional information available at the December 31, 2014, year-end follows: a. An analysis of the company’s policies shows that $1,250 of insurance coverage has expired. b. An inventory shows that teaching supplies costing $450 are on hand at the end of the year. c. The estimated annual depreciation on the equipment is $8,000. d. The estimated annual depreciation on the professional library is $4,500. e. The school offers off-campus services for specific employers. On November 1, the company agreed to do a special six-month course for a client. The contract calls for a monthly fee of $950, and the client paid the first five months’ fees in advance. When the cash was received, the Unearned Extension Fees account was credited. Home PacRim Careers Trial Balances.xls Insert Page Layout Formulas Data Review View P18 fx A B C D E F G 1 PacRim Careers Trial Balances December 31, 2014 2 3 4 Unadjusted Adjusted 5 Trial Balance Adjustments Trial Balance 6 Account Dr. Cr. Dr. Cr. Dr. Cr. 7 Cash $ 18,000 8 Accounts receivable -0- 9 Teaching supplies 6,500 10 Prepaid insurance 1,400 11 Prepaid rent 7,200 12 Professional library 60,000 13 Accumulated depreciation, professional library $ 18,000 14 Equipment 96,000 15 Accumulated depreciation, equipment 32,000 16 Accounts payable 2,500 17 Salaries payable -0- 18 Unearned extension fees 6,300 19 Karoo Ashevak, capital 229,000 20 Karoo Ashevak, withdrawals 92,000 21 Tuition fees earned 196,000 22 Extension fees earned 72,500 23 Depreciation expense, equipment -0- 24 Depreciation expense, professional library -0- 25 Salaries expense 206,000 26 Insurance expense -0- 27 Rent expense 44,000 28 Teaching supplies expense -0- 29 Advertising expense 14,000 30 Utilities expense 11,200 31 Totals $ 556,300 $ 556,300 APTER 3 Adjusting Accounts for Financial Statements 165 Help Me SOLVE IT f. On October 15, the school agreed to teach a four-month class for an individual for $1,200 tuition per month payable at the end of the class. The services to date have been provided as agreed, but no payment has been received. g. The school’s two employees are paid weekly. As of the end of the year, three days’ wages have accrued at the rate of $120 per day for each employee. h. The balance in the Prepaid Rent account represents the rent for three months: December, January, and February. Required 1. PreparethenecessaryannualadjustingjournalentriesatDecember31,2014,basedon(a)to(h)above. Analysis Component: 2. Refer to the format presented in Exhibit 3.22 and complete the adjusted trial balance using the information in (a) through (h) above. 3. If the adjustments were not recorded, calculate the over- or understatement of income. 4. Is it ethical to ignore adjusting entries?

Case Study #11—Martha Stewart Read the Martha Stewart case study located in the section titled Case Studies in your textbook concerning the following situation: This case focuses on the corporate governance aspect of Martha Stewart Living Omnimedia (MSO), a media empire founded by Martha Stewart. Stewart is a former model and devoted her career to domestic perfection and luxury. She is the brand icon of MSO; however, with new technology and the shift of consumer tastes and preferences, MSO’s business model is receiving serious threats from other competitors. After a review of the history of Martha Stewart Living Omnimedia, the case discusses its competition, the legal problem that Martha Stewart encountered, changing leadership within MSO, Martha Stewart’s questionable compensation, and the future of MSO. The case concludes with a discussion of MSO’s future at a crossroads.

The case underscores the importance of corporate governance when conditions in the environment change. An analysis of the separation of ownership and managerial control, board of directors, and executive compensation will aid in evaluating the future of MSO. Some analysts suggest that MSO will lose its competitiveness once Martha Stewart leaves the company; others suggest that the MSO brand has lost its brand image by going into product lines such as cleaning fluids and dog poop bags. Also, a few analysts suggest that MSO is a potential takeover target.

This case is ideal for demonstrating the importance of corporate governance. The following points are to guide a review and discussion of some important concepts.

Discuss MSO’s corporate governance. Has the company been able to separate the ownership and managerial control?

Evaluate the effectiveness of MSO’s board of directors. Have the directors been able to monitor and control the company?

Executive compensation is a method of governance mechanisms. Discuss Martha Stewart’s compensation and evaluate its effectiveness.

Is MSO in financial trouble? Discuss the possibility of the market for corporate control. Will MSO become a takeover target?

Describe MSOs next move in terms of growth and expansion. Provide an analysis, of what additional recommendations would be required to be done to help MSO achieve its goals?

Evaluate MSO’s international strategy and its use of alliances to achieve company objectives, what would be their best strategy?

Ms. Sandipa is the accounts executive for a company called SS Enterprises. Her job description requires her to supervise the process of recording of the transactions of business and to ensure that all accounting assumptions are taken care of. However, her junior executive is confused about the concepts of the accounting period assumption and the Separate entity assumption.

Elaborate on how Sandipa can explain the concepts to her junior with the help of a suitable example.

The above question contains 20 Marks. As per University guidelines, the answer should be a min of 800 words. If possible then only prepare. If you provide 400 / 500 words its not useful for me. Pls ensure need a min of 800 words answer.