In 2022, Draper Company discovered errors made in 2019-2021, its first three years of operation.
|
2021 |
2020 |
2019 |
|
|
Items not recognized: |
|||
|
Prepaid expenses |
$1,300 |
$900 |
$550 |
|
Unearned Revenues |
950 |
700 |
800 |
|
Other information: |
|||
|
Reported net income |
$23,000 |
$25,000 |
$20,000 |
|
Dividends declared and paid |
4,100 |
2,600 |
5,000 |
|
Common stock and additional paid in capital at 12/31 |
22,000 |
17,000 |
15,000 |
Indicate the error in 12/31/21 Retained Earnings:
Select one:
a. $400 overstated
b. $350 overstated
c. $400 understated
d. $350 understated
e. $550 understated
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In 2022, Draper Company discovered errors made in 2019-2021, its first three years of operation.
|
2021 |
2020 |
2019 |
|
|
Items not recognized: |
|||
|
Prepaid expenses |
$1,300 |
$900 |
$550 |
|
Accrued expenses |
950 |
700 |
800 |
|
Other information: |
|||
|
Reported net income |
$23,000 |
$25,000 |
$20,000 |
|
Dividends declared and paid |
4,100 |
2,600 |
5,000 |
|
Common stock and additional paid in capital at 12/31 |
22,000 |
17,000 |
15,000 |
Corrected 12/31/21 Total Equity will be:
Select one:
a. $78,450
b. $110,300
c. $77,950
d. $110,650
e. $78,650
In: Accounting
In: Operations Management
PRODUCT SAFETY
As a brand manager at a large food manufacturer, you’re positioning a new product for entry into the highly competitive snack food market. This product is low in fat and calories, and it should be unusually successful, especially against the rapidly growing pretzel market. You know that one of your leading competitors is preparing to launch a similar product at about the same time. Since market research suggests that the two products will be perceived as identical, the first product to be released should gain significant market share.
A research report from a small, independent lab—Green Lab—indicates that your product causes dizziness in a small group of individuals. Green has an impressive reputation, and its research has always been reliable in the past. However, the research reports from two other independent labs don’t support Green’s conclusion.
Your director of research assures you that any claims of adverse effects are unfounded and that the indication of dizziness is either extremely rare or the result of faulty research by Green Lab. Since your division has been losing revenue because of its emphasis on potato chips and other high-fat snack food, it desperately needs a
low-fat moneymaker. You were brought in to turn the division around, so your career at the company could depend on the success of this product.
What are your alternatives? What is your obligation to consumers? Who are your other stakeholders, and what do you owe them? What is your obligation to your employer and to other employees at your company? What should your course of action be? How can you apply the due care theory to this case?
Learning Activity #2
Imagine that you’re the CEO of a large firm whose company faces an ethical dilemma, what concrete steps would you take to restore your company’s reputation?
In: Operations Management
Call options on a stock TKM are available with strike prices of $13, $15, $17.5, $18.5 and $20 and expiration dates in three months. Their prices are $5.5, $4, $2, $1.5 and $0.5 respectively. Put options on the same stock are available with strike prices of $24, $23.5, $22.5, $21 and $19 and expiration dates in three months. Their prices are $5, $4, $2, $1.5 and $0.5 respectively. TKM is currently trading at $19.40 and assuming the company is in the education industry with a turnover of $120 million per annum and 80 full time employees and the company is in the market for thirty years focusing on higher learning education and adult/executive learning programs. TKM has three main offices in the U.S. and is thinking to explore international business in the future to grow its portfolio.
In: Finance
Special Purpose Frameworks vs GAAP
X Company is seeking your advice about how to report the
year-end balances in its two bank accounts,
as determined by the following bank reconciliations it has prepared
for your review:
Account #1
Balance per
bank
$500
Outstanding vendor
check
(700)
Balance per
books
($200)
Account #2
Balance per
bank
($500)
Undeposited customer
check 700
Balance per
books
$200
Required—Briefly describe the advice you should
offer X Company under each of the independent
assumptions below, and then offer an equally brief response to the
question that follows them.
1. X Company’s financial reporting framework is the tax basis-cash
method.
2. X Company’s financial reporting framework is U.S. GAAP.
In: Accounting
Indiana Company expects to receive 5 million euros in one year from exports.
It can use any one of the following strategies to deal with the exchange rate risk. Estimate the dollar cash flows received as a result of using the following strategies:
unhedged strategy
money market hedge
option hedge
The spot rate of the euro as of today is $1.30. Interest rate parity exists. Indiana Company uses the forward rate as a predictor of the future spot rate. The annual interest rate in the U.S. is 6% versus an annual interest rate of 4% in the eurozone. Put options on euros are available with an exercise price of $1.25, an expiration date of one year from today, and a premium of $.04 per unit. Estimate the dollar cash flows it will receive as a result of using each strategy. Which hedge is optimal?
In: Finance
Ready to Go is a producer of fine deserts and pastries. The company has operations in the U.S. and Canada. The Company currently has 52 different product lines. The accounting departments consists of a controller and two accounting staff. You obtained the following information following your inquiry with the controller:
Required
Prepare an audit program of at least three tests of controls to verify the related key control objective.
In: Accounting
You’ve Got Mail…and You’re Fired! The Case of RadioShack No one likes to receive bad news, and few like to give it. In what is heralded as one of the biggest human resources blunders of 2006, one company found a way around the discomfort of firing someone face-to-face. A total of 400 employees at the Fort Worth, Texas, headquarters of RadioShack Corporation (NYSE: RSH) got the ultimate e-mail message early one Tuesday morning. The message simply said, “The work force reduction notification is currently in progress. Unfortunately, your position is one that has been eliminated.” Company officials argued that using electronic notification was faster and allowed more privacy than breaking the news in person, and additionally, those employees who were laid off received generous severance packages. Organizational consultant Ken Siegel disagrees, proclaiming, “The bottom line is this: To almost everyone who observes or reads this, it represents a stupefying new low in the annals of management practice.” It’s unclear what, if any, the longterm effect will be for RadioShack. It isn’t just RadioShack that finds it challenging to deal with letting employees go. Terminating employees can be a painful job for many managers. The communication that takes place requires careful preparation and substantial levels of skill. BusinessWeek ethics columnist Bruce Weinstein suggests MAN 1163_2 (April 4 th, 2020) © 2020 LAMBTON COLLEGE IN TORONTO that anyone who is involved with communicating with downsized employees has an ethical responsibility to do it correctly, which includes doing it in person, doing it privately, giving the person your full attention, being honest but sensitive, and not rushing the person. Some organizations outsource the job of letting someone go to “terminators” who handle this difficult task for them. In fact, Up in the Air, the 2009 movie starring George Clooney that was nominated for six Oscars, chronicles changes at a workforce reduction firm and highlights many of these issues. Downsizing has been referred to using many euphemisms (language that softens the sound of the word) for termination. Here are just a few ways to say you’re about to lose your job without saying you’ve been fired: • Career alternative enhancement program • Career-change opportunity • Dehiring staff • Derecruiting resources • Downsizing employment • Employee reduction activities • Implementing a skills mix adjustment • Negative employee retention • Optimizing outplacement potential • Rectification of a workforce imbalance • Redundancy elimination • Right-sizing employment • Vocation relocation policy Regardless of how it’s done or what it’s called, is downsizing effective for organizations? Jeffrey Pfeffer, a faculty member at Stanford and best-selling author, argues no: “Contrary to popular belief, companies that announce layoffs do not enjoy higher stock prices than peers—either immediately or over time. A study of 141 layoff announcements between 1979 and 1997 found negative stock returns to companies announcing layoffs, with larger and permanent layoffs leading to greater negative effects. An examination of 1,445 downsizing announcements between 1990 and 1998 also reported that downsizing had a negative effect on stock-market returns, and the negative effects were larger the greater the extent of the downsizing. Yet another MAN 1163_2 (April 4 th, 2020) © 2020 LAMBTON COLLEGE IN TORONTO study comparing 300 layoff announcements in the United States and 73 in Japan found that in both countries, there were negative abnormal shareholder returns following the announcement.” He further notes that evidence doesn’t support the idea that layoffs increase individual company productivity either: “A study of productivity changes between 1977 and 1987 in more than 140,000 U.S. companies using Census of Manufacturers data found that companies that enjoyed the greatest increases in productivity were just as likely to have added workers as they were to have downsized.” Please Answer the Following 5 Questions: 1. What communication barriers did RadioShack likely experience as a result of terminating employees via the communication method used? 2. What do you think RadioShack’s underlying motivation was in using this form of communication? 3. What suggestions for the future would you give RadioShack when faced with the need to dismiss a large number of employees? 4. How has technology enhanced our ability to communicate effectively? In what ways has it hindered our ability to communicate effectively? 5. What ethical challenges and concerns do you think individuals involved in downsizing have?
In: Operations Management
Suppose the following conditions exist between the U.S. and Canada. U.S. interest rate = 4.5%. Canadian interest rate = 3.4%. Spot rate: 1 CAD = .9537 USD. 6 month forward rate: 1 CAD = .9612 USD. Are the conditions of interest rate parity violated? If so, what would be our profit if we engaged in covered interest arbitrage with $2M?
| A. |
Interest rate parity is not violated- no opportunity |
|
| B. |
Yes, interest rate parity is violated. We can make a profit of $4,995.60 with our $2M. |
|
| C. |
Yes, interest rate parity is violated. We can make a profit of $5,655.90 with our $2M. |
|
| D. |
Yes, interest rate parity is violated. We can make a profit of $2,887.32 with our $2M. |
In: Finance
If real U.S. interest rate is higher than real European interest rate, the demand for U.S. Dollar would likely ____, and the supply of Euros to be exchanged for dollars would likely ____, other factors held constant.
1 point
a. increase; increase
b. increase; decrease
c. decrease; increase
d. decrease; decrease
In: Finance