Comment on the description of the Lorenz Curve? Is this okay? Which type of tax system are you in favor of and why? (progressive, proportional (flat), or regressive) Which is the best and why? Should we penalize a person because the market pays them a certain wage that is higher than the norm? (Ex: professional athlete, movie star, doctor, CEO, etc.) Why or why not?

On January 1, 2014, Allan Company bought a 15 percent interest in Sysinger Company. The acquisition price of $184,500 reflected an assessment that all of Sysinger’s accounts were fairly valued within the company’s accounting records. During 2014, Sysinger reported net income of $100,000 and declared cash dividends of $30,000. Allan possessed the ability to influence significantly Sysinger’s operations and, therefore, accounted for this investment using the equity method. On January 1, 2015, Allan acquired an additional 80 percent interest in Sysinger and provided the following fair-value assessments of Sysinger’s ownership components: Consideration transferred by Allan for 80% interest . . . . . . . . . . . . . $1,400,000 Fair value of Allan’s 15% previous ownership . . . . . . . . . . . . . . . . . . 262,500 Noncontrolling interest’s 5% fair value . . . . . . . . . . . . . . . . . . . . . . . 87,500 Total acquisition-date fair value for Sysinger Company . . . . . . . . . . . $1,750,000 Also, as of January 1, 2015, Allan assessed a $400,000 value to an unrecorded customer contract recently negotiated by Sysinger. The customer contract is anticipated to have a remaining life of 4 years. Sysinger’s other assets and liabilities were judged to have fair values equal to their book values. Allan elects to continue applying the equity method to this investment for internal reporting purposes. At December 31, 2015, the following financial information is available for consolidation: Allan Company Sysinger Company Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (931,000) $ (380,000) Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 615,000 230,000 Equity earnings of Sysinger . . . . . . . . . . . . . . . . . . . . . . . . . (47,500) –0– Gain on revaluation of Investment in Sysinger to fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (67,500 ) –0– Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 431,000 $ 150,000 LO 4-9 (continued ) hoy62228_ch04_149-202.indd 198 11/5/13 3:42 PM Final PDF to printer Consolidated Financial Statements and Outside Ownership 199 Allan Company Sysinger Company Retained earnings, January 1 . . . . . . . . . . . . . . . . . . . . . . . . $ (965,000) $ (600,000) Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (431,000) (150,000) Dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,000 40,000 Retained earnings, December 31 . . . . . . . . . . . . . . . . . . . . . $(1,256,000 ) $ (710,000 ) Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 288,000 $ 540,000 Investment in Sysinger (equity method) . . . . . . . . . . . . . . . . 1,672,000 –0– Property, plant, and equipment . . . . . . . . . . . . . . . . . . . . . . 826,000 590,000 Patented technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 850,000 370,000 Customer contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . –0– –0– Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,636,000 $ 1,500,000 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,300,000) $ (90,000) Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (900,000) (500,000) Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . (180,000) (200,000) Retained earnings, December 31 . . . . . . . . . . . . . . . . . . . . . (1,256,000 ) (710,000 ) Total liabilities and equities . . . . . . . . . . . . . . . . . . . . . . . $(3,636,000 ) $(1,500,000 ) a. How should Allan allocate Sysinger’s total acquisition-date fair value (January 1, 2015) to the assets acquired and liabilities assumed for consolidation purposes? b. Show how the following amounts on Allan’s preconsolidation 2015 statements were derived: • Equity in earnings of Sysinger. • Gain on revaluation of Investment in Sysinger to fair value. • Investment in Sysinger. c. Prepare a worksheet to consolidate the financial statements of these two companies as of December 31, 2015. At year-end, there were no intra-entity receivables or payables.

Read the assigned article and  answer the question at the end of the article:

Whistleblower wins $51 million in kickback and bribery case.

A whistleblower will collect a $51 million payday after sounding the alarm about bribes and kickbacks at the medical device company where he worked.

Olympus Corporation of the Americas agreed Tuesday to pay $646 million in fines after it admitting to a pattern of bribery and kickbacks. About half of that fine was a criminal penalty for violating the federal anti-kickback statue, making it the largest amount ever paid for breaking that law. The payment to the whistleblower will be paid out of the company's fines.

John Slowik, 53, worked for 20 years for Olympus, which is the medical device unit of the Japanese company that also makes cameras. In 2009 he was named the company's compliance officer. But he said that his complaints about the company's policy of disguising payments as grants and lavishing expensive trips and entertainment on doctors and hospital administrators in order to sell equipment fell on deaf ears within the company.

Slowik was fired in 2010, and has not worked since, according to his lawyer, Kathryn Schilling. But he filed a sealed federal lawsuit, using the federal whistleblower act, on behalf of the federal government, which was being cheated by the company's illegal acts.

Related: FIFA corruption probe now zeros in on U.S. banks

The kickbacks and bribes "can improperly influence a provider's judgment about a patient's health care needs, result in the use of inferior or overpriced equipment, and drive up health care costs for everybody," said Deputy Attorney General Benjamin Mizer.

Slowik's suit said that when he was named compliance officer, it was a new position at the company and he had no resources or training to perform the job. He said that Mark Gumz, who was Olympus CEO at the time, told him the job as compliance officer was "to try to figure out how to 'work around the rules' so as to 'not impact the business.'" He said when he tried to come up with a compliance program to stop the bribes and kickbacks Gumz "began to ostracize and harass" him.

"He's extremely honest and intelligent," Schilling said about her client. "He was just very intent on doing the right thing."

Related: SEC probes HSBC hiring in Asia

Slowik declined to be interviewed about the case. He issued a statement thanking his attorneys as well as the Justice Department lawyers and other government investigators who worked on the case.

"I would also like to thank my family and friends who have stood by me and supported my efforts to do the right thing under difficult circumstances," he said.

In a statement, Olympus said that its previous conduct did not adversely affect patient health or patient care. It said that while it acknowledges responsibility for that conduct it "does not represent the values or Olympus or its employees" and that it is committed to complying with the law going forward.

QUESTIONS:

1. Should whistleblowing be encouraged by businesses? Why or why not?

2. Do you think the amount the whistleblower received for reporting the bribes and kickbacks is appropriate? Why or why not?

Imagine you are the head accountant for GE Corp located in Wisconsin. In November 2017, that state had the second highest unemployment rate in the Midwest: 4.9% (down from 6.1% in January 2015). For the past few years, you have noticed that the company’s bad debt rate has been about 7% of year-end accounts receivable. That rate of bad debts has severely affected the company’s profitability…especially since management has steadily been lowering the standards for granting credit to customers.

Your salary structure (as well as that of other corporate managers) allows for a bonus when net income is equal to or greater than a specific percentage of net sales. Unfortunately, that profit metric has not been reached in four years. However, the CEO and CFO (who is retiring after the first quarter of 2018) realized that a change in the bad debts percentage would allow them and you to obtain bonuses in 2017. If bad debts were computed at 2% of year-end A/R rather than 7%, everyone would receive a reasonable (but not extreme) bonus for 2017. The CEO justifies the use of that rate by concluding that, since unemployment in Illinois has been decreasing over the past few years, so will bad debts.

a.   Is a change in a bad debts estimate permissible under generally accepted accounting principles? If yes, explain how such a change is effected. If no, explain why such a change would not be allowed

b.   Would making such a change in the bad debts estimate violate any basic accounting concepts? Explain your yes or no answer

c.   Provide at least two alternatives to help improve the company’s profit performance.

d.   You have a new baby at home as of September 2017. The bonus would help with the added expenses. Additionally, you are up for promotion to CFO next year upon the retirement of the current CFO; allowing the current CEO and CFO to receive their bonuses would certainly bring positive recommendations for that new position.

      1.   Is reducing the bad debts estimate illegal? Explain.

      2.   Is reducing the bad debts estimate unethical, given the CEO’s justification? Explain.

e.   Assume that the CEO and CFO are very adamant that the bad debts percentage be reduced in 2017 to 2% of year-end receivables. The 5% difference is not material to the financial statements. You believe that you will be terminated if you don’t make this adjustment. What should you consider in making your decision?

Patagonia

Patagonia sells rugged clothing and gear to mountain climbers, skiers, and other extreme-sport enthusiasts. The company is also well known for its environmental stands and its commitment to product quality. Patagonia has never owned a fabric mill or a sewing shop. Instead, to make a ski jacket, for example, it buys fabric from a mill, and zippers and facings from other manufacturers, and then hires a sewing shop to complete the garment. To meet its own environmental standards and ensure product quality, it works closely with each partner to make sure the jacket meets its rigid standards.

As a result of these standards, Patagonia does as much business as it can with as few partners as possible and chooses its relationships carefully. The first thing the company looks for in a partner is the quality of its work. It doesn’t look for the lowest-cost provider, who might sew one day for a warehouse store such as Costco and try to sew the next day for Patagonia. Contractors that sew on the lowest-cost basis, the company reasons, wouldn’t hire sewing operators of the skill required or welcome Patagonia’s oversight of its working conditions and environmental standards. What Patagonia looks for, more than anything, is a good fit between itself and the companies it partners with. It sees its partners as an extension of its own business, and wants partners that convey Patagonia’s own sense of product quality, business ethics, and environmental and social concern.

Once a relationship is established, Patagonia doesn’t leave adherence to its principles to chance. Its production department monitors its partners on a consistent basis. The objective is for both sides to prosper and win. In fact, in describing the company’s relationship with its partners, Patagonia founder Yvon Chouinard says, “We become like friends, family—mutually selfish business partners; what’s good for them is good for us.”

Build-A-Bear Workshop

A similar set of beliefs and actions describe Build-A-Bear Workshop. Build-A-Bear lets its customers, who are usually children, design and build their own stuffed animals, in a sort of Santa’s workshop setting. Like Patagonia, Build-A-Bear is a very socially conscious organization, and looks for partners that reflect its values. Affirming this point, Maxine Clark, the company’s founder, said, “The most successful corporate partnerships are forged between like-minded companies with similar cultures that have come together for a common goal, where both sides benefit from the relationship.”

Also similar to Patagonia, Build-A-Bear thinks of its partners as good friends. Reflecting on her experiences in this area, Clark said, “I tend to think of partners as good business friends—companies and people who would do everything they could to help us succeed and for whom I would do the same.” In a book she wrote about founding and building Build-A-Bear into a successful company, Clark attributes having good partners to careful selection. She also likens business partnership to a marriage, which has many benefits but also takes hard work: “Good business partnerships are like successful marriages. To work, they require compatibility, trust and cooperation. Both parties need to be invested in one another’s well-being and strive for a common goal.”

Both Patagonia and Build-A-Bear make extensive use of partnerships and are leaders in their respective industries.

Questions for Critical Thinking

1. 1. To what extent do you believe that Patagonia and Build-A-BearWorkshop’s ethical cultures drive their views on partnering?

2. 2. Assume you were assigned the task of writing a code of conduct for Patagonia. Write the portion of the code of conduct that deals with business partnership relationships.

3. 3. What similarities do you see between the partnership philosophies of Patagonia and Build-A-Bear Workshop?

4. 4. Spend some time studying Patagonia by looking at the company’s website and its Facebook page, and via other Internet searches. Describe Patagonia’s general approach to business ethics, social responsibility, and environmental concerns. What, if anything, can start-ups learn from Patagonia’s philosophies and its experiences?

Read this article and answer questions at the bottom.

The Rise of the Jumbo Student Loan

Most students with loan balances exceeding $50,000 in 2010 had failed to pay down any debtfour years late

During the housing boom of the 2000s, jumbo mortgages with very large balances became a flashpoint for a brewing crisis. Now, researchers are zeroing in on a related crack but in the student debt market: very large student loans with balances exceeding $50,000. A study released Friday by the Brookings Institution finds that most borrowers who left school owing at least $50,000 in student loans in 2010 had failed to pay down any of their debt four years later. Instead, their balances had on average risen by 5% as interest accrued on their debt. As of 2014 there were about 5 million borrowers with such large loan balances, out of 40 million Americans total with student debt. Large-balance borrowers represented 17% of student borrowers leaving college or grad school in 2014, up from 2% of all borrowers in 1990 after adjusting for inflation. Large-balance borrowers now owe 58% of the nation’s $1.4 trillion in outstanding student debt. “This is comparable to mortgage lending, where a subset of high-income borrowers hold the majority of outstanding balances,” write Adam Looney of Brookings and Constantine Yannelis of New York University. “A relatively small share of borrowers accounts for the majority of outstanding student-loan dollars, so the outcomes of this small group of individuals has outsized implications for the loan system and for taxpayers,” the authors say. The problem is particularly acute among borrowers from graduate schools, who don’t face the kinds of federal loan limits faced by undergraduate students. Half of today’s big balance borrowers attended graduate school. The other half went to college only or are parents who helped pay for their children’s education. Grad school borrowers tend to be among the best at paying off student debt because they typically earn more than those with lesser degrees. But the rising balances unearthed in the latest study suggest that pattern might be changing. Overall across the U.S., one-third of borrowers who left grad school in 2009 hadn’t paid down any of their debt after five years, compared to just over half of undergraduate students who hadn’t, federal data show. Mr. Yannelis and Mr. Looney, a former Treasury Department official under President Barack Obama, built the research out of exclusive access to federal student-loan and tax data. The findings on graduate schools are particularly noteworthy because the government offers little information on the loan performance of grad students, who account for about 14% of students at universities but nearly 40% of the $1.4 trillion in outstanding student debt. The data set accompanying the new study breaks down performance for students at 934 schools with 100 or more graduate borrowers whose loans first came due in 2009. At Nova Southeastern University , a large private nonprofit school in South Florida, just over half of the 10,319 graduate borrowers who departed in 2009 had reduced their balances by just a dollar or more five years later, the data show. Many sought or received advanced degrees in health fields. They collectively borrowed $412 million for grad school, or an average $40,000, excluding any debt from other schools, the study showed. George Hanbury, Nova Southeastern’s president, said many of the school’s former grad students went into health fields, where salaries often start low and then rise quickly later on. “They all have the capability to see higher incomes the longer they stay in their career, which means they have the greater capability to increase their rate of payback than they do in the earlier stage,” Mr. Hanbury said. He said the school’s former students earn more, on average, than workers with bachelor’s degrees. At Arizona State, a large public university in Tempe, 51% of the 4,000 grad students who left in 2009 had reduced their initial balances by 2014. Arizona State, through a spokesman, declined to comment. At Walden University, a large collection of graduate programs run by Wall Street giant Laureate Education Inc., 53% of 9,530 graduate borrowers paid down their balances by at least a dollar or more over five years. Many were enrolled in programs involving social services. Walden, in a statement emailed by a spokeswoman, said many former graduate students are in fields that often pay modestly at first but serve a social good. “This is consistent with our social mission where we are educating in professions like teaching, social work, and counseling, for example, and those professionals may not earn significant salaries right after graduation, but who are making a significant societal impact,” the statement said. Most borrowers from those schools aren’t in default. Instead, a big share of them are in debtrelief plans that lower monthly payments, known as income-driven repayment, or they’ve won permission from the government to postpone payments due to a range of circumstances, including unemployment or further study.

Questions

Brown Inc. acquired a delivery van on October 1, 2017 at a cost of $45,000. The useful life of the van was 12 years with a residual value of $3,000. Assume that the company used straight-line method with fractional years rounded to the nearest whole month. The delivery van was traded-in with a new one as of end of the year of 2018 (December 31, 2018). The list price of the new delivery van was $56,000. The Brown Inc. accepted a trade-in allowance of $40,850 and paid the remaining amount in cash to get the new van. In recording the trade-in, which of the following is correct?(3 Points)

Accumulated depreciation of the old van is debited by $3,375

Accumulated depreciation of the old van is debited by $4,375

Accumulated depreciation of the old van is credited by $4,375

Accumulated depreciation of the old van is credited by $3,375

(ii) Broadoak acquired a 12-year lease en a property on 1 October 2016 at a cost of S240,000. The company policy is to revalue its properties to their market values at the end of each year. Accumulated amortization is eliminated and the property is restated to the revalued amount. Annual amortization is calculated on the carrying values at the beginning of the year, The market values, of the property on 30 September 2017 and 2018 were $231,000 and $175,000 respectively, The existing balance on the revaluation reserve at 1 October 2016 was S50,000. This related to some non-depreciable land whose value had not changed significantly since 1 October 2016.

Required: Prepare extracts of the Fiancial statements of of Broadoak. (including the movement on the revaluation reserve) for the years to 30 September 2017 and 2018 in respect of the leasehold property

(ii) Broadoak acquired a 12-year lease en a property on 1 October 2016 at a cost of S240,000. The company policy is to revalue its properties to their market values at the end of each year. Accumulated amortization is eliminated and the property is restated to the revalued amount. Annual amortization is calculated on the carrying values at the beginning of the year, The market values, of the property on 30 September 2017 and 2018 were $231,000 and $175,000 respectively, The existing balance on the revaluation reserve at 1 October 2016 was S50,000. This related to some non-depreciable land whose value had not changed significantly since 1 October 2016.

Required: Prepare extracts of the Fiancial statements of of Broadoak. (including the movement on the revaluation reserve) for the years to 30 September 2017 and 2018 in respect of the leasehold property

The following information is used for the following two questions. Ping and Slazenger Company (its 90% owned affiliate) reported the following income information for year X1:

During Year X1, Slazenger made sales of $20,000 to Ping. Slazenger’s Cost of Sales was $10,000. As of 12/31/X1, Ping had still owned 60% of the units acquired from Slazenger. Based on this information, how much Consolidated Income should Ping report?

Please select the correct answer below only one:

a. $140,000

b. $144,000

c. $146,000

d. $150,000

e. None of the Above