In Fall 2016, you are hired as Controller of the Medical Device division of Virtek. You report to Steve Slack, the General Manager of the division. Virtek has annual sales of approximately $1.7 billion. The Medical Device Division annual sales are approximately $170 million, about 10% of Virtek’s total annual sales. The Medical Device Division had a very good 2016. As you close the books for 2016 in January 2017, you are reporting a net profit of $21.6 million, well above the 2016 target profit of $20 million for the division. After reviewing the preliminary 2016 financial statements, Steve Slack says,

“We get our bonuses as long as we meet or exceed our $20 million target for net profit. It doesn’t help us to exceed the target by more than one and a half million, that will only encourage corporate to make our target that much higher for 2017. I want you to develop a rational for increasing our reserve for inventory obsolescence that will reduce our 2016 net profit to just over $20 million.”

By taking a pessimistic view of future market prospects, you are able to identify $1.25 million worth of inventory that under those market conditions could be justifiably fully reserved (written off) using conservative accounting. Steve Slack is pleased with the results you reported to him. He said,

“That’s very good! I’m fairly confident we can sell all that inventory in 2017 without offering any more than a small discount off our regular price. That will boost our 2017 net profit by nearly $1 million. With that extra cushion, we’re almost certain to achieve our 2017 earnings targets and our bonuses. I want you to book that adjusting entry to increase our inventory reserve for obsolescence. Oh, by the way, are you sure you can’t find another $200,000 or so of inventory we could write off in the same manner? It wouldn’t hurt to have even more of a cushion.”

You were a little uncomfortable reviewing inventory for obsolescence with a specific target value in mind, and following the meeting with Steve Slack, you decide that before you book the adjusting entry to increase the inventory reserve for obsolescence as he instructed, you want to review the entire situation before proceeding.

Required

Write a memo to Steve Slack in good form. Your memo should:

Identify the ethical issues you both face.

Identify the major stakeholders involved and state how the stakeholders would be affected by the course of action ordered by Steve Slack.

Explain why you believe the course of action proposed by Steve Slack (identifying inventory that can be written down for 2016 that will likely be sold at no more than a small discount to normal prices in 2017) is ethical or unethical.

Regardless of whether you believe the course of action proposed by Steve Slack is ethical or unethical, identify an ethical alternative to his proposed course of action. Recommend one course of action, and explain and support your recommended choice.

Case Study 1:

Zhivago Brands Ltd makes a special-purpose horse and dog rug sewing machine, Multiweaver (MW), used in the textile industry. In early 2015, Zhivago Brands Ltd designed the MW machine with the strategic purpose of being distinct from its competitors. From the feedback received at trade shows, the MW machine has been generally regarded as a superior machine to others in the market. Zhivago Brands Ltd presents the following performance for its accounting years 1 January 2016 to 30 December 2016 as well as 1 January 2017 to 30 December 2017.

Zhivago Brands Ltd produces no defective machines but it did experience some material quality issues from its suppliers. It wants to reduce direct materials usage per MW machine in 2017. Conversion Costs in each year depending on production capacity defined in terms of MW units that can be produced, not the actual units produced. Selling and customer-service costs depend on the number of customers that Zhivago Brands can support, not the actual number of customers it serves. Zhivago Brands has75customers in 2016 and 80 customers in 2017.

Required

1. Identify the business strategy adopted by Zhivago Brands and explain briefly how you reached your decision on the type of business strategy adopted. 2. Calculate the Growth Component analysis of strategic profitability analysis.

(Include whether Favourable or Unfavourable for Qs 2 to 5).

3. Calculate the Price-Recovery component of strategic profitability analysis.     

4. Calculate the productivity component of strategic profitability analysis.   

5. Calculate the variance in operating profit for Zhivago Brands Ltd for the 2016-2017 accounting years.

6. Provide one measure from any of the above tables for each of the four Balanced Scorecard perspectives. Relate your measure to its perspective.

PLEASE POST EXCEL SPREADSHEET

1. Please show all computation and underline your final answer in your submission.

6. Income statements and balance sheets follow for Microsoft Corporation. Refer to these financial statements to answer the requirements. (non-operating items are red-marked)

Required:

2015. (8 points) Compute net operating profit after tax (NOPAT) for 2016 and 2015. Assume that combined federal and state statutory tax rates are 37% for both years.

2015. (8 points) Compute net operating assets (NOA) for 2016 and 2015. Assume Equity and other investments are operating assets.

2015. (8 points) Compute return on net operating assets (RNOA) for 2016 and 2015. Net operating assets are $26,720 million in 2014.

2015. (4 points) Compute return on equity (ROE) for 2016 and 2015. (Stockholders’ equity in 2014 is $89,784 million.)

1. (4 points) What is nonoperating return component of ROE for 2016 and 2015?

1. (4 points)Comment on the difference between ROE and RNOA. What inference do you draw from this comparison?

PLEASE POST EXCEL SPREADSHEET

Problem 2-12
Free Cash Flows

Rhodes Corporation: Income Statements for Year Ending December 31 (Millions of Dollars)

Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars)

Using Rhodes Corporation's financial statements (shown above), answer the following questions.

1. What is the net operating profit after taxes (NOPAT) for 2016? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to one decimal place.
   $   million
   
2. What are the amounts of net operating working capital for both years? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to one decimal place.
   2016 $   million
   2015 $   million
   
3. What are the amounts of total net operating capital for both years? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to one decimal place.
   2016 $   million
   2015 $   million
   
4. What is the free cash flow for 2016? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to one decimal place.
   $   million
   
5. What is the ROIC for 2016? Round your answer to two decimal places.
   %
   
6. How much of the FCF did Rhodes use for each of the following purposes: after-tax interest, net debt repayments, dividends, net stock repurchases, and net purchases of short-term investments? (Hint: Remember that a net use can be negative.) Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to one decimal place.

   After-tax interest payment	$   million
   Reduction (increase) in debt	$   million
   Payment of dividends	$   million
   Repurchase (Issue) stock	$   million
   Purchase (Sale) of short-term investments	$   million

Problem 2-12
Free Cash Flows

Rhodes Corporation: Income Statements for Year Ending December 31 (Millions of Dollars)

Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars)

Using Rhodes Corporation's financial statements (shown above), answer the following questions.

1. What is the net operating profit after taxes (NOPAT) for 2016? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to one decimal place.
   $   million______
2. What are the amounts of net operating working capital for both years? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to one decimal place.
   2016 $   million________
   2015 $   million________
   
3. What are the amounts of total net operating capital for both years? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to one decimal place.
   2016 $   million_______
   2015 $   million_______
   
4. What is the free cash flow for 2016? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to one decimal place.
   $   million_______
   
5. What is the ROIC for 2016? Round your answer to two decimal places.
   %_______
   
6. How much of the FCF did Rhodes use for each of the following purposes: after-tax interest, net debt repayments, dividends, net stock repurchases, and net purchases of short-term investments? (Hint: Remember that a net use can be negative.) Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to one decimal place.

   After-tax interest payment	$   million
   Reduction (increase) in debt	$   million
   Payment of dividends	$   million
   Repurchase (Issue) stock	$   million
   Purchase (Sale) of short-term investments	$   million

Problem 9-7
Forecasted Statements and Ratios

Upton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, ships them to its chain of retail stores, and has a staff to advise customers and help them set up their new computers. Upton's balance sheet as of December 31, 2015, is shown here (millions of dollars):

Sales for 2015 were $375 million and net income for the year was $11.25 million, so the firm's profit margin was 3.0%. Upton paid dividends of $4.5 million to common stockholders, so its payout ratio was 40%. Its tax rate is 40%, and it operated at full capacity. Assume that all assets/sales ratios, spontaneous liabilities/sales ratios, the profit margin, and the payout ratio remain constant in 2016. Do not round intermediate calculations.

1. If sales are projected to increase by $40 million, or 10.67%, during 2016, use the AFN equation to determine Upton's projected external capital requirements. Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places.
   $ ____million
   
2. Using the AFN equation, determine Upton's self-supporting growth rate. That is, what is the maximum growth rate the firm can achieve without having to employ nonspontaneous external funds? Round your answer to two decimal places.
   _____%
   
3. Use the forecasted financial statement method to forecast Upton's balance sheet for December 31, 2016. Assume that all additional external capital is raised as a line of credit at the end of the year and is reflected (because the debt is added at the end of the year, there will be no additional interest expense due to the new debt).
   Assume Upton's profit margin and dividend payout ratio will be the same in 2016 as they were in 2015. What is the amount of the line of credit reported on the 2016 forecasted balance sheets? (Hint: You don't need to forecast the income statements because you are given the projected sales, profit margin, and dividend payout ratio; these figures allow you to calculate the 2016 addition to retained earnings for the balance sheet.) Round your answers to two decimal places. Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000.

   Upton Computers Pro Forma Balance Sheet December 31, 2016 (Millions of Dollars)
   Cash	$____
   Receivables	$  ____
   Inventories	$  ____
   Total current assets	$  ____
   Net fixed assets	$  ____
   Total assets	$  ____
   Accounts payable	$  ____
   Notes payable	$  ____
   Accruals	$  ____
   Total current liabilities	$  ____
   Mortgage loan	$  ____
   Common stock	$  ____
   Retained earnings	$  ____
   Total liabilities and equity	$  ____

answer all the blanks ____  and plz show your steps

You are asked to prepare 500. mL of IV therapy solution, with a final concentration of the following solutes: 3.3 % dextrose and 0.90 % normal saline (m/v). How much dextrose and sodium chloride would you need to weigh to prepare the solution?