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ACC 290 Week 3/4 Learning Team Financial Reporting

Problem, Part 1 (**2 Different Papers**)(New)

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Financial Reporting Problem Part I Browse the Internet to acquire a


copy of the most recent annual report for a publicly traded company.
Analyze the information contained in the companys balance sheet
and income statement to answer the following questions: What are the
companys total assets at the end of its most recent annual reporting
period? Why is this important? What are the total assets at the end of
the previous annual reporting period? How much cash and cash
equivalents did the company have at the end of its most recent annual
reporting period? What amount of accounts payable did the company
have at the end of its most recent annual reporting period? What
amount of accounts payable did the company have at the end of the
previous annual reporting period? What are the companys net
revenues for the last three annual reporting periods? What is the
change in dollars in the companys net income from its most recent
annual reporting period to the previous annual reporting period? What
are the companys total current assets at the end of its most recent
annual reporting period? What are the total current assets at the end of
the previous annual reporting period? What in the information above
would be important to a potential investor, employee, and so on?
Summarize the analysis in a 1,050-1,400 word paper in a Microsoft
Word document. Include a copy of the companys balance sheet and
income statement. Format your paper consistent with APA guidelines.

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ACC 290 Final Exam Guide (New)

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ACC 290 Finals Question 1 Jackson Company recorded the following


cash transactions for the year: Paid $135,000 for salaries. Paid
$60,000 to purchase office equipment. Discussion Question 1:

Based on what you know about accounting, what role do you see it
playing in business operations? How dependent do you think a
business is on its accounting department? Why?

Accounting plays many important roles especially when it comes to


business operations. Accounting is mainly responsible for almost all
of the financial needs of the business. It keeps track of all spending,
profit and loss that the company inquires.
The business is very dependent on it accounting department.
Accounting department is responsible for monitoring more than the
cash flow, it also works closely with IRS, government to make sure
that everything is being done correctly (payroll, taxes, etc). The
accounting side of the business can be considered to be the lungs of
the company next to the heart.
Discussion Question 2:

Why are ethics so important in the field of accounting?

Wow where should I start? First of all the when dealing with
accounting there must be consistent clear communication between
the business and the accounting department. Honesty is always the
best policy. Good ethnics keeps the business running at its top
level. The company's personal information, employee
information could be given to the wrong hands and it can destroy the
company. A good accounting department has way too much to lose
and they will not want to risk a horrible reputation in the field.

Another response

People bring all their financial information to an accountant who in


turn looks through all of it with a fine tooth comb. People need to
know that they can trust this person with all of their personal
information. Most licensed professionals swear to a code of ethics,
whether they follow them or not is up to that professional.
Unfortunately there are many out there that do not and they ruin the
trust for other professionals. Accountants really need to have the
trust of their clients being that they work with peoples taxes and
finances and need much information from their clients.

Another response

Ethics are important in the field of accounting for several reasons.


Ethics mean different things to differnt depending on the role of the
accountant. If an accountant is hired by an individual or a business,
that accountant is trusted with the finances of the person or business.
The accountant is trusted to give an honest account of finances and
not to defraud or jeopardize that individuals or companies
relationship with the government, creditors of financiers. Individuals
and businesses also trust the ethics of accountants insofar that they
do not disclose their information to those that do not have a right to
it. Finally, In the accounting profession, much like many other
professional service professions, an accountants reputation is the
continuing source of employment. If they are knows to have a bad or
even flexible ethical code then they can develop a bad reputation and
experience a loss of business.

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ACC 290 Week 1 Discussion Question 1

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ACC 290 Week One - DQ #1 What are the four basic financial
statements? What is the primary purpose of each of the four basic
financial statements

Financial Statements

Today, I will be describing a balance sheet, income statement,


retained earnings statement, and statement of cash flows and how a
company uses these financial statements as a tool to make future
decisions for the company.

Balance Sheet

A balance sheet a statement sheet that reports the companys financial


balances of the business. This sheet includes the companys total of
assets and liabilities. It is used for all three types of business sole
proprietorship, business partnership and corporate business
companys. Creditors rely on this financial sheet to determine if the
company will be able to repay.

Income Statement

An Income Statement is a financial statement that shows the


companys profit and losses. It basically shows all the companys
gains and losses that were made during a period of time. After the
company deducts the expenses from the revenue then you will get a
total net income. This is a great statement to use especially because
this will show investors how much net income is the company
bringing in, or how financially stable the company truly is.

Retained Earnings Statements

Retained Earnings Statements reports the changes to the retained


earnings (net income in a corporation) during a certain time period.
This financial statement shows dividends, profits and loses. Investors
and Lenders monitor the retained Earning Statements especially when
it comes to monitoring dividends. Some invest use this tool to see if
the company is paying high/low dividends. Retained Earnings
Statement is part of the balance sheet under Stockholders equity.
Statement of Cash Flow

Statement of Cash Flows provides information regarding the


companys cash receipts. This statement gives a detailed account of
the operating, investing and financial activities of the company. It also
allows investors a chance to observe how financially stable the
company is so that they can make a choice if they want to take a risk
on investing into the company. Also the accounting department needs
this statement in order to see if the company has enough money for
payroll uses.

All four of these financial statements are all extremely important tools
to use in the business. Another statement that was not listed but is
often used is called comparative statements. Comparative statement
gives a side by side comparison of the financial statements above.

Reference

http:yourdictionary.com /accounting_statements.org Retrieved


1/28/10

Thomas, Y. 2005-08-27 Accounting 101 pg. 52 Statements


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ACC 290 Week 1 Discussion Question 2

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What are debits and credits? How are debits and credits used to record
business transactions? Compare and contrast sole proprietorships,
partnerships, and corporations.

Sole proprietorships means that a business that owned by one person.


That includes and not limited to all profits and losses, debts and
unlimited liability, all will come from the solely one owner and not a
group or in this case a partner or co-owner etc. Partnerships are seen
much differently than sole proprietorships. Partnerships is a business
that owned by more that one person/s. This is the number one
difference from being a sole proprietorship or sole owner. Basically,
two or more people come together and split the cost, debts, and
liability. Corporations is an business that has separate entity owned by
stockholders. The huge difference between corporations and the other
two is that they are owned by stockholders. Stockholders make
decisions that is first best for their company, secondly the company
that they have together.

Why would a entrepreneur want to choose one over the other?


An Entrepreneur is a person that wants to start a business with their
vision and have more power of the decision making. The best choice
for an entrepreneur is to choose sole proprietorship out of all the three
choices. The first and most important reason is because it is much
easier to start a business as sole proprietorships. Sole proprietorship
takes all the profit that and doesn't have to split it between any other
owners or corporations.

If I was to start a new business which one would I choose?

In this case it depends on the type of business. My case I will be


opening a hair salon and I would prefer sole partnerships. i choose
that because I want to be in control and I don't want to split the profit.

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ACC 290 Week 1 Individual Assignment Financial


Statements Paper

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Individual - Financial Statements Paper - Prepare a 700 -1,050 word


paper in which you identify the four basic financial statements.
Describe the purpose of each of the four financial statements Current
assets
When it comes to a company's classified balance sheets you will find
current assets sheet. Current assets is cash or cash equilivants that the
company will use. What you will find on a current asset sheet is Cash and
equilvants, Short term investments, Accounts receivables, and other
assets.
Long-term investments
Long-term investments when it comes to balance sheet are investments
that the company intends to hold onto. The investments that are listed are
as follows, bonds, stocks and cash. You will also find short-term
investments in the company. The difference between short-term and long-
term investments is that the short-term investments will be sold and the
long-term investments normally the company will choose to keep it.
Property, plant, and equipment
Property, plant, and equipment are what the company calls "fixed assets".
Property, plant and equipment are assets that can not be easily converted
into cash. These are basically items such as company car (used to deliver
products), computers and copier machine, and freezer used for
restaurants.
Intangible assets
Intangible assets are non-monetary items that can not be seen or touched.
For example, trademarks, copywriters, patents and goodwill. Intangible
assets are normally listed in the separate assets.

references
http://www.investopedia.com/terms/i/intangibleasset.asp

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ACC 290 Week 1 Practice Quiz(New)

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Question 1 Current assets are expected to be converted to cash or


consumed within the next year or the normal operating cycle,
whichever is longer. For Discussion Question 1: Post your response to
the following:
When reviewing a financial report, why should information be
reliable, relevant, consistent, and comparable?

In other words, why are these accounting characteristics


important?

What kinds of problems could be created if a financial report is


not reliable, relevant, consistent, or comparable?

It is extremely vital that the company has accurate financial reporting.


This information determines whether or not to invest in your
company's stock. This information will help them decide if it is
profitable to invest or not to invest in your company based what is in
your financial history. The information must be relevant because it
will help the company, investors and lenders make decisions. It helps
answer questions like, "how stable is your company", or "what future
does this company have". The information should be reliable. In other
words the information that is reported must be able to be verified,
backed up with truthful information. Comparable occurs when
different companies use the same accounting principles. This makes it
much easier to compare results between company's. Consistency
happens when the company uses the same accounting method every
year. When the financial statements are reported each year, it paints a
financial picture of where the company is headed now and in the
future.

What kinds of problems will occur if the information does not include
these things?
Falsified or manipulated statements doesn't only effect the company
but it also to name a few effects the lenders, creditors, investor's, etc.
This will result in the company not having a faithful representation.

Another response

The main objective of generating financial information is providing


useful information that can be used in decision-making... only if this
information is relevant, reliable, comparable, and consistent, can it be
useful for decision makers. (Kieso, 2003).

Relevance gives a basis for making decisions that will impact the
future of a business, and it confirms and corrects expectations from
the past. If the information makes a difference in making decisions, it
is relevant.

Reliability means that the information can be depended on and it can


be proven to be free of error, and the information is factual. The
information cannot favor one set of users over another. CPAs audit
financial statements to ensure reliability.

Comparability is also an important characteristic of financial


reporting... this happens when different businesses use similar
accounting principles, making it much easier for one to compare
companies, and the method used in a business must be disclosed to
the users of the information to enable the users to convert the
information as accurately as possible.
Consistency simply means that the business uses the same accounting
principles on a yearly basis... consistently. This helps decision makers
analyze a company's trends. A company can change the methods used
if they can justify the change, showing that the new method is more
useful for analysis. If the method is changed, it must be disclosed in
the notes that go with the statements to show users a lack of
consistency.

These characteristics are very important to a business... decisions


cannot be made based on incorrect information, and everyone
involved in a business venture of any kind, whether they be
management, owners, or investors and creditors, as well as
consumers, etc. must be able to rely on the financial information
provided in order to make any type of decision. Without this
information, it is difficult to imagine any business succeeding, even
for a short time.

Examples of problems that could occur without reliable, relevant,


consistent, or comparable information includes not being able to get
loans or investments; management could make decisions that cause
irreparable damage to entire operations, consumers could easily lose
faith and cut their ties... the possibilities are endless for companies
that lack these qualities in their financial reporting.

DQ2
For Discussion Question 2: Post your response to the following:

How does information from financial reports influence business


decisions?

Why is it important for business managers to understand the


information found on financial reports?

How does information from financial reports influence business


decisions?

Once the information from the financial reports have been posted then
a team will review the company's financial history to see what
decision were profitable or not. The decisions that were made
previous to the financial reports being posted will show which way
the company needs to go to continue to remain #1.

Why is it important for business managers to understand the


information found on financial reports?

IT is extremely important for he business managers to understand the


information found on the financial reports. The business managers are
going to be the people that are going to make decisions for the
company. They need to know how to interpret the financial reports
and come up with different strategies that will continue to make the
company money.

Another response

The information from financial reports influences business decisions


because it shows where the company stands. The managers use the
information from the financial report compared to the current year
from the previous year, whether the company growths or losses. It is
very important for business managers to understand the information
found on financial reports because the information from the financial
reports enables business managers to see how to improve and keep the
business afloat. It also gives business managers an insight what came
in and went out and the total operating cost of the company as well as
cutting cost in a certain areas. The information from the financial
reports helps the manager manages the business accurately.

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ACC 290 Week 1 Vocabulary Activity (New)

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WileyPLUS Assignment: Week 1 Vocabulary Activity Resource:

Internal Cash Control

By

Kamilah Crooms

Accounting 220

Jess Stern

Internal Cash Control

The accounting department receives from sales invoices once a


month. Most of the information is missing on the invoices.
The accounting department relies on each department within the
company and all the information has to be submitted completely and
in a timely matter. In this scenario most of the information that has
been turned in has information that is missing on the invoices. I would
say that the internal controls that are not being followed are
Documentation procedures. Company documentation is very
important and must be turned in complete. These documents show
proof of delivery or proof of services to the customer. Any incomplete
documents can be very costly and can cause a delay in the company
being paid for any services rendered. For example, one of the
requirements in a transportation department is to make sure that the
drivers verify the load and sign for the load prior to leaving the yard,
these documents says that the load left in good condition. Well, it so
happened that we allowed a driver to leave without signing the
paperwork. This caused a delay in accounting because we had to get
signatures from the driver and the customer which took a month later
to complete.

Rob, Sue, and Bob use the same cash register at the donut shop.

Rob, Sue, and Bob all use one register has often turned into not the
best decision ideally for the company. It can increase the risk for the
drawer being short and it will be hard for the company to find out
which employee or employees had shorted the register. The internal
controls that are not being followed are Establishment of
responsibility. Happens when the company assigns one person to be in
control of a specific job or have authority to make decisions (pg 161
Internal Control and Cash). When the company signs one person to be
responsible over the register it will allow the company to hold that
one person responsible for any shortages.

Sam does the ordering of materials at the beginning of every month


and pays the bill.

In this case Sam is ordering materials and paying all the bills. This
process is actually known as related activities (pg 162 Internal
Control and Cash). This occurs when one person is doing two
different responsibilities just like Sam. The internal Control that is
not being applied is Segregation of Duties. It is better for the two to
be a separate responsibility because it will minimize the billing errors.

Bank reconciliations are done by the person who is responsible for all
cash responsibilities.
The problem with this scenario is that the same person is responsible
for all cash responsibilities, why is this person doing the only one that
does this job? Having one person take on such a major responsibility
increases the chances of embezzlement and thief. The internal control
that is not being applied is rotating employees duties and requiring
employees to take vacations. One person should not be completely in
control of one job, the company should encourage vacations or
switching positions to prevent incorrect handling of the companys
valuable information.

New checks came in and are left on the shelf with other supplies.

This is a tough scenario because there are all sorts of internal controls
that are not being used in this case. I would say in my opinion that the
first internal control that comes to my mind that is not being applied is
bonding of employees who handle cash.

Every employee that works near or with expensive equipment should


be held reliable or responsible for the companys assets. Bonding of
employees who handle cash protects the company by insuring that the
employee is or isnt a risky applicant (background checks) or
reassuring that the employee that they will be prosecuted to the fullest
extinct if they are found guilty of thief. For example, I had worked at
Mc Donalds and
there were my shift managers and one employee that were caught
with stealing money from the company. This situation had happen
very differently. The armor truck dropped off a deposit that belonged
to another company (armors mistake) but they signed it. Those
employees thought that nothing was going to be traced back to them
but the little did they know, all evidence traced back to them. They
each received jail time, and felony records.

Everyone has access to the computer system and the last audit was
seven years ago by the former accountant

This scenario has two things that are going on at the same time. I will
first start off with the computer system and how everyone has access
to the computer. The internal control that is not being applied is
Physical, Mechanical, and Electronic Controls. This allows the
company to control assets through physical or electronic based
systems or programs. It is extremely important for a company to
invest in computer or informational protection for the company and
for their employees. Todays technology age most companies are
investing in a computerized program. This will help protect from
internal errors and external protection. For example, all companies
invest in a virus protection this will ensure that the companys
information is protected and not in the wrong hands.

Invest idle cash

Invest idle cash occurs when any excess funds or cash needs to be
invested. The money should be highly invest and risk free. For
example, a major company should make investments with their assets
into profitably investments and risk free.

Plan the timing of major expenditures

This is when a company sets aside money for major cash needs. We
live in a world that things happen daily. A good company would set
aside emergency funds. For example, during a terrible thunderstorm,
the winds practically ripped off the roofing shingles off a commercial
business. The company will be able to use the money for emergency.

Delay payment of liabilities

Delay payment of liabilities is when a company pays bills not too


soon and not late. This allows the company to have money available
for bills that that really need to be paid allowing excess funds to be
free for other uses.

Keep inventory levels low

This occurs when the company keeps the inventory low so that it will
bring in more profits. For example, if the managers at a fast-food over
plan and fix too many hamburgers and the customers dont buy it,
then the food will go bad and the company will lose profit.

Increase the speed of collection on receivables


This occurs when money is owed to the company, the company
cannot claim these until the funds have been received. Some
companies offer incentives to encourage customers to pay early or on
time. For example, my job encourages their customers by letting them
know that there will be a price increase on or after a certain date and
this really works because the customers want to pay at a lower price.

References:

http:yourdictionary.com /accounting_statements.org Retrieved


2/13/2010

Thomas, Y. 2005-08-27 Accounting 101 pg. 52 Statements

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ACC 290 Week 1 WileyPlus Assignment DI1-3, E1-3,E1-4,


E2-4, IFRS2-4 (New)

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WileyPLUS Assignment: Week 1 Assignment Resource: Axia College


Material
Appendix B

Cash Management Matrix

Directions: Using the matrix, list how each of the principles of


internal control works, and give an example for each. Next, list how
each of the principles of cash management works, and give an
example for each.

Principles of Internal Control How it Works Example

Establishment of responsibility Happens when the company My job, Our


assigns one person to be in department
control of a specific job or that can wai
have authority to make fee. It allows
decisions. be in contro
returns

Segregation of duties This is when the company A church- Y


has more than one person to who count th
control a task or job then you hav
writes down
was received
Documentation procedures Evidence or proof of all My job we d
company transactions shingles to o
and we mak
prior to leav
the custome
Delivery fo

Physical, mechanical, and Allows the company to Our job has


electronic controls control assets through Cisco and th
physical or electronic based employees b
systems or programs. lunches. Als
long the CSR
ready or wo

Physical con
security gua
identificatio

Independent internal Any information that can be My job has


verification reviewed , compare, and our inventor
reconciliation by a employee someone say
shorted on t
go back and
inventory an
numbers in
physical cou
the numbers
Other controls Bonding of employees, Our compan
company protects against recently bec
abuse of assets. the company
card for per
not work rel

Principles of Cash How it Works Example


Management

Invest idle cash Occurs when any excess funds My fathers


or cash needs to be invested, wise investm
around in hi

Plan the timing of major A company wants to make During the r


expenditures sure that there is money set dropped low
aside for major cash needs so some com
from these f

Delay payment of liabilities When a company pays the Ok, when tim
bills at an appropriate time home and bi
not late and not too soon. organize the
bills needs to
soonest, beca
bills too earl
excess funds
used for som

Keep inventory levels low Happens when a company Sees Choco


keeps the inventory low so make sure th
that it will continue to bring over produc
profit much or else
company wi

Increase the speed of collection Money that is owe to the When a cust
on receivables company by other people or order for a p
customers is money that can not paid yet,
not be counted towards the not count th
companies funds until it is rec

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ACC 290 Week 2 Discussion Question 1

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What is the revenue recognition principle? What is the expense


recognition principle? Discussion Question 1: Post your response to
the following:

How would you describe the difference between financial and


managerial accounting? What are the distinguishing features of
managerial accounting?
There are many differences between financial and managerial
accounting. The financial accounting statements are available to
external users such as employees, stockholders, creditors, investors,
etc. This is available to them so that they can monitor the company's
performances quarterly or annually. Managerial accounting provides
financial information for managers and other internal people or
department. Managerial accounting is confidential so it is only
observed by internal users such as management, owner, and will
provided to external users such as the public. Management uses this
for budgeting purposes or to monitor profit loss/gain within the
company. Managerial accounting can be available to them as often as
needed. Managerial accounting statements is a great way for
management to make decisions based on what has been reported.

Another response

The differences between managerial accounting and financial


accounting are distinct. Managerial accounting reports are for those in
managerial and decision making positions. The managers use the
financial report to answer questions, which would advance the
company and its employees. The manager would want to know if
certain investments should be made and should the company advance
an employee's salary. The manager needs the report to decide if a
factory is built or if a certain stock is brought. The financial
accountant has the job of showing the external users such as creditors
and stockholders a picture of the company's stability.

The manager's purpose is to manage by making stable plans, delegate


duties, motivate the workers, and control the atmosphere.
Distinguishing features of managerial accounting are the fact no cpa
will audit the report, and there is no specific frequency of the report.
The reports are done in a need to know basis and for a specific reason,
which is for business purposes. The reports are detailed and pertain to
specific business decisions. The financial accountant need only be
concerned with the company's finances.

DQ2

Discussion Question 2: Post your response to the following:

Select a management function (planning, directing and


motivating, or controlling) and explain how that function relates to
business as a whole. Next, select a different function listed by a
classmate. Discuss with your classmate how the functions you each
selected complement each other.

The management functions that I choose was controlling.


Controlling job is to make sure that the each
department/person is keeping the company's activities or plans on
track and in order to achieve that they must work closely with
Management planning function. Controlling continually compares the
company's performance to make sure that the planned standards
are being met. In my opinion this is known as the "dirty work".
Controlling operations have to know what to look for and how to keep
track of all the company's activities. They have to take actions and
quickly correct any errors and make sure that the company goals are
being achieved in a timely matter or the time that it was planned. If
there are errors it is job of the controlling operations to take quick
action. The controlling operations not only correct errors after it
happens but they also are in charge of foreseeing any potential errors
and act quickly to get that resolved.
Another response

I chose Controlling as part of the management function. The


controlling function relates to business as a whole because it helps
monitoring the firms performance to make sure the planned goals are
being met. Managers need to pay attention to costs versus
performance of the organization. let say, if the company has a goal of
increasing sales by 10% over the next two months, the manager may
check the progress toward the goal at the end of month one. If they
are not reaching the goal the manager must decide what changes are
needed to get back on track.

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ACC 290 Week 2 Discussion Question 2

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What accounts are subject to adjusting journal entries and why? Cost,
Volume, and Profit Formulas

By
Kamilah Crooms

Due February 28, 2010

Explain the components of cost-volume-profit analysis.

The components of cost volume-profit analysis consist of Level or


volume of activity, Unit Selling Price, Variable Cost per unit, total
fixed costs, and Sales mix.

What does each of the components mean?

Level or volume of activity is the activity that causes change or


behavior when it comes to the cost. Unit selling Price is the cost for
the product basically how much each unit is selling for. The Variable
Cost per unit is something that can change depending on the activity.
The total fixed cost does stay the same as activities change but differ
per unit. The Sales mix is basically what the name says. Its a mixture
of sale items when more than one product sold the sales will remain
the consistent.

Based on the formulas you have reviewed, what happens to


contribution margin per unit when unit selling prices increase?

Contribution margin is the amount of revenue left over after


subtracting the variable cost. So basically Unit sales price subtracting
or minus variable cost.

Illustrate your explanation with an example from a fictitious


company of how an increase in unit selling prices might affect
contribution margin.

Kellys Sweetheart Flowers

The owner of Kellys Sweetheart Flowers is selling their bouquet


of flowers for $10 per unit. The Variable Cost per unit is $4.00.
The contribution margin will be ($10-$4) = $6. If the sells price
increases to say $15, then the contribution margin will be ($15-$6)
= $9 per unit.

When fixed costs decrease, what does this do for sales? Illustrate
your explanation with an example from a fictitious company.

Kellys Sweetheart Flowers

When the fixed cost decreases, the contribution margin ratio the net
income and sales will increase.

For example,

The flowers are $10 per unit. The variable cost per unit is $4.00.
The contribution margin will be ($10-$4) = $6. The fixed cost is
$3. We subtract Contribution margin Fixed Cost= Net income.
The net income is $3.00.

Define contribution ratios


The contribution margin ratio is the contribution margin per unit
margin divided by the unit selling price.

What happens to contribution ratios as one of the components


changes?

Shown in the example above, if one or more of the components


changes is will cause the net income to increase or decrease.

Reference

statements.suite101.com/article.cfm/cost_volume_profits*the_p_l.
Retrieved 2/28/2010

//http:yourdictionary.com /CVP.org Retrieved 2/26/2010

Thomas, Y. 2005-08-27 Accounting 101 pg. 52 Statements

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ACC 290 Week 2 LT Reflection Summary (New)


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Discuss the objectives for ACC 290 Week Two. What do you think
will be the most important of the skills learned when you are in an
accounting position7 How should mixed costs be classified in CVP
analysis? What approach is used to effect the appropriate
classification?
According to our class materials all mixed cost must be classified into
their fixed and variable and variable elements. The method that can be
used to determine is called the high/low method. To determine the
variable cost the analysis takes the total cost and divide it with the low
activity level. To get the fixed cost then the company would have to
subtract the total variable with either the high or low activity level.
9. Cost volume profit CVP analysis is based entirely on unit costs. Do
you agree? Explain.
In my opinion when it comes to making financial decisions for the
company, often times more than one method is used. Cost volume
profit is also based on Volume or level activities, unit selling prices,
variable cost per unit, total fixed and sales mix.
14. You can find the break point in dollars by drawing a horizontal
line to the vertical axis. I you want to find the break even point in
units it will be a vertical line from the break even point to the
horizontal axis.

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ACC 290 Week 2 LT Reflection Summary


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Discuss the objectives for ACC 290 Week One. How do they relate to
the practice of accounting and its uses in business? Axia College
Material

Appendix C

Budgets Matrix

Directions: Using the matrix, define each of the budgets listed and
briefly describe its uses.

Budget Definition Describe its uses

Sales budget Estimate of the The sales budget


expected sales for shows dollars and
the period. All of units. This will
the other budgets allow management
depend on the sales to see how many
budget. This is units will be
where all the other produced for the
budgets will start period
from

Production budget A production of Shows management


units needed to be how many units will
produced in order be produced during
to meet the each budget period
projected sales and what amount is
needed to fulfill
inventory demands

Direct materials Is the estimated Shows management


budget quantity or cost of how much raw
the raw materials materials that is
that is needed in already on hand and
order to produce or that needs to be
the units required ordered to meet
to fulfill inventory inventory demands.

Direct labor budget A estimate of cost Shows how many


and quantity of hours, how many
direct labor needed laborers needed to
in order to meet produce the units
production for that budget
period.
Management will
decide what will be
the right amount of
laborers needed and
if the company will
be able to meet the
budget

Manufacturing An estimated This list all


overhead budget expected amount of overhead cost
manufacturing cost involving cash
for the budget disbursement in a
period quarter

Selling and Anticipated selling Shows area of


administrative and administrative budget expenses
expense budget expenses in the that are not listed
budget period other than
manufacturing.
Expenses such as
marketing,
promotion cost etc
for the budget
period

Budgeted income Estimate of Is a very important


statement expected tool because it
profitability of shows the company
operations in a estimated profit for
budget period the budget period.

Cash budget A projection of Cash budget helps


expected cash flows management keep a
in and out of the tally or total of all
business. cash balances.

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ACC 290 Week 2 Practice Quiz (New)

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Question 1 Expenses decrease retained earnings. Question 2 During


2014, Gibson Company assets decreased $50,000 and its liabilities
decreased $90,000. Discussion Question 1: Post your response to the
following:

You know how important it is to create budgets for your


household. How does budgeting help management make good
business decisions?

Budgeting is a very important skill that can be applied to everyday


life and also when it comes to making good business decisions. I
really like the way our class resources says about Budgeting.
Budgeting is used as a planning tool used by management to make
good decision for the company. If a company is successful than more
than likely that means that the management team is very good at
managing the company finances. Budgeting helps management plan
ahead, defines what is most important, shows warning signs, reach a
company target without over or under budgeting and etc.

Another response
In a business, a budget helps a business make good decisions because
they are used by the company to plan for future events and coordinate
the events and duties in the company. They also gives objectives used
to evaluate the performance of the company on each level which can
help to make future decisions that will not hurt the company based on
the projected objectives. It can also be used to alert the company of
possible problems or negative trends in the company that need to be
addressed so that there is a clear picture of the overall health of the
company before decisions are made. The budget helps the company to
be able to make an informed decision when making one. It is there in
order to make sure that making a decision like taking on another
company will not hurt the company and is something that the
compnay can sustain based on the budget.

DQ2

Discussion Question 2: Post your response to the following:

What are some of the different types of budgets?

Describe in detail one type of budget covered in the text.

Describe what the budget is used for and what information it


provides a business.

Then, as you respond to your classmates, discuss how the


budget you described relates to the budgets they described.
Discuss how a business benefits from each of the budgets.

There are many different types of budgetting. For example, there sales
budget which allows management to see how many units that need to
be produced, production budget which will allows everyone to see
how many units are going to be produced in or needed to be produced
in order to meet the inventory for that budget period. One budget that
I can describe in detail is called the direct labor budget and this
budget shows how many people, hours is needed in order to meet the
required budget for that period. This will give management an idea of
how much money is needed such as paying the cost of labor. The
company benefits by each of these budgets because it will help
manage just how much money it will cost the company during this
period. Management can also see if there are different ways to cost
the company out of pocket cost down during this period.

Another response

I chose to write about the Production Budget. The Production Budget


shows the cost of each unit needed to produce an item or manufacture
a product. The formula used by the Production Budget :

Budget sales units + Desired ending finished goods units - Beginning


finished goods units = Required production units.

An example would be, every Easter the bakeries in the Bronx loads up
on Hot Cross Buns. My mother and grandmother would buy these
tasty sweet breads,and eat them for breakfast. I personally would like
to eat them every week but, they are only sold during the Easter
season. Maybe, it has something to do with the glazed cross on the
top.

Every Easter Holiday, there appears these Hot Cross Buns and the
bakeries production department allows for the purchases for items
needed to make the buns. After Easter has gone, Hot Cross Buns are
not included in the budget.

-----------------------------------------------

ACC 290 Week 2 Vocabulary Activity (New)

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WileyPLUS Assignment: Week 2 Vocabulary Activity Resource:


What is a Flexible budget?

A Flexible budget is a budget that change or is flexible during


different levels or activity. Unlike the static budget which is a budget
based on one activity level, the flexible budget is based off of more
than one activity level.

The steps to development a flexible budget is :


a) Identify the activity index, and the range of activity

b) Find out what the variable cost, and determine the variable cost
per unit

c) Find out what the fixed cost and determine the budgeted
amount for each unit

d) Organize the budget for selected additional activity within the


appropriate range

The information found on a flexible budget cannot begin with


the master budget. The flexible budget uses the same guidelines the
original budget. The budget consists of Sales, Cost of Goods Sold,
Selling Expenses, General and Administrative Expenses, Income
Taxes, and finally the Net Income.

The information on the budget is a great tool to be used for


evaluation performances. The flexible budget can be used for monthly
comparison purposes. Also during the process that management is
identifying the activity index and the range of activity it will allow
them to see the cost of direct labor hours for that budget period.

-----------------------------------------------

ACC 290 Week 2 WileyPlus Assignment BYP2-2, IFRS2-6,


E3-4, E3-8, BYP 3-2, IFRS 3-2, P3-5, P3-6 (New)
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ACC 290 Week One - DQ #1 What are the four basic financial
statements? Income statement is a financial statement that shows how
much money is coming from product sales and services prior to any
expenses being taken out. Both internal and external users such as
managers and investors are able to access this. For example, if a
investor wanted to see if the company made money or lost money
they would use this financial statement report.
Balance sheet shows what condition the company is currently in.
whereas the other financial statements only came monthly or annually.
For example, what if the management planning team wanted to see
the company's current assets, ownership equity and liabilities? All
they have to do is run the balance sheet report.
CVP income statement or Cost Volume statement reports or monitors
the effects of the changes in cost and volume when it comes to the
company profits. For example, I work at a manufacturing plant for
roofing shingles. The CVP analyst studies the cost which includes but
not limited too, manufacturing, material, labor cost. This financial
statement report would help the management team budget the cost of
manufacturing goods.
Statement of cash flow tracks the movement of cash coming in or out
of the business. This financial statement will show if the company
made cash or not, or if the net income increased or decreased. For
example, the owner or the management department will use this to
determine if the company has earned enough money to be able to for
any expenses.
Retained earnings statements is a percentage that is kept by the
company to be reinvested or to be used to pay debts. For example, if a
company was looking to expand their business by purchasing top of
the line equipment they can use this statement to see how much
money the company has put away.

References:

http://www.investopedia.com/terms/r/retainedearnings.asphttp://finan
cial- Retrieved 2/18/2010

statements.suite101.com/article.cfm/financial_statements_the_p_l.
Retrieved 2/18/2010

-----------------------------------------------

ACC 290 Week 3 Discussion Question 1

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What are the steps in completing the accounting cycle? How do the
different steps affect the financial statements? What is a Flexible
budget?

A Flexible budget is a budget that change or is flexible during


different levels or activity. Unlike the static budget which is a budget
based on one activity level, the flexible budget is based off of more
than one activity level.
The steps to development a flexible budget is :

a) Identify the activity index, and the range of activity

b) Find out what the variable cost, and determine the variable cost
per unit

c) Find out what the fixed cost and determine the budgeted
amount for each unit

d) Organize the budget for selected additional activity within the


appropriate range

The information found on a flexible budget cannot begin with


the master budget. The flexible budget uses the same guidelines the
original budget. The budget consists of Sales, Cost of Goods Sold,
Selling Expenses, General and Administrative Expenses, Income
Taxes, and finally the Net Income.

The information on the budget is a great tool to be used for


evaluation performances. The flexible budget can be used for monthly
comparison purposes. Also during the process that management is
identifying the activity index and the range of activity it will allow
them to see the cost of direct labor hours for that budget period.

-----------------------------------------------

ACC 290 Week 3 Discussion Question 2


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What are the pros and cons of using reversing entries? Why are
reversing entries optional? Capstone Discussion Question: Post your
response to the following:

Think back over what you have studied and learned in this
course. Do you have a new perception of or appreciation for the field
of accounting and how it contributes to business? Explain.

To be perfectly honest with you I truly had no clue what accounting


did for a company and how important it was. I always thought that
accounting only dealt with payroll. In fact accounting does much
more that just payroll and monitor company supplies (coffee, paper,
pens & pencils). The accounting sets budgets for the entire company,
monitors outflow and inflow of profits, plans budgets for each
department, and much more. When I first begun this class I was
really nervous, I truly thought that I was going to have a hard time
understanding the accounting but I happy to say that I was wrong. I
understood every part of this course.

On a personal note I would like to thank you Jess. If it wasn't for your
pep talk I probably would had gave up. You are truly a
great instructor. I wish you all the best! God Bless
Another response

Accounting has taken a whole new meaning to me in my vocabulary.


Prior to this course, I just took accounting as a calculator and
crunching numbers. I now have a new respect for accounting and all
the aspects that are involved. I never once took into consideration
profit, sales, revenue, and balance sheets also being included with
accounting. There is so much more involved with accounting, and
had I not taken this course I would have never known. Accounting is
a very important part of running a business. I feel that it is imperative
to all people thinking of opening a business should take some type of
accounting class to become more aware of how to run the accounting
part of a business.

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ACC 290 Week 3 LT Reflection Summary

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Discuss the objectives for ACC 290 Week Two. What do you think
will be the most important of the skills learned when you are in an
accounting position?
Business Plan

By

Kamilah T. Crooms
The name of my business is called DestinyWear. DestinyWear is
a urban fashion clothing company for woman, men and youth.
DestinyWear specializes in making clothing for every occasion. My
name is Kamilah Crooms and I am the owner and CEO of
DestinyWear.My goal is to ensure that my company will be succesfull
in all areas and in each department. In order for me to make sure that
the company was going to begin in the right direction I had to
priortize what was most important in establishing my business plan.
The main priority is that I had to first choose the appropriate business
structure, a high demanding product, and most of all an outstanding
accounting team.

Business Structure

Upon establishing DestinyWear I had to decide which business


struture that I felt was best for me to pursue. I decided that as a
Entreprenuer the best choice for me abd the direction of the company
would be for me to be sole proprietorship. Sole proprietorship
allowed me to be the sole owner of DestinyWear. The first and most
important reason that I wanted sole proprietorship is because it is
much easier to start a business as sole proprietorships. Sole
proprietorship takes all the profit that and doesn't have to split it
between any other owners or corporations. I also want the power to
make and change decisions along the way without having to first
consult anyone else.

DestinyWear Products

DestinyWear products will range from jeans, shirts, accessories and


shoes. The company will first start off with its most profitable product
and that will be the DestinyWear designer jeans line. The jeans line
has over twenty different jeans designs

from straight leg, baggy, cargo, overalls, shorts and much more. The
jeans line will provide services within the United States and Canada
and will eventually service International customers. The DestinyWear
jeans line will have its own building. In this building the bottom floor
will consist of the factory and the top floor will have the different
departments such as management, marketing and most importantly
the accounting department.
DestinyWear Accounting Department

The accounting plays a major role in establishing my company


DestinyWear. The accounting department does more than managing
and reporting the companys financial documents it is the greatest tool
in establishing my business. The key to a powerful accounting
department here at DestinyWear is applying the principles of internal
control. These principles consist of establishment of responsibilities,
segregation of responsibilities, documentation procedures, Physical,
mechanical, and electronic controls, Independent internal verification
and other controls such as Bonding of employees. In order to ensure
that this business plan works DestinyWear has to hire nothing but the
best qualified employees.

DestinyWear Accounting Staff

DestinyWear accounting team of fine employees will all be


hired through the company. There are several requirements that have
to be met in order for myself as the owner and Human Resource
department to even consider the applicant for accounting. We looked
for characteristics, education and work history experience. The first
and far most important qualifying requirements are education. The
applicant has to have a Bachelor BA/BS in accounting degree a plus if
he or she has a masters.
The second requirement is experience. The applicant must have the
minimum of five years of experience working in accounting. He or
She must have knowledge and employment experience of working
with financial statements, cash management and internal control.
Employees must be experienced in Invest idle cash, planning the
timing of major expenditures, delay payment of liabilities keeping
inventory levels low, and increasing the speed of collection on
receivables. In the category of experience we had to hire applicants
according to the position that had to be filled in accounting. For
example, if a position in accounting such as management or
supervisory needed to be filled, then we would look for years of
experience in management or supervisory positions. I personally
prefer that every employee have some type of management
experience.

Last but not least, the employees characteristics. It is a must that every
accounting staff member has and applies professionalism, great ethic
and moral skills, accuracy, and most importantly punctuality, and
reaching company deadlines. These characteristics are very important
to have at DestinyWear.

DestinyWear Accounting Management Team

The DestinyWear accounting management team will be


reporting to me and to the other head staff each week to report
updates and any new changes. The management team is responsible to
have all the different types of budgeting reports that includes Sales,
Labor, etc. Management must follow the responsibility reporting
system for each department. The managers will use the companys
financial information to predict outcomes of the business. I require a
report from each responsibility center, cost center, profit center and
investment center to be reported each month. Management is
responsible to ensure that the company does not over or under budget
and if any changes it must be reported immediately.

Conclusion

DestinyWear will be a very successful team not only because of


the products that we produce but because of having a great accounting
team. With the help of accounting team I DestinyWear products will
be in every wardrobe in America.

REFERENCES

//http:yourdictionary.com /CVP.org Retrieved 3/20/2010

Thomas, Y. 2005-08-27 Accounting 101 pg. 52 Statements.


March 19, 2010
Drucker, P. Managing in the next society 2002. retrieved march
19,2010

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ACC 290 Week 3 Practice Quiz (New)

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Question 1 The revenue recognition principle dictates that revenue is


recognized in the period in which the cash is received.

Costco Wholesale Corporation

If we look at the financial statements of the company we can find that


the company is financially strong. Its strength are:

1. It has enough amount of current asset to repay its current


liability. The current ratio of the company 8.18 indicates that the
company has $8.18 liquid asset to repay its $1 of current
liability.
2. The operating cost of the company is increasing because the
company is able to reduce its expenses.

3. Cash from operating activity has increased for the company.

Apart from this strength the company also has some weakness in its
financial statement:

(i) Increasing inventory indicates that the company inventory


conversion period is increasing.

(ii) The cash from investing activity shows that the company
cash outflow is more in the short term investment i.e. in non
operating activity.

(iii) The overall has for the year 2008 has declined for the
company.

Net Income:
If we look at the trend in net income of the company we can find that
the company net income looks fluctuating but it has improved it net
income in 2008 as compared to 2007.

Debt ratio as a percentage of total assets:


If we look at the debt ratio as percent of total asset we can find that
the debt ratio is declining in 2008 as compared to 2007 i.e. the
company is increasing equity to finance debt.

Debt as a percentage of total equity:

As we can see that the debt as percent of total equity is declining in


2008 as compared to 2007 i.e. the company is increasing equity in its
capital structure.

As we can see that there is nothing negative in 2008 for the company
and this is the reason it has positive trend as compared to 2007. Hence
there is no need to correct anything for the company.

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ACC 290 Week 3 Vocabulary Activity (New)


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WileyPLUS Assignment: Week 3 Practice Quiz Resource: Week 1


DQ 1
Due Tuesday, Day 2

Go to the U.S. Securities and Exchange Commissions Web site


at http://www.sec.gov and the Financial Accounting Standards
Boards Web site athttp://www.fasb.org. Identify the mission and main
activities of each organization. Then, analyze the similarities and
differences between the roles of each entity. Which entity has more
influence over financial statement reporting? Explain your answer.

According to the SEC website their mission is to protect investors,


maintain fair, orderly, and efficient markets, and facilitate capital
formation. The SEC also requires public companies to disclose
meaningful financial and other information to the public. This
provides a common pool of knowledge for all investors to use to
judge for themselves whether to buy, sell, or hold a particular
security. The SEC is concerned primarily with promoting the
disclosure of important market-related information, maintaining fair
dealing, and protecting against fraud.

According to the FASB website the mission of the FASB is to


establish and improve standards of financial accounting and reporting
that foster financial reporting by nongovernmental entities that
provides decision-useful information to investors and other users of
financial reports. Since 1973, the Financial Accounting Standards
Board (FASB) has been the designated organization in the private
sector for establishing standards of financial accounting that govern
the preparation of financial reports by nongovernmental entities

The major difference in the SEC and the FASB is that the SEC deals
with reporting of financial statements for all industries while the
FASB deals mainly with the private nongovernmental entities. Both
are concerned with the fairness of financial reports and work in the
interest of the public. I believe that the SEC has more influence over
financial statement reporting because they can bring civil action
against companies and individuals for violations of securities laws.
Although according to the FASB website, the Commissions policy
has been to rely on the private sector for this function to the extent
that the private sector demonstrates ability to fulfill the responsibility
in the public interest.

Response 2

Go to the U.S. Securities and Exchange Commissions Web site


at http://www.sec.gov and the Financial Accounting Standards
Boards Web site athttp://www.fasb.org. Identify the mission and main
activities of each organization. Then, analyze the similarities and
differences between the roles of each entity. Which entity has more
influence over financial statement reporting? Explain your answer.

U.S. Securities and Exchange Commission (SEC)

According to the SECs website The mission of the U.S.


Securities and Exchange Commission is to protect investors, maintain
fair, orderly, and efficient markets, and facilitate capital
formation(U.S. Securities and Exchange Commission, 2010, Para.
1).

The main activities of the SEC are to interpret federal securities


laws; issue new rules and amend existing rules; oversee the inspection
of securities firms, brokers, investment advisers, and ratings agencies;
oversee private regulatory organizations in the securities, accounting,
and auditing fields; and coordinate U.S. securities regulation with
federal, state, and foreign authorities. (U.S. Securities and Exchange
Commission, 2010)

Financial Accounting Standards Board (FASB)

According to the FASBs website The mission of the FASB is to


establish and improve standards of financial accounting and reporting
that foster financial reporting by nongovernmental entities that
provides decision-useful information to investors and other users of
financial reports. That mission is accomplished through a
comprehensive and independent process that encourages broad
participation, objectively considers all stakeholder views, and is
subject to oversight by the Financial Accounting Foundations Board
of Trustees (Financial Accounting Standards Board, n.d., Para. 3).
The main activities of the FASB are to identify financial reporting
issues based on requests/recommendations from stakeholders or
through other means. The FASB Chairman decides whether to add a
project to the technical agenda, after consultation with FASB
Members and others as appropriate, and subject to oversight by the
Foundation's Board of Trustees. The Board deliberates at one or more
public meetings the various reporting issues identified and analyzed
by the staff. The Board issues an Exposure Draft to solicit broad
stakeholder input. (In some projects, the Board may issue a
Discussion Paper to obtain input in the early stages of a project) The
Board holds a public roundtable meeting on the Exposure Draft, if
necessary. The staff analyzes comment letters, public roundtable
discussion, and any other information obtained through due process
activities. The Board redeliberates the proposed provisions, carefully
considering the stakeholder input received, at one or more public
meetings. The Board issues an Accounting Standards Update
describing amendments to the Accounting Standards Codification
(Financial Accounting Standards Board, n.d.).

Both the SEC and the FASB have the same goals of fairness,
accuracy, and understandability of financial accounting and reporting.
Both agenecys accomplish these goals in the best interest of the
overall public.

The differences between the SEC and the FASB is that the FASB
regulates financial reporting in the private sector of businesses (but
are subject to the rules and regulations of the SEC) and the SEC deals
with regulating the financial reporting of publicly held corporations.

I believe that the SEC has the greatest influence over financial
statements reporting because they have the final approval on all
changes of the rules and regulations. The Sec can also bring civil or
administrative enforcement actions against individuals and companies
in violation of the securities laws.

References

Financial Accounting Standards Board. (n.d.). Facts about FASB.


Retrieved July 15, 2010, from Financial Accounting Standards
Board:http://www.fasb.org/facts/index.shtml#mission

U.S. Securities and Exchange Commission. (2010, May 3). The


Investors Advocate: How the SEC Protects Investors, Maintains
Market Integrity, and Facilitates Capital Formation. Retrieved July
15, 2010, from U.S. Securities and Exchange
Commission: http://www.sec.gov/about/whatwedo.shtml
Week 1 DQ 2
Due Thursday, Day 4

Search the Internet or the Online Library for information about the
Sarbanes-Oxley Act. A useful guide to some of these provisions is
located at http://www.soxlaw.com. Summarize at least two provisions
of the law, and discuss your interpretation of these provisions with
your classmates. Do you think this law will make financial statements
more reliable? Also, discuss how Sarbanes-Oxley establishes
boundaries to ensure ethical practices. What does the law allow or
prohibit, and why?

The Sarbanes-Oxley act has many provisions to give companies


guidelines for responsible, and ethical financial reporting. One of
those provisions is listed in Section 302 of the act. The provision is
that periodic statutory financial reports be certified that signing
officers have reviewed the reports, the report does not contain any
untrue, or misleading information. The financial statements fairly
present the financial condition. The signing officers are responsible
for internal controls. A list of all deficiencies in internal controls, and
a list of fraud involving employees, and anything that could
negatively affect the internal controls.

Another provision pertains to the "management assessment of internal


controls". This provision ensures that information is published in
annual reports regarding the adequacy of internal controls, structure
and procedures.
The Sarbanes-Oxley act is designed to help companies promote
ethical accounting procedures. The act gives guidelines as to how
financial statements are reported. The act requires verification that
officers within the company have checked the information in the
reports for accuracy and true. The act also requires that the
companies have internal controls in place to ensure ethical reporting
practices. The main thing that the Sarbanes-Oxley promotes is
transparency in reporting.

Response 2

Section 802 of the Sarbanes-Oxley Law defines the penalties that may
be assessed against individuals who failed to comply with the Act. An
individual could be subject to 20 years in jail for altering, destroying,
mutilating, concealing, falsifying records, documents or tangible
objects. Guilt is define by the intent to impede a legal investigation.
This part of the law gets to the heart of how Arthur Anderson reacted
by destroying documents important to Worldcom. The law further
defines that any accountant who knowingly violates their ethics by
wilfully violates the requirements of maintenance of all audit or
review papers. These papers are subject to review up to five years.

The second Section that I reviewed was the Section 302. This
actually is my favorite part of the law because it directly holds the
officers and directors accountable for the accuracy of reporting in
their financial statements. It defines that the management must
review and understand the financial statements and sign that they are
true and accurate. It also holds the management accountable for the
internal controls, requiring any deficiencies to be reported. In the past
directors of companies relied heavily on the internal officers,
management, to report the company performance without questioning
the accuracy or taking their role on oversight committees seriously.
They could hide behind a veil of trust of the key leaders. This Section
clearly puts the responsibility for the Board to remain independent of
the executives and function more effectively on the respective
oversight committees they serve. The example I would share is what
happened in WorldCom. The company leaders shared what they
wanted to with the Board, who trusted implicitly the top leaders. Had
they questioned their legal representation or auditors, they potentially
could have uncovered the fraud that was committed by the creation of
shell companies, with WorldCom employees as stockholders.

I would love to think this law would protect the investing community.
Financial reporting has improved to some extent. Unfortunately the
scams still continue. Example would be Barney Madoff or what
happened in the financial mortgage industry. These unethical
practices were conducted after Sarbanes Oxley was implemented.
Madoff was able to provide false financial information to investors.
Financial industry was allowed to get to aggressive in underwriting
and product suite. Fines and penalties are deterrents. Ethics still must
be inherent in an individual and company. Laws and requirements are
a guide. There will never be enough auditors, inspectors or oversight
boards to catch all of the fraud in the corporate community.

The law prohibits falsifying information, failing to notify of material


changes, and destruction of records.
-----------------------------------------------

ACC 290 Week 3 WileyPlus Assignment BE4-1, P4-2A, P4-


3A, BYP4-1, IFRS PQ-1, PQ-2, PQ-3, PQ-4 (New)

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Assignment: Week 3 Assignment Complete the following Week 3


Lucent Technologies

Axia College of University of Phoenix


Lucent Technologies is a company based on networking for service
providers, government, and enterprises worldwide (Lucent
Technologies, n.d., Para 1). The products and services they work with
are separated into three categories; service and maintenance, wireless
mobility networking, and wire line networking. Lucent Technologies
is backed by Bell Labs, which does research and development in
networking technologies.

During the years of 2001 to 2003 this company has experienced a


decrease in demand because of other companies loss or capital used
toward spending. This is mainly due to a downturn in the economy.
As an investor this information is necessary to know because it
explains the decrease or increase in sections of the balance sheet. In
order to compare the growth or decline of the companys profit, an
investor must change a balance sheet into a common-size balance
sheet. First when looking at the balance sheet an investor will see that
the amount of paid in capital has increased from the year of 2003 to
2004, the assets have increased, but the liabilities have decreased.
When running a debt/asset ratio it is noticed that this ratio drops from
1.2 in 2003 to 1.0 in 2004. This shows the companys risk is low
when concerning financial leverage, usually when the debt ratio is
less than one percent it is financed mainly by company equity, so this
company is close to being debt free from creditors.

After changing the balance sheet to a common-size balance sheet


there are several factors an investor will look at. The current assets
have dropped to .48 from .49 in 2004. This does not show harm to the
company because only the accounts receivable dropped while the rest
of the current assets increased. This means the company is not in as
much danger of default on money owed to it. It does have a rise in
marketable securities. The one concern in the assets is the increase of
prepaid cost of pensions and goodwill. Goodwill can be used for tax
breaks but prepaid pensions cannot benefit the company.
When looking at the liabilities section an investor will see a drop in
pension and liabilities and an increase in long term debt, both of these
could be affected because of the drop in the economy. Long term
liabilities are often increased to help a company control interest rate
increases so as an investor cutting back on pension liabilities cuts
back cost to the company and watching interest rate increase show the
company is concerned with its earning and investors. This would be
encouraging or an investor. The stockholders deficit shows a drop in
accumulated deficits from -1.43 to -1.22 and total deficits of -.26 to
-.08. This shows the company is working to control any money loss
and turning it to the companys advantage. Overall it shows the
company is still earning a profit although small. With an increase of
assets and a drop in liabilities the company is showing it is working in
a low risk capital.

After reviewing this information, a creditor or investor must be able


to compare this company to the industry totals. By comparing how
this company compares to other companies similar to it, a person can
see if it is competitive and worth taking a risk. Running ratios will
also show if the company is capable of paying off any debts it has or
if it can acquire the needed cash in case of emergencies. Overall as an
investor, I would say this company would be worth investing in.
Reference

Axia College. (2007). Understanding Financial Statements. Retrieved


May 10, 2010 from Axia College, Week 2 Assignment, ACC/230.

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ACC 290 Week 4 Discussion Question 1

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How would you calculate cost of goods sold? What items make up
cost of goods sold

Differentiating Depreciation Methods

There is one main difference between straight line depreciation and


accelerated depreciation. Straight line is decided by taking the cost of
the assets, figuring out the salvage cost when the use of the asset is
finished and how many years of use the asset has. A person then takes
the cost minus salvage and divides the remainder by the number of
years of use. This amount is the depreciation expense subtracted each
year from the cost. The accelerated depreciation does not have the
same amount of deprecation subtracted each year. It does have the
cost minus salvage value to figure out the amount to use but is then
divided out differently. A person takes the sum of the years of a
products useful life, such as three years is 3 + 2 + 1 = 6, then a
person would divide the depreciation amount by 3/6 the first year, 2/6
the second and finally 1/6 for the final year. So the amount of
depreciation expense is larger to smaller with accelerated and equal
amounts for straight line.

The advantages of straight line method are it is easier and faster to


figure. The advantage of accelerated method is it is more accurate
when figuring depreciation expense. The accelerated method has an
advantage and disadvantage concerning taxes. A company can use the
accelerated method to take advantage of bigger tax breaks at the
beginning of an assets life, but since this amount drops during the
lifespan if the company needs added tax breaks it will not receive
them from these assets in the future. With the straight line method the
amount of tax breaks are even through the life of the product. Most
companies choose this form of depreciation for reporting purpose on
taxes but will use the accelerated method to figure taxable income.

As mentioned before the advantage of straight line depreciation is it is


easier to figure and uses the same total each year for deduction of
depreciation expense but the disadvantage is that if use for taxable
income and reporting a company does not get a bigger tax break at the
beginning of the assets life when they have just put out the cost for
the item and may need a bigger tax break.

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ACC 290 Week 4 Discussion Question 2

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What are the three different inventory cost flow assumptions
commonly used in commerce today and allowed by generally
accepted accounting principles?

Preparing an Income Statement


The companies net income is profitable when the sales exceed the
cost of goods sold. In this, the gross profit is $761k. This is beneficial
to the company. Though we took the cost of goods away from the net
sales there are still other areas which need to take a piece of the pie.
For this company, once the SG&A and depreciation are taken out, the
company still contains a profit of $290k. But the buck does not stop
there. Once the interest income and interest expense are adjusted the
balance before earnings and taxes is $290k. After taxes are taken out,
the company is left with a net profit of $174k.

In this case I think the company has achieved success with a net profit
of $174k. If the company were unable to be profitable, the company
would eventually go out of business. We would be able to tell if the
company was not profitable by looking at each section individually.
The cost of goods sold is what stands out for me. If we pay more to
make the product then we are actually selling it for, there is no profit
to be made. So, I think it should all start there.

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ACC 290 Week 4 LT Reflection Summary

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Reflection and Financial Reporting Problem Part I. Discuss the
objectives for ACC 290 Week Three. Week 3 DQ 1
Due Tuesday, Day 2

Post your answer to Problem 3.5 on p. 109 (Ch. 3). How might the
information contained within the stockholder equity statement be used
for management and investor decision-making? Provide specific
examples of situations in which the stockholder equity information
might be used.

The statement of stockholders equity provides the changes in the


equity accounts during the accounting period more in depth than the
balance sheet. The information found on the statement of
stockholders equity includes retained earnings, common and
preferred stock, and additional paid in capital. Management uses the
statement of stockholders equity to ensure they are reaching their
goal of maximizing shareholder's equity. The use of market ratios help
with the analysis of the statement of stockholders equity, such as
earnings per share, price-to-earnings, dividend payout, and dividend
yield. These ratios will help both management and investors in
analyzing the company. For example, if I were looking to invest in a
companys stocks I would utilize all of the financial ratios, as well as
the market ratios. The earnings per share ratio is calculated before the
price to earnings ratio, P/E, because the earnings per share ratio is
used in the second. If a company pays dividends, the dividend payout
ratio will come in handy. It tells us The percentage of earnings paid
to shareholders in dividends (Investopedia, 2010, p. 1).

References
Investopedia. (2010). Dividend Payout Ratio. Retrieved August 3,
2010, from
Investopedia:http://www.investopedia.com/terms/d/dividendpayoutrat
io.asp

Response 2

Explain what can be found on a statement of stockholders equity.

The major elements of stockholders' equity include capital stock,


paid-in capital, retained earnings, treasury stock, unrealized loss on
long-term investments, and foreign currency translation gains and
losses.

How might the information contained within the stockholder


equity statement be used for management and investor decision-
making? Provide specific examples of situations in which the
stockholder equity information might be used.
Management may look at the stockholders equity statement retained
earnings section to determine if company should borrow money for
capital investments or finance it through various forms of equity. It
may also be used by the stockholder to evaluate the compensation
paid to the company officers. Investors may also look at the statement
for cumulative net unrealized gains and losses before purchasing
stock in the company. Investors are also interested in the paid in
capital because they can compare it to the additional paid in capital
and the difference between the two values will equal the premium
paid by investors over and above the par value of the shares.

DQ 2

Week 3 DQ 2
Due Thursday, Day 4

Provide an example from the text or the Internet that demonstrates a


situation in which a companys net profits appeared good in the
statements, but the gross or operating profits presented a different
picture. Discuss how this might have occurred. Respond to the
following question, addressed in Problem 3.6 on p. 109 (Ch. 3): Why
is the bottom-line figure, net income, not necessarily a good indicator
of a firms financial success? Look for indicators like liquidity or
solvency to answer this discussion question.

An example that demonstrates the situation is Enron. Enrons


financial statements did not show all the expenses and costs. Instead
of showing them on the income statement they made entries so the
cost and expenses would post in the balance sheet. The same was
done with the revenues. This way it would be less expenses and the
net profit appeared good. Many debts and losses were not reported in
the financial statements. From the third quarter of 2000 through the
third quarter of 2001, the directors fraudulently used reserve accounts
within Enron Wholesale to mask the extent and volatility of its
windfall trading profits, particularly its profits from
theCalifornia energy markets; avoid reporting large losses in other
areas of its business; and preserve the earnings for use in later
quarters. By early 2001, Enron Wholesale's undisclosed reserve
accounts contained over $1 billion in earnings. The head of the
company improperly used hundreds of millions of dollars of these
reserves to ensure that analysts' expectations were met. In addition,
Skilling and others improperly used the reserves to conceal hundreds
of millions of dollars in losses within Enron's EES business unit from
the investing public.This would show the creditors that Enron was
making profits and its position was solid.

The net income is not necessarily a good indicator of a firms


financial success because the income statement only shows the profit
or loss at a period of time and does not show the whole picture of the
company. The Balance Sheet, Statement of cash flow, Statement of
shareholders equity and the Income Statement all together give the
real picture of the business. Each one of them shows different aspects
of the business. These statements show where the income is actually
coming from; is it from sales or from loans the company is
borrowing? If the company is selling a building or any other asset but
that does not mean that it is selling more products and making profit.
Looking at the Income Statements the company might be making
profit but at the same time it is extremely leveraged.

Response 2

A companys net income is not the whole picture, just part of it. There
are lots of things that contribute to the net income that may not be
significative to the companys success. If the value of a dollar has a
sudden change that can affect the bottom line if the company happens
to hold the medium of exchange that can benefit by the change that
might occur. The company can falsely inflate the bottom line. A
companys net income is coupled with liabilities, cash flow, and
selects financial ratios. Looking at it this way is a much better way of
seeing what the companys success is like. A company can change up
many things to make it look like their income is better. These things
that can be changed are single sales events, cash infusion, or false
financial statements. Some things like debt that a company has, the
companys cash on hand, their capital assets conditions, or even their
sales trends. To figure the success of the company, you must look at
the whole picture. One thing cannot tell you all the facts of the
companys affairs. You cannot tell the net income of the company just
from the bottom line. Look at all the financial records.

Response 3

Provide an example from the text or the Internet that demonstrates a


situation in which a companys net profits appeared good in the
statements, but the gross or operating profits presented a different
picture. Discuss how this might have occurred. Respond to the
following question, addressed in Problem 3.6 on p. 109 (Ch. 3): Why
is the bottom-line figure, net income, not necessarily a good indicator
of a firms financial success? Look for indicators like liquidity or
solvency to answer this discussion question.

Net income is not necessarily a good indicator of a firms financial


success because they have ways to manipulate it by increasing their
revenues or hiding some of their expenses. For investors trying to
decide where to invest their money, they need to look more into
assessing how the company came up with the numbers they
presented.
An example of this situation is when Laribee Wire Manufacturing Co.
exaggerated in recording their inventory value which allowed them in
acquiring loans from six banks totaling to about $130 million using it
as collateral. At the same time, they reported $3 million in net income
for the period, but in actuality they lost $6.5 million.

This company showed a higher net income by reporting fake


inventory in which its value was overstated and transferred over to
their income statement. When the banks assessed their financial
statements, it was enough to sway them into lending the loans they
needed.

Reference:

Investopedia. (2010). Spotting Creative Accounting On The Balance


Sheet. Retrieved
fromhttp://www.investopedia.com/search/searchresults.aspx?
q=Spotting+Creative+Accounting+On+The+Balance+Sheet&submit=
Search

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ACC 290 Week 4 Practice Quiz (New)

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Question 1 A service company's operating cycle is ordinarily shorter
than that of a merchandising company.
STOCK DIVIDEND

Stock Split

University of Phoenix

Stock Dividend

In the present time, the stock dividend has become important concept. When dividend

is given in form of stock, it is called stock dividend. In this form of dividend, the cash does

not use. It is important, when the corporation declares stock dividend, the market value of the

share decreases because the number of stock increases. The many companies prefer stock

dividend due to the tax benefit. If the individual gets stock dividend, he does not pay any tax

on stock dividend. Thus the stock dividend reduces tax burden. On the other hand, the

ownership of investors also spurs up in the company because the number of holding share

increases. There is also disadvantage of stock dividend. The market value of the share

decreases, so the market value of holding also decreases (Kennon, 2009).

The ABC Company is leading company in its industry. The number of outstanding

share of the company is one million. On the other hand, the number of investors is five

millions. The value of market capitalization is $100 million. The management declares 20%

stock dividend. Thus the 200000 shares will be distributed as a stock dividend. The number

of outstanding share will be increased by 200000 and the new total number of outstanding
stock will be 1.2 million. On the other hand, the new value per share in the market will be

$83.33 (100 million/1.2 million). This example is taken from below mentioned link:

Stock Split

The stock split is also an important concept. When the management wants to increases

number of shares, the management follows this method. In this method, the face value of the

share is split and number of share gets increased. Due to increment in number of outstanding

share, the market value of per share also gets affected but the total market capitalization of

the company does not affect. Both stock split and stock dividend increase number of

outstanding shares but both are different due to the accounting treatment. In the stock split,

the investors do not get any real benefit. It is also known as non-cash distribution of

dividend. The motto behind stock split is to increase trading of the shares in the market

(Baker, 2009)

For example, the face value of per share is $100 and the total outstanding shares are

100 million. If the management of the company announces stock split in ratio of 1:2, the total

outstanding shares will be increased by 100 million, thus the new total number of the share

will be 200 million. On the other hand, the face value of the share will reduce by 50%. So the

new face value of the share will be $50. Due to effect of stock split, the holding share of the

investor will also increase in the prorate basis. If the investor has 10 shares, now he will have

20 shares. It is important thing that the total issued capital will not be changed. The

illustration of stock split has been got from following link:

Reverse Stock Split

The reverse stock split is just opposite of stock split. In this process, the management

reduces the number of outstanding shares. The company increase face value of the share. In

this method corporation decides a ratio such as 2:1. Thus the company accumulates two

shares in one share. In this method, the total market value of company does not change. Due
to reverse stock split, the earning per share and face value of per share rises. Thus the reverse

stock split provides just opposite result from stock split. It is important question, why

company selects this method. When the management seems that the face value of the share is

less as compared to competitors then the company goes for this method to make its share

value to equal to competitors shares face value. It is also a sound strategy to increase

treading of shares. If the face value of share is too cheap in comparison to competitors, the

investors will be discouraged for investment. For increasing the confidence of investors, the

management uses this method (Mladjenovic, 2009).

For example, an investor holds 100 shares of XYZ Company and the face value per

share is $50. If the management go for reverse stock split option and declares one share for

10 shares then the holding of the individual will reduce 9 shares for every 10 shares. Thus the

new holding of the investor will be 10 (100/10) shares but the face value per share will be

$500. It is also important that the total market capitalization will remain as same as before

reverse split. The example of the reverse split is take form below mentioned link:

http://www.sec.gov/answers/reversesplit.htm.
References
Baker, H. K. (2009). Dividends and Dividend Policy. John Wiley and Sons.
Kennon, J. (2009). All About Dividends. Retrieved May 31, 2010, from
http://beginnersinvest.about.com/od/dividendsdrips1/a/aa040904_2.htm
Mladjenovic, P. (2009). Stock Investing for Dummies. Dummies.

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ACC 290 Week 4 Vocabulary Activity (New)

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WileyPLUS Assignment: Week 4 Vocabulary Activity Resource:

Analyzing an Income Statement

The net income of Kodak has decreased a bit; it appears that the company is
more profitable. By conducting a side by side analysis from 2004 to 2003 the
company has increased in current assets and decreased in total assets. It
appears that the company went down in property, plant and equipment net as
well as discontinued operations. So, despite the decrease in total assets it looks
like the company has made a good decision.

The company has also decreased its total liabilities by about 4%. I believe this to
be good because the short term borrowings and long term debt has decreased.
To me, this means that the company is tightening their belt and paying off old
debt.
Total shareholders equity has down a little bit in dollars, but on the percentage
level the companys percentage has gone up. I believe this is because the
company issued $104k more shares in 2004 than in 2003. The company has the
same amount of shares outstanding in 2004 that it did in 2003 as well. Retained
earnings on the stock have gone up in 2004 as well. I believe this is contributed
by the more shares that have been issued.

I believe the profitability of the company is under good standings. They appear to
be making the necessary adjustments in the company to stay with in a profitable
income.

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ACC 290 Week 4 Wileyplus Assignment P4-8A, BYP5-1,


BYP5-2, BE5-1, BE5-2, IFRS5-2, IFRS5-4, PQ-1, PQ-2,
PQ-3 (New)

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Week 4 Assignment Complete the following Cash Flow Statement


Analysis

Cash Flow Statement Analysis

The cash flow statement is important financial statement of the

corporation. The cash flow statement states from where cash has come and

where cash has been gone. Thus the cash flow statement makes a relationship

between beginning balance and ending balance of cash. The cash flow statement
is prepaid on the basis of income statement and balance sheet of the company.

The Little Bit Incs beginning cash balance including marketable securities was

$24000. On the other hand, the ending cash balance including marketable

securities of the company was $40000 (Weygandt, Kimmel & Kieso, 2009).

The net income of the company was $5500 during 2009. The company

generated cash inflow from operating activity is less as compared cash out flow

from operating activities. The company generated $9000 negative cash balance

in operating activity section of the cash flow statement. On the other hand, in

the investment section, the firm has also negative cash balance. The firm has

$7000 negative balance in investment section of the cash flow statement. The

Little Bit Inc made investment during the year instead of selling of assets. Last

section of the cash flow statement is financing activity section. In which, all

finance related activities come. The corporation sold some shares and borrowed

some money from outside lenders therefore the company has positive case

balance by $32000 in financing activity section.

Reference

Weygandt, J.J.,Kimmel, P.D. & Kieso, D.E. (2009). Managerial Accounting: Tools for

Business Decision Making. John Wiley and Sons.

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ACC 290 Week 5 Discussion Question 1

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What is the control environment? How does the control environment
affect a companys internal controls? Week 5 DQ 1
Due Tuesday, Day 2

In what ways does the statement of cash flows relate to the balance sheet
and income statement?

It is important to understand what we are doing with the numbers and the results
these numbers give us because the result is the information that will be available to
us from financial statements. Although some want to see the income statement and
ignore the other statements we need to use them together to see the total picture of
what is happening to our business. The relationship between the numbers on the
financial statements shows us everything we need to know about the business.
The income statement shows income and expenses for a period of time and if we
are making or loosing money. The balance sheet compares the assets to liabilities
and shows how much money the business would have if everything is sold today.
The statement of cash flow might be the most critical statement because there is
plenty of information we can gain form it. This statement relates with the income
statement on operating activities to see if they are generating cash or not. It is
related to the balance sheet on how much cash is used in investing activities. In
relationship with the balance sheet the cash flow statement shows what cash is
provided or used by financing activities. It will tell us how much debt has been
paid and will indicated if we are using more debt or have paid down the credit line.
When the business makes a sale or receives payment for a sale on credit that is an
inflow. A sale shows up as income on the profit and loss statement and as an inflow
on the cash flow statement. It also shows up either as cash or accounts receivable
on the balance sheet. Also, how quickly we can collect on accounts receivable will
play a big role in the cash flow. When the business spends money, it shows up as
an expense in the profit and loss statement and as an outflow on the cash flow
statement. It also shows up on the balance sheet as a decrease in cash, or an
increase or decrease in liabilities, depending on what the expense represents.

Response 2
In what ways does the statement of cash flows relate to the balance sheet and income statement?

The cash flow statement relates to the income statement and balance sheet. The net income
from the income statement is listed on the statement of cash flows. Operating activities are
analyzed on the statement of cash flows; this section of the statement reconciles the net
income to the actual cash the company received from or used during operations. The second
section of the statement of cash Flows is the cash flow from investing activities which
include purchase or sale of assets. The last section in the Statement of Cash Flows is the cash
flows from financing activities that includes raising cash by selling stocks/bonds or
borrowing from backs; or cash out flows from paying back loans. The balance sheet shows
the different account balances at the end of the accounting period. The statement of cash
flows reflects changes in the accounts listed on the balance sheet between accounting periods.
The net cash from operating, financing, and investing activities are added up to calculate the net
change in cash.

Week 5 DQ 2
Due Thursday, Day 4

Discuss how the statement of cash flows is utilized by investors. If you


were an investor reviewing a statement of cash flows, what section might
interest you most? Why? Discuss the circumstances in which other
sections of the statement might be important to an investor.

Prior to making an investment in a company, one would want to


understand the decisions the owners are making to fund the
operations of the company daily. Maintaining sufficient cash to
acquire new product, pay overhead, and satisfy generated sales
would be the predominant need of the company. Second need
would be for the company to have sufficient cash to remain
competitive. This may require cash to invest in research and
development, increase inventory as new product introduction,
improve efficiency in plant and equipment, or cash to satisfy prior
borrowing obligations. By reviewing the statement of cash flow,
the investor can determine if the company is generating sufficient
cash internally to fund operations or are they requiring outside
injection of cash to finance the short fall in cash needed to
operate the company. Last, the investor can review the
statement of cash flow to better understand the leverage of the
company and the requirement for repayment of debt, or dividends
to reward prior investments.

Response 2
Discuss how the statement of cash flows is utilized by investors. If you were an investor reviewing a
statement of cash flows, what section might interest you most? Why? Discuss the circumstances in
which other sections of the statement might be important to an investor.
The statement of cash flow is utilized by investors because it has all information integrated
from the balance sheet and the income statement. The statement of cash flow is used by an
investor to see if the operating activities are greater than the net income to have earnings that
are called high quality. If operating activities are less, then a red flag will be raised as to
why the net income is not becoming cash. Another reason would be investors believe cash is
the best. The statement shows all cash coming and going from the business. If the company
generates additional cash than what is being used, then the company can reduce their debt,
acquire another business, or buy some of the stock back. The last reason why would be that
financial models are based upon the statement of cash flow.
If I was an investor reviewing a statement of cash flows the section that might interest me the
most would be the operating activities. I would like to know how the company was doing and
what areas need to be improved to have more cash generated in the business. All the sections
are important to an investor so they can see the complete big picture of their investment.

-----------------------------------------------

ACC 290 Week 5 IFRS Paper (New)

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IFRS 2-1: In what ways does the format of a statement of financial of


position under IFRS often differ from a balance sheet presented under
GAAP? IFRS 2-2:

Analyzing Statements of Cash Flows

4.8. Research Problem


Choose five companies from different industries and locate their statements of cash flows
for the most recent year.
(a) Create a table to compare the dollars provided or used by operating, investing, and financing
activities, as well as the overall increase or decrease in cash.
(b) Create a second table for each company comparing this same information for each of the three
years presented in that companys statement of cash flows. Include an additional column that looks at
the combined cash flows for all three years.
(c) Write a short analysis of the information gathered. Your discussion should address, among other
things, whether cash flow from operating activities is large enough to cover investing and financing
activities, and if not, how the company is financing its activities. Discuss differences and similarities
between the companies you have chosen.
(a) Create a table to compare the dollars provided or used by operating, investing, and financing
activities, as well as the overall increase or decrease in cash.

STATEMENT OF CASH FLOW ANALYSIS

HARELY
STARBUCKS DAVIDSON RITE AID
2008 2008 2008

NET INCOME / STARTING $


LINE $ 315.5 $ - (1,079.0)
$
OPERATING ACTIVITIES $ 1,258.7 (684.7) $ 79.4
$ $
INVESTING ACTIVITES $ (1,086.6) (393.3) (2,933.7)
FINANCING ACTIVITIES $ (184.5) $ 1,293.4 $ 2,904.0
CASH $ (11.5) $ 190.7 $ 49.9

(b) Create a second table for each company comparing this same information for each of the three
years presented in that companys statement of cash flows. Include an additional column that looks at
the combined cash flows for all three years.
STARBUCKS

2008 2007 2006

Net Income/Starting Line 315.5 672.64 564.26


Cash from Operating Activities 1258.70 1331.22 1131.63
Cash from Investing Activities -1086.60 -1201.95 -841.04
Cash from Financing Activities -184.50 -171.89 -155.33
Net Change in Cash -11.50 -31.35 138.80
Net Cash - Beginning Balance 281.30 312.61 173.81
Net Cash - Ending Balance 269.80 281.26 312.61

HARLEY DAVIDSON

2008 2007 2006

Net Income/Starting Line 0 933.84 1043.15


Cash from Operating
Activities -684.65 798.15 761.78
Cash from Investing
Activities -393.25 391.21 -35.26
Cash from Financing
Activities 1293.39 -1037.80 -637.02
Net Change in Cash 190.70 164.46 97.42
Net Cash - Beginning
Balance 402.85 238.40 140.98
Net Cash - Ending Balance 593.56 402.85 238.4
RITE AID

2008 2007 2006

Net Income/Starting Line -1078.99 26.83 1273.01


Cash from Operating Activities 79.37 309.15 417.17
Cash from Investing Activities -2933.74 -312.78 -231.08
Cash from Financing Activities 2903.99 33.72 -272.84
Net Change in Cash 49.61 30.08 -86.75
Net Cash - Beginning Balance 106.15 76.07 162.82
Net Cash - Ending Balance 155.76 106.15 76.07

(c) Write a short analysis of the information


gathered. Your discussion should address,
among other things, whether cash flow from
operating activities is large enough to cover
investing and financing activities, and if not,
how the company is financing its activities.
Discuss differences and similarities between the
companies you have chosen.

Starbucks operating cash flow has gone up in 2007 and decreased a little in 2008. The net change in cash for Starbu
from the previous year. This could mean that this year there can be a gain.

Harley Davidson's operating cash flow has significantly decreased from 2007. It appears the company was on an u
supplied for net income. With the economy the way it is and not many people buying at this point could have an e
positive gain.

Rite Aid's operating cash flow has taken a significant decrease as well from previous years. Although, after taking
years. Rite Aids net gain in cash could be from the ever growing needs in medical supplies. This also could reflec

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ACC 290 Week 5 Learning Team Reflection Summary
(New)

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Reflection and Financial Reporting Problem Part II. Discuss the

objectives for ACC 290 Week Four. Findwhat.com Case - CheckPoint

ACC 230

Findwhat.com has recorded the 135 percent increase in the revenue which is mainly

due to the business acquired of Espotting during the year. The different accounting policies

are present for the acquiring firm and the acquired firm. The company has recorded certain

premature revenues for the amount which advertisers had made only the advance deposit. As

result, the company is recognizing the vendor financing as revenue. In some places, the gross

revenue has been recognized while in another, the net revenue has been recognized. The

network click revenue is recognized at gross level while the private level revenue is taken at

net level. Some of the revenue expenditures have been recognized as the capital expenditures.

Revenue for set up network fee is treated as deferred revenue and is recognized over

a period of time. The company is very inconsistent with regards to its accounting policies in

terms of recognition of revenue. The provision and treatment of amount for doubtful debt is
also not satisfactory. When a customer clicks on a sponsored advertisement, the whole of the

revenue due to him is recognized. The company is having a very high amount of doubtful

debt balance at the end of the year ending December 31, 2004.

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ACC 290 Week 5 WileyPlus Assignment BE6-5, BE6-7,


BYP6-1, BYP6-2, BE7-4, BE7-6, IFRS PQ-1, PFRS PQ-
2(New)

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Assignment: Week 5 Assignment Complete the following Week 5


Week 7 DQ 1
Due Tuesday, Day 2

Post your answer to Study Question 5.2 on p. 180 (Ch. 5). As


you read your classmates responses, consider the following
scenario: If you compared two different companies that utilized
two different valuation methods, how might the quality of the
results differ? Also, comment on the difficulty of making
comparisons between two firms that use different valuation
methods.

Understanding the different inventory methods is


crucial. First the person that establishes the inventory needs to
determine which method to use. LIFO, or FIFO. LIFO means Last
in First Out. This means that when a purchase is made, and sales
are recorded the newest product is used first. So if I bought 10
combs at $2 on December 1st, and then I buy 5 combs at $2.50
on December 10th. When sales are made I am going to record
sales using the $2.50 until I sell through the 5 combs that were
purchased on the 10th, and then the cost will go to the previous
purchase price of $2 until those 10 combs are sold through. FIFO
is just the opposite. Meaning that goods are used in the order
that they are received. The first items ordered, are the first items
sold. Either method will pass an audit. It is important to note
though that managers can't switch back and forth between the
two methods. Profit will vary depending on which method is being
used. Say you sold only 6 combs at $3 each. Using the LIFO
method this would equal $3.50 profit. If you used the FIFO
method, this would result in a $6.00 profit.

Response 2
Post your answer to Study Question 5.2 on p. 180 (Ch. 5). As you read your classmates responses,
consider the following scenario: If you compared two different companies that utilized two different
valuation methods, how might the quality of the results differ? Also, comment on the difficulty of
making comparisons between two firms that use different valuation methods.

It is very important to understand which inventory valuation method is being used to


determine the profit numbers quality. The balance sheet, statement of cash flow and income
statement can be directly impacted by the valuation method that used to determine the costs
of inventory. The three methods that are used are FIFO, LIFO and Average Cost. The
valuation ratios can be dramatically affected depending on the inventory valuation that is
being used over a long-term period; especially because prices are likely to rise. When using
FIFO you can increase net income, but then at the same time raise the amount taxes that
business is obligated to pay. When using LIFO the inventory can be obsolete because they are
old this will result in lower net revenue because the products pricing is higher. The Average
Cost results usually fall between LIFO and FIFO. The bottom line can be affected mainly by
the inventory analysis and the ratio results that are formed from that analysis. It is easier to
compare companies that are in the same line of business, so I believe that quality of results
would differ tremendously if different valuation methods were used. If you use LIFO that
company may seem unattractive but they are performing well, as for FIFO it may look good
as for profit, but may not be performing well.

DQ 2

Week 7 DQ 2
Due Thursday, Day 4

Post your answer to Study Question 5.6 on p. 180 (Ch. 5).


Discuss the consequences of poor quality reporting. What has
the U.S. government done to improve the quality of reporting
after recent financial scandals such as Enron?

I think that the significance is that the analysts only see this one
HUGE transaction. The events that actually led up to this large
transaction actually took place over a 2 year period. These items
should have been written off as they occurred. Wall Street would
not have known that the executives refused to write off these
accounts when they should have. Wall Street only see's the one
large transaction. If the company would have been more honest
in their reporting they would have seen (more than likely) that
there were many accounts over a two year period that should
have been written off at different periods. So the analysts would
not have seen a pattern of recurring write-offs. If the analysts
only see the one transaction they are less likely to be able to
paint an accurate picture of the financial standing of the business
for investors, or potential investors. If the investors could see
that there were many accounts that had to be written off maybe
their investing decisions would have been different. The
regulation of the accounting field has grown by leaps and bounds
since the Enron scandal. The government has implemented
several agencies and regulations to ensure honesty in accounting
practices. SOX is one example of an agency that has been put into
place to ensure honesty in accounting. SOX implements things
like internal controls, and accountability for CEO's and CFO's.

Response 2
I believe the impact and importance of this write-off event is a
very big matter. It is obvious how they handled it that it was a
scandal from the start. I think that everyone involved had a big
role in how things played out. To me I think of the investors as a
really big hit to this but also feel that audit committees have to be
held responsible as well. It has been shown over many examples
that adit oversights are happening to financial reporting.
Although I do feel they are getting better and tighter due to
conforming tightly with the GAAP requests. I feel over time the
accounts receivable should have been written off in smaller
increments and not all taken by $405 million at once. Maybe that
isn't correct but it would have been easier I would think to take
the receivables over time.

Response 3
Wall Street should have read the footnotes and seen that the write off was for
accounts receivables and should have been reported in the allowance for doubtful
accounts. Every company that allow sales on credit face doubtful accounts;
therefore, the write off may reoccur. The significance of this transaction is that
WorldCom want to cover up the $405 million dollars that it was unable to collect from
its customers, but WorldCom wrote off a large sum of money rather recording the
write-off as needed and the analyst over looked it. Depending on how the company
policy is for writing off accounts, from 1998 to the 3rd quarter in 2000 is 11 quarters.
If the company wrote off bad accounts quarterly it should have wrote off
36,818,181.82 per quarter. Investors would not want to continue to invest into a
company that has poor collection skills, or poor management. Unusual items are
simply for those items that are not recurring operating expenses. Bad debts do not
fall under this category. Since the Enron and WorldCom scandals many rules and
regulations have been put in place by the government such as SOX. More people are
being held accountable for their actions and consequences follow poor quality
reporting such as fudging the books.

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ACC 290 Week 4/5 Individual Assignment Financial


Reporting Problem Part II (**2 Different Papers**)(New)

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Financial Reporting Problem Part II Access the internet to acquire a


copy of the most recent annual report for the public traded company
used to complete the Financial Reporting Problem, Part 1 assignment
due in ACC 290 Week Four.

Candela Corporation
Axia College of University of Phoenix

Candela Corporation

Candela Corporation and Subsidiaries have been working for over 34 years

developing and commercialize aesthetic laser systems that allow physicians and

personal care providers to treat a variety of cosmetic and medical conditions

such as removal of spider veins, scars, stretch marks, warts, as well as hair

removal and age spots, freckles and tattoos. Other skin treatments such as

psoriasis and acne and acne scars are also treated. (Axia College, 2007)

Going from top to bottom on The Candela Corporation and Subsidiaries

Consolidated Statement of Cash Flows; for the operating activities, 2002 shows

an alarming loss in the net income while 2003 and 2004 for the company are

showing a significant and steady climb in the net income. In 2004 there was a

new category added called Provision for the disposal of discontinued operations

and the category has caused an increased the account for 2004. Loss from

discontinued operations grew from 2002 to 2003 but had a significant decline for

2004. Depreciation has increased over the last 3 years as well. Provision for bad

debts increased significantly too, but an increase in bad dept is expected as

revenue increases. The provision for deferred taxes shows the company went

from a loss in 2002 and 2003 to show there was no tax loss in 2004. The tax

benefit from exercised stock options has practically doubled sense 2003. The

changes in assets and liabilities for the last 3 years have been up and down.

Receivables have increased, notes receivable decreased, and inventories have

increased. Other current assets, other assets have also increased. Accounts

payable has made a significant decrease in the last 3 years as well as accrued

payroll expenses. The accrued payroll decreasing could mean that the amount of
employees over the years has decreased as well. The accrued warranty costs

have increased as well; this could mean that the company renewed equipment

warranties. The net cash provided by operating activities looks to have gone

from a loss in 2002 to a large profit in 2003 and then a decrease, yet still a profit

for 2004. It appears on the operations level that management needs to do more

to regulate the companys finances so there is not an up and down variance each

year.

The cash flow from investing activities shows me that in the last three years

they had large amount of investments in 2002 and 2003 but now they are letting

them decrease.

The cash flow from financing activities states that the proceeds from issuance

of common stock have increased significantly from 2002 to 2003 and rose a little

more in 2004. The repurchases of stock has not happened sense 2002 and the

principle payment of long-term debt grew in 2003 from 2002 and shows no

activity for 2004. Same goes for the net borrowing on line of credit; it appears

that Candela Corporation is current on payments to line of credit. So, the net

cash from financial activities looks great for 2004. The cash and cash equivalents

for each year have increased steadily.

After reviewing the consolidated statement of cash flows for Candela

Corporation, I believe the company is making a profit, but perhaps need some

control over their operating activities.

Reference

Axia College. (2007). Statement of Cash Flows. Retrieved June 14, 2010 from Axia
College, Week Six, ACC 230.

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