Professional Documents
Culture Documents
-----------------------------------------------
ACC 290 Final Exam Guide (New)
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?
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
Another response
-----------------------------------------------
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
Balance Sheet
Income Statement
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
What are debits and credits? How are debits and credits used to record
business transactions? Compare and contrast sole proprietorships,
partnerships, and corporations.
-----------------------------------------------
references
http://www.investopedia.com/terms/i/intangibleasset.asp
-----------------------------------------------
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
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.
DQ2
For Discussion Question 2: Post your response to the following:
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.
Another response
-----------------------------------------------
By
Kamilah Crooms
Accounting 220
Jess Stern
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.
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.
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 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.
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.
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.
References:
-----------------------------------------------
Physical con
security gua
identificatio
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
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
-----------------------------------------------
Another response
DQ2
-----------------------------------------------
What accounts are subject to adjusting journal entries and why? Cost,
Volume, and Profit Formulas
By
Kamilah Crooms
When fixed costs decrease, what does this do for sales? Illustrate
your explanation with an example from a fictitious company.
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.
Reference
statements.suite101.com/article.cfm/cost_volume_profits*the_p_l.
Retrieved 2/28/2010
-----------------------------------------------
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.
-----------------------------------------------
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.
-----------------------------------------------
ACC 290 Week 2 Practice Quiz (New)
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
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
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.
-----------------------------------------------
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
-----------------------------------------------
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
-----------------------------------------------
What are the steps in completing the accounting cycle? How do the
different steps affect the financial statements? What is a Flexible
budget?
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
-----------------------------------------------
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.
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
-----------------------------------------------
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
DestinyWear Products
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
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.
Conclusion
REFERENCES
-----------------------------------------------
Apart from this strength the company also has some weakness in its
financial statement:
(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.
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.
-----------------------------------------------
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
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
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?
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.
-----------------------------------------------
How would you calculate cost of goods sold? What items make up
cost of goods sold
-----------------------------------------------
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.
-----------------------------------------------
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.
References
Investopedia. (2010). Dividend Payout Ratio. Retrieved August 3,
2010, from
Investopedia:http://www.investopedia.com/terms/d/dividendpayoutrat
io.asp
Response 2
DQ 2
Week 3 DQ 2
Due Thursday, Day 4
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
Reference:
-----------------------------------------------
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
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
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
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.
-----------------------------------------------
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.
-----------------------------------------------
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
Reference
Weygandt, J.J.,Kimmel, P.D. & Kieso, D.E. (2009). Managerial Accounting: Tools for
-----------------------------------------------
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
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.
-----------------------------------------------
HARELY
STARBUCKS DAVIDSON RITE AID
2008 2008 2008
(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
HARLEY DAVIDSON
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
-----------------------------------------------
ACC 290 Week 5 Learning Team Reflection Summary
(New)
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.
-----------------------------------------------
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.
DQ 2
Week 7 DQ 2
Due Thursday, Day 4
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.
-----------------------------------------------
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
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)
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
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.
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
Corporation, I believe the company is making a profit, but perhaps need some
Reference
Axia College. (2007). Statement of Cash Flows. Retrieved June 14, 2010 from Axia
College, Week Six, ACC 230.