You are on page 1of 108

ACC 290 Week 3/4 Learning Team Financial Reporting

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

FOR MORE CLASSES VISIT


www.acc290genius.com

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: 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.

--------------------------------------------------------
ACC 290 Final Exam Guide (New)

FOR MORE CLASSES VISIT


www.acc290genius.com

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. Paid $15,000 for utilities 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 is the only o
control of a specific job or a restocking
have authority to make Sales team to
decisions. the customer

Segregation of duties This is when the company has A church- Yo


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
we make the
to leaving an
customer sig
Delivery fo

Physical, mechanical, and Allows the company to control Our job has
electronic controls assets through physical or Cisco and th
electronic based systems or employees b
programs. lunches. Als
long the CSR
or working.

Physical con
security gua
identification
Independent internal Any information that can be My job has a
verification reviewed , compare, and our inventor
reconciliation by a employee someone say
shorted on th
go back and
inventory an
numbers in
physical cou
the numbers

Other controls Bonding of employees, Our compan


company protects against recently beca
abuse of assets. the company
card for pers
not work rel

Principles of Cash How it Works Example


Management

Invest idle cash Occurs when any My fathers


excess funds or cash company makes
needs to be invested, wise investments
and it turns around
in his favor

Plan the timing of A company wants to During the


major expenditures make sure that there recession profits
is money set aside dropped lower than
for major cash expected so some
needs companies pulled
from these funds

Delay payment of When a company Ok, when times are


liabilities pays the bills at an tough at home and
appropriate time not bills are due I
late and not too organize the bills by
soon. which bills needs to
be paid the soonest,
because if I pay the
bills too early I will
cut off my excess
funds that could be
used for something
else

Keep inventory levels Happens when a Sees Chocolate


low company keeps the factory has to make
inventory low so sure that they are
that it will continue not over producing
to bring profit or making too much
or else the sit and
the company will
lose money

Increase the speed of Money that is owe When a customer


collection on to the company by places a order for a
receivables other people or product and has not
customers is money paid yet, the
that can not be company can not
counted towards the count the money as
companies funds theirs until it is
received.
--------------------------------------------------------

ACC 290 Week 1 Discussion Question 1

FOR MORE CLASSES VISIT


www.acc290genius.com

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? 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 1 Discussion Question 2

FOR MORE CLASSES VISIT


www.acc290genius.com
What are debits and credits? How are debits and credits used to record
business transactions? 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.

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

ACC 290 Week 1 Individual Assignment Financial


Statements Paper

FOR MORE CLASSES VISIT


www.acc290genius.com
Individual - Financial Statements Paper - Prepare a 700 -1,050 word
paper in which you identify the four basic financial statements. 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 Statemen

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

ACC 290 Week 1 Practice Quiz(New)

FOR MORE CLASSES VISIT


www.acc290genius.com

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


consumed within the next year or the normal operating cycle,
whichever is longer7 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.

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

ACC 290 Week 1 Vocabulary Activity (New)

FOR MORE CLASSES VISIT


www.acc290genius.com

WileyPLUS Assignment: Week 1 Vocabulary Activity Resource: 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 u

Sales budget Estimate of the expected sales The sales bud


for the period. All of the other and units. Th
budgets depend on the sales management
budget. This is where all the units will be
other budgets will start from period

Production budget A production of units needed Shows manag


to be produced in order to units will be
meet the projected sales each budget
amount is ne
inventory dem

Direct materials budget Is the estimated quantity or Shows manag


cost of the raw materials that raw material
is needed in order to produce on hand and
the units required to fulfill be ordered to
inventory demands.

Direct labor budget A estimate of cost and Shows how m


quantity of direct labor many laborer
needed in order to meet produce the u
production budget perio
will decide w
right amount
needed and i
will be able t

Manufacturing overhead An estimated expected This list all o


budget amount of manufacturing cost involving cas
for the budget period in a quarter

Selling and administrative Anticipated selling and Shows area o


expense budget administrative expenses in the that are not l
budget period manufacturin
as marketing
etc for the bu

Budgeted income statement Estimate of expected Is a very imp


profitability of operations in a because it sh
budget period estimated pro
period.

Cash budget A projection of expected cash Cash budget


flows in and out of the management
business. total of all ca

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

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


E2-4, IFRS2-4 (New)
FOR MORE CLASSES VISIT
www.acc290genius.com

WileyPLUS Assignment: Week 1 Assignment Resource: WileyPLUS


Complete the following Week 1 Assignment in WileyPLUS:
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 Discussion Question 1

FOR MORE CLASSES VISIT


www.acc290genius.com

What is the revenue recognition principle? What is the expense


recognition principle? Why are they important to financial reporting?
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 Discussion Question 2

FOR MORE CLASSES VISIT


www.acc290genius.com

What accounts are subject to adjusting journal entries and why?


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.

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

ACC 290 Week 2 LT Reflection Summary (New)

FOR MORE CLASSES VISIT


www.acc290genius.com

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

ACC 290 Week 2 LT Reflection Summary

FOR MORE CLASSES VISIT


www.acc290genius.com

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

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

ACC 290 Week 2 Practice Quiz (New)

FOR MORE CLASSES VISIT


www.acc290genius.com

Question 1 Expenses decrease retained earnings. Question 2 During


2014, Gibson Company assets decreased $50,000 and its liabilities
decreased $90,000 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 2 Vocabulary Activity (New)

FOR MORE CLASSES VISIT


www.acc290genius.com
WileyPLUS Assignment: Week 2 Vocabulary Activity Resource:
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.

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

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)
FOR MORE CLASSES VISIT
www.acc290genius.com

ACC 290 Week One - DQ #1 What are the four basic financial
statements? 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.

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

ACC 290 Week 3 Discussion Question 1

FOR MORE CLASSES VISIT


www.acc290genius.com

What are the steps in completing the accounting cycle? How do the
different steps affect the financial statements? 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

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

ACC 290 Week 3 Discussion Question 2

FOR MORE CLASSES VISIT


www.acc290genius.com

What are the pros and cons of using reversing entries? Why are
reversing entries optional?

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.ht
m

Mladjenovic, P. (2009). Stock Investing for Dummies. Dummies.

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

ACC 290 Week 3 LT Reflection Summary


FOR MORE CLASSES VISIT
www.acc290genius.com

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?

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.

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

ACC 290 Week 3 Practice Quiz (New)

FOR MORE CLASSES VISIT


www.acc290genius.com

Question 1 The revenue recognition principle dictates that revenue is


recognized in the period in which the cash is received. 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.

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

ACC 290 Week 3 Vocabulary Activity (New)

FOR MORE CLASSES VISIT


www.acc290genius.com

WileyPLUS Assignment: Week 3 Practice Quiz Resource: 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 3 WileyPlus Assignment BE4-1, P4-2A, P4-


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

FOR MORE CLASSES VISIT


www.acc290genius.com
Assignment: Week 3 Assignment Complete the following Week 3
Assignment

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.

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

ACC 290 Week 4 Discussion Question 1

FOR MORE CLASSES VISIT


www.acc290genius.com
How would you calculate cost of goods sold? What items make up
cost of goods sold? How does beginning and ending inventory affect
cost of goods sold? 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

STARBUCK HARELY
S 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 1258.7 1131.6


Activities 0 1331.22 3

-
1086.6 -
Cash from Investing Activities 0 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 1043.1
Line 0 933.84 5
Cash from
Operating -
Activities 684.65 798.15 761.78

Cash from -
Investing Activities 393.25 391.21 -35.26

Cash from -
Financing 1293.3 1037.8 -
Activities 9 0 637.02

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 1078.9 1273.0
Line 9 26.83 1

Cash from 309.1


Operating Activities 79.37 5 417.17

- -
Cash from Investing 2933.7 312.7 -
Activities 4 8 231.08

Cash from Financing 2903.9 -


Activities 9 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 106.1


Balance 155.76 5 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 200
previously was doing well. The net loss in cash at end of year is decreasing fro

Harley Davidson's operating cash flow has significantly decreased from 2007.
cash from operating activities is probable from the lack of information supplied
buying at this point could have an effect on why the net income is decreasing.
gain.
Rite Aid's operating cash flow has taken a significant decrease as well from pre
financing, the net change in cash is better than it has been in previous years. R
supplies. This also could reflect the expansion of the company.

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

ACC 290 Week 4 Discussion Question 2

FOR MORE CLASSES VISIT


www.acc290genius.com

What are the three different inventory cost flow assumptions


commonly used in commerce today and allowed by generally
accepted accounting principles? 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.
--------------------------------------

ACC 290 Week 4 LT Reflection Summary

FOR MORE CLASSES VISIT


www.acc290genius.com

Reflection and Financial Reporting Problem Part I. Discuss the


objectives for ACC 290 Week Three. 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.

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

ACC 290 Week 4 Practice Quiz (New)

FOR MORE CLASSES VISIT


www.acc290genius.com
Question 1 A service company's operating cycle is ordinarily shorter
than that of a merchandising company. The operating cycle of a
merchandising company is ordinarily shorter than that of a service
company Presenting to Stakeholders

Axia College of University of Phoenix

Presenting to Stakeholders

Financial statements provide insight into the companys current


status and lead to the development of policies and strategies for the
future (Axia, 2007). Financial statements and notes to the financial
statements should be used to analyze the company. For instance, what
do the financial statements reveal about why the company has
requested a loan or purchased items on credit? What is the firms
capital structure and what does the firm have outstanding? How well
can the company pay back debt? What recourses are used to pay debt?
What is the companys performance record and are there any future
expansions? What are the expected returns and how successful is the
company compared to industry averages? Which areas of operations
contributed to the companys success, and what are the strengths and
weaknesses of the company? What changes can be made to improve
the future performance of the company?

Key financial ratios will assist in determining the information


requested. Liquid ratios measure a firms ability to meet cash needs as
they arise. The current ratio is a good tool to use because it measures
the ability the firm has to pay debts when due. The current ratio for
REC is at 2.4 times for 2007, although it is down from 2006 the
company is still able to pay current debt when due. Cash flow ratio
considers cash flow from operating activities has increased from
2006, and this indicates an improvement in short-run solvency.
Average collection period has gone down 5 days within the last year.
The cash conversion cycle gives in-site on why the cash flow has
improved or decreased, in this case the conversion period for REC has
improved by 26 days.

Activity ratios measure the liquidity of specific assets and the


efficiency of managing assets. Accounts payable turnover is up seven
times from the prior year and inventory turnover is also up .25 from
last year. Accounts payable turnover is down 9.05 from 12.10 in 2006.
This means that the company is taking longer to repay payables. The
fixed asset turnover and total asset turnover ratios are used to assess
managements skills in generating sales from investments in assets.
The fixed asset turnover has dropped slightly, but the total asset
turnover has risen slightly. The increase in total asset turnover comes
from improvements in inventory and accounts receivable turnover.

Leverage ratios measure the extent of a firms financings with debt


relative to equity and its ability to cover interest and other fixed
charges (Axia, 2007). Debt ratio, long-term debt to total capitalization
and dept to equity have all raised slightly implying a slightly riskier
capital structure. The times interest earned and the cash interest
coverage have increased since 2006. The interest payments can be
covered 7.4 times this year. The cash interest has improved due to the
operating profits and cash from operations. The fixed coverage ratio is
also important in cases where companies use operating leases. In this
case, the fixed charges have increased slightly.

Profitability ratios are used to measure the overall performance of a


firm and its efficiency in managing assets, liabilities, and equity. The
ratios used are the gross profit margin, operating profit margin and net
profit margin. All of which have improved for REC. As well as the
cash flow margin, return on total assets, return on equity and cash
return on assets. Over all the company seems to be in well financial
standings and looking toward a profitable year.

Reference

Axia College. (2007). The Analysis of Financial Statements.


Retrieved June 28, 2010,

from Axia College, Week Eight, ACC 23

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

ACC 290 Week 4 Vocabulary Activity (New)

FOR MORE CLASSES VISIT


www.acc290genius.com

WileyPLUS Assignment: Week 4 Vocabulary Activity Resource:


Interpreting Financial Ratios
Luna Lighting, a retail firm, has experienced modest sales growth
over the past three years
but has had difficulty translating the expansion of sales into improved
profitability. Using
three years financial statements, you have developed the following
ratio calculations and
industry comparisons. Based on this information, suggest possible
reasons for Lunas profitability problems.

Industry

2009 2008 2007 2009


Current 2.3X 2.3X 2.2X 2.1X
Average collection period 45 days 46 days 47 days 50
days
Inventory turnover 8.3X 8.2X 8.1X 8.3X
Fixed asset turnover 2.7X 3.0X 3.3X 3.5X
Total asset turnover 1.1X 1.2X 1.3X 1.5X
Debt ratio 50% 50% 50% 54%
Times interest earned 8.1X 8.2X 8.1X 7.2X
Fixed charge coverage 4.0X 4.5X 5.5X 5.1X
Gross profit margin 43% 43% 43% 40%
Operating profit margin 6.3% 7.2% 8.0%
7.5%
Net profit margin 3.5% 4.0% 4.3%
4.2%
Return on assets 3.7% 5.0% 5.7%
6.4%
Return on equity 7.4% 9.9% 11.4%
11.8%
Based on this information, some possible reasons for Lunas
profitability problems are suggested as under:

a) Net Profit margin of the company has degraded and this might
be due to decrease in the net income of the company due to
increase in expenses. This needs to be improved upon by cost
control and cost reduction.

b) Return on equity of the company has degraded further and this


also indicates that there is a decrease in the net income of the
company due to increase in expenses. This needs to be improved
upon by cost control and cost reduction.

c) Fixed charge coverage has fallen, which means that the debt
payment along with interest might have increased and this will
also lead to decrease in the net income of the company and thus
degrading the profitability position of the company.

d) Operating profit margin has dropped even though gross profit


margin has remained constant. It means that the operating
expenses are higher and need to e controlled to improve the
profitability of the company.

e) The fixed assets turnover and the return on assets have also
degraded; this also indicates decrease in the net income of the
company.
--------------------------------------

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)

FOR MORE CLASSES VISIT


www.acc290genius.com

Week 4 Assignment Complete the following Week 4 Assignment in


Problem 4-8A Brief Exercise 5-1 Brief Exercise 5-2 BYP 5-1 BYP 5-
2 Capstone Discussion Question
Due Tuesday, Day 2

What have you learned in this course about the process of


analyzing financial statements?

I have learned that there is a lot more to analyzing financial


statements than I thought. This class has made me question my
decision to go into the accounting field. I feel inadequate after taking
this class. I am not an articulate, or analytical person. I tend to get
confused easily and do better at putting the information together than
I am at figuring out what it all means. This is my last block of classes
before my Bachelor program starts, and I don't know if I am ready, or
if I even want to continue. Analyzing financial statements takes a
very detail oriented mind, and one that is great at problem solving. It
is critical to understand the financial statements, and how they relate
to one another. There is a lot of information that is not as obvious as
it would seem. Looking at the bottom line will not give a good
picture of how a company is doing financially. It is important to
know the how and why the bottom line looks the way that it does.

Response 2

I have learned that it takes someone that has the patience, tenacity,
and motivation to truly analyze the statements. If you go about it not
wanting to do the work you wont give a good analysis. I found that
you have to be willing to dig deeper than most would to get a full
picture of the company. I found that it is not an easy task to complete.
For me the process is a tedious one. I don't think I would want to go
into that type of accounting where I have to analyze the statements of
a company. I think for me I would be better in specialized accounting
like A/P or A/R. I am better at figuring out problems and figuring out
ways to make them better. I am better at specific tasks so for me I
wouldn't want to analyze the statements. I am glad to have learned
how, because at some point I am sure it will come in handy.

Response 3
All financial statements are essential documents because they tell
what has happened to a business over a period of time but most users
of financial statement are more concerned about what will happen in
the future. Stockholders and creditors are concerned with future
earnings and dividends and company's future ability to repay its debts.
Management is concerned with the company's ability to finance
future expansion.
Working as a bookkeeper I do all the steps in monthly cycles
consisting of entering transactions into the journals, working with
A/R, A/P, payroll and preparing the reports, but I have not been able
to analyze the reports the way I learned in this class. I learned how
important is to monitor and interpret the results. I learned how to
compare financial statements of a company with a company from the
same industry and point out the differences and similarities. This class
taught me the importance of analyzing the Income Statement, Balance
Sheet, Cash Flow Statement and Stockholders Equity each one
individually. I learned how essential is the quality reporting and how
useful this quality is in business decision making. I learned about key
financial ratios: liquidity ratios, activity ratios, leverage ratios, and
profitability ratios. All these ratios are valuable as analytical tools and
will help me indicate the areas of strength and weakness in a business.
Even though I learned the information step by step in this class I tent
to go over every single chapter all over again to better absorb the
material. This class taught us the potential of some management
manipulations of financial statements, thus following the general
accounting rules, being honest, ethical and professional are the ways
on leading to safe and profitable decisions.

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

ACC 290 Week 5 Discussion Question 1

FOR MORE CLASSES VISIT


www.acc290genius.com

What is the control environment? How does the control environment


affect a companys internal controls? What are the negative and
positive elements of a control environment?

Evaluating Financial Health 1

Evaluating Financial Health

Apple Inc. (AAPL)

Axia College of University of Phoenix

Evaluating Financial Health 2

Apple Inc. (AAPL)

Apple is one of the strong market participants of computer industry. It


also involve in manufacturing of telecom devices, software and other
peripherals. It enjoys full advantage of USA as home country, as it has
a strong retail network of 273 physical stores whose majority is in
USA, beside the E-retail outlet around the globe. The diversified
product portfolio empowers the apple to strive in tough competition
against Dell, HP & Compaq (Electronista, 2010). Amongst its
competitor Apples outclass profitability is witnessed of its effective
diversification efficient reach of product to customer and state of an
art Research and Development.

Managements Strategy

It is clear from the financial and the strategic analysis of the Apple
Inc. that the management of the company believes in continued
research, innovation and product development. It may be the sole
reason that why the firm avoids the cash dividend and rely over the
stock options. Besides the hardware business of computer the apple is
also focus on developing application software operating system, and
all such software application which added the value of its product.
The management is of the view that R&D, integrated marketing
channels and its product diversification is the source of competitive
edge against rivals of its industry. Management is aware of the need
of the investment in the promotion and advertisement activities; it
increases the brand equity, brand loyalty and awareness about the
products. Management also considers focusing on the retail store as it
is the source to remain in contact with customer and a way to market
the product directly; it is also a way to cross sell the market to
customer.

Evaluating Financial Health 3

Financial returns in Comparison to Industry


An investor is always keen to know about the profitability. Hence we
start with the assessment of profitability. Apple Inc. has shown a
tremendous improvement in net sales and profitability since 2005 to
2009. In 2008 the net income increases 75.07% and in 2009 increases
34.58% shown that Apple cop. is continuously enhancing its profit.
Company earning P\S is also at increasing trend. In 2009 basic EPS is
9.22 from 6.94 last year, and it was 4.04 in 2007. It should be noted
that no cash dividend is announced since 2005, although stock base
benefit and compensation is given. An increase in return on asset has
been observed in 2009 i.e.26.96% against 19.33% last year while
industries average is 19.8. Hence Apple is leading the Industry from
this angle. Return on equity is 18.92% into 2009 lower than 33.40%
of industry benchmark, meaning apple is at lower leverage with a roe
increase of 4.03% this year (Hardware Marketplace, 2010).

Financial Risk and Industry

At this stage of our analysis we extend our findings to assessment of


risk associated with the investment opportunities in APPLE Inc.
Analyzing the liquidity we observed that Apple has a sound ability to
meet its short term obligation. It is revealed by the healthy current
ratio of 2.74 for the year 2009; it is improved from 2.46 of the last
year 2008. If we had a glace on the industry it reflects a standard of
2.5. In the computer equipment industry a very low inventory has
been observed. That is why the acid test ratio fall lightly below the
current ratio i.e. acid test ratio is 2.70 for the year 209 in comparison
to 2008, which were 2.43. If we compare the acid test of 2009 i.e.
2.70 with industry average, which is 2.5 (msn.com, 2010). On the
liquidity

Evaluating Financial Health 4


situation it is stated that the risk avoider will be glad to look at the
satisfactory liquidity position.

As far as the solvency risk is concern in the long run the debt
equity ratio is 0.11 for the year 2009, which is increased from 0.08 of
2008. Here it is important to refer to the industry average of 0.07
(OnlyHardwareBlog, 2010). Hence it is apparent that though the
APPLE Inc. is more risky in the long run, but it does not sound like
the alarm.

Cash Flow Analysis

Due to the increase in sale the operation of the firm expanded,


and hence besides other assets, the requirement of the cash also
increases in 2009. $1.11 billion is generated from operations, which is
5.87% higher than the last year. The deferred tax expense in 2009 is
v1040 million this noon cash expense last year it was 39 million and
78 million in 2007 (Electronista, 2010).

The company actively invests in marketable securities that not only


improve its liquidity, but rather give a room to meet hazardous need
of raw inventory at any point of time. Investing activities gives
negative balance $ 17.434 billion. It is also clear from the cash flow
that firm does not announce any dividend in cash, rather it takes a tax
benefit form stock base benefit; secondly, firm keeps healthy cash in
hand.

Apple and its Main Competitor


When comparing the Apple with its major competitor like Dell
& HP, Apple marks higher price earning ratio of 19.10 times that is
greater than Dell and HP, which is 16 times and

Evaluating Financial Health 5

18.3 times respectively. We analyze the share price to book value it is


5.71 times; again higher than 4.1 times of Dell and 1.38 times of HP.
Cause of higher market price is the retention of profit and stock base
benefits. Apple also has high capitalization; the date is $ 250.0 billion
(Electronista, 2010).

Apples Performance and Economy

Global economic recession is on the way to recovery, although


Europe and America needs some more time to normalize. However,
reasonable growth is observed in emerging market like Brazil,
Malaysia, India and China. Triad block recorded a poor growth. What
is going to be with the world economic outlook is the global economy
is going to revive with the V shape pattern or its recovery would be
like expanded U as some economist say growth will be slow. I am
of the view that Apple Inc. should more focus on the emerging market
like India, China, South Pacific region countries. So Apple needs to
exploit more and more opportunities outside the USA. I am optimistic
that the idea of direct marketing will work out side the USA as well.
Hence Apple needs to introduce maximum retail store outside the
USA.
It is important to look at trend analysis and industry comparisons as a
means of determining if it is the best time to expand or stay put and to
see how its future products will be accepted by the public.

Evaluating Financial Health 6

References

Electronista. (2010). Apple only US computer builder to outgrow


industry average. Retrieved

July 2, 2010, from

http://www.electronista.com/articles/10/06/04/isuppli.sees.apple.at.34
pc.world.market.share/

Hardware Marketplace. (2010). Computer Hardware. Retrieved July


2, 2010 from

http://www.hardwaremarketplace.com/computer-hardware/
msn.com. (2010). Apple Inc: Key Ratios. Retrieved July 2, 2010 from

http://moneycentral.msn.com/investor/invsub/results/compare.asp?
Page=PriceRatios&Sy

mbol=AAPL

OnlyHarwareBlog. (2010). Highest debt to equity ratio in the


computer hardware industry

detected in shares of international business machines. Retrieved


July 2, 2010 from

http://onlyhardwareblog.com/?p=2107

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

ACC 290 Week 5 IFRS Paper (New)

FOR MORE CLASSES VISIT


www.acc290genius.com

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? Financial Analysis
Wal-Mart Stores Incorporated operates chain of retail stores in USA
as well as outside the USA. The first Wal-Mart store was opened by
Sam Walton in Arkansas in USA in 1962. Within a span of five years;
he opened more stores and he number increased to 24 stores across
Arkansas. The incorporation of Wal-Mart Stores Incorporated was
done in 1969. Wal-Mart grew in the United States of America by
opening of more stores in to the country. The company not only
opened the stores across Arkansas but also across the United States of
America (Wal-Mart Corporate, 2010).

Wal-Mart was opposed by the unorganized retail business holders in


the USA as their business was affected by opening Wal-Mart stores.
The company also opened its first store outside the USA in South
America in 1995. Wal-Mart wanted to spread itself not only to the
USA, but in other countries as well. In 2006, the company was having
3800 stores in USA and more than 2980 stores outside USA making it
one of the largest retail chains in the world. This corporation was also
having a vision to establish itself in to a global entity. Wal-Mart was
one of the first companies to operate in the organized retail sector
(Fishman, 2006). The modes of entry used by the company were
different for different countries. Wal-Mart used the mode of entry in
to various countries according to the rules and regulations prevailing
in to that country (Wal-Mart Stores Inc: Financial Statement, 2010).

The sales of the company for the financial year ending in January
2010 are 413.8 billion dollars and income for the same period is 14.7
billion dollars. The quarterly sales growth for the company has been
5.90%, while the industry average is 6.80 %. The five-year annual
growth in the sales of the company has been recorded at 7.50 % while
five year annual growth of income is 6.58 %. By analyzing the
financial statements of WalMart Incorporated, we find that debt
equity ratio of Wal-Mart is 0.71 on 31st January 2010, which is 0.68
for the industry. It means the proportion of debt of the company in its
capital structure is lesser than the equity. The company is less
leveraged so the interest burden on the company is minimal. Wal-Mart
has capacity to borrow from the market for its CAPEX in the future.
The interest coverage ratio is 13 times in January 2010, which is 21.9
for the industry. Wal-Mart needs to improve profitability to improve
interest coverage ratio for the reduction of risk of the lenders of the
company (Wal-Mart Stores Inc: Financial Statement, 2010).

The total revenues received by the organization in the year ending


January 2010 were $408.2 billion whereas revenues in the year ending
January 2009 were $404.3 billion dollars. The revenues in the year
ending January 2008 stood at $377 billion dollars. Thus, it can be
easily analyzed that the total revenues of the organization has grown
over the years steadily. This has also impacted the net income of the
organization and thus, increments could also be seen in the net income
of the organization. Net Income, which stood in the year ending 2008
at $12.7 billion, increased to $13.4 billion for the year ending 2009
and again increased to $14.3 billion in the year ending 2010 (Wal-
Mart Stores Inc: Financial Statement, 2010).

Again if cash flow statement of the organization is analyzed it can


easily be viewed that the cash flow from operating activities have
always increased from the last three years. The cash flow from
operating activities stood at $20.6 billion in the year ending 2008 has
increased to $23.1 billion for the year ending 2009 and too further
increased to $26.2 billion for the year ending 2010. But the cash flow
from investing and financing activities has seen positive and negative
fluctuations both. Here where net cash outflow from investing
activities has decreased first and increased later again. For the year
ending 2008, it stood at $15.6 billion which decreased to $10.7 billion
but again increased to $11.6 billion. Again the net cash outflow from
financing activities increased constantly since at the end of year 2008,
it stood at $7.4 billion which further for the year ending 2009
increased to $9.9 billion and further increased to $14.1 billion for the
year ending 2010 (Wal-Mart Stores Inc: Financial Statement, 2010).
Wal-Marts return on equity has improved in the last three years,
which is a good sign for the shareholders of the company. It was
19.9% in January 2008, which increased to 20.3 % in 2009 and then
again marginally increased to 20.4 % in 2010. The return on asset has
also shown the same trends in the last three years. In 2008 the return
on asset was 7.9 %. It increased to 8.1 % in 2009 and then further
increased to 8.4 % in 2010. It shows the increase in the efficiency in
the utilization of the assets of the company. The net profit margins
have been almost the same in the last three years in the company. It
was 3.4 % in 2008, 3.3 % in 2009 and 3.5 % in 2010 (Wal-Mart
Stores Inc: Financial Statement, 2010).

The price to sales ratio and price to book value ratio have shown
negative trends in the last three years, which shows that the stock of
the company is available at cheap price as compare to the price it was
carrying three years back. The price to sales ratio, which was 0.55 in
2008, was decreased to 0.46 in 2009 and then improved to 0.51 in
2010. Similarly, price to book value ratio reduced from 3.12 in 2008
to 2.83 in 2009 and then improved marginally to 2.86 in 2010. This
represents the better opportunity available for the shareholders to
invest in to the stock of the company. The book value per share of the
company has also increased in the last three years. It was 16.26
dollars per share in 2008, which increased to 16.63 dollars per share
in 2009 and further improved to 18.69 dollars per share in 2010. This
represents the increase in the retained earnings of the shareholders in
the company (Shim & Siegel, 2007).

Wal-Marts current assets level has shown stability in the last three
years for the company, which shows the lesser investment in current
assets for the company even with the increased sales. In 2008 the cash
and marketable securities available with the company was 48020
million dollars, which increased to 48949 million dollars in 2009 and
then decreased to 48331 million dollars in 2010.
Quantitative Analysis holds huge significance while evaluating the
financial health of the organization. Three types of techniques are
used for quantitative analysis. The three techniques are trend analysis,
common-size analysis and ratio analysis. Trend analysis is one of the
significant quantitative analysis tools that assist in analyzing the
financial health of the company as compared to its previous years.
The year on year trends in the financial statements are studied to
analyze whether organization is improving upon its past performance
or it is further going down (Brigham & Houston, 2007).

Common-Size analysis is another quantitive analysis tool again one of


another tool that helps in making evaluation of the financial health of
the company as against its competitors. The financial statements of
the company and its industry competitors are compared by taking a
common base and then performance is analyzed as against the
competitors. It helps in knowing whether the organization is
performing better than its competitors or not. Ratio analysis is also
used to evaluate the financial statements of an organization. This
analysis is used to interpret the performance shown in the financial
statements of the organization. The ratio analysis helps the
organization compare performance over the years or in the same year
(Brigham & Houston, 2007).

Quantitative Analysis is used by the company and its stakeholders to


analyze the financial performance of the organization. Trend analysis
is used by the company, the shareholders and the investors to analyze
the performance of the company over the years. Common-Size
analysis is used by the competitors, management, and investors to
evaluate the organization that is performing better whereas ratio
analysis is used specifically by all the stakeholders to interpret clear
and well defined results shown in the financial statements of the
company (Brigham & Houston, 2007).
These techniques help to evaluate the liquidity or short-term solvency.
By using current ratio, one can analyze the effectiveness of the
liquidity position of the organization. Profitability of the organization
is also analyzed through profitability ratios, common-size analysis, as
it helps to know the organizations profits earned by the company as
compared to others. Trend analysis and ratio analysis with the help of
different asset turnover ratios and trends could easily analyze that
assets are effectively used or not (Brigham & Houston, 2007).

Wal-Marts current stock price is 50.56 dollars. The stock has gone up
as high as 56.27 dollars, and as low as 47.35 dollars in the last year.
The earnings per share of the company which was 3.16 dollars per
share in 2008, was increased to 3.35 dollars in 2009. Earnings per
share further increased to 3.76 dollars in 2010. The analysis shows the
improvement in the earnings of the company in the last three year.
The current price earnings ratio of the company is 13.2 which is less
than the industry average of P/E ratio of 15 times (Wal-Mart Stores
Inc (WMT), 2010).

Analyzing the stock of the company from the investment point of


view, we can estimates that the fundamentals of the company are very
strong. The stock has return on equity, return on assets better than the
industry average of 22.9 % and 9.1 % respectively. The company has
given a better annual average return on asset and return on equity in
the last five years as compared to the industry. The company has a
debt equity ratio and net profit margin, which is less than the industry.
However, Wal-Mart is improving on the efficiency front. As a result,
Wal-Mart stock is recommended for investment.

References

Brigham, E.F. & Houston, J.F. (2007). Fundamentals of Financial


Management. (11th ed.). Cengage Learning.
Fishman, C. (2006). The Wal-Mart Effect: How the World Most
Powerful Company Really Works-- and How it's Transforming the
American Economy. Penguin Group

Shim, J.K. & Siegel, J.G. (2007). Schaum's Outline of Financial


Management. (3rd ed.). McGraw-Hill Professional.

Wal-Mart Corporate. (2010). History. Retrieved July 25, 2010 from


http://walmartstores.com/AboutUs/297.aspx

Wal-Mart Stores Inc: Financial Statement (2010). Retrieved May 31,


2010, from
http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?
Symbol=WMT

Wal-Mart Stores Inc. (WMT) (2010). Retrieved May 31, 2010, from
http://finance.yahoo.com/q/co?s=WMT+Competitors

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

ACC 290 Week 5 Learning Team Reflection Summary


(New)

FOR MORE CLASSES VISIT


www.acc290genius.com

Reflection and Financial Reporting Problem Part II. Discuss the


objectives for ACC 290 Week Four. For this week's checkpoint we
had to look up three job postings in the field of accounting. I'm glad
that I got this opportunity because it actually opened my eyes and
expanded my knowledge in the accounting field. The three job
positions are listed below. The first job title was Senior Internal
Auditor. A Senior Internal Auditor responsibilities is to plan and
perform financial, operational audits, and identify business process
risk. This job position only specified that the pay was well over 100k
a year!!!! Qualifications BA/BS, and minimum of 3-4 years public
accounting. The second job posting was a Tax Manager. Tax Manager
is responsible for conducting basic tax research, maintain tax records
and ensure proper tax accounting. This position requires a BA in
Accounting, and a minimum of 7-8 years of expereience.The job pay
is listed as 120k!!! The third job posting was Assistant Corporate
Controller- SR Management. Assistant Corporate Controller- SR
Management position Inventory Accounting for North America,
Credit management for North America and Corporate accounting for
Latin America, responsible for assuring accuracy of inventory and
sales and works closely with external auditors on receivable audits.
The requirements for this position is as follows, BA/BS, public
accounting experience preferred, Strong verbal and written
communication. For the Assistant Corporate Controller- SR
Management the salary pay starts at 110k-130k with bonus and
benefits.

I didn't know that Accounting career actually paid this much. I might
think about changing my careers.

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

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)

FOR MORE CLASSES VISIT


www.acc290genius.com

Assignment: Week 5 Assignment Complete the following Week 5


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.

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

ACC 290 Week 4/5 Individual Assignment Financial


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

FOR MORE CLASSES VISIT


www.acc290genius.com

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. Analysis of Scenarios:

Debt Scenario would increase the debt ratios from to 50%. Equity
Scenario would reduce the debt ratio to 40%. With Debt option,
earnings per share would be higher. Interest declines to 2.86 times
with the Debt option while times interest earned increases to 3.75
times with the Equity option. Either option exhibits a good use of
financial leverage because for both, the financial leverage index being
greater than 1. However, it is higher using the Debt option

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

You might also like