Case Study Athina Essay example

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To: CFO of Athina Building Supplies Ltd. From: IV Consulting Group’s consultants- Purpose: Recommendations for the CFO of Athina Building Supplies Ltd. We are writing to you on behalf of IV Consulting Group after closely examining the financial statements of your national retail and commercial building supplier chain, Athina Building Supplies Ltd.’s. We have stumbled upon several issues, which will be discussed in detail below. We have prepared an insightful report on our findings and recommendations as asked for by the CFO of the national chain. Though the CFO is whom we are reporting too, we have considered how our advice will affect other key stakeholders of Athina such as the investors and CRA (assuming it is a Canadian firm),…show more content…
Generally, depreciation expenses with assets are recorded right away, yet Athina’s management failed to do so as an error and therefore this can be seen a usual/non-recurring item. The solution is to deduct the $175,000 as an unusual/non-recurring expense after a net income has been calculated for the business’s normal transactions (Refer to Appendix 1). Objectives of the investors will not be met with this solution as it maximizes income and pay out amount, but their method is still correct as well. ISSUE 3 In mid-2013 (assuming April), Athina obtained a five year dealership for kitchen cabinets, the contract was not renewed in 2017 but $210,000 were spent by Athina within 2013-2107 to set up displays to promote the line. $210,000 was capitalized and amortized over 10 years, and since it was discovered the products will not sell beyond April 2018, the unamortized portion was written off. The displays’ expense at December 31, 2017 becomes $105,000, meaning a remainder of another $105,000 is left to be expensed. (Refer to Appendix 2) In order to support the primary objective, and also provide a benefit for Athina’s management, the remaining $105,000 should have not been written off in 2017 but instead in 2018. This is beneficial in two ways, not expensing the amount in 2017 meets the CFO’s income maximization objective and for Athina’s management, because they are now aware

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