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(1)
Earnings per share (EPS): The amount of earnings made available to each common share is referred to as earnings per share. Dilutive securities like convertible bonds, convertible
Facts of the case: The discussion between RB, chief financial officer, and JL, controller of IN Solutions reveals that JL proposes that they should go for a buyback of shares to ‘quick fix’ the EPS numbers before the closure of current fiscal year. Although the company has grown rapidly in the growth stage, the profits are saturated in the recent years.
To explain: The method through which the buyback of shares provide a ‘quick fix’ for EPS
(2)
To explain: Whether the proposal made by JL is ethical.
(3)
To indicate: The persons who are affected by the implementation of the proposal.
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Chapter 19 Solutions
INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
- TM Office Supplies, Inc., is a wholesale distributor of office supplies. It sells pencils and pens, paper goods (including computer paper and forms), staplers, calendars, and other items, excluding furniture and other major items such as copy machines that you would expect to find in an office. Sales have been growing at 5 percent per year during the past several years. Mr. Marina, the president of TM Office Supplies, recently attended a national office supplies convention. In conversations during that convention, he discovered that sales for TM Office Supplies competitors have been growing at 15 percent per year. Arriving back home, he did a quick investigation and discovered the following: TM Office Supplies customer turnover is significantly higher than the industry average. TM Office Supplies vendor turnover is significantly lower than the industry average. The new market analysis system was supposed to be ready two years ago but has been delayed for more than one year in systems development. A staff position, reporting to the president, for a person to prepare and analyze cash budgets was created two years ago but has never been filled. Mr. Marina has called on you to conduct a systems survey of this situation. You are to assume that a request for systems development has been prepared and approved. The information system at TM Office Supplies is much like that depicted in Chapters 10 through 16. Make and describe all assumptions that you believe are necessary to solve any of the following: a. What are the specific tasks of this systems survey? b. Indicate specific quantifiable benefits and costs that should be examined in assessing the economic feasibility of any solutions that might be proposed. Explain how you would go about quantifying each benefit or cost. c. Propose and explain three different scopes for the systems analysis. Use a context diagram to describe each scope alternative. Hint: What subsystems might be involved in an analysis?arrow_forwardPrevention costs: Total prevention costs Appraisal costs Total appraisal costs Internal failure costs: Total internal failure costs External failure costs: Total external failure costs Total quality cost Florex Company Quality Cost Report Last Year Amount (in Percent of thousands) Sales 0 0 0 0 0.00 0.00 0.00 0.00 This Year Amount (in thousands) 0 0 0 0 Percent of Sales 0.00 0.00 0.00 0.00arrow_forwardQuestion 6 Veronica Mars, a recent graduate of Bell’s accounting program, evaluated the operating performance of Marigold Company’s six divisions. Veronica made the following presentation to Marigold’s board of directors and suggested the Percy Division be eliminated. “If the Percy Division is eliminated,” she said, “our total profits would increase by $27,000.” The OtherFive Divisions PercyDivision Total Sales $1,665,000 $100,000 $1,765,000 Cost of goods sold 978,300 76,600 1,054,900 Gross profit 686,700 23,400 710,100 Operating expenses 528,100 50,400 578,500 Net income $158,600 $ (27,000 ) $131,600 In the Percy Division, cost of goods sold is $60,100 variable and $16,500 fixed, and operating expenses are $29,200 variable and $21,200 fixed. None of the Percy Division’s fixed costs will be eliminated if the division is discontinued.arrow_forward
- Problem 17-6 Costs of Financial Distress Steinberg Corporation and Dietrich Corporation are identical firms except that Dietrich is more levered. Both companies will remain in business for one more year. The companies' economists agree that the probability of the continuation of the current expansion is 80 percent for the next year and the probability of a recession is 20 percent. If the expansion continues, each firm will generate earnings before interest and taxes (EBIT) of $3.1 million. If a recession occurs, each firm will generate earnings before interest and taxes (EBIT) of $1.5 million. Steinberg's debt obligation requires the firm to pay $940,000 at the end of the year. Dietrich's debt obligation requires the firm to pay $1.6 million at the end of the year. Neither firm pays taxes. Assume a discount rate of 15 percent. a-1. What is the value today of Steinberg's debt and equity? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars,…arrow_forwardPROBLEM 13-30 Restructuring a Segmented Income Statement [LO1] Losses have been incurred at Millard Corporation for some time. In an effort to isolate the problem and improve the company's performance, management has requested that the monthly income statement be segmented by sales region. The company's first effort at preparing a segmented state- ant is given below. This statement is for May, the most recent month of activity. Sales Region West Central East Sales $450,000 S800,000 $ 750,000 Regional expenses (traceable): Cost of goods sold Advertising Salaries 162,900 280,000 376,500 210,000 135,000 15,000 30,000 28,500 108,000 200,000 90,000 88,000 12,000 Utilities 13,500 Depreciation. Shipping expense. 27,000 17,100 28,000 32,000 Total regional expenses 418,500 640,000 795,000 Regional income (loss) before corporate expenses 31,500 160,000 (45,000) Corporate expenses: Advertising (general) General administrative expense. 18,000 50,000 32,000 30,000 50,000 50,000 Total corporate…arrow_forwardProblem 10-14 Measures of Internal Business Process Performance [LO10-3] DataSpan, Inc., automated its plant at the start of the current year and installed a flexible manufacturing system. The company is also evaluating its suppliers and moving toward Lean Production. Many adjustment problems have been encountered, including problems relating to performance measurement. After much study, the company has decided to use the performance measures below, and it has gathered data relating to these measures for the first four months of operations. Month 1 2 4 Throughput time (days) ? ? ? Delivery cycle time (days) ? ? ? ? ? ? ? ? Manufacturing cycle efficiency (MCE) Percentage of on-time deliveries Total sales (units) 2060 1972 1871 1800 Management has asked for your help in computing throughput time, delivery cycle time, and MCE. The following average times have been logged over the last four months: Average per Month (in days) 1 2 3 4 Move time per unit 0.7 0.4 0.5 0.5 Process time per unit…arrow_forward
- Problem 10.9 Nakamichi Bancorp has made an investment in banking software at a cost of $1,643,813. Management expects productivity gains and cost savings over the next several years. If, as a result of this investment, the firm is expected to generate additional cash flows of $590,022, $867,060, $419,945, and $342,312 over the next four years, what is the investment's payback period? (Round answer to 2 decimal places, e.g. 15.25.) Payback period is yearsarrow_forwardProblem 11-21 (Algo) Return on Investment (ROI) and Residual Income [LO11-1, LO11-2] “I know headquarters wants us to add that new product line,” said Dell Havasi, manager of Billings Company’s Office Products Division. “But I want to see the numbers before I make any move. Our division’s return on investment (ROI) has led the company for three years, and I don’t want any letdown.” Billings Company is a decentralized wholesaler with five autonomous divisions. The divisions are evaluated on the basis of ROI, with year-end bonuses given to the divisional managers who have the highest ROIs. Operating results for the company’s Office Products Division for this year are given below: Sales $ 22,900,000 Variable expenses 14,313,400 Contribution margin 8,586,600 Fixed expenses 6,205,000 Net operating income $ 2,381,600 Divisional average operating assets $ 4,580,000 The company had an overall return on investment (ROI) of 17.00% this year (considering…arrow_forwardpart 3 4 Question 4.4 Celebration Greeting Cards Incorporated is starting a new business venture and are in the process of evaluating its product lines. Information for one new product, traditional parchment grade cards, is as follows: Sixteen times each year, a new card design will be put into production. Each new design will require $600 in setup costs. The parchment grade card product line incurred $75,000 in development costs and is expected to be produced over the next four years. Direct costs of producing the designs average $0.50 each. Indirect manufacturing costs are estimated at $50,000 per year. Customer service expenses average $0.10 per card. Current sales are expected to be 2,500 units of each card design. Each card sells for $3.50. Sales units equal production units each year. Required What are the estimated life-cycle revenues? What is the estimated life-cycle…arrow_forward
- Exercise 12-3 Measures of Internal Business Process Performance [LO12-3] Management of Mittel Rhein AG of Köln, Germany, would like to reduce the amount of time between when a customer places an order and when the order is shipped. For the first quarter of operations during the current year the following data were reported: Inspection time 0.7 day Wait time (from order tostart of production) 16.5 days Process time 3.0 days Move time 0.6 day Queue time 3.8 days 4. Compute the delivery cycle time. (Round your intermediate calculations and final answer to 1 decimal place.) 5. If by using Lean Production all queue time during production is eliminated, what will be the new MCE? (Do not round intermediate calculations. Round your percentage answer to nearest whole percent.)arrow_forwardExercise 10-3 Measures of Internal Business Process Performance [LO10-3] Management of Mittel Rhein AG of Köln, Germany, would like to reduce the amount of time between when a customer places an order and when the order is shipped. For the first quarter of operations during the current year the following data were reported: Inspection time Wait time (from order to start of production) Process time Move time Queue time 0.6 days 15.7 days 3.3 days 1.0 days 4.1 days Required: 1. Compute the throughput time. (Round your answer to 1 decimal place.) 2. Compute the manufacturing cycle efficiency (MCE) for the quarter. (Round your percentage answer to nearest whole percent.) 3. What percentage of the throughput time was spent in non-value-added activities? (Round your percentage answer to nearest whole percent.) 4. Compute the delivery cycle time. (Round your intermediate calculations and final answer to 1 decimal place.) 5. If by using Lean Production all queue time during production is…arrow_forwardExercise 12-3 Measures of Internal Business Process Performance [LO12-3] Management of Mittel Rhein AG of Köln, Germany, would like to reduce the amount of time between when a customer places an order and when the order is shipped. For the first quarter of operations during the current year the following data were reported: Inspection time 0.7 day Wait time (from order tostart of production) 16.5 days Process time 3.0 days Move time 0.6 day Queue time 3.8 days Required: 1.Compute the throughput time. (Round your answer to 1 decimal place.) 2. Compute the manufacturing cycle efficiency (MCE) for the quarter. (Round your percentage answer to nearest whole percent.) 3. What percentage of the throughput time was spent in non–value-added activities? (Round your percentage answer to nearest whole percent.) 4. Compute the delivery cycle time. (Round your intermediate calculations and final answer to 1 decimal place.) 5. If by using Lean…arrow_forward
- Pkg Acc Infor Systems MS VISIO CDFinanceISBN:9781133935940Author:Ulric J. GelinasPublisher:CENGAGE LAccounting Information SystemsFinanceISBN:9781337552127Author:Ulric J. Gelinas, Richard B. Dull, Patrick Wheeler, Mary Callahan HillPublisher:Cengage Learning
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