The Home Depot is a leading specialty retailer of hardware and home improvement products and is the second-largest retail store chain in the United States. It operates large warehouse-style stores. Despite declining sales and difficult economic conditions in 20X1 and 20X2, The Home Depot continued to invest in new stores. The following table provides summary hypothetical data for The Home Depot. REQUIRED a. Use the preceding data for The Home Depot to compute average revenues per store, capital spending per new store, and ending inventory per store in 20X2. b. Assume that The Home Depot will add 100 new stores by the end of Year +1. Use the data from 20X2 to project Year +1 sales revenues, capital spending, and ending inventory. Assume that each new store will be open for business for an average of one-half year in Year +1. For simplicity, assume that in Year +1, Home Depots sales revenues will grow, but only because it will open new stores.

Consider the following conversation between Leonard Bryner, president and manager of a firm engaged in job manufacturing, and Chuck Davis, certified management accountant, the firms controller. Leonard: Chuck, as you know, our firm has been losing market share over the past 3 years. We have been losing more and more bids, and I dont understand why. At first, I thought that other firms were undercutting simply to gain business, but after examining some of the public financial reports, I believe that they are making a reasonable rate of return. I am beginning to believe that our costs and costing methods are at fault. Chuck: I cant agree with that. We have good control over our costs. Like most firms in our industry, we use a normal job-costing system. I really dont see any significant waste in the plant. Leonard: After talking with some other managers at a recent industrial convention, Im not so sure that waste by itself is the issue. They talked about activity-based management, activity-based costing, and continuous improvement. They mentioned the use of something called activity drivers to assign overhead. They claimed that these new procedures can help to produce more efficiency in manufacturing, better control of overhead, and more accurate product costing. A big deal was made of eliminating activities that added no value. Maybe our bids are too high because these other firms have found ways to decrease their overhead costs and to increase the accuracy of their product costing. Chuck: I doubt it. For one thing, I dont see how we can increase product-costing accuracy. So many of our costs are indirect costs. Furthermore, everyone uses some measure of production activity to assign overhead costs. I imagine that what they are calling activity drivers is just some new buzzword for measures of production volume. Fads in costing come and go. I wouldnt worry about it. Ill bet that our problems with decreasing sales are temporary. You might recall that we experienced a similar problem about 12 years agoit was 2 years before it straightened out. Required: 1. Do you agree or disagree with Chuck Davis and the advice that he gave Leonard Bryner? Explain. 2. Was there anything wrong or unethical in the behavior that Chuck Davis displayed? Explain your reasoning. 3. Do you think that Chuck was well informedthat he was aware of the accounting implications of ABC and that he knew what was meant by cost drivers? Should he have been well informed? Review (in Chapter 1) the first category of the Statement of Ethical Professional Practice for management accountants. Do any of these standards apply in Chucks case?

Dorothy Koehl recently leased space in the Southside Mall and opened a new business, Koehl’s Doll Shop. Business has been good, but Koehl frequently runs out of cash. This has necessitated late payment on certain orders, which is beginning to cause a problem with suppliers. Koehl plans to borrow from the bank to have cash ready as needed, but first she needs a forecast of how much she should borrow. Accordingly, she has asked you to prepare a cash budget for the critical period around Christmas, when needs will be especially high. Sales are made on a cash basis only. Koehl’s purchases must be paid for during the following month. Koehl pays herself a salary of $4,800 per month, and the rent is $2,000 per month. In addition, she must make a tax payment of $12,000 in December. The current cash on hand (on December 1) is $400, but Koehl has agreed to maintain an average bank balance of $6,000—this is her target cash balance. (Disregard the amount in the cash register, which is insignificant because Koehl keeps only a small amount on hand in order to lessen the chances of robbery.) The estimated sales and purchases for December, January, and February are shown in the following table. Purchases during November amounted to $140,000. Prepare a cash budget for December, January, and February. Suppose that Koehl starts selling on a credit basis on December 1, giving customers 30 days to pay. All customers accept these terms, and all other facts in the problem are unchanged. What would the company’s loan requirements be at the end of December in this case? (Hint: The calculations required to answer this part are minimal.)

You were recently hired to work in the controller's office of the Balboa Lumber Company. Your boss, Alfred Eagleton, took you to lunch during your first week and asked a favor. "Things have been a little slow lately, and we need to borrow a little cash to tide us over. Our inventory has been building up and the CFO wants to pledge the inventory as collateral for a short-term loan. But I have a better idea." Mr. Eagleton went on to describe his plan. "On July 1, 2021, the first day of the company's third quarter, we will sell $100,000 of inventory to the Harbaugh Corporation for $160,000. Harbaugh will pay us immediately and then we will agree to repurchase the merchandise in two months for $164,000. The $4,000 is Harbaugh's fee for holding the inventory and for providing financing. I already checked with Harbaugh's controller and he has agreed to the arrangement. Not only will we obtain the financing we need, but the third quarter's before-tax profits will be increased by $56,000, the…

Ethics in Action Margie Johnson is a staff accountant at ToolEx Company, a manufacturer of tools and equipment. The company is under pressure from investors to increase earnings, and the president of the company expects the accounting department to “make this happen.” Margie's boss, who has been a mentor to her, is concerned that if earnings do not increase, he will be terminated. Shortly after the end of the fiscal year, the company performs a physical count of the inventory. When Margie compares the physical count to the balance in the inventory account, she finds a significant amount of inventory shrinkage. The amount is so large that it will result in a significant drop in earnings this period. Margie's boss asks her not to make the adjusting entry for shrinkage this period. He assures her that they will get “caught up” on shrinkage in the next period, after the pressure is off to reach this period's earnings goal. Margie's boss asks her to do this as a personal favor to him.…

The auditor worked for this client for years. But before accepting or continuing with the client, What are the reasons the auditor or audit firm should or should not retain this existing client this time around using the information below about the client? What risks could the client, its business, and its environment pose to the auditor or audit firm? The client: Although client cash flows have been stable, the disruption caused by the 2020 global pandemic made it difficult for retail lessors to pay their rent on time. Due to the company's tenant-friendly approach, retail clients were allowed to renegotiate their lease and temporarily pause rent payments between June 2020 and July 2021, shifting those payments to the last 12 months. Most of these leases will expire in the next two years, including all retail companies unable to pay their rent. However, they estimate that they will receive all the lost cash flow from these tenants within a couple of years. Currently, the company is a…

You are an accounting student at Berkeley College and will not graduate for another year. But because of your excellent grades so far, you have been able to land a job in the purchasing department of a retailer. One of the purchasing agents in your company is negotiating for the receipt of a very large order of uninsured goods from a supplier. The purchasing agent is able to get a better deal on the goods if they are shipped FOB shipping point rather than FOB destination. The agent doesn’t know the difference between these two concepts. He also doesn’t understand why choosing one over the other should make any difference to the company. As a student of accounting at Berkeley College, you know well the difference between these 2 concepts and you know why one would be a better choice over the other in the case of uninsured goods. Please explain these two concepts in this discussion and tell the purchasing agent which shipping method is preferable and why.

Electronics, Inc. is a high-volume, wholesale merchandising company. Most of its inventory turns over four or five times a year. The company has had 50 units of a particular band of computers on hand for over a year. These computers have not sold and probably will not sell unless they are discounted 60 to 70%. The accountant is carrying them on the books at cost and intends to recognize the loss when they are sold. This way, she can avoid a significant write-down in inventory on the current year's financial statements. Is the accountant correct in her treatment of the inventory? Why or why not? can you help me explain this?

Muscat Tubes Manufacturing LLC is a manufacturer of television picture tubes. The company must keep various types of materials on hand for the manufacturing process. The store manager is having difficulty keeping track of all the inventory. When compared to last year, the amount of material lost has increased, which is a source of concern for the store manager. He wishes to employ an effective tool for controlling material loss. While exploring, he came across the concept of ABC analysis, which is used by many MNCs around the world. Because he has no background in costing, he is unable to grasp the concept. He asked you to explain the following because you are the company's cost accounting executive: Working/Application of ABC analysis?