Concept explainers
Introduction:
Ethics means morals implies moral rules that oversee an individual’s conduct or the directing of an action.
Internal control means an inward control is a methodology or strategy set up by the executives to shield resources, advance responsibility, increment effectiveness, and stop fake conduct. As it were, an interior control is a procedure set up to keep representatives from taking resources or submitting extortion.
Capitalization decision means Capitalization, in bookkeeping, is the point at which the expenses to procure an advantage are expensed over the life of that benefit as opposed to in the period it was brought about. In money, capitalization is the entirety of an organization’s stock, long haul obligation, and held income.
To choose:
What are the probable consequences of this behavior for the company?
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Cornerstones of Financial Accounting
- Walkure A.G., a multinational corporation from Country A, announced the relocation of its manufacturing plants from Country B to Country C. The news about the relocation was never reported in the media. The move is expected to create positive synergies, as most of the company's other manufacturing operations are based in Country C. The relocation is also expected to lead to tax benefits. The company's shares are traded in three stock exchanges in Country A, Country B, and Country C. Share prices in the three stock exchanges responded to the relocation in three different ways: Country A: The share price increased drastically after the announcement. Country B: The share price decreased drastically after the announcement. Country C: The share price increased marginally after the announcement. Based solely on the information given, which of the following statements is least likely true of the stock exchanges? The exchange in Country A is most efficient, as the market reacted…arrow_forwardConsider yourself the financial controller of Alpha. The managing director, who is not an accountant, has recently attended a seminar and has raised the following questions for you concerning issues discussed at the seminar: The notes to the financial statements say that plant and equipment is held under the ‘cost model’. However, property which is owner occupied is revalued annually to fair value. Changes in fair value are sometimes reported in profit or loss but usually in ‘other comprehensive income’. Please explain how all these treatments comply with relevant reporting standards. The manager director also added “I wonder how the revaluation model can affect the information relevancy and reliability”. Required: Provide answers to the queries raised. You should justify your answers with reference to relevant IFRS Standards and academic literature.arrow_forwardWhich of the following is a type of intangible business property that is legally protected? Select one: a. Land and equipment. b. Stock and Inventory. c. Acres. d. Jane’s registered symbol and design for her hair gel. What factors should businesses consider when determining financing needs to determine whether they can repay the debt? Select one: a. Inventory b. Equity c. Depreciation d. Liquidity The most successful businesses do not have well-defined portraits of the customers they are seeking to attract. Select one: True False Which of the following is an example of how an entrepreneur might use marketing information? Select one: a. To create surveys. b. To carry out research. c. To forecast change. d. To examine and analyze data.arrow_forward
- Clonal Inc., a biotechnology company, developed and patented a diagnostic product called Trouver. Clonal purchased some research equipment to be used exclusively for Trouver and other research equipment to be used on Trouver and subsequent research projects. Clonal defeated a legal challenge to its Trouver patent and began production and marketing operations for the product. Clonal allocated its corporate headquarters’ costs to its research division as a percentage of the division’s salaries. Required: 1. Explain how Clonal should report the equipment purchased for Trouver on its income statements and balance sheets. 2. Describe the accounting treatment of R&D costs. What is the justification for the accounting treatment of R&D costs? 3. Explain how Clonal should classify its corporate headquarters’ costs allocated to the research division on its income statement. 4. Explain how Clonal should report the legal costs incurred in defending Trouver’s patent on its statement of cash…arrow_forwarda) Your nephew, a chartered accountant in good standing, who is working with Corona Company Ltd., a multinational company as the chief accountant, returned home after work very moody. Upon enquiring about his change in mood, he informed you that he was in a dilemma. He continued that Corona Company Ltd. is preparing a bid document for a government contract worth billions of dollars. However, the company’s current financial position would not make it the best candidate to be awarded the said contract. Yet, to remain competitive in the bid process, the Board Chairman has instructed your nephew to ‘make the numbers work’ to increase the company’s chances in securing the contract. Your nephew is hesitant about the instruction from the Board Chairman but thinks his job could be at stake. With the knowledge you have acquired in this course, advice your nephew on how best to deal with this episode to minimize rift between the Board Chairman and himself. b) As a professional ethics…arrow_forwardAble Corporation owns numerous businesses along the coast of Florida. The company's management has identified business interruption events as a potential risk resulting from storm damages caused by hurricanes. Management is so fearful of the possibility of storm damage that they elect to divest the company of virtually all properties on the Florida coast. Able's response to potential risks is known as: Avoidance Reduction Share Acceptarrow_forward
- Simpson Corp. is an entertainment firm that derives approximately 30% of its income from the Casino Knights Division, which manages gambling facilities. As auditor for Simpson Corp., you have recently overheard the following discussion between the controller and financial vice president. Vice President: If we sell the Casino Knights Division, it seems ridiculous to segregate the results of the sale in the income statement. Separate categories tend to be absurd and confusing to the stockholders. I believe that we should simply report the gain on the sale as other income or expense without detail. Controller: Professional pronouncements would require that we report this information separately in the income statement. If a sale of this type is considered unusual and infrequent, it must be reported separate from income from continuing operations. Vice president: What about the walkout we had last month when employees were upset about their commission income? Would this situation not…arrow_forwardSimpson Corp. is an entertainment firm that derives approximately 30% of its income from the Casino Knights Division, which manages gambling facilities. As auditor for Simpson Corp., you have recently overheard the following discussion between the controller and financial vice president. Vice President: If we sell the Casino Knights Division, it seems ridiculous to segregate the results of the sale in the income statement. Separate categories tend to be absurd and confusing to the stockholders. I believe that we should simply report the gain on the sale as other income or expense without detail. Controller: Professional pronouncements would require that we report this information separately in the income statement. If a sale of this type is considered unusual and infrequent, it must be reported separate from income from continuing operations. Vice president: What about the walkout we had last month when employees were upset about their commission income? Would this situation not…arrow_forwardASSIGNMENT TWODazzle Co. is a stock‐market listed company that manufactures personal protection equipment. At a recent board meeting of Dazzle Co., a non‐executive director suggested that the company’s remuneration committee should consider scrapping the company’s current share option scheme, since executive directors could be rewarded by the scheme even when they did not perform well. A second non‐executive director disagreed, saying the problem was that even when directors acted in ways which decreased the agency problem, they might not be rewarded by the share option scheme if the stock market were in decline. Required:(a) Explain the nature of the agency problem in detail. (b) Discuss the use of share option schemes as a way of reducing the agency problem in a stock‐market listed company such as Dazzle Co.arrow_forward
- Government had recently declared certain policy changes to setup and run heavy industries. The company have to obtain no-objection-certificate from National Green Tribunal to run the unit. A company XYZ engaged in manufacturing cement is searching to relocating their manufacturing facility. Explain various factors that cement company should consider while taking location decision, also explain how these factors will affect the bottom line of the company.arrow_forwardNancy John, a bright, female investment analyst about to give a major presentation to a group of bankers supporting a corporate acquisition. After walking in and meeting the bankers before you give the presentation, you're asked by your boss to "be a dear and serve them coffee." Imagine the insult and awkwardness of such a situation-what do you do? Do you carry through with the task, sacrificing your dignity or doing something wrong because you can't afford to lose the job? Or do you speak up? A group of Swiss occupational health researchers have recently started a program of research on illegitimate tasks, or tasks that violate "norms about what can reasonably be expected from a given person" in a job. Question: 1. What do you think of this situation? 2. What might cause supervisors and managers within organizations to allocate these kinds of tasks? 3. Can you explain it based on 'positive reinforcement' behavior and suggest some suggestion?arrow_forwardMachine Corp. has several pending lawsuits against its company. Review each situation: A. A pending lawsuit, claiming $120,000 in damages, is considered likely to favor the plaintiff and can be reasonably estimated. B. Machine Corp. believes there might be other potential lawsuits about this faulty machinery, but this is unlikely to occur. C. A claimant sues Machine Corp. for damages, from a dishonored service contract agreement; the plaintiff will likely win the case but damages cannot be reasonably estimated. D. Machine Corp. believes a customer will win a lawsuit it filed, but the outcome is not likely and is not remote. It is possible the customer will win. 1 and 2. Which of the above situations require recognition in the financial statements and which require note disclosure only? a. A must be recognized and requires note disclosure; C and D require note disclosure only. b. All four cases require note disclosure only. c. A, C, and D must be recognized; B requires note…arrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning