ACME Company sells computer components and plans on borrowing some money to expand. After reading a lot about earnings management, Bill, the owner of ACME, has decided he should try to accelerate some sales to improve his financial statement ratios. He has called his best customers and asked them to make their usual January purchases by December 31. Bill told the customers he would allow them, until the end of February, to pay for the purchases, just as if they had made their purchases in January. •Explain if you think there are ethical implications of Bill's actions. Which ratios will be affected, and how, by accelerating these sales?
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- ACME Company sells computer components and plans on borrowing some money to expand. After reading a lot about earnings management, Bill, the owner of ACME, has decided he should try to accelerate some sales to improve his financial statement ratios. He has called his best customers and asked them to make their usual January purchases by December 31. Bill told the customers he would allow them, until the end of February, to pay for the purchases, just as if they had made their purchases in January. Explain if you think there are ethical implications of Bill’s actions. Which ratios will be affected, and how, by accelerating these sales? Please do not copy and paste from other websites.The president of the retailer Prime Products has just approached the company’s bank with a request for a$30,000, 90-day loan. The purpose of the loan is to assist the company in acquiring inventories. Becausethe company has had some difficulty in paying off its loans in the past, the loan officer has asked for a cashbudget to help determine whether the loan should be made. The following data are available for the monthsApril through June, during which the loan will be used:a. On April 1, the start of the loan period, the cash balance will be $24,000. Accounts receivable onApril 1 will total $140,000, of which $120,000 will be collected during April and $16,000 will becollected during May. The remainder will be uncollectible.b. Past experience shows that 30% of a month’s sales are collected in the month of sale, 60% in themonth following sale, and 8% in the second month following sale. The other 2% represents bad debtsthat are never collected. Budgeted sales and expenses for the…You are the bookkeeper at a small merchandising firm. You are comparing the income statements from the last three years. You notice that the Purchases Returns and Allowances account (as a percentage of net sales) has been increasing at an alarming rate. If you were a manager, to whom would you speak in the organization to help you understand why so much merchandise is being returned? What types of questions would you ask?
- Roy Akins was the accounting manager at Zelco, a tire manufacturer, and he played golf with Hugh Stallings, the CEO, who was something of a celebrity in the community. The CEO stood to earn a substantial bonus if Zelco increased net income by year-end. Roy was eager to get into Hugh’s elite social circle; he boasted to Hugh that he knew some accounting tricks that could increase company income by simply revising a few journal entries for rental payments on storage units. At the end of the year, Roy changed the debits from “rent expense” to “prepaid rent” on several entries. Later, Hugh got his bonus, and the deviations were never discovered. Requirements How did the change in the journal entries affect the net income of the company at year-end? Who gained and who lost as a result of these actions?Roy Akins was the accounting manager at Zelco, a tire manufacturer, and he played golf with Hugh Stallings, the CEO, who was something of a celebrity in the community. The CEO stood to earn a substantial bonus if Zelco increased net income by year-end. Roy was eager to get into Hugh’s elite social circle; he boasted to Hugh that he knew some accounting tricks that could increase company income by simply revising a few journal entries for rental payments on storage units. At the end of the year, Roy changed the debits from “rent expense” to “prepaid rent” on several entries. Later, Hugh got his bonus, and the deviations were never discovered. Requirements How did the change in the journal entries affect the net income of the company at year-end? How did the change in the journal entries affect the net income of the company at year-end?Ryan Egan and Jack Moody are both cash register clerks for Organic Markets. Lee Sorrell is the store manager for Organic Markets. The following is an excerpt of a conversation between Ryan and Jack: Ryan: Jack, how long have you been working for Organic Markets? Jack: Almost five years this November. You just started two weeks ago … right? Ryan: Yes. Do you mind if I ask you a question? Jack: No, go ahead. Ryan: What I want to know is, have they always had this rule that if your cash register is short at the end of the day, you have to make up the shortage out of your own pocket? Jack: Yes, as long as I’ve been working here. Ryan: Well, it’s the pits. Last week I had to pay in almost $40. Jack: It’s not that big a deal. I just make sure that I’m not short at the end of the day. Ryan: How do you do that? Jack: I just shortchange a few customers early in the day. There are a few jerks that deserve it anyway. Most of the time, their attention is elsewhere and they don’t think to check…
- I need help filling out the excel template with this given information. Kate has just completed her first year of Kate's Cards. She has been preparing monthly income statements and balance sheets, so she knows that her company has been profitable and that there is cash in the bank. She has not, however, prepared a statement of cash flows. Kate's provides you with the year-end income statement and balance sheet and asks that you construct an statement of cash flows for Kate's Cards.Additional information:1. There were no disposals of equipment during the year2. Dividends in the amount of $1,300 were paid in cash during the year.3. Prepaid expenses relate to operating expenses.Requireda. Construct an statement of cash flows for Kate's Cards for the year-ended August 31, 2019, using the indirect method. Hint: Since this was Kate's first year of operations, the beginning balance sheet account balances were zero.b. Construct an statement of cash flows for Kate's Cards for the year ended…Roy Rogers is the accounting manager at Tire, Inc, a tire manufacturer. He plays golf with the CEO, who is somewhat of a celebrity in the local community. The CEO would be able to receive a huge bonus if the company increases net income by the end of the year. Roy, wanting to become part of the elite circle the CEO was in, explained he knows some tricks to increase the company income. This would require revising some journal entries on the rent paid on storage units used by the company. Roy changed the rental payments to prepaid rent, allowing the CEO to receive his bonus and the revisions were never discovered. 1. By Roy changing the journal entries how did it cause the net income to increase and the CEO to get his bonus? 2. With the change of the journal entries, who gained and who lost? 3. What are the consequences of Roys actions if they are discovered?Katie Murphy is preparing for a meeting with her banker. Her business is finishing its fourth year of operations. In the first year, it had negative cash flows from operations. In the second and third years, cash flows from operations were positive. However, inventory costs rose significantly in Year 4, and cash flows from operations will probably be down 25%. Murphy wants to secure a line of credit from her banker as a financing buffer. From experience, she knows the banker will scrutinize operating cash flows for Years 1 through 4 and will want a projected number for Year 5. Murphy knows that a steady progression upward in operating cash flows for Years 1 through 4 will help her case. She decides to use her discretion as owner and considers several business actions that will turn her operating cash flow in Year 4 from a decrease to an increase. Required 1. Identify two business actions Murphy might take to improve cash flows from operations. 2. Comment on the ethics and possible…
- Your client, Corp. B, is a trading or distributor of home living product. Corp B import goods and sells them to its customers who are retail stores. In the current year, Corp. B's financial statements reported an increase in net income. The increase was driven by increased sales. Corp B's accounts receivable also increased rapidly. Corp B reportedly has many new customers.You are informed that there may be a fictitious revenue generated using fictitious customers. Corp B makes fictitious credit sales using bogus customers, and when receivables are due, management make kiting in order to look like the fictitious accounts receivable paid by their customer. Question:a. Explain how the fraud scheme can be carried out by Corp B?b. What kind of audit procedure will you use to examine for possible kiting?Your client, Corp. B, is a trading or distributor of home living product. Corp B import goods and sells them to its customers who are retail stores. In the current year, Corp. B's financial statements reported an increase in net income. The increase was driven by increased sales. Corp B's accounts receivable also increased rapidly. Corp B reportedly has many new customers.You are informed that there may be a fictitious revenue generated using fictitious customers. Corp B makes fictitious credit sales using bogus customers, and when receivables are due, management make kiting in order to look like the fictitious accounts receivable paid by their customer. What kind of audit procedure will you use to examine for possible kiting?Roy Akins was the accounting manager at Zelco, a tire manufacturer, and he played golf with Hugh Stallings, the CEO who was something of a celebrity in the community. The CEO stood to earn a substantial bonus if Zelco increased net income by year-end. Roy was eager to get into Hugh’s elite social circle. He boasted to Hugh he knew of some accounting tricks to increase the company’s income by simply revising a few journal entries for rental payments on storage units. At the end of the year, Roy changed the debits form “rent expense” to “prepaid rent” on several entries. Later Hugh got his bonus, and the deviations were never discovered. How did the change in the journal entries affect the net income of the company at year-end? Who gained and who lost as a result of these actions?