accounting for decision makers module 1

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Jacksonville University *

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Accounting

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Jun 14, 2024

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Malicca Mility Accounting For Decision Makers Module 1 Assignments

Ch 1 Ex 1.5 Jim Sandrolini ought to take the following into account when deciding whether to draft the financial statements for Dan's store: 1. Ethical Considerations  Jim needs to make sure he stays impartial and independent in his work. A contingent fee agreement might cause him to lose objectivity and create a conflict of interest because it would encourage him to show the financial statements in a way that would help Dan get the loan.  Jim must maintain the highest standards of authenticity, making sure that no financial statement is false or deceptive. He needs to refrain from doing anything that would be interpreted as shady or deceptive. 2. Professional Standards and Regulations  Jim needs to follow the moral guidelines established by organizations that support professionals in accounting, like the American Institute of Certified Public Accountants (AICPA). In general, contingent fees for financial statement preparation are prohibited by the AICPA Code of Professional Conduct.  Jim needs to be conscious of and abide by all applicable laws and regulations. Giving an institution misleading financial details or making false representations could have legal repercussions. 3. Reputation and Future Career  Participating in a potentially unethical arrangement might harm Jim's standing and image in the accounting industry. Also, it might harm his chances of a successful future in the workforce.  Jim should consider his employer's procedures regarding outside work and potential conflicts of interest because he works for a local manufacturing company. 4. Potential Consequences  A contingent fee agreement may result in financial statements that are skewed, raising the possibility of fraud. As a result, the bank might decide to lend money based on misleading data.  Jim might be subject to monetary penalties or litigation from the bank or other parties involved if it is discovered that the financial statements were false or deceptive. 5. Professional Relationship with Dan

 Jim needs to think about how his friendship with Dan might be impacted by this agreement. Their connection can suffer if the loan is denied or if there are problems with the financial statements.  Jim must exercise professional skepticism and objectivity while being aware of any prejudices that might result from his friendship with Dan. 6. Alternative Arrangements  Jim might recommend a different fee schedule that isn't dependent on the loan being approved. It would be more reasonable and moral to charge a fixed fee or an hourly rate.  Jim may suggest that Dan hire an independent accountant to prepare the financial statements if he believes he cannot remain impartial. 7. Communication with the Bank  To maintain transparency and allay any suspicions of improper behavior, Jim should fully reveal the fee arrangement to the bank if he chooses to move forward with the commitment. In summary, when Jim is considering whether to prepare the financial statements for Dan's store, he ought to carefully weigh all these variables and give his ethical obligations and professional standards top priority. Ex1.6 A range of financial and non-financial data, likely produced by their CPA, would be included in the information Chris and Tiasha Hirst need to determine an asking price for their retail furniture store. The following are the main categories of information that could be were as follows: 1. Previous Financial Records  The income statement provides detailed information on a store's income, expenses, and profits over time, helping to identify profitability patterns. Balance sheets display equity, liabilities, and assets, while cash flow statements show the store's ability to raise funds through operations and financing activities. 2. Income Tax Returns  Income Tax Returns provide a detailed account of a store's profits, sales patterns, and payroll costs, aiding in confirming financial success and tax compliance, while also providing crucial information on employee remuneration. 3. Ratios in Finance and Performance Measures  The store's profitability is assessed through its profit margins, ROI and ROA, and liquidity ratios, which evaluate its ability to meet short-term obligations. 4. Valuation Reports

 Business Valuation Reports, if conducted by a CPA, aid in determining asking prices by utilizing asset-based, market, and income-based approaches, such as discounted cash flow and comparable sales. 5. Analyzing the market using comparable sales data  Benchmarking store value against market trends and industry benchmarks provides context for valuation by comparing financial performance to industry averages and similar sales of nearby businesses. 6. Information related to operations  Inventory reports provide valuable insights into inventory management effectiveness and potential value, while customer data provides insights into the target market, growth potential, demographics, loyalty plans, and sales trends. 7. Assets and Debts:  Fixed assets include detailed PPE listings with depreciation schedules, while intangible assets include trademarks, brand value, and proprietary systems. Liabilities include unpaid bills, leases, and commitments. 8. Lease Agreements and Property Information  Specifics of property valuations, lease agreements, and terms, if the store owns or leases its space. 9. Staffing Levels and Payroll Costs  Details about the number of workers, their positions, and the payroll expenses related to them. Employee Contracts and Benefits: Information about contracts between employees, as well as any available retirement or benefit plans. 10. Additional Useful Data:  Documentation confirming adherence to laws and regulations is crucial, while agreements and contracts detailing significant relationships with clients, vendors, or business associates are also essential. Chapter 2 1. Calculate the Total Current Assets on December 31, 2019 Items like cash, accounts receivable, inventory, and supplies are examples of current assets. Considering the information: Receivables on account: $99,000 $27,000 in cash Materials: $18,000 Inventory of Merchandise: $93,000 Total Current Assets = Accounts Receivable + Cash + Supplies + Merchandise Inventory

Total Current Assets=99,000+27,000+18,000+93,000=237,000 2. Calculate the Total Liabilities and Stockholders’ Equity on December 31, 2019 Both current and long-term liabilities are included in total liabilities. Retained earnings and common stock are included in shareholders' equity. $69,000 in accounts payable Debt over time: $120,000 $30,000 is Common Stock $177,000 is Retained Earnings Total Liabilities = Accounts Payable + Long-term Debt Total Liabilities=69,000+120,000=189,000 Total Stockholders' Equity = Common Stock + Retained Earnings Total Stockholders’ Equity=30,000+177,000=207,000 Total Liabilities and Stockholders' Equity = Total Liabilities + Total Stockholders' Equity Total Liabilities and Stockholders’ Equity=189,000+207,000=396,000 3. Calculate the Earnings from Operations (Operating Income) for the Year Ended December 31, 2019 Net Sales less Cost of Goods Sold (COGS) and Operating Expenses (excluding interest and taxes) equals Operating Income. $420,000 in net sales Gross profit margin: $270,000 Expense for Depreciation: $36,000 Cost of supplies: $42,000 Operating Expenses = Depreciation Expense + Supplies Expense Operating Expenses=36,000+42,000=78,000 Operating Income = Net Sales - Cost of Goods Sold - Operating Expenses Operating Income=420,000−270,000−78,000=72,000 4. Calculate the Net Income (or Loss) for the Year Ended December 31, 2019 After deducting all costs—including taxes and interest—from total revenues, net income is determined. Revenue from Operations: $72,000

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