February 14, 2012 Stephen Conley Wiki Art Gallery, Inc. 117 Western Ave. Peoria, IL 61604 Stephen, Thank you for taking the time to meet with us.During our meeting, you stated that you (Stephen) are planning to purchase your co-owner’s (Rob Wilco) shares of Wiki Art Gallery, Inc. (WAG). As a private company, WAG’s shares do not have a readily available market price. However, you and Rob have agreed on calculating the buy-out price using the “earning multiplier” equal to five times the GAAP based net income for the year ended September 30, 2011.You stated that you would like an opinion regarding the 2011 financial information as it has not been audited. You would like to know whether WAG’s fiscal 2011net income fairly reports …show more content…
As a result we can see that only one of the four above criteria is met and it is a fixed price. Based on these findings we can advise to change WAG’s policy on revenue recognition upon the delivery of the product. This will lower the sales revenue by $50,000, as well as cost of goods sold and net income. Allowance for Doubtful Accounts/Bad Debt The allowance for doubtful accounts is lower than last year even though the receivables and the revenue are higher. This does not follow any form of consistency in that case. GAAP only allows the establishment of the allowance for doubtful accounts that are supported by appropriate analyses and that the policy is well documented and applied consistently from period to period. Again, without additional information the consistency item is an issue here. The accounts receivable from artists is significantly higher than last year. With 165 artists charged $40 per month, you only have about $6,600 in revenue monthly. However, your accounts receivable from artists is $15,000. This represents more than two months of website revenue. Your revenues doubled by raising the price which has resulted in quadruple the amount of receivables. This leads us to believe that some of these receivables may be uncollectable. According to GAAP, a loss must be recognized when the
A1. E-Commerce Solutions. Spice King houses its menu as well as a shopping cart for gathering orders. Payments are taken online through a company called Eat24. When clicking on checkout from Spice King’s site, customers are routed to Eat24’s secure site where they simply enter their payment information. Payments can be made via several payment types, including cash at delivery. Eat24 secures private payment information encrypting it with a SSL certificate. Eat 24 acts as a local restaurant directory of sorts. It boasts a pool of thousands of vendors who have delivery, pick-up, and catering. Customers enter their location information and it shows restaurants in that city. From there you can enter more advanced search
There are several different types of business ownership which are most commonly used in business’ and company’s today, these include; Co-operative which is a business owned by its employees, Partnership which is a business owned by between 2 and 20 people, Private limited which is a business owner by a small groups of people who have shares and a Public limited business is owned by private individuals by shares bought and sold on the stock market. A charity is a business with the purpose to help the public, the government is a business owned by the government and lastly a sole trader which is a business owned by only one person.
The grocery industry has a relatively high market commonality; a lot of grocery stores are somewhat related in terms of technologies used, labor force and the products or services offered in the stores. Differentiation with other competitors is key for survival in this highly competitive industry.
INVESTools should definitely capitalize these expenses. The practice of not capitalizing these expenses has led to routine recording of net losses
The collection of private, commercially oriented organizations, ranging in size from sole proprietorships to large corporations is referred to as
It should be noted that based on this test, the allowance for doubtful accounts should be adjusted to reflect the
Harnischfeger’s corporate recovery plan was a four pronged approach that involved (1) changes in top management, (2) cost reductions to lower the break-even point, (3) reorientation of the company’s business and (4) debt restructuring and recapitalization. These changes at first glance appear to have allowed Harnischfeger to improve its financial performance from a net loss of $3.49 per share in 1983 to a net gain of $1.28 per share in 1984. In addition, Harnischfeger has appeared to have achieved a majority of its desired outcomes from each of its four changes as shown below.
and the sale of noncore assets were common. Moreover, in anticipation of sluggish sales in the
Brenda Franklin had been serving Allied Tech for the past 8 years. As any other organisations, Brenda used to be a part of the lunch hour conversations with her colleagues. One day when her colleagues were discussing about corruption and politics, something occurred to her. As a result she prepared a list called “Ethically Dubious Conduct” and pasted it on the common notice board. Her colleagues were taken by surprise. Brenda was now anticipating the next lunch where she was expecting her list to be analysed among her colleagues.
If the company decided to sell the new product at price of D.Cr. 8.20, that means the full fixed expense of 1.20 is covered and the company will make high profit. However, the selling price of D.Cr. 8.20 is very high and under this price the company will sell the new product at a lower volume than what the company planned sale volume in the budget and that will affect the company in the market as a strong competitor in the food manufacturing. According to the case, the company sales volume drop to 30 tons when the product was sold at the price of D.Cr. 8.2. Thus, my recommendation are as follows:
To organize and prioritize the current and future projects in the pipeline in a way that fits into the PMB budget of $5B, and ensures projects that increase sales, growth, and stockholder value are of top priority, whereas projects that are not beneficial are either put on hold or discarded.
Southwest Airlines encourages respect, innovation, a caring attitude and strives to adhere to all labor and employment laws which includes respecting privacy and equal opportunity. With a strong concern for avoiding corruption and avoiding anti-competitive behavior, they work hard to maintain accountability of all business practices. An example of this is the promotion of competition to provide consumers low air fares and a variety of high quality air service offerings across the US. This shows their devotion to the community they serve and maintains the company culture.
Proponents of the knowledge-based theory of the firm point out that this one sided concentration on incentive conflicts in the economics of organizational literature overlooks the production side of the firm. Langlois and Foss, for example, argue that the literature has unreflectively relied on a dichotomy between productive aspects and exchange aspects of the firm, that is, on a dichotomy between production costs and exchange costs. In analyzing exchange costs the literature recognizes that exchange itself is not costless, but involves transaction costs from imperfect knowledge and opportunism. But in analyzing production costs, there has been an embedded agreement that price theory tells us all we need to know about production. As Langlois and Foss point out, however, it is very likely that knowledge about how to produce is imperfect and that knowledge about how to link together one person’s (or organization’s) productive knowledge with that of another is imperfect. These twin issues of capabilities and coordination are discrete from the hazards of astringent that other traditional beliefs have focused on. Both knowledge resources and (imperfect) production costs can be said to vary depending on the attributes of a production process, in the same way that transaction costs differ depending on the asset attributes of investment projects. Thus, instead of holding technology constant across alternative modes of organization as a
Flexibility of Management in Accounting Policy: Receivables are recognised and carried at original invoice amount less a provision for any uncollectible debts. They make an estimate for doubtful debts when collection of the full amount is no longer probable. The estimation of provision of doubtful debt relative to receivable is regularly reviewed. Bad debts are written off as incurred. As can be seen, it is a bit risky approach for the company not to assign provision of bad debts according to the percentage of credit sales. It is to be noted here that the days of receivable decreased from 2002 to 2003, almost halved.
Business plays a major role within our society. It is a creative and competitive activity that continuously contributes to the shaping of our society. By satisfying the needs and wants people cannot satisfy themselves, businesses improve the quality of life for people and create a higher standard of living.