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Question 1:
a1. How do you paste a spreadsheet in a document showing row and column headings?
Copying the spreadsheet in Excel 2010:
1. Go to Page Layout tab after that click on the Print Titles in the middle ofthis tab
2. Tick the Row and column headings setting under the print section andthen click OK to close the Page Setup.
3. Choose the area of cells that you want to copy and then go to Home tab.4. Click on the Copy Options and a drop down menu will appear. Select AsPicture Copy as Picture after that a window will appear.
5. Select As shown when printed and click OK.Pasting the spreadsheet in Word 2010:
Select the location to paste the spreadsheet and then use Ctrl + V to paste your
picture.
a2. How do you paste the formula view of a spreadsheet?
Copying the spreadsheet in Excel 2010:
1. Go to Page Layout tab and click on the Print Titles located on the rightcorner of the Page Layout group.
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A B C D E
FIFO 1 LIFO 1 FIFO 2 LIFO 2
Revenue $448,000.00 $448,000.00 $448,000.00 $448,000.00
Cost of goods sold $296,000.00 $336,000.00 $264,000.00 $224,000.00
Gross margin $152,000.00 $112,000.00 $184,000.00 $224,000.00
Tax rate
Tax fee $60,800.00 $44,800.00 $73,600.00 $89,600.00
Cash $91,200.00 $67,200.00 $110,400.00 $134,400.00
40.00%
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2. Tick the Row and column headings setting under the print section andthen click OK to close the Page Setup.
3. Press the Control ` key combination.4. Select the ranges of cells that you want to copy and then go to Hometab.
5. Click on the Copy Options and a drop down menu will appear. Select AsPicture Copy as Picture and then a window will appear.
6. Select As shown when printed and click OK.Pasting the spreadsheet in Word 2010:
Select the location to paste the spreadsheet and then use Ctrl + V to paste your
picture.
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A B C D E
FIFO 1 LIFO 1 FIFO 2 LIFO 2
Revenue =D8*C8 =D8*C8 =D8*C8 =D8*C8
Cost of goods sold =B4*C4+8000*C6 =28000*C6 =B4*C4+8000*C7 =28000*C7
Gross margin =B13-B14 =C13-C14 =D13-D14 =E13-E14
Tax rate
Tax fee =B15*$B$16 =C15*$B$16 =D15*$B$16 =E15*$B$16
Cash =B15-B17 =C15-C17 =D15-D17 =E15-E17
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b. Capture a screen shot to your computer.
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Question 2:
15-2. DefineAssets andLiabilities.
Assets are things that have their own value like property. Assets are owned by a person or a
corporation that can determine to keep or sell them to pay debts. Assets have two types, namely
tangible and intangible. Tangible assets are fixed assets such as land, equipment and so on.
Intangible are nonphysical assets such as copyrights and goodwill. Assets is considered to bring
the future economic advantages and it also be depreciated during the time using. Assets have
three essential characteristics. First one is that the probable present benefit involves a capacity,
singly or combining with other assets. Second one is that the entity can control asset to make
profits. Last one is that the transaction rise to the entitys right to or control of the profit has
already occurred.
Liabilities are debts of company with outside parties such as accounts payable, loans. The
debtor has the responsibility to pay the amount money that they borrowed before. Liabilities,
similar to assets, have short and long-term liabilities. It can be seen that liabilities allow a person
and a company be able to do their plant even though they do not have enough cash. Therefore,
there are so many companies using liabilities to invest in their assets. Many companies use debt
as a strategy for their invested plants. Liabilities also include the owners equity. The more
proportion of owners equity, the more risk for the company. However, there is a worse if the
excesses in debt happened. In fact, to control the debt, company has to decline its consumptions
or even investment. As a result, the society will develops slowly.
According to Horngren, Sundem, Stratton, Burgstahler & Schatzberg, liabilities are the entitys
economic obligations to nonowners (2010, p637).
15-4.Criticize: Net income is the difference in the ownership capital account balances at
two points in time.
This statement is untrue. This is because net income is a company's total earnings (or profit). Net
income is calculated by taking revenues and adjusting for the cost of doing business,
depreciation, interest, taxes and other expenses. This statement forgot mentioning about
http://www.investopedia.com/terms/n/netincome.asphttp://www.investopedia.com/terms/n/netincome.asp -
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withdrawals and investment in ownership capital when both of wh ich only influence to owners
equity. In fact, withdrawals and investment do not affect to the net income.
15-7. Explain why some accountants want to record R&D expenditures as an asset on
acquisition.
R & D refer to research and development. Givoly and Shi (2008) point out that the R&D
expenditures are the wisdom of investing in intangibles. Furthermore, R&D can be expected net
advantages. Thus, GAAPs principle for accounting is appropriate for expenditure of intangible
in which it is defined as an asset.
15-9 Depreciation is cost allocation, not valuation. Do you agree? Explain.
I agree with this statement because the present market price of an asset or equipment is always
lower than the value at the date of exchange. So, this process of allocating the equipment cost to
the years its useful life via a depreciation method applies to physical assets. (Horngren et al,
2010, p645). Depreciation expense is the amount of cost allocation within an accounting period.
15-12. Criticize the following statement: As a stockholder, I have a right to more
dividends. You have millions stashed away in retained earnings. Its about time that you let
the true owners get their hands on that pot of gold
I disagree with this statement. This is because the company have to keep the retain earnings to
reinvest. After that the company can pay to you the dividend in the end of reinvestment.
Dividends are distributions of assets to stockholders that reduce ownership claims. The cash
dividends that companies pay typically arise from profitable operations. Thus, journalists often
write about dividends or withdrawals as distributions of profits or distributions of retained
earnings. If the stockholder wants to get more dividends, it means that the company will have
no capital to reinvest again. In addition, the right of stockholder is only earn dividend from profit
of company and company always keep amount money called retain earnings to reinvest again
(Horngren et al, 2010, p 650).
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Question 3:
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A B C D E F G H I J K L
DATA INPUT
$
Accured liabilities 1,604.00 Required:
Cash and cash equivalents 2,619.00 Caculate Inventories, taotal stockholders' equity
Total stockholders' equity b and total liabilities
Total liabilities c
Long-term liabilities 2,206.00
Total revenues 72,483.00
Accounts receivable 748.00
Common stock 3,546.00
Inventories a
Account payable 5,225.00Property, net of accumulated depreciation 10,355.00
Retained earnings 5,361.00
Other assets 1,921.00
Other liabilities 2,455.00
Other stockholders' equity 285.00
Total assets 20,682.00
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A B C D E F G H I J K L
REPORT
BALANCE SHEET
for Costco Wholesale Corporation
as at August 31, 2008 (in millions of dollars)
ASSETS $
Current assetsCash and equivalents 2,619.00
748.00
Inventories 5,039.00
Total current assets 8,406.00
Non-current assets
Property, n accumulated depreciation 10,355.00
Total noncurrent assets 10,355.00
Other assets 1,921.00
Total assets 20,682.00
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable 5,225.00
Accured liabilities 1,604.00
Total current liabilities 6,829.00
Non-current liabilities
Long-term debt 2,206.00
Total noncurrent liabilities 2,206.00
Other liabilities 2,455.00
Total liabilities 11,490.00
Shareholders' equity
Common stock 3,546.00
Retained earnings 5,361.00
Other stockholders' equity 285.00
Total shareholders' equity 9,192.00
Total liabilities and shareholders' equity 20,682.00
Total liabilities (c)= total current liabilities + total noncurrent liabilities + other liabilities = $11,490.00
Account receivable
Inventories (a) = total current assets - account receivable - cash and cash equivalents = $5,039.00
Total shareholders' equity (b)= Common stock + retained earnings + other stockholders' equity = $9,192.00
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Question 4:
16-5 Criticize: Depreciationis the loss in value of a fixed asset over a given span of time
This statement is untrue. As a defined assets is what a company owns, which are expected to
last more than one year, are called Fixed Assets. These assets include such things as automobiles,
computers, furniture, office buildings, and equipment. These fixed assets that a company owns
have a set amount of useful life. This means that a fixed asset is not expected to last forever, and
thus its value depreciates over time. The definition of depreciation is the decline in the useful life
of a fixed asset. However, land is also a type of fixed asset but land is not subject to
depreciation as we do not use up land (Horngren et al, 2010, p 645). Therefore, when this
statement mentions about fixed asset but not excluding land, it means that it is wrong.
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A B C D E F
REPORT
BALANCE SHEET
for Costco Wholesale
as at August 31, 2008 (
ASSETS $
Current assetsCash and equivalents 2619
748
Inventories =F33-F30-F31
Total current assets =F39-F37-F38
Non-current assets
Property, net of accum accumulated deprecia 10355
Total noncurrent asset =F36
Other assets 1921
Total assets 20682
LIABILITIES AND STOC
Current liabilities
Accounts payable 5225
Accured liabilities 1604
Total current liabilitie =F43+F44
Non-current liabilities
Long-term debt 2206
Total noncurrent liabil =F48
Other liabilities 2455
Total liabilities =F45+F49+F50
Shareholders' equity
Common stock 3546
Retained earnings 5361
Other stockholders' eq 285
Total shareholders' eq =SUM(F54:F56)
Total liabilities and sh =F57+F51
Account receivable
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16.8. Goodwill may have nothing to do with the personality of the manager or employees.
Do you agree? Explain.
I disagree with this statement because McLaney & Atrill (2010, p 62) point out that the term
goodwill is often used to cover various attributes such as the quality of the product, the skill ofemployees and the relationship with customers. Therefore, the personality of the managers and
employees also affect on goodwill.
16.28. Why is there usually a difference between the cash collections from customers and
sales revenue in a periods financial statement?
There is usually a difference between the cash collections from customers and sales revenue in a
periods financial statement because the former includes the current cash sales plus collection of
the previous periods credit sales (Horngren et al, 2010, p 295). Therefore, the sales revenue
only equals the cash collection when the previous periods credit sale is 0.
16.34. Study Appendix 16A. Purchases of inventory at the end of a fiscal period can have a
direct effect on income under LIFO. Do you agree? Explain.
I agree with this statement because in the LIFO method, the latest inventory will be sold first. So,
when the company buys the inventory at the end of a fiscal period, there are two circumstances
happened. One is that if the value of goods increases in comparison with the purchased price, the
income will increase as well. However, if the value of goods decreases compared with the
purchased price, the income also decreases. In conclusion, the LIFO method has a direct effect
on income (Appendix 16A, Horngren et al, p707).
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Question 5
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A B C D E F G
DATA INPUT
$Cash and equivalents 55,000.00
Revenues 800,000.00
Notes payable 51,000.00
Longterm debt, excluding current portion 210,000.00
Accounts receivable, net 48,000.00
Provision for income taxes 60,000.00
Other long-term assets 110,000.00
Interest expense 55,000.00
Deferred income tax liability-longterm 44,000.00
Retained earnings 204,000.00Income taxes payable 37,000.00
Cost of sales 470,000.00
Inventories 36,000.00
Prepaid expenses 15,000.00
Common stock (50,000 shares outstanding 25,000.00
Property, plant, ad equipment, at cost 580,000.00
Accounts payable 43,000.00
Interest income 15,000.00
Goodwill, patents, and trademarks 75,000.00
Current portion of long-term debt 16,000.00
Less: Accumulated depreciation 170,000.00
Selling and administrative expenses 150,000.00
Additional paid-in capital ?
Required:
Prepare balance sheet and income statement for Weikart
Company. Include the proper amount for additional paid-in capital
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H I J K L M N O P Q R S
REPORT
BALANCE SHEET
ASSETS $
Current assets
Cash and equivalents 55,000.00
Account receivable, net 48,000.00
Inventories 36,000.00
Prepaid expenses 15,000.00
Total current assets 154,000.00
Non-current assets
Property, plant, and equipment
At cost 580,000.00
Less: accumulated depreciation -170,000.00
Goodwill, patents, and trademarks 75,000.00
Other long-term assets 110,000.00
Total nuncurrent assets 595,000.00
Total assets 749,000.00
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
current portion of long-term debt 16,000.00
Notes payable 51,000.00
Accounts payable 43,000.00
Income taxes payable 37,000.00
Total current liabilities 147,000.00
Non-current liabilities
Long-term debt 210,000.00
Deferred income taxes 44,000.00
Total noncurrent liabilities 254,000.00
Total liabilities
Shareholders' equity
Common stock 25,000.00
Retained earnings 204,000.00
Additional paid-in capital 119,000.00
Total shareholders' equity 348,000.00
Total liabilities and shareholders' equity 749,000.00
The amount for additional paid-in capital = Total shareholders' equity - common stock - retained earnings = $119,000.00
INCOME STATEMENT
for Weikart Company
for the month ending December 31, 20x0
Revenues $800,000.00
Cost of sales $470,000.00
Gross margin $330,000.00
Selling and administrative expenses $150,000.00
Income from operations $180,000.00
Other (expense) income
Interest income $15,000.00
Interest expense -$55,000.00
Total other (expense) income -$40,000.00
Income before income taxes $140,000.00
Provision for income taxes $60,000.00
Net income $80,000.00
Earnings per share $1.60
for Weikart Company
as at December 31, 20x0
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H I J K L M
REPORT
BALANCE SHEET
ASSETS $
Current assets
Cash and equivalents 55000
Account receivable, ne 48000
Inventories 36000
Prepaid expenses 15000
Total current assets =SUM(M8:M11)
Non-current assets
Property, plant, and eq
At cost 580000
Less: accumulated dep -170000
Goodwill, patents, and 75000
Other long-term assets 110000
Total nuncurrent asse =SUM(M16:M19)
Total assets =M12+M20
LIABILITIES AND STOC
Current liabilities
current portion of long 16000
Notes payable 51000
Accounts payable 43000
Income taxes payable 37000
Total current liabilitie =SUM(M26:M29)
Non-current liabilities
Long-term debt 210000
Deferred income taxes 44000
Total noncurrent liabil =M33+M34
Total liabilities
Shareholders' equity
Common stock 25000
Retained earnings 204000
Additional paid-in capi =M43-M40-M39
Total shareholders' eq =M45-M30-M35
Total liabilities and sh =M22
The amount for additi
INCOME STATEMENT
for Weikart Company
for the month ending
Revenues 800000
Cost of sales 470000
Gross margin =M54-M55
Selling and administrat 150000
Income from operatio =M56-M57
Other (expense) incom
Interest income 15000
Interest expense -55000
Total other (expense) i =M60+M61
Income before income =M58+M62
Provision for income t 60000
Net income =M63-M64
Earnings per share =M65/50000
for Weikart Company
as at December 31, 20x0
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Question 6:
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A B C D E F
DATA INPUT
Date Inventories Unit cost SalesDec 31 20x0 20000.00 $10.00
During 20x1
Question 1 30000.00 $12.00
Question 2 30000.00 $8.00
$16.00 28,000.00
Required:
1. At price $12 per unit. Assume FIFO and then FIFO
2. At price $8 per unit. AssumeFIFO and LIFO
3. Tax rate = 40%. Which method results in more cash for Kansas City Fertilizer for each question.
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A B C D E F G
SOLUTION
FIFO 1 LIFO 1 FIFO 2 LIFO 2
Sales $448,000.00 $448,000.00 $448,000.00 $448,000.00
Beginning inventory $200,000.00 $200,000.00 $200,000.00 $200,000.00
Purchases $360,000.00 $360,000.00 $240,000.00 $240,000.00
Cost of goods available for sale $560,000.00 $560,000.00 $440,000.00 $440,000.00
Ending inventory $264,000.00 $224,000.00 $176,000.00 $216,000.00
Cost of goods sold $296,000.00 $336,000.00 $264,000.00 $224,000.00
Gross profit $152,000.00 $112,000.00 $184,000.00 $224,000.00
Tax rate 40.00%
3a. In question 1 gross profit is higher under FIFO. However, cash will be higher under LIFO by $16,000.00
3b. In question 2 gross profit is higher under LIFO. However, cash will be higher under FIFO by $16,000.00
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Question 7
a. What went wrong at ABC?
The first wrong is that the ACB paid too much for childcare centers. Even though ABC learning
improved significantly from 2001 to 2006, with the increasing from $2 to $8.6 in share price, it
collapses from 2007 because of astronomical debt, crisis of liquidity and inflated asset value.
Astronomical debt of ACB is reflected by company had to issue share to raise capital and every
$0.3 in equity, ACB owes more than $1 in debt. Crisis of liquidity is presented by the decreasing
in market price to $0.54. The issue of inflated asset value is the international expansion. There
are also some issues of ACB such as the recognition revenue runs unreasonable, the expending
large amount of cash, growing cost without any reasonable management, incorrect of intangible
asset valuation and behaviors repeat themselves. Finally, we can realize three reasons for failure
of ACB are valuation of intangible assets and goodwill, accounting irregularities and unrealistic
growth ambitions.
b. Why are profits important?
One company always wants make profit to survive. Profit is important in any business because
the profit relates to the shareholders and stockholders. Firstly, it is a sign whether they operate
effectively or efficiently. Secondly, shareholders are investing money on a consistent basis in
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A B C D E F G
SOLUTION
FIFO 1 LIFO 1 FIFO 2 LIFO 2
Sales =$D$8*$C$8 =$D$8*$C$8 =$D$8*$C$8 =$D$8*$C$8
Beginning inventory =$B$4*$C$4 =$B$4*$C$4 =$B$4*$C$4 =$B$4*$C$4
Purchases =B6*C6 =B6*C6 =B7*C7 =B7*C7
Cost of goods available for sale =B19+B20 =C19+C20 =D19+D20 =E19+E20
Ending inventory =22000*C6 =(B4*C4)+(2000*C6) =22000*C7 =(B4*C4)+(2000*C7)
Cost of goods sold =B21-B22 =C21-C22 =D21-D22 =E21-E22
Gross profit =B18-B23 =C18-C23 =D18-D23 =E18-E23
Tax rate 0.4
3a. In question 1 gross profit is higher =B26*(B24-C24)
3b. In question 2 gross profit is higher =B26*(E24-D24)
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hopes of receiving returns on their investment. If there is no profit, investors will stop investing
and business cannot continue. Therefore, in order to attract investors to make investments,
companies need to generate profit.
Why is cash flow important?
Cash flow for a business is simply the flow of cash through the organization over time. Cash
flows are necessary for the firm to survive and prosper. Understanding cash flow means you
understand your money and you can make smart decisions with your money. The cash flow is
important because of two reasons. The first one is that if a company has a positive cash flow, it is
critical to remaining solvent which is opposite to bankrupt. However, if you have a negative cash
flow, you are going to be broke. In fact, negative net cash flow is a main way most people and
most businesses go bankrupt
c. What are the characteristics of a good internal control system?
Internal control system provides some policies to protect and make the most efficient use of an
organizations asset. Internal control system is recognized with clearly roles and duties. In fact, it
provides the reasonable assurance to achieve the goals (CPA). The characteristics of a good
internal control system are:
- Effectiveness and efficiency of operations.- Reliability of financial reporting and compliance with compliance withapplicable laws and regulations (Ucop).
Question 8
17-11. It is better to recognize goodwill than to write up assets to their fair market values
Do you agree? Why?
I disagree. This is because goodwill is defined as a difference between the purchased price and
the fair value of an asset. Companies record goodwill as an asset only when one company
purchases another. A purchase may be willing to pay more than the sum of the fair values
because the acquired company is able to generate abnormally high earning. So it should mention
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in balance sheet until its value is impaired and it is no longer present (Horngren et al, 2010,
p742).
17.13. Why is it useful to analyze income statements and balance sheets by component
percentages?
The reason is that it will make comparisons across companies easier when we compare between
two companies which are different about size. Moreover, changes between one year can reveal
easily compared with average method because component percentage can help the accountant
understand how developed of company is. However, the average method only shows the number
which is very difficult to calculate the developed level of company (Horngren et al, 2010, p746).
17.14. Name the three types of comparisons made with ratios.
The names of three types of comparisons are: time-series comparisons, benchmark comparisons
and cross-sectional comparisons (Horngren et al, 2010, p747)
17.17.An efficient capital market is one where securities are traded through
stockbrokers. Do you agree? Explain.
This statement is untrue in respect with accounting. This is because in accounting, it is important
to recognize that the market is efficient only in regard to publicly available information. Thus,
accounting issues that deal with the disclosure of new information are more important than those
that simply change securities from one to another through brokers or dealers. The meaning of
efficient does not mean that efficiency in quantity or quality of trade, but means efficiency in
gathering date and information. (Horngren et al, 2010, p751-752)
17.19. Evaluate the following quotation from Forbes: if IBM had been forced to expense
[the software development cost of] $785 million, its earnings would have been cut by 72
cents a share. With IBM selling at 14 times earnings, expensing the costs might have
knocked over $10 off IBMs share price
The quotation from Forbes is not correct. In the first sentence, it is right because increasing in
expense leads to the decreasing in net income. Therefore, earnings per share will be decreased.
However, in the first phrase of second sentence, they already mentioned the relation between
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selling and earnings. This means that the earnings is constant. Moreover, expensing the costs has
no relation with share price when share price is calculated by net income and average common
shares outstanding.
Question 9:
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A B C D E
Abercrombie & Fitch
DATA INPUT Dividends per common share 0.7
Market price 17.85
Number of share 86.816
Income statement for the year ended Jan 31,2009 (in millions)
Net sales 3540.00
Cost of sales 1178.00
Gross profit 2362.00
Other expenses (summarized) 1911.00Earnings before income taxes 451.00
Provision for income taxes 179.00
Net earnings 272.00
Balance sheet (in millions) Jan 31,2009 Feb 2,2008
Assets
Inventories 372.00 333.00
Other current assets (smummarized) 713.00 807.00
Total current assets 1085.00 1140.00
Property and equipment ( net) 1399.00 1318.00
Other assets 364.00 110.00
Total assets 2848.00 2568.00
Liabilities and stockholders' equity
Current liabilities (summarized) 450.00 543.00
Long-term liabilities (summarizied) 553.00 406.00
Total liabilities 1003.00 949.00
Stockholders' equity (summarized) 1845.00 1619.00
Total liabilities and stockholders' equity 2848.00 2568.00
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A B C D E
SOLUTION
Financial ratios
Abercrombie & Fitch
applied to 31st Jan 2009
Typical Name of Financial Ratios Numerator Denominator Numbers
1. Current ratio Current assets Current liabilities 2.4111111112. Total debt to equity Total liabilities Stockholders' equity 54.4%
3. Gross profit rate Gross profit Net sales 66.7%
4. Return on sales Net earnings Net sales 7.7%
5. Return on stockholders' equity Net earnings Average stockholders' equity 15.7%
Net earnings less dividents Average common $3.13
on preferred stock, if any. shares outstanding.
Market price per share of Earnings per share $5.70
common stock
8. Divident yeild Dividends per common share Market price per common share 3.9%
9. Divident payout Dividends per common share Earnings per share 22.3%
6. Earnings per share
7. Price earnings
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A B D E
Typical Name of Financial Ratios Numerator Denominator Numbers
1. Current ratio Current assets Current liabilities =B20/B26
2. Total debt to equity Total liabilities Stockholders' equity =B28/B29
3. Gross profit rate Gross profit Net sales =B9/B7
4. Return on sales Net earnings Net sales =B13/B7
5. Return on stockholders' equity Net earnings Average stockholders' equity =B13/((B29+C29)/2)
Net earnings less dividents Average common =B13/E5
on preferred stock, if any. shares outstanding.
Market price per share of Earnings per share =E4/E45
common stock
8. Divident yeild Dividends per common share Market price per common share =E3/E4
9. Divident payout Dividends per common share Earnings per share =E3/E45
6. Earnings per share
7. Price earnings
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53
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5960
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69
70
71
72
73
74
75
A B C D E
Make up data for income statement for the year ended Feb 2,2008
Net sales 3230.00
Cost of sales 938.00
Gross profit 2292.00
Other expenses (summarized) 2011.00
Earnings before income taxes 281.00
Provision for income taxes 89.00Net earnings 192.00
Financial ratios
Abercrombie & Fitch
applied to Feb 2, 2008
Typical Name of Financial Ratios Numerator Denominator 2008
1. Current ratio Current assets Current liabilities 2.099447514
2. Total debt to equity Total liabilities Stockholders' equity 58.6%
3. Gross profit rate Gross profit Net sales 71.0%
4. Return on sales Net earnings Net sales 5.9%
5. Return on stockholders' equity Net earnings Average stockholders' equity 11.1%
6. Earnings per share Average common shares
outstanding
$2.21
7. Price earnings Earnings per share $8.07
8. Divident yeild Dividends per common share Market price per common share 3.9%
9. Divident payout Dividends per common share Earnings per share 31.7%
Market price per share of
common stock
Net earnings less dividents on
preferred stock, if any.
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A B C D E
Make up data for income statement for th
Net sales 3230
Cost of sales 938
Gross profit =B54-B55
Other expenses (summarized) 2011
Earnings before income taxes =B56-B57
Provision for income taxes 89
Net earnings =B58-B59
Financial ratios
Abercrombie & Fitch
applied to Feb 2, 2008
Typical Name of Financial Ratios Numerator Denominator 2008
1. Current ratio Current assets Current liabilities =C20/C26
2. Total debt to equity Total liabilities Stockholders' equity =C28/C29
3. Gross profit rate Gross profit Net sales =B56/B54
4. Return on sales Net earnings Net sales =B60/B54
5. Return on stockholders' equity Net earnings Average stockholders' equity =B60/((B29+C29)/2)
6. Earnings per share Average common shares outstanding
=B60/E57. Price earnings Earnings per share
=E4/E72
8. Divident yeild Dividends per common share Market price per common share =E3/E4
9. Divident payout Dividends per common share Earnings per share =E3/E72
Market price per share of common stock
Net earnings less dividents on preferred stock, if any.
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Question 10:
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9
Graph to compare between 2008 and
2009 in 9 ratios
2009
2008
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8
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11
A B C D
DATA INPUT
$
Price per unit 3
Cost per order 68
Purchased worth per year 6000
Workings day 250
Lead time 6
Carrying cost 15% of the value of inventory
Required: EOQ, reoder point, annual inventory costs
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A B C D E F G H
SOLUTION
Annual demand 2000
Average purchased worth 3000
Cost of carrying one unit for one year 0.45
Daily usage 8EOQ 777.4603
Reoder point 48 Reoder point = leadtime x daily usage
Annual inventory costs 6349.857 TAIC = odering costs+ carrying costs+ purchase outlay
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A B
SOLUTION
Annual demand =B6/B4
Average purchased worth =B6/2
Cost of carrying one unit for one year =B4*B9
Daily usage =B16/B7EOQ =SQRT((2*B16*B5)/B1
Reoder point =B8*B19
Annual inventory costs =(B16*B5/B20)+(B18*
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A B C D E
Cost table for graph: Start at 200 increment by 100
Q Order Cost Holding cost Total cost
200 680 45 725
300 453.3333333 67.5 520.833333
400 340 90 430
500 272 112.5 384.5
600 226.6666667 135 361.666667
700 194.2857143 157.5 351.785714
800 170 180 350
900 151.1111111 202.5 353.611111
1000 136 225 361
1100 123.6363636 247.5 371.136364
1200 113.3333333 270 383.333333
1300 104.6153846 292.5 397.115385
1400 97.14285714 315 412.1428571500 90.66666667 337.5 428.166667
1600 85 360 445
1700 80 382.5 462.5
With holding cost = 15% x value of average inventory
With order cost = number of order x cost per order = (D/Q) x cost per order
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A B C D E
Cost table for graph: Start at 200 increment by 100
Q Order Cost Holding cost Total cost
200 =($B$16/B28)*$B$5 =15%*$B$4*(B28/2) =C28+D28
300 =($B$16/B29)*$B$5 =15%*$B$4*(B29/2) =C29+D29
400 =($B$16/B30)*$B$5 =15%*$B$4*(B30/2) =C30+D30500 =($B$16/B31)*$B$5 =15%*$B$4*(B31/2) =C31+D31
600 =($B$16/B32)*$B$5 =15%*$B$4*(B32/2) =C32+D32
700 =($B$16/B33)*$B$5 =15%*$B$4*(B33/2) =C33+D33
800 =($B$16/B34)*$B$5 =15%*$B$4*(B34/2) =C34+D34
900 =($B$16/B35)*$B$5 =15%*$B$4*(B35/2) =C35+D35
1000 =($B$16/B36)*$B$5 =15%*$B$4*(B36/2) =C36+D36
1100 =($B$16/B37)*$B$5 =15%*$B$4*(B37/2) =C37+D37
1200 =($B$16/B38)*$B$5 =15%*$B$4*(B38/2) =C38+D38
1300 =($B$16/B39)*$B$5 =15%*$B$4*(B39/2) =C39+D39
1400 =($B$16/B40)*$B$5 =15%*$B$4*(B40/2) =C40+D40
1500 =($B$16/B41)*$B$5 =15%*$B$4*(B41/2) =C41+D41
1600 =($B$16/B42)*$B$5 =15%*$B$4*(B42/2) =C42+D421700 =($B$16/B43)*$B$5 =15%*$B$4*(B43/2) =C43+D43
With holding cost = 15% x value of average inventory
With order cost = number of order x cost per order = (D/Q) x cost per order
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800
200 300 400 500 600 700 800 900 10001100120013001400150016001700
Totalcost($)
Order quantity (units)
Boeing Company
Economic order quantity
Order cost
Holding cost
Total cost
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Question 11:
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A B C D E F G H
DATA INPUT
August 31, bank balance $4,660
Two charges for NSF #1 $360.00
#2 $160.00
Watson checks are outstanding at August 31:
Check No. Amount
237 $80.00
288 $180.00
291 $550.00
294 $630.00
295 $30.00296 $120.00
Collection from customers $1,100.00
Bank has not recored yet
Dividend revenue $950.00
Interrest revenue $40.00
Bank service charges $60.00
Deposit in transit $340.00
Bank statement includes a $500.00
deduction - bank error
Cash account on August 31 $2,400.00
Required : prepare bank reconciliation for Watson's Heathcare at August 31,2012
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A B C D E F
REPORT
Bank reconciliation for Watson's Healthcare at August 31, 2012
$Balance as per bank statement as at 31st August 4660
Add : Deposit in transit 340
Bank correction: incorrect cheque 500
Less: outstanding cheques
237 -80
288 -180
291 -550
294 -630
295 -30
296 -120
Adjusted bank balance as at 31st August 3910
Balance as per our records as at 31st August 2400
Add:
Collection from customer 1100
Dividend revenue 950
Interest revenue 40
Less
Two charges from customers #1 -360
#2 -160
Service charges -60
Adjusted balance as per our records as at 31st August 3910
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Question 12:
1. Triple bottom line (TBL) reporting.
Triple bottom line reporting makes companies accountable for economic, social and
environmental effects of doing business. This is a popular form of accounting for non-profit
companies and government organizations to show a commitment to corporate social
responsibilities. For these companies, social and ecological performance is just as important asfinancial performance.
The facts of TBL: The idea of triple bottom line reporting was first used by John Elkington in
1994. He wrote a book on this topic in 1998, "Cannibals with Forks: the Triple Bottom Line of
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A B C D E F
REPORT
Bank reconciliation fo
$
Balance as per bank st 4660
Add : Deposit in transit 340
Bank correction: incor 500
Less: outstanding cheques
237 -80
288 -180
291 -550
294 -630
295 -30
296 -120
Adjusted bank balanc =SUM(F33:F43)
Balance as per our rec 2400
Add:
Collection from custo 1100
Dividend revenue 950
Interest revenue 40
Less
Two charges from cust #1 -360
#2 -160
Service charges -60
Adjusted balance as p =F47+SUM(F50:F57)
http://www.ehow.com/business/http://www.ehow.com/business/ -
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21st Century Business." Triple bottom line reporting has gained momentum in all industries and
sectors, not just nonprofit and government organizations.
The function of TBL: Triple bottom line reporting requires a company to be responsible to
shareholders and to all stakeholders of a company. Stakeholders are made up of all shareholders,
employees, customers, suppliers and anyone else who is affected by the actions of the business.
Triple bottom line reporting demands that a company be accountable for every aspect of
business.
The benefits of TBL: The social aspect of triple bottom line reporting focuses on fair treatment
of a company's human capital. Besides providing a safe workplace and fair wages for employees,
being socially responsible also entails performing beneficial and responsible business practices
in the surrounding community. Triple bottom line reporting requires a company to engage in
sustainable environmental activities. Companies should exert an effort to help the environment,
or at least reduce the harm they inflict on the environment as much as possible. A company that
uses triple bottom line reporting manages the consumption of energy, reduces waste, recycles,
and avoids producing harmful items such as chemicals or weapons.
The significance of TBL: Appearing socially and environmentally responsible to customers
helps businesses increase profits. It's often the case to see a company in the headlines foraccounting scandals, unfair wages, unsafe workplaces, discrimination and much more; these
reports hurt a company's reputation and goodwill, resulting in lost revenue. Also, focusing on
more things just profits can help a company open market potential that was unattainable before.
Companies may also lose market share to other competing businesses that are utilizing triple
bottom line reporting because they appear more socially responsible to consumers.
Misconceptions: Triple bottom line reporting isn't just traditional accounting, with
environmental and social impact factored in. The economic section of this accounting approach
is focused on the economic impact of the company and is not limited to the revenues and
expenses of a business.
http://www.ehow.com/about_5064070_triple-bottom-line-reporting.htmlhttp://www.ehow.com/about_5064070_triple-bottom-line-reporting.htmlhttp://www.ehow.com/business/http://www.ehow.com/about_5064070_triple-bottom-line-reporting.htmlhttp://www.ehow.com/about_5064070_triple-bottom-line-reporting.htmlhttp://www.ehow.com/business/http://www.ehow.com/about_5064070_triple-bottom-line-reporting.htmlhttp://www.ehow.com/about_5064070_triple-bottom-line-reporting.html -
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2. Lean accounting.
What is Lean Accounting?
Accounting, control, measurement, and management methods that truly reflect leanthinking and lean practice. Lean Accounting leads to better decisionmaking by providingaccurate, understandable, and actionable cost & profitability information. Lean Accounting saves
time and money by eliminating much of the waste associated with traditional accounting
&control systems. Lean Accounting motivates lean improvement over the longerterm byproviding measurement and reporting information that is thoroughly leanfocused. LeanAccounting enables companies to make more money by identifying the potential financial
benefits of lean improvement and developing strategies to realize that profit. Lean Accounting
methods such as Target Costing and SOFP provide shortterm and longterm focus on customervalue through the value stream, and the teambased continuous improvement required togrow the business, eliminate cost, and improve profitability.
How to implement Lean Accounting?
Lean Accounting does not stand alone. It supports lean manufacturing, lean product design, lean
logistics, and so forth. Lean Accounting is the servant of the operation. There is a prudent and
orderly maturity path to the implementation of Lean Accounting. As your company matures with
lean manufacturing (and other lean processes) more and more of the benefits of Lean Accounting
can be implemented and realized.
Question 13:
1-4. Distinguish among scorekeeping, attention directing, and problem solving.
Scorekeeping is the classification, accumulation, and reporting of data that help users understandand evaluate organizational performance of a division for the preceding year. This is a routine
evaluation of an organizational unit for which managers want systematic date on a regular basis.
For example, Apple gathers numerous reports from numerous stores to evaluate performance for
the preceding year.
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Attention directing usually involves routine reports that compare actual results to before-the-fact
expectations. Attention directing identifies products that need attention, managers want
information that highlights deviations of actual results from pre-specified expectations in the
budget. For example, Coca-Cola Company made a profit of $30 million dollars, while the
expected profit was $35million dollars. Therefore, managers will look for the explanation why
the company cannot achieve its budget.
Problem solving often involves an analysis of the impacts of each alternative to identify the best
course to follow. This is a one-time decision for which managers need information about the
potential impacts of each of alternatives under consideration. For instance, each year Starbucks
decides to add and delete some inappropriate from their menu. So, the analysis presents how
these products affect on revenues and costs, managers will give the decisions.
1-22. The problem with accounting is that accountants never get to become top managers
such as CEOs. Do you agree? Explain
I disagree with this statement. A research by Financial Executive magazine presented that 33%
of CEOs in big companies with revenues higher than $500 million had increased through
finance/accounting ranks, in comparison with 26% from operations and 21% from sales and
marketing (Horngren et al, 2010, 34). Moreover, when accountants are CEOs, they may make
various right decisions in purchasing, manufacturing, wholesaling, retailing and so one because
they know what wrong with their company. It is found in the balance sheet, income statement,
and cash flow statement. For instance, James Sutherland is an accountant and CEO in cricket
Australia and Tim Pethick in Nudie Foods Australia and so on.
1-23. How are changes in technology affecting management accounting?
The technology has affected on the increasing capabilities and decreasing cost of computer
processing and storage in management accounting. Databases in computer allow managers toaccess data directly and to generate their own reports and analyses. Because of using advanced
technology such as B2C and B2B, many companies have reduced more than 70% processing
cost. Moreover, data and information will be reserved carefully without risky in comparison with
keeping in the papers. With all the promise that information technologies have given us, the
accounting profession must embrace the changes that come along with new technology and learn
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to use it to our advantage, or risk being replaced by nonprofessionals. For example, Oracle
describes its ERP as one that helps you integrate all aspects of your business and SAP,
Microsoft Dynamics and the Sage Group argue that ERP system provides the financial
information that managers need.
2-11. Why is break-even analysis a misnomer?
The study of cost-volume-profit relationship is some time called as break even analysis. In the
opinion of some, it is a misnomer as break even analysis depicts a point where costs and total
sales revenue is same. Beyond this point, it is called cost-volume- profit relationship. Some hold
the view, that break even analysis can be interpreted in two senses narrow and broad sense. In
narrow sense, it refers to determine the level of output where total costs equal to total revenue i.e.
no profit, no loss. In the broad sense, it is used to determine the probable profit at any level of
output. In addition, cost-volume-profit analysis does much more than compute the break-even
point. It is often an important part of a companys planning process. It helps managers to predict
how their decisions will affect sales, costs, and net income. Nevertheless, computing a break-
even point is one application of cost-volume-profit analysis.
2-20. CVP relationships are unimportant in nonprofit organizations. Do you agree?
Explain.
I disagree with this statement. This is because nonprofit organizations have to know how much
they can spend on operation. CVP relationship can be used to calculate the number of patient
served by city hospital. For example, a city has a $120,000 lump-sum to serve patient. Variable
costs are $600 per patient and fixed costs are $40,000. In this case, we must use break-even
equation to find how many people can be served.
Question 14:
1. Description of what you think would make for good corporate citizenship for 7categories.
Environment: corporates should focus on environment by implementing some right actions
such as decreasing hazardous waste.
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Climate change: corporates can achieve this goal if they give some plant such as recreating
forest.
Human rights: is presented by supporting for poor children have right to go to school by giving
scholarship.
Employees relation: can be performed by centering on employees benefits by giving
appropriate working time and salary.
Philanthropy: a good corporate citizenship is to organize some charity and donation for people
living in poverty.
Financial: contribute to solving the unemployment in society.
Governance: there should be not conflict between company with government and between
employees and managers.
1. Predict top 2 companies in each of 7 rated categories.
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In environment rank: In 2010, Intel Corp and International Business Machines Corp stood at
number 1 and 2 respectively. After that, in 2011, the latter jumped to number 1, whereas the
former dropped to number 4. In conclusion, even though there was a small change in position, I
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predict that in 2012 Intel Corp and International Business Machines Corp continue standing at
top 2.
In climate change rank: International Business Machines Corp also got high position in this rank
when it stood at number 5 and 1 in 2010 and 2011 respectively. However, Dell was number 1 in2010 and number 7 in 2011. In my knowledge, I believe that Dell will get higher position in
2012 at top 2 and International Business Machines Corp still stand at number 1.
In human rights rank: Ford Motor Co and Johnson Control Inc will be top 2 companies in this
rank because during two years 2010 and 2011 they always stood at high position, with 1 and 4 in
2010 and 1 and 2 in 2011 respectively.
In employees relation rank: Citigroup Inc jumped up from top 3 to top 1 and it prospects a high
rank in future year. In addition, Gap Inc already increased significantly its position in the rank
from 45 in 2010 to 4 in 2011. Therefore, top 2 for this rank is citigroup Inc and Gap Inc.
In philanthropy rank: Procter & gamble Co reflected a high jump in its potential from 19 to top
2, whereas there was a major decrease in Intel Corp from top 1 to 13. In brief, I also think that
both of them will be at top 2 of this rank.
In financial rank: In my opinion, Cummins Inc and Nike Inc may get top 2 because during the
last two years, they developed and increased slightly in comparison with others.
In governance rank: Surprisingly, there were a lot of companies have the rate of number 1 in this
rank, such as Campbell Soup Co, Mattel Inc, 3M Co, HP, Nike, Gap and so on. Therefore, all of
them can get the same opportunity of top 2 of this rank.
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Question 15:
1.
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1112
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A B C D E F G
DATA INPUT
Total area cleaned (in square feet) $50,000.00
Time work per day 7
In March, number of
time cleaning 60
Cost of labor and rent
equipment $24,000.00
Cleaning supplies
used cost $10,800.00
Charge rate per time $680.00
Required: 1.Table shows labor cost, cleaning supplies cost, total cost, taotal cost per squareand what is the predicted total cost of store cleaning for the next quarter
with 50, 46, 35 times cleaning respectively in April, May and June
2. Prepare a single graph to predict the fixed, variable and total cleaning cost
3. charge rate for cleaning $680/time. Will Kroger save money or not
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A B C D E F G H I
REPORT
The cost for labor and rent on equipment is fixed for every month with $24,000.00
Cost of cleaning supplies cost for one time ( variable cost) $180.00
Table for the cost in store for the next quarter
Time of cleaningLabor cost and
rent
Cleaning
supplies costTotal cost
Total cost per
square
35 24000 6300 30300 0.606
40 24000 7200 31200 0.624
45 24000 8100 32100 0.642
46 24000 8280 32280 0.6456
50 24000 9000 33000 0.66
55 24000 9900 33900 0.678
60 24000 10800 34800 0.696
The predicted total cost of store cleaning is $33000, $32280 and $30300 respectively for the next quarter from April to June
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2.
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A B C D E F
REPORT
The cost for labor and rent 24000
Cost of cleaning supplies c =B8/B6
Table for the cost in store
Time of cleaningLabor cost
and rent
Cleaning
supplies costTotal cost
Total cost
per square
35 =$F$18 =A25*$F$19 =B25+C25 =D25/$B$4
40 =$F$18 =A26*$F$19 =B26+C26 =D26/$B$4
45 =$F$18 =A27*$F$19 =B27+C27 =D27/$B$4
46 =$F$18 =A28*$F$19 =B28+C28 =D28/$B$4
50 =$F$18 =A29*$F$19 =B29+C29 =D29/$B$4
55 =$F$18 =A30*$F$19 =B30+C30 =D30/$B$4
60 =$F$18 =A31*$F$19 =B31+C31 =D31/$B$4
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A B C D E F G H
Data for the graph of Kroger store in Cleveland start at 10 Increment by 5
Time of cleaningLabor cost and
rent
Cleaning
supplies costTotal cost
0 24000 0 24000
5 24000 900 24900
10 24000 1800 25800
15 24000 2700 26700
20 24000 3600 27600
25 24000 4500 28500
30 24000 5400 29400
35 24000 6300 30300
40 24000 7200 31200
45 24000 8100 32100
50 24000 9000 33000
55 24000 9900 33900
60 24000 10800 34800
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3.
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A B C D
Time of cleaningLabor
cost and
Cleaning
supplies costTotal cost
0 =$F$18 =A38*$F$19 =B38+C38
5 =$F$18 =A39*$F$19 =B39+C39
10 =$F$18 =A40*$F$19 =B40+C4015 =$F$18 =A41*$F$19 =B41+C41
20 =$F$18 =A42*$F$19 =B42+C42
25 =$F$18 =A43*$F$19 =B43+C43
30 =$F$18 =A44*$F$19 =B44+C44
35 =$F$18 =A45*$F$19 =B45+C45
40 =$F$18 =A46*$F$19 =B46+C46
45 =$F$18 =A47*$F$19 =B47+C47
50 =$F$18 =A48*$F$19 =B48+C48
55 =$F$18 =A49*$F$19 =B49+C49
60 =$F$18 =A50*$F$19 =B50+C50
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Question 16:
Ai. I think I will not change my choice. In my point of view, when the TV host opened one
door, the percentage for the right door will be 50% for each circumstance. Therefore, each door
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The table of comparison between two method : Method 1 is hiring labor and rent equipment
Method 2 is hiring an outside cleaning company
Month Time cleaning Total cost 1 Total cost 2
April 50 $33,000.00 $34,000.00
May 46 $32,280.00 $31,280.00
June 35 $30,300.00 $23,800.00
Total $95,580.00 $89,080.00
The total cost of hiring outside cleaning company is lower than another. Thus, Kroger will save money over the next quarter
Time cleaning Totalcost 2
0 0
5 3400
10 6800
15 10200
20 13600
25 17000
30 20400
35 23800
40 27200
45 3060050 34000
55 37400
60 40800
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A B C D
The table of comparison between two metho Method 1 is hiring labor and
Method 2 is hiring an outside
Month Time cleaning Total cost 1 Total cost 2
April 50 =D29 =B80*$B$9
May 46 =D28 =B81*$B$9
June 35 =D25 =B82*$B$9
Total =SUM(C80:C82) =SUM(D80:D82)
The total cost of hiring outside cleaning comp
Time cleaning Totalcost 2
0 =$B$9*B89
5 =$B$9*B90
10 =$B$9*B91
15 =$B$9*B92
20 =$B$9*B93
25 =$B$9*B94
30 =$B$9*B95
35 =$B$9*B96
40 =$B$9*B97
45 =$B$9*B98
50 =$B$9*B99
55 =$B$9*B100
60 =$B$9*B101
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has the same opportunity. In addition, there would be a tricky on what I chose if I already chose
the right door. In contrast, if I decide to change my choice, it is not appropriate to my standpoint
because I always concentrate on what I think it is right.
The survey by taking from my friends has a result of 50% for each respect. I think this resultcause from human thinking when people are wavering between two decisions.
Aii. In my own explanation for swapping door, there were 2 goats and 1 car. In first
circumstance, assume that you picked the car at the first time, the percentage of picking a car
will be 33%. Therefore, when you change your choice, you will be lost the price and the
probability of choosing right door is 0%. However, in second circumstance, assume that you pick
the goat at the first time, the percentage of picking a goat will be 66.7% because there were 2
goats. Then, TV host had to open the remaining door with the goat inside because one goat you
already chose. After that, if you change your choice, you will definitely get the car, with 100%
Thus, the probability of getting car will be: 33% x 0% + 66.7% x 100% = 66.7%
Therefore you should change your choice.
This graph below will present clearly my explanation:
Many people get wrong answer when they think that there will be 50% chance for each
choice. This is because they think when one door already was opened, they only had to choose
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between two doors. They only calculate the chance of picking card from two doors not calculate
the chance of picking car from 3 doors.
B.
A: The test is positive
H1: The man has a deadly disease
H2: The man has no disease
P(H1)=1/1000
P(H2)=999/1000
P(A/H1)=95%
P(A/H2)=5%
Using the Bayes formula
The probability of having disease:
P (H1/A) = (
) ( ) (
) =
( )(
)= 0.0186 or 1.86%
When this question was put to a group of medical doctors, the probability of having disease:
P= 0.0186 x 80% = 0.01488 or 1.488%
This probability is too low for him to have this disease. Thus he does not need to worry.
C. What strategy would you employ?
My strategy is that I will calculate how many circumstance we have when we pick one marble.
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And then calculate how many proportion of red and black marble we have when we take it out
from urn. Moreover, the quantity of marble does not change because we put it back in urn after
shown the colour.
What would you guess?
I guess that the chance of picking red marble is three times as many as black marble because the
quantity of the former is three times as many as the latter. In particular, the probability of picking
the red one is 75% and black one is 25%.
Assume 4 red come out in a row. What would your next guess be? Why?
I still believe that the next marble will be the red one. This is because the probability of red
marble is higher than black marble.
D. Discuss the rationality of human decision making using these and other examples. Are
there implications for business decision making?
These examples gave the fact that investors always want to invest in some project having less
risky. They will decide to choose what method can bring more probabilities of earning profit.
This also affects on business decision making because any business always want to choose which
way have more safety than others.
What DoesBlack Swan Mean?
An event or occurrence that deviates beyond what is normally expected of a situation and that
would be extremely difficult to predict. This term was popularized by Nassim Nicholas Taleb, a
finance professor and former Wall Street trader.
Characteristics of Black Swan
Black swan events are typically random and unexpected. For example, the previously successful
hedge fund Long Term Capital Management (LTCM) was driven into the ground as a result of
the ripple effect caused by the Russian government's debt default. The Russian government's
default represents a black swan event because none of LTCM's computer models could have
predicted this event and its subsequent effects.
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A Black Swan can occur in different forms, on different levels of complexity and in various
environments. So, what common characteristics can be identified?
To begin with, all the events are rare in the sense that something similar has never happened
before and their possibilities are even too rare to imagine. Why the 11/9-attacks happened? Why
global financial crisis spread quickly? Some events are just too rare to predict.
Secondly, the events have a major impact and influence their surroundings extensively. The
financial crisis has decelerated the advance of the world economy, the penicillin has saved
millions of lives and the terrorist attacks on the Twin towers ended up in a seemingly never-
ending war against terrorism. These events will change the way how those affected view the
world.
The third and last characteristic is about predictability and in order to define this, a point of
observation has to be taken. In the forward-looking perspective the event is totally unpredictable.
Additionally, in the hindsight the events appear to be explainable and totally logical. Why should
the US government have ordered a higher level of security by the knowledge of the holy war of
the islamists against the USA auspicated by Osama bin Laden in 1998.
Shortly, it is always easy to look intelligent and find indicators of an event retrospectively after
all facts have been presented. To summarize, each and every event classified as a Black Swan
can be ascribed with the three following characteristics:
-The event is rare,
-The event has a major impact,
-In advance the event is unpredictable, but retrospectively its explainable.
Question 17
Critically evaluate Six Sigma.
Six Sigma is a rigorous and a systematic methodology that utilizes information (management by
facts) and statistical analysis to measure and improve a company's operational performance,
practices and systems by identifying and preventing 'defects' in manufacturing and service-
related processes in order to anticipate and exceed expectations of all stakeholders to accomplish
effectiveness. Six Sigma can be understood/perceived at three levels:
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1. Metric: 3.4 Defects Per Million Opportunities. DPMO allows you to take complexity of
product/process into account. Rule of thumb is to consider at least three opportunities for a
physical part/component - one for form, one for fit and one for function, in absence of better
considerations. Also you want to be Six Sigma in the Critical to Quality characteristics and not
the whole unit/characteristics.
2. Methodology: DMAIC/DFSS structured problem solving roadmap and tools.
3. Philosophy: Reduce variation in your business and take customer-focused, data driven
decisions.
Six Sigma is a popular process improvement methodology that started in the manufacturing
sector and has spread to other areas as well. Many companies have seen tremendous success,
while others have abandoned the methodology or found it too overwhelming to support.
Based on Data
In Six Sigma, decisions are made based on empirical evidence, not just on assumptions and
anecdotal evidence. This includes determining the need for a project, determining the cause of
the problem being addressed, and deciding what improvements will be made. In all these cases,
data is required for decision making.
Proven Success
Beginning with Motorola, many large companies have successfully rolled out Six Sigma
initiatives and driven positive change in their organizations. The results have benefited
customers, employees, and shareholders.
Sustainable Solutions
The DMAIC and DMADV processes are specifically designed for sustainable solutions. In
DMAIC, the improvements to a process are confirmed with data, and an entire phase is devoted
to ensuring that the gains are sustained. In DMADV, which is used for creating new products and
processes, a similar mindset holds.
http://www.isixsigma.com/index.php?option=com_glossary&id=182http://www.isixsigma.com/index.php?option=com_glossary&id=52http://www.isixsigma.com/index.php?option=com_glossary&id=81http://www.ehow.com/facts_4760705_advantages-disadvantages-six-sigma.htmlhttp://www.ehow.com/facts_4760705_advantages-disadvantages-six-sigma.htmlhttp://www.isixsigma.com/index.php?option=com_glossary&id=81http://www.isixsigma.com/index.php?option=com_glossary&id=52http://www.isixsigma.com/index.php?option=com_glossary&id=182 -
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Timeframe
As the saying goes, "Do you want it fast or do you want it right?" In order to effectively use the
Six Sigma methodology, a substantial amount of time must be allowed for a project. It does not
provide simple fixes, and at times the people involved can become frustrated with the time
required to systematically follow the improvement model.
Training Requirements
In traditional Six Sigma implementations, employees go through extensive training to become
Six Sigma project leaders (Black Belts and Green Belts) and sponsors (Champions and Process
Owners). For the Black Belt role in particular, training can take several weeks or more, and
occur over a period of months. This is not feasible in some environments.
Corporate Focus
Although the principles underlying Six Sigma could certainly be made applicable to small
business and organizations, it is primarily an option for larger corporate organizations.
Overwhelmingly, the majority of training and information available is geared toward that sector.
This makes it difficult for other groups to see any benefit in adopting the methodology.
In conclusion, although there are still some disadvantages, Six Sigma still demonstrates it has
been an essential tool for choosing an effective project.
Question 18:Ten desired features of well-designed multiple choice questions (MCQ):
Feature 1: Test knowledge comprehension, not just recall
A MCQ should ask about explanation, evaluation or prediction of a situation than definition.
Feature 2: Use simple sentence structure and precise wording
Write test questions in a simple structure that is easy to understand and also avoid
misunderstanding meaning of question.
Feature 3: Place most of the words in the question stem
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Because of doing this, the answer options can be short, making them less confusing and more
legible.
Feature 4: Make all distractions plausible
All of the wrong answer choices should be completely reasonable.
Feature 5: Keep all answer choices the same length
This can be difficult to achieve, but expert test-takers can use answer length as a hint to the
correct answer. Often the longest answer is the correct one. When I cant get all four answers
to the same length, I use two short and two long.
Feature 6: Avoid double negatives
Dont use combinations of these words in the same question: not, no , nor, the -un prefix, etc.
For example, this type of question could confuse test-takers: Which of the following
comments would NOT be unwelcome in a work situation?
Feature 7: Mix up the order of the correct answers
Make sure that most of your correct answers arent in the b and c positions, which can
often happen. Keep correct answers in random positions.
Feature 8: Keep the number of options consistent
A question should have 4 or 5 options is best because it is enough for test-taker to get the
right answer much easier.
Feature 9: Avoid tricking test-takers
As faulty as they are, tests exist to measure knowledge. Never use questions or answer
options that could trick a learner. If a question or its options can be interpreted in two ways or
if the difference between options is too subtle, then find a way to rewrite it.
Feature 10: Use All of the Above and None of the Above with caution
TheAll of the Above option can encourage guessing if the learner thinks one or two answers
are correct. In addition, the downside to None of the Aboveis that you cant tell if the learner
really knew the correct answer.
1. Six multiple choice questions:
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A B C D E F G H I J K
1. Nonfinancial information that management might evaluate in making a decision would not include:
a. Employee turnover.
b. Contribution margin.
c. The environment.
d. The corporate profile in the community.
e. None of the above.Answer: b. Contribution margin.
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A B C D E F G H I J K
The following data relates to question 2, 3 and 4
VongCanh Company just received its bank statement and is preparing the bank reconciliation.
The following information is known. The company's cash account shows a balance of $30,000. The
company had outstanding cheques of $13,200 and deposits in transit of $7,000. Customers had paid
directly $15,500 to the bank, but VongCanh Company was unaware of this. There was a dishonoured cheque
in the amount of $200 that VongCanh was also unaware of.
2. What is the correct amount of VongCanh Company's cash?
a. $45,300.00
b. $14,300.00
c. $45,700.00
d. $14,700.00
e. None of the above
Answer: a. 45,300
3. What was the balance reported on the bank statement?
a. $51,500.00
b. $20,500.00
c. $51,900.00
d. $20,900.00
e. None of the above
Answer: a. 51,500
4. Which of the following items will require VongCanh Company to make adjustments to their cash
account?a. Outstanding cheques
b. Deposits in transit
c. Dishonoured cheque
d. Both A and B
e. Both A and C
Answer: c. Dishonoured cheque
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M N O P Q R S T
SOLUTION
Right Wrong Wrong Wrong
Balance per bank statement 51,500 20,500 51,900 20,900
Add : deposit in transit 7000 7000 7000 7000
Less: outstanding cheques -13,200 -13200 -13200 -13200Adjustment bank balance 45300 14300 45700 14700
Balance per our records 30000 30000 30000 30000
Add: collection from customers 15500 -15500 15500 -15500
Less: dishonoured cheque -200 -200 200 200
Adjustment our records balance 45300 14300 45700 14700
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M N O P Q R S T
SOLUTION
Right Wrong Wrong Wrong
Balance per bank stat =Q14-Q13-Q12 =R14-R13-R12 =S14-S13-S12 =T14-T13-T12
Add : deposit in transi 7000 7000 7000 7000
Less: outstanding che -13200 -13200 -13200 -13200
Adjustment bank bala =Q19 =R19 =S19 =T19
Balance per our recor 30000 30000 30000 30000
Add: collection from c 15500 -15500 15500 -15500
Less: dishonoured che -200 -200 200 200
Adjustment our recor =SUM(Q16:Q18) =SUM(R16:R18) =SUM(S16:S18) =SUM(T16:T18)
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A B C D E F G H I J K
5. A company can produce and sell one of the following two products
Time working of labour 3000 hours
what is the total contribution margin of the product it should produce to maximize net income?
a. $33,600.00
b. $21,000.00
c. $24,000.00
d. $15,000.00
e. Cannot be determined
Answer: c. 24000
Contribution margin per unitLabor hours required
Product A
Product B
5
7
$35.00
$56.00
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L M N O P Q
CALCULATION
A (right)
B (right)A (wrong)
B (wrong)
$5.00
$11.20
$15,000.00
$33,600.00
Contributon margin per hour Total contribution
$7.00 $21,000.00
$8.00 $24,000.00
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L M N O P Q
CALCULATION
A (right)
B (right)
A (wrong)B (wrong)
=G41/D42=G42/D41
=M46*$E$44=M47*$E$44
Contributon margin per hour Total contribution
=G41/D41 =M44*$E$44
=G42/D42 =M45*$E$44
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A B C D E F G H I
6. Which following answer is appropriate to the characteristic of " break-even point"
a. Fixed cost = variable cost
b. Total revenue > total cost
c. Total revenue < total cost
d. Total revenue = total cost
e. Fixed cost < variable cost
Answer: d. Total revenue = total cost
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References :
10 Rules For Writing Multiple Choice Questions. Retrieved from:
http://theelearningcoach.com/elearning_design/rules-for-multiple-choice-questions/
AICPA Code of Professional Conduct. (1988). Jersey City, NJ:American Institute of Certified
Public Accountants.
Black swans. Retrieved from:
http://www.math.chalmers.se/~rootzen/finrisk/group4_PeterStegersjo_ViktorWiderberg_
BlackSwan.pdf
CRs 100 best corporate citizens 2010. Retrieved from:
http://www.thecro.com/files/CR100Best3.pdf
CRs 100 best corporate citizens 2011. Retrieved from:
http://www.thecro.com/files/100Best2011_List_revised.pdf
D. Givoly and C. Shi, "Accounting Choice for Software Development Costs and the Cost of
Capital: Evidence from Underpricing of Initial Public Offerings in the Software
Industry",Journal of Accounting, Auditing and Finance, 2008, 23 No. 2.
Horngren, C, T., Sundem, G, L., Stratton, W, O., Burgstahler, D. & Schatzberg, J. 2010.
Introduction to management accounting (15 ed). USA: Pearson.
IMA. (1997). Statements on Management Accounting: Objectives of Management Accounting,
Statement No. 1B. New York: Institute of Management Accountants.
http://theelearningcoach.com/elearning_design/rules-for-multiple-choice-questions/http://theelearningcoach.com/elearning_design/rules-for-multiple-choice-questions/http://www.math.chalmers.se/~rootzen/finrisk/group4_PeterStegersjo_ViktorWiderberg_BlackSwan.pdfhttp://www.math.chalmers.se/~rootzen/finrisk/group4_PeterStegersjo_ViktorWiderberg_BlackSwan.pdfhttp://www.math.chalmers.se/~rootzen/finrisk/group4_PeterStegersjo_ViktorWiderberg_BlackSwan.pdfhttp://www.thecro.com/files/CR100Best3.pdfhttp://www.thecro.com/files/CR100Best3.pdfhttp://www.thecro.com/files/100Best2011_List_revised.pdfhttp://www.thecro.com/files/100Best2011_List_revised.pdfhttp://www.thecro.com/files/100Best2011_List_revised.pdfhttp://www.thecro.com/files/CR100Best3.pdfhttp://www.math.chalmers.se/~rootzen/finrisk/group4_PeterStegersjo_ViktorWiderberg_BlackSwan.pdfhttp://www.math.chalmers.se/~rootzen/finrisk/group4_PeterStegersjo_ViktorWiderberg_BlackSwan.pdfhttp://theelearningcoach.com/elearning_design/rules-for-multiple-choice-questions/ -
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