finish the case study for module 3,4 & 5
Financial statements are included in the annual report which is presented to its shareholders. In this section, prepare the financial statement notes as indicated.
Critical Thinking: Creativity and Innovation
Prepare the Financial Statements Notes: Note 1. The Company
Deliverables Chart
Time Line
Week
Assignment
01
Case Study – Financial Accounting: Excel file – Module 01 Page 1, Page 2 and Page 3
02
Case Study – Financial Statement Analysis: Excel file – Module 02 Page 1, Page 2 and Page 3
03
Case Study – Full Disclosure in Financial Reporting and Management Responsibility: Excel file – Module 03 Page 1 and Page 2
04
Case Study – Management Decision: Excel file – Module 04 Page 1 and Page 2
05
Case Study – Professional Business Ethics and Internal Control: Excel file – Module 05 Page 1, Page 2 and Page 3
06
Case Study – Presentation and Final Exam
Requirements
Your final deliverable is a Case Study presentation addressed to your instructor which outlines the financial situation of the company. In this proposal,
you will comment on each of the business areas or challenges outlined in the timeline above (e.g. Financial Accounting, Financial Statement Analysis,
and so on). The proposal should include adequate and credible research to support your decision about these areas or challenges. In addition, when
outside sources are used, you must include APA-style in-text citations and a reference list. For more information on APA, visit the APA Guide:
http://guides.rasmussen.edu/apa
Due Date
Your final project is due in Module 6. The Case Study project is the main project for this course and will be due along the way. The assignments and
modules that are due are noted in bold in the timeline below. As you can see, your first assignment “Case Study – Financial Reporting” is due in Module
01.
Evaluation
Each assignment leading up to the final project is evaluated and graded independently. Your instructor will provide specific grading criteria for each step
of the project prior to its due date.
Case Study Introduction
Transferable Skills are a set of essential abilities that will position students for success as they develop and build their
careers. College faculty and staff believe it is important that all Rasmussen graduates develop these skill sets, as having
expertise in these areas will be beneficial throughout one’s life. Employers have also identified these skills as being
essential in well-rounded employees.
In this course, you will have the opportunity to learn and demonstrate each of these skills. These skills will be measured as
a portion of our course project that has been designed to replicate an authentic workplace project. These skills are the
following: Communication, Critical Thinking, Digital Fluency, Diversity and Teamwork, Ethics and Professional
Responsibility, and Information Literacy.
How can I learn more about the Transferrable Skills? Rasmussen College faculty and staff have worked together to create
a visual guide to each of the Transferable Skills. You are able to view the entire set of six guides at the following location:
http://guides.rasmussen.edu/transferableskills
This Case Study is the major lesson material for this course and incorporates the use of transferable skills.
Case Study
Company Name: GolfPro Center
Introduction
Millions of people every day must make informed decisions about organizations. To make the decisions these people need
information. Accountants measure the activities of an organization and communicate those measurements to others.
Accounting information provided for internal users, such as managers, is referred to as managerial accounting; accounting
information provided to external users is referred to as financial accounting. The two functions of financial accounting are to
measure business activities of a company and then to communicate those measurements to external parties for decisionmaking purposes.
GolfPro Center
Let’s say you are ready to begin your new venture of working as the Accounting Manager for a new start-up golf center
called GolfPro Center. The purpose of the golf center is to provide PGA-certified golf instruction and essentials to
customers, such as junior players to develop their opportunity for top university programs. By using the base network of
customers, the company intends to expand to sell nationwide as an integrated multi-channel retailer. The target market of
junior league will be to individual golf pro shops, golf teams and eventually lead to selling through an online store. In
additional to future new store openings, a significant part of the company’s strategy is to continue to enhance the internet
aspects of the direct to customer channel. The plan also entails the ongoing development of their own brand portfolio as
they continue to grow.
Golf Industry
The golf retail industry is highly fragmented among mass merchants, off course specialty retailers, Internet merchants,
warehouse type merchants and on course pro shops. The off course specialty golf retail industry has become extremely
competitive as general sporting goods or their golf specialty retails have expanded their markets. The company will face
competition as competitors enter the marketplace in the existing markets.
Company Information
Steve Smith is the owner and Chief Executive Officer of the company. He has appointed a close family member, Mike
Smith as the Chief Financial Officer. You were recently hired by Mike Smith as the Accounting Manager. Your first main
function is to set up the accounting department structure and financial statements. The corporate office is located in
Chandler, Arizona. Let’s look at some initial activities of functions within the new company. The company opened business
on December 1, 2016. You also started employment on this same date. You have been tasked with setting up the
accounting department and internal control process. The financial statements, which you will prepare, will be the first set of
financials for the company. You will also be tasked with setting up the financial notes and management’s discussion and
analysis portion of the financial statements. This will include company information, accounting policies, revenue recognition
and inventory components. You will also encounter a few ethical situations along the way which will define your accounting
educational activities.
Let’s talk about how the company developed the investment for opening the business. The company needed about
$35,000 to get the business up and going. Since the company did not have that amount of money to start the business,
they began looking for investors. With their money, investors buy ownership in the company and have the right to share in
the organizations profits. Each share of ownership is typically referred to as a share of common stock. For GolfPro Center
they sell 1,000 shares of common stock for $25 each, receiving cash of $25,000 from investors. The 1,000 shares include
300 sold to family for $7,500, giving them 30% (= 300/1,000) ownership in the company. The company also offered you
100 shares for $2,500, giving you 10% ownership. The remaining 600 shares include 300 to extended partners, 200 to a
friend, and 100 to the owners childhood golf coach. The company now has $25,000 from investors.
To raise the remaining cash needed, the company will borrow $10,000 from a local bank, which is agreed to repay within
three years. Thus, the bank is the creditor. Now, with the $35,000 of cash obtained from investors and creditors, the
company buys equipment. This equipment costs $24,000, leaving $11,000 cash for future use. At this point, the company
has the following resources that can be used for operations.
The investors and creditors has the claims to the company’s resources. Creditors have claims equal to the amount loaned
to the company, $10,000. In other words, $10,000 of the company’s resources are promised to the local bank. Investors
have claims to all remaining resources, $25,000.
You manage the resources of the company on behalf of the owners (stockholders, in this case), while the owner is also an
investor this will help in aligning the interests with the other investors in the company. This is common in many start-up
businesses.
Formally defined, a corporation is a company
separate is that the stockholders have limited
responsible for the financial obligations of the
$25,000 if the company fails, but they cannot
furniture).
that is legally separate from its owners. The advantage of being legally
liability. Limited liability prevents stockholders from being held personally
corporation. Stockholders of GolfPro Center can lose their investment of
lose any of their personal assets (such as homes, cars, computers, and
Other common business forms include sole proprietorships and partnerships. A sole proprietorship is a business owned by
one person; a partnership is a business owned by two or more persons. If the owner had decided to start GolfPro Center
without outside investors, he would have formed a sole proprietorship. However, because he did not have the necessary
resources to start the business, being a sole proprietorship (or even one member of a partnership) was not a viable option.
Thus, a disadvantage of selecting the sole proprietorship or partnership form of business is that owners must have
sufficient personal funds to finance the business in addition to the ability to borrow money. Another disadvantage of being a
sole proprietorship or partnership is that neither offers limited liability. Owners (and partners) are held personally
responsible for the activities of the business.
Sole proprietorships and partnerships do offer the advantage of lower taxes compared to corporations. Sole proprietorships
and partnerships are taxed at the owner’s personal income tax rate, which is typically lower than the corporate income tax
rate. In addition, a corporation’s income is taxed twice (known as double taxation): (1) the company first pays corporate
income taxes on income it earns and (2) stockholders then pay personal income taxes when the company distributes that
income as dividends to them.
What information would GolfPro Center’s investors and creditors be interested in knowing to determine whether their
investment in the company was a good decision? Ultimately, investors and creditors want to know about the company’s
resources and their claims to those resources. Accounting uses some conventional names to describe such resources and
claims.
GolfPro Center has a liability of $10,000 to the local bank. Other examples of liabilities would be amounts owed to
suppliers, employees, utility companies, and the government (in the form of taxes). Liabilities are claims that must be paid
by a specified date.
Investors, or owners, have claims to any resources of the company not owed to creditors. Therefore GolfPro Center, this
amount is $25,000. We refer to owners’ claims to resources as stockholders’ equity, because stockholders are the owners.
The relationship among the three measurement categories is called the accounting equation. GolfPo Center has assets of
$35,000 and liabilities of $10,000. The stockholder equity is $25,000.
Of course, all owners hope their claims to the company’s resources increase over time. This increase occurs when the
company makes a profit. Stockholders claim all resources in excess of amounts owed to creditors; thus, profits of the
company are claimed solely by stockholders.
You will calculate the company’s profits by comparing its revenues and expenses. Revenues are the amounts recorded
when the company sells products or provides services to customers. For example, when you or one of your employees
provides golf training to a customer, the company records revenue. However, as you’ve probably heard, “It takes money to
make money.” To operate the academy, you’ll encounter many costs. For example, you’ll have costs related to salaries,
rent, supplies, and utilities.
You’ll notice the use of the term net to describe a company’s profitability. In business, the term net is used often to describe
the difference between two amounts. Here, we measure revenues net of (or minus) expenses, to calculate the net income
or net loss. If we assume that by the end of the first month of operations GolfPro Center has total revenues of $7,200 and
total expenses of $6,000, then we would say that the company has net income of $1,200 for the month. This amount of
profit increases stockholders’ claims to resources but has no effect on creditors’ claims.
When the company has positive net income, it will either distribute those profits back to its stockholders or retain those
profits to pay for future operations. For example, suppose you decide that because GolfPro Center has net income of
$1,200, a cash payment of $200 should be returned to stockholders at the end of the month. These cash payments to
stockholders are called dividends.
The other $1,000 of net income adds to stockholders’ equity of the company. Thus, when GolfPro Center has net income of
$1,200, stockholders receive a total benefit of $1,200, equal to $200 of dividends received plus $1,000 increase in
stockholders’ equity in the company they own.
Let’s now proceed to the your new journey in accounting with GolfPro Center.
Module 01: Financial Accounting
Preparing the Financial Statements
Your function as accounting manager is to prepare the financial statements for the first operating period of December 2016.
The December 31, 2016 adjusted trial balance for GolfPro Center is presented below. Using the Trial Balance, complete the following:
1. Prepare an income statement for the year ended December 31, 2016
2. Prepare a statement of stockholder’s equity for the year ended December 31, 2016 assuming no common stock was issued during 2016.
3. Prepare a classified balance sheet as of December 31, 2016.
Keep in mind, the beginning balances are zero only because this is the first month of operations for GolfPro Center.
GolfPro Center
Trial Balance December 31, 2016
For the period ending December 31, 2016
Accounts
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accumulated Depreciation
Accounts Payable
Salaries Payable
Utilities Payable
Deferred Revenue
Interest Payable
Notes Payable
Common Stock
Retained Earnings
Dividends
Service Revenue
Rent Expense
Supplies Expense
Depreciation Expense
Salaries Expense
Utilities Expense
Interest Expense
Total
1
Debit
$
Credit
6.900
2.700
1.300
5.500
24.000
$
400
2.300
300
900
400
100
10.000
25.000
0
200
7.200
$
500
1.000
400
3.100
900
100
46.600
$
46.600
GolfPro Center
Income Statement
For the period ended December 31, 2016
Revenues
Service Revenue
Expenses
Rent Expense
Supplies Expense
Depreciation Expense
Salaries Expense
Utilities Expense
Interest Expense
7.200
500
1.000
400
3.100
900
100
Net Income
2
6.000
$
1.200
GolfPro Center
Statement of Stockholder’s Equity
For the period ended December 31, 2016
Accounts
Beginning Balance (Dec 1)
Issuance of common stock
Add: Net Income for the period
Less: Dividends
Ending balance (Dec 31)
Common Stock
$
25.000
0
25.000
Retained Earnings
$
1.200
(200)
1.000
Total Stockholders Equity
$
25.000
$
$
$
1.200
(200)
26.000
3
GolfPro Center
Balance Sheet
For the period ended December 31, 2016
Assets
Current Assets:
Cash
Accounts Receivable
Supplies
Prepaid Rent
Total Current Assets
Long Term Assets:
Equipment
Less: Accumulated Depreciation
Total Long term assets
Total Assets
$
$
$
$
6.900
2.700
1.300
5.500
16.400
24.000
(400)
23.600
40.000
Liabilities
Current Liabilities:
Accounts Payable
Salaries Payable
Utilities Payable
Deferred Revenue
Interest Payable
Total Current Liabilities
$
$
2.300
300
900
400
100
4.000
Long Term Liabilities:
Notes Payable
Total Liabilities
10.000
$ 14.000
Stockholder’s Equity
Common Stock
Retained Earnings
Total Stockholders Equity
25.000
1.000
$ 26.000
Total Liabilities & Stockholders Equity
$ 40.000
4
Critical Thinking: Clarity and Precision
Communication with CFO: In the complexity of preparing the financial statements, the CFO tells you that he prefers the single step income statement
because the multiple step format seems to overstate the income. Express in a short declarative manner, how would you respond to this question?
5
Communication: Language Usage
Explain how financial accounting information is communicated through financial statements to internal and external users. Construct widely varied sentence
types and advance grammatical concepts to explain insight.
6
Critical Thinking: Creativity and Innovation
Describe the role that financial accounting plays in the decision making process. In your response, use human and/or professional in field knowledge
through the creation of the response.
Module 01: Financial Accounting
Cash Flow Statement
The below information are transactions which analyze the cash effects on GolfPro Center.
Use the information provided to complete the Statement of Cash Flow.
External Transactions of GolfPro Center
Type of
Activity
Is Cash
Involved?
Inflow or
Outflow?
Financing
Yes
Inflow
Financing
Yes
Inflow
Investing
Yes
Outflow
Operating
Yes
Outflow
Operating
No
—
Operating
Yes
Inflow
Operating
No
—
8
Receive cash in advance for 12 golf training
Operating
sessions to be given in the future $600
Yes
Inflow
9
Pay salaries to employees $2800
Operating
Yes
Outflow
10
Pay cash dividends of $200 to
shareholders.
Financing
Yes
Outflow
Transaction
1
2
3
4
5
6
7
1
External Transactions in December
Sell shares of common stock for $25,000 to
obtain funds necessary to start the
business.
Borrow $10,000 from the local bank and
sign a note promising to repay the full
amount of the debt in three years.
Purchase equipment necessary for giving
golf training, $24,000 cash
Pay one year of rent in advance, $6000
($500 per month).
Purchase supplies on account, $2,300.
Provide golf training to customers for cash,
$4300
Provide golf training to customers on
account $2000
GolfPro Center
Statement of Cash Flow
For the period ended December 31, 2016
Cash Flows from Operating Activities
Cash inflows:
From customers
Cash outflows:
For salaries
For rent
Net cash flows from operating activities
Cash Flows from investing Activities
Purchase equipment
Net Cash Flows from Investing Activities
Cash Flows from Financing Activities
Issue common stock
Borrow from bank
Pay dividends
Net cash flows from financing activities
Net increase in cash
Cash at the beginning of the period
Cash at the end of the period
$
4.900
(2.800)
(6.000)
(3.900)
(24.000)
(24.000)
25.000
10.000
(200)
34.800
6.900
0
$ 6.900
Communication: Audience and Delivery
2
In the space provided below, explain to the CEO and CFO the main purpose of the statement of cash flow. In your
response, utilize effective persuasive techniques to influence and engage the CFO and CEO.
Communication: Organization, Focus, and Supporting Examples
3
In the space provided below, explain to the CFO some of the activities reported on the statement of cash flows. In your
response, coordinate your thoughts to synthesize and provide context regarding the concept of the statement of cash
flows. Provide carefully integrated thoughts and examples to clarify the topic to the CFO.
Communication: Organization, Focus, and Supporting Examples
4
In the space provided below, describe some of the investing activities on the GolfPro Center statement of cash flows. Use
a variety of thoughts integrated to present the meaning of your evidence.
Communication: Content and Voice
5
Explain to the CEO and CFO the why the net income differs from the amount of cash flow from operating activities. In
your response, explain the relationship between the net income and cash flows such as the investing and financing
activities. Develop a response which incorporates a focus on uniting multi faceted mutually supportive arguments to create
a distinct connection with the content and the audience.
Module 01: Financial Accounting
Closing Entry
In the space provided below, prepare the Closing Entry for GofPro Center.
Closing Entry for December 31, 2016
1
Journal Entry
Account
a Service Revenue
Retained Earnings
Comment: Close revenues to retained earnings.
b Retained Earnings
Rent Expense
Supplies Expense
Depreciation Expense
Salaries Expense
Utilities Expense
Interest Expense
Comment: Close expense to retained earnings.
c
Retained Earnings
Dividends
Comment: Close dividends to retained earnings
Debit
7.200
Credit
7.200
6.000
500
1.000
400
3.100
900
100
200
200
Critical Thinking: Definitions, Terms, Concepts and Ideas
2
Communication with CEO and CFO: In the space provided below, in a clear and concise manner, explain to the CEO and
CFO the main purpose of these closing entries.
3
Critical Thinking: Definitions, Terms, Concepts and Ideas
Communication with CEO and CFO: Comment on why adjusting entries are needed and what happens if certain adjusting
entries are neglected.
Digital Fluency: Internet Technology Usage
4
Go to the FASB website, http://www.fasb.org, to access the FASB Concepts Statements. After you have read the documents,
use the search tool in your Internet browser to respond to the following items.
a) What is the objective of financial reporting?
b) What other means are there of communicating information besides financial statements?
c) Indicate the users and the information FASB is most directly concerned with in economic decision making.
Module 02: Financial Statement Analysis
Interpret financial data by computing ratios.
Using the GolfPro Center financial information prepared in Module 01, calculate the following ratios:
Liquidity, Leverage and Profitability Ratios
1 Liquidity & Efficiency Analysis
1 Current Ratio
2 Total Asset Turnover
3 Accounts Receivable Turnover Ratio
Formula
Current Assets/Current Liability
Net Sales/Average Total Assets
Sales/Average Accounts Receivable
December 2016 Ratio
4,10
0,18
2,67
2 Leverage Analysis
4 Debt to Equity Ratio
5 Debt Ratio
5 Times Interest Earned Ratio
Formula
Total Liabilities/Total Stockholders’ Equity
Total Liabilities/Total Assets
Income before Interest/Interest Expense
December 2016 Ratio
54%
35%
1300%
3 Profitability Analysis
Formula
6 Gross Profit Margin Ratio
Gross Profit/Net Revenue
7 Profit Margin Ratio
Net Income/Net Revenue
8 Return on Total Assets
Income/Average Assets
9 Return on Common Stockholders’ EquityIncome/Average Equity
December 2016 Ratio
18%
17%
0,03
0,05
Critical Thinking: Definitions, Terms, Concepts and Ideas
In the space provided below, prepare a professional business report to the CFO by describing the analytical use of
each of the nine ratios. Discuss what the financial ratios present and identify two ratios that would be most valuable as
4
a basis in a management decision for expanding sales. In your report, explain the relationship of the asset turnover to
the return on assets.
The current ratio indicates the capability of the company to meet current obligations. Total asset turnover shows the
effectiveness in the management of assets in generation of sales. Accounts receivable turnover shows the
effetiveness in the management of accouts receivables/ debt collection. Debt to equity ratio is represents the capital
structure of the firm. Debt ratio shows the proportion of assets that is financed by debt. Times interest earned ratio
shows how the interest is covered by the Earnings Before interest and tax, therefore showing the capability to pay
interest obligations. Gross margin ratio shows the proportion of sales revenue, that is reported in gross profit and
therefore indicated the effetiveness in management of cost of sales. Profit margin ratio indicated the effectiveness in
management of both cost of sales and expenses. Return on assets shows the effectiveness of the GolfPro in utilizing
assets to make profit. return on common stockholders’ equity indicated the effectiveness of the management in
utilizing stockholders’ equity to make profits.
Critical Thinking: Definitions, Terms, Concepts and Ideas
5 Explain the limitations of ratio analysis:
Many companies have more than 1 divisions and therefore generation of proper set of division ratios is a hard task.
Moreover, inflation adversely affects the financial ratio from time to time and therefore comparison of financial ratios
from time to time may have incorrect conclusions. Several accounting practices may be used which lead to distortion
of inter-company comparison of financial ratios. sometimes, it is hard to determine if a ratio is good or bad, especially if
there is no benchmark. lastly, the same company may have both bad and good financial rations making conclusion
hard.
Critical Thinking: Definitions, Terms, Concepts and Ideas
6 Discuss what type of users will benefit from ratio analysis within the company and explain how they will benefit.
The ratio analysis is used mainly by the stakeholders and the managers. Managers use the ratios to estimate
progress. They also use the ratios to make important decisions such as dividend payment, and expansion/ contraction
decisions.
Module 02: Financial Statement Analysis
Capital expenditure decision using NPV and IRR.
The CFO of GolfPro Center is considering purchasing an automated fairway weed control machine, but is uncertain as to whether it is a favorable expenditure
decision. The CFO has asked you, the accounting manager, to evaluate the capital expenditure item and report the results. Since the cash flows don’t occur in
the same periods and because a dollar today is worth more than a dollar tomorrow, you will need to take into account the time value of money by using the net
present value (NPV) approach and/or the internal rate of return (IRR) approach. The company estimated the equipment will last 5 years. Each year it will save
the company $2000 in wasted spraying conditions. It will also reduce labor costs by $20,000 a year. It is estimated that the equipment will require $1,000
maintenance costs per year. The equipment costs $70,000 and it is expected to have a residual or salvage value of $5000 at the end of 5 years. Top
management has determined the required rate of return is 12%. Should the company invest in the new equipment? Report results and decision determination to
owner.
1
Net Present Value Approach
Time Period
0
Cash Flow
Purchase Price
$
(70.000)
Labor Savings
Paint Savings
Maintenance
Residual Value
Total Cash Flow
$
(70.000)
PV Factor
1,00
Total Cash Flow
$
(70.000) $
Required Rate of
Return
NPV
IRR
2
1
2
20.000
2.000
(1.000)
20.000
2.000
(1.000)
21.000
0,893
18.750
21.000
0,797
16.741
$
3
$
4
5
20.000
2.000
(1.000)
20.000
2.000
(1.000)
21.000
0,712
14.947
21.000
0,636
13.346
20.000
2.000
(1.000)
5.000
26.000
0,567
14.753
$
$
0,12
$
8.537
17%
NPV Using Excel (show formula):
IRR Using Excel (show formula):
$8.537
17%
NPV(C19,D15:H15)+C15
IRR(C15:H15)
Critical Thinking: Problem Solving
Problem Solving: What is the result consider the NPV? Should the project be undertaken?
The results of the NVP analysis shows that, the project has a positive NVP of $8,537. Since the NVP is positive, the purchase project should be undertaken.
Critical Thinking: Problem Solving
3
Problem Solving: What is the result considering both NPV and IRR? Should the project move forward? Creatively solve the problem by determining the best method for the
situation.
According to the NVP and IRR, the results indicate that the project should be undertaken. The project has a positive NVP which is the decision rule for acceptance of the
project. The IRR too, is less than the required rate of return. The decision rule for acceptance of projects is to accept a project if it has a IRR lesser than the required rate of
return. Both tools therefore tend to same conclusions, accept the project. The best is however the NVP, because it shows a positive value from the project.
Critical Thinking: Clarity and Precision
4
Summarize the comparison of net present value and internal rate of return methods. In your response, be sure to use a complex idea expressed in a short, declarative
response.
The Net present value determines if the overall project gives a positive value or negative, while the IRR shows the point where the net present value of the project changes
from negative to positive.
Critical Thinking: Definitions, Terms, Concepts and Ideas
5
The CFO asks, how do the net present value and internal rate of return methods differ in their approach to evaluating this investment decision? How do you respond to this
question?
The NVP differs from IRR in that, for NVP approach, a project should have a positive value to be accepted, while for IRR, a project should have a lower IRR than the
required rate of return to be accepted. The higher the NVP, the better the project is, while the lower the IRR, the better the project is.
Critical Thinking: Definitions, Terms, Concepts and Ideas
6
The CFO asks, why is it important to take into account the time value of money when making capital budgeting decisions?
It is important to take in consideration the time value of money, because the value of a unit currency today, is not the same as a year to come, due to the interest rate. It is
important to discount cash flows so that the value of a unit currency is the same for all the years.
Information Literacy: Evaluating Information
7
Research an Accounting Issue: Decide which would be a better option for the company: should the company acquire a lease option as opposed to purchase option?
Research lease options versus purchase options for the company. In your response discuss how the lease option would be accounted for financially. Analyze and select
which is a better decision for the company, the lease option or purchase option?
When a company needs to replace an old machine and get a new machine, it may choose to lease it or buy it. The best option would be the buy option. This is because, in a
purchase option, the asset belongs to the company, as opposed to a lease option where the property in the good is the property of the lesser. It is also possible to sell or
trade with the assets in transactions, for instance, it can be used as a security for a loan.However, Leaseed assets cannot be used as loan security. Leased assets are
reflected in modern financial position. Buy option is better for a company.
Module 02: Financial Statement Analysis
Communication: Purpose and Meaning and Digital Fluency: Creation of Digital Files
Prepare an analysis report for the capital expenditure decision.
Once completed, publish the created file online for a board audience using open source repositories with sharing and viewing capabilities.
Year
0
1
2
3
4
5
Discounted
Cash Flow
Cumulative
Disc. Cash
Flow
-$70.000
18.750
16.741
14.947
13.346
14.753
-70.000
-51.250
-34.509
-19.562
-6.216
8.537
Cumulative Disc. Cash Flow
20.000
10.000
0
-10.000 0
1
2
3
4
5
6
-20.000
Cumulative Disc.
Cash Flow
-30.000
-40.000
-50.000
-60.000
-70.000
-80.000
Discount
Rate
10%
12%
14%
16%
18%
20%
Discount Rate – NPV
NPV
12.711,13
8.537,43
4.691,54
1.140,73
(2.143,86)
(5.187,76)
14.000,00
12.000,00
10.000,00
8.000,00
6.000,00
4.000,00
Discount Rate – NPV
2.000,00
0,00
(2.000,00) 8%
10%
12%
14%
16%
18%
20%
22%
24%
(4.000,00)
(6.000,00)
(8.000,00)
The capital expenditure decision making process involves the use of capital budgeting tools to determine if a project is worth undertaking. In the above project, NVP and IRR
tools were used to determine if the project should be undertaken. The NVP results showed that, the NVP is positive. The decision rule for NVP is that, a project should be
undertaken if it has a positive NVP. From the above analysis, the cumulative discounted cashflows are calculated. The cumulative discounted cashflows are negative from year
0-4. however, it turns positive in the fifth year. The point of intersection of the NVP curve with the X-axis shows the point where the NVP is zero, once the line crosses the X-axis
to the area above the X-axis, the NVP is positive and therefore the project should be accepted. as a result, according to NVP, the project should be undertaken. Another tool that
is used for the capital expendirure decision is the IRR. according to the IRR, a project should be undertaken if it has an IRR that is greater than the required rate of return. For
the project, the IRR (17%) is greater than the required rate of return (12%) and therefore, it should be undertaken.
I have also tried to analyse the relationship between various levels of required rate of return (discount rate) and respective NPV associated with them. The NPV turns negative
some where around 17%. So we can sya that the project will be acceptable till the time firm has required rate of return below 17%. In other words we can say that project is
accepatble till discount rate is below IRR, which results in a positive NPV.
Discount Rate – NPV
e project, NVP and IRR
, a project should be
ows are negative from year
the line crosses the X-axis
ndertaken. Another tool that
quired rate of return. For
. The NPV turns negative
can say that project is
Module 03: Full Disclosure in Financial Reporting and Management Responsibility
Financial Disclosure: Notes and MD&A
Financial Notes
Financial statements are included in the annual report which is presented to its shareholders. In this section,
prepare the financial statement notes as indicated.
Critical Thinking: Creativity and Innovation
1 Prepare the Financial Statements Notes: Note 1. The Company
Critical Thinking: Creativity and Innovation
2 Prepare the Financial Statements Notes: Note 1. Revenue Recognition
Critical Thinking: Creativity and Innovation
3 Prepare the Financial Statements Notes: Note 2. Inventories
Critical Thinking: Creativity and Innovation
4
Prepare the Financial Statements Notes: In this section create a financial statement of your choice. You may
create and assess any category of the financial statements accordingly.
Management’s Discussion and Analysis
In addition to the financial statements and disclosure notes, each annual report of a public company requires a
lengthy discussion and analysis provided by the company’s management. In this section review the views on
significant events, trends, and uncertainties which pertain to GolfPro Center’s operations, liquidity and capital
resources.
5 Prepare the Management Discussion & Analysis: Accounting Policy and Internal Control
Critical Thinking: Creativity and Innovation
6 Prepare the Management Discussion & Analysis: Management’s Responsibility
Critical Thinking: Creativity and Innovation
7 Prepare the Management Discussion & Analysis: Internal Control
Critical Thinking: Creativity and Innovation
8
Prepare the Management Discussion and Analysis: In this section create a component of the MD&A of your
choice. You may create and assess any category of the financial statements accordingly.
Critical Thinking: Creativity and Innovation
9
The CFO has asked you to explain the major advantages of notes to the financial statements and to identify the
items are typically reported in the notes. Also explain what the full disclosure principle means in accounting.
Critical Thinking: Definition, Terms, Concepts and Ideas
10 Explain what the MD&A section provides and the viewpoint it contains.
Critical Thinking: Definition, Terms, Concepts and Ideas
11 Explain what the note disclosures offers to users.
The note disclosures offers additional information either to explain the information presented in the financial
statements or to provide information note included in the financial statements.
Communication: Audience and Delivery
Explain to the CEO and CFO the responsibility of company management and the independent auditors in the
12 accounting communication process. Use audience specific and influential tones to engage others on points
made.
Module 03: Full Disclosure in Financial Reporting and Management Responsibility
Management Responsibility
Demonstrate leadership characteristics of the managerial accounting profession.
The IMA’s Statement of Ethical Professional Practice was designed to help finance professionals “to link ethical perspectives directly to
their ongoing workplace responsibilities.” Unfortunately, some individuals may choose to act unethically and perhaps cause great harm
to other individuals and organizations. Review the Institute of Management Accountants (IMA) website and read the IMA’s Statement
of Ethical Professional Practice. In each of the following examples, determine which of the four standards of ethical conduct has been
violated. Some examples may violate more than one standard.
You are the accounting manager for GolfPro Center. Betty Jones is a new accountant you have hired and reports directly to you. The
company is now selling third party golf carts at cost plus 25% and charges a fee of $250 per delivery and time spent on each
engagement. Recently the CFO asked Betty directly to charge the delivery fee to the Peachtree Golf Course account when instead it
was actually delivered to the Pelican Hills Golf Course account. The rationale: “Look, Pelican Hills Golf Course is a struggling start-up
course and they can barely afford to buy our golf carts. We made a mistake at delivery and did not deliver the right amount at the
estimate due to some unforeseen problems, and they’ll balk if we charge them for all of our time. Peachtree Golf Course, on the other
hand, is a highly profitable course, and we’re providing services that are going to make them even more profitable. They’ll have no
problem with their bill.”
Digital Fluency: Evaluation of Digital Resources & Information Literacy: Evaluating Information, Ethical Use of Information,
and Creation of New Information/Participation in Field
According to the IMA’s ethical standards, what do you suggest that would help Betty resolve this issue? In your answer, cite specific
1 language in the IMA code. Which IMA principle(s) was/were violated? Assess the reliability/credibility of the material and cite your
sources in APA-style, including in-text citations and a reference list at the bottom of this box.
Information Literacy: Inquiry Development
Let’s say you found out that in a the CFO’s prior workplace he had lied to federal investigators saying that there was a standing order
to sell the stock if the share price fell below a certain average. In return for lying the CFO reportedly received money, airplane ticked
2
and extra vacation money. Which IMA standard(s) was violated? In your response, analyze the topic based on the scope, depth and
the assignment.
Information Literacy: Inquiry Development
Let’s say you found out that a golf shop competitor’s CFO was just charged with recording operating expense as capital assets.
3 Depreciating these assets over time inflated the company’s profits and hid the expenses from the company’s auditors. Which IMA
standard(s) was violated? In your response, analyze the topic based on the scope, depth and the assignment.
Critical Thinking: Self Reflection and Logical Thought
4
Discuss the importance of ethical behavior in managerial accounting. In your response, demonstrate self awareness with an ability to
question your own ideas and belief systems.
Module 04: Management Decision
Access cost-volume-profit techniques to determine optimal managerial decision.
Examine the effects of changes in sales price, cost and volume.
The company has developed a target budget for selling 50,000 units in the upcoming year. The estimated budget is to sell 40,000 golf shirts and 10,000 pairs of shoes.
Therefore the sales mix is 4 golf shirts for every pair of golf shoes sold. No fixed expenses are assigned to either golf shirts or golf shoes. As long as the company keeps
selling golf shirts and shoes, the fixed expenses will not change therefore they are deducted in total rather than allocated to the individual product lines. The forecasted
income statement is listed below.
GolfPro Center
Forecasted Income Statement
For the year ended 2017
Sales
Cost of goods sold
Sales commission
Variable expenses
Contribution margin
Selling and marketing
Administrative expense
Fixed expense
Operating income
Sales Price
Cost of goods sold
Sales Commission
Total Variable expenses
Contribution Margin
Total
$800.000
592.000
48.000
640.000
160.000
Golf Shirts
Per Unit
$20,00
14,80
1,20
16,00
4,00
Golf Shirts
$20,00
14,80
1,20
16,00
$4,00
Golf Shoes
$45,00
36,00
2,70
38,70
$6,30
Percentage
100%
74%
6%
80%
20%
Golf Shoes
Total
Per Unit Percentage
$450.000
$45,00
100%
360.000
36,00
80%
27.000
2,70
6%
387.000
38,70
86%
63.000
6,30
14%
Total Company
Total
Percentage
$1.250.000
100%
952.000
76,16%
75.000
6%
1.027.000
82,16%
223.000
17,84%
125.000
53.400
178.400
446.000
Use the data tables above to solve Case Study problems:
The CFO is in the process of making a business decision based on revenue generating concepts to increase sales for next year. He has asked for your assistance in
examining the effects of financial changes in the sales mix. He needs assistance using cost-volume-profit techniques.
1
His first question to you: what is the company’s CM ratio and variable expense ratio for golf shirts and golf shoes?
CM ratio = unit CM/unit selling price
Golf Shirts
Golf Shoes
Variable Expense Ratio = variable expense/selling price
Golf Shirts
Golf Shoes
2
His second question, is what is the current break even point? (use the equation method)
3
His third question, what would happen if we increase sales by $400,000 next year. Let’s assume the cost behavior pattern remains unchanged, by how much will the
company’s net income increase? (use the CM ratio to compute answer)
Increase in Sales
CM ratio
Expected increase in CM
4
His fifth question is how many golf shirts and pairs of shoes are needed to be sold to earn $66,900 in operating income?
Based on the information provided to the CFO, he has now developed a new proposal to increase sales for next year. The CFO is determined to increase sales therefore
he has set up a commission of 6% to the sales staff team. Consider the golf shop’s original sales mix of 40,000 golf shirts and 10,000 shoes. In an effort to stimulate
sales, the golf shop sales incentive will be use the target market of youth golf teams. This move has increased the sales commission paid on each golf shirt to 12.3%.
The CFO believes that this move will generate additional sales of 10,000 golf shirts, with no effect on shoes sales.
5
How will this move alter the golf shops sales mix?
Sales price
Cost of goods sold
Sales commission
Total Variable expenses
Contribution margin
6
Calculate and explain how will it affect the breakeven point?
Information Literacy: Creation of New Information/Participation in Field
7
Select and organize expert information and weigh the information against your own emerging research. Do you
think the company should accept the CFO’s proposal to increase sales commission? By lowering the
contribution margin per unit of golf shirts and shifting a greater percentage of sales to those golf shirts, more golf
shirts and more shoes will have to be sold in order to break even. Is this change a good move? Include in your
analysis, what happens to the breakeven point if the sales mix changes.
Original contribution margin:
Golf shirts
New contribution margin:
Golf shirts
Reduction in contribution margin
8
If the sales proposal should be accepted and if sales remain at current level, what will the income or loss from operations be for the budgeted year.
9
Identify basic cost behavior patterns and explain how changes in activity level affect the total cost and unit cost.
Cost behavior
Variable
Fixed
Mixed
As Activity Increases
Total Cost
Cost per Unit
As Activity Decreases
Total Cost
Cost per Unit
Module 04: Management Decision
Digital Fluency: Creation of Digital Files
The CFO is anxious to increase the company’s profit and has asked you to prepare an analysis and summary of your
findings. Prepare an analysis report to support the business decision. You may use graphs and other statistical data to
present findings. Apply advanced formatting features to present and produce a professional document. Create the
information to present to users in a visually interesting and organized manner.
Module 05: Professional Business Ethics and Internal Control
Select an appropriate conclusion to an ethical dilemma.
You have now worked for GolfPro Center for a few years and along your journey have obtained your CPA license. Now that you have
become a CPA you have taken on extra work on the side by performing tax services to some small business clients. Desert Willow
Golf Course is one of your new small business accounts and you are obligated to compete their corporate tax return by April 15th.
Ironically, Desert Willow Golf Course, is also a customer of GolfPro Center as they purchase inventory to stock their pro-shop at the
golf course. Desert Willow Golf Course has recently fallen more than 90 days past due on paying their bills to GolfPro Center. In your
position at GolfPro Center you have been assigned to review and perform an internal audit of Desert Willow Golf Course’s customer
account. In addition, you are also responsible for preparing and estimating the Allowance for Doubtful Accounts for GolfPro Center.
When preparing the report, you have left Desert Willow Golf Course off of the aging report. The CFO has asked you for your
justification for not including Desert Willow Golf Course on the 90+ aging report. Your reply is, it seems there are some audit related
questions about the collectible amount for Desert Willow Golf Course; therefore you have come up with an explanation for not
including them in the estimated allowance report which satisfies the CFO.
GolfPro Center is now growing and has decided to expand by opening a new store in Southern California. Since you have now
obtained your CPA license the company has offered you a nice promotion and raise with GolfPro Center. You will have to transfer to a
new location to begin gathering a team to start the finance department at the new store in Southern California. You have accepted the
promotion and leave immediately. In the mean time you have decided to quit doing accounting on the side which includes your
business with Desert Willow Golf Course. In moving, you have not completed the corporate tax return Form 1120 for Desert Willow
Golf Course which should be filed with the IRS by a specific date. You also failed to inform Desert Willow Golf Course of your new
relocation. In trying to locate you, Desert Willow Golf Course contacts GolfPro Center and discloses your side work business.
Ethics and Professionalism: Ethical and Situational Awareness
1
Determine the best outcome for this situation: Do you think it is ethically appropriate to provide tax services to Desert Willow Golf
Course, a customer of GolfPro Center, while at the same time being employed by GolfPro Center? Evaluate the impact this decision
has on laws and on your own core of beliefs and personal ethics.
Information Literacy: Ethical Use of Information
2
According to the Case Study, have you violated any of your ethical responsibilities to GolfPro Center and to Desert Willow Golf
Course? In your response be specific and reference the AICPA Code of Professional Conduct in answering the question. Provide
attribution and integrate citations for all resource types. Provide APA style in-text citations and a reference entry for the AICPA Code.
Ethics and Professionalism: Integrity
3
What if your new boss at your new job in Southern California just found out about your dual role as internal auditor and tax accountant
for the corporate office of GolfPro Center. What would you expect the new boss should do? Determine the level responsibility your
new boss has on the impact this decision will make for the overall department.
Module 05: Professional Business Ethics and Internal Control
Internal Control
Ethics and Professionalism: Attitudes
1
Explain to the department what internal control is and why the company should establish an internal control system.
Ethics and Professionalism: Attitudes
2
Currently John works as the accountant for GolfPro Center. He opens the mail for the company everyday and sets aside all of the incoming checks
for the company. He lists all incoming checks on a spreadsheet which includes the name of the customer and the check amount. He then records
all of the checks into the accounting system by applying the payment to the customers account. Next he prepares the checks for the bank deposit.
He completes the bank deposit slip and attaches all checks. He then gives the incoming check spreadsheet, checks and bank deposit to you the
review and sign off on. After your approval, he then hand carries the checks to the bank each day to deposit. Define cash receipts and discuss the
basic controls for cash receipts. Also, explain directly how the company could improve its internal control procedure for handling cash receipts.
Include in your response the demonstration of the importance of understanding the segregation of duties and how additional proper documentation
could be used to improve the final approval process.
Ethics and Professionalism: Attitudes
3
4
John approves all requests for payment out of the $200 fund, which is replenished at the end of each month. At the end of each month, John
submits a list of all accounts and amounts to be charged and a check is written to him for the total amount. John is the only person ever to tally the
fund. Explain the internal control weakness and describe how internal controls can be improved upon. What questions would you ask to find out
additional information regarding this internal control situation?
Ethics and Professionalism: Attitudes
All of the company’s cash disbursements are made by check. Each check must be supported by an approved voucher, which is in turn supported
by the appropriate invoice and, for purchases, a receiving document. After reviewing the supporting documentation, you approve the voucher. John
prepares the checks for the CFO’s signature. John also maintains the company’s check register (the cash disbursements journal) and reconciles
the bank account at the end of each month.
Diversity and Teamwork: Skills
5
GolfPro Center has just completed the annual audit. The auditors presented a list of control deficiencies to the CFO. The CFO has asked you to
meet with your team to decide on a improvement plan. Using the above examples as control evidences, explain how you would gather your
department team to discuss how to improve on these items. Include the following details in your response: Discuss the team members and
resources you would gather to discuss this matter. Advocate respect, value and appreciation for individuals working within the finance department,
explain the communication skills needed to approach the team. Describe the professional skills needed to accomplish the task.
Diversity and Teamwork: Skills
6
Continuing along the results of the annual audit, explain how an audit enhances the quality for financial statement reporting and managements
report on internal controls. Include in your repose if an audit actually guarantee a fair presentation of a company’s financial statements.
Module 05: Professional Business Ethics and Internal Control
Diversity of Accounting Issues
Diversity and Teamwork: Knowledge
Research the FASB Website.
1
2
Go to the website of the Financial Accountant Standards Board (http://www.fasb.org). Identify the most recently issued financial
reporting standard and summarize briefly its principal provisions. Also search under Project Activities to identify the reporting issue
with the most recent update. Describe the issue and the nature of the action taken by the FASB. In your response, demonstrate a
profound appreciation of the meaning of diversity in accounting standards, explain the need for diverse perspectives.
Diversity and Teamwork: Knowledge
Research the IASB Website
Go to the website of the International Accounting Standards Board (http://www.isab.org). Search for the International Financial
Reporting Standards (IFRS) summaries. Identify the most recently issue international financial reporting standard and summarize
briefly its principle provisions. In your response, demonstrate a profound appreciation of the meaning of diversity in accounting
standards, explain the need for diverse perspectives.
Diversity and Teamwork: Attitudes
3
Critique and criticize bias regarding accounting practice issues in diversity by explaining the reasons for differences in accounting
practice’s across countries.
Diversity and Teamwork: Skills
4
International Financial Reporting Standards are gaining support around the globe. In 2007, the SEC eliminated the requirement for
foreign companies that issue stock in the United States to include in their financial statements a reconciliation of IFRS to U.S. GAAP.
There also is serious discussion of allowing U.S. companies to choose whether to prepare their financial statements according to U.S.
GAAP or IFRS. Do you think U.S. companies should be allowed the choice of reporting under either U.S. GAAP or IFRS? Provide
arguments both for and against this idea. Interpret intercultural experience from multiple perspectives and worldviews.
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