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Chapter 16: Q2RQ (page 859)
Question: What is an annual report? Briefly describe the key parts of the annual report.
Answer
An annual report is all about the financial performance and other activities of an organization in the last preceding years
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Applying ethical standards
Ava Borzi is the new controller for Halo Software, Inc. which develops and sells education software. Shortly before the December 31 fiscal year-end, Jeremy Busch, the company president, asks Borzi how things look for the year-end numbers. He is not happy to learn that earnings growth may be below 9% for the first time in the company鈥檚 five-year history. Busch explains that financial analysts have again predicted a 9% earnings growth for the company and that he does not intend to disappoint them. He suggests that Borzi talk to the assistant controller, who can explain how the previous controller dealt with such situations. The assistant controller suggests the following strategies:
a. Persuade suppliers to postpone billing \(18,000 in invoices until January 1.
b. Record as sales \)120,000 in certain software awaiting sale that is held in a public warehouse.
c. Delay the year-end closing a few days into January of the next year so that some of the next year鈥檚 sales are included in this year鈥檚 sales.
d. Reduce the estimated Bad Debts Expense from 3% of Sales Revenue to 2%, given the company鈥檚 continued strong performance.
e. Postpone routine monthly maintenance expenditures from December to January.
Requirements
1. Which of these suggested strategies are inconsistent with IMA standards?
2. How might these inconsistencies affect the company鈥檚 creditors and stockholders?
3. What should Borzi do if Busch insists that she follow all of these suggestions?
Identifying product costs and period costs Classify each cost of a paper manufacturer as either a product cost or a period cost:
i. Life insurance on the CEO.
Calculating unit cost per service
Marx and Tyler provides hair-cutting services in the local community. In February, the business cut the hair of 190 clients, earned \(4,800 in revenues, and incurred the following operating costs:
Hair Supplies Expense \) 950
Wages Expense 548
Utilities Expense 190
Depreciation Expense鈥擡quipment 60
What was the cost of service to provide one haircut?
Identify the following characteristics as primarily related to financial accounting (FA) or managerial accounting (MA):
4. Has a focus on the future.
1. What is the primary purpose of managerial accounting?
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