Explain Why? How should Blue Corporation’s manufacturing expenditures be reported?
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- Blue Corporation is a manufacturing company which has decided to introduce a new line of merchandise on January 25, 2019. The company has experienced significant revenue and earnings growth in recent years and anticipates future growth to decline slightly, yet remain consistent with the strong industry average (10-15% annual revenue growth). Blue has incurred certain patent costs and considerable attorney fees, in addition to survey costs, management studies, salaries, insurance, and quality inspections. Given the three alternative methods for handling research and experimental expenditures, which method(s) would be most appropriate for Blue Corporation? Explain Why? How should Blue Corporation’s manufacturing expenditures be reported? *******PLEASE PROVIDE NEW ANSWER, NOT A COPIED ANSWER FROM ANOTHER SOURCE***Diamond Computers, which is owned and operated by Dale Diamond, manufactures and sells different types of computers. The company has reported profits every year since its inception in 2002 and has applied for a bank loan near the end of 2021 to upgrade manufacturing facilities. These upgrades should significantly boost future productivity and profitability. In preparing the financial statements for the year, the chief accountant, Sandy Walters, mentions to Dale that approximately $80,000 of computer inventory has become obsolete and a write-down of inventory should be recorded in 2021. Dale understands that the write-down would result in a net loss being reported for company operations in 2021. This could jeopardize the company’s application for the bank loan, which would lead to employee layoffs. Dale is a very kind, older gentleman who cares little for his personal wealth but who is deeply devoted to his employees’ well-being. He truly believes the loan is necessary for the company’s…On March 3, 2016, Zad Company was established to produce and sell plastic products. The company produces a full line of plastic products included customized orders. The Chief Executive Officer of the company is working hard to enhance profitability and liquidity. Recently, you have been hired as the Financial Director of the company. 1. On March 8, 2020, the Chief Financial Officer stated to you that she wishes to reduce the company's investment in current assets since those assets provide little, if any, return to the firm. How would you respond to this statement? 2. On September 17, 2020, the Chief Financial Officer stated to you that as long as the company maintains a positive cash balance, why is it essential to review the firm's cash flows? 3. On January 5, 2021, the Chief Financial Officer wishes to expand the company's operations and are trying to determine the amount of debt financing the company should obtain versus the amount of equity financing that should be raised. The…
- Nancy Tercek, the financial vice president, and Margaret Lilly, the controller, of Romine Manufacturing Company are reviewing the financial ratios of the company for the years 2020 and 2021. The financial vice president notes that the profit margin on sales ratio has increased from 6% to 12%, a hefty gain for the 2-year period. Tercek is in the process of issuing a media release that emphasizes the efficiency of Romine Manufacturing in controlling cost. Margaret Lilly knows that the difference in ratios is due primarily to an earlier company decision to reduce the estimates of warranty and bad debt expense for 2021. The controller, not sure of her supervisor's motives, hesitates to suggest to Tercek that the company's improvement is unrelated to efficiency in controlling cost. To complicate matters, the media release is scheduled in a few days. Instructions What, if any, is the ethical dilemma in this situation? Should Lilly, the controller, remain silent? Give reasons. What…Umatilla Bank and Trust is considering giving Sheffield Corp. a loan. Before doing so, it decides that further discussions with Sheffield’s accountant may be desirable. One area of particular concern is the Inventory account, which has a year-end balance of $273,850. Discussions with the accountant reveal the following. 1. Sheffield shipped goods costing $53,860 to Hemlock Company FOB shipping point on December 28. The goods are not expected to reach Hemlock until January 12. The goods were not included in the physical inventory because they were not in the warehouse. 2. The physical count of the inventory did not include goods costing $88,840 that were shipped to Sheffield FOB destination on December 27 and were still in transit at year-end. 3. Sheffield received goods costing $26,690 on January 2. The goods were shipped FOB shipping point on December 26 by Yanice Co. The goods were not included in the physical count. 4. Sheffield shipped goods costing $52,540 to…Umatilla Bank and Trust is considering giving Novak Corp. a loan. Before doing so, it decides that further discussions with Novak’s accountant may be desirable. One area of particular concern is the Inventory account, which has a year-end balance of $261,940. Discussions with the accountant reveal the following. 1. Novak shipped goods costing $55,800 to Hemlock Company FOB shipping point on December 28. The goods are not expected to reach Hemlock until January 12. The goods were not included in the physical inventory because they were not in the warehouse. 2. The physical count of the inventory did not include goods costing $97,720 that were shipped to Novak FOB destination on December 27 and were still in transit at year-end. 3. Novak received goods costing $25,980 on January 2. The goods were shipped FOB shipping point on December 26 by Yanice Co. The goods were not included in the physical count. 4. Novak shipped goods costing $54,080 to Ehler of Canada FOB…
- Horizon Corporation manufactures personal computers. The company began operations in 2012 and reported profits for the years 2012 through 2019. Due primarily to increased competition and price slashing in the industry, 2020’s income statement reported a loss of $20 million. Just before the end of the 2021 fiscal year, a memo from the company’s chief financial officer (CFO) to Jim Fielding, the company controller, included the following comments:If we don’t do something about the large amount of unsold computers already manufactured, our auditors will require us to record a write-down. The resulting loss for 2021 will cause a violation of our debt covenants and force the company into bankruptcy. I suggest that you ship half of our inventory to J.B. Sales, Inc., in Oklahoma City. I know the company’s president, and he will accept the inventory and acknowledge the shipment as a purchase. We can record the sale in 2021 which will boost our loss to a profit. Then J.B. Sales will simply…Splish Brothers Bank and Trust is considering giving Pohl Company a loan. Before doing so, it decides that further discussions with Pohl's accountant may be desirable. One area of particular concern is the Inventory account, which has a year-end balance of $319,000. Discussions with the accountant reveal the following. 1. Pohl shipped goods costing $63,800 to Hemlock Company FOB shipping point on December 28. The goods are not expected to reach Hemlock until January 12. The goods were not included in the physiçal inventory because they were not in the warehouse. The physical count of the inventory did not include goods costing $95,000 that were shipped to Pohl FOB destination on December 27 and were still in transit at year-end. Pohl received goods costing $29,000 on January 2. The goods were shipped FOB shipping point on December 26 by Yanice Co. The goods were not included in the physical count. 3. Pohl shipped goods costing $59,160 to Ehler of Canada FÓB destination on December 30.…Garcia Home Improvement plc installs replacement siding, windows and louvered glass doors for single-family homes and condominium complexes. The company is in the process of preparing its annual financial statements for the fiscal year ended MAY 31, 2019. Jim Alcide, controller for Garcia, has gathered the following data concerning inventory. At May 31, 2019, the balance in Garcia's Raw Materials Inventory account was $408,000, and Allowance to Reduce Inventory to NRN had a credit balance of $27,500. Alcide summarized the relevant inventory cost and market data at May 31, 2019, in the schedule below. Alcide assigned Patricia Devereaux, an intern from a local college, the task of calculating the amount that shoukd share on Garcia's May 31, 2019, financial statements for inventory under the LCNRV rule as applied to each item in inventory. Devereaux expressed concern over departing from the historical cost principle. Cost Sales Price Net Realizable Value Aluminum siding $…
- CarniTrin is a manufacturer of Carnival costumes in a highly competitive market. Thecompany's management team is seeking guidance on the use of financial performancemeasures to identify the key drivers of the company's financial performance and develop astrategy to improve it. The following data relate to the company for the year 2022: In its clothing division, the company has $6,000,000 invested in assets. After-taxoperating income from sales of clothing in 2022 is $900,000. Income for the clothingdivision has grown steadily over the last few years. The cosmetics division has $14,000,000 invested in assets and an after-tax operatingincome in 2022 of $1,900,000. The weighted-average cost of capital for CarniTrin is 10% and the 2021’s after-taxreturn on investment for each division was 15%. The general manager of CarniTrin has asserted that in the future, managers shouldhave their compensation structure aligned with their performance measures with nofixed salaries. However, the…CarniTrin is a manufacturer of Carnival costumes in a highly competitive market. Thecompany's management team is seeking guidance on the use of financial performancemeasures to identify the key drivers of the company's financial performance and develop astrategy to improve it.The following data relate to the company for the year 2022: In its clothing division, the company has $6,000,000 invested in assets. After-taxoperating income from sales of clothing in 2022 is $900,000. Income for the clothingdivision has grown steadily over the last few years. The cosmetics division has $14,000,000 invested in assets and an after-tax operatingincome in 2022 of $1,900,000. The weighted-average cost of capital for CarniTrin is 10% and the 2021’s after-taxreturn on investment for each division was 15%. The general manager of CarniTrin has asserted that in the future, managers shouldhave their compensation structure aligned with their performance measures with nofixed salaries. However, the…CarniTrin is a manufacturer of Carnival costumes in a highly competitive market. Thecompany's management team is seeking guidance on the use of financial performancemeasures to identify the key drivers of the company's financial performance and develop astrategy to improve it. The following data relate to the company for the year 2022: In its clothing division, the company has $6,000,000 invested in assets. After-taxoperating income from sales of clothing in 2022 is $900,000. Income for the clothingdivision has grown steadily over the last few years. The cosmetics division has $14,000,000 invested in assets and an after-tax operatingincome in 2022 of $1,900,000. The weighted-average cost of capital for CarniTrin is 10% and the 2021’s after-taxreturn on investment for each division was 15%. The general manager of CarniTrin has asserted that in the future, managers shouldhave their compensation structure aligned with their performance measures with nofixed salaries.…
