Find and discuss a current article concerning a financial accounting issue. Make sure that it is a financial accounting issue (i.e., how something is accounted for – the topic of this class). There are several in the past couple months in the Wall Street Journal that might be good. It can’t be one I’ve posted for you on Canvas. If you have any questions about whether it is appropriate or not please feel free to run it by me first.
Concepts for Analysis
CA24.1 (LO 1, 2) (General Disclosures; Inventories; Property, Plant, and Equipment) Koch Corporation is in the process of preparing its annual financial statements for the fiscal year ended April 30, 2021. Because all of Koch’s shares are traded intrastate, the company does not have to file any reports with the Securities and Exchange Commission. The company manufactures plastic, glass, and paper containers for sale to food and drink manufacturers and distributors.
Koch Corporation maintains separate control accounts for its raw materials, work in process, and finished goods inventories for each of the three types of containers. The inventories are valued at the lower-of-cost-or-market.
The company’s property, plant, and equipment are classified in the following major categories: land, office buildings, furniture and fixtures, manufacturing facilities, manufacturing equipment, and leasehold improvements. All fixed assets are carried at cost. The depreciation methods employed depend on the type of asset (its classification) and when it was acquired.
Koch Corporation plans to present the inventory and fixed asset amounts in its April 30, 2021, balance sheet as shown below.
Property, plant, and equipment (net of depreciation)
What information regarding inventories and property, plant, and equipment must be disclosed by Koch Corporation in the audited financial statements issued to stockholders, either in the body or the notes, for the 2020–2021 fiscal year?
Read the Over-land Trucking and Freight Case Study. Consider the proposal from FHP and prepare a recommendation to management. Use the questions in the Decision section at the end of the case study to organize your recommendation. Responses to each question should be substantive with supporting information and calculations.
The attached is the Excel worksheet for Janel Janitorial’s balance sheet and income statement included in the case study. Use this worksheet to perform the following analyses.
1. Horizontal Analyses for 5 years.
2. Vertical Analyses for 5 years both for the balance sheet (using the total asset as the benchmark) and income statement (with total sales).
3. Ratio analyses – Use 1) Professor Grove and Cook’s 6 ratios for red flags for reporting problems and financial performance (e.g. gross margins and sales growth, PE ratios, profit margines, etc.), and 2) ‘Beneish’s 5 statistically significant ratios for catching earnings management’ in the textbook (page 4-44).*
*Note: If the case does not provide sufficient informaton to calculate a ratio, you can simply document that and skip the ratio (e.g. PE ratio). But when most, if not all, of the numbers needed for a ratio are available in the case, calculate the ratio using the available information.
After the analyses, identify the areas that suggest further investigation of irregular activities (errors or fraud). Also document anything else you noticed on Janet Janitorial’s financial statements.
It is your second week on a new job as a bookkeeper at Mags and Bags, a small boutique store. While you’re enjoying the challenge, you’ve found a few things that don’t add up after completing some of the transactions in the store’s computerized accounting system. Store owner Margaret Posley has given you a trial balance from the end of last month. She says that her CPA told her to use it to compare to her account balances for accuracy. The bookkeeping and recordkeeping functions have not been Margaret’s favorite task as an owner, as she doesn’t understand the information. It has caused accuracy to suffer.
Begin with the template provided here:
Complete a brief analysis of what the current account balances are, and what they are should be according to Margaret’s CPA. Show your calculations in the gray area in column G.After your analysis, address the following questions in the Error Correction Template:
Identify which accounts are in error, and how they are related to each other.
Discuss the likely causes of the errors (omission, duplication, incorrect transaction date, etc.).
Looking forward, what tools will you use and actions will you take to ensure these errors don’t continue to be an issue in the company records?
Draft a brief response to Margaret sharing your findings and plan for how you will correct the errors in the computerized accounting software. Be specific in your findings and recommendations for correction. Include suggestions for how these types of errors can be avoided in the future.