Question 1
Completed worksheet; 500-word response to the 5 questions Respond to the following scenario with your thoughts, ideas, and comments. Be substantive and clear, and use research to reinforce your ideas. Given that its food packaging customers have been inquiring about its ability to supply complementary products, Apex is considering coffee packaging as an additional diversification to its product line. You are able to catch James in Luke?s office and stop in to ask for their reaction to the query. ?Hi,? you say. ?I?ve got a quick question for you both. May I interrupt for just a minute?? ?Sure,? says Luke. ?What?s up?? ?I need to calculate the net present value (NPV) for the coffee packaging project?the coffee packaging production equipment and a lamination machine that will bond plastic substrates for airtight quality. Does the coffee packaging line make sense for us?? ?The process will be challenging, initially,? says Luke. ?But once our employees acclimate, I anticipate a very efficient process. I?m certain we will be competitive in this industry.? ?I can definitely leverage the customers within the channels of distribution that we intend to reach with our food packaging line,? says James. ?Many of them distribute coffee products. I also see an opportunity for snack-food packaging, which requires metalized lamination. This packaging can also be applied to health products such as antibacterial cloths. The possibilities are endless! Let?s try to make this work.? ?Thank you, both,? you say. ?Would you get me the same type of information you gave me for the expansion project so that I can compute the cash flows?? James laughs and says, ?We anticipated this question!? Luke and I were just putting our information in an e-mail to you. You should have it by the time you get back to your office.? ?Thanks so much!? you say. ?I knew I could count on you.? Back in your office, the promised e-mail is in your Inbox. Now you can compute the cash flows given the following information: Initial investment outlay of $20 million for equipment only Project and equipment life: 5 years Sales projected to be $12 million per year for 5 years. Assume gross margin of 50% (exclusive of depreciation) Depreciation: Straight-line for tax purposes Selling, general, and administrative expenses: 10% of sales Tax rate: 35% As I started wondering if this coffee packaging project will maximize the firm?s value I said to myself, I?ll compute the NPV and see what it looks like and I will use a weighted average cost of capital (WACC) of 5% as reflected in the attached Week 5 NPV IRR. This project should be calculated on its own merits; that is, separately from the food packaging product. I?ll include a recommendation on that point, and a couple of others in my 2-page executive summary. You reach for your keyboard to make the following notes about the questions you want to address: Does the coffee packaging project maximize the firm?s value? Should the company undertake this project, the prior project, or both? What advice should I give to John Matthews and the board? How can I describe my assessment? Should the second project be accepted?
Question 2
Problem 2: Kingdom Leasing Inc. agrees to lease jousting equipment to Knight Inc. on Jan 1, 2012. They agree on the following terms: 1) The normal selling price of the jousting equipment is $325000 and the cost of the asset to Kingdom Leasing Inc. was $250000. 2) Knight will pay all maintenance, insurance and taxes costs directly and annual payments of $60000 on Jan 1 each year. 3) The lease begins on Jan 1, 2012 and payments will be in equal annual installments. 4) The lease is noncancelable with no renewal option. The lease term is 10 years (the same as the estimated economic life). 5) At the end of the lease, the jousting ring will revert to Kingdom Leasing Inc. and have an unguaranteed residual value of $30000. Their implicit interest rate is 10%. 6) Kingdom Leasing, Inc. Incurred costs of $6500 in negotiating and closing the lease. There are no uncertainties regarding additional costs yet to be incurred and the collectability of the lease payments is reasonably predictable. Required: a) Determine what type of lease this would be for the lessee and calculate the initial obligation. b) Prepare Knight Inc.'s amortization schedule for the lease terms. c) Prepare all the journal entries for Knight Inc. for 2012. Assume a calendar year fiscal year.
Question 3
1. If the expected deviation rate exceeds the tolerable deviation rate, the auditor is most likely to A. Have a large sample size. B. Set control risk at the maximum without sampling. C. Set control risk at the minimum without sampling. D. Pick a lower risk of assessing control risk too low to increase sample size. 2. Auditors who prefer statistical to judgmental sampling believe that the principal advantage of statistical sampling flows from its unique ability to A. Define the precision required to provide audit satisfaction. B. Mathematically measure uncertainty. C. Establish conclusive audit evidence with decreased audit effort. D. Promote a more legally defensible procedural approach. 3. In non-statistical sampling for tests of controls, increasing the desired confidence level results in a A. Higher tolerable deviation rate. B. Lower expected deviation rate. C. Larger sample size. D. Smaller sample size. 4. In PPS, population size is A. The dollar balance in an account. B. The number of items in an account. C. Unrelated to sample size. D. Included in the denominator of the formula to determine sample size. 5. When conducting fieldwork for a physical inventory, an auditor cannot perform which of the following steps using a generalized audit software package? A. Observing inventory. B. Selecting sample items of inventory. C. Analyzing data resulting from inventory. D. Recalculating balances in inventory reports. 6. If auditors conducting attributes sampling found that the client deviated from a prescribed control in nine of the first 10 items examined, the auditor is most likely to A. Increase sample size. B. Increase the computed upper deviation rate. C. Decrease the tolerable deviation rate. D. Stop the test and increase control risk. 7. PPS sampling should not be used if A. The population includes several large items. B. The auditor expects overstatement errors. C. Many errors are expected. D. No items in the account have zero balances. 8. The risk of incorrect acceptance and the risk of assessing control risk too low relate to the A. Preliminary estimates of materiality levels. B. Allowable risk of tolerable error. C. Efficiency of the audit. D. Effectiveness of the audit. 9. In parallel simulation, actual client data are reprocessed using an auditor software program. An advantage of using parallel simulation, instead of performing tests of controls without a computer, is that A. The test includes all types of transaction errors and exceptions that may be encountered. B. The client's computer personnel do not know when the data are being tested. C. There is no risk of creating potentially material errors in the client's data. D. The size of the sample can be greatly expanded at relatively little additional cost. 10. A primary advantage of using generalized audit packages in the audit of an advanced computer system is that it enables the auditor to A. Substantiate the accuracy of data through self-checking digits and hash totals. B. Utilize the speed and accuracy of the computer. C. Verify the performance of machine operations which leave visible evidence of occurrence. D. Gather and store large quantities of supportive evidential matter in machine readable form 11.A limitation on the scope of an audit sufficient to preclude an unqualified opinion will usually result when management A. Presents financial statements that are prepared in accordance with the cash receipts and disbursements basis of accounting. B. States that the financial statements are not intended to be presented in conformity with generally accepted accounting principles. C. Does not make the minutes of the board of directors? meetings available to the auditor. D. Asks the auditor to report on the balance sheet and not on the other basic financial statements. 12. Which of the following procedures most likely would not be included in a review engagement of a nonpublic entity? A. Inquiring about subsequent events. B. Considering whether the financial statements conform with GAAP. C. Assessing control risk. D. Obtaining a management representation letter 13. A CPA?s report on agreed-upon procedures related to an entity?s compliance with specified requirements should contain A. An acknowledgment of responsibility for the sufficiency of the procedures. B. An opinion about whether the entity complied with specified requirements. C. A statement of limitations on the use of the report. D. Negative assurance that control risk has not been assessed. 14. A CPA should not express negative or limited assurance in a standard A. Review report on financial statements of a nonpublic entity. B. Comfort letter on financial information included in a registration statement of a public entity. C. Compilation report on financial statements of a nonpublic entity. D. Review report on interim financial statements of a public entity 15. An auditor?s decision concerning whether to dual date the audit report is based upon the auditor?s willingness to A. Accept responsibility for subsequent events. B. Assume responsibility for events subsequent to the issuance of the auditor?s report. C. Permit inclusion of a footnote captioned: event (unaudited) subsequent to the date of the auditor?s report. D. Extend auditing procedures 16. When there has been a change in accounting principles, but the effect of the change on the comparability of the financial statements is not material, the auditor should A. Refer to the change in an explanatory paragraph. B. Refer to the change in the opinion paragraph. C. Not refer to consistency in the auditor?s report. D. Explicitly concur that the change is preferred. 17. The objective of the consistency standard is to provide assurance that A. There are no variations in the format and presentation of financial statements. B. Substantially different transactions and events are not accounted for on an identical basis. C. The comparability of financial statements between periods is not materially affected by changes in accounting principles without disclosure. D. The auditor is consulted before material changes are made in the application of accounting principles. 18. The AICPA Code of Professional Conduct requires compliance with accounting principles promulgated by the body designated by the AICPA Council to establish such principles. The pronouncements considered officially established accounting principles include all of the following except A. APB Opinions. B. Interpretations issued by the FASB. C. AICPA Issues Papers. D. AICPA Accounting Research Bulletins. 19. What is an auditor?s reporting responsibility concerning information accompanying the basic financial statements in an auditor-submitted document? A. The auditor should report on the accompanying information only if it contains obvious material misstatements. B. The auditor should report on the accompanying information only if the auditor did not participate in its preparation. C. The auditor should report on all the accompanying information included in the document. D. The auditor should report on the accompanying information only if the auditor participated in its preparation. 20. Grant Company?s financial statements adequately disclose uncertainties that concern future events, the outcome of which are not susceptible to reasonable estimation. The auditor?s report should include A. An unqualified opinion. B. An adverse opinion. C. An ?except for? qualified opinion. D. A ?subject to? qualified opinion. 21. Under which of the following circumstances may audited financial statements contain a note disclosing an event occurring after the balance sheet date that is labeled unaudited? A. When the event occurs after completion of field work and before issuance of the auditor?s report. B. When the subsequent event requires adjustment of the financial statements. C. When audit procedures with respect to the event were not performed by the auditor. D. When the event occurs between the date of the auditor?s original report and the date of the reissuance of the report 22. In the first audit of a new client, an auditor was able to extend auditing procedures to gather sufficient evidence about consistency. Under these circumstances, the auditor should A. Not refer to consistency in the auditor?s report. B. State that the consistency standard does not apply. C. Not report on the client?s income statement. D. State that the accounting principles have been applied consistently. 23. Which of the following requires recognition in the auditor?s report as to consistency? A. Changing the presentation of prepaid insurance from inclusion in other assets to disclosing it as a separate line item. B. Division of the consolidated subsidiary into two subsidiaries that are both consolidated. C. Changing the salvage value of an asset. D. Changing the companies included in combined financial statements. 24. If management declines to present supplementary information required by GAAP, the auditor should express A. An unqualified opinion with an additional explanatory paragraph. B. An adverse opinion. C. A qualified opinion with an explanatory paragraph. D. An unqualified opinion 25. If the auditor obtains satisfaction with respect to the accounts receivable balance by alternative procedures because it is impracticable to confirm accounts receivable, the auditor?s report should be unqualified and could be expected to A. Refer to a footnote that discloses the alternative procedures. B. Disclose in the opinion paragraph that confirmation of accounts receivable was impracticable. C. Disclose that alternative procedures were used because of a client-imposed scope limitation. D. Not mention the alternative procedures.
Question 4
Identify factors that contribute to the rising costs of healthcare and discuss efforts to control those costs. Describe the four basic financial statements and the information that can be gathered from each. Interpret and analyze financial statements. Summarize concepts related to capital management such as working capital, the time value of money, and net present value. Evaluate investment opportunities and available sources of capital financing. Illustrate how cost information can be used to make financial decisions. List the essential components of the budgeting process and understand how to prepare a budget. Explain how organizational units within a healthcare organization measure their financial performance. Discuss methods used by healthcare providers to determine their costs. ? Analyze the changes in financial statements and their impact on health care organizations. ? Perform horizontal, trend, and ratio analyses for financial statements of a health care organization. ? Interpret these results and make preliminary assessments of an organization's financial position and performance. ? ?Communicate the assessments and formulate suggestions for further financial and operating improvement goals and initiatives for a health care organization. ? Describe the methods to allocate overhead and support costs to revenue-producing departments in order to achieve full costing. Breakeven Analysis. ? Explain the rationale for the capital budgeting process. ? ?Analyze the various financial methods for evaluating capital projects. ? ?Explain the role of opportunity costs in the capital budgeting process. ? Discuss the importance of the due diligence process in determining the capital project selected by the organization. ? Identify the components necessary for the preparation of a budget. ? Discuss how assumptions are arrived at in the budget process. ? Identify the key parties involved in the budget process. ? Explain how a complete and detailed budget process can provide operational and financial benefits to any organization. ? Identify the value of sensitivity and scenario analysis. ? Quantify the importance of measuring the risk alternatives in projects for the management and governing body of the health care organization. ? Assess the reasons for the variability in an organizations cash inflows and outflows. ? Consider characteristics and strategies of current asset management programs and how these can assist in maximizing return on these assets. ? Describe the nature of municipal bond financing. ? Discuss the various types of bonds, parties involved, and issuance process. ? Describe the role of swaps in the capital financing process ? Discuss how private insurance companies reimburse health care organizations. ? Describe the flow of activity in a shared risk capitation model. ? Discuss how physicians are reimbursed for their professional services. ? Explain the changing patterns and initiatives within health care, including the growing interest and application of the hospitalist concept. ? Describe the major components of a managed care contract. ? Identify opportunities and strategies within managed care contracting and negotiations. ? Discuss the importance that negotiations play in obtaining appropriate reimbursement rates from managed care organizations. ? Identify the three main components of the revenue cycle of a health care organization: admitting and registration, coding, and billing. ? Explain some of the best practices in the revenue cycle and the impact these can have on reimbursement and in ensuring compliance with regulatory reviews. ? Discuss the fundamental shift of Medicare from an insurer and payor of claims to a value purchaser of health care services. ? Describe the increased review and audit of providers by Medicare and other payors. ? Discuss certain tax issues that face not-for-profits in health care. ? Explain the role of financial transparency within health care and help these organizations plan for these changes in the future.
Question 5
Read the Short Case Study below. Post a 150-300 word response to the following: -Describe the ethical issues facing a manager in the study case -Imagine you are a manager at the company described in the case. Explain how you would remedy this ethical dilemma. Short Case Study: MANAGING A DIVERSE WORKFORCE After two years of sales calls and persuasion, a large, multinational petroleum company? Big Oil Ltd.?decides to sign with your employer, Secure Bank. Since Big Oil is headquartered in Saudi Arabia and most of the meetings with the client have been in the Middle East, Secure Bank?s senior executive in charge of oil and oil products companies, Julie, has not attended. Although the Secure Bank employees who have met with the company have told the Big Oil executives that the lead on their account will be a woman, the news must not have registered, perhaps because of language difficulties. Today, the Big Oil reps are in Chicago to sign on the dotted line and meet with Secure Bank?s senior managers, and of course, they?ve met with Julie. A member of your sales team calls you to say that Big Oil?s senior team member has told him he does not want Julie to work on their account, period. Because of cultural issues, Big Oil execs are uncomfortable dealing with women from any country. As Julie?s manager, what do you do?
