Exam 11: Quality of Earnings, corporate Governance, and Ifrs

Tom's Ware donated 100 T-shirts to the local high school.The company will record the donation as an operating expense.The shirts cost Tom's Ware $6.00 each and the company usually sells them for $10.50.If Tom's Ware reports a charity expense of $1,050,this accounting choice would be considered ________.

Quality of earnings is considered higher if management ________.

Team Instructions: Divide the class into teams of three or four people.Each team member should work the following problem separately outside of class.Then give the students time in class to compare answers with their teammates and put together a final correct copy of the problem.Each team should turn in only one copy of the problem for grading,along with a copy of the annual report that it used.All team members will receive the same grade. Provide students with copies of real merchandising companies' annual reports,or give students the Web addresses of real merchandising companies and ask them to print out and submit the annual reports.All team members should work with the same company's annual report. Answer the following questions using the annual report assigned to your team: 1.What is the name of your company? 2.Find management's report on internal control over financial reporting.What page is it on? 3.Who does it say is responsible for establishing and maintaining an adequate internal control system? 4.Does management say that the company's internal controls are effective? If your answer is "No," briefly describe the deficiencies. 5.Has management's report on internal control over financial reporting been audited? 6.Who signed management's report on internal control over financial reporting? What are their positions in the company? 7.Find the company's auditors' report(s).(There might be two separate reports,or they might be combined into a single report)What page(s)are they on? 8.To whom is the auditors' report addressed? 9.What are the names of the specific financial statements that the auditors have examined? 10.According to the auditors' report,the audit was conducted in accordance with standards set by whom? 11.Do the auditors say that the financial statements are perfect? 12.Does the auditors' report mention the management report on internal control? 13.Find a list of the members of your company's board of directors.What page is it on? 14.How many people are on the board of directors? 15.How many of the people on the board do NOT work for the company?

Alpha,Inc.bought land and a new warehouse for $100,000.Because Alpha needs to separate the cost of the land (which will not be depreciated)from the cost of the building (which will be depreciated),Alpha got two independent appraisals.The first appraiser said the land was worth $10,000.The second appraiser said the land was worth $15,000.If Alpha records the land at $15,000 and the building at $85,000,this accounting choice would be considered ________.

Who are elected by the shareholders to make decisions on major company policies,such as dividend payments?

Using LIFO instead of FIFO to value inventory when prices are rising ________.

Who is responsible for regulating the auditing profession?

What are some of the new responsibilities of the board of directors required by the Sarbanes-Oxley Act of 2002?

GB Company had a very bad year in 2011.The controller knew that the company already had a significant loss for the year,so he put the paperwork in his bottom drawer for some of the shipments made in the last two weeks of 2011.As a result,$100,000 of sales were not recorded and the customers weren't billed until 2012.What is the effect of omitting these sales from GB Company's 2011 financial statements?

Tastee Bakery donated its used delivery truck to the local Health Right Clinic,which provides free healthcare for people with no medical insurance.The bakery will record the donation as an operating expense.Since Tastee Bakery uses double-declining-balance depreciation,the book value of the truck is only $1,500,but the "blue book" market value of the truck is $2,500.If Tastee Bakery records a charity expense of $2,500,this accounting choice would be considered ________.

Earnings per share is ________.

Ken's Candy has been selling to Art's Quik Mart for thirty years.Lately Art's has been paying its bills increasingly slowly.Right now,Ken's Candy has $10,000 in accounts receivable on its books from Art's Quik Mart for candy sold to Art's over the last six months.Art's Quik Mart says it will pay the bill as soon as it can.Ken's Candy is trying to decide whether it should increase its allowance for uncollectible accounts to cover the amount owed by Art's.If Ken's Candy increases the allowance,this accounting choice would be considered ________.

List two ways management may manipulate its revenue recognition and describe the effect each manipulation will have on the company's current earnings per share and the following year's earning per share.Is this ethical?

Higher than usual expenses may indicate a company is manipulating earnings using big bath charges.

The accounting for property,plant and equipment is the same under U.S.GAAP and IFRS.

The SOX Act requires external auditors ________.

Quality of earnings is considered higher if management depreciates its long-term assets over a shorter period than the industry average.

Who hires a company's external auditors?

Which of the following may indicate a company is setting up a cookie jar reserve this year?

The ethical climate of a company is determined by the tone at the top.