{"id":432338,"date":"2018-06-18T10:47:10","date_gmt":"2018-06-18T10:47:10","guid":{"rendered":"https:\/\/essaypaper.org\/?p=26607"},"modified":"2018-10-24T08:53:24","modified_gmt":"2018-10-24T08:53:24","slug":"accounting-case-assignment-paper","status":"publish","type":"post","link":"https:\/\/www.benedictsol.com\/blogs\/accounting-case-assignment-paper\/","title":{"rendered":"Accounting Case Assignment Paper"},"content":{"rendered":"

Accounting Case<\/h2>\n

Case 2: Review of Introductory Accounting<\/p>\n

Introduction<\/h3>\n

As we move into Intermediate Accounting, it can be very helpful to take time to review some of the basic principles from our introductory financial accounting class. This case is designed as a review for some of the most important topics you covered in those classes.<\/p>\n

In addition, recent ethical scandals have rocked the financial markets.\u00a0 While people blame many different sources for these scandals, the real reason is that a group of individuals chose to manipulate the markets for their own benefit.\u00a0 In other words, the scandals occurred because of a breakdown in ethics, which unfortunately was not caught by the checks and balances used at the time. The final portion of this case will help you to think about these scenarios and how you can react to avoid the poor choices that have caused so much consternation to the capital markets and the employees of the companies affected.<\/p>\n

Case Questions<\/h3>\n

Please read the attached case, \u201cTo Adjust or Not to Adjust: The Case of BNB Credit Union.\u201d\u00a0 As you read the case, think about each of the individuals involved and their choices.\u00a0\u00a0 What is the main dilemma facing these individuals?\u00a0 What options do they have and what are the consequences of each action?\u00a0 Who would be affected (positively or negatively) by each choice?\u00a0 Which option do you think they will choose and why?\u00a0 These questions are just for you to consider.\u00a0 You do not<\/strong> need to formally answer them.\u00a0 You only need to answer the question in the case.<\/p>\n

Do NOT<\/strong> try to answer the questions in one long essay.\u00a0 You should answer each question individually. \u00a0Each answer should be clear and concise<\/strong> and should flow easily from one thought to the next.<\/p>\n

Personal Ethical Code<\/h3>\n

Now that you have read and thought about an ethical scenario and the motives and incentives that lay behind it, take a minute to think about your own code of ethics.\u00a0 You might want to consider the following:<\/p>\n

    \n
  • What do you<\/strong> consider to be right and wrong?<\/li>\n
  • What is your<\/strong> priority in life?<\/li>\n
  • How far are you<\/strong> willing to go to make money?<\/li>\n
  • How do you<\/strong> wish to treat others?<\/li>\n
  • How do you<\/strong> wish to be remembered someday?<\/li>\n<\/ul>\n

    Write up your ethical code (1 page max).\u00a0 This part of the assignment is meant to encourage personal reflection, so it will be graded based on your thought and effort not on what you have decided to be right or wrong.\u00a0 If you wish, you may use quotes from books, journal articles, or established ethical codes as part of your personal code as long as you give any sources you use appropriate credit<\/u>.<\/p>\n

    Formatting<\/h3>\n

    Your paper write up should be written in standard font (Times New Roman 12 pt or similar) with 1\u201d margins.\u00a0 Please single space your paper with blank lines between paragraphs (similar to the format of these instructions).\u00a0 The title page should contain the assignment name, the course number and section, my name, your name, and the due date.\u00a0 All of your work, including that in Excel, must be submitted as one file <\/strong>to BBLearn by 11pm on the due date in the syllabus. It is very easy to paste from Excel to Word, so please DO NOT attempt to upload multiple files.<\/p>\n

    This is not an English class, so I will accept any paper than shows at least a minimal level of editing (i.e. running spell check and grammar check, reading through the paper at least once, following the formatting instructions above, etc.).\u00a0 Papers returned because of editing problems can still be turned in late for partial credit (see the policy on late work in the syllabus).<\/p>\n

    Your entire assignment, including title page, should NOT<\/strong> be more than six (6) pages long. \u00a0Include the question as the header for each of your answers.\u00a0 You should also include a header for your personal ethical code.\u00a0 Please leave an extra line between questions or emphasize heading in some way.\u00a0 Please put your answer to question 5 and the ethical code on separate pages<\/strong> at the end of your paper (in other words, make sure that they could each be handed to someone separately from the other parts of the case).<\/p>\n

    Please note that you will lose<\/strong> points for each formatting omission. \u00a0<\/strong>As a final note, make sure that your paper size is set to standard letter size (8.5\u201d x 11\u201d).\u00a0 Papers formatted for legal size CANNOT be printed for the grader and, therefore, WILL NOT<\/strong> be graded!<\/p>\n

    Grading<\/h3>\n

    Your answer to the first four (4) questions will be graded based on the quality of your work (30 points) <\/strong>and your logic in defending your answer (10 points<\/strong>).<\/p>\n

    Your answer to question 5 <\/strong>from the case will be graded using the ethics rubric posted in BBLearn (20 points possible<\/strong> \u2013 I expect you to be in the 4 range, so 5\u2019s will give you extra credit).<\/p>\n

    The remaining points (10 points possible<\/strong>) will be based on the effort and thought you put into your personal ethical code.\u00a0 The grading will be broken down as follows: \u00a0Exceptional, 10 points; Good, 8; Acceptable, 6 points; Marginally acceptable, 4 points; Not acceptable, 2 points; No effort, 0 points.<\/p>\n

    Extra Credit (5 points possible):<\/strong> DSO\u2019s original Statement of Cash Flows is included in the financial statements for the company. The adjustments required in the case don\u2019t change total cash, but they do affect the Statement of Cash Flows. Provide an updated Statement of Cash Flows along with your other financial statements.<\/p>\n

    To Adjust or Not to Adjust:\u00a0 The Case of BNB Credit Union<\/h3>\n

    Background Information<\/h4>\n

    BNB Credit Union was founded by the Beiterman family over 100 years ago in the small town of West Klirk, GA.\u00a0 Since its founding, BNB has served the local population with mortgage, auto, and small business loans, as well as other banking services.\u00a0 Because of West Klirk\u2019s remote location, BNB was the only bank used by most of the members of the community.\u00a0 In the last twenty years, BNB has struggled to maintain its position as the primary bank of the local community.\u00a0 Online banking services, heavy marketing by large banks in nearby towns, and a small branch office opened in West Klirk by a national banking chain have all served to reduce BNB\u2019s profits.<\/p>\n

    In order to improve their shrinking deposits and loan portfolio, BNB\u2019s management was forced to increase the interest rate paid on savings accounts, and to reduce interest rates charged on several types of loans.\u00a0 These measures further dipped into BNB\u2019s profit margin, but allowed the credit union to retain most of its customer base.\u00a0 Friendly customer service and less stringent regulations for credit unions also helped.<\/p>\n

    The situation changed with the banking debacle in 2009.\u00a0 The local branch of the national bank closed in early 2010, and lending limits and new restrictions on many of BNB\u2019s competitors have allowed BNB to slowly improve profit margins.\u00a0 However, BNB still hasn\u2019t fully recovered.\u00a0 The Beiterman family has offered the management team significant bonuses if they can improve profits during the upturn without exposing the credit union to too much risk.\u00a0 The current manager, Sam Oliver, has been pushing his team to do just that.<\/p>\n

    Introduction<\/h4>\n

    Two weeks ago DSO, Inc., a local manufacturing firm, approached Judy Intersan, one of BNB\u2019s loan officers, for a $1,000,000 loan to expand their facilities.\u00a0 The company was seeking funds to expand production on its most successful line, which had experienced record growth in the past six months.\u00a0\u00a0 Following BNB\u2019s credit policies, Judy requested DSO\u2019s adjusted trial balance and financial statements (see Figures 1-3).\u00a0\u00a0 In order to assess the company\u2019s overall risk and credit worthiness, she computed the financial ratios required by the credit union\u2019s loan department.\u00a0 The financial ratios revealed that DSO had met the targets on four (4) of the six (6) required ratios in BND\u2019s risk analysis.\u00a0 While the credit union generally requires all 6 ratios be met for a small business loan, loan officers can override this requirement in certain cases.\u00a0 Judy felt that DSO had a sound business model, good governance practices and the product line showed continued potential for growth.\u00a0 Based on these considerations, Judy decided to approve the loan.<\/p>\n

    << DSO\u2019s adjusted trial balance and financial statements are at the end of the case and as a template on BBLearn>><\/p>\n

     <\/p>\n

    \u00a0<\/strong><\/p>\n

    Present<\/h3>\n

    Upon arriving at work, Judy had a message from Jim Terrle, DSO\u2019s owner, requesting a meeting about the loan.\u00a0 Given the size of the potential loan and Judy\u2019s recommendation to approve the loan with special consideration, Judy immediately rearranged her schedule to accommodate Jim\u2019s request.\u00a0 Shortly after the meeting started, Judy became increasingly concerned about her decision.<\/p>\n

    Jim nervously explained to Judy that the financial information he had provided with DSO\u2019s loan application had been unaudited, but that he had assumed that the information was accurate.\u00a0 Previous audits had never raised any concerns.\u00a0 This year, BNB had hired a new auditor and the audit had uncovered several issues that needed to be addressed.<\/p>\n

    First, the auditor felt that DSO was depreciating some assets over lives that were too long.\u00a0 The auditor\u2019s recommendation was to increase depreciation expense by $75,000.\u00a0\u00a0 Second, the company had included in sales revenue $60,000 of cash received as a deposit for product not yet shipped.\u00a0 Third, the company had misclassified a $50,000 loan due the following year as a long-term liability.\u00a0 Finally, DSO had neglected to accrue salary expense of $15,000.<\/p>\n

    \u201cI just hired a new accounting manager, and I assumed that he knew what he was doing.\u00a0 I guess I was wrong,\u201d Jim admitted.\u00a0 \u201cI\u2019m not sure if I\u2019m going to replace him, but I assure you that we will be much more careful in the future.\u201d<\/p>\n

    Judy sighed as she considered the conversation. Jim promised to send her the corrected financial statements as soon as they were completed.\u00a0 She didn\u2019t think that Jim had intentionally tried to trick her or lie to her.\u00a0 If so, he certainly wouldn\u2019t have volunteered the information about the changes from the auditor so quickly.\u00a0 He could have waited until the loan was fully processed.\u00a0 At that point, there wouldn\u2019t have been anything she could do about it.\u00a0 Still, even if he wasn\u2019t lying, his financial position was completely different now.\u00a0 She glanced again at DSO\u2019s risk analysis (see Figure 4).<\/p>\n

    << BNB\u2019s Ratio Threshold Table is the last page of the case>><\/p>\n

    These changes will affect the ratios she had calculated as well as the financial statements.\u00a0 Since the loan documents were making their way through final processing, she decided it would be best to involve her manager in the discussion on how to proceed with DSO\u2019s loan application given this new information.\u00a0 She sighed and headed towards Sam\u2019s office.<\/p>\n

     <\/p>\n

    \u00a0<\/strong><\/p>\n

    Meeting between Judy Intersan and Sam Oliver<\/h3>\n

    \u201cJudy.\u00a0 How are you doing?\u201d Sam asked as he waved Judy into his office.<\/p>\n

    \u201cI\u2019m very concerned at the moment,\u201d Judy answered as she came in and sat down.<\/p>\n

    \u201cWhat\u2019s the problem?\u2019 Sam asked.<\/p>\n

    \u201cI just got through talking with DSO\u2019s owner, Jim Terrle.\u201d<\/p>\n

    \u201cDSO?\u00a0 Isn\u2019t that the company that just applied for a $1M loan to expand their business?\u00a0 I looked over their financial statements.\u00a0 I thought they looked like a solid investment.\u201d<\/p>\n

    Judy nodded.\u00a0 \u201cI felt the same way, until I talked with Jim today.\u00a0 It turns out the financial statements they gave us were unaudited.\u201d<\/p>\n

    \u201cI don\u2019t see that as a problem, as long as there aren\u2019t any surprises after the audit.\u201d<\/p>\n

    \u201cUnfortunately, there were a few issues raised by the audit.\u00a0 The auditor found some significant transactions that DSO had not handled properly.<\/p>\n

    Sam frowned.\u00a0 \u201cThat\u2019s never a good sign.\u00a0 Was it fraud?\u201d<\/p>\n

    Judy shook her head.\u00a0 \u201cI don\u2019t think so.\u00a0 I think they were honest mistakes, but I\u2019m still a little concerned that they weren\u2019t more careful before applying for such a large loan. I\u2019m also concerned about some of their ratios given the corrected financial statements.\u00a0 Remember, they were border line in my original risk analysis.\u00a0 They only met four of six required thresholds.\u00a0 That was enough under our guidelines, but I fear they will be short of even more requirements now.\u00a0 Honestly, I don\u2019t think we should approve the loan.\u201d<\/p>\n

    \u201cI can see your point, but why should we stop them from getting the loan?\u00a0 We could increase the interest rate on the loan to compensate for the additional risk.\u00a0 That would give us an additional loan on the books, which the owners will like, and lead to increased revenues, which the owners will like even more.\u201d<\/p>\n

    \u201cBut,\u201d J\u00a0\u00a0 udy argued. \u201cThey now appear to be a risky company, and I don\u2019t think that the owners want us to increase our loan base or our interest revenue on risky loans.\u00a0 They want us to grow safely.\u201d<\/p>\n

    \u201cBut, slowly,\u201d Sam interrupted.\u00a0 \u201cLook, Judy, I appreciate your concerns.\u00a0 I really do, and I want to see the new numbers and the new ratio analysis.\u00a0 However, I really want to see that big bonus in my Christmas paycheck.\u00a0 Let\u2019s just let this one go, enjoy the bonus, and work with DSO very carefully to ensure that the company makes its payments on time.\u00a0 The owners will never even know.\u201d<\/p>\n

    With that, Sam ushered Judy out of his office.\u00a0 \u201cI\u2019m your manager, Judy, and I say we approve the loan.\u00a0 They aren\u2019t that much more risky now than they were this morning.\u00a0 Just let it go, and I\u2019ll make sure I\u2019m not the only one that enjoys a good bonus at the end of the year.\u201d<\/p>\n

    Case Requirements<\/h3>\n
      \n
    1. Update DSO, Inc.\u2019s adjusted trial balance to reflect the audit changes.<\/li>\n<\/ol>\n

       <\/p>\n

        \n
      1. Using the adjusted trial balance completed in requirement #1, generate DSO\u2019s updated Income Statement and Balance Sheet.<\/li>\n<\/ol>\n

         <\/p>\n

          \n
        1. Update the risk analysis table for DSO by recalculating the following:\n
            \n
          1. Current Ratio<\/li>\n
          2. Quick Ratio<\/li>\n
          3. ROA<\/li>\n
          4. ROE<\/li>\n
          5. Debt-to-Equity<\/li>\n
          6. Profit margin<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n

             <\/p>\n

              \n
            1. Based on your ratio analysis and<\/strong> the updated financial statements, do you think that BNB should approve DSO\u2019s loan application? Defend your answer.<\/li>\n
            2. Sam wants to approve DSO\u2019s application, while Judy feels that the risk is too great based on the updated numbers. Using your knowledge of GAAP, BNB\u2019s business goals, the principles of business ethics, and your answers to questions 1-4, do the following:<\/li>\n<\/ol>\n

               <\/p>\n

                \n
              1. Assume you are Sam, what would be the reasons and rationalizations for approving the loan?<\/li>\n
              2. Assume you are Judy, what would be the reasons and rationalizations for rejecting the loan?<\/li>\n
              3. What arguments do you think Judy should use to convince Sam to agree with her position?<\/li>\n
              4. Based on the scenario and your responses to a through c, do you think the loan will be approved?<\/li>\n<\/ol>\n

                 <\/p>\n

                 <\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
                DSO Inc.<\/strong><\/td>\n<\/tr>\n
                Adjusted Trial Balance<\/strong><\/td>\n<\/tr>\n
                As of 12\/31\/Year 2<\/strong><\/td>\n<\/tr>\n
                <\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                <\/td>\nDR<\/td>\nCR<\/td>\n<\/tr>\n
                \u00a0Cash<\/td>\n$60,000<\/td>\n<\/td>\n<\/tr>\n
                \u00a0A\/R<\/td>\n$160,000<\/td>\n<\/td>\n<\/tr>\n
                \u00a0Allowance for Bad Debts<\/td>\n<\/td>\n$20,000<\/td>\n<\/tr>\n
                \u00a0Inventory<\/td>\n$520,000<\/td>\n<\/td>\n<\/tr>\n
                \u00a0Land<\/td>\n$440,000<\/td>\n<\/td>\n<\/tr>\n
                \u00a0Building<\/td>\n$320,000<\/td>\n<\/td>\n<\/tr>\n
                \u00a0Equipment<\/td>\n$1,120,000<\/td>\n<\/td>\n<\/tr>\n
                \u00a0Accumulated Depreciation<\/td>\n<\/td>\n$480,000<\/td>\n<\/tr>\n
                \u00a0Accounts Payable<\/td>\n<\/td>\n$459,375<\/td>\n<\/tr>\n
                \u00a0Salaries Payable<\/td>\n<\/td>\n$70,000<\/td>\n<\/tr>\n
                \u00a0Unearned Revenue<\/td>\n<\/td>\n$100,000<\/td>\n<\/tr>\n
                \u00a0Loan Payable<\/td>\n<\/td>\n$100,000<\/td>\n<\/tr>\n
                \u00a0Notes Payable<\/td>\n<\/td>\n$560,000<\/td>\n<\/tr>\n
                \u00a0Common stock<\/td>\n<\/td>\n$400,000<\/td>\n<\/tr>\n
                \u00a0\u00a0 ($1 par, 1,000,000 authorized, 400,000 outstanding)<\/td>\n<\/tr>\n
                \u00a0Additional Paid-In capital<\/td>\n<\/td>\n$120,000<\/td>\n<\/tr>\n
                \u00a0Retained Earnings<\/td>\n<\/td>\n$116,000<\/td>\n<\/tr>\n
                \u00a0Dividends<\/td>\n$46,000<\/td>\n<\/td>\n<\/tr>\n
                \u00a0Sales Revenue<\/td>\n<\/td>\n$4,000,000<\/td>\n<\/tr>\n
                \u00a0Cost of Goods Sold<\/td>\n$2,776,000<\/td>\n<\/td>\n<\/tr>\n
                \u00a0Advertising Expense<\/td>\n$75,000<\/td>\n<\/td>\n<\/tr>\n
                \u00a0Bad Debt Expense<\/td>\n$154,000<\/td>\n<\/td>\n<\/tr>\n
                \u00a0Depreciation Expense<\/td>\n$80,000<\/td>\n<\/td>\n<\/tr>\n
                \u00a0Sales Force Salaries Expense<\/td>\n$215,000<\/td>\n<\/td>\n<\/tr>\n
                \u00a0Shipping Expense<\/td>\n$32,750<\/td>\n<\/td>\n<\/tr>\n
                \u00a0Executive Salaries Expense<\/td>\n$256,000<\/td>\n<\/td>\n<\/tr>\n
                \u00a0Insurance Expense<\/td>\n$6,000<\/td>\n<\/td>\n<\/tr>\n
                \u00a0Miscellaneous Admin. Expenses<\/td>\n$4,000<\/td>\n<\/td>\n<\/tr>\n
                \u00a0Rent Expense<\/td>\n$14,500<\/td>\n<\/td>\n<\/tr>\n
                \u00a0Utilities Expense<\/td>\n$30,000<\/td>\n<\/td>\n<\/tr>\n
                \u00a0Rent Revenue<\/td>\n<\/td>\n$12,500<\/td>\n<\/tr>\n
                \u00a0Interest Expense<\/td>\n$25,500<\/td>\n<\/td>\n<\/tr>\n
                \u00a0Income Tax Expense<\/td>\n$103,125<\/td>\n <\/td>\n<\/tr>\n
                <\/td>\n$6,437,875<\/td>\n$6,437,875<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                 <\/p>\n

                 <\/p>\n

                \u00a0<\/strong><\/p>\n

                 <\/p>\n

                 <\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
                DSO Inc. <\/strong><\/td>\n<\/tr>\n
                Multi-Step Income Statement<\/strong><\/td>\n<\/tr>\n
                For the Year Ended December 31, Year 2<\/strong><\/td>\n<\/tr>\n
                <\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Sales Revenue<\/td>\n<\/td>\n$4,000,000<\/td>\n<\/td>\n<\/tr>\n
                Cost of Goods Sold<\/td>\n<\/td>\n$2,776,000<\/td>\n<\/td>\n<\/tr>\n
                Gross Profit<\/td>\n<\/td>\n<\/td>\n$1,224,000<\/td>\n<\/tr>\n
                <\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Operating Activities<\/u><\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Selling Expenses<\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Advertising Expense<\/td>\n$75,000<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Bad Debt Expense<\/td>\n$154,000<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Depreciation Expense<\/td>\n$80,000<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Sales Force Salaries Expense<\/td>\n$215,000<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Shipping Expense<\/td>\n$32,750<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Total Selling Expenses<\/td>\n <\/td>\n$556,750<\/td>\n<\/td>\n<\/tr>\n
                Administrative Expenses<\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Executive Salaries Expense<\/td>\n$256,000<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Insurance Expense<\/td>\n$6,000<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Miscellaneous Admin. Expenses<\/td>\n$4,000<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Rent Expense<\/td>\n$14,500<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Utilities Expense<\/td>\n$30,000<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Total Administrative Expenses<\/td>\n <\/td>\n$310,500<\/td>\n$867,250<\/td>\n<\/tr>\n
                Income from Operations<\/td>\n<\/td>\n<\/td>\n$356,750<\/td>\n<\/tr>\n
                <\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Other Gains and Losses<\/u><\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Rent Revenue<\/td>\n<\/td>\n$12,500<\/td>\n<\/td>\n<\/tr>\n
                Interest Expense<\/td>\n<\/td>\n($25,500)<\/td>\n($13,000)<\/td>\n<\/tr>\n
                Income from Continuing Operations before Taxes<\/td>\n <\/td>\n$343,750<\/td>\n<\/tr>\n
                Income Tax Expense<\/td>\n<\/td>\n<\/td>\n$103,125<\/td>\n<\/tr>\n
                Net Income<\/td>\n<\/td>\n<\/td>\n$240,625<\/td>\n<\/tr>\n
                <\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                EPS<\/td>\n<\/td>\n<\/td>\n$0.60<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                 <\/p>\n

                 <\/p>\n

                 <\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
                DSO Inc.<\/strong><\/td>\n<\/tr>\n
                Balance Sheet<\/strong><\/td>\n<\/tr>\n
                As of 12\/31\/Year 2<\/strong><\/td>\n<\/tr>\n
                <\/td>\nYear 2<\/td>\nYear 1<\/td>\n<\/tr>\n
                Assets<\/strong><\/td>\n<\/tr>\n
                Current Assets<\/u><\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Cash<\/td>\n$60,000<\/td>\n$76,000<\/td>\n<\/tr>\n
                A\/R<\/td>\n$160,000<\/td>\n$120,000<\/td>\n<\/tr>\n
                Allowance for Bad Debts<\/td>\n($20,000)<\/td>\n($60,000)<\/td>\n<\/tr>\n
                Inventory<\/td>\n$520,000<\/td>\n$560,000<\/td>\n<\/tr>\n
                Total Current Assets<\/td>\n$720,000<\/td>\n$696,000<\/td>\n<\/tr>\n
                PPE<\/u><\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Land<\/td>\n$440,000<\/td>\n$280,000<\/td>\n<\/tr>\n
                Building<\/td>\n$320,000<\/td>\n$320,000<\/td>\n<\/tr>\n
                Equipment<\/td>\n$1,120,000<\/td>\n$520,000<\/td>\n<\/tr>\n
                Accumulated Depreciation<\/td>\n($480,000)<\/td>\n($400,000)<\/td>\n<\/tr>\n
                Total PPE<\/td>\n$1,400,000<\/td>\n$720,000<\/td>\n<\/tr>\n
                Total Assets<\/td>\n$2,120,000<\/td>\n$1,416,000<\/td>\n<\/tr>\n
                <\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                \u00a0Liabilities and Stockholders’ Equity<\/td>\n<\/tr>\n
                Current Liabilities<\/u><\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Accounts Payable<\/td>\n$459,375<\/td>\n$240,000<\/td>\n<\/tr>\n
                Salaries Payable<\/td>\n$70,000<\/td>\n$40,000<\/td>\n<\/tr>\n
                Unearned Revenue<\/td>\n$100,000<\/td>\n$60,000<\/td>\n<\/tr>\n
                Total Current Liabilities<\/td>\n$629,375<\/td>\n$340,000<\/td>\n<\/tr>\n
                Long-term Debt<\/u><\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Loan Payable<\/td>\n$100,000<\/td>\n$120,000<\/td>\n<\/tr>\n
                Notes Payable<\/td>\n$560,000<\/td>\n$320,000<\/td>\n<\/tr>\n
                Total Long-term Debt<\/td>\n$660,000<\/td>\n$440,000<\/td>\n<\/tr>\n
                Total Liabilities<\/td>\n$1,289,375<\/td>\n$780,000<\/td>\n<\/tr>\n
                <\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Stockholders’ Equity<\/u><\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Common stock<\/td>\n$400,000<\/td>\n$400,000<\/td>\n<\/tr>\n
                \u00a0 ($1 par, 1,000,000 authorized, 400,000 outstanding)<\/td>\n<\/td>\n<\/tr>\n
                Additional Paid-In capital<\/td>\n$120,000<\/td>\n$120,000<\/td>\n<\/tr>\n
                Retained Earnings<\/td>\n$310,625<\/td>\n$116,000<\/td>\n<\/tr>\n
                Total Stockholders’ Equity<\/td>\n$830,625<\/td>\n$636,000<\/td>\n<\/tr>\n
                Total Liabilities and Stockholder’s Equity<\/td>\n$2,120,000<\/td>\n$1,416,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                 <\/p>\n

                 <\/p>\n

                 <\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
                DSO Inc.<\/strong><\/td>\n<\/tr>\n
                Statement of Cash Flows<\/strong><\/td>\n<\/tr>\n
                For Year Ended 12\/31\/Year 2<\/strong><\/td>\n<\/tr>\n
                Cash Flow from Operations<\/u><\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Net Income<\/td>\n<\/td>\n$240,625<\/td>\n<\/tr>\n
                Adjustments:<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Change in A\/R<\/td>\n($80,000)<\/td>\n<\/td>\n<\/tr>\n
                Change in Inventory<\/td>\n$40,000<\/td>\n<\/td>\n<\/tr>\n
                Depreciation<\/td>\n$80,000<\/td>\n<\/td>\n<\/tr>\n
                Change in A\/P<\/td>\n$219,375<\/td>\n<\/td>\n<\/tr>\n
                Change in Salaries Payable<\/td>\n$30,000<\/td>\n<\/td>\n<\/tr>\n
                Change in Unearned Revenue<\/td>\n$40,000<\/td>\n$329,375<\/td>\n<\/tr>\n
                Net Cash Flow from Operations<\/td>\n <\/td>\n$570,000<\/td>\n<\/tr>\n
                <\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Cash Flow from Investments<\/u><\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Purchase of Land<\/td>\n($160,000)<\/td>\n<\/td>\n<\/tr>\n
                Purchase of Equipment<\/td>\n($600,000)<\/td>\n <\/td>\n<\/tr>\n
                Net Cash Flow from Investments<\/td>\n<\/td>\n($760,000)<\/td>\n<\/tr>\n
                <\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Cash Flow from Financing<\/u><\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Repayment of Loans<\/td>\n($20,000)<\/td>\n<\/td>\n<\/tr>\n
                Issuance of Notes Payable<\/td>\n$240,000<\/td>\n<\/td>\n<\/tr>\n
                Payments of Dividends<\/td>\n($46,000)<\/td>\n <\/td>\n<\/tr>\n
                Net Cash Flow from Financing<\/td>\n<\/td>\n$174,000<\/td>\n<\/tr>\n
                <\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Net Increase (Decrease) in Cash<\/td>\n<\/td>\n($16,000)<\/td>\n<\/tr>\n
                Cash, January 1, Year 2<\/td>\n<\/td>\n$76,000<\/td>\n<\/tr>\n
                Cash, December 31, Year 2<\/td>\n<\/td>\n$60,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                 <\/p>\n

                 <\/p>\n

                 <\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
                BNB Credit Union <\/strong><\/td>\n<\/td>\n<\/tr>\n
                Ratio Threshold Table*<\/strong><\/td>\n<\/td>\n<\/tr>\n
                Small Manufacturing Firms<\/strong><\/td>\n<\/td>\n<\/tr>\n
                <\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Ratio Amounts<\/strong><\/td>\n<\/td>\n<\/tr>\n
                <\/td>\nThresholds<\/td>\n<\/td>\n<\/tr>\n
                Ratio<\/td>\nExcellent<\/td>\nGood<\/td>\nAcceptable<\/td>\nPoor<\/td>\n<\/td>\n<\/tr>\n
                Current Ratio<\/td>\n2.2 – 2.8<\/td>\n1.7 – 2.2<\/td>\n1.1 – 1.7<\/td>\n< 1.7 or > 2.8<\/td>\n<\/td>\n<\/tr>\n
                Quick Ratio<\/td>\n> 0.5<\/td>\n0.3 – 0.5<\/td>\n0.1 – 0.3<\/td>\n< 0.1<\/td>\n<\/td>\n<\/tr>\n
                ROA<\/td>\n> 0.25<\/td>\n0.15 – 0.25<\/td>\n0.05 – 0.15<\/td>\n< 0.05<\/td>\n<\/td>\n<\/tr>\n
                ROE<\/td>\n> 0.34<\/td>\n0.22 – 0.34<\/td>\n0.10 – 0.22<\/td>\n\u00a0< 0.1<\/td>\n<\/td>\n<\/tr>\n
                Debt-to-Equity<\/td>\n< 1.0<\/td>\n1.0 – 1.6<\/td>\n1.6 – 2.2<\/td>\n> 2.2<\/td>\n<\/td>\n<\/tr>\n
                Profit Margin<\/td>\n> 0.11<\/td>\n0.07 – 0.11<\/td>\n.03 – 0.07<\/td>\n< 0.03<\/td>\n<\/td>\n<\/tr>\n
                <\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
                Decision Guidelines<\/strong><\/td>\n<\/td>\n<\/tr>\n
                <\/td>\nMinimum # of Ratio Values in Each Category<\/td>\n<\/td>\n<\/tr>\n
                Loan Balances<\/td>\nExcellent<\/td>\nGood<\/td>\nAcceptable<\/td>\nPoor<\/td>\n<\/td>\n<\/tr>\n
                Greater than $5M<\/td>\n3<\/td>\n3<\/td>\n0<\/td>\n0<\/td>\n<\/td>\n<\/tr>\n
                $2M – $4M<\/td>\n1<\/td>\n3<\/td>\n1<\/td>\n0<\/td>\n<\/td>\n<\/tr>\n
                $1M – $2M<\/td>\n1<\/td>\n3<\/td>\n2<\/td>\n0<\/td>\n<\/td>\n<\/tr>\n
                $0.5M – $1M<\/td>\n0<\/td>\n3<\/td>\n3<\/td>\n0<\/td>\n<\/td>\n<\/tr>\n
                Less than $0.5M<\/td>\n0<\/td>\n0<\/td>\n4<\/td>\n2<\/td>\n<\/td>\n<\/tr>\n
                Loan applications that do not meeting these guidelines must include a letter of support from the local branch manager.<\/em><\/td>\n<\/td>\n<\/tr>\n
                <\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                 <\/p>\n","protected":false},"excerpt":{"rendered":"

                Accounting Case Case 2: Review of Introductory Accounting Introduction As we move into Intermediate Accounting, it can be very helpful to take time to review some of the basic principles from our introductory financial accounting class. This case is designed Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[],"class_list":["post-432338","post","type-post","status-publish","format-standard","hentry","category-essay-paper-writing"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/432338","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=432338"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/432338\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=432338"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=432338"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=432338"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}