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ACCT 607 Assignment Help
| Case Study 1
ACCT
607 Applied Case Assignment #1 (Chapters 1 and 5)
McCormick & Company, Incorporated (NYSE: MKC; Sparks, MD;
hereafter, “McCormick” or “the Company”) was formed in 1915 under Maryland law
as the successor to a business established in 1889. Answer the following
questions based on McCormick’s 2014 Annual Report, which also contains the
Company’s 10-K. This document is available online at:
http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjY4MzE3fENoaWxkSUQ9LTF8VHlwZT0z&t=1
Part I: The Basic Financial
Statements
1. (a) On what day of the year does the
Company’s fiscal year end? (b) What units are reported on these financial
statements?
2. For how many years does the Company present: (a)
Balance Sheets?
(b) Income Statements?
(c) Cash Flow Statements?
(d) Statements of Changes in Stockholders’ Equity?
3. Write out the fundamental accounting equation, and
identify the values for the fundamental accounting equation for the Company’s
2014 year end.
4. What is the account name and value of the Company’s
largest expense for 2014?
5. What amount of net cash did the Company use in
financing activities for 2014?
6. What items affected the Company’s Retained Earnings
during 2014?
ACCT 607 Applied Case Assignment #1
(Chapters 1 and 5) - Continued Part II:
Beyond the Basic Financial Statements—Additional Information in the 10-K
7. Are the Company’s annual financial statements audited
by independent CPAs? How do you know?
8. Are the Company’s annual financial statements audited
by independent CPAs? How do you know?
9. What risk has the Company identified with respect to
potential climate change? In what section did you find that discussion?
10. What risk has the Company identified with respect to
potential climate change? In what section did you find that discussion?
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ACCT
607 Assignment Help | Case Study 2
1. (a) Did the Company’s “Inventories”
increase or decrease over the last year?
(b) Were there more
debits or credits to the Company’s inventory accounts during 2014?
2. (a) Did the Company’s “Prepaid expenses
and other current assets” increase or decrease over the last year?
(b)
Were there more debits or credits to the Company’s prepaid expense and other
current asset accounts during 2014?
3. (a) Did the Company’s “Trade accounts
payable” increase or decrease over the last year?
(b)
Were there more debits or credits to the Company’s trade accounts payable
during 2014?
4. (a) Did the Company’s “Net sales”
increase or decrease over the last year?
(b) Were there more debits or credits to the Company’s net sales
accounts during 2014?
5. (a) Did the Company’s “Interest Expense”
increase or decrease over the last year?
(b) Were there more debits or
credits to the Company’s interest expense accounts during 2014?
ACCT 607 Applied Case Assignment #2
(Chapters 2 and 3) - Continued
6. Assume that, during 2014, the
Company purchased an additional $38.3 million in raw materials inventory for
cash. Write the journal entry necessary to record this transaction.
7. Assume that interest of $49.7
million was due and paid for by the Company during 2014. Write the journal
entry necessary to record these transactions.
8. Assume that all of the Company’s net
sales are “on account.” Write the journal entry necessary to record total net
sales for 2014.
9. Write the journal entry necessary to
record the Company’s “Selling, general, and administrative expenses” for 2014,
assuming that 90 percent of the expense was paid for with cash while 10 percent
was paid for on credit to regular suppliers. (2 pts).
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ACCT
607 Assignment Help 3 | Case Study 3
ACCT 607 Applied Case Assignment #3 (Chapters 5 and 13)
Answer the following questions based on McCormick &
Company, Incorporated’s (NYSE: MKC; Sparks, MD; hereafter, “McCormick” or “the
Company”) 2014 Annual Report (containing the Company’s 10-K) and the press
release and related 10-Q filing for the second quarter ended May 31, 2015.
These documents are available online at: Annual report:
http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjY4MzE3fENoaWxkSUQ9LTF8VHlwZT0z&t=1
Press release:
http://phx.corporate-ir.net/phoenix.zhtml?c=65454&p=irol-newsArticle&ID=2063942,
10-Q filing: http://services.corporateir.net/SEC/Document.Service?id=P3VybD1hSFIwY0RvdkwyRndhUzUwWlc1cmQybDZZWEprTG1OdmJTOWtiM2R1Ykc5aFpDN
XdhSEEvWVdOMGFXOXVQVkJFUmlacGNHRm5aVDB4TURNMk5EQXhOaVp6ZFdKemFXUTlOVGM9JnR5cGU9MiZmbj1N
Y0Nvcm1pY2tDb21wYW55SW5jLnBkZg==
Part I:
Strategic Ratio Analysis
1. (a) Compute ROE
and a three-factor ROE decomposition for the Company for the years ended 2014
and 2013. For simplicity, use year-end balances in your ratio computations. (4
pts)
(b) Has the Company’s ROE increased or decreased in 2014? Which
component(s) of the ROE decomposition support or contribute to that directional
change in the Company’s ROE?
(c) Select ONE of the three components of the ROE decomposition
and explain what most likely lead to the observed change in that component.
(HINT: Explanations for two of the three components are more readily
identifiable from the financial statements. You only need to identify ONE of
those.)
2. Are the Company’s quarterly financial statements audited by
independent CPAs? How do you know?
3. What periods are being reported on the Company’s interim
income statements? Refer to specific months and years.
4. (a) What level of
growth does the Company expect for its Net Sales for the fiscal year 2015?
(HINT: Refer to the details of press release, and think carefully about how the
Company is describing its sales!)
(b) Would the management guidance for fiscal year 2015’s net
sales be likely interpreted by investors as an improvement or a deterioration
in the Company’s performance, relative to 2014?
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ACCT
607 Assignment Help 4 | Case Study 4
ACCT 607 Applied Case Assignment #4
(Chapters 6 and 7)
Incorporated in Virginia in 1924,
Hooker Furniture Corporation’s (NASDAQ: HOFT; Martinsville, VA; hereafter,
“Hooker” or “the Company”) is ranked among the nation’s top 10 largest publicly
traded furniture sources, based on 2013 shipments to U.S. retailers, according
to a 2014 survey published by Furniture Today. Answer the following questions
based on Hooker’s 10-K for the year ended February 1, 2015 (hereafter, “fiscal
2015” or “2015”). Show computations for your responses to quantitative
questions.
The 10-K is available online at:
http://investors.hookerfurniture.com/sec-filings/sec-filing/10-
k/0001185185-15-000947
1. What are the Company’s operating segments? In what section
did you find that information?
2. At what point in the Company’s operating cycle does it
recognize revenue?
3. What was the journal entry that the Company recorded during
2015 to (a) accrue bad debt expense, and (b) write-off uncollectible accounts?
(HINT: Refer to related footnotes!)
4. What was the amount of cash collected from customers during
2015? Assume that related to the "Receivable from factor" account is
also "cash collected from customers" for purposes any cash received
of this question. (HINT: Review the similar calculation that we completed
during our live session!)
ACCT 607
Applied Case Assignment #4 (Chapters 6 and 7) -Continued
5. What is the Company’s Inventory Turnover ratio for 2015?
6. What inventory cost flow assumption does the Company apply
for 2015?
7. What would each of the following items have been if all
inventories had been recorded using the FIFO cost flow assumption?
(a) Ending inventory for 2015 and for 2014?
(b) Cost of
Goods Sold for 2015?
(c) Inventory
Turnover Ratio for 2015?
ACCT
607 Assignment Help 5 | Case Study 5
ACCT 607 Applied Case Assignment #5 (Chapter 8)
Neuralstem, Inc. (NYSE: CUR;
Germantown, MD; hereafter, “Neuralstem” or “the Company”) is a
biopharmaceutical company that is utilizing its proprietary human neural stem
cell technology to create a comprehensive platform for the treatment of central
nervous system diseases. The Company was founded in 1997 and currently has
laboratory and office space in Germantown, Maryland and laboratory facilities
in San Diego, California and in the People’s Republic of China.
Use the attached financial
statements, selected notes to the financial statements, and excerpts from the
Management Discussion & Analysis section from Neuralstem’s 10-K for the
year ended December 31, 2014 to answer the following questions. (You will not
need to supplement with outside sources of company data in order to answer the
questions.)
Part I: Background
1. (a) Have the Company’s
revenues increased or decreased over the period 2012-2014?
(b) What was the primary source of the
Company’s revenues for 2014?
(c) What dollar value of revenue did
the company record from the sale or commercialization of its products in
2014?
2. (a) What was the primary source of cash
during 2014?
(b) Explain why the Company might need
a high level of cash and short-term investments leading into the next fiscal
year (and potentially into the foreseeable future)?
ACCT 607
Applied Case Assignment #5 (Chapter 8) - Continued
Part II:
Spotlight on Long-term Operational Assets:
3. (a) What is the approximate age (on
average) of the Company’s “property and equipment?”
(b) Is that relatively new or
relatively old compared to the expected life of the property and equipment?
Explain.
4. Assume that the Company purchased its additional Property
and Equipment with cash. Write the journal entry that the Company would have
used to record the purchase of Property and Equipment in 2014.
5. (a) The Company
engages in significant research and development activities. What account on its
Balance Sheet is currently affected the most by those research and development
activities? Explain.
(b) The
Company follows U.S. GAAP. If the Company instead followed IFRS, would its
long-term assets likely be higher, lower, or the same as currently reported?
Explain.
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ACCT
607 Assignment Help 6 | Case Study 6
ACCT 607 Applied Case Assignment #6 (Chapters 9 and
10)
Marriott International Inc.
(NASDAQ: MAR; Bethesda, MD; hereafter, “Marriott” or “the Company”) is a
worldwide operator, franchisor, and licensor of hotels and timeshare properties
under numerous brand names at different price and service points, including the
Ritz-Carlton, BVLGARI, and Courtyard by Marriott. The Company became a public
company in 1998 when it was “spun off” as a separate entity by the company
formerly named “Marriott International, Inc.” Use the attached financial
statements and selected notes to the financial statements from Marriott’s 10-K
for the year ended December 31, 2014 to answer the following questions. (You
will not need to supplement with outside sources of company data in order to
answer the questions.)
1. Write out the fundamental accounting equation, and identify the
values for the fundamental accounting equation for the Company’s 2014 year end.
(You’ll notice something unusual about how this equation has balanced. This
question previews one of our topics for next week! For the rest of this
assignment, we’ll focus on liabilities…)
2. Compute and evaluate the Company’s current ratio as at
December 31, 2014 and 2013. Based on these computations, has liquidity
increased or decreased during the current year?
3. (a) Is the
Company’s “Liability for guest loyalty programs” a deferred revenue or an
accrued liability? Explain.
(b) What
percentage of the Company’s total liability for guest loyalty programs is
expected to be resolved in the coming fiscal year (that is, in 2015)?
4. (a) The attached
“Commitments and Contingencies” footnote indicates that the Company has a
“commitment, with no expiration date, to invest up to $11 million in a joint
venture for development of a new property” and that it expects “to fund this
commitment in 2015.” Yet, the footnote also indicates that no liability has yet
been recorded on the Balance Sheet. Why not?
(b) The
attached “Commitments and Contingencies” footnote also indicates that the
Company has been named as a defendant in a lawsuit filed by several former
Marriott employees. Yet, no liability has been recorded on the Balance Sheet.
Under what circumstances would this be inappropriate?
5. The
Company’s Long-Term Debt footnote (not attached) includes the following
information: In the 2013 third quarter, we issued $350 million aggregate
principal amount of 3.4 percent Series M Notes due 2020 (the “Series M Notes”).
We received net proceeds of approximately $345 million from the offering, after
deducting the underwriting discount and estimated expenses. We pay interest on
the Series M Notes on April 15 and October 15 of each year, commencing on April
15, 2014.
These Series M Notes are described as: Series M Notes,
interest rate of 3.4%, face amount of $350, maturing October 15, 2020
(effective interest rate of 3.6%)
(a) What
journal entry would have been recorded in the third quarter of 2013 to record
the issuance of the Series M Notes?
(b) What
journal entry would have been recorded in the third quarter of 2013 to record
the issuance of the Series M Notes?
(c) Assume
that, at the end of 2014, the prevailing market rate for interest obligations
similar to these notes was 4.0%. What would be the approximate net carrying or
book value of the notes at the year end? Explain.
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ACCT
607 Assignment Help 7 | Case Study 7
Applied Case Assignment 7
Bonus case score didn't replace any
prior case grades.
Bonus case - Each question is worth
2 points. Bonus case score = 5.
Bonus 1 (-2) Total principle or
face value of debt per Note 8 for 2014 is $7,041 million.
Bonus 2a. (-1) Yes, but what are
the terms? As per Note 8: The covenants are described as limitations on
the company’s ability to encumber assets and a maximum leverage ratio.
Bonus 2.b. (-1) Partial credit for
your logic. ROE decomposition leverage = Assets/Equity. In this case, the
covenant ratio per the agreement reverses prior adjustments to equity related
to post-retirement benefit plans.
Bonus 3 (-1) These notes were paid
at maturity so any premium or discount would have been fully amortized and
therefore would have been at par value.
Case 7: Questions 1 & 4 are worth 3 points each and questions 2 &
3 are worth 2 points each.
4a. (-1) No journal entry required
for a stock split.
4b. (-.5) (partial credit awarded,
amount incorrect) The journal entry for a large stock dividend is to Debit
Retained Earnings for the par value and Credit Common Stock for the par
value. Since it was a 100% dividend then the amounts in the common stock
accounts will double (a 100% increase in stock shares multiplied by the
existing par value of the stock) So looking at the balance sheet (59+12=$71)
Debit Retained Earnings for 71 and Credit Common Stock for 71.
4c (-.5). (Partial credit awarded)
A 100% stock dividend should have the same effect on stock price as a 2 for 1
stock split. The market should react and reduce the market price by half
in both of those situations. There is a difference in accounting for a
stock dividend and a stock split which you mentioned. There is also a
difference in terms of voting rights as this 100% stock dividend is non-voting
shares but the 2 for 1 split results in 2 voting shares for every 1 share held
before the split.
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