Master Budgeting with Supporting Schedule Essay Example for Free

Master Budgeting with Supporting Schedule Essay Cravat Sales Company, a nationwide distributor of a designer’s silk ties with an exclusive franchise on the distribution of the ties, and sales have grown rapidly over the last few years. Your have been given responsibility for all planning and budgeting. Your assignment is to prepare a master budget for the next 3 months, starting April 1st. You are anxious to make a favorable impression on the president and have assembled the information below. The company desires a minimum ending cash balance each month of ,000. The ties are sold to retailers for $8 each. Recent and forecasted sales in units are as follows: The large buildup in sales before and during June is due to Father’s Day. Ending inventories are supposed to equal 90% of the next month’s sales in units. The ties cost the company $5 each. Purchases are paid for as follows: 50% in the month of purchase, and the remaining 50% in the following month All sales are on credit, with no discount, and payable within 15 days, however, only 25% of a month’s sales are collected by month-end. An additional 50% is collected in the following month, and the remaining 25% is collected in the second month following sale. Bad debts have been negligible. The company’s monthly selling and administrative expenses are given below: Variable monthly expenses: Sales commissions (per unit)$1.00 Fixed monthly expenses: Wages and salaries$22,000.00 Utilities$14,000.00 Insurance$1,200.00 Depreciation$1,500.00 Miscellaneous$3,000.00 All selling and administrative expenses are paid during the month, in cash, with the exception of depreciation and insurance expired. Land will be purchased during May for $25,000 cash. The company declares dividends of $12,000 each quarter, payable in the first month of the following quarter. The company’s balance sheet at March 31 is given below: The company has an agreement with a bank that allows it to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $40,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $10,000 in cash. Assignments: Prepare a master budget for the three-month period ending June 30, including: * sales budget by month and in total * schedule of expected cash collections from sales, by month and in total * merchandise purchases budget in units and in dollars, by month and in total * schedule of expected cash disbursements for merchandise purchases, by month and in total * cash budget by month and in total * budgeted income statement for the three-month period ending June 30, with the contribution approach * budgeted balance sheet as of June 30 Solutions: Based on the sale forecast from April to July and the expected cash collection portions in each month (25% 50% 25%) , a sales budget ,a schedule of expected cash collections from sales, a merchandise purchases budget and schedule of expected cash disbursements were calculated and displayed in Table 1. Table 1 – Cravat Sales Company Expected sales, cash collections, and cash disbursements for merchandise purchases Unit: USD The Cravat Sales Company was expected to spend $195,750, $256,250, and $251,250 in cash for purchasing of merchandises in April, May, and June respectively. Totally, it would spend $703,250 within the 2nd quarter. In the first attempt to forecast the cash funding, we found that the company could not borrow less than $40,000 per month as agreed with the bank while maintaining the minimum ending cash balance of $10,000 at the same time. If comply only the borrowing limit, it would keep marginal cash of $2,250 in hands by end of April and suffer severe cash shortage of $37,000 by the end of May.

Financial History of the American Airlines

Financial History of the American Airlines American Airways was incorporated in 1930, becoming American Airlines in 1934. Operating as a passenger and cargo carrier, they also offer freight and mail services. With 9 hubs functioning throughout the country, they average around $522 million a month. In 1939, they began trading stock on the New York Stock Exchange (NYSE) under the symbol AAL. (Yahoo Finance, November 2013) American Airlines began trading stock publicly on December 9, 2013. In 1970, American Airlines gained its first Caribbean routes, merging with Trans Caribbean Airways. The agreements of the merger were that American Airlines would aid Trans Caribbean in obtaining a total of $10 million in financing. Also, for 100 shares of Trans Caribbean, American Airlines exchanged 17Â  shares. This merger would make for airlines first merger under its current name. (NY Times Archives, 1970.) January 10, 2001, it became public that American Airlines had acquired bankrupt Trans World Airlines (TWA) for $4.2 billion. This transaction made American Airlines the worlds largest airline carrier. American acquired all of TWAs assets, as well as saved the jobs of thousands of TWAs employees by integrating them into their family. (Biz Journals, 2001) In 2003, talks of possible bankruptcy arose for American. Labor unions eventually approved economizing contracts to avoid the bankruptcy, in which employees agreed to accept intense pay cuts in attempts to save the airline. Joy came in 2007, when American reported an annual profit of $231 million for fiscal 2006, its first reporting since around 2000. But, the glory didnt last long, as shareholders announced at their annual meeting that due to soaring jet fuel costs, they would have to lay off thousands of workers, park at least 85 aircraft, cut domestic capacity by 25%, and increase baggage fees and other service offered to customers. An official bankruptcy protection was filed November 29, 2011, after the airline reported a net loss of $471 billion, bringing their total losses to exceed $10 billion since 2001. American had acquired $29.6 billion in debt. Required to run all their future financial decisions across a judges desk, they were permitted to purchase fuel, pay for labor, and other expenditures, to maintain business. In July 2011, they received approval to place the largest plane order in history, buying 460 aircraft from Boeing and Airbus, replacing older planes. The newer models would cut down on fuel and maintenance costs. (Yahoo Finance, 2011) The year of 2012 introduced talks of a merger with US Airways. Agreements were made to exchange financial information so that the companies can research the potential merger. The merger eventually passed February 2013, officially announced on the 14th day of the month, thus the creation of the worlds biggest airline. (Yahoo Finance, 2013) As of December 31, 2015, American Airlines gross profit was approximately $29 billion, with a net operating income of $6.2 billion and a net income of $7.6 billion, all driven by lower fuel costs, American could benefit from the decline on fuel prices. (2015 Form 10-K, AA.com) References American Airlines Investor Information, 2015 Form 10-K. http://phx.corporate-ir.net/phoenix.zhtml?c=117098p=irol-reportsannual History of American Airlines. https://www.aa.com/i18n/customer-service/about-us/history-of-american-airlines.jsp A timeline of events in American Airlines history, November 12, 2013. The Associated Press. http://finance.yahoo.com/news/timeline-events-american-airlines-history-011902886.html American Airlines acquires TWA. December 23, 2001. Biz Journals. http://www.bizjournals.com/stlouis/stories/2001/12/24/focus3.html Koenig, David. November 29, 2011. American Airlines files for bankruptcy protection. https://www.yahoo.com/news/american-airlines-files-bankruptcy-protection-121438848.html

USSC Audit Income

USSC Audit Income Case 1.11 United States Surgical Corporation Q3. Prepare common-sized financial statements for USSC for the period 1979-1981. Also compute key liquidity, solvency, activity, and profitability ratios for 1980 and 1981. Given these data, identify what you believe were the high-risk financial statement items for the 1981 USSC audit. U.S. Surgical Corporation Common Size Income Statement 1979-1981 (000s omitted) 1981 % Sales 1980 %Sales 1979 %Sales Net Sales 111,800 100 86,214 100 60,876 100 Costs and Expenses COGS 47,983 43 32,300 37.5 25,659 42.1 Selling, General And Admin. 45,015 40.3 37,740 43.7 23,935 39.3 Interest 5,898 5.2 4,063 4.7 3,403 5.6 98,896 88.5 74,103 85.9 52,997 87.0 Income Before Taxes 12,904 11.5 12,111 14.0 7,879 12.9 Income Taxes 1,120 1.0 4,226 4.9 2,750 4.5 Net Income 11,784 10.5 7,885 9.1 5,129 8.4 U.S. Surgical Corporation Common Size Balance Sheet 1979-1981 (000s omitted) Current Assts 1981 %Assets 1980 %Assets 1979 %Assets Cash 426 .21 1,243 1.04 596 .85 Receivables (net) 36,670 17.7 30,475 25.6 22,557 31.9 Inventories Finished Goods 29,216 14.1 9,860 8.3 5,685 8.1 Work in Process 5,105 2.5 2,667 2.2 1,153 1.6 Raw Materials 20,948 10.1 18,806 15.8 7,365 10.4 55,269 26.7 31,333 26.3 14,203 20.1 Other Current Assets 7,914 3.8 1,567 2.4 1,820 2.6 Total Current Assets 100,279 48.4 64,618 54.3 39,176 55 Assets 1981 %Assets 1980 %Assets 1979 %Assets Property, Plant, Equip Land 2,502 1.2 2,371 2.0 1,027 1.5 Buildings 32,416 15.6 18,511 15.5 13,019 18.5 Molds and Dies 32,082 15.5 15,963 13.4 8,777 12.4 Mach. Equip. 40,227 19.4 23,762 20.0 12,362 17.5 Allowance for Depreciation (14,953) (9,964) (6,340) Other Assets 14,786 7.1 3,842 3.2 2,499 3.5 Total Assets 207,339 119,103 70,520 Liabilities 1981 %Liability/ 1980 %Liability 1979 %Liability Stock.Eq. Stock. Eq. Stock. Eq. Accounts Payable 12,278 5.9 6,951 5.8 6,271 8.9 Notes Payable 1,596 2.3 Income Taxes Payable 1,685 1.4 Current L-T Debt 724 .35 666 .56 401 .57 Accrued Expenses 5,673 2.7 5,130 4.3 5,145 7.3 Long-Term Debt 80,642 38.9 47,569 39.9 33,497 47.5 Deferred Income Tax 7,466 3.6 2,956 2.5 1,384 2.0 Liabilities 1981 %Liability/ 1980 %Liability 1979 %Liability Stock.Eq. Stock. Eq. Stock. Eq. Stockholders Equity Common Stock 1,081 .52 930 .78 379 .54 Add. Paid-in Capital 72,594 35.0 34,932 29.3 10,736 15.2 Retained Earnings 32,665 15.8 20,881 17.5 13,189 18.7 Translation Allowance (1,086) Deferred Compensation- Issue Restricted Stock (4,698) (2,597) (2,078) Total Stock. Equity 100,556 48.5 54,146 45.5 22,226 31.5 Total Liabilities/ Stockholders Equity 207,339 119,103 70,520 Financial Ratios for U.S. Surgical Corporation 1981 1980 Cash Ratio .0228 .0861 Current Ratio 5.37 4.48 Accounts Receivable Turnover 3.33 2.57 Inventory Turnover 1.11 .75 Gross Profit Percent 57% 62% Profit Margin 11.5 14.1 Return on Assets 7.9 7.4 The common sized income statement was prepared to display all items as a percentage of sales. On the income statement we can see that there was a decrease in cost of goods sold from 1979 to 1980. Cost of goods sold went from 42.1% of sales to 37.5% of sales even though net sales increased. This information along with the increase in the current asset inventory account on the balance sheet indicates a significant increase in inventory held by USSC. Another high risk income statement item was the selling, general and administrative expenses. Included in this category of expenses are research and development costs. The amounts of research and development costs reported dropped significantly. In 1980 they were reported at $3,020,000 and dropped to $1,337,000 in 1981. Also the entire category of selling, general and administrative expenses which included these RD costs decreased as a percent of sales from the previous year. The USSC openly admitted to undergoing a large research and devel opment program to create new products and technology in 1981. The major decrease in costs reported for research and development in 1981 should have caused further investigation by the auditing team. The common sized balance sheet was prepared to display each asset as a percentage of total assets. The percentages for the cash and accounts receivable accounts in 1981 decreased significantly from the previous years while the inventory account increased. This indicates a decrease in liquidity of assets which is also supported by the change in the cash ratio from 1980 to 1981. Another high-risk item would have been the other assets account. United States Surgical Corporation included their patents in this other assets account. They were capitalizing costs associated with the legal defense of a patent that should not have been capitalized. There was a significant increase in this account, $3,842,000 in 1980 to $14,786,000 in 1981. Another red flag would be the significant increase in total long term assets. In 1979 long term assets accounted for 45% of total assets, in 1980 it was 45.7% of total assets and in 1981 long term assets accounted for 51.6% of total assets. USSC was capitali zing costs associated with patents that should not have been capitalized, charging inventoriable production to a long-term assets account molds and dies, and extending the useful lives of some assets and therefore understating depreciation. All of these actions would have caused a significant increase in total long-term assets. A more specific high-risk item was the long-term asset molds and dies. This account doubled in 1981 from the previous year; from $15,963,000 to $32,082,000. The SEC investigation later revealed that USSC was in fact capitalizing production costs and charging them to the molds and dies asset account. Financial ratios were also calculated to determine high-risk items. The current ratio for USSC in 1981 is a little high and has increased from the previous year. In 1981 the current ratio indicated that USSC had $5.37 in current assets for every dollar of current liabilities. This high ratio may indicate that United States Surgical Corporation was overstating their assets. The inventory turnover is low at .75 in 1980 and 1.11 in 1981. The auditing team would have wanted to investigate to find out why inventory was accumulating and not turning over as these numbers indicated. By preparing the common size financial statements and ratios we can identify the high-risk items when performing an audit. The major items for United States Surgical Corporation were the reduced research and development costs recognized despite the increase in research for new products, the major increase in the long-term asset account molds and dies and the other assets account. Q5. Regarding the costs incurred for USSC by Barden, identify (a) the evidence Hope collected that supported USSCs claim that the costs involved tooling modifications and (b) the audit evidence that supported the position that the costs were generic production expenses. What do generally accepted auditing standards suggest are the key evaluative criteria that auditors should consider when assessing audit evidence? Given these criteria, do you believe Hope was justified in deciding that the costs in question were for tooling modifications? Why or why not? The evidence that hope collected that supports USSCs claim that the charges in question were in fact for tooling modifications was the General Manager of Lacey Corporation (A division of Barden Corporation) goes back on his previous statement and confirms that the purchase orders and invoices were in fact for tooling modifications. USSC explained their position and said that they had instructed Lacey to make certain tooling changes that would result in improved efficiency in production of USSC products. When the audit team asked to take a tour of the Lacey plant to examine the actual production process the Lacey General Manger informed the audit team that personnel often mistakenly charge tooling jobs to production. There was more evidence that supported the position that the costs in question were just generic production expenses. Initially the audit team did not notice that the assets were being overstated and there was an issue with the classification. It was the company who does work for USSC that admitted that there were issues with some of the purchase orders and invoices. The Lacey general manager informed the auditors that invoices and purchase orders were being reviewed and that they were for general production work and not tooling modifications as USSC had previously stated. The chairman of the board of directors for Barden Corp. reported that an independent investigation by an outside law firm has concluded that the purchase orders and invoices were in fact for general production work and not for tooling modifications. Finally the Senior Vice President and Treasurer for Barden Corporation refused to sign confirmation that $1 million in charges were for tooling modifications on two occ asions. The key criteria for evaluating audit evidence are relevance, reliability and sufficiency. The evidence must be relevant to audit objective. The auditors must use procedures and documents that are relative to the audit objective. The evidence must be reliable, or must be believable and trust worthy. The sufficiency of evidence has to deal with the quantity of evidence obtained. In my opinion Hope was not justified in deciding that the costs were for tooling modifications. There was not sufficient evidence to come to this conclusion, just some complicated explanations from USSC and inaccurate purchase orders and invoices. The evidence was not relevant to the audit objective. The specific products with modifications should have been traced back to their purchase orders. Instead the auditors just took the explanation of these orders from management. Finally the reliability of the evidence was not high, USSC had a lot to lose if it was concluded that they were indeed general production and the General Manger for Lacey had changed his position numerous times. The only reliable evidence was that of the independent law firm that concluded the purchase orders and invoices were not for tooling modifications. References Knapp, Michael C., United States Surgical Corporation Contemporary Auditing. Real Issues Cases. Sixth Edition (2006), 137-146. Arens, R. Randal, M. Beasley, Auditing and Assurance Services. An Integrated Approach. (2008) 175-176.

Combining Environmental Groups in Order to Preserve Wildlife :: Environment Environmental Pollution Preservation

Combining Environmental Groups in Order to Preserve Wildlife Environmental issues have been a problem all over the world.   Some species are constantly being declared endangered and on the verge of extinction.   A group of concerned people join together to raise funds in order to improve the habitat or produce more of   the endangered species.   These organizations have proved to be successful.   Many have even removed plants and animals from the long list of endangered species.   A problem that persists within the environment groups is the use of funding.   The organizations bring in a great deal of money from contributors, but all of the donations are not going toward the groups certain goal to save the endangered.   Some of the money is spent on paying employees, organization expenses, and most of all on advertising (Belt 2).   It is absolutely unnecessary for donated money to be spent just to get more contributors.   If that money went toward the use of scientific work or habitat repair, the environment groups would be and even greater success and so much more could be done to preserve the planets endangered.   I propose that we combine all environmental groups into one.   If they were to all join together, so much more could be done to save the plants and animals that are becoming extinct.   Environment groups have already done so much to help better the wildlife.   Many have raised enough money to improve the habitat of and endangered species or even encourage the reproduction of almost extinct animals.   This is what they should be doing with all of the money that is donated toward the certain organizations, but it is not (Short 1).   The groups have to spend a great deal of their money for a numerous amount of unnecessary reasons.   They have to pay for traveling, promotions, and advertising, which in no way benefits the endangered plants and animals.   One of the main reasons for combining all of the groups, is that it would be more beneficial for   the spending of funds.   The amount of money that environmental groups bring in is outrageous.   One of the larger groups has an annual budget of $64 million dollars.   They turn around and spend $54 million dollars of that for advertising in order to get more contributors (Belt 1).   So much of the money donated to environmental groups is spent on frivolous activities.   $12 million dollars is being spent to keep a killer wale happy.

My Most Embarassing Day Ever Essay examples -- essays research papers

Dear Diary, Today was the most embarrassing day of my life. I hope this will never happen to me again. Here’s how my day went. I woke up this morning around 7:30am. It was the Grand Final day for my Under 17’s football side. We were undefeated. I was the full forward and so far I have kicked ninety seven goals. I need at least three more goals this game to get my first one hundred goal season. I was going through my normal Sunday morning football routine. Get up, eat breakfast (nine wheat bix and two glasses of orange juice) and get changed for footy. One of my superstitions is to wear the same footy jocks I’ve worn all season. Every game I have worn them we have won but for some reason today I completely forgot about them. I got to the oval at around 10:30am and met my team so we coul...

Lagos, Nigeria :: essays research papers

Lagos is the largest city in Nigeria. In 1989 the population was 1,274,000. It is still growing immensely as we speak. It is the former capital of Nigeria. It is located on the Gulf of Guinea. It occupies four islands(Lagos, Ikoyi, Victoria, and Ido). Lagos is Nigeria's largest city. It is the administrative and economic center of Lagos and also its main port. Main Industries include railroad repair, motor vehicle assembly, food processing, and the manufacture of metal products, textiles, beverages, chemicals, pharmaceuticals, soap, and furniture. The city is a road and railroad center and has an international airport. In Lagos, education is usually private. There are both Boarding Schools and Home schooling and both cost a lot of money. Public Schools are not that common in Lagos like they are here. The main source of transportation in Lagos is Buses and â€Å"tracks." Tracks are a simple version of street cars. In Lagos, power failures, water-supply interruptions and traffic jams is very common due to the huge population. Pollution is a very serious problem because of the surrounding lagoons have been used as dumps for the past few years and the increase in factories and cars. There are many national institutions located in Lagos, among them are the National Museum, the National Library, the University of Nigeria, and the University of Lagos. Brief History The Portuguese, was the first to visit Lagos in 1472. It was later established as a slave-trading center. The area was under the rule of the Kingdom of Benin from the late-16th to the mid-19th century then in 1861. It was later taken over by the British.

Waste Disposal on Cat Ba Island

At present, the waste disposal issue on Cat Ba Island is still seriously concerned. Mr. Sang Bui Quang, Director of Department of Natural Resources and Environment, said on website www. monre. gov. vn that waste management has not met environment protection requirements, there has not been waste treatment firms, and commonly discharge waste directly from ships into the sea. Consequently, it seems to impact on the environment, the scenery and also Cat Ba People. Waste disposal includes treatment in the land and on the water. In the land, Cat Ba has only one landfill, Dong Trong. It is not far from Hung Son block( about 8km), the point of storing rubbish through all sites of Cat Ba and surrounding areas with the volume of 40m3/day. Each day, the rubbish is buried and prayed three times. However, the landfill has not met hygienic standards so that the pollution here is adversely affecting people's lives in this area. In reality, there are some campaigns to dispose the situation, but it is not effective. The landfill still has rising smoke and the unbearable stench so that flies and mosques are crowded there and surrounding areas. Assigned to Cat Hai public construction and urban service company to collect, transport and dispose rubbish in the area of Cat Ba, including handling baggage pollution of Dong Trong. Despite great efforts to minimize pollution affects people's lives, the district also can process according to the method of chemical spraying, burial. There is no way to remedy the situation thoroughly cell infection here. On the water, waste disposal has met more difficulty. In the bay, there are 123 cages, including 106 aquaculture cages and 17 cages with people living, which is the main reason for water pollution. Although each cage has its own trash, the big amount of rubbish into the water (i. e. waste water, fish, food†¦). Waste from the fishing vessel and the fish cages are at risk of causing environmental pollution at the alarming level. Fishing boats use big plastic bags to marinate fis, they scratch those and throw into the sea before moving up onto the shore. According to Mr. Bay Vu Tien, there is also a collecting ship to take rubbish from cages to the land. But it just counts for 30% of the waste. The baggage is floating on the water that makes a bad image about Cat Ba environment in tourists’ mind.