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Linda Ellis, division manager, is evaluated and rewarded on the basis of budgetary performance. Linda, her assistants, and the plant managers are all eligible to receive a bonus if actual divisional profits are between budgeted profits and 120 percent of budgeted profits. The bonuses are based on a fixed percentage of actual profits. Profits above 120 percent of budgeted profits earn a bonus at the 120 percent level (in other words, there is an upper limit on possible bonus payments). If the actual profits are less than budgeted profits, no bonuses are awarded. Consider the following actions taken by Linda: a. Linda tends to overestimate expenses and underestimate revenues. This approach facilitates the ability of the division to attain budgeted profits. Linda believes that the action is justified because it increases the likelihood of receiving bonuses and helps to keep the morale of the managers high. b. Suppose that toward the end of the fiscal year, Linda saw that the division would not achieve budgeted profits. Accordingly, she instructed the sales department to defer the closing of a number of sales agreements to the following fiscal year. She also decided to write off some inventory that was nearly worthless. Deferring revenues to next year and writing off the inventory in a no-bonus year increased the chances of a bonus for next year. c. Assume that toward the end of the year, Linda saw that actual profits would likely exceed the 120 percent limit and that she took actions similar to those described in item b. Required: 1. Comment on the ethics of Linda’s behavior. Are her actions right or wrong? What role does the company play in encouraging her actions? 2. Suppose that you are the marketing manager for the division, and you receive instructions to defer the closing of sales until the next fiscal year. What would you do? 3. Suppose that you are a plant manager, and you know that your budget has been padded by the division manager. Further, suppose that the padding is common knowledge among the plant managers, who support it because it increases the ability to achieve the budget and receive a bonus. What would you do? 4. Suppose that you are the division controller, and you receive instructions from the division manager to accelerate the recognition of some expenses that legitimately belong to a future period. What would you do?
Carter's preferred stock pays a dividend of $1.00 per quarter. If the price of the stock is $45.00, Illustrate what is its nominal (not effective) annual rate of return?
Describe the concepts in detail and explain relevance to accounting. Include the theoretical and practical applications in your discussion.
Prepare closing entries as appropriate. What would have been the difference in the year-end financial statements, if any, had the county not made the budgetary entries?
Assume Ken’s modified adjusted gross income for purposes of the bond interest exclusion and for determining the taxability of his Social Security benefits is $70,000 and that Ken files as a single taxpayer. Find out Ken’s 2009 gross income
multiple choice questions on construction costing and accounting1. indiana co. began a construction project in 2008
What is the expected price of Stock C four years from now if growth (g) is 6%, and the investors are requiring 11%, (the required rate of return - Calculate the dividend for each year from D1 through D5 assuming Do is $4 and growth.
Dillons Corporation made credit sales of $30,000 which are subject to 6% sales tax. The corporation also made cash sales which totaled $20,670 including the 6% sales tax.
Discuss the differences between accrual-basis financial statements and cash-basis financial statements. Determine which provides more useful information and the reasons it is more useful.
What is the annual retirement benefit for each plan participant and what is the required annual beginning of the year contributions
your ceo read a recent report on the importance of the sox act but he acknowledged that he does not know much about it.
show the impact of these transactions on a set of t-accounts and you must create a trial balance and adjusted trial balance. You will then close out the income statement accounts as you would at year end.
A process began the month with 3,000 units in the beginning work in process inventory and ended the month with 2,000 units in the ending work in process. If 12,000 units were completed and transferred out of the process during the month, how many ..
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