initial public offering (IPO)

Assume you are the partner in an accounting firm hired to perform the audit on a fortune 1000 company.  Assume also that the initial public offering (IPO) of the company was approximately five (5) years ago and the company is concerned that, in less than five (5) years after the IPO, a restatement may be necessary. During your initial evaluation of the client, you discover the following information:

  • The client is currently undergoing a three (3) year income tax examination by the Internal Revenue Service (IRS). A significant issue involved in the IRS audit encompasses inventory write-downs on the tax returns that are not included in the financial statements. Because of the concealment of the transaction, the IRS is labeling the treatment of the write-down as fraud.
  • The company has a share-based compensation plan for top-level executives consisting of stock options. The value of the options exercised during the year was not expensed or disclosed in the financial statements.
  • The company has several operating and capital leases in place, and the CFO is considering leasing a substantial portion of the assets for future use. The current leases in place are arranged using special purpose entities (SPEs) and operating leases.
  • The company seeks to acquire a global partner, which will require IFRS reporting.
  • The company received correspondence from the Securities and Exchange Commission (SEC) requesting additional supplemental information regarding the financial statements submitted with the IPO.
  • Write an eight to ten (8-10) page paper in which you:
  1. Evaluate any damaging financial and ethical repercussions of failure to include the inventory write-downs in the financial statements. Prepare a recommendation to the CFO, evaluating the negative impact of a civil fraud penalty on the corporation as a result of the IRS audit. In the recommendation, include essential internal control procedures to prevent fraudulent financial reporting from occurring, as well as the major obligation of the CEO and CFO to ensure compliance.
  2. Examine the negative results on stakeholders and the financial statements of an IRS audit which generates additional tax and penalties or subsequent audits. Assume that the subsequent audit and / or additional tax and penalties result from the taxpayer’s use of an inventory reserve account, applying a 10 percent reduction to inventory over three (3) years.
  3. Discuss the applicable federal tax laws, regulations, rulings, and court cases related to the inventory write-downs, and explain the specific relevance of each to the write-down.
  4. Research the current generally accepted accounting principles (GAAP) regarding stock option accounting. Evaluate the current treatment of the company’s share-based compensation plan based on GAAP reporting. Contrast the financial benefits and risks of the share-based compensation stock option plan with the financial benefits and risks of a share-based stock-appreciation rights plan (SARS). Recommend to the CFO which plan the company should use and provide the correct accounting treatment for each.
  5. Research the reporting requirements for lease reporting under GAAP and International Financial Reporting Standards (IFRS). Based on your research, create a proposal for future lease transactions to the CFO. Within the proposal, discuss the use of off-the-balance sheet financing arrangements, capital leases, and operating leases, and indicate the related business and financial risks of each.
  6. Create an argument for or against a single set of international accounting standards related to lease accounting based on the global market and cross border leases of assets. Examine the benefits and risks of your chosen position.
  7. Examine the major implications of SAS 99 based on the factors you discovered during the initial evaluation of the company. Provide support for your rationale.
  8. Analyze the potential for a material misstatement in the financial statements based on the issues identified in your initial evaluation. Make a recommendation to the CFO for the issuance of        restated financial statement restatement. Identify at least three (3) significant issues that can result from the failure to issue restated financial statements.
  9. Examine the economic effect of restatement of the financial statements on investors, employees, customers, and creditors.
  10. Use at least five (5) quality academic resources in this assignment. Note: Wikipedia and similar websites do not qualify as academic resources. You have access to Strayer University’s Online Library at https://research.strayer.edu or iCampus University Library Research page at https://icampus.strayer.edu/library/research.
  11. Your assignment must follow these formatting requirements:
  • This course requires use of new Strayer Writing Standards (SWS). The format is different than other Strayer University courses. Please take a moment to review the SWS documentation for details.
  • Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow SWS or school-specific format. Check with your professor for any additional instructions.
  • Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.
  • The specific course learning outcomes associated with this assignment are:
  • Apply the proper accounting rules and make recommendations to ensure compliance with generally accepted accounting principles.
  • Determine the appropriateness of decision making in terms of professional standards and ethics
  • Apply advanced federal taxation concepts to business situations.
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financial statements

  • Which of the required financial statements explain the difference between two balance sheet dates?
  • Describe how these financial statements explain the difference between two different balance sheets completed on different dates.
  • Do you agree or disagree with the statement: “Because many estimates are used in the preparation of financial statements, the statements are not a meaningful and accurate measurement of the financial position of a company.” Why/why not?
  • Is the use of estimates in accounting ethical? Why/why not?

financial statements

For this assignment, you will use the consolidated financial statements you chose in Week Four. As a team, analyze your chosen consolidated financial statements and make recommendations to leadership based on your findings.

Write a 750- to 1,050-word proposal, and include a link to your chosen financial statements.

Cite 3 peer-reviewed, scholarly, or similar references to support your paper.

Format your proposal according to APA guidelines.

About St. Jude Children’s Research Hospital.

This assignment has the team to assume the role of consultant or financial advisors. The team should develop a creative idea to pitch to the organization as a source of growth or opportunity. Use the two statements chosen by the team to evaluate and explain how the proposed change/addition (etc) would be beneficial to the organization. Also give detail as to what possible benefits the entity would see financially.

 

Your proposal is a written document (APA format, 750 -1050 words).

Make sure you have attached the financial statement that was used.

 

Make sure your proposal includes:

 

1. An Introduction that provides background on the proposed recommendation

2. The body should have major points supporting the proposal.

3. Also be sure to include graphs and/or tables (to help with delivery of your proposed item)

4. The Conclusion should wrap up/summarize your key points.

5. Be sure to also format your proposal in APA with a minimum of 3 peer reviewed/scholarly references.

 

Financial Statements

3 pages/ APA format/ NO PLAGARISM

The next part of your project will require you to navigate to the website of Johnson & Johnson and locate the most recent annual reports. You will use the annual reports to create financial statements. These statements will become the reference statements for your case. Annual reports for JNJ are usually located in a section titled Investor Relations, Investor Information, etc.

  • Use the annual report to find the total current assets and total current liabilities.
  • Compute the current ratio for JNJ for previous two fiscal years
  • Review reports on data for the last two years.
    • Net Cash Flows from Operating Activities
    • Net Cash used by Investing Activities
    • Net Cash used by Financing Activities
    • Cash and Cash Equivalents at the end of the Years
  • Create a Balance Sheet or Statement of Cash Flows for most recent two years
  • Identify trends with an indication of if the financial statements show a positive or negative for the organization and investors.
    • Use Microsoft Excel to create at least three (3) graphical displays to show the trends (i.e., bar graph, pivot table, histogram, etc). You should include a copy of your graphs in the body of your report.
  • Discusses which year Johnson & Johnson appear to be in a stronger financial position and big differences between the 2 years (Keep in mind that dollar amounts in ( ) are negative or cash outflows).
  • Imagine that this information represents information for your project case. Incorporate or reference financial information in your case to support the report.

Summarize your responses in a report using titles from the assignment requirements (i.e., assets and liabilities, cash flows/balance sheet, trends, financial position). This document will serve as your Financial Statements section of your project.

Accounting Project 1

Project Data:

Callie Jamison owns and operates a consulting firm called Jamison Consulting. The business began operating in October 2016. Transactions for October and November 2016 have been recorded and posted.

 

Jamison Consulting had the following transactions in December 2016.

Dec 2 Provided $3,950 consulting services to Gomez Company on account.
3 Paid $1,025 cash to Hillside Mall for Jamison Consulting’s share of mall advertising costs.
  4 Paid $400 cash for minor repairs to the company’s computer.
  10 Purchased $1,100 of computer supplies on credit from Harris Office Products.
  14 Paid cash to employee for six days of work at the rate of $125 per day.
  15 Notified by Alex’s Engineering Co. that Jamison Consulting’s’ bid of $7,000 on a proposed project has been accepted. Alex’s paid a $1,500 cash advance to Jamison Consulting.
  20 Completed a project for Lyn Corporation and received $5,625 cash.
  28 Received $3,000 cash from Gomez Co. on its receivable.
  29 Reimbursed C. Jamison $193 for business automobile mileage.
  31 C. Jamison withdrew $1,500 cash from the company for personal use.

 

 

The following additional facts are collected for use in making adjusting entries prior to preparing financial statements for the company’s first three months of operations:

 

  1. The December 31 inventory count of computer supplies shows $320 still available.
  2. Three of the four months’ prepaid rent has expired.
  3. Three months have expired since the 12-month insurance premium was paid in advance.
  4. As of December 31, the only employee of Jamison Consulting had not been paid for four days of work at $125 per day.
  5. The computer system, acquired for $8,000 on October 1, is expected to have a four-year life with no salvage value.
  6. The office equipment, acquired for $20,000 on October 1, is expected to have a five-year life with no salvage value.

 

Required:

  1. Journalize the December transactions for Jamison Consulting. You may omit explanations for the journal entries. Skip a line between each journal entry – see the journal entries for October – November as a formatting example.
  2. Post the December transactions to the appropriate accounts in the ledger.
  3. Prepare a trial balance to prove the equality of debits and credits prior to continuing with this project. Omit any accounts that have a zero balance. Check figure: $99,816. Consult your instructor if your trial balance does not balance before proceeding with the project.
  4. Journalize the adjusting entries to reflect items a through f above.
  5. Post the adjusting entries to the appropriate accounts in the ledger.
  6. Prepare an adjusted trial balance as of December 31, 2016. Check figure: $101,816. Consult your instructor if your adjusted trial balance does not balance before proceeding with the project.
  7. Prepare the three basic financial statements in good form.  See pages 120-121 of your accounting text for a good example of financial statement formatting.
    1. Prepare an income statement for the three months ended December 31, 2016.
    2. Prepare a statement of owner’s equity for the three months ended December 31, 2016.
    3. Prepare a balance sheet as of December 31, 2016.
  8. Journalize and post the necessary closing entries for Jamison Consulting.
  9. Prepare a post-closing trial balance as of December 31, 2016.

 

 

 

Below are the journal entries recorded by Jamison Consulting for October and November 2016.

NOTE:  These are for your information only; you do not need to do anything with these entries.

 

GENERAL JOURNAL PAGE 1
DATE ACCOUNT POST REF DEBIT CREDIT
 2016        

 

 

 

 Oct 1 Cash 101 45,000

 

 

 

    Office Equipment 163 20,000

 

 

 

      Computer Equipment 167 8,000  
           C. Jamison, Capital 301   73,000
             
    1 Prepaid Insurance 128 2,220  
           Cash 101   2,220
             
    2 Prepaid Rent 131 3,300  
           Cash 101   3,300
             
    9 Computer Supplies 126 2,545  
           Accounts Payable 201   2,545
             
    16 Accounts Receivable 106 4,800  
           Computer Services Revenue 403   4,800
             
    31 Wages Expense 623 875  
           Cash 101   875
             
  Nov 2 Mileage Expense 676 320  
           Cash 101   320
             
    5 Accounts Payable 201 2,545  
           Cash 101   2,545
             
    8 Cash 101 4,800  
           Accounts Receivable 106   4,800
             
    14 Cash 101 4,633  
           Computer Services Revenue 403   4,633
             
    23 Accounts Receivable 106 5,208  
           Computer Services Revenue     5,208
             
    30 C. Jamison, Withdrawals 302 2,000  
           Cash 101   2,000