Sign Up Now
Get instant access to over 1 million+ study documents
OR
Already registered? click here to login
By creating your account, you agree to our terms of service, privacy policy and student honor code.
Accounting II
ABC Overall risk profile
The ABC Company may face series of risks based on the current industry and economic issues. First, the company is operating in a competitive market environment making the company to face a fierce competition from other companies producing similar products. Thus, the ABC Company may likely to lose some of its customer to competitors if the price per product is too high.
Moreover, the current recession may affect the purchasing power of customer, which may affect the company annual revenue. Moreover, inflation is likely to increase the cost of production. Another risk issue is that the company should satisfy its shareholders by declaring high dividends and failure to satisfy the shareholder may make some shareholders to disinvest their fund from the company, which may make the company to lose the public image. (Daniel, Njikizana, . & Chamboko, 2011).
Current ABC cash flow using Direct Method
ABC Statement of Cash Flow using Direct Method
CASH FLOWS FROM OPERATING ACTIVITIES
Payments Received from Customers
1,200,000.00
Payment to supplier and vendors
-250,000.00
Payments to Vendors and Suppliers
Cash generated from operations
170,000.00
Interest paid
-70,000.00
Income tax paid
-70,000.00
Dividends paid
-100,000.00
Net Cash Provided (Used) by Operating Activities
880,000.00
CASH FLOWS FROM INVESTING ACTIVITIES
Business acquisitions, net of cash acquired
0
Purchase of property, plant and equipment
-100,000.00
Proceeds from sale of equipment
0
Acquisition of portfolio investments
0
Investment income
220,000.00
0
Net Cash Provided (Used) by Noncapital Financing Activities
120,000.00
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital
240,000.00
Proceeds from long-term borrowings
0
Payment of long-term borrowings
0
Net Cash used in Financing Activities
240,000.00
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Sales and Maturities of Investments
0
Investment Income
0
Purchase of Investments and Related Fees
0
Net Cash Provided (Used) by Investing Activities
0
Net...
The cash flow reveals that source of fund of ABC are from cash received from the sale of products, which is $1.2 million. Typically, the company receives the bulk of its fund from this source. Moreover, the company receives fund from investment income and shares bought by investors. Moreover, the company used the fund to invest.
ii. The strategy the company can do to improve the cash flow is to indulge in a long-term borrowing in order to use the cash for long-term investment, which will generate income for the company.
iii. Yes, the company can finance the project with the current cash flow because the company still has net cash and equivalent of $1,240,000.
iv. The best method for to raise additional financing is to issue the corporate debt because this type of debt carries low interests rate which can be appropriate for the company to finance its project.
a. The product cost for the ABC company under the variable costing and absorption costing for the expansion product are as follows:
Expansion Product
Variable Costing
Absorption costing
Direct Material
$5.60
$5.60
Direct Labor
4.00
4.00
Variable manufacturing overhead
1
1
Fixed Manufacturing Overhead
198,000/5.000
=39.6
Unit product cost
$10.00
$49.6
b.
Current Product
Variable Costing
Absorption costing
Direct Material
$1.30
$1.30
Direct Labor
2.80
2.80
Variable manufacturing overhead
1.00
1.00
Fixed Manufacturing Overhead
198,000/80.000
=2.5
Unit product cost
$5.30
$7.80
Based on the results of the calculation, the product costs under the current is $7.80. Thus, the difference of the product cost between current and expansion product is 49.6-7.8 =$41.8. Thus, the expansion will not be cheaper compared to the current product.
c. The selling for the expansion product is $29.08 x $5,000 = 100,400
d. The calculations for the breakeven point and contribution margins by product if the same mix percentages are used are as follow:
Current Product
Expansion product
Sales Price…
Reference
Bragg, S.M. (2011). The Controller's Function: The Work of the Managerial Accountant, (Fourth Edition) UK. Wiley .
Daniel, B.M. Njikizana, C.T. & Chamboko, R. (2011). Interpretation and Application of International Financial Reporting Standards.UK. Wiley.
Loyalty to the client was clearly placed above loyalty to the overall public good and the standards of the profession. "Enron paid Andersen $25 million for its audit…and $27 million for 'consulting' and other services" which meant that Anderson had a substantial financial stake in retaining Enron as a client (Kadlec 2002). The Enron case illustrates the difficulty of self-policing within the industry. Today, providing additional services besides the
Accounting Approaches: Deductive vs. Inductive Approaches Two major divisions exist regarding the classification of accounting approaches: the inductive and deductive method. "In the deductive or judgmental approach, relevant environmental factors are identified, and, by linking these to national accounting practices, international groupings or development patterns are proposed. In the inductive or empirical approach, individual accounting practices are analyzed, development patterns or groupings are then identified, and finally explanations keyed to a
Accounting Several terms and definitions are valuable to understand financial statements. In the United States, financial statements of public corporations are produced in accordance with the U.S. Generally Accepted Accounting Principles. These principles govern how the information for financial statements is compiled and presented. The purpose of these principles is so that all stakeholders can easily understand the statements and make comparisons across both time and across different companies, because the
Accounting in Australia: Accounting basically incorporates the recording of events as well as the organization and detailing results, which is the main medium in discharging accountability. Accounting has developed to become an important element of the business fabric and economic development of a country and its organizations and institutions. This element has developed as a profession and business practice that is closely linked with the considerable economic development in Australia for
Accounting Systems There are many ways in accounting to get the job done right but two basic approaches give accountants a foundation to work upon. The purpose of this essay is to examine the differences between manual and computerized accounting systems. This essay will explain the history and development of both types of systems and will break down the advantages and disadvantages of them as well. Explanation and History of the Manual
Accounting What is Accounting Accounting is a term which is usually referred to when there is a formalized manner to hold an individual, firm or other organization to account. The process of accounting will usually involves the collection of data that measures or quantifies actions or transactions, to allow for an evaluation or assessment of performance. The most common type of accounting will be used to measure and quantify financial data. A