ACC260 WK 2 Assignment

ACC260 WK 2 Assignment - 6.)Reports were in excess of 30%...

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Enron Questions 1.) The segment of operations that got Enron into difficulties would be JEDI. JEDI had operated since 1993 as a nonconsolidated SPE. Enron wanted to create a larger unit with capital but the inability to find a proper counterparty, JEDI and Chewco had to be consolidated into Enron’s financial statement and on a retroactive basis. 3. ) No the directors did not understand how profits were being made. 5.) Lay and Whalley directed Causey to terminate the Raptors. The purchase price was apparently the result of a private negotiation which reflected a calculation that LJM2’s residual interest in the Raptors was $61 million. Enron accounted for the buyout of the Raptors under typical business combination accounting, in which the assets and liabilities of the acquired entity are recorded at their fair market value, and any excess cost typically is recorded as goodwill.
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Unformatted text preview: 6.)Reports were in excess of 30% annualized returns described, but Enron retained the economic risks involved. 9.) Andersen and Enron concluded that the prior accounting entries were wrong and the proper accounting for those transactions would have been to show the notes receivable as a reduction to shareholders’ equity. WorldCom Questions 1.) Worldcom fraudulently manipulated its financial result in a number of respects, including by improperly reducing its operating expenses in at least two ways. The improperly released certain reserves held against operating expenses. They then recharacterized certain operating costs as capital assets. 3. ) They should have just showed the net losses. 4.) They had worked for Arthur Andersen before and worldcom did not possess a code of ethics. 5.) He was supposed to buy World com stock or for margin calls as the stock price fell....
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This note was uploaded on 07/15/2011 for the course ACCT 260 taught by Professor Mickipitcher during the Spring '11 term at University of Phoenix.

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