Chap001 Solution Manual

This aicpa code has been codified into law in most

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This AICPA Code has been codified into law in most states and, therefore, this action would also be an illegal act for a CPA.) 4. Ethical considerations guiding this decision include the potential harm to affected parties by allowing such a fee arrangement to exist. The unacceptable nature of such a fee arrangement guards the profession against unethical actions that could undermine its real and perceived value to society. Communicating in Practice — BTN 1-4 1. Deciding whether Facebook is a good loan risk can be difficult because the planned expansion is risky if customer demand does not meet expectations. As a loan officer in this situation you would want information on the company’s (1) projections of expected cash receipts and cash payments (best provided on a monthly basis); (2) assessment of the market, the company’s plans, and a strategy to achieve success; (3) cash contributions that Mark Zuckerberg will make to the business; and (4) a listing of tangible assets (including their price and useful life) necessary to carry out the company’s plans. 2. How the company is organized is important to a loan officer. If it is a pro- prietorship (and not LLC), the personal assets of Mark Zuckerberg are available to repay the loan. In this case, a loan officer will want information about Mark’s financial status. If it is a corporation, the amounts invested in the business by each shareholder are especially important. The loan officer can also require owners or shareholders to personally guarantee the loan for additional protection for the bank. Careful execution of these steps should minimize the bank’s risk of taking on a bad loan. 1-57
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Chapter 01 - Accounting in Business Taking It to the Net — BTN 1-5 (in thousands) 2009 2008 2007 2006 2005 Revenues ...... $28,539 $31,878 $31,573 $28,074 $24,524 Net income .... 3,719 4,961 4,745 4,065 3,317 1. Rocky Mountain Chocolate Factory’s (RMCF) revenues grew considerably from 2005 through 2007, but they flattened and even declined in the recessionary period of 2008 and 2009. Each year saw solid revenue growth prior to 2008. Management must work to recover those lost revenues. 2. Net income performance for RMCF was impressive over the time period 2005 through 2008. Its net income grew nearly 50%. However, 2009 net income declines 25% from its 2008 level. Although 2008 and 2009 were recessionary times, management must work to recover lost revenues and reestablish profitability levels. Teamwork in Action — BTN 1-6 Suggestions for forming support/learning teams are in the Instructor’s Resource Manual (IRM). The IRM provides the master of a Student Data Form that can be duplicated and used to gather information as a basis for forming these teams. The IRM also includes other administrative materials helpful in creating an active learning environment for studying accounting. [ Note: Instructors often have students use the copy function in e-mail to keep them advised of meeting times and other important team activities. This also encourages students to use and explore additional features of e-mail. ] 1-58
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Chapter 01 - Accounting in Business Entrepreneurial Decision — BTN 1-7 1. (a)
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