ADMS 4590 Chapter Notes - Chapter all: General Ledger, Purch Group, Current Liability

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pucegoat339

27 Sep 2016

School

York University

Department

Administrative Studies

Course

ADMS 4590

Professor

Jonathan Farrar

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Document Summary

Financial reports: budgets should be prepared monthly and the actual results should be compared to budgeted results and any variances noted should be investigated and followed up on. Budgets should be prepared for cash flows and income statement. This will allow the bod to be prepared for any cash flow shortage and current situation can potentially be avoided. Or prepare monthly income statement should be prepared detailed/segmented by activity and a breakdown of costs for each month. This will allow the bod to assess performance of the club and the various programs to see which one is doing well and not doing well and which activities to improve. Or detailed cash flow statement for the month should be prepared separating the operating, investing and financing activities. This will allow the bod to better assess the cash flows and see where there are high/low costs and where to reduce costs.

Related Questions

CASE 6â30 Service Organization; Segment Reporting[LO6â4]

Music Teachers, Inc., is an educational association for musicteachers that has 20,000 members. The association operates from acentral headquarters but has local membership chapters throughoutthe United States. Monthly meetings are held by the local chaptersto discuss recent developments on topics of interest to musicteachers. The associationâs journal, Teachersâ Forum, is issuedmonthly with features about recent developments in the field. Theassociation publishes books and reports and also sponsorsprofessional courses that qualify for continuing professionaleducation credit. The associationâs statement of revenues andexpenses for the current year is presented below.

Page 278

The board of directors of Music Teachers, Inc., has requestedthat a segmented income statement be prepared showing thecontribution of each segment to the association. The associationhas four segments: Membership Division, Magazine SubscriptionsDivision, Books and Reports Division, and Continuing EducationDivision. Mike Doyle has been assigned responsibility for preparingthe segmented income statement, and he has gathered the followingdata prior to its preparation.

Membership dues are $100 per year, of which $20 is considered tocover a one-year subscription to the associationâs journal. Otherbenefits include membership in the association and chapteraffiliation. The portion of the dues covering the magazinesubscription ($20) should be assigned to the Magazine SubscriptionDivision.

One-year subscriptions to Teachersâ Forum were sold tononmembers and libraries at $30 per subscription. A total of 2,500of these subscriptions were sold last year. In addition tosubscriptions, the magazine generated $100,000 in advertisingrevenues. The costs per magazine subscription were $7 for printingand paper and $4 for postage and shipping.

A total of 28,000 technical reports and professional texts weresold by the Books and Reports Division at an average unit sellingprice of $25. Average costs per publication were $4 for printingand paper and $2 for postage and shipping.

The association offers a variety of continuing education coursesto both members and nonmembers. The one-day courses had a tuitioncost of $75 each and were attended by 2,400 students. A total of1,760 students took two-day courses at a tuition cost of $125 foreach student. Outside instructors were paid to teach somecourses.

Salary costs and space occupied by division follow:

Personnel costs are 25% of salaries inthe separate divisions as well as for the corporate staff. The$280,000 in occupancy costs includes $50,000 in rental cost for awarehouse used by the Books and Reports Division for storagepurposes.

Page 279

Printing and paper costs other than for magazine subscriptionsand for books and reports relate to the Continuing EducationDivision.

General and administrative expenses include costs relating tooverall administration of the association as a whole. The companyâscorporate staff does some mailing of materials for generaladministrative purposes.

The expenses that can be traced or assigned to the corporatestaff, as well as any other expenses that are not traceable to thesegments, will be treated as common costs. It is not necessary todistinguish between variable and fixed costs.

Required:

Prepare a contribution format segmented income statement forMusic Teachers, Inc. This statement should show the segment marginfor each division as well as results for the association as awhole.

Give arguments for and against allocating all costs of theassociation to the four divisions.

Somewhat similar to a vignette in literature, this provides anopportunity to look at the application of Managerial Accounting ina diverse set of factual circumstances.

After completing the requirements for the case study, pleaseprovide a short narrative (two to four pages) and analysis of yourimpressions on how these principles and processes can be appliedproductively in settings that you encounter or expect to encounterin your career. Which aspects of the course do you believe you willbe able to apply most productively going forward? Which of thesetechniques are you regularly using in your current positions? Ifyou are using different applications, provide insight of the prosand cons in comparison to the reports and analysis above.

Schedules should be submitted in excel format and any analysisand write-ups should be in a Microsoft Word Document.

1. Apply to actual companies the basic knowledge and analytical techniques learned from our course.

2. Prepare common-size financial statements, comparative financial statements, and various profitability and risk ratios.

3. Compare the calculated results with competitors and across different years.

4. Summarize the analyses and make investment recommendations.

You will be analyzing the following firms:

Williams-Sonoma, Inc.

Pier 1 Imports, Inc.

For these firms, download the most recent annual report (10-K report) to begin your work. In 10-K reports, you can find companiesâ basic information, financial statements, footnotes to the financials, and the management discussions and analyses. Please download the 10-K reports from the following web links:

10-K reports (fiscal year 2016) for Williams-Sonoma, Inc.

https://www.sec.gov/Archives/edgar/data/719955/000119312517104341/d265187d10k.htm

10-K reports (fiscal year 2015) for Williams-Sonoma, Inc.

https://www.sec.gov/Archives/edgar/data/719955/000119312516525847/d120289d10k.htm

10-K reports (fiscal year 2014) for Williams-Sonoma, Inc.

https://www.sec.gov/Archives/edgar/data/719955/000119312515118009/d851953d10k.htm#tx851953_13

10-K reports (fiscal year 2016) for Pier 1 Imports, Inc.

https://www.sec.gov/Archives/edgar/data/278130/000119312517136345/d343458d10k.htm

10-K reports (fiscal year 2015) for Pier 1 Imports, Inc.

https://www.sec.gov/Archives/edgar/data/278130/000119312516556025/d133529d10k.htm

10-K reports (fiscal year 2014) for Pier 1 Imports, Inc.

https://www.sec.gov/Archives/edgar/data/278130/000119312515153179/d881010d10k.htm#toc881010_13

For your convenience, I also provided the balance sheet and income statement of each company for the most recent years at the end (page 5-8; Table 1-4). Please use them to prepare common-size financial statements and comparative financial statements.

Guidance

The required tasks are detailed below:

(1) Prepare common-size balance sheets and income statements for both companies. Note: Compute for the most recent THREE years.

(2) Prepare comparative analysis (i.e., change of percentage analysis) on income statement and balance sheet for both companies. You should compute for the most recent THREE years.

(3) Prepare ratio analyses (for the same THREE year time period) for both companies. At least, you should include the following ratios in your computations: (1) current ratio, (2) acid-test ratio, (3) receivables turnover, (4) inventory turnover, (5) asset turnover, (6) profit margin on sales, (7) rate of return on assets, (8) rate of return on common stock equity, (9) earnings per share, (10) payout ratio, (11) debt to total assets ratio, (12) times interest earned, (13) cash debt coverage ratio, and (14) book value per share.

(4) Comment on the analytical results of the two companies. Your comments should concentrate on the trends across the companies. In addition to contrasting the ratios between the companies, you should interpret the numbers and make suggestions as to why the ratio of one company might be higher/lower than the other.

(5) Write a conclusive summary on the firms you have studied. Based upon your conclusions, recommend the better performing firm for potential investment. Your conclusions should be based upon, and specifically reference, the analyses prepared in this report.

(6) Read sample project to get some ideas.

Report Format Requirements:

A. Report body requirements:

Cover page. List the title of the project, your names, and semester/year.

Abstract or Executive Summary. This is a separate page. It should cover the purpose of the project, the major findings, and the conclusions/recommendations, in summary form.

Table of Contents.

Main body. Use the following sequence for report content:

Introduction to the two companies and to the purpose of the report

Analytical section. This should include all your numerical analyses. This is where you will discuss the results of, comments on, and conclusions about the vertical and horizontal common-size statements, comparative analysis (i.e., change of percentage analysis), and the ratio analyses for both companies.

Comparisons of companies and all other analysis (observations and/or interpretations). (You may combine b and c if you wish, as long as both are well covered.)

Conclusions and recommendation for investment.

References. List all major reference sources.

Appendices. Include tables and graphs of your numerical analyses. For reference convenience, assign a title to each separate item, such as Table 1, Exhibit 1, etc.

B. Typesetting requirements:

Use size 12 font. Times New Roman is preferred.

Double space between lines.

Number pages in accordance with the APA style guide.

One inch on all sides.

Do not right justify text. Use left justify.

Minimum length: 8 pages. (Note: You can easily meet the minimum length requirement since you will have a lot of tables in the paper.)

The submitted work should be in ONE file with a word or pdf format. An Excel spreadsheet file is NOT acceptable.

Plagiarism

Plagiarism will not be tolerated. Evidence of plagiarism will result in a grade of âFâ to the course and be subject to appropriate disciplines.

NOTES:

A portion of your grade will be assessed based on the overall report quality, clarity, format, and cohesiveness.

A FREE RIDER in the group will not be tolerated. However, to report an alleged free rider, you should send me a formal written complaint. You should carefully manage your group over the semester to ensure that no teammate will take the chance of turning into a free rider. Try to contact/manage your teammates frequently and inform me if any member is not willing to participate the group work so we can address this issue ASAP. A free rider will receive his/her group project grades solely based on what he/she has contributed to the projects. If there is a free-rider in your group or a member drops the class, the rest of the group members are still expected to submit a COMPLETE paper.

Again, the balance sheet and income statements are provided at the end. Please use them to prepare common-size and comparative financial statements.

Table 1. Williams-Sonoma, Inc ----Balance Sheet

Williams-Sonoma, Inc.
BALANCE SHEET
Fiscal Years 2016, 2015, 2014, 2013
(In thousands)	FY 2016	FY 2015	FY 2014	FY 2013
ASSETS
Current assets
Cash and cash equivalents	$ 213,713	$ 193,647	$ 222,927	330121
Restricted cash	â	â	â	14289
Accounts receivable, net	88,803	79,304	67,465	60,330
Merchandise inventories, net	977,505	978,138	887,701	813,160
Prepaid catalog expenses	23,625	28,919	33,942	33,556
Prepaid expenses	52,882	44,654	36,265	35,309
Deferred income taxes, net	â	â	130,618	121,486
Other assets	10,652	11,438	13,005	10,852
Total current assets	1,367,180	1,336,100	1,391,923	1,419,103
Property and equipment, net	923,283	886,813	883,012	849,293
Deferred income taxes, net	135,238	141,784	4,265	13,824
Other assets, net	51,178	52,730	51,077	54,514
Total assets	$ 2,476,879	$ 2,417,427	$ 2,330,277	2,336,734
LIABILITIES AND STOCKHOLDERSâ EQUITY
Current liabilities
Accounts payable	$ 453,710	$ 447,412	$ 397,037	404791
Accrued salaries, benefits and other liabilities	130,187	127,122	136,012	138,181
Customer deposits	294,276	296,827	261,679	228,193
Income taxes payable	23,245	67,052	32,488	49,365
Current portion of long-term debt	â	â	1,968	1,785
Other liabilities	59,838	58,014	46,764	38,781
Total current liabilities	961,256	996,427	875,948	861,096
Deferred rent and lease incentives	196,188	173,061	166,925	157,856
Long-term debt				1,968
Other long-term obligations	71,215	49,713	62,698	59,812
Total liabilities	1,228,659	1,219,201	1,105,571	1,080,732
Stockholdersâ equity
Preferred stock: $.01 par value; 7,500 shares authorized; none issued	â	â	â	0
Common stock: $.01 par value; 253,125 shares authorized;
87,325 and 89,563 shares issued and outstanding at	873	896	919	941
January 29, 2017 and January 31, 2016, respectively	873	896	919	941
Additional paid-in capital	556,928	541,307	527,261	522,595
Retained earnings	701,702	668,545	701,214	729,043
Accumulated other comprehensive loss	(9,903)	(10,616)	(2,548)	6524
Treasury stock â at cost: 20 and 29 shares as of January 29, 2017 and January 31, 2016, respectively	(1,380)	(1,906)	(2,140)	(3,101)
Total stockholdersâ equity	1,248,220	1,198,226	1,224,706	1,256,002
Total liabilities and stockholdersâ equity	$ 2,476,879	$ 2,417,427	$ 2,330,277	2,336,734

Table 2. Williams-Sonoma, Inc --- Statement of Income

Williams-Sonoma, Inc.
STATEMENT OF INCOME
Fiscal Years 2016, 2015, 2014,2013
(In thousands)	FY 2016	FY 2015	FY 2014	FY 2013
E-commerce net revenues	$ 2,633,602	$ 2,522,580	$ 2,370,694	$ 2,115,022
Retail net revenues	2,450,210	2,453,510	2,328,025	2,272,867
Net revenues	5,083,812	4,976,090	4,698,719	4,387,889
Cost of goods sold	3,200,502	3,131,876	2,898,215	2,683,673
Gross profit	1,883,310	1,844,214	1,800,504	1,704,216
Selling, general and administrative expenses	1,410,711	1,355,580	1,298,239	1,252,118
Operating income	472,599	488,634	502,265	452,098
Interest (income) expense, net	688	627	62	(584)
Earnings before income taxes	471,911	488,007	502,203	452,682
Income taxes	166,524	177,939	193,349	173,780
Net earnings	$ 305,387	$ 310,068	$ 308,854	$ 278,902

jadegoat246

Be noted the required is to June 2016 Not December 2016.

You have just been hired as a new management Accountant by SaudiJewellery, a distributor of earring to various retail outletslocated in shopping malls across the country. In the past, thecompany has done very little in the way of budgeting and at certaintimes of the year has experienced a shortage of cash.

Since you are well trained in budgeting, you have decided toprepare a master budgets for the Fourth quarter of 2016 in order toshow management the benefits that can be gained from an integratedbudgeting program. To this end, you have worked with accounting andother areas to gather the information assembled below.
The company sells many styles of earrings, but all are sold for thesame price- $10 per pair. Actual sales of earrings for the lastthree months and budgeted sales for the next six months follow (inpairs of earrings):

Recent and forecast sales ( in units)

January (actual)... 20,800
February (actual)... 26,000
March (actual)... 40,000
April (budget)... 65,000
May (budget)... 100,000
June (budget)... 50,000

July (budget)... 30,000

August (budget ... 28,000

September (budget) 25,000

The concentration of sales before and during May is due to MothersDay.

The concentration of sales before and during May is due toMother's Day.

Balance sheet at September 30, 2016

Assets Cash 74,000

Accounts receivable 346,000

Inventory 104,000

Prepaid insurance 21,000

Property and equipment (net) 950,000

Total assets $1,495,000

Liabilities and Stockholders' Equity

Accounts payable $100,000

Dividends payable 15,000

Capital stock 800,000

Retained earnings 580.000

Total liabilities & stockholders' equity $1.495.000

All sales are on credit. The collection of sales is asfollows:

20% of a month's sales are collected in the month of sale.

70% is collected in the following month, and the remaining

10% is collected in the second month following sale.

Bad debts have been negligible.

Additional information: Cost to buy a pair of earrings fromsuppliers is S4 Desired ending inventory at the end of each monthis 40% of the cost of goods sold in the following month.

Payment for purchases is as follows:

One-half of a month's purchases is paid for in the month ofpurchase; the other half is paid for in the following month.

Monthly operating expenses for the company are given below:

Variable monthly expenses:

Sales commissions 4% of month's sales paid as incurred

Fixed monthly expenses paid as incurred:

Advertising 200,000

Rent 18,000

Salaries 106,000

Utilities 7,000

Depreciation 14,000

Insurance is paid on an annual basis, in November of each year$36000 was paid on 1st of nov last year (i.e., $3000 permonth).

The company plans to purchase $16,000 in new equipment duringMay and $40,000 in new equipment during June; both purchases willbe for cash

The company declares dividends of $15,000 each quarter, payablein the first month of the following quarter.

The company maintains a minimum cash balance of $50,000. Allborrowing is done at the beginning of a month and any repaymentsare made at the end of a month.

The company has an agreement with a bank that allows the companyto borrow in increments of $1,000 at the beginning of each month.The interest rate on these loans is 1% per month and for simplicitywe will assume that interest is not compounded. At the end of thequarter, the company would pay the bank all of the accumulatedinterest on the loan and as much of the loan as possible (inincrements of $1,000), while still retaining at least $50,000 incash.

Required: Prepare a master budget for the three-month periodending December 31, 016.

Include the following detailed budgets: a. A sales budget, bymonth and in total N b. A schedule of expected cash collectionsfrom sales, by month and in total. c. A merchandise purchasesbudget in units and in dollars. Show the budget by month and intotal. A schedule of expected cash disbursements for merchandisepurchases, by month and in total.

2. A cash budget. Show the budget by month and in total.Determine any borrowing that would be needed to maintain theminimum cash balance of $50,000. 3. A budgeted income statement forthe three-month period ending June 30 2014. Use the contributionapproach.

4. A budgeted balance sheet as of June 30, 2014.

5. Based on the master budget that you prepared for the fourthquarter of 2016, what would you expect the results to be for thefourth quarter of the year.

6: Define strategic plan, long range plan, capital budgets and amaster budget.

7. Briefly explain the major benefits of budgets 8. Explain thepotential problems in implementing budgets g. Differentiate betweenan operating budget and a financial budget.

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ADMS 4590 Chapter Notes - Chapter all: General Ledger, Purch Group, Current Liability

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