Lunch Money Fraud

How low can you go? Otis Josey, a 54-year old Detroit man, allegedly told a pre-school girl that he worked at a radio station and was raising donations for a children’s hospital charity. In exchange for a donation, he would give the donor a gift card. Police say he literally cheated the 5-year old girl out of her $5 lunch money in exchange for a fake $20 gift card to Chuck E. Cheese.

Questions:

1. Read the article by Ray Martin. What is one of the most reported gift card scams?
2. What does Martin recommend that you should do with an unwanted gift card?
3. How do most companies recognize the revenue from gift cards? What journal entries are involved?

Sources:

NBC Video.(2012). Man accused of selling child fake Chuck E. Cheese gift card, NBC News, April 26 (Retrievable at http://video.msnbc.msn.com/nbc-news/47178295/#47178295)

Martin, R. (2011). Attention Shoppers: Avoid this Gift Card Scam. CBS News, December 15 (Retrievable online at http://www.cbsnews.com/8301-505145_162-57343690/attention-shoppers-avoid-this-gift-card-scam/)

Visit msnbc.com for breaking news, world news, and news about the economy

Copyright Infringement?

On Wednesday, the Second Circuit Court of Appeals reversed a lower court’s decision to throw out a five-year old lawsuit asking for $1 billion and filed against YouTube by Viacom, as well as other media companies. This copyright infringement suit has become a symbol of the clash between media companies and those competing with them, such as YouTube, who allows users to upload clips by users. The Circuit Court indicated that “a reasonable jury could conclude [whether] YouTube had knowledge or awareness” of copyright infringement “at least with respect to a handful of specific clips.”

Questions:

1. How are copyrights reported in the financial statements?
2. If the suit for $1 billion is awarded, how would it be recorded, as far as a journal entry? Do you think this award will become a reality? Why or why not?
3. How should YouTube record any revenue gained from the Viacom deal that lets users rent movies on the YouTube site?

Source:

Stetler, B. (2012). Appeals Court Revives Viacom Suit Against YouTube, The New York Times, April 5 (Retrievable online at http://mediadecoder.blogs.nytimes.com/2012/04/05/appeals-court-revives-viacom-suit-against-youtube/?ref=business)

Big News at Amazon: Fulfillment Robots

Amazon.com Inc said on Monday it agreed to buy Kiva Systems Inc for $775 million in cash, a deal that will bring more robotic technology to the e-commerce company’s giant network of warehouses.

Questions:

1. What other companies use this kind of robot technology?
2. Discuss the trend of Amazon’s fulfillment costs and what they would mean in terms of net income and taxes.
3. Discuss in general how Amazon would account for the $775 million acquisition and the types of journal entries it would make.

Source: Barr, A. (2012). Amazon’s Kiva Systems Acquisition To Put Robots To Work, Reuters.com, March 19 (Retrievable online at http://www.huffingtonpost.com/2012/03/19/amazoncom-kiva-acquisition_n_1365512.html)

Taken for a Ride When Trading in a Car

Under the Dodd-Frank financial reform act, the Federal Trade Commission (FTC) is now going after auto dealers that imply to customer that they have no remaining debt obligation for trade-ins. Five dealers in four states (South Dakota, North Carolina, Connecticut and West Virginia) have already agreed to settlements that order them to stop running ads promising to pay off a customer’s loan on a trade-in.

Questions:

1. Explain the practice that the FTC is putting a stop to by using the journal entries that a dealer would make.
2. What percentage of new-car shoppers in 2011 traded in a car on which they had negative equity? Develop an example of this using T-accounts from the point of view of the car owner.
3. The FTC is accepting public comments on the proposed dealer settlements until what date?

Source: Singletary, M. (2012). Trading in a car? Don’t get taken for a ride. The Washington Post, March 17 (Retrievable online at http://www.washingtonpost.com/auto-dealers-take-trade-in-owners-for-a-ride/2012/03/12/gIQAT2sRJS_story.html)

Crime of Grime OR Sign of the Times?

Tide is flying off the shelves, according to the Associated Press. Unfortunately, retailers are not seeing the profits from this familiar laundry soap. Instead, Tide has become a hot commodity among thieves at supermarkets and drugstores in at least some parts of the country. While the maker of Tide, Procter & Gamble, has been baffled about why the brand has gotten so much attention from thieves, law enforcement has discovered direct and indirect links to the exchange of the product for illegal drugs.

Questions:

1. If a retailer uses a perpetual inventory method to account for Tide, what should they also follow up with to determine any shortages in the product?

2. If shortages of Tide are found, how should they be accounted for? Give an example including journal entries.

3. How should the extra expenses of security tagging Tide be accounted for? Give an example including journal entries.

Sources:

Nuckols, B. (2012). Thieves Rolling Tide Detergent Out of Stores, Associated Press, March 15. (Retrievable online at http://abcnews.go.com/US/wireStory/thieves-rolling-tide-detergent-stores-15922603)

Youtube.com (Wane.com). (2012). Retailers speak out against odd Tide thefts, March 14.(Retrievable online at www.youtube.com)

The Judge Says So

Just days ago, it appeared that a hundred low-wage workers at a Walmart-contracted warehouse in California would lose their jobs after publicly accusing their employer of shorting them on pay and forcing them to work in harsh conditions. But after the workers argued that the layoffs amounted to illegal retaliation, a state judge ordered this week that the contractors keep the mostly immigrant workers employed at the warehouse.

Questions:

1. What was the name of the company that Wal-Mart contracted with?  What is a common name for this arrangement?
2. Why won’t Wal-Mart be included in the litigation regarding this situation?
3. Explain what type of journal entries Wal-Mart would make with respect to this arrangement.

Source:

Jamieson, D. (2012). Wal-Mart-Contracted Warehouse Jobs Saved By Judge, The Huffington Post, Feb. 3 (Retrievable online at http://www.huffingtonpost.com/2012/02/03/walmart-warehouse-workers-california_n_1253267.html?ref=business)

Super Bowl Sunday!

Well it’s almost time for the Super Bowl again.  So get the snacks ready in front of the big screen TV.  But what comes with the game and half-time?  Of course, the commercials.  However, the hoopla behind Super Bowl ads has spawned a team of skeptics. Growing research shows the $3.5 million that advertisers pay for 30 seconds during Sunday’s game between the New England Patriots and New York Giants often isn’t worth the cost.

 

Questions:

1.  What companies are lined up to advertise on the Super Bowl 2012?

2.  Why does the article say that companies would be better off advertising somewhere else?

3. How would you record, in the accounting records, the $3.5 M paid to a network for airing a Super Bowl ad?  Are there any other costs other than the airing costs?  Discuss what they are and how you would record them in the accounting records.

Source:

Dicker, R. (2012). Super Bowl: Are Ads Worth the Millions? The Huffington Post, Jan. 31 (Retrievable online at http://www.huffingtonpost.com/2012/01/30/super-bowl-are-ads-worth-_n_1241677.html?ref=business)

A Good Deal?

Show them the money and you, too, could live at The Plaza in New York City! Life at the city’s storied hotel is kush no matter what, but this newest listing is giving new meaning to the high life. Curbed directed our attention to the Astor Suite, a four-bedroom, six-bath rental, which is currently being offered for $165,000 per month. Yes, that makes it New York’s most expensive rental on the market.

Questions:

1. If as the video indicated, the apartment is worth $55M today, what percent of the value is the owner willing to accept in annual rent? How does this compare to the rent to value ratio of an average furnished apartment in your area?

2. Assuming that the owner’s renovations were $5M, what percentage annual return will the owner receive on his investment, if he is able to sell it for $55M? How would he record the journal entry?

3. Based on the square footage stated in the article, what is the sales price per square foot? Look online and find a home with similar square footage that is furnished and discuss how it compares. What are some of the qualitative differences that the buyer be paying for in The Plaza apartment, as compared to the one you found for sale online?

Source:

Zeveloff, J. (2011). At $165,000 A Month, This Is The New Most Expensive Apartment Rental In New York, Business Insider, Dec. 8 (Retrievable online at http://www.businessinsider.com/most-expensive-apartment-rental-new-york-astor-suite-plaza-2011-12)

Knutsen, E. (2011). Only at the Plaza Could They Charge $165,000 a Month for An Apartment, The New York Observer, Dec. 8 (Retrievable online at http://www.observer.com/2011/12/only-at-the-plaza-could-they-charge-165000-a-month-for-an-apartment/)

CNN Video, New York’s Most Expensive Rental, Dec. 15

Tickets, Anyone?

Ticketmaster’s various fees and surcharges, which sometimes add 40 percent or more to the cost of a ticket, have long infuriated its customers. But next year, thanks to a recent class-action settlement, many of those fans will be able to get some money back.

Questions:

1. According to the article, what are the two types of credits that will be offered to people who bought tickets on the Ticketmaster Web site from Oct. 21, 1999, to Oct. 19, 2011?
2. Are there any limitations to the credits?
3. Explain how Ticketmaster will likely make the journal entries for these claim amounts.
4. What is the minimum payment that Ticketmaster faces per year over the four-year life of the settlement? What happens if individuals do not claim their credits?

Source:

Sisario, B. (2011). Ticketmaster Offers Credits to Settle Lawsuit. The New York Times, Dec. 2 (Retrievable online at http://mediadecoder.blogs.nytimes.com/2011/12/02/ticketmaster-to-offer-redress-for-fees/?scp=2&sq=ticketmaster&st=cse)

Kenya Life Companies

Many countries are making a mint from commodities such as oil, copper and gold thanks to sky-high prices. But is that enough to give Africa a permanent boost? Probably not, because commodity markets are notoriously fickle and revenues can quickly be squandered.

According to a report by the African Development Bank, a third of Africans are now “middle-class”, defined as having between $2 and $20 to spend a day. A decade ago that was true of only a quarter of Africans. This change has occurred in a period of fast population growth among low-income families. This video talks about what some middle class Kenyans are now spending their money on.

Questions:

1.What were some of the benefits for Kenya of having a strong and vibrant insurance sector, as mentioned in the video?

2. What were some of the risks associated with the growing industry of insurance?

3. What is driving the rise of life insurance in Kenya? What are the challenges?

4. What type of journal entry should an insurance company make to account for a whole life policy, where part of the premium goes to investment?

Sources:

CNN Video. (2011). The Business of Death, November 28. (Retrievable online at www.cnn.com/videos)

Staff. (2011). Pleased to be bourgeois. The Economist, May 11 (Retrievable online at http://www.economist.com/node/18682622)

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