Eneslow Shoes: Change is Good!

Eneslow – The Foot Comfort Center was founded in 1909 and is a family owned business providing high quality, stylish and comfortable shoes, as well as therapeutic accessories, on-site shoe makeovers and repairs and custom-made footwear. When New York State dropped Medicaid support for orthopedic shoes, Robert Schwartz saw his business drop by nearly 50%. As a result, he sought counsel and closed seven out of eight of the company’s stores in 1989. He used this as an opportunity to reposition the company’s products and now avoids the perception of being an “old ladies store.”

Questions:
1. What were some of the key costs that Robert Schwartz probably eliminated in repositioning his store? What are some costs that Schwartz probably could not eliminate in the downsizing of his operations?

2. Schwartz mentioned that he went to a mentor/counselor about the downturn in his business. What type of services could you provide him as a CPA regarding increasing his business?

3. What was the old model that Eneslow followed? What is the new model according to the video?

4. Go to Eneslow’s website at http://www.eneslow.com/home.cfm Does the company still have one store? What are the most interesting/favorable things that you notice about the company’s website?

Source:

MSNBC Video. (2011). If the Shoe Fits, Your Business (Retrievable online at http://www.msnbc.msn.com/id/21134540/vp/25142886#25003452)

Eneslow website, http://www.eneslow.com/home.cfm.

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HAPPY HALLOWEEN: 1-800-Autopsy

As hospitals and municipalities around the country cut back on the costly service of providing autopsies, family members of the deceased who feel there are unanswered questions that could be resolved by a post-mortem investigation are not without recourse. Today, only about 5 percent of all hospital deaths are autopsied, which is down 42 percent from 1965, according to Archives of Pathology and Laboratory Medicine. Therefore, private autopsy firms are moving in to fill the void.

Questions:

1. Go to the website http://www.1800autopsy.com/.  What services does this company provide? What business model structure did Herrera follow in 2005? Do you agree/disagree that
there is a need for this type of service? Discuss.

2. According to the WSJ article, what fees are typically charged for the autopsies?  Based on this article and the website, what types of accounts do you think Herrera would have as part of his chart of accounts?

3.  According to the WSJ article, what mistakes does Suzanna Dana explain should be avoided in this type of business, as well as for other first-time entrepreneurs?

Sources:

Staff. (2010). Demand Breathes Life into Private Autopsy Companies, Wall Street Journal, October 14 (Retrievable online at http://www.1800autopsy.com/articles/189-demand-breathes-life-into-private-autopsy-companies.html)

MSNBC Video, A dying business? Hardly, Oct. 26 (Retrievable online at http://www.msnbc.msn.com/id/13561213/ns/business-small_business/)

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

The Volcker Rule

Regulators released a proposal on Oct. 11 known as the Volcker Rule, which is aimed at overhauling how the banking industry carries out its trading activity. The proposal, spanning about 300 pages, includes provisions that scrutinize how banks collect revenue, award compensation and track their compliance with the Volcker Rule.

According to financial industry lawyers and lobbyists these will challenge the very nature of Wall Street.

Questions:

1.  What is the Volcker Rule?  Specifically, explain the revenue provision focus. Do you think this regulation is needed?  Why or why not?

2. The proposal spells out an expansive internal control regime that banks must adopt, creating layers of expensive and time-consuming compliance.   Can too much internal control be a bad thing?  Discuss in general.

3. Do you agree with Sullivan & Cromwell, who say: “The combined effect of these conditions could have a highly adverse impact not only on foreign banks, but on the position of the United States as a financial center.”   Why or why not?

Source:

Protess, B. (2011) With Volcker Rule, Wall Street Braces for Change, The New York Times, Oct. 11(Retrievable online at http://dealbook.nytimes.com/2011/10/11/with-volcker-rule-wall-street-braces-for-change/?ref=business)

Groupon in the News

Groupon disclosed a major accounting change on Friday, essentially halving its once-jaw-dropping revenue after it encountered resistance from regulators with its filing to go public. Groupon, the online coupon titan, announced separately that its chief operating officer of about five months, Margo Georgiadis, resigned and will return to her former employer, Google, as president of the Americas.

Questions:

1. What was the accounting change mentioned? Was it a violation of GAAP?

2. What effect did it have on the financial statements?

3. What is the SEC quiet period mentioned in the article, how long is it, and what is its purpose?

Source: De La Merced, M.J. and E.M. Rusli (2011). Accounting Change Cuts Groupon’s Revenue. The New York Times – DealBook, September 23 (Retrievable online at http://dealbook.nytimes.com/2011/09/23/groupon-changes-its-revenue-accounting/)

Tax Breaks Galore in Video Games

The United States government offers tax incentives to companies pursuing medical breakthroughs, urban redevelopment and alternatives to fossil fuels, but also to video game producers. They are able to combine tax breaks across software development, the entertainment industry, and online retailing for a bonanza effect.

Electronic Arts, founded in 1982, has since become one of the world’s dominant video game companies, producing popular titles like SimCity, FIFA soccer, Harry Potter, and Madden NFL, largely due to huge tax incentives.

Questions:

1. Discuss why you think that Union Carbide failed to meet the experimental threshold for the R & D credit, though video game makers often seem to have little trouble meeting the requirement.

2. What was the most interesting point made in this article that pertains to you as an accountant? Do you agree or disagree with the tax incentives that the video game industry has been able to capitalize on? Discuss.

3. Do you agree or disagree with video game industry officials that say by improving technology, they are indirectly helping society at large? Why or why not?

Source: Kocieniewski, D. (2011). Rich Tax Breaks Bolster Makers of Video Games, The New York Times, Sep. 10 (Retrievable online at http://www.nytimes.com/2011/09/11/technology/rich-tax-breaks-bolster-video-game-makers.html?_r=2&nl=todaysheadlines&emc=tha2)

More evidence of the wealth divide

Even with the economy in a funk and many Americans pulling back on spending, the rich are again buying designer clothing, luxury cars and about anything that catches their fancy. Luxury goods stores, which fared much worse than other retailers in the recession, are more than recovering — they are zooming. Many high-end businesses are even able to mark up, rather than discount, items to attract customers who equate quality with price. In July, the luxury segment had an 11.6 percent increase, the biggest monthly gain in more than a year.

Questions:

1. According to the article, Tiffany’s first-quarter sales for 2011 were up 20 percent to $761 million, as compared to last year. Based on this information, what were the last year’s first quarter sales?

2. According to the article, in 2008, for example, the most expensive Louboutin item that Saks sold was a $1,575 pair of suede boots. Now, a $2,495 pair of suede boots costs $2,495 .  What percentage increase is that?

3. What is the snob factor?  What is your reaction to this article? Which comment to the article is your favorite and why?

4. If, as the article said, consumers awaited 70 percent discounts rather than buying right away and we assume that a luxury item was priced at $3,300, how much would the consumer pay?  

Source:

Clifford, S. (2011) Even Marked Up, Luxury Goods Fly Off Shelves, The New York Times, Aug. 3 (Retrievable online at http://www.nytimes.com/2011/08/04/business/sales-of-luxury-goods-are-recovering-strongly.html?src=ISMR_AP_LO_MST_FB)

Just Say No to Debt During the Holidays

According to this year’s National Retail Federation holiday survey, the average American will spend close to $700 this season on gifts, cards, decorations, and the like. This is one time when you want to be below average — way below. In fact, if you are in debt, just say no to gift buying this holiday. There is absolutely NO reason for you to go further into debt buying gifts for others. There are still 13.6 million Americans who are trying to pay off holiday debt from last year.

 Questions:

 1.  Which of the tips mentioned in the article would help you the most in steering clear of holiday debt? Explain.

2. Go to GiftCards.com and click on Discounted Gift Cards.  Select “View All Available Gift Cards” and then pick one of the merchants that you would normally visit.  Assume that you buy the card.  What journal entry would this merchant make for the sale of this card? (In your answer, assume that the merchant must pay GiftCards.com a transaction fee of 1%.)

3.  Assume that you redeem the card that you purchased in Question 2.  What journal entry would the merchant make for the redemption?

 Source:

Pagliarini, Robert (2010). 10 Tips to Save Big Money This Christmas.  HuffingtonPost.com, December 8 (Retrievable online at http://www.huffingtonpost.com/robert-pagliarini/10-tips-to-save-big-money_b_793857.html)

Google’s Questionable Algorithm

Any publicity, even negative publicity, means a win with Google’s ranking algorithms. This New York Times story details a retailer known as DecorMyEyes.com who first hired a search optimization company to burnish the site’s reputation by writing positive things about the company, but then stumbled on a better “free” success strategy of providing poor customer service and racking up negative complaints to  push the company higher in Google search results, leading to even greater sales.

Questions:

1. The New York Times article focused on Google, but what does Sullivan say about other search engines?

2. According to the articles, is DecorMyEyes.com right? Could all those bad reviews be helping sales?  Discuss costs and benefits, both long-term and short-term.

3. The original insight behind page rank used in search engines came from academia, where the importance of a paper can be measured by the citation index, i.e. how many other papers refer to it. Brainstorm and discuss ways which make more sense for displaying higher ranking or hits from a performance evaluation standpoint.

Source:

Segal, D. (2010).  A Bully Finds A Pulpit on the Web. The New York Times, November 28. (Retrievable online at http://www.nytimes.com/2010/11/28/business/28borker.html?_r=1)

Sullivan, D. (2010). Google’s “Gold Standard” Search Results Take Big Hit In New York Times Story, Search Engine Land, November 28. (Retrievable online at http://searchengineland.com/googles-gold-standard-results-take-hit-new-york-times-57081)

New rules for Debt-Relief Services

Starting this week, for-profit companies marketing debt-relief services over the telephone are prohibited from charging a fee before they settle or reduce a customer’s debt to the Internal Revenue Service, credit card company, or other unsecured debt. The new rule by the Federal Trade Commission covers telemarketers of for-profit debt-relief services, including credit counseling, debt settlement, and debt negotiation services. Nonprofit firms are not affected by the rule.

Questions:
1.  What is this ruling meant to prevent?  Explain this in terms of GAAP recognition of revenue.
2. Under the new ruling, providers’ fees for a single debt must be in proportion to the total fee that would be charged if all of the debts had been settled.  Assume that John Smith has 3 debts enrolled ($150,000, $450,000, and $300,000) and the company agrees to settle the debts for a charge of $1,200 for settling the debt.  When they settle the $450,000 debt according to the new ruling, how much of this fee can they collect?
3. Under the ruling, if a consumer enrolls multiple debts into one debt relief program and the provider bases its fee on the percentage of what the consumer saves as result of using its services, the percentage charged must be the same for each of the consumer’s debts, according to the FTC. Can you think of a possible situation where manipulation of this part of the ruling may be used by debt-relief services to gain greater fees?  If so, how do you think this can be investigated?

Source:
Staff. (2010). FTC rule prohibits debt-relief companies from collecting up-front fees. AccountingWEB, October 27. (Retrievable online at http://www.accountingweb.com/topic/tax/ftc-rule-prohibits-debt-relief-companies-collecting-front-fees)

Bollywood on a Budget

The world’s movie capital is not Hollywood but Bollywood. Bollywood is the nickname for the Indian film industry located in Bombay. Fourteen million Indians go to the movies on a daily basis (about 1.4% of the population of 1 billion) and pay the equivalent to the average Indian’s day’s wages (US $1-3) to see any of the over 800 films churned out by Bollywood each year. That’s more than double the number of feature films produced in the United States. However, as this video presents, more movie productions in Bollywood will undergo budget cuts due to economic risks and the push for profits.

Questions:

1. The article tells about the 10 most high budget films of Bollywood. Look at the budget for Love Story 2050. If 1 crore rupee = 10,000,000 rupees, use the Currency Converter at http://coinmill.com/INR_USD.html to find out how many U.S. dollars this is. How does this compare to the average budget for a Hollywood movie?

2. In the article, look at the movie “Singh is Kinng.” This film had the title track song sung by Snoop Dogg. Snoop Dogg was paid 7 crores for this. What percent of the movie’s total budget was this?

3. In the article, look at the movie “Ghajini.” What percentage of profits were made on this movie?

 
Source:

Staff (2009). 10 Most High Budget Films of Bollywood. Full Dhamaal, August, 19 (Retrievable online at http://www.fulldhamaal.com/bollywood-critics/10-most-high-budget-films-of-bollywood-21146.htm)
Video (2010). Budget Bollywood Success, September 7. (Retrievable at http://www.cnn.com/video/)

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