Shopping Comes at A Price

Posted by & filed under Accounting Information Systems, Accounting Principles, Cost Accounting, Financial Accounting, Financial Reporting and Analysis, Intermediate Accounting, Managerial Accounting, Video Updates.

According to Chico Harlan, five years after the Great Recession, the most striking change in the world of low-income commerce has been the proliferation of rent-to-own stores.

Questions:
1. How do rent to own stores avoid state usury laws and other regulations aimed at excessive interest payments?
2. What percentage of items are returned or repossessed by Buddy’s Home Furnishings according to the Cullman store employee interviewed in the article?
3. Record Buddy’s journal entry for the “rent-to-own” sale of the sofa mentioned in the article.
4. If the same sofa is repossessed after $500 is paid toward the principle of the sofa, what journal entry should Buddy’s make?

Source:
Harlan, C. (2014). Rental America: Why the Poor Pay $4,150 for a $1,500 sofa. Washington Post, Oct. 16 (Retrievable online at http://www.washingtonpost.com/news/storyline/wp/2014/10/16/she-bought-a-sofa-on-installment-payments-now-its-straining-her-life/?hpid=z1)

The new trend in non-compete clauses

Posted by & filed under Accounting Principles, All Articles, Cost Accounting, Financial Accounting, Intermediate Accounting, Managerial Accounting.

If you are a chief executive of a large company, you very likely have a non-compete clause in your contract and also understand the importance of this clause in preventing you from jumping ship to a competitor until some period has elapsed. However, according to the New York Times, non-compete clauses are popping up in an array of low to moderate pay jobs, like for sandwich makers at the chain – Jimmy John’s.
Questions:
1. According to the article, why do non-compete clauses for low to moderate pay jobs serve to tilt the playing field toward the owners of businesses and away from the workers who staff them?
2. What are some of the subtle work conditions used by employers to extract more value from entry level workers?
3. According to the article, what are examples of companies that embrace workers as valuable partners in building a company for the long term and how do they demonstrate this?
4. How do non-compete clauses affect accountants and the accounting profession? Do you agree with non-compete clauses in the accounting profession? Discuss.

Source:
Irwin, N. (2014) When the Guy Making Your Sandwich Has a Noncompete Clause. The New York Times, Oct. 14 (Retrievable online at http://www.nytimes.com/2014/10/15/upshot/when-the-guy-making-your-sandwich-has-a-noncompete-clause.html?mabReward=RI%3A6&action=click&contentCollection=Politics&region=Footer&module=Recommendation&src=recg&pgtype=article&abt=0002&abg=1&_r=0)

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Impending Huge Penalties!

Posted by & filed under Accounting Information Systems, Accounting Principles, Auditing, Cost Accounting, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, Intermediate Accounting, Managerial Accounting.

The Kansas Supreme Court found that FedEx drivers were illegally misclassified as independent contractors from the late 1990s through 2011, despite being treated as employees. According to Alan Pyke, FedEx set contract agreements with delivery and pickup drivers in order to avoid the higher costs associated with making the drivers full employees.

Questions:
1. What is the amount per worker that the Treasury Department estimates that FEDEX saved annually from this misclassification?
2. Based on this, what types of payroll-related expense accounts would have seen savings?
3. The Kansas case is but one of several FedEx suits filed last decade. What is the estimate of penalty that FEDEX will face for back pay to California drivers alone?
4. As an auditor, what type of evidence would you ask to review in order to determine whether employees were misclassified as independent contractors?

Source:

Pyke, A. (2014). FedEx Illegally Labeled Employees As Independent Contractors To Cut Costs, Kansas Court Finds. Think Progress, Oct. 7 (Retrievable online at http://thinkprogress.org/economy/2014/10/07/3576714/fedex-driver-misclassification-kansas/)

Fedex

The Game is Rigged: Criminal Spoofing of the Market

Posted by & filed under Accounting Information Systems, Accounting Principles, Advanced Accounting, Auditing, Cost Accounting, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, Fraud Accounting, Intermediate Accounting, Managerial Accounting.

Federal prosecutors have filed the first-ever indictment of an individual financial professional for manipulating markets through high-speed trading. By using a Michael Coscia used the high-tech trading platform at a commodities trading company that he runs, Michael Coscia placed and then cancelled dozens of large purchases in less than a second. The result was that he tricked the electronic marketplaces that determine the commodities prices.

Questions:
1. How much was Mr. Coscia able to pocket with this scheme over a three-month period?
2. What is the commodities market? Explain and give examples.
3. How does the article propose that a Financial Transactions Tax (FTT) would limit damage to consumers as investors? Discuss after you watch the video.

Source:

Pyke, A.(2014) This Is The First High-Frequency Trader To Be Criminally Charged With Rigging The Market. ThinkProgress.org, Oct. 3 (Retrievable online at http://thinkprogress.org/economy/2014/10/03/3575732/high-frequency-trading-criminal-charge-spoofing/)

YouTube (2014). Wall Street Tax Briefing. Public Citizen, Sep. 26 (Retrievable online at https://www.youtube.com/watch?v=BmShwQB_ajk)

Dutch Treat?

Posted by & filed under Accounting Information Systems, Accounting Principles, Auditing, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, IFRS, Intermediate Accounting, International Accounting, Managerial Accounting.

According to the New York Times, “Dutch pensions are scrupulously funded, unlike many United States plans, and are required to tally their liabilities with brutal honesty, using a method that is common in the financial-services industry but rejected by American public pension funds.” This article discusses the Dutch belief that each generation should pay its own costs. To do that requires that the costs be measured accurately.

Questions:
1. According to the data from the article, for every dollar owed to current and future pensioners in the U.S. through public funds, how much is actually funded or held by the pension fund?
2. Do you see this situation becoming better or worse with more U.S. firms adopting IFRS? Discuss.
3. Perform a comparative analysis of U.S. pensions versus Dutch pensions, based on the information in the article.
4. Explain the intergenerational debate occurring in the Netherlands regarding management of pensions.

Source:
Walsh, M.W. (2014). No Smoke, No Mirrors: The Dutch Pension Plan. The New York Times, Oct. 11 (Retrievable online at http://www.nytimes.com/2014/10/12/business/no-smoke-no-mirrors-the-dutch-pension-plan.html?hp&action=click&pgtype=Homepage&version=HpSumSmallMediaHigh&module=second-column-region&region=top-news&WT.nav=top-news)

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Should After-Work Screenings be Part of the Payroll?

Posted by & filed under Accounting Information Systems, Accounting Principles, All Articles, Cost Accounting, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, Fraud Accounting, Intermediate Accounting, Managerial Accounting, Uncategorized.

The nation’s retailers are paying close attention to the hotly contested issue before the Supreme Court this week. On Wednesday, the justices will determine whether security checks and the related waiting time should be part of an employee’s regular, compensable workday.

Questions:
1. As part of the opposition of compensation for antitheft checks, retailers’ groups estimate that what percentage of stores check bags and perform other antitheft checks at the end of the workday?
2. If you assume that Mr. Busk should be compensated for the 25 minutes as overtime pay, how much would this amount to?
3. Based on Mr. Busk’s hourly wage of $12.35, make both the journal entries that should be recorded by the company for his first 40-hour week of employment in 2014 with the 25 minutes of overtime included.

Source:
Greenhouse, S. (2014). Justices Weighing Wages for After-Work Screenings, The New York Times, Oct. 3 (Retrievable online at http://www.nytimes.com/2014/10/04/business/justices-weighing-wages-for-after-work-screenings-.html?module=Search&mabReward=relbias%3As)

Bounced Check from Mortgage settlement

Trademarks Gone Wild

Posted by & filed under Accounting Information Systems, Accounting Principles, Advanced Accounting, All Articles, Auditing, Cost Accounting, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, Intermediate Accounting, Managerial Accounting.

A bitter legal battle is raging between a best-selling author and a management guru against America’s largest Greek yogurt manufacturer. For Chobani, it is a fight about an ambitious brand campaign and its straining process that is built around the phrase “How Matters.” For Dov Seidman, “How Matters” revolves around his business of helping companies create more ethical cultures.

Questions:
1. According to accounting standards, what are the reporting and recognition standards for trademarks?
2. According to the article, there have been a lot of trademark lawsuits over common words but never one as generic as “how.” What two categories do these lawsuits fall in?
3. Based on this article, what category does this suit fall into and who do you think will prevail, if anyone?

Source:
Mahler, J. (2014). If the Word ‘How’ Is Trademarked, Does This Headline Need a ™ ? Chobani and Dov Seidman Wrestle Over Use of ‘How’ Trademark, The New York Times, Oct. 5
chobani

Why Won’t My Car Start?

Posted by & filed under Accounting Information Systems, Accounting Principles, Cost Accounting, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, Intermediate Accounting, Managerial Accounting, Video Updates.

Before many subprime borrowers drive their car off the lot, their car is equipped with a starter interrupt device, which allows lenders to remotely disable the ignition. This article and video highlight the problematic issues related to “electronic repossession.”

Questions:
1. What percentage of car loans are estimated to be lending for subprime borrowers?
2. Who is the leading device maker and what is their claim about the reduction of late payments?
3. Why are legal experts arguing that these tactics violate state laws? Do you agree or disagree? Discuss.
4. If PassTime or another manufacturer was sued in 2014 and it was probable that the subprime lenders would win $25 million in court for safety violations, how should the device maker report this in its annual report and financial statements?

Sources:
Corkery, M. and J. Silver-Greenburg. (2014). Miss a Payment? Good Luck Moving That Car. The New York Times, Sep. 24 (Retrievable online at http://dealbook.nytimes.com/2014/09/24/miss-a-payment-good-luck-moving-that-car/?_php=true&_type=blogs&_r=0)

NBC News Video. (2014). Lenders Remotely Disable Car When Payments are Late. NBC, Oct. 5 (Retrievable online at http://www.nbcnews.com/watch/nightly-news/lenders-remotely-disable-car-when-payments-are-late-338102851592)

Ouch! Sometimes Consent Forms Hurt!

Posted by & filed under Accounting Information Systems, Accounting Principles, Advanced Accounting, All Articles, Auditing, Cost Accounting, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, Intermediate Accounting, Managerial Accounting.

According to the New York Times, an increasingly common practice used by hospitals is that some medical experts call drive-by doctoring assistants, consultants, and other hospital employees into cases and these incidents are charging patients or their insurers hefty fees. Most times patients do not realize these individuals have been involved or are charging until the bill arrives.

Questions:
1. What are some of the reasons why this charges can be so significant?
2. How does this practice drive medical insurance rates?
3. According to the Brookings Institution, how much does this contribute to the nation’s overall annual healthcare bill?
4. Insurance experts say surgeons and assistants sometimes share proceeds from operations. Do you think this is ethical and/or legal? Discuss.
5. Assuming the original bill from Dr. Tindel was $133,000, prepare the journal entry (using payables) that Dr. Nathaniel L. Tindel would make for the negotiated fee determined through Mr. Drier’s insurance company of $6,200, where Mr. Drier owes $3,000 to meet his deductible.

Source:
Rosenthal, E. (2014). After Surgery, Surprise $117,000 Medical Bill From Doctor He Didn’t Know. The New York Times, Sep. 20 (Retrievable online at http://www.nytimes.com/2014/09/21/us/drive-by-doctoring-surprise-medical-bills.html?emc=edit_th_20140921&nl=todaysheadlines&nlid=62022414&_r=0)
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The Big Wash Machine for Mexican drug cartels

Posted by & filed under Accounting Information Systems, Auditing, Fraud Accounting, IFRS, Intermediate Accounting, International Accounting, Video Updates.

Turning dirty cash from drug sales into clean, usable currency has become harder for Mexican drug gangs as a result of tighter banking regulations at home and in the U.S. However, the latest money laundering schemes are piggy-backing on cross-border trade.

Questions:
1. What is a “suspicious activity report” filed by banks in the U.S. and where did most of these come from?
2. Small manufacturers and cash deposits are not the only place to look for Mexican drug laundering. What other places does this article indicate should be examined?
3. Explain the simple scheme of money laundering used by those arrested in Los Angeles on Sep. 10.

Source:
The Economist staff. (2014). Mexico’s Drug Cartels Have An Ingeniously Simple Method Of Laundering Money. Business Insider, Sep. 21 (Retrievable online at http://www.businessinsider.com/laundering-mexicos-drug-money-washing-up-2014-9)

YouTube.com video. (2013). Money laundering, Explained. Global Financial Integrity, Oct. 17 (Retrievable online at https://www.youtube.com/watch?v=ChNpq9QbMRY)