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

For all you Starbuck’s watchers, remember in February 2012 when Logan Warren held the record for the most expensive Starbuck’s drink? It was a 31-ounce Trenta that cost $23.60. Into it went a Java Chip Frappuccino, enhanced with plenty of that’ll-cost-you-add-ons: 16 shots of espresso, soy milk, caramel, banana and strawberry purees, vanilla beans, and Matcha and protein powders, all topped with a bit of caramel and mocha. While Warren admitted that the 1,400 mg of caffeine was not great for his body, he also did not have to pay for it since he had a free drink coupon.

Now fast forward to this week, Feb. 19, 2013, Beau Chevassus ordered the “Quadriginoctuple Frap.” This $47.30 drink is: a venti 40-shot mocha Frappuccino with soy milk, mocha drizzle, matcha powder, protein powder, caramel brulee topping, strawberry, two bananas, caramel drizzle, Frappuccino chips, and vanilla bean. In this case, Chevassus brought his own 52-ounce mug (purchased at Goodwill), and ordered the drink on his birthday—so it was free.

Questions:
1. How should Starbucks account for these drinks? Please include journal entries in your answer.
2. What is the most expensive part of both of these drinks? In the 2013 record, the report said that Chevassus did “a lot of research” about breaking the record. What do you think this meant?
3. Calculate the per ounce cost for both the February 2012 and February 2013 record drinks. What percentage increase per ounce occurred between the two record drinks? Based on your calculations, can you say that the cost per ounce went up over the year? Would the profit margin for each drink be similar? If not, explain what additional information would you need to answer these cost questions and how a comparison could be made.
4. Go to http://www.guinnessworldrecords.com. What problems do you see with either of these individuals trying to be a Guinness record holder? Discuss.

Sources:
Roberts, C. (2013). VIDEO: Starbucks’ most expensive drink may just be the $47.30 ‘Quadriginoctuple Frap,’ NYDailyNews.com. February 19 (Retrievable online at http://www.nydailynews.com/news/national/starbucks-most-expensive-drink-record-broken-article-1.1268184#ixzz2LRlotGiI)
Levy, G. (2013). Man orders world’s most expensive Starbuck’s drink at $47.30. UPI.com, Feb. 19 (Retrievable online at http://www.upi.com/blog/2013/02/19/Man-orders-worlds-most-expensive-Starbucks-drink-at-4730/2181361285111/)
Seamons, K. (2013). Priciest Ever? Guy orders $47.30 Starbucks Drink. Newser.com, Feb. 20 (Retrievable online at http://www.newser.com/story/163145/priciest-ever-guy-concocts-4730-starbucks-drink.html)
Seamons, K. (2012). Man Tries to Order Priciest Starbucks Drink Ever. Newser.com Feb. 19 (Retrievable online at http://www.newser.com/story/139858/man-tries-to-order-priciest-starbucks-drink-ever.html

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

Rita-Crundwell-009_244x183In November 2012, Rita Crundwell, comptroller of Dixon, Illinois, pleaded guilty to wire fraud and admitted that she stole approximately $53 million, admitting she stole the money from the city of Dixon while she was comptroller. She still faces 60 separate but related state felony charges for theft in Lee County. She has pleaded not guilty to those charges.

Questions:
1. Based on Bryan Smith’s article, how was Crundwell’s fraud discovered?
2. In retrospect, what red flags should have been investigated earlier?
3. According to forensic accountant, Dennis Czurylo, which part of Crundwell’s fraudulent scheme would be nearly impossible to execute today, given new regulations and government reporting?
4. How did the structure of the city government for Dixon contribute to the inability to find this fraud?

Source:

Glynn, C. (2013). Rita Crundwell, Ill. financial officer who allegedly stole $53 million, sentenced to 19.5 years in prison. CBS News.com, Feb. 14 (Retrievable online at

Smith, B. (2012). Rita Crundwell and the Dixon Embezzlement. Chicago Magazine, Nov. 14 (Retrievable online at http://www.chicagomag.com/core/pagetools.php?mode=print&url=%2FChicago-Magazine%2FDecember-2012%2FRita-Crundwell-and-the-Dixon-Embezzlement%2F)

Posted by & filed under Accounting Principles, Advanced Accounting, All Articles, Auditing, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, Fraud Accounting, Intermediate Accounting.

UPDATE 2/22/13: After the traders failed to appear at a hearing today in Manhattan, U.S. District Judge Jed Rakoff agreed to freeze the Goldman Sachs Group Inc. account until the case is resolved. The SEC on Feb. 15 sued the “unknown” traders over suspicious purchases of Heinz options through the account. Judge Rakoff was quoted as saying, “They can hide but their assets can’t run.”

Ketchup2/16/13: The U.S. Securities and Exchange Commission has frozen the assets of a Swiss trading account that allegedly made a series of “highly suspicious” trades reaping about $1.7 million ahead of the blockbuster sale of H.J. Heinz to Warren Buffett’s Berkshire Hathaway.

Questions:

1. What steps did investigators take before freezing the assets?
2. What percent increase did the stock see on Thursday after the deal was made public?
3. What is unique about the Heinz enforcement action?
4. What does this investigation have in common with the 2010 Burger King inquiry into insider trading?
5. Explain the concept of how the traders amassed an unrealized profit in this case and what their initial investment was.

Source:

Bray, C. and J. Eaglesham. (2013) SEC Freezes Swiss Account over Heinz Trades. The Wall Street Journal, Feb. 16 (Retrievable Online at http://online.wsj.com/article/SB10001424127887323478004578306500280942678.html)

Hurtado, P. and C. Smythe (2013). SEC Wins Asset Freeze After Heinz Traders Fail to Appear. Bloomberg, Feb. 22 (Retrievable Online at http://www.bloomberg.com/news/2013-02-22/sec-wins-asset-freeze-after-heinz-traders-don-t-appear-in-court.html)

Posted by & filed under Accounting Principles, All Articles, Auditing, Cost Accounting, Financial Accounting, Fraud Accounting, Intermediate Accounting, Managerial Accounting, Video Updates.

Ohio has returned more than $3.4 million in unclaimed funds to Elyria in what it says is the largest such payment in state history.

Questions:
1. Where did the funds originate?
2. Are there unclaimed funds in every state? If so, how do you access the list in your state?
3. How do you think the states handle the accounting of these funds?

Source:

CNN Video. (2013). Town gets $3.4 million in lost funds, January 29 (Retrievable online at http://cnn.com/video/data/2.0/video/us/2013/01/29/dnt-oh-town-recovers-lost-funds.wjw.html)

Associated Press. (2013.) Ohio Returns over $3.4 million in Unclaimed Funds to Elyria. January 28 (Retrievable online at http://www.newsnet5.com/dpp/news/local_news/oh_lorain/ohio-returns-over-34m-in-unclaimed-funds-to-elyria)

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

Out-of-NetworkAccording to a new study from the Center for Policy and Research, the nation must address the soaring cost of medical care that continues to rise at an unsustainable rate. For consumers who choose to seek care out-of-network, their survey shows that the charges billed by some out-of-network providers can exceed several hundred or several thousand percent of what Medicare would reimburse for the same service in the same area. In a new expose by The New York Times, reporter Roni Rabin submits that the industry suggests using Medicare rates as a benchmark will only lead to patients’ picking up much more of the cost for out-of-network care, whether they carefully select a specialist or have no choice in the matter.

Questions:
1. What is the Affordable Care Act?
2. Do you think the problem with out-of-network providers will become better or worse with the implementation of this Act? Discuss.
3. Why do you think that many of the highest billers were in New York, Texas, Florida and New Jersey? Present your reasons.
4. Take the examples listed in the Rabin article and calculate the percentages above Medicare reimbursement. Which medical procedure example has the highest percentage above Medicare?

Sources:
Rabin, Roni. (2013). Report Faults High Fees for Out-of-Network Care. The New York Times, January 31 (Retrievable online at http://www.nytimes.com/2013/02/01/health/insurance-industry-report-faults-high-fees-for-out-of-network-care.html?hp&_r=0)
The Center for Policy and Research. (2013).Survey of Charges Billed by Out-of-Network Providers: A Hidden Threat to Affordability. January (Retrievable online at http://www.ahip.org/Value-of-Provider-Networks-Report-2012/)

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

According to Ethan Bronner at the New York Times, law school applications are headed for a 30-year low, reflecting increased concern over soaring tuition, crushing student debt and diminishing prospects of lucrative employment upon graduation.

Questions:
1. Summarize the recent trend in the number of applications to law schools.
2. What are your views on why the allure of law school does not lead to upward mobility as it has in the past?
3. Many students interested in taxation consider law school. Present the costs and benefits of this path as compared to obtaining an accounting degree or Master’s degree in taxation and a CPA.

Source:

Bronner, E. (2013). Law Schools’ Applications Fall as Costs Rise and Jobs Are Cut. The New York Times, January 30 (Retrievable online at http://www.nytimes.com/2013/01/31/education/law-schools-applications-fall-as-costs-rise-and-jobs-are-cut.html?hp&_r=1&)

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

Texas may be experimenting with an initiative to help students and families struggling with the high costs of college: a bachelor’s degree for $10,000, including tuition fees and even textbooks. Under a plan unveiled in 2011, Republican Gov. Rick Perry is proposing a bachelor’s degree for $10,000, including tuition fees and even textbooks. The governor has called on institutions in Texas to develop options for the success of these low-cost undergraduate degrees.

Questions:

1. If the annual cost of tuition in Texas is $8,354 at a public institution, what percentage decrease in costs is the governor proposing?
2. What is the UT Arlington model for $10,000?
3. What is the Angelo State University model for under $10,000?
4. What is the Texas A & M model for about $10,000?
5. Which of these do you think makes the most sense and why?
6. Do you think that the $10,000 degree will result in innovation or what some critics argue is a a second-rate education (you get what you pay for)?
Source:
Seligman, L. (2012). Does Texas Have an Answer to Sky-High Tuition? The National Journal, Nov. 23 (Retrievable online at http://www.nationaljournal.com/domesticpolicy/does-texas-have-an-answer-to-sky-high-tuition–20121123) 

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

There are very few corporate leaders whose interests are more closely aligned with their shareholders’ than the homemaking icon, Martha Stewart. She owns 26 million shares and controls nearly 90 percent of the voting rights of her company Martha Stewart Living Omnimedia. While the company lost $50.7 million dollars in the most recent quarter, this bad news has not impacted Ms. Stewart’s own compensation. In fact, her corporate perks are well known, and she has long blurred the line between business and personal expenses.
Questions
1. The article mentions that Ms. Stewart gets an additional minimum of $2 million a year under an “intangible assets license agreement.” Explain what this is and how the company would record this in its financial statements.
2. The article mentions that the company saw a $44.3 million noncash write-down related to the shrinking value of two of its magazines. Make the journal entry for this and discuss how it would be presented in the financial statements.
3. Just before Ms. Stewart got out of prison in 2005, her shares were trading at over $34 and she was a billionaire. After plunging during the financial crisis, they were above $8 a share in September 2009. They traded this week at about $2.80. What percentage drop have the shares seen since 2005?
4. What is the main point of the article? Why would licensing the brand be better for the shareholders, as the article suggests?
Source:
Stewart, J.B. (2012). A Brand Icon in Need of Some Oversight. The New York Times, Nov. 8 (Retrievable online at http://www.nytimes.com/2012/11/10/business/at-martha-stewart-living-martha-may-be-the-problem.html?pagewanted=1&ref=marthastewartlivingomnimediainc)

Posted by & filed under Accounting Principles, All Articles, Cost Accounting, Fraud Accounting, Intermediate Accounting, Managerial Accounting, Video Updates.

This article looks at ad spending on the presidential race from April 10 to Oct. 10, based on data from Kantar Media. According to the video and article, the millions of dollars spent by superPACs and other outside groups send a clear message: There are really only 12 states in this presidential election and it’s no surprise that they are all pretty purple, rather than red or blue.

Questions:
1. Based on the article, how much are you worth as a voter as a voting-age adult (based on ad dollars per individual)?
2. What is the controversy over finances and super-PACs? Discuss.
3. Which states have the highest ad spending per individual voting-age adult? Can you speculate on why these states are higher than another state (perhaps the one you live or go to school in)? Discuss.
4. What qualitative issues are being ignored by these individual costs?

Source:
Cole, A. (2012). A Campaign Map, Morphed By Money. www.NPR.org, Nov. 1 (Retrieveable at http://www.npr.org/blogs/itsallpolitics/2012/11/01/163632378/a-campaign-map-morphed-by-money)

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

Hyundai Motors America and Kia Motors America are being forced to lower the fuel economy estimates on the majority of their 2012-13 models after an investigation by the Environmental Protection Agency found that the companies overstated the fuel efficiency numbers for their vehicles in previous years. Based on the audit, they will also have to compensate owners of at least 900,000 2011-2013 model year vehicles.

Questions:

1. What is the anticipate reimbursement program expected to cost and how should Hyundai account for it?
2. According to the EPA, why was this deviation from gas mileage so different from previous incidents?
3. Which other agency or agencies may get involved in this investigation? Do you think there should be an audit of the industry for this type of violation? Discuss.

Source:
Guarino, M. (2012). Hyundai, Kia overstated mileage, EPA finds. What it means for consumers. The Christian Science Monitor, Nov. 2 (Retrievable online at http://www.csmonitor.com/Business/2012/1102/Hyundai-Kia-overstated-mileage-EPA-finds.-What-it-means-for-consumers)