The Disappearing Debt Suddenly Reappears!

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.

Jackie Esposito, of Guilford, Conn., got a letter that said her debt with JPMorgan Chase was canceling the amount she owed on a home equity account. While most people would be excited to get such a letter, Ms. Esposito was not. That is because Ms. Esposito had the debt legally wiped out three years ago through bankruptcy court.

Questions:

1. What type of tax complications might this cause Ms. Esposito with the IRS?
2. Explain the questionable issue with the lien on the property. What is another name for a home equity loan?
3. Why don’t you think that Chase will modify Ms. Esposito’s first mortgage but forgive one that doesn’t exist?
4. How do you think that the government credits for banks play into this story? Brainstorm the possibilities.

Source:
Morgenson, G. (2012). How to Erase A Debt that Isn’t There. The New York Times, Sep. 29 (Retrievable online at http://www.nytimes.com/2012/09/30/business/when-banks-erase-a-debt-that-isnt-there.html?_r=0)

An Ugly Tale: Double-Life and Secret Fortune

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

CFO John Franklin Howard, the trusted CFO and CPA for Raley Holdings, Inc., a defense contractor based in Grapevine, Texas, now has more than just $32 million to account for from his embezzlement; he is also facing solicitation of murder charges. Interestingly, he used some of the embezzled money to pay someone to murder his wife of 29 years, as well as provide millions to support his mistress.

Questions:

1. What control(s) would have prevented Mr. Howard from embezzling this money?

2. What false journal entries is Mr. Howard accused of making? Give an example of these entries, as explained in the article.

3. The false entries explained in the article only account for $144,000. How do you think the other millions were siphoned off? Explain why you think this fraud was able to span over a three-year period before it unraveled.

Source:

Ambord, T. (2012). CFO Accused of Murder-for-Hire on His Employer’s Dime. AccountingWEB, Sep. 18 (Retrievable online at http://www.accountingweb.com/article/cfo-accused-murder-hire-his-employers-dime/219868?source=education)

When Will Apple Hit the Trillion Dollar Mark?

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

When will Apple become the first company ever to be valued at $1 trillion? This new guessing game is the focus of the article by Nick Bilton.

Questions:

1. Explain the $1 trillion in accounting terms (or the accounting equation). What is/are the product(s) that got the company to this point? Research these products and find out the estimate of profit that Apple makes on each one sold.
2. Why does the article mention Nokia and Microsoft? Could you see Apple in either one of these situations in a few years? Why or why not?
3. What does the article predict as the second phase in the Apple revolution?

Source:

Bilton, N. (2012). Disruptions: Will Apple Be the First to Break $1 Trillion? The New York Times, Sep. 23 (Retrievable online at http://bits.blogs.nytimes.com/2012/09/23/will-apple-be-the-first-to-break-1-trillion/?hp)

Aporkalypse? Not So.

Posted by & filed under Accounting Principles, Advanced Accounting, Cost Accounting, Financial Accounting, Financial Statement Analysis, Intermediate Accounting, Managerial Accounting, Video Updates.

A bacon shortage was part of the headlines this week as a result of a September 20 press release from Britain’s National Pig Association, a trade group that describes itself as “Fighting for the growth and prosperity of the British pig industry.” While the pork industry is currently under serious stress, the reality is that a bacon shortage will probably be remote.

Questions:

1. Where did the story start regarding a bacon shortage? From your perspective, what does this story say about media and social media with respect to business issues?
2. What is the actual story of demand and supply and prices for pork in the near future?
3. The Minyanville article presents a quote by Shawn Hackett, a money manager specializing in agricultural commodities, which says, “ There’s nothing binary about livestock; there are always a lot of moving parts.” After reading the articles and viewing the video, what does he mean in economic terms?

Sources:

New York Times Video. (2012). A Sizzling Hot Commodity. September 27 (Retrievable online at http://www.nytimes.com/video/playlist/business/1194811622255/index.html#100000001810165)

Minyanville Staff. (2012). Relax, the Great Bacon Shortage of 2012 Is a Myth. Minyanville.com-Trading and Investing, Sep. 28 (Retrievable online at http://www.minyanville.com/trading-and-investing/commodities/articles/bacon-shortage-Global-Bacon-Shortage-feed/9/28/2012/id/44511)

Satran, J. (2012). Bacon Shortage “Aporkalypse” Theoretically Possible, But Highly Unlikely Given Basic Economics. Huffington Post, Sep. 28 (Retrievable online at http://www.huffingtonpost.com/2012/09/28/bacon-shortage_n_1920575.html?utm_hp_ref=food)

Feds Catch Bid-Rigging Bankers

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

Federal authorities are pursuing legal action against bankers accused of systematically defrauding states, local governments and non-profits. The ongoing probe is focusing on bankers who have colluded about the offers they’ve made as they bid on contracts to invest municipal bond proceeds.

Questions:
1. What is bid-rigging? Summarize the way in which the suspect bankers perpetrated their municipal bond crime.

2. Over the course of the federal investigation, which firms have been found to be participating in the bid-rigging? How much have the victimized government agencies been able to collect in penalties, restitution and other fees from the institutions involved?

3. While the investigation remains ongoing, how old are some of the bid-rigging instances?

4. Is this a victimless crime? If not, who are the those stakeholders that lose money in this scheme?

Source:
O’Toole, J. (2012). Bankers nabbed in bid-rigging scandal, CNN.com, Sep. 18 (Retrievable online at http://www.wptz.com/news/money/Bankers-nabbed-in-bid-rigging-scandal/-/8869718/16645342/-/2fewq5/-/index.html)

The End to Red Ink?

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.

The struggling online company, Groupon, has just announced promotion that will allow them to stay afloat. It is a combination of hardware and software that will allow businesses to accept credit cards at rate far lower than what most merchants are currently paying. Instead of the usual credit card processing fee of between 2% and 4% on every transaction, Groupon Payments only asks 1.8% plus 15 cents for each swiped transaction. However, to get this rate, merchants must run a daily deal with Groupon.

Questions:
1. According to the article, will Groupon be profitable with this scheme?
2. What are the costs and benefits to Groupon with this scheme?
3. What are the costs and benefits for businesses using this scheme?
4. Research the company – Square. How do they compare with Groupon?

Source:
Mims, C. (2012). Can a Credit Card Scheme Save Groupon? (Probably Not). The Atlantic, Sep. 21 (Retrievable online at http://www.theatlantic.com/business/archive/2012/09/can-a-credit-card-scheme-save-groupon-probably-not/262667/)

How to Earn $46,000 for Each Day Spent in Prison

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

Bradley Birkenfeld, the whistleblower in a tax fraud case against Swiss bank UBS AG, was awarded a record-setting $104 million reward from the IRS. Birkenfeld learned about the inner workings of UBS as an employee of the company and supplied many secrets about his former employer’s dealings with U.S. clients. Despite this, he was jailed after the government said that he withheld other information. He spent 30 months in prison as a result and was only released from prison last month. He is now living in New Hampshire under home confinement at a friend’s estate.

Questions:

1. After paying taxes and legal fees on the $104 million reward, how much will Mr. Birkenfeld have? What percentage is this of the original reward?
2. To settle the case, UBS paid fines, penalties, interest and restitution of how much? How would this be recorded in the financial statements of UBS?
3. What was the return to the IRS for the information that Mr. Birkenfeld provided? Do you agree or disagree with the reward in this case? Why or why not?

Sources:

CNBC Video (2012). Whistleblower Gets $104 Million Payout from IRS. Sep. 11 (Retrievable online at http://video.cnbc.com/gallery/?video=3000115258#)

Temple-West, P. and L. Browning. (2012). Whistleblower in UBS tax case gets record $104 million. Reuters.com, Sep. 11 (Retrievable online at http://www.reuters.com/article/2012/09/11/us-usa-tax-birkenfeld-idUSBRE88A0TE20120911)

Movie with a Happy Ending?

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

When the Treasury Department bailed out AIG and said two years ago that it was likely to lose only about $5 billion on the bailout, Neil Barofsky, a former official of the Troubled Asset Relief Program (TARP) declared that the number was “manipulated” as part of a “publicity campaign” to boost the positive aspects ahead of the midterm elections. However, this week, the Treasury Department indicated that it would sell its $18 billion share of AIG and turn a profit.

Questions:
1. Now that the Treasury has announced its profit, what does Mr. Barofsky have to say?
2. Based on the article, do you agree with the Treasury’s concept of profit?
3. Explain the concept of the break-even sale price for AIG shares.

Source:
Sorkin, A. (2012). Plot Twist in the A.I.G. Bailout: It Actually Worked. The New York Times, Sep. 10 (Retrievable online at http://dealbook.nytimes.com/2012/09/10/plot-twist-in-the-a-i-g-bailout-it-actually-worked/?hp)

The Unbanked

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

According to a new Federal report, more Americans are limiting or have no interaction with banks. Instead they rely on check cashers and payday lenders to manage their finances.

Questions:
1. What are the costs and benefit of avoiding banks?
2. What percentage of U.S. households are “unbanked”? What are the demographics of this group?
3. Do you think that this is related to financial institution abuses? Discuss.

Source:
Douglas, D. (2012). More Americans Opting Out of the Banking System. The Washington Post, Sep. 12 (Retrievable online at http://www.washingtonpost.com/business/economy/more-americans-opting-out-of-banking-system/2012/09/12/6380b986-fcf1-11e1-a31e-804fccb658f9_story.html?tid=pm_business_pop )

Do I have to take the course? Will I go to jail?

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

More than 300 district attorneys’ offices allow debt collectors to use their letterhead to send letters to people across the country who have written bad checks. These letters threaten them with jail if they do not pay up. In return, the companies try to collect not only the unpaid check, but also high fees from debtors for a budgeting and financial responsibility class, some of which goes back to the district attorneys’ offices.

Questions:
1. How are the district attorneys’ office justifying these relationships with debt collectors?
2. What are the challenges to this practice?
3. Do you agree with the ethics and legitimacy of these programs? Why or why not?

Source:
Silver-Greenberg, J. (2012). In Prosecutors, Debt Collectors Find a Partner. The New York Times, Sep. 15 (Retrievable online at http://www.nytimes.com/2012/09/16/business/in-prosecutors-debt-collectors-find-a-partner.html?_r=1&hp)