Lack Luster Gold

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According to Ms. Pattanaik, GOLD is not the safe haven that it once was. In fact, she concludes that gold may only come back as a safe haven if the markets face even grimmer news than that of recent times.

Questions:
1. According to the author, what are the reasons why investor panic is not translating into a bigger bounce in gold?
2. By how much has gold dropped in price since November 2015? What happened to gold’s rebound on January 20?
3. According to the author, explain why gold is not a good hedge against inflation in the western world.

Source:
Pattanaik, S. (2016). Gold’s prospects are dull. Reuters.com, Jan. 25 (Retrievable online at http://blogs.reuters.com/breakingviews/2016/01/25/golds-prospects-are-dull/)gold-investment-25076051

The New Surge in Corporate Migrants: Is there an End?

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The federal government gave Johnson Controls a bailout in 2008 to avoid certain bankruptcy, along with its customers, the large automakers – General Motors and Chrysler. This week, Johnson Controls renounced its United States corporate citizenship by selling itself to Tyco International, based in Ireland. This deal was struck, in large part, to reduce an annual tax bill by $150 million.

Questions:
1. What other large companies does the article mention as part of exodus of companies seeking lower tax havens?
2. Explain the term “corporate inversion.”
3. Between 1992 and 2009, what amount of tax breaks has Johnson Controls received from Michigan?
4. What does the author point to as the solution for keeping American companies in America?

Source:
Sorkin, A. (2016) A Tidal Wave of Corporate Migrants Seeking (Tax) Shelter. The New York Times, Jan. 25 (Retrievable online at http://www.nytimes.com/2016/01/26/business/dealbook/a-tidal-wave-of-corporate-migrants-seeking-tax-shelter.html)

tax shelter

Her Majesty’s Revenue and Customs said it enforces tax rules impartially—regardless of a company’s size.

Posted by & filed under Accounting Information Systems, Accounting Principles, Advanced Accounting, Auditing, Cost Accounting, Financial Accounting, Intermediate Accounting, International Accounting, Managerial Accounting.

Google has agreed to pay 130 million pounds (or about $185 million) in a tax settlement to U.K. authorities, where the British Labour Party criticizes the government’s handling of the case and the normal use of corporate tax strategy workarounds.

Questions:

1. How far back in time does the settlement go to cover back taxes?
2. What are the two shelter strategies that Google has used to avoid billion of dollars in taxes around the world?
3. What is the name of Google’s parent company?
4. Make the journal entry that Google would record for this settlement, assuming that it will be paid sometime in the near future.

Source:
Womack, B. (2016). Google Agrees to Pay $185 million in U.K. Tax Settlement. Accounting Today, Jan. 25 (Retrievable online at http://www.accountingtoday.com/news/tax-practice/google-agrees-to-pay-185-million-in-uk-tax-settlement-77030-1.html)

chess

Secret Buyers of Real Estate Targeted

Posted by & filed under Accounting Information Systems, Accounting Principles, Advanced Accounting, All Articles, Auditing, Cost Accounting, Ethical Dilemma, Financial Accounting, Fraud Accounting, Intermediate Accounting, Managerial Accounting, Video Updates.

In an unprecedented move, the Treasury Department will begin identifying and tracking cash sales of real estate in an effort to expose money laundering and secret buyers of high-end properties.

Questions:
1.At which locations will the new initiative begin?
2. Is the use of shell companies legal in real estate?
3. How will the real estate deals be tracked (e.g. via paper trail or e-documents)?
4. Do you see any way around these proposed procedures?
5. Why is the real estate industry worried about this move by the federal government?

Source:
Story, L (2016). U.S. Will Track Secret Buyers of Luxury Real Estate. The New York Times, Jan. 13 (Retrievable online at http://www.nytimes.com/2016/01/14/us/us-will-track-secret-buyers-of-luxury-real-estate.html)

Will it Work?

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Norovirus, salmonella, and E. Coli outbreaks during 2015 at fresh food restaurants run by Chipotle have cost a huge loss of business. However, in mid-February, the chain plans a strategic marketing campaign aimed at trying to bring these customers back.

Questions:
1. By how much did comparable restaurant sales fall in the fourth quarter of 2015 for the Chipotle stores?
2. How do you think the criminal investigation into Chipotle will affect the marketing efforts?
3. How much will the new food safety protocols and marketing cost Chipotle and what is the outlook for the company’s campaign in the long-run?

Wong, V. (2016) Chipotle Has A Plan To Woo Customers Back Into Restaurants. Will It Succeed? Buzzfeed, Jan. 14 (Retrievable online at http://www.buzzfeed.com/venessawong/chipotle-has-a-plan-to-woo-customers-back#.sxRovPlzv)

Weird Thought Experiment

Posted by & filed under Accounting Information Systems, Accounting Principles, Advanced Accounting, Auditing, Cost Accounting, Ethical Dilemma, Financial Accounting, Intermediate Accounting, Managerial Accounting, Video Updates.

As Powerball mania and the promise of $1.6 Billion swept the airways, Andy Kiersz came up with his own idea on how to win. Unfortunately, it would require 189,000 people filling out all the possible Powerball combinations on those annoying scantrons, working 10 hours a day at a rate of 50 tickets per hour.

Questions:
1. Read the comments to the story. Which is your favorite and why?
2. Assume that Kiersz was one of the three actual winners after buying all the ticket combinations and selected the cash option. Present a profit and loss statement using this information and discuss whether this was a good idea.
3. What type of relationship is shown in the graph of The Likelihood of Avoiding a Split Pot vs. Number of Tickets Sold? What effect does this have on Andy’s plan?
4. Did you buy a Powerball ticket? Why or why not?

Source:
Kiersz, A. (2016). What If You Bought All 292 Million of the Possible Powerball Combinations? The Atlantic, January 13 (Retrievable online at http://www.theatlantic.com/business/archive/2016/01/powerball-ticket-all-combinations/423930/#article-comments)

The Age of the Employee-less Company

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During most of the 20th century, companies bringing in the most money also employed the most people. This article looks at a new paper from the Brookings Institute about the new age of ghost companies.

Questions:
1. The article mentions Walnart as one of the five largest companies in 2012 that had 100,000 people employed but more than 2.2 million people working for them. How is this possible? Explain.
2. List and discuss at least three reasons why this shift is bad for the middle class.
3. List and discuss at least three reasons why this shift is good for investors.
4. Do you see these costs and benefits being long-run or short-run trends? Why?
5. Why isn’t there more post-IPO job growth?

Source:
White, J. (2016). The Age of the Ghost Company. The Atlantic, Jan. 7 (Retrievable online at http://www.theatlantic.com/business/archive/2016/01/the-age-of-the-ghost-company/423138/)

walmart

Be sure to remember your server!

Posted by & filed under Accounting Information Systems, Accounting Principles, All Articles, Auditing, Cost Accounting, Ethical Dilemma, Financial Accounting, Intermediate Accounting, Managerial Accounting, Uncategorized.

According to the Washington Post, after a change in tax rules last year, the auto-gratuity added to the bill of large parties at restaurants is on its way out.

Questions:
1. What is the new rule that the Internal Revenue Service imposed on restaurants that led to this change?
2. How does this change lead to greater costs to the employer and less income to the servers?
3. Why have some smaller restaurants kept the auto-gratuity, while the bigger chains have not?
4. What is the tipped minimum wage for servers nationally?
5. What have some of the larger restaurants proposed for changing how server wages work?

Source:
DePillis, L. (2015). Restaurants have changed how tips work, and waiters are furious. The Washington Post, Dec. 16 (Retrievable online at https://www.washingtonpost.com/news/wonk/wp/2015/12/16/restaurants-have-changed-how-tips-work-and-waiters-are-furious/)

enhanced-buzz-32382-1435860727-9

Want to open a franchise?

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Because Papa John’s is trying to recruit franchisees for new restaurant growth, it is offering enormous discounts to potential U.S. operators. Based on the information in the article, Papa John’s says the incentive package is worth roughly $60,000.

Questions:
1. What are the fees that Papa John’s is temporarily waiving?
2. Using the minimum investment amounts in place before this discount period, what percentage are Papa John’s franchise fees of McDonalds? What percentage are Papa John’s franchise fees of Taco Bell?
3. What are the two typical monthly fees that a franchisee must pay and what are these based upon?
4. What journal entries do you think a franchisee would make for Papa John’s franchise fees, assuming $300,000 net sales at a startup restaurant?
5. How does Papa John’s determine that the net sales figure is correct?

Source:
Peterson, H. (2015). Here’s how much it costs to open a Papa John’s restaurant. Business Insider, Dec. 19 (Retrievable online at http://www.businessinsider.com/how-much-it-costs-to-open-a-papa-johns-2015-12)

Arbitration Lurks in the Fine Print

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In this article, the New York Times found that arbitration rules tend to favor businesses, and judges and juries have been replaced by arbitrators who commonly consider the companies to be their clients. According to the authors, this has created an alternative justice system with conflicts of interest.

Questions:
1. What types of claims are arbitrated?
2. What event propelled arbitration clauses in contracts?
3. What rules of evidence apply in arbitration?
4. According to the article, why don’t more people opt out of arbitration?

Source:
Silver-Greenberg, J. and M. Corkery. (2015) In Arbitration, a ‘Privatization of the Justice System.’ The New York Times, Nov. 1 (Retrievable online at http://www.nytimes.com/2015/11/02/business/dealbook/in-arbitration-a-privatization-of-the-justice-system.html)