Credit Unions for Pot?

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Since medical marijuana was legalized in Colorado in 2001 and recreational marijuana was legalized a year ago, sellers have had limited, if any, access to banking services. As a result, a group of other entrepreneurs in Colorado want to start the first-ever financial institution established specifically to serve the pot industry.

Questions:
1. What are the legal issues associated with banking for the marijuiana industry in Colorado?
2. What are the political issues associated with banking for the marijuiana industry in Colorado?
3. What is money laundering and why do bankers in Colorado think that they would be violating anti-money laundering laws if they allow bank accounts to marijuiana growers?
4. What are the costs of “not banking” to the marijuiana industy? What are the benefits of banking?

Source:
Ritchel, M. (2015). The First Bank of Bud. The New York Times, Feb. 5 (Retrievable online at http://www.nytimes.com/2015/02/08/business/marijuana-industry-in-colorado-eager-for-its-own-bank-waits-on-the-fed.html?hp&action=click&pgtype=Homepage&module=photo-spot-region&region=top-news&WT.nav=top-news&_r=0)
Pot Banks

Why Can’t I Get A Break on Airline Tickets, with Gas Down to Record Lows?

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Even with oil prices down, it seems like airline tickets are either increasing in price or staying level. In fact in October 2014, there were four separate attempts by U.S. airlines to hike airfares with mixed success. But why?

Questions:
1. To what conditions does Seany attribute the high airline ticket prices?
2. Do you think there are any important issues that Seany missed? Discuss.
3. What industries are affected by oil futures and hedges? Explain how they work.
4. What type of cost is oil to the airline industry? Explain.

Source:
Seany, R. (2014). Airfare explainer: Why ticket prices continue to rise as oil prices drop. Fox News, December 3 (Retrievable online at http://www.foxnews.com/travel/2014/12/03/airfare-explainer-why-ticket-prices-continue-to-rise-as-oil-prices-drop/)

ABC News Video. (2015) Explain, Please video. ABC News, January 21 (Retrievable online at https://www.youtube.com/watch?v=9hkz4JFpW48)

Pop Goes the Bubble!

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According to the New York Times, the drop in oil prices are dimminishing one of the few big bright spots that banks have enjoyed since the financial crisis. The reason is that banks have been experiencing a lending boom to companies in the nation’s energy industry.

Questions:
1. Which banking group has the greatest investment banking revenue from the oil and gas sector in 2014?
2. What is the prediction of analysts if oil remains at or below $50 per barrel for long?
3. What is the underlying collateral of most energy loans valued at?
4. What do advisors predict will happen to the yield on energy junk bonds for 2015 & possibly 2016?

Source:

Corkery, M. and P. Eavis. (2015). As Oil Prices Fall, Banks Serving the Energy Industry Brace for a Jolt. The New York Times, January 11 (Retrievable online at http://dealbook.nytimes.com/2015/01/11/as-oil-prices-fall-banks-serving-the-energy-industry-brace-for-a-jolt/?hp&action=click&pgtype=Homepage&module=first-column-region&region=top-news&WT.nav=top-news&_r=0)

No More SkyMall?

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

The parent company for SkyMall filed for bankruptcy protection on January 23, 2015. SkyMall was the entertaining catalogue of everything you never thought about buying, but was in the seat pockets of every plane. As Farhi said, “the value added to this grotesque shlock was SkyMall’s enthusiastic descriptive copy. SkyMall’s writers never let on that they were essentially glossy carny barkers. No winks or nods, and no snark, ever. They played it all with a straight face — making, say, a Bigfoot garden ‘sculpture’ seem like a reasonable, even classy, every-home-should-have-one purchase.”

Questions
1. What does Farhi blame for the bankruptcy of SkyMall and what is wrong with SkyMall’s business model in the current environment?
2. What types of bankruptcy are there? Discuss.
3. What type of bankruptcy protection did SkyMall’s parent company file for and how much were its assets?
4. How long was SkyMall in business?
5. How much did SkyMall lose in 2013?
6. How much did a full page ad cost?

Source:
Farhi, P. (2015). Remembering SkyMall: the in-flight catalogue at the apex of commercialism. The Washington Post, January 23 (Retrievable online at http://www.washingtonpost.com/lifestyle/style/remembering-skymall-the-in-flight-catalogue-at-the-apex-of-commercialism/2015/01/23/e9960cea-a336-11e4-9f89-561284a573f8_story.html?tid=hpModule_1f58c93a-8a7a-11e2-98d9-3012c1cd8d1e&hpid=z13)

Ferdman, R.A. (2015). SkyMall, the wacky in-flight catalogue, is filing for bankruptcy. How did it last this long? The Washington Post, January 23 (Retrievable online at http://www.washingtonpost.com/blogs/wonkblog/wp/2015/01/23/skymall-the-wacky-in-flight-catalog-is-filing-for-bankruptcy-how-did-it-last-this-long/)

Military Contracting Failures: A $1.5 Trillion Mistake

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The F-35 is being produced by 1,200 suppliers. Seen as the fighter jet of the future, it has trouble flying at night, its engines have exploded during takeoff, and early models suffered structural cracks.

Questions:
1. Why is the military still pursuing the production of this pink elephant? Why doesn’t technology become less costly for the military?
2. What features were suppose to be cost effective? What are the implications of this case for internal auditing?
3. Which aircraft is it supposed to replace?
4. According to Fallows, how many will be produced at the end of the contract?
5. Based on the limited information in the article and video, perform a cost/benefit analysis of this contract program.

Fallow, J. and J. Lay. (2014). The Pentagon’s $1.5 Trillion Mistake. The Atlantic, Dec. 29 (Retrievable online at http://www.theatlantic.com/video/index/384088/the-pentagons-15-trillion-mistake/)

Marriott to pay $600,000 to Resolve WI-FI-Blocking Investigation

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

In March 2013, the Federal Communications Commission (FCC) received a complaint that the Marriott convention center at the Gaylord Opryland location in Nashville, Tennessee was in violation of Section 333 of the Communications Act. After an FCC investigation substantiated unlawful use of containment features, Marriott agreed to pay $600,000.

Questions:
1. What did the FCC’s investigation find that Marriott did? Discuss the ethics of this finding.
2. Was this a fine or settlement? Was it criminal or civil? What is the difference between these terms?
3. Additionally, what type of reporting must Marriott undertake?
4. Can Marriott write off the $600,000 on their taxes as an operating expense? Discuss.

Source:
FCC News (2014). MARRIOTT TO PAY $600,000 TO RESOLVE WIFI-BLOCKING INVESTIGATION. Oct. 3 (Retrievable online at https://apps.fcc.gov/edocs_public/attachmatch/DOC-329743A1.pdf)
Jeff Havens News video. (2014). Marriott Fined $600K for Blocking Guest WiFi, Oct. 14 (Retrievable online at https://www.youtube.com/watch?v=jZ6-miGUgGE)

Financial Worries Spark Divorce Settlement Appeals

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

In late 2014, oil tycoon Harold Hamm called a divorce settlement with his ex-wife, Sue Ann Arnall, equitable and fair, awarding her about $1 billion. Since then his holdings in oil have decreased dramatically and he argues that her award is a substantially larger proportion than he first agreed to.

Questions:
1. Who is Harold Hamm and how did he amass his fortune?
2. Why might Oklahoma divorce law result in an unusual financial settlement in this case?
3. What does “wealth gained passively” mean?
4. Given Mr. Hamm’s wealth when the first award was crafted, by what percentage has Ms. Arnall’s award increased based on Mr. Hamm’s current holdings?
5. According to the video, what are some of the tax issues associated with this case?
6. What are some of the reasons why the IRS will carefully scrutinize the tax returns of these individuals?

Source:

Ohlheiser, A. (2015). A guide to the billion-dollar divorce appeal that’s headed to the Oklahoma Supreme Court. The Washington Post, January 3 (Retrievable online at http://www.washingtonpost.com/news/national/wp/2015/01/03/a-guide-to-the-billion-dollar-divorce-appeal-thats-headed-to-the-oklahoma-supreme-court/?hpid=z4)

Sequence Media video. (2014). Harold Hamm’s Billion Dollar Divorce: Taxation Possibilities, Nov. 19 (Retrievable online at https://www.youtube.com/watch?v=KZ3WJTFZ128)

Don’t Pay that Medical Bill: The Truth about Balance Billing

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As health-care costs continue to soar, millions of confused consumers are paying medical bills they don’t actually owe. Typically this occurs when an insurance plan covers less than what a doctor, hospital, or lab service wants to be paid. The health-care provider demands the balance from the patient.

Questions:
1. Explain why balance billing is usually illegal.
2. According to the article, what percentage of consumers fall victim to this scheme and pay the balance bill?
3. When are balance billings allowed?
4. Is balance billing allowed under Medicare?
5. What recourse does a person have over a medical provider that demands balance billing?

Source:

Terhune, C. (2008). Medical Bills You Shouldn’t Pay. BusinessWeek, August 27 (Retrievable online at http://www.businessweek.com/stories/2008-08-27/medical-bills-you-shouldnt-pay)

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Capitalism is Broken?

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Camp Bow Wow, a dog-sitting chain, makes its workers sign non-compete agreements that bar them from plying any of the “trade secrets” they learn walking dogs at any other animal day care centers for up to two years.

Questions:
1. Do you think that these quasi-feudal non-compete contracts should be illegal for everyone other than senior executives?
2. According to the article, why are more companies using non-compete clauses?
3. Find a recent case where a non-compete clause has been enforced for a worker at a level other than a senior executive. Find a recent case where a non-compete clause has been enforced against a senior executive. Compare and contrast the two cases.
4. What type of “trade secrets” do you think are involved in dog-walking?

Source:
O’Brien, M. (2014) Capitalism is officially broken: Even doggy day care workers have non-competes now. Washington Post, Dec. 2 (Retrievable online at http://www.washingtonpost.com/blogs/wonkblog/wp/2014/12/02/capitalism-is-officially-broken-even-doggy-day-care-workers-have-non-competes-now/?hpid=z4)

Let’s Have Pizza!

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

According to the New York Times, the uptick in pizza sales in Brooklyn at Domino’s Pizza is due to stolen credit card numbers being used to order to see which cards were still active and could be used for bigger purchases.

Questions:
1. Explain why the article called this a blend of high-tech fraud and street-level word of mouth.
2. Dominos was left to pay back the credit card companies for their own pies. How should the company account for this? Give journal entries, assuming that they lost 200 pies at $15 each (retail) with a 50% markup.
3. Based on the article, what type of internal control, if any, could Dominos implement to avoid this situation in the future?

Source:

Wilson, M. (2014). Pizza Orders Reveal Credit Card Scheme, and a Secondhand Market. The New York Times, Dec. 5 (Retrievable online at http://www.nytimes.com/2014/12/06/nyregion/pizza-orders-reveal-credit-card-scheme-and-a-secondhand-market.html?rref=homepage&module=Ribbon&version=origin&region=Header&action=click&contentCollection=Home%20Page&pgtype=article&_r=0)