NOTE: I NEED HELP WITH THESE 10 QUESTIONS,IT IS AN EMERGENCY PLEASE!
Use the following information to answer questions 1-4.
The Bayside Company uses the LIFO cost flow method to value inventory. In the current year, profit at Bayside is running unusually high. The corporate tax rate is also high this year but it is scheduled to decline significantly next year. In light of this information, the president of Bayside instructs the purchasing department to make a large purchase of inventory for delivery 3 days before the end of the year. The price of the inventory to be purchased has doubled during the year.
QUESTION 1
What would be the effect of this transaction on this year’s net income?
a. The net income could increase.
b. The net income could decrease.
c. There would be no effect on net income
d. There is not enough information to determine if there would be an effect.
QUESTION 2
What would be the effect of this transaction on this year's income tax expense?
a. The income tax expense could increase.
b. The income tax expense could decrease
c. There would be no effect on income tax expense.
d. There is not enough information to determine if there would be an effect.
QUESTION 3
If Bayside had been using the FIFO cost flow method to value inventory instead of the LIFO cost flow method, would the president have given the same directive?
a. Yes, the president would have given the same directive. The effect on net income and the income
tax expense would have been the same.
b. Yes, the president would have given the same directive. There would have been no effect on net income or the income tax expense.
c. No, the president would not have given the same directive. There would have been an opposite effect on net income and the income tax expense.
d. No, the president would not have given the same directive. There would have been no effect on net income or the income tax expense.
QUESTION 4
The president's actions are an example of "earnings management." Which of the following statements about earnings management is false?
a. Earnings management is illegal.
b. Earnings management can sometimes have a negative side effect (e.g., the company may not be able to pay for the additional inventory).
c. Earnings management can sometimes be considered to be unethical.
d. None of these statements is false.
Use the following information to answer questions 5-7.
Blue Bird Bus Company is suffering declining sales of its principal product, school buses. The bank has threatened to call due a note if the company’s net income declines next year. The president, Joe Blow, talks to his controller, Ed Meek, and suggests that if net income declines Ed will not receive his annual bonus and may even lose his job. Joe suggests that Ed lengthen the useful lives of the production equipment from 10 years to 15 years for depreciation purposes and to continue to use the straight line method. The next day, Ed Meek informs the president he has made the changes in the depreciation schedules for the upcoming year.
QUESTION 5
What would be the effect on Blue Bird's depreciation expense if the useful life of the production equipment was increased from 10 to 15 years?
a. The increased life would cause the depreciation expense to increase.
b. The increased life would cause the depreciation expense to decrease.
c. The increased life would have no effect on the depreciation expense.
d. There is not enough information to determine if there would be an effect.
QUESTION 6
What would be the effect on Blue Bird's net income if the useful life of the production equipment was increased from 10 to 15 years?
a. The increased life would cause the net income to increase.
b. The increased life would cause the net income to decrease.
c. The increased life would have no effect on the net income.
d. There is not enough information to determine if there would be an effect.
QUESTION 7
What do you think of the president's ethical behavior as it relates to this situation?
a. It may be unethical for the president to threaten the controller with losing his bonus and potentially his job.
b. It may be considered unethical for the president to manipulate the useful life of assets.
c. Both statements might be considered to be unethical.
d. Neither statement would ever be considered to be unethical.
Use the following information to answer questions 8-10.
The Boxcar Corporation has paid a total of $1 million in cash bonuses to its officers for 8 consecutive years. The board’s policy requires that, for this bonus to be paid, net cash provided by operating activities reported on the current year’s statement of cash flows must exceed $1 million. President and CEO, I.M. Troubled, is very concerned with producing annual operating cash flows to support the usual bonus. At the end of the current year, controller Willie Waffle presented the president with some disappointing news; the net cash flows provided by operating activities calculated by using the indirect method was only $970,000. The president, I.M. Troubled, asked Willie if there was any way to increase the operating cash flows by another $30,000. He said Willie’s job depended on it. Later in the day, Willie met with the president and suggested that they could reclassify a $60,000, 2-year note payable listed in the financing activities section as “Proceeds from a bank loan, $60,000” as an increase in accounts payable instead.
QUESTION 8
What would be the effect on operating cash flows on Boxcar's statement of cash flows if the proceeds from the bank loan were reclassified as an increase in accounts payable?
a. Net cash provided by operating cash flows would decrease.
b. Net cash provided by operating cash flows would increase.
c. Net cash provided by operating cash flows would not be affected.
d. There is not enough information to determine if there would be an effect.
QUESTION 9
What would be the effect on financing cash flows on Boxcar's statement of cash flows if the proceeds from the bank loan were reclassified as an increase in accounts payable?
a. Net cash provided by financing cash flows would decrease.
b. Net cash provided by financing cash flows would increase.
c. Net cash provided by financing cash flows would not be affected.
d. There is not enough information to determine if there would be an effect.
QUESTION 10
Assuming the controller does reclassify the proceeds of the bank loan as an increase in accounts payable, which of the following statements is true?
a. The controller's actions are ethical as long as he is doing what the CEO ordered him to do.
b. The CEO's actions are unethical because he is threatening the controller that he will lose his job if he doesn't make the change.
c. Both statements are true.
d. Neither statement is true.
Haha Extra credit questions? Looking for help on these also.
WOW! yes it is extra credit, you have class with Filzen?
That is funny.... We all have class with Filzen. lololol
To answer these questions, we need to analyze the given information and apply accounting principles and concepts. Let's go through each question step by step:
QUESTION 1:
The president instructs the purchasing department to make a large purchase of inventory right before the end of the year. According to the information provided, the price of the inventory has doubled during the year. The company uses the LIFO cost flow method to value inventory. Based on this, we can determine that purchasing inventory at a higher price will increase the cost of goods sold (COGS), resulting in lower net income. Therefore, the correct answer is b. The net income could decrease.
QUESTION 2:
The increase in COGS due to the purchase of inventory at a higher price will decrease net income. Since income tax expense is based on net income, an increase in COGS will also increase income tax expense. Therefore, the correct answer is a. The income tax expense could increase.
QUESTION 3:
If Bayside had been using the FIFO cost flow method instead of LIFO, the president may not have given the same directive. Under FIFO, the older, lower-cost inventory would be sold first, resulting in a lower COGS and potentially higher net income. Therefore, the correct answer is c. No, the president would not have given the same directive. There would have been an opposite effect on net income and the income tax expense.
QUESTION 4:
The president's actions of instructing the purchasing department to make a large purchase of inventory before the end of the year to manipulate net income is an example of earnings management. Earnings management is not illegal per se, but it can have negative consequences and is often considered unethical. Therefore, the false statement about earnings management is a. Earnings management is illegal.
QUESTION 5:
If the useful life of production equipment is increased from 10 to 15 years, it will decrease the annual depreciation expense. The straight-line method of depreciation is used, which allocates the cost of an asset evenly over its useful life. Increasing the useful life will spread the cost over a longer period, lowering the annual depreciation expense. Therefore, the correct answer is b. The increased life would cause the depreciation expense to decrease.
QUESTION 6:
A change in the useful life of the production equipment will have an impact on the depreciation expense, which is a component of net income. Decreasing the annual depreciation expense will increase net income. Therefore, the correct answer is a. The increased life would cause the net income to increase.
QUESTION 7:
Based on the president's actions of manipulating the useful life of assets and threatening the controller's job and bonus, it can be considered unethical behavior. Both statements in option c are true. Therefore, the correct answer is c. Both statements might be considered to be unethical.
QUESTION 8:
Reclassifying the proceeds from a bank loan as an increase in accounts payable would not affect the operating cash flows on the statement of cash flows. The loan proceeds are part of the financing activities section, not the operating activities section. Therefore, the correct answer is c. Net cash provided by operating cash flows would not be affected.
QUESTION 9:
Reclassifying the proceeds from a bank loan as an increase in accounts payable would decrease the net cash provided by financing cash flows on the statement of cash flows. The original cash inflow from the loan would be reclassified as an increase in accounts payable, which is a liability, and not considered a financing cash flow. Therefore, the correct answer is a. Net cash provided by financing cash flows would decrease.
QUESTION 10:
The CEO's actions of threatening the controller's job if he doesn't make the suggested change are considered unethical. The CEO is exerting pressure and using his position of authority to manipulate the financial statements. Therefore, the correct answer is b. The CEO's actions are unethical because he is threatening the controller that he will lose his job if he doesn't make the change.
I hope this helps you answer the questions. If you have any more questions, feel free to ask!