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International Accounting

1. All citations must follow APA format guidelines. 2. Font size should be 12pt, and font should be Times New Roman. 3. Spacing should be no larger than double spacing.

4. Writing is clear and professional. Calculations are done accurately,

explanation is clear, and tables are well done. Paper is correctly

referenced and professionally presented.

Description

This assignment requires you to thoroughly analyze a particular company’s

accounting profile. It will also require you to prepare pro forma financial

statements by altering the assumptions originally used by the company. You

must submit a written report that is well formatted, contains detailed

calculations and is properly referenced.

The specific steps are as follows:

1. Choose a public company (not a financial institution or utility). The

company must have issued bonds and have operating leases. Confirm

your choice with your professor. Obtain a copy of the most recent

annual report or SEC filing that contains a complete set of financial

statements and notes.

2. Prepare an analysis of the company’s accounting choices as described

in the accounting policies note. (Do not copy and paste from the

financial statements into your report, you should only submit original

work.) Highlight the areas in which the company had a choice of

accounting method and comment upon whether you think the choice is

appropriate, given your company’s industry. Explain how each choice

affects the three primary financial statements (the balance sheet,

income statement and statement of cash flows). For example, is the

choice one that would cause assets to be greater than if the company

made an alternative choice? This summary should be about five pages

long.

3. For each of the following prepare a table showing your calculations and

provide a written explanation of your analysis and methodology.

Using the accounting equation framework, show the calculations for

how each change affects the primary financial statements. Then

prepare a revised balance sheet and income statement in good form.

a. Identify Bad Debt Expense. If your company disclosed bad debt

expense, use that amount. If your company does not disclose bad

debt expense, assume that it is 5% of gross accounts receivables.

In either case, determine the effect on the financial statements of a

50% increase in bad debt expense.

b. If your company used the LIFO method of accounting for inventory,

use the required disclosures to compute what would happen if the

company had used FIFO instead. If the company used FIFO,

make the assumption that the numbers are actually LIFO numbers

and that the LIFO reserves at the beginning and end of the year

were 30% of the reported inventory numbers.

c. Compute the average useful life of your company’s long-lived

assets. Determine the effect if the average useful lives were 40%

longer than what the company actually used.

d. Prepare a profile of the company’s debt. How many bonds have

been issued? What are the coupon rates and effective (i.e., yield

or market) rates? Obtain a current market quote of the company’s

two most recently issued bonds as of year-end and calculate the

effect if the company repurchased those bonds at those prices on

that date. If you cannot determine the carrying value of these

bonds, assume that they were issued at par. Assume that to

repurchase these bonds, the company issued bonds with a par

value equal to the repurchase cost and that the new bonds carry a

coupon rate of 4% with semiannual coupon payments and a 10-

year maturity. Assume the market rate at issuance is 4.5%.

e. Capitalize all operating leases using the market rate of interest from

part d.

f. Assume that 60 days prior to the year-end, the company

repurchased 500,000 shares of its common shares at the market

price on that date. Assume that 30 days prior to the year end, the

company declared a 10% stock dividend.

g. Assume the company declares and pays a cash dividend equal to

10% of their net income.

h. Recalculate income tax expense using revised net income and the

tax rate reflected on the original income statement and make any

necessary accrual.

i. If the revisions that are made put the company in a negative cash

position, assume that the company borrows enough cash to

produce an ending cash balance of $1,000,000. Assume that the

borrowing took place at year end at a 6% interest rate and is to be

paid back in six months.

4. Using your new balance sheet and income statement, prepare a

revised statement of cash flows.

Grading rubric for this assignment:

Parts a through i are worth 5 points each, 10 each points for the revised

balance sheet, income statement and statement of cash flows, 10 points for

part 2, and 10 points for the overall paper.