ShoeZoo, Inc. is an athletic shoe and apparel company that is struggling tocompete with much larger companies in its industry. One of ShoeZoo's main assetsis that it has Billy Paultz, a rookie NBA basketball player, as its main endorser.SportGiant, Inc. offered to purchase ShoeZoo at a price that was $10/share over thecompany's appraised value. ShoeZoo's board of directors approved the offer after a15 minute meeting and without soliciting other offers. Six months later, Billy Paultzbecame a huge star and the value of the company skyrocketed. The formershareholders of ShoeZoo sued. Will the directors be liable?1) Yes, because the board made an uninformed decision.2) Yes, because the board breached its duty of care.O 3) No, because the board had a meeting, even if it was only 15 minutes.No, if the directors can prove that both the process and the decision were4)fair to the shareholders.

The Board of Directors (BOD) is an elected group of individuals who have been assigned roles,…

Answered: ShoeZoo, Inc. is an athletic shoe and…

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter1: Quality Auditing: Why It Matters

Section: Chapter Questions

Problem 8RQSC

See similar textbooks

Similar questions

Video Concepts, Inc. (VCI) markets video equipment and film through a vari- ety of retail outlets. Presently, VCI is faced with a decision as to whether it should obtain the distribution rights to an unrelcased film titled Touch of Orange. If this film is distributed by VCI directly to large retailers, VCI's invest- ment in the project would be $150,000. VCI estimates the total market for the film to be 100,000 units. Other data available are as follows: Cost of distribution rights for film $125,000 Label design 5,000 Package design 10,000 Advertising 35,000 Reproduction of copies (per 1,000) 4,000 Manufacture of labels and packaging (per 1,000) 500 Royalties (per 1,000) VC's suggested retail price for the film is $20 per unit. The retailer's margin is 40 percent. 500 a. What is VCI's unit contribution and contribution margin? b. What is the break-even point in units? In dollars? c. What share of the market would the film have to achieve to earn a 20 percent return on VCI's investment…
Recycltoy Inc. is a company that produces recycled toys. The company is examining an investment in a new toy – recycled basketball. The CEO, who is against the project, hired you as a consultant to examine whether or not the company should undertake the project. The CEO promised you the following compensation for your work: (1) an assured payment of $100 thousand; (2) A bonus of $300 thousand if you are able to convince the board of directors not to undertake the project. Both payments (if paid) will be paid today. According to your estimation, the expense for research and development of the recycled basketball will take one year and will cost $4.5 million (today). After finishing product development (the recycled basketball). In addition, you know the following: - The company expects revenues of $500 thousand for the first operating year. Due to new enacted regulation from the government, which supports the use of recycled products, in the next three years the company estimates that…
Finerly Corporation sells cosmetics through a network of independent distributors. Finerly shipped cosmetics to its distributors and is considering whether it should record $300,000 of revenue upon shipment of a new line of cosmetics. Finerly expects the distributors to be able to sell the cosmetics, but is uncertain because it has little experience with selling cosmetics of this type. Finerly is committed to accepting the cosmetics back from the distributors if the cosmetics are not sold. How much revenue should Finerly recognize upon delivery to its distributors?
Big Tractor, Inc.'s best salesperson is Misty Hammond. Hammond's largest sales have been to Farmer's Cooperative, a customer she brought to the company. Another salesperson, Bob Blanchette has been told in confidence by his cousin (an employee of Farmer's Cooperative) that Farmer's Cooperative is experiencing financial difficulties and may not be able to pay Big Tractor Inc. what is owed. Both Hammond and Blanchette are being considered for a promotion to a new sales manager position. What are the ethical considerations that Bob Blanchette faces? What alternatives do you think he has?
The president of Midnight Rambler wants to know if he should allow Jack Flash to have the scooters for $120,000. Determine the effect on profits from accepting Jack Flash’s offer. Briefly explain why certain costs should be omitted from the analysis in requirement (a.) Assume Midnight Rambler is operating at capacity and could sell the 300 scooters at its regular markup: Determine the Opportunity Cost of accepting Jack Flash’s offer. Determine the effect on profits of accepting Jack Flash’s offer What other factors should Midnight Rambler consider before deciding to accept the special order?
Golf Inc. is a public company that has been in business since the 1980s. It owns and operates over 40 golf courses across Canada. It also owns and operates pro shops and dining facilities. On 1 November 20X4 GI announced it was going to sell three of its golf courses that were underperforming. They have had declining memberships over the past couple of years. GI is currently looking for a buyer. The asking prices are reasonable, and at the time of listing, the real estate agents expected that the courses will be sold before the spring of next year. On 1 November 20X4, the carrying amount of the land is $50,000 but the fair market value is $750,000. The equipment (that is, golf carts), has a carrying amount of $600,000 ($900,000 cost) and a fair market value of $450,000. There was no change to the estimated fair values on 31 December 20X4. The company accepted an offer on 15 January 20X5. The total proceeds for the sale were $1,075,000. The company has a 31 December year-end. Required:…
Feinan Sports, Inc., manufactures sporting equipment, including weight-lifting gloves. A national sporting goods chain recently submitted a special order for 4,000 pairs of weight-lifting gloves. Feinan Sports was not operating at capacity and could use the extra business. Unfortunately, the order's offering price of $12.70 per pair was below the cost to produce them. The controller was opposed to taking a loss on the deal. However, the personnel manager argued in favor of accepting the order even though a loss would be incurred; it would avoid the problem of layoffs and would help maintain the community image of the company. The full cost to produce a pair of weight-lifting gloves is presented below. Direct materials $ 7.40 Direct labor 3.80 Variable overhead 1.60 Fixed overhead 3.10 $15.90 Total No variable selling or administrative expenses would be associated with the order. Non-unit- level activity costs are a small percentage of total costs and are therefore not considered.…
Simpson Corp. is an entertainment firm that derives approximately 30% of its income from the Casino Knights Division, which manages gambling facilities. As auditor for Simpson Corp., you have recently overheard the following discussion between the controller and financial vice president. Vice President: If we sell the Casino Knights Division, it seems ridiculous to segregate the results of the sale in the income statement. Separate categories tend to be absurd and confusing to the stockholders. I believe that we should simply report the gain on the sale as other income or expense without detail. Controller: Professional pronouncements would require that we report this information separately in the income statement. If a sale of this type is considered unusual and infrequent, it must be reported separate from income from continuing operations. Vice president: What about the walkout we had last month when employees were upset about their commission income? Would this situation not…
AutoShine, Inc. who currently supplies Car Wash Products has decided to expand its operations to owning and operating car washes. The following is an excerpt from the conversation between the chief executive officer of AutoShine , Larry VanWinkle, and the vice president of finance of AutoShine, John Clancy: Larry to John: John, have you given any thought to how we're going to manage the acquisition of Wash and Shine Car Wash? John: Well, the two basic options, as I see it, are to issue either preferred stock or bonds. The equity market is a little depressed right now and I have heard through the rummer mill, that the Federal Reserve Bank's going to increase the interest rates either this month or next. Larry: Yes. I've heard that rumor. The problem is that we can't wait around to see what's going to happen. We'll have to move on this quickly if we want any chance to complete the acquisition of Wash and Shine Car Wash. John: Well, the bond market is really strong right now. Maybe we…
Simpson Corp. is an entertainment firm that derives approximately 30% of its income from the Casino Knights Division, which manages gambling facilities. As auditor for Simpson Corp., you have recently overheard the following discussion between the controller and financial vice president. Vice President: If we sell the Casino Knights Division, it seems ridiculous to segregate the results of the sale in the income statement. Separate categories tend to be absurd and confusing to the stockholders. I believe that we should simply report the gain on the sale as other income or expense without detail. Controller: Professional pronouncements would require that we report this information separately in the income statement. If a sale of this type is considered unusual and infrequent, it must be reported separate from income from continuing operations. Vice president: What about the walkout we had last month when employees were upset about their commission income? Would this situation not…
Feinan Sports, Inc., manufactures sporting equipment, including weight-lifting gloves. A national sporting goods chain recently submitted a special order for 4,600 pairs of weight-lifting gloves. Feinan Sports was not operating at capacity and could use the extra business. Unfortunately, the order’s offering price of $12.80 per pair was below the cost to produce them. The controller was opposed to taking a loss on the deal. However, the personnel manager argued in favor of accepting the order even though a loss would be incurred; it would avoid the problem of layoffs and would help maintain the community image of the company. The full cost to produce a pair of weight-lifting gloves is presented below. Direct materials $ 7.50Direct labor 3.90Variable overhead 1.60Fixed overhead 3.10Total $16.10 No variable selling or administrative expenses would be associated with the order. Non-unit- level activity costs are a small percentage of total costs and are therefore not considered.…
Boswell Manufacturing Company has been in business for five years. Thecompany has now decided to expand its operations. To finance this process, the company is considering two approaches: (1) Lease the assets that are needed on a long term basis or (2) Issue bonds and use the proceeds to purchase the assets. The CEO is seeking your advice on the matter. Without knowledge of the comparative cost involved, how would you advise him in the following questions: (i) What might be the advantages and disadvantages of leasing the assetsinstead of owning them. (List at least three advantages and threedisadvantages) (ii) How will leasing the assets instead of owning them affect the financialstatements?

SEE MORE QUESTIONS

Recommended textbooks for you

Auditing: A Risk Based-Approach (MindTap Course L…

Accounting

ISBN:

9781337619455

Author:

Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:

Cengage Learning