Web research: Stocks

Go the website of Starbucks Corporation at http://www.starbucks.com/aboutus and find information that you would use in developing a company profile. Click on the company, and then click on and read the brief Company Fact Sheet and Mission Statements. Then go back to the about us page and click on investor relations. Click on stock information and find the current price of the company’s stock and the high and low price of each share during the past year.
Discussion Question

How did Starbucks get its name? What is the current price of a share of Starbucks stock? What was the high and low price of a share of Starbucks stock during the past year? Does Starbucks Corporation appear to have an operating philosophy that is similar or dissimilar to other corporations? Do you think this philosophy is serving Starbucks well?

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My Response:
Jill Stidd
26 Sep 08 8:24 PM MST

I know that this post is a bit long winded,,,but I thought all these bits of information were so interesting along with all the “data” we were to get for this post. I like real life stuff. I also do not like to take simply what their website says but look further into what others are saying to get to the truth of thier statements.I wanted to find a little more details on the origination of Starbucks, It was very interesting to see where the first vision of three men started. “Starbucks began in 1971 when three academics—English teacher Jerry Baldwin, history teacher Zev Siegel, and writer Gordon Bowker—opened a store called Starbucks Coffee, Tea, and Spice in the touristy Pikes Place Market in Seattle. The three partners shared a love of fine coffees and exotic teas and believed they could build a clientele in Seattle much like that which had already emerged in the San Francisco Bay area. Each invested $1,350 and borrowed another $5,000 from a bank to open the Pikes Place store. Baldwin, Siegel, and Bowker chose the name Starbucks in honor of Starbuck, the coffee-loving first mate in Herman Melville's Moby Dick(so company legend has it), and because they thought the name evoked the romance of the high seas and the seafaring tradition of the early coffee traders. The new company's logo, designed by an artist friend, was a two-tailed mermaid encircled by the store's name. (http://www.mhhe.com/business/management/thompson/11e/case/starbucks.html)

It was obvious that the inspiration for these 3 men came from Aflred, Peet, “The inspiration for the Starbucks enterprise was a Dutch immigrant, Alfred Peet, who had begun importing fine arabica coffees into the United States during the 1950s. Peet viewed coffee as a fine winemaker views grapes, appraising it in terms of country of origin, estates, and harvests. Peet had opened a small store, Peet's Coffee and Tea, in Berkeley, California, in 1966 and had cultivated a loyal clientele. (http://www.mhhe.com/business/management/thompson/11e/case/starbucks.html)

After reading about how Schultz came on board with the company “In 1981, Howard Schultz, vice president and general manager of U.S. operations for Hammarplast—a Swedish maker of stylish kitchen equipment and housewares—noticed that Starbucks was placing larger orders than Macy's was for a certain type of drip coffeemaker. Curious to learn what was going on, he decided to pay the company a visit. The morning after his arrival in Seattle, Schultz was escorted to the Pikes Place store by Linda Grossman, the retail merchandising manager for Starbucks. A solo violinist was playing Mozart at the door, with his violin case open for donations. Schultz immediately was taken by the powerful and pleasing aroma of the coffees, the wall displaying coffee beans, and the rows of red, yellow, and black Hammarplast coffeemakers on the shelves. As he talked with the clerk behind the counter, the clerk scooped out some Sumatran coffee beans, ground them, put the grounds in a cone filter, poured hot water over the cone, and shortly handed Schultz a porcelain mug filled with the freshly brewed coffee. After three sips, Schultz was hooked. He began asking the clerk and Grossman questions about the company, about coffees from different parts of the world, and about the different ways of roasting coffee. (http://www.mhhe.com/business/management/thompson/11e/case/starbucks.html)

As a man that knew nothing about coffee or brewing after visiting the Pikes Place store he was sold on the idea and approached the three owner to hire him. After much effort on Shultz part they hired him as the marketing director .I was interested to see why they were so resistant to his visionary ideas. I was really trying to see how Peets coffee and tea were involved, I found out that later the 3 owners of Pikes Place store also purchased Peet’s coffee and tea, located in San Francisco with about all the funds they had and there was nothing left to promote Shultz’s idea to expand locations. “But a more pressing reason for their resistance emerged shortly—Baldwin and Bowker were excited by an opportunity to purchase Peet's Coffee and Tea. The acquisition took place in 1984; to fund it, Starbucks had to take on considerable debt, leaving little in the way of financial flexibility to support Schultz's ideas for entering the beverage part of the coffee business or expanding the number of Starbucks stores.”
(http://www.mhhe.com/business/management/thompson/11e/case/starbucks.html)

How strange that after various interactions with Shultz and Baldwin as owners of Starbucks and Shultz’s decision to go on his own that Baldwin would be involved yet again. “Ironically, as Schultz was finalizing the documents for his new company, Jerry Baldwin announced he would invest $150,000 of Starbucks' money in Schultz's coffee-bar enterprise, thus becoming Schultz's first investor. Baldwin accepted Schultz's invitation to be a director of the new company, and Gordon Bowker agreed to be a part-time consultant for six months. Bowker urged Schultz to make sure that everything about the new stores—the name, the presentation, the care taken in preparing the coffee—was calculated to lead customers to expect something better than competitors offered. Bowker proposed that the new company be named Il Giornale (pronounced ill jor-nahl-ee ) Coffee Company, a suggestion that Schultz accepted. In December 1985, Bowker and Schultz made a trip to Italy during which they visited some 500 espresso bars in Milan and Verona, observing local habits, taking notes about decor and menus, snapping photographs, and videotaping baristas in action.”
(http://www.mhhe.com/business/management/thompson/11e/case/starbucks.html)To the question of Starbucks operating philosophy two things stood out for me…1. That Starbucks bases there attention on the employees that it hires for reasons that are very smart most companies even though they might understand this concept do not have the passion that Starbucks does, “Starbucks recognizes competitors can replicate products, but they can’t replicate people. That’s precisely why the company focuses so much attention on the employee experience, because it is employees who create meaningful connections with customers. Many marketers view employee relations as a job solely for human resources—they see employees as tools. But employees—happy, rewarded employees—can work wonders for the company’s marketing efforts. There is no better spokesperson for a company, product, and brand than someone who is happy with his job and respected by his employer and peers. A happy employee will in turn, make customers happy.”2. I found it very interesting that Starbuck has stock options for its employees. “Starbucks has more than 172,000 partners (employees) worldwide as of September 2007. Eligible part- and full-time partners qualify for a comprehensive benefit package that includes healthcare benefits and stock option grants through Bean Stock,Starbucks company-wide stock option plan. Starbucks is committed to maintaining the quality, integrity and great taste of coffee as the company grows. “We have the mostknowledgeable workforce in our industry,” says Schultz. “I take great pride, not in the number of stores we have opened, but in the growth and development of our people.”(http://tribalknowledge.biz/discussion-tribal-truths/33-the-employee-experience-matters)I think both of these topics do set Starbucks apart from other companies in terms of their operating philosophy, and I also feel that it is this commitment to their employees that creates the successes that they have had.In terms of stocks:Data as of 09/26/08 4:00 p.m. ET / $14.96 / 52 Week High$27.82/ 52 week Low $13.33Sept, 26, 2007 $27.09.

(http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-stockQuote)http://www.mhhe.com/business/management/thompson/11e/case/starbucks.html retrieved: September 26, 2008http://tribalknowledge.biz/discussion-tribal-truths/33-the-employee-experience-matters retrieved: September 26, 2008http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-stockQuote retrieved: September 26, 2008

Ethics discussion: Stocks

The par value assigned to a share of stock bears no relationship to the market value of that share of stock (i.e., the price at which the stock sells to an investor/owner.) The market value, however, should reflect some real or perceived value of the corporation.
Gigi Liken and Ron Bobo are organizing Gold Unlimited Inc. to undertake a high-risk gold-mining venture in Canada. Gigi and Ron tentatively plan to request authorization for 75,000,000 shares of common stock to be sold to the general public. Gigi and Ron have decided to establish par of $1 per share in order to appeal to a wide variety of potential investors. Gigi and Ron feel that investors would be more willing to invest in the company if they received a large quantity of shares for what might appear to be a "bargain" price.
Discuss whether Gigi and Ron are behaving in a professional manner.

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My response:

Jill Stidd
26 Sep 08 2:07 PM MST

Given the description in our book on page 574 in regards to stock prices, “the price at which stock can be sold by a corporation depends on a variety of factors. 1. Financial record, earnings record, and dividend record of the corporation. 2. Investors expectations of the corporations earning potential. 3. General business and economic conditions and prospects.” (Warren, Reeve, and Duchac, p.574)

I would be important to know if Gigi Liken and Ron Bobo had any of these discussions or evaluations. That was not stated in the post exactly. However what was stated was that there reason was for determining the price of $1 was that the investors would be more willing to invest in the company if they received a large quantity of shares for what would be a “bargain” price. I also understand that this corporations was also a “high-risk” venture and that would be even more reason to create this “bargain” price, but if it does not fall under three factors stated then it is not appropriate and not ethical.Out text also states in regards to discounted stock this, “many states do not permit stocks to be sold at a discount, in others it may be done only under unusual conditions.”(Warren, Reeve, and Duchac, p.574)

I researched the web for whether it was legal to sell discounted stock in Canada and could not get a definite answer. But because our text does not even illustrate discounted stocks due the rareness I would have to say that Gigi and Ron were not deriving their price for the stocks for their company in the proper format and using the 3 guides listed above.

Warren, Reeve, and Duchac.( 2007). Accounting 11. Thompson South – Western.

Web Research: Contingencies

Go to the website of Altria Group, Inc. at http://www.altria.com/. Click on Annual Reports and select the most recent annual report available. Click on Financial Review, and then click on Notes to Consolidated Financial Statements. Scroll down to find the note on Contingencies and read two or three pages of this note.
Discussion Question
Please respond to this Discussion Question using the information from the Web Field Trip above. Take time to review the responses of your classmates and provide your feedback.
In your Web Field Trip, you were asked to research the contingent liabilities of Altria Group, Inc. What are the major business units of Altria Group? Why do you think the Altria Group Annual Report has so much discussion of contingencies? Based on your brief review of the Contingencies note, are you confident that Altria Group has reported ALL its liabilities?

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My Response:
Jill Stidd
20 Sep 08 1:27 PM MST

This financial page supports the subsidiaries that Altria owns, however I would like to add Kraft to this list as well, “Altria Group, Inc. is the name of the parent company of Philip Morris USA Inc., John Middleton Co., and Philip Morris Capital Corporation. As of December 31, 2007, Altria Group also holds a 28.5% economic interest in SABMiller plc. (http://www.altria.com/investors/2_6_1_financialnews.asp)

I have to say that my research after reading the many pages of contingencies, litigations, and lawsuits that the tobacco industry produced have created amazing liabilities for the subsidiaries. It makes me question the fact that there was a name change to Altria Group, “The name change to Altria Group, Inc. was effective January 27, 2003. All news releases in this Financial News section of our Web site, prior to this change, will refer to the parent company's former name of Philip Morris Companies Inc. “ (http://www.altria.com/investors/2_6_1_financialnews.asp)

The second question /concern for me was reading about the “spin-off” of shares by both Phillip Morris and Kraft very recently, “On March 28, 2008, Altria completed the spin-off of 100% of the shares of Philip Morris International to Altria’s shareholders.(http://www.altria.com/investors/2_6_1_financialnews.asp).

The Board of Directors of Altria Group, Inc. voted on January 31, 2007, to authorize the spin off of all shares of Kraft Foods Inc. owned by Altria to Altria's shareholders. The distribution of the approximately 88.9% of Kraft's outstanding shares owned by Altria was made on March 30, 2007, to Altria shareholders of record as of 5:00 p.m Eastern Time on March 16, 2007” (http://www.altria.com/investors/2_2_2_kraftspinoff.asp).

I think that the amount of liability due to the contingencies was to great a burden for Altria. It is very clear from the mission statement of the company that they are trying to stress change and improvements for the industry’s that they have purchased. There was a great deal of transactions happening during 2007 with all these spin-offs. What I did read from the Altria company was about their level of integrity. “Altria Group's scale, market position, balance sheet strength and improved operational focus make the company one of the most compelling investment opportunities available in tobacco and consumer products.” (http://www.altria.com/investors/2_1_strategyfinancialgrowth.asp)

Ultimately I feel that they are committed to proper reporting for the integrity of their company, the historic subsidiaries that they have purchased, and the shareholders that are scrutinizing their every move.

http://www.altria.com/investors/2_6_1_financialnews.asp retrieved September 20,2008.http://www.altria.com/investors/2_2_2_kraftspinoff.asp retrieved September 20,2008.http://www.altria.com/investors/2_1_strategyfinancialgrowth.asp retrieved September 20,2008.

Ethics discussion: Payroll

An employer bears a special responsibility to account properly for the company’s payroll. A primary object of that responsibility is the government’s (federal, state, and local) “connection” to taxes levied on each employee’s income, as well as other taxes levied on the employer’s payroll.

Connor Lang was discussing summer employment with Jarrod McIntyre, president of Azalea Landscaping Service:
Jarrod: I'm glad that you're thinking about joining us for the summer. We could certainly use the help.Connor: Sounds good. I enjoy outdoor work, and I could use the money to help with next year's school expenses.Jarrod: I've got a plan that can help you out on that. As you know, I'll pay you $12 per hour, but in addition, I'd like to pay you with cash. Since you're only working for the summer, it really doesn't make sense for me to go to the trouble of formally putting you on our payroll system. In face, I do some jobs for my clients on a strictly cash basis, so it would be easy to just pay you that way.Connor: Well, that's a bit unusual, but I guess money is money.Jarrod: Yeah, not only that, it's tax-free!Connor: What do you mean?Jarrod: Didn't you know? Any money that you receive in cash is not reported to the IRS on a W-2 form; therefore, the IRS doesn't know about the income-hence, it's the same as tax-free earnings.
Why does Jarrod McIntyre want to conduct business transactions using cash (not check or credit card)?
How should Connor respond to Jarrod's suggestion?

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My Response: Jill Stidd 19 Sep 08 12:01 PM MST

Per out text and the IRS website, it states clearly that an employer is responsible for submitting FICA taxes, social security taxes, workers comp that have been calculated and withheld from the employee’s gross pay. The other segment of payroll taxes is state taxes which are explained here on the Employment Development Department (EDD) website, “California has four State payroll taxes which are administered by the Employment Development Department (EDD). They are Unemployment Insurance (UI) and Employment Training Tax (ETT), which are employer contributions, and State Disability Insurance (SDI) and Personal Income Tax (PIT), which are withheld from employees' wages.Wages are generally subject to all four payroll taxes. However, some types of employment are not subject to payroll taxes and/or PIT withholding. For more information, please refer to the California Employer's Guide (DE 44).” (http://wwwedd.cahwnet.gov/Payroll_Taxes/What_Are_State_Payroll_Taxes.htm)

The employer is required to meet the amount of FICA taxes that the employee pays. This can be a very large cost to the employer and must be budgeted into operating costs of the business. The penalties and interest are quite large for late FDT payments. This is all very expensive and time consuming for an employer and that is the reason that Jarrod is suggesting this arrangement. By using Cash for payment, there is no paper trail or accounting of the payment there for a way he thinks he can hide the payment to Conner. However what he is not telling Conner is that Conner will still be responsible for his portion of FICA coming out of his paycheck at the end of the year if this company should ever be audited by the Employment Development Department in the state of California and caught for these actions. Which could result in a much lower tax return for Conner than he expected. Connor could learn the very hard lesson that he should have said no to Jerrod.Here is some good advice from the IRS, “How Can I Avoid Receiving FTD Penalties? You will be subject to a FTD penalty. The penalty rate increases according to the number of days the tax liability remains unpaid.If you make a deposit; late (after the deposit due date), or; of an incorrect amount (less than 100% or theapplicable safe harbor amount), or; in an incorrect manner (to an unauthorizedfinancial institution, directly to the IRS, or notthrough an electronic funds transfer, if required.”

(http://www.irs.gov/pub/irs-pdf/p1932.pdf)Warren, Reeve, and Duchac.( 2007). Accounting 11. Thompson South – Western.http://wwwedd.cahwnet.gov/Payroll_Taxes/Reporting_Requirements.htm retrieved September 19,2008.http://wwwedd.cahwnet.gov/Payroll_Taxes/What_Are_State_Payroll_Taxes.htm retrieved September 19,2008.

Web research: Corporations

Go to the website of About.com and find information about patents and copyrights at http://www.usgovinfo.about.com/blpatents.htm. Read Part 1 on the first page, which contains general information about patents, and then click on one or more of the links to information about applying for a patent. Go back to the first page, click on Part 2, and read about copyrights. Click on one or more of the links about registering a copyright.
Discussion Question
Please respond to this Discussion Question using the information from the Web Field Trip above. Take time to review the responses of your classmates and provide your feedback.
In your Web Field Trip, you were asked to research the procedures for applying for a patent and registering a copyright. What are those procedures? Are these procedures available to anyone who wants to apply for a patent or register a copyright, or are there limitations?

My Response: Jill Stidd 12 Sep 08 12:14 PM MST

Patent: who can apply?“According to the law, only the inventor may apply for a patent, with certain exceptions. If a person who is not the inventor should apply for a patent, the patent, if it were obtained, would be invalid. The person applying in such a case who falsely states that he/she is the inventor would also be subject to criminal penalties. If the inventor is dead, the application may be made by legal representatives, that is, the administrator or executor of the estate. If the inventor is insane, the application for patent may be made by a guardian. If an inventor refuses to apply for a patent or cannot be found, a joint inventor or a person having a proprietary interest in the invention may apply on behalf of the non-signing inventor. If two or more persons make an invention jointly, they apply for a patent as joint inventors. A person who makes a financial contribution is not a joint inventor and cannot be joined in the application as an inventor. It is possible to correct an innocent mistake in erroneously omitting an inventor or in erroneously naming a person as an inventor.”

http://usgovinfo.about.com/gi/dynamic/offsite.htm?site=http://www.uspto.gov/web/offices/pac/doc/general/apply.htm)

Patent: who can not apply?“Officers and employees of the Patent and Trademark Office are prohibited by law from applying for a patent or acquiring, directly or indirectly, except by inheritance or bequest, any patent or any right or interest in any patent.” (http://usgovinfo.about.com/gi/dynamic/offsite.htm?site=http://www.uspto.gov/web/offices/pac/doc/general/apply.htm)Patent:

how to apply?They recommend using the electronic filing system due to its ease. All you do is turn what you are tryping to patent into a PDF and send it through there secure system along with the application and fees. “Use EFS-Web, the USPTO's electronic filing system for patent applications.” (http://usgovinfo.about.com/gi/dynamic/offsite.htm?site=http://www.uspto.gov/main/patents.htm)Patent: feesAlternative fee amount (non-small entity) basic filing fee 850.00 and for Alternative fee amount (small entity) basic filing fee 425.00 ( http://usgovinfo.about.com/gi/dynamic/offsite.htm?site=http://www.uspto.gov/go/fees/index.html p 2)

Patent financial data:Fiscal year 2007 small entity payments $41,519 and for non small entity $ 209,577 quite a bit of revenue here for patent applications. (http://usgovinfo.about.com/gi/dynamic/offsite.htm?site=http://www.uspto.gov/go/fees/index.html. p4,5)

Copyrights: who may apply?Persons or organizations creating "original works of authorship" including literary, dramatic, musical, architectural, cartographic, choreographic, pantomimic, pictorial, graphic, sculptural, and audiovisual displays usually register copyrights. Authors, artists, song writers and creators of computer programs typically register copyrights.Several categories of material are generally not eligible for federal copyright protection.


These include among others:• Works that have not been fixed in a tangible form of expression (for example, choreographic works that have not been notated or recorded, or improvisational speeches or performances that have not been written or recorded)• Titles, names, short phrases, and slogans; familiar symbols or designs; mere variations of typographic ornamentation, lettering, or coloring; mere listings of ingredients or contents• Ideas, procedures, methods, systems, processes, concepts, principles, discoveries, or devices, as distinguished from a description, explanation, or illustration•

Works consisting entirely of information that is common property and containing no original authorship (for example: standard calendars, height and weight charts, tape measures and rulers, and lists or tables taken from public documents or other common sources)http://usgovinfo.about.com/blcopyrights.htm

There is no need to "apply" for a copyright. A copyright is automatically considered to be granted to the author or creator of the work as soon as it is finished and considered "fixed" in a copy or recording. [Details from the US Copyright Office] While there is no need to apply for copyrights, there are definite advantages to registering them through the Copyright Office. Primarily, registering a copyright establishes a legally enforceable public record of the creator's copyright claim.Things that cannot be copyrighted include any inventions, ideas, procedures, processes, slogans, principles, or discoveries. (http://usgovinfo.about.com/blcopyrights.htm)

Copyright: who may not apply?In the case of works made for hire, the employer and not the employee is considered to be the author. Section 101 of the copyright law defines a “work made for hire” as:1. work prepared by an employee within the scope of his or her employment; or2. work specially ordered or commissioned for use as; a contribution to a collective work; a part of a motion picture or other audiovisual work&; a translation &; a supplementary work; a compilation; an instructional text; a test; answer material for a test an atlas.(http://usgovinfo.about.com/blcopyrights.htm)

Copyright: how to registerTo register a work, send the following three elements in the same envelope or package to:Library of CongressCopyright Office101 Independence Avenue, SEWashington, DC 20559-60001. A properly completed application form.2. A nonrefundable filing fee* for each application.3. A nonreturnable deposit of the work being registered. The deposit requirements vary in particular situations. The general requirements follow. Also note the information under “Special Deposit Requirements.”
(http://usgovinfo.about.com/blcopyrights.htm)

I have written a children’s book that I have wanted to copyright for some time now. I had researched into this a while back and found out that one way to secure copyright of my book was to make a copy, seal it, and send it to myself, and never break the seal. I did that. I now may make the next step and register it now that I have all the information I need to do so. I want to publish it as well; I am looking right now for someone to illustrate it.http://usgovinfo.about.com/blpatents.htmhttp://usgovinfo.about.com/blcopyrights.htmDate Modified: 12 Sep 08 12:20 PM MST

Ethics discussion: Internal controls

Leah Corbin, CPA, is an assistant to the controller of Beartooth Consulting Co. In her spare time, Leah also prepares tax returns and performs general accounting services for clients. Frequently, Leah performs these services after her normal working hours, using Beartooth Consulting Co.’s computers and laser printers. Occasionally, Leah’s clients will call her at the office during regular working hours.

Discuss whether Leah is performing in a professional manner.

My Response: 12 Sep 08 11:10 AM MST

Initial Post: Jill Stidd

I feel that this is not a professional attitude as a CPA. I think that there are two points to consider here that are important for this discussion. First, our text defines capital and revenue expenditures, “once a fixed asset has been acquired and placed in service, expenditures may be incurred for ordinary maintenance and repairs. In addition, expenditures may be incurred for improving an asset or for extraordinary repairs that extend the assets useful life. Expenditures that benefit only the current period are called revenue expenditures. Expenditures that improve the asset or extend its useful life are called capital expenditures.” (Warren, Reeve, and Duchac. P. 9,10)

The discussion says that Leah frequently uses the computer and printer to work on private clients after hours. It does not say if she has permission to do this, if so then that is a different story all together. If she does not have permission then she is adding to the wear and tear of the equipment that could add to accumulated depreciation and affect the assets on the balance sheet for the company she works for. If she creates a situation that the printer goes through more ink (which by the way is very expensive, or needs a minor repair then that would affect expenses which would effect the income statement and net income for the company.Second idea to look at, should not Leah as a CPA create her own company that purchases her own equipment so that she can garner the tax benefits that the company she is working for gets with deprecation and expenses?

Not only is she not very ethical and professional here, she is not a very smart CPA if she is letting the company she works for get all the tax benefit that she could acquire if she created her own business.As far as the phone calls go at work, in most places of business the policy is stated in the handbook that there should be no personal phone calls, so again this is highly unprofessional.Warren, Reeve, and Duchac.( 2007). Accounting 11. Thompson South – Western.

Class Work by Jill Stidd

For this Web Field Trip you will review the annual reports of the Coca Cola Company and Wal-Mart, two of the largest publicly traded firms in America.
Coca Cola
Go to http://www.thecoca-colacompany.com/investors/annual_other_reports.html. This page shows a link to the 2006 annual report.You will need to scroll through the annual report to find the information that you need to answer the questions. Remember what you learned in Accounting I about financial statements to help you find what you need.
Wal-Mart
Go to http://investor.walmartstores.com/phoenix.zhtml?c=112761&p=irol-irhome. Find the financial information and then annual reports. You will need to scroll through the annual report to find the information that you need to answer the questions. Remember what you learned in Accounting I about financial statements to help you find what you need.
Discussion Question
Please respond to this Discussion Question using the information from the Web Field Trip above. Take time to review the responses of your classmates and provide your feedback.
Compare the accounts receivable turnover ratios for Coca-Cola and Wal-Mart. What characteristic(s) of these companies would indicate that these ratios are reasonable?

http://kucourses.com/ec/crs/default.learn?CourseID=3073466&Survey=1&47=4849309&ClientNodeID=404340&coursenav=2&bhcp=1


My Response: 8 Sep 08 12:44 PM MST


Initial post: Jill Stidd

Coca-colaAccounts receivable turnover = (net sales) / (average accounts receivable)(24,088 ) / (2,587) +( 2,281) / 2 the AR net realizable values for both years INCLUDE the estimated write off.

To support this statement Coca Cola 2006 report states, “We record trade accounts receivable at net realizable value. This value includes an appropriate allowance for estimated uncollectible accounts to reflect any loss anticipated on the trade accounts receivable balances and charged to the provision for doubtful accounts. We calculate this allowance based on our history of write offs, level of past-due accounts based on the contractual terms of the receivables, and our relationships with and the economic status of our bottling partners and customers.” http://www.thecocacolacompany.com/investors/pdfs/form_10K_2006.pdf . p.76

9.90= (24,088 ) / 2434

Answer 9.90 Accounts receivable turnoverWal-Mart($312,427) / (2,662) +( 1,715) / 2($312,427) /4377 /2($312,427) / 2188,50

Answer 142.76 Accounts receivable turnover

I would say that Coca Cola is completely different customer base from Wal-Mart. The account receivables also come from different sales strategies. Coca-cola, in that it ultimately sells beverage retail products to a consumer; those revenues go to the seller not to Coca Cola. Coca Cola makes it sales as a wholesaler invoicing the seller given the terms stated by Coca Cola, which creates their accounts receivables. (I looked long and hard for and documentation on terms, but did not find any) Let’s assume that they are net 30 and given that there turnover was 9.90 this would justify those numbers and are in line for Coca-Cola.Wal-Mart sells directly to the consumer there for the sales revenue is from the consumer. There receivables are from a very different venue. As stated by the 2006 report from Wal-Mart, “Receivables Accounts: receivable consist primarily of receivables from insurance companies resulting from our pharmacy sales, receivables from suppliers for marketing or incentive programs, receivables from real estate transactions and receivables from property insurance claims. Additionally, amounts due from banks for customer credit card, debit card and EBT transactions that take in excess of seven days to process are classified as accounts receivable.” http://walmartstores.com/Media/Investors/2006_annual_report.pdf p.36

I am sure part of the High turnover or Wal-Mart has two factors. I would like to note that I was very surprised to see this high turnover rate of 142.76 at first, but when I looked more closely it made perfect sense. Give that we use the net sales for the computation, Wal-Mart’s net sales is much higher than Coca-Cola net sales, but both of their A/R values were similar, that would be one reason that Wal-Mart’s turnover rate would be higher. The second reason I would think is because there A/R consists of insurance billing. With the electronic infrastructure of the insurance billing today it happens very quickly once it is submitted to the insurance company. It is all electronic from the submittal, to the response, and finally to the money being directly deposited into Wal-Mart’s bank account. This would create a rapid turnover in A/R .In conclusion I would have to say that yes, both companies in all their differences as companies are reasonable in their ratios of turnovers.

http://www.thecocacolacompany.com/investors/pdfs/form_10K_2006.pdfhttp://walmartstores.com/Media/Investors/2006_annual_report.pdfWarren, Reeve, and Duchac.( 2007). Accounting 11. Thompson South – Western.

Ethics discussion: Bank Interest computation

Neka Kiser, vice president of operations for Mountain National Bank, has instructed the bank’s computer programmer to use a 365-day year to compute interest on depository accounts (payables). Neka also instructed the programmer to use a 360-day year to compute interest on loans (receivables).

Discuss whether Neka is behaving in a professional manner.

My Response: 5 Sep 08 10:09 AM MST

I wanted to provide a definition of a deposit account. I went to the web in search of this definition, “A deposit account is a current account at a banking institution that allows money to be deposited and withdrawn by the account holder, with the transactions and resulting balance being recorded on the bank's books. Some banks charge a fee for this service, while others may pay the customer interest on the funds deposited.

(http://en.wikipedia.org/wiki/Deposit_account, reveiwed, September 4, 2008)

To increase the days that the intrest is compute for the deposit account would increase the interest that the bank could collect from the consumer. This is not ethical and if customers looked at their bank statement and could analize this amount that must be disclosed then there would be complaints. This complaint would also be sent to the regulations that oversee the banking industry. The order that Neka gave the programer to compute the loans (receivables) for a 360 day year sends a clear message that Neka was aware of the correct thing to do and chose not to for the payables. Neka is acting in a very unprofessional manner and is asking someone else to create something in terms of computer programming that is unethical as well.The computations of the receivables is in order for computing at 360 days per our text. “ The interest rate on notes is normally stated in terms of a year, reagardlessof the actual period involved.”

(Warren, Reeve, and Duchac,. 2007)

http://en.wikipedia.org/wiki/Deposit_account reveiwed, September 4, 2008)Warren, Reeve, and Duchac.( 2007). Accounting 11. Thompson South – Western.