Accounting -FINA425-1201A-01: Budgeting Discussion Board

| January 31, 2017

Question
FINA425-1201A-01: Budgeting

Discussion Board

The Assignment (YOU DO NOT HAVE TO DO THE ASSIGNMENT ITSELF, ONLY RESPOND TO STUDENT POSTS, BASED ON THE ASSIGNMENT!)

For this assignment, you must write 4–5 paragraphs that you will deliver to the ICBI board (discussed in the IP 3 assignment) on the need for a budget contingency plan. Please think of 2 scenarios or events that could happen in which a budget contingency plan is needed. You must answer the following:

Explain the need for a budget contingency plan
Identify two (2) events or problems that could occur in which a budget contingency plan is needed.
Add three (3) budgeting guidelines to prevent the risks or problems you identified in question #2.
How to respond to students’ posts:

Your DB assignment and your comments to classmates should be critical and meaningful.

• Include detail and specific content

• Illustrate critical thinking

• Relate the learning to the class readings

• Create opportunities for discussions that lead to fuller understanding of the subject matter

• Use credible sources to support positions

• When agreeing with postings of classmates, give specific information that supports the concept

• When disagreeing with postings of classmates, give specific information illustrating the credibility of the disagreement

• Constructive debate using proof to support points

• Reflective thinking should be displayed in responses

• Incorporate pertinent real-life experiences (optional)

• The mechanics, grammar, spelling and structure should be accurate, logical, and clear

Discussion Board Grading Criteria:

“A” – Answer the question fully and intelligently, providing meaningful responses to classmates and use the text as support. To earn a high A, you must site external research sources, make reasonable inferences, and/or use a real world example. Responses are posted within the allotted timeframe and are written at a college-level.

Student Posts:

Student#1

Mario Boquin

American InterContinental University

Contingency planning is an anticipating advance unexpected circumstances occurrences, situations that there can be a fast response to a crisis. The possible eventualities should consider. Contingency planning involves the identity occurrences that acceptance the warning signs indicators of problems and formulating a response.

Contingency plan budget often develops a break down flow of operations, that will develop strategies that will make possible breakdowns and showing also a continue function organization. An example could be that a business will always depends increase heavily on telephone communications for the conduction of business, the contingency plan would help to create a secondary wireless network to activated an event for that public telephone lines would be disable by some disaster.

Their a moment that a budget contingency plan will create a server as disaster recovery plan that business will often focus on creation of process for their new goals. They work in three situations first the plan allows day per day to continue great deals of interference. Secondly, the backup is capable functional long to restore proper function plan. Lastly it emerges plan to inconvenience customer to continue goods and services a time efficient manner.

Another contingency problem that can emerge would be a marketing department created a appearance that ideal marketing strategy for new product or products. A secondary market plan developed to possible quickly shift the focus to other consumer markets to switch the forms of promotion of an event that will seemingly ideal primary plan fails to desired the results.

Budgeting guideline will achieve always to track the spending quickly as easily, because when you don’t do it is when it emerges the depts. And suddenly you are making new promotion as developing strategies or market. A great roll meant of budget guideline would be a generic guide would help you control all spending in a good order as following house things and company.

Student#2

The need for a budget contingency plan is simply put as a plan in case of an emergency situation. Budgets are made to in order to know where and how money will be spent under normal circumstances for a business (Coyle, 2009). The contingency plan is contingent on some kind of disaster happening. Being able to answer the question of what will be done in case something uncontrollable happens is a good idea (Ibis).

In the event of a prolonged power loss the company would need to activate its contingency plan. No company can operate without power and there should be steps to take if the situation occurs. This is very necessary in case the back-up generator fail to supply power. Another event that could happen is a mass recall of a product. The amount of things being returned would completely change how the budget looked.

In order to prevent total power loss there are some steps in the budget that could be added. Making sure that maintenance is always on the budget is important. Taking the time to spend the money now will help in the case when the generators may be needed to power buildings and equipment. There should be no reason that the company is not ready for a power outage. Losing money because of negligence is not good business practice. The generators not working should be the last thing a company is thinking about if the power is out in the area.

The proper amount of research and development funding should be in the budget. Although there is no way to completely make everything safe it is best to make sure all the steps are taken to get pretty close. Along with proper research and development making sure quality assurance has the right funds is important in the budget. The proper amount of funds mean the people can check the products to the best of their ability before shipping them out to store or customers.

Contingency plans need to be put in place just for emergencies. Since there should be a low chance of activating these plans they should be reasonable. There is no need to have an extra flashy backup plan that is more involved than the original plan the business is using. In the time where the plan is activated it is important that everyone involve understand their roles and is able to perform whatever their role calls for.

Coyle, V. (2009, May 14). Contingency Budget. Retrieved January 18, 2012, from Mahasset Press: http://www.antonnews.com/manhassetpress/news/281-what-exactly-is-a-contingency-budget.html

Ibis, h.-p.C. (n.d.).Contingency Planning. Retrieved January 18, 2012, from Ibis: http://www.ibisassoc.co.uk/contingency-planning.htm

Student#3

Michael Wolfe

01/18/12

AIU Online

Unit 3

A contingency plan is essential a Plan B or a for emergencies only plan. For instance, our company created a Plan A for the year 2013, but in order for this to take place, a certain amount of scenarios must play out. If, and only if, these scenarios do not play out accordingly, we will have to go with Plan B, the contingency plan. This could also be known as a back-up plan, just in case.

Shim, J. K., Siegel, J. G., & Shim, A. I. (2012).Budgeting Basics and Beyond (4th ed.). Hoboken, NJ: John Wiley & Sons, Inc

ACCT311-1201A-01: Principles of Financial Accounting

The Assignment (YOU DO NOT HAVE TO DO THE ASSIGNMENT ITSELF, ONLY RESPOND TO STUDENT POSTS, BASED ON THE ASSIGNMENT!)

Consider the following scenario:

Jim’s Music Company uses LIFO for inventory, and the company’s profits are quite high this year. The cost of inventory has been steadily rising all year, and Jim is worried about his taxes. You are Jim’s accountant and you suggested that the company make a large purchase of inventory to be received during the last week in December. You explained to Jim that this would reduce his income significantly.

Jim still doesn’t understand the logic of your suggestion. Explain how the purchase would affect taxable income. (1 paragraph)
Is this ethical? Jim is uncertain about the appropriateness of this from a legal and ethical perspective. Give your opinion and explain the ethical implications of making the purchase. (1 to 2 paragraphs)
Suggestions for Responding to Peer Posts

Compare and contrast your peer’s response to your own. Were there any similarities or differences?
Were the reasons your peer gave for his or her decision supported well?
What statements would you use to refute his or her position?
How you should respond to students’ posts:

Your DB assignment and your comments to classmates should be critical and meaningful.

• Include detail and specific content

• Illustrate critical thinking

• Relate the learning to the class readings

• Create opportunities for discussions that lead to fuller understanding of the subject matter

• Use credible sources to support positions

• When agreeing with postings of classmates, give specific information that supports the concept

• When disagreeing with postings of classmates, give specific information illustrating the credibility of the disagreement

• Constructive debate using proof to support points

• Reflective thinking should be displayed in responses

• Incorporate pertinent real-life experiences (optional)

• The mechanics, grammar, spelling and structure should be accurate, logical, and clear

Discussion Board Grading Criteria: “A” – Answer the question fully and intelligently, providing meaningful responses to classmates and use the text as support. To earn a high A, you must site external research sources, make reasonable inferences, and/or use a real world example. Responses are posted within the allotted timeframe and are written at a college-level.

Student#1

Since Jim’s Music Company uses LIFO inventory method, that is last-in-first-out, purchasing inventory late in December will increase the cost of goods sold. LIFO’s perspective on income, in comparison to the balance sheet which includes older costs that can be much lower than current inventory item prices, is the combination of current sales prices and current purchase costs. As in this instance where there is an increase in profits i.e. growing inventory, the LIFO method creates a lower net income. This is demonstrated by making this purchase to offset the profits to date; Assets – Liabilities = Net Income. So this purchase means lower taxable income, less taxes for the company to pay.

Though this strategy may not be ethical in the sense that it is creating more liabilities to circumvent paying higher taxes, it is acceptable in the US for income tax purposes. It is also used by nearly two-thirds of US companies. The tradeoff may be lower taxes; however, the IRS Code does require that if a company does this, they must also use these numbers for their financial reporting. Doing so shows a company to have lower profits which is not a favorable thing when reviewed by lenders or investors. Jim may be concerned that there may be legal or ethical repercussions, but it should be explained to him that his concern should be which inventory method is best for his company long term. Use LIFO and pay less taxable income or opt for FIFO which will make his financial statements more favorable to lenders and investors. Understanding what direction he wants will help him and his accountant decide on accounting practices that will best allow him to reach his goals.

Reference:

Horngren, C., Sundem, G., Elliott, J., Philbrick, D. (2011). Inventories and cost of goods sold. In S. Yagan (Ed.),
Introduction to financial accounting (10th ed., pp. 286-287). Upper Saddle River, NJ: Pearson Prentice Hall.

Student #2

Financial Accounting Unit 3 Discussion Posst

By Donielle Davis

LIFO stands for last in first out and what this means is the new inventory a company purchases is the first to get sold. LIFO is a very contreversial form of inventory accounting method because it is said to aid companies in manipulating income for the purpose of lowering taxes. Horngren, C., Sundem, G., Elliot, J., Philbrick, D. (2011) This large inventory purchase that I’m suggesting Jim to make will lower the company’s net profits drastically ensuring lower income tax amount being owed. The reason why profits will decrease is because the large purchase will be categorized under cost of goods sold.

I believe that making the large purchase at the end of the year to lower profits for tax purposes is definately unethical. First off if the IRS decides to look at the company’s past tax returns from previous years and see that they don’t usually purchase a large amount of inventory at the end of the year that might throw up a red flag to further investigate. Also businesses that use LIFO have to follow strict tax regulations and the IFRS prohibits the use of LIFO due to the fact that management can influence reported income by timing inventory purchases. Horngren, C., Sundem, G., Elliot, J., Philbrick, D. (2011) It is also mandatory that a business using LIFO must use it for financial reporting as well as tax reporting. Doing this shows a lower profit for the business and may steer investors away.

References

Horngren, C. T., Sundem, G. L., Elliot, J. A., Philbrick, D. R. (2011). Introduction to Financial

Acounting. Upper Saddle River, NJ: Pearson Prentice Hall.

Student#3

Acquisitions and Payments

Trisha Parish

Unit 3 DB

Jim, a client, owner of a music company uses the last in- first out (LIFO) as his inventory method. Jim has noticed that this year the company’s profits are quite high. Jim has become concerned about his taxes, because of the fact that the cost of inventory has been steadily rising all year (AIU Online, 2012). As his accountant, I suggested that make a large purchase of inventory to receive during the last week of December, because it would reduces his income significantly, thus lowering his taxes (AIU Online, 2012). Jim doesn’t understand the logic of what I suggested he do, so he has asked for an explanation of how making such a large purpose affects taxable income. Jim also wants to know if the purchasing and retrieval of inventory at of a fiscal is legal and ethical.

Purchasing and receiving inventory lowers a company’s taxable income by reducing a company’s gross profit. The gross profit reduces the net income; which is what a company’s tax rate is based off. According to Clausen (2010), “Gross profit is determined by subtracting cost of goods sold from sales; cost of goods sold is generally determined by inventory value.” By purchasing and receiving inventory before the end of the year it will increase the amount of inventory, thus reducing the gross profit for the company and reducing the company tax liability.

Purchasing and receiving inventory right before the end of a fiscal year is legal and ethical because it reduces profits without negatively affecting cash flow. If all purchases are reported on the fiscal statements when they are paid for and received than, it is not illegal. However if the inventory does not arrive until after the fiscal year, and it is reported it is considered falsify information. Also if a company receives and pays for inventory before the end of the fiscal year and doesn’t claim it on their financial statements that is also considers falsify information, which is illegal and unethical.

References

AIU Online. (2012). ACCT 311: Unit 3: Acquisitions and Payments[Multimedia presentation]. Retrieved from AIU Online Virtual Campus. Principles of Financial Accounting: ACCT311-1201A:01 website.

Clausen, J. (2010). Income Tax Liability and LIFO Inventory Valuation Method. Retrieved from.suite101.com/income-tax-liability-and-lifo-inventory-valuation-method-a224342″>http://james-clausen.suite101.com/income-tax-liability-and-lifo-inventory-valuation-method-a224342

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