Emerging trends in accounting

Assignment Help Accounting Basics
Reference no: EM1362698

Gaines Company recently initiated a postaudit program. To motivate employees to take the program seriously, Gaines establised a bonus program. Managers receive a bonus equal to 10 percent of the amount by which actual net present value exceeds the projected net present value. Victor Holt, manager ofthe North Western Division, had an investment proposal on his desk when the new system was implemented. The investment opportunity required a $250,000 initial cash outflow and was expected to return cash inflows of $90,000 per year for the next five year. Gaines desired rate of return is 10 percent. Mr. Holt immediately reduced the estimated cash inflows to $70,000 per year and recommended accepting the project.

a. Assume that actual cash inflows turn out to be $91,000 per year. Determine the amount of Mr. Holt's bonus if the original computation of net present value were based on $90,000 versus $70,000.

b. Speculate about the long-term effect the bonus plan is likely to have on the company.

c. As the Gaines Company ethics officer advising the financial decision-maker, recommend how to compensate managers in a way that discourages gamesmanship.

Reference no: EM1362698

Questions Cloud

Determine synergy from the merger : Fly-by-night Couriers is analyzing the possible acquisition of Flash-in the pan Restaraunts. Neither firm has debt. The forecasts of Fly-by-night show that the purchase would increase its annual after-tax cash-flow by $600,000 indefinately.
What is the speed of sound in water : A sound wave moving through water has a frequency of 256Hz and a wavelength of 5.77m.What is the speed of sound in water.
Manage the cost of processing orders : Manage the cost of processing orders - How might an operations manager use this information to manage the cost of processing orders?
Explain the similar bonds without a conversion feature : Explain the Similar bonds without a conversion feature returned 10% at the time and The bond is convertible into stock at a price of $35
Emerging trends in accounting : Assume that actual cash inflows turn out to be $91,000 per year. Determine the amount of Mr. Holt's bonus if the original computation of net present value were based on $90,000 versus $70,000.
Elucidate what is the probability that a randomly : Employment data at a large company revel that 72% of the workers are married, that 44% are college grads,and half of the college grads are married. Elucidate what is the probability that a randomly chosen worker;
Write program that asks user for initial : Write a program that asks a user for his/her first initial. Then ask the user to type 1,2 3, 4. When the user types 4 the program ends. When the user types in 1, 2, or 3 , the program displays the message.
Assume that the speeder maintains a constant speed : A speeding motorist traveling 100km/h passes a stationary police officer. The officer immediately begins pursuit at a constant acceleration of 12km/h/s (note the mixed units).
Factors of dietary supplements : What factors must you consider before taking dietary supplements? In what ways are they helpful or harmful?

Reviews

Write a Review

 

Accounting Basics Questions & Answers

  Write a report on internal controls

Write a report on Internal Controls

  Types and benefits and intricacies of rules

Tax rules are often very precise. For instance, a taxpayer must ordinarily provide "over 50%" of another person's support in order to claim a dependency exemption. Why is the threshold "over 50%" as opposed to "50% or more"? Explain in detail.

  Cash and receivables journal entries

Salen Company finances some of its current operations by assigning accounts receivable to a finance company. On July 1, 2012, it assigned, under guarantee, specific accounts amounting to $150,000.

  Journalization of below events

Gilbert Corporation has an opportunity to acquire a company which produces one of the parts it uses in its manufacturing process. After careful analysis, Gilbert has decided to raise the necessary capital for the acquisition by issuing $3,000,000 ..

  Aicpa code of professional conduct does work

In light of the business scandals of the last few years, does the AICPA's Code of Professional Conduct work? What is the area of greatest concern?

  Average-marginal tax-llc and gaap

Explain the meaning of the term "accounting principles" as used in the audit report. How is it determined if an accounting principle is "generally accepted". Discuss the sources of evidence for determining whether an accounting principle has substa..

  Capital improvement phase of the project

The governing body of the Order decided that it was no longer feasible to operate the convent, which had been built about sixty years ago, so it was advertised locally for sale.

  Starling coating and substitution

Starling Coating produces weatherproofing coatings that protect metal from oxidation. One of Starling's patented coatings, zurtan, is composed of two inputs, magna45 and zelon. While both inputs are required, they can be substituted for each other..

  Short run and long run equilibrium in fishing rod market

How would you predict that the short-run equilibrium that you have identified in question 1 will change? Illustrate your answer using appropriate diagrams. What will be the long-run equilibrium number of fishing rod manufacturers?

  Journal entries for foundation formal letter

Prepare the journal entries that should be made to record the expenditure of $100,000 on activities related to the legal assistance program. Prepare the journal entries that should be made upon receipt of the $100,000 check, assuming that it was r..

  Sec and european equivalent views of gaap

The SEC and its European equivalent are trying to merge their respective views of GAAP (Generally Accepted Accounting Principles). What are the easy points and what are the stumbling blocks?

  Expense which is related to the company sole

In year 1 Laylor Company has revenues of $100,000, advertising expense of $22,000, depreciation of $15,000-what is expected for last four years. The cost of capital is 10%.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd