1) How do generally accepted accounting principles affect the recognition of gold that has yet to be mined from the

earth? Accounting practice only allows the company to recognize revenue when the gold is mined and processed. Generally accepted accounting principles does not allow a company to recognize revenue before the gold is mined and processed. This includes not recognizing revenue for gold that is assumed to be in the ground based on an engineering firms assurance. Recognizing revenue for gold that has not been mined or processed in order to avoid concerns from investors is considered bad accounting and attempted fraud. Seeing as though generally accepted accounting principles allows the company to recognize gold when it is mined and processed, the company will still have revenue upon mining the gold, and will have to compensate for possible losses during the selling process 2) It is evident that changes need to be made in your organization. You went into business with your friend who was to be responsible for all accounting duties. It has been uncovered that he has been incorrectly depreciating equipment using the double-declining balance method causing the company to appear to be operating at a loss. There is a scheduled meeting with the employee grievance committee because the company has been operating at a loss and they are seeking answers. How will you handle these two different situations? A change in accounting process needs to take place. Although my partner is my friend, business affects both parties. We have to first convert from using the double-declining balance method of depreciation to using the straight-line method. Along with a change in depreciation method we have to adjust the useful lives and residual value assumptions with more realistic values. Generally accepted accounting principles does not require a company to enter any financial statement changes when adjusting the useful life of an asset, but it does require a note in the financial statements. By changing elements of depreciation it has been found that the company is actually operating at a profit. For the upcoming meeting with the employee grievance committee, we will need to inform them of the changes that have been made which now rightfully shows the increased profits the company has actually had for the past five years. Operating at a profit means that there is excess income that should have been used to increase employee wages and also offer fringe benefits. The grievance committee will be notified that with the recent changes, they will also begin to see changes regarding their wages and benefits. I will also have to take measures in order to ensure that my partner is properly educated to handle preparing the companys financial statements. If he turns out able to handle the preparation of the financial statements, then I will have to take actions to review each set of financial statements just to ensure accuracy. 3) Larsen Enterprises has to maintain a current ratio of 2 to not default on its debt. Currently, the current ratio stands at 1.9. How can Larsen Enterprises ethically increase the current ratio in order to not default on its debt?

Larsen Enterprises is considered at technical default on its debt because their current ratio currently stands at 1.9 which is below 2. That basically means the company is bankrupt and we need to figure out a way to fix that by manipulating the ratio. We have a few choices we can act on. First, we want to think about either increasing the assets to make the current ratio increase by obtaining more inventory, or decrease the liabilities to change the current ratio. Since we have very limited liquid assets, we should not place that as a priority. I suggest that we concentrate on the current liabilities because those are our priority. Since we are a large company with 200 employees we could suggest furlough days in order to decrease salaries and wages payable. I do not think that it is in the best interest of the shareholders and lending institutions for Steve and John to make business decisions that have cosmetic effects on the financial statements. 4) Your company has been operating at a significant profit and you wish to convey this to your shareholders. Although you will provide them with a dividend, it will be a stock dividend instead of cash. Construct a draft memo on how you will explain this upcoming dividend declaration. In order to assist the shareholder relations department with the announcement of a 10% stock dividend, I would suggest the memo state the following: In recognition of the upcoming dividend disbursement, this memorandum is to inform you, the shareholders, of an announced issuance of a stock dividend. Former dividends have been issued through a 6% cash dividend, but upon further inspection of our recent financial statements, we are now able to offer you a 10% stock dividend. A stock dividend issuance increases your total number of shares within the company by 10%. This 10% stock dividend also increases your vote and proportioned share of profits by 10%. The memo should inform the shareholders of what a stock dividend is, and also give the incentives it has to offer.