Problem 1. You are considering opening a kiosk in the mall that will sell customizable aprons. You need to borrow money from the bank to get the business started and estimate that you will need approximately $20,000. The bank would like you to prepare an estimated profit statement showing what the expectations of the company are. You will pay $6 for the aprons and will sell them for $10. You estimate that you can sell 1,000 aprons per month. The cost of paint and supplies to customize the shirts will be $1.00 per apron. The cost of rent on the kiosk will be $500.00 per month. Utilities will be $200.00 per month. Wages of workers will be $1000.00 per month. Calculate the estimated profit of your company for the first year of operation.
Calculate the estimated profit of your company for the first year of operation.
Problem 2. During 2002, Enron Corporation hid large liabilities from its balance sheet. WorldCom admitted to recording expenses as assets. Both companies tried to improve their financial appearance by window-dressing their financial statements. Is this an ethical issue? If yes, what is the ethical issue? Provide mini history on these two companies.
Problem 3. You are an accountant working for an advertising agency and you are working on the adjusting entries for the year ending December 31st. You notice that the prepaid insurance account is too high, because the policy has now been used up based on time. You paid for another year on January 1st, so the December 31 balance did not require any adjusting. Is this accurate and what effect will this type of behavior have on the financial statements.