I need help with this milestone one for ACC 630, the attached file will include rubric and the guidelines, if you need any work that has been done before regarding ACC 620 just let me know!

ACC 630 Milestone One Guidelines and Rubric For the final project, you will continue to work with the retail company that you chose in ACC 610 or, if you transferred into ACC 620, you will continue with the retail company you chose from the following options: Wal-Mart, Target, Sears, Kroger, or Amazon. You have adopted this company to apply learning concepts in authentic scenarios. For this project, you will conclude the portfolio that you have been assembling throughout the financial reporting series. This is the first of three milestone assignments that will lead to completion of your course project. In this assignment, you will complete Section I of the final project. You will prepare a Word document that addresses the critical elements below. Make sure you answer each question in a substantive way and defend your content with at least one scholarly source other than your textbook. You will want to pay close attention to the grading rubric in order to make sure you meet the exemplary level in each requirement. Specifically, the following critical elements must be addressed: I. Business EntitiesPartnerships and Corporations Assume your company is involved in a major lawsuit and the probable damages are estimated to be $2,000,000. A. Describe the effects damage estimates would have on the financial statements of a corporation and a partnership. B. How do disclosure requirements differ from a corporation to a partnership and what information is required? C. Are the shareholders at risk for any personal liability with the company set up as a corporation? Defend your response. D. If your company was set up as a partnership, would the partners be at risk for personal liability? Defend your response. Guidelines for Submission: Your paper must be submitted as a 2- to 3-page Microsoft Word document with double spacing, 12-point Times New Roman font, and one-inch margins. You should use at least one outside source other than the textbook. Sources should be cited according to APA style. Instructor Feedback: This activity uses an integrated rubric in Blackboard. Students can view instructor feedback in the Grade Center. For more information, review these instructions. Rubric Critical Elements Business Entities: Damages Estimate Exemplary (100%) Meets \"Proficient\" criteria and description is exceptionally clear and contextualized Business Entities: Disclosure Requirements Meets \"Proficient\" criteria and uses relevant research to illustrate claims Business Entities: Personal Liability Meets \"Proficient\" criteria and defense is well supported and logical Business Entities: Partnership Meets \"Proficient\" criteria and defense is well supported and logical Determines whether the partners would be at risk for personal liability and defends response Submission is free of errors related to citations, grammar, spelling, syntax, and organization and is presented in a professional and easy to read format Submission has no major errors related to citations, grammar, spelling, syntax, or organization Articulation of Response Proficient (90%) Describes the effects the damages estimate would have on the statements based on the company being set up as a corporation Identifies how disclosure requirements differ from a corporation to a partnership and what information is required Determines whether the shareholders are at risk for any personal liability and defends response Needs Improvement (55%) Describes the effects the damages estimate would have on the statements, but does not base this on the company being a corporation Identifies how disclosure requirements differ from a corporation to a partnership, but not what information is required Determines whether the shareholders are at risk for any personal liability, but does not defend response or defense is weak or cursory Determines whether the partners would be at risk for personal liability, but does not defend response or defense is weak or cursory Submission has major errors related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas Not Evident (0%) Does not describe the effects the damages estimate would have on the statements Value 22.5 Does not identify how disclosure requirements differ from a corporation to a partnership 22.5 Does not determine whether the shareholders are at risk for any personal liability 22.5 Does not determine whether the partners would be at risk for personal liability 22.5 Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas Total 10 100% Running head: FINAL PROJECT 1 Final project Prof: Piper ACC 620 Ismail Amar Southern New Hampshire University May 6, 2016 FINAL PROJECT 2 The basic assumptions of the projections made on percentage of sales method The basic assumption is that there is no inflation in the business environment in that the increase in the sales will mainly be caused by an increase in production and not an increase in the selling price. In addition, it is assumed that the company will be operating at full capacity due to increase in the finance to boost up the production process. Therefore, the increase in production will demand an increase in fixed assets in future. Nevertheless, the capital remains constant throughout the forecasting period in that there is no issuance of preference shares or ordinary shares or debentures. It is further assumed that the relationship between the balance sheet items and the sales remain constant throughout the forecasting period. More so, the profit margin will be realized and shall remain constant during the forecasting period. Projected income statement SEARS CORPORATION INCOME STATEMENT FOR THE YEAR ENDING 31ST Revenue $ 4,583 Operating expense 1200 Purchase expenses: 883 54 Utilities 0 18 Depreciation 6 14 Advertisement 2 31 Interest expense 0 3,26 Total expenses 1 1,32 Operating income 2 Taxes 35% 462.70 FINAL PROJECT Net income 3 859.30 Impact on the income statement The increase in capital will have a consequential increase in the items of the income statement. For instance, the total sales of the corporation will increase due to increase in the factor of production. The increase in the total sales will have a consequent increase in the gross profit provided that all other factors are held constant. It is exhibited that the increase in the total sales results to an increase in the expenses such as advertisement for the product to be sold to the market. In addition, a lot of expenditure is also incurred in the advertisement and interest expense for the external borrowing that are made by the company to finance it internal business activities alongside equity finance. Despite the increase in the expenses, there is anticipated increase in the gross profit for the firm. Projected statement of retained earnings SEARS CORPORATION RETAINED EARNINGS STATEMENT Retained Earnings previous year 12,030.70 Add: Net income 859.30 Total Less dividend paid Ending balance of retained Earnings Impact on statement of retained earnings 12,890 750 12,140 FINAL PROJECT 4 The injection of the capital proposed will increase the net income of the firm leading to an increase in the total earnings at the end of the year. The ending balance of the retained earnings is anticipated to increase at an increasing rate implying that the corporation will have a good financial health which is good news to both the shareholders and the investors. Projected balance sheet BALANCE SHEET FOR SEARS CORPORATION Value in "M" ASSETS 2015 Current Assets Cash 540 Net accounts receivable 3670 Inventory 1770 Temporary investment 120 Prepaid expenses 20 Total Current Assets 6120 Fixed Assets Long-term investments Land Buildings (net of depreciation) Plant & equipment (net) Furniture & fixtures (net) Total Net Fixed Assets TOTAL ASSETS LIABILITIES Current Liabilities Accounts payable Short-term notes Current portion of long-term notes Accruals & other payables Total Current Liabilities Long-term Liabilities Mortgage Other long-term liabilities Total Long-term Liabilities 420 6560 9030 6080 610 22700 28820 2460 240 140 140 2980 8970 4430 13400 FINAL PROJECT SHAREHOLDERS' EQUITY Capital stock Retained earnings Total Shareholders' Equity TOTAL LIABILITIES & EQUITY 5 300 12140 12440 28820 Impact on projected balance sheet The influx of the capital proposed will enhance the financial position of the company in the following ways. The cash available for the running of the company will be enhanced hence smooth running of the corporation. Additionally, the increase in the cash will improve the liquidity position of the company hence operating under going concern. Further, the improvement of the liquidity position of the company will enable it to meet its short-term financial obligations when they fall due hence being solvent. On the other hand, this will lower the gearing ratio of the firm by improving its financial health by decreasing the financial distress of the firm. The company investments are anticipated to increase overtime due to increase in the capital outlay that facilitates the company investment. Increase in the investment will result to increase in the firm's income hence increase in the value of the firm alongside shareholders wealth maximization which is the main company's objective for its existence. The capital stock is probable to increase due to predetermined increase in the company share price. Consequently, the shareholder's equity is also predetermined to increase due to the increase in the share prices in the stock exchange market. Projected cash flow SEARS CASH FLOW STATEMENT FINAL PROJECT Net profit before Adjusted for-dep-equipment Plant & machinery Gain on disposal Gain on disposal Interest Cash flow from operation before working capital changes Increase in stock Decrease in accruals Increase in debtors Increased in debtors Less tax paid Net cash flow from operating activities CASH FLOW FROM INVESTING ACTIVITIES Purchase of equipment Purchase of plant & machinery Sale of plant & machinery Net cash outflow from investing activities CASH FLOW FROM FINANCING ACTIVITIES Loan repayment Dividend paid -preference -ordinary loan acquisition interest paid net cash outflow from financing activities change in cash and cash equivalent cash and cash equivalent of the beginning cash and cash equivalent at the end Impact on projected cash flow 6 1451 1611 1510 -700 915 800 5587 -2107 -220 -585 930 16640 14658 -5500 -4500 2500 -7500 -1200 -750 -3200 2500 -800 4050 10384 2263 12647 FINAL PROJECT The increase in capital will consequently lead to increase in the cash and cash equivalent at the year end. The increase in the proposed finance will enable the firm to venture into more investment activities that gives a green light to the production of quality products. The capital will facilitate the purchase of equipment for production purposes, purchase of plant and machinery to enhance the quality of the product alongside facilitating the replacement of the old machine with the new one. The loan repayment will be made easier by the payment of the interest. The cash from investing activities are projected to increase due to increase in stock and debtors. 7 FINAL PROJECT 8 References Coyle, B. (2011). Cash flow forecasting and liquidity. Chicago: Glenlake Pub. Co. Droms, W. G. (2003). Finance and accounting for nonfinancial managers: All the basics you need to know. Cambridge, MA: Perseus Pub. Fridson, M. S. (2002). Financial statement analysis: A practitioner's guide. Chichester: Wiley. Greatapes, Inc. (2009). Reading the income statement. Minneapolis, MN: Greatapes. 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There are two major types of leases namely operating and capital leases. In operating lease, the lessor transfers the right to use the property only while retaining the title of the property (Arkansas, 2008). At the end of agreed period of leasing, the lessee returns the respective property to the lessor and since the lease do not assume the risk of ownership, the expense from the lease is normally treated as an operating expense in the financial statements. In capital lease the lease assumes all the risks associated with the property alongside the ownership of the property. The lease in this case is recognized as an asset and as a liability on the balance sheet (Vancil, 2013). The company claims depreciation each year on the asset and makes deductions on the interest expense of the lease payment in each year. The capital leases recognize expenses earlier than the operating leases. Pursuant to the financial standards board, a lease can only be treated as a capital lease if it meets all the following conditions: The lease economic life is greater than 75 percent of the economic life of the asset. There exists a transfer of ownership to the lessee in the end of the lease term. There exists an option of purchasing the asset at the end of the lease term at a bargain price. The lease payments' present value at a given discount rate exceeds the 90 percent market fair value of the asset. MILESTONE THREE: LEASES AND CHANGES IN FINANCIAL POSITION 3 Impact of the leases to the company The capital leases of the company led to higher recorded amount of assets to the corporation because of the respective investment in assets. Additionally, the liabilities of the company increased due to increase in depreciation expense of the leased property. The depreciation of the properties was recorded in the company's come statements as expense. The interest expense hiked the liability to the company. The leasing of the company property led to a decrease in the corporation's net income at the beginning of the year while the operating lease led to increase in the net income at the beginning of the year. Particular company lease SEARS leases real estate by considering the purchase of leased operating properties alongside assign leased properties. The company reviews the leases that are anticipated to expire in short-term for a corrective action to be taken. Trademarks and trade names: the company leases trade names like KMART and SEARS that are used in United States which are material to the corporation retail businesses. Advantages and disadvantages of leasing a building versus purchasing one Advantages: There is no down payment in form of deposit; the initial capital is substantially less than the down payment that is required for purchasing one hence a positive impact to company's cash flow. Each lease that is made on lease payment is a business expense and therefore, this reduces the corporations' taxable income. MILESTONE THREE: LEASES AND CHANGES IN FINANCIAL POSITION 4 There are no repairs and maintenance costs based on the lease terms and conditions. Leasing a building is easier to qualify as it does not require a credit report. Disadvantages: Leases of the building increases annually while others to some extent increase costs when the lease expires and need to be renewed. When the lease renewal ends, there might be a change in location. The building owner may decide to change the business location for a number of reasons so that renewal of the business lease becomes impossible. There is a little control over the property improvements, maintenance, repairs among other factors. Purchasing building Advantages: Tax deduction: the owner of the building deducts depreciation and mortgage interest to reduce tax liability. Investment capital: over time the value of the building increases hence adding capital valuation. Total control: the owner of the building has total control after purchasing it and can make decision on how he/she can improve it at a given point in time. MILESTONE THREE: LEASES AND CHANGES IN FINANCIAL POSITION 5 Disadvantage: The initial cost: the cost of buying the building is more initially as compared to leasing. More responsibility: when you purchase a building, you are responsible for all repairs, maintenance and other financial management. Cost increases: the building property taxes are anticipated to increase alongside insurance costs hence increase in the building cost. Statement of changes in the financial position From the analysis of the company's operations, I will not invest in the company based on the following grounds. The company is trading on a dangerous track whereby it has been continuously decreasing its annual revenue from one year to another. From the income statement of 2015 annual report, the company annual sales were $25,146 million which was decrease from $31,198 million in 2014. Additionally, the earnings per share of the company have been decreasing significantly over the period. To make matters worse, the company had a negative earnings before interest tax, depreciation and amortization of (836) from (647) in 2014. Since investors like investing in companies that have high returns and low risks, I will not invest in the company. MILESTONE THREE: LEASES AND CHANGES IN FINANCIAL POSITION 6 Internal memo To: CEO From: Controller's group of Acer Corp Date: 24/04/2016 Re: Recommendations This notice serves as a written notice to CEO SEARS Company regarding pertinent recommendations on the improvement of the financial position of the company. It has come to attention that the company is experiencing a poor financial health and an increase in the financial leverage. As the company controller, I take this opportunity to highlight some of the pertinent recommendations for the betterment of the company in future. The company should reduce the total operational expenses by reducing the unnecessary costs that are associated with the production and distribution of the company products. In addition, it is also important that the company consider increasing the sales volume to increase the revenue generation at the end of the year (Graci, 2009). From the accounting point of view, an increase I sales other factors held constant leads to an increase in the total profit that the company earns, Lastly it is important that the company reduces the external borrowings in form of longterm debts and rather finance most of its business activities by use of equity. This is because, though the debts have tax shield which adds advantage to the company, the debts increase the MILESTONE THREE: LEASES AND CHANGES IN FINANCIAL POSITION 7 company's gearing ratio hence increasing the insolvency and indebtedness consequently leading to bankruptcy. Regards, Controller's group of Acer Corp MILESTONE THREE: LEASES AND CHANGES IN FINANCIAL POSITION References Arkansas. (2008). Rule B-26, general lease operating requirements. El Dorado, Ark.: Arkansas Oil and Gas Commission. Graci, S. P. (2009). Effects of the statement of changes in financial position on the short-term loan division. Vancil, R. F. (2013). Leasing of industrial equipment: With tables for the analysis of financial alternatives and capital expenditures. New York: McGraw-Hill. 8 Running head: INCOME TAXES AND PENSIONS 1 Income Taxes and Pensions Prof: Piper Ismail Amar Southern New Hampshire University April 7, 2016 INCOME TAXES AND PENSIONS 2 Income Taxes A. If Congress voted to eliminate corporate taxes, what would be the effect on Sear's income statement and balance sheet? If a corporation wants to reduce the effects of corporate taxes which creates double taxation on their side, they would shift it to the consumers the product. But when they eliminate the corporate taxes, they would do so by relying on much debt financing. This therefore would bring an effect whereby the company's debts increase, thus increasing the liabilities, and it would lead to increased revenue on the income statement. In corporate taxation, the assets of the company are used to determine the marginal corporate tax basis. If this were the case, the assets of the company would thus have to be decreased hence leading to an overall decrease in the balance sheet, (Contos, 2005). If the corporate tax rate is lowered, a company with deferred tax liability would be required to decrease the balance sheet account and increase the company's income statement earnings figure, (Haskins and Simko, 2011). B. The income tax rate for Sears, and the effect of increasing in income of $2,000,000 on Sears. Federal income tax rate for Sears Holdings Corporation is 35% (benefit). Since the company had a net income loss last year of $1,385 million this would offset the loss by $2 million; remaining income (loss) before tax would be $1,384.385 million. INCOME TAXES AND PENSIONS 3 C. The effects on the balance sheet and income statement. It would have an effect of increasing the balance sheet while the income statement would decrease. This is simply because when the income (loss) decreases by a certain figure, it means the expenses have decreased by a certain amount, hence leading to a general decrease in the income statement. The GAAP permits that firms with net losses to have carry-forward or carryback offsets and the corporate tax rate could increase but they won't be taxed for a loss, (Haskins and Simko, 2011). D. The amount of money Sears paid in foreign taxes last year, and the percentage of its income is United States vs. foreign. The company paid foreign income tax of $17 million last year which was a tax benefit. The Income (loss) of the company in U.S.A was $1,420 million while foreign income was $35 million; Total Income before taxes was thus a net income loss of $1,385. The U.S.A percentage of this income loss is thus 102.5% while foreign is 2.5%. Pensions The company has adopted domestic pension plan, the defined benefit plans. The reason as to why the company adopted this plan is because of the uncertainties that may greatly affect the cash deficiency and therefore can feel freely to cease its contribution or terminate it at their own wish. It also serves as a motivation factor which also establishes a legacy that would go on forever. This is therefore something that builds the image of the company. For instance, they pay for medical bills of their former employees who are under post-retirement. INCOME TAXES AND PENSIONS 4 The effect of the pension plan on Sears's financial statements. The pension plan has an effect on the income statement as it's recorded as an expense which therefore reduces the net profit (losses) thus decreasing the income statement. It would have a similar effect on the balance sheet since the company funds the pension plans by itself using the available cash. An important factor is that pension plans would keep on reducing the assets and if they decrease to a certain level such that they are less than the required amounts, the company is required to cease the contribution and incase of surplus, they would be taxed, (Yuan and Clara, (2010) . Other option plans of retirement plans are the defined contribution plans; Include other plans such as profit sharing, stock bonus plan, money purchase pension plan, combination plans, thrift or saving plan, employee stock ownership plan (ESOP), 401 k plans, target benefit plans, cash balance plans, b plans, SIMPLE and the SEP. The Simplified Employee Plan (SEP) is the best plan for this company as they are less complicated, require minimal disclosure and reporting requirements. If the employer had a salary deduction policy, it would still remain so under this contribution plan. It also has the advantage of a favored tax basis on the side of the employee. I therefore strongly recommend this plan not only because of the above advantages but also because the burden of contribution would not rest upon the employer alone as is the case, but also on the employees. This would reduce the cash deficiency the company is experiencing. INCOME TAXES AND PENSIONS 5 References George Contos, (2005) An essay on the effects of taxation on the corporate financial policy: Internal Revenue Service. Vol. 98, pp. 415-423. Mark E. Heskins, & Paul J. Simko, (2011) What a corporate tax cut might mean: An analysis of deferred taxes. Virginia; University of Virginia. Juan Yermo and Clara Severinson, (2010) The impact of the financial crisis on defined benefit plans and the need for counter-cyclical funding regulations. France, OECD<>