only question 3

or prody e Camere Accu Bebed Bed Expre The best dell.com Arrasate Agir A A A Here M 17 6 days old Chade 15 O, water. Test, der boet The Teles www.FF Media when a declared by the decis make the Muda Hemed Accessible poplice, the played Teslimat dragasiyaomar Tag (Abed Tent Add chic Model Xprenticing of Maritis Thaanaa Total will be wel 3. Analyze the accounting issues for the March 2021 quarterly report. Provide your recommendation and analyze the impact on the March 31, 2021 quarterly financial report. (30 marks) Note: An overall evaluation of the communication component of the report will be made. (5 marks) U Exhibit 1: List of concerns prepared by the Controller of the company, including excerpts from his working papers (please note that all events in the case are fictitious and made up for the purpose of case analysis project Accounts Receivable and Bad Debt Expense The following is the schedule prepared by the controller to calculate the required allowance for doubtful accounts (in S000's): Accounts Receivable Aging March 31, 2021 December 31, 2020 $ $ $ $ Accounts % Allowance Accounts % Allowance Receivable Receivable Current 503 1.6 8 300 5 30-60 days 626 2.1 13 442 2.0 9 61-90 days 200 8.0 16 162 8.0 13 Over 90 days 220 15.0 33 140 15.0 21 Total 1,549 70 1,044 48 The working files indicate that aging of receivable approach was used in calculating bad debt expense. The aging was tested and large accounts were reviewed. Accounts were confirmed on a test basis, and no significant errors were found. Subsequent payments were also reviewed. On April 4, 2021, there was a newspaper article that Fast and Furious Company (FF), a customer of Tesla, declared bankruptcy due to a fire. The fire occurred on April 1". Tesla's books shows a balance owing from FF account of $145,000 as at March 31, 2021, of which $50,000 remained unpaid when it declared bankruptcy. You approached the Controller indicating why an adjustment was not made to the March financial statements. He explained that since FF went bankrupt after March 314, this adjustment will only be made on June's quarterly financial statements. Accounts Payable Accounts payable for previous periods included an accrdal of $180,000 related to a disputed payable to a supplier. The supplier initially sued Tesla for payment, and Tesla responded with a countersuit. The working file indicates that the dispute has been ongoing for about three years, and Tesla came close to going to court on a few occasions but the date was delayed due to procedural details. The CFO had worked diligently to reach a settlement. On the March 31 statements, Tesla reduced the accrual to $80,000, representing the actual settlement amount and the related legal costs. The $100,000 difference was taken into March's income. The file includes documents, signed by the CFO on behalf of Tesla, indicating that he finally paid the settlement amount out of court on April 25, 2021. Page 6 of 9 Lawsuit In January 2021, Tesla launched a patent infringement lawsuit against Advanced Motors Ltd. (Advanced). Tesla asserts that Advanced uses technology that is protected through the company's Model XL patent and is claiming damages of $50.0 million. A gain of $25 million was recorded in March 31st, 2021 financial statements because Tesla's in-house legal counsel believes that Tesla will win the lawsuit and be awarded damages of at least $25 million. Prepare a memo addressing Jaymond's request and concerns that includes the following: 1. Prepare an evaluation of the financial results of Tesla by completing the financial statements ratios worksheet contained in the template posted on Quercus. In addition, provide a visualization of trend analysis of the Debt-to-Equity ratio, P/E ratio and Return on Equity ratio over the past five years. To do the trend analysis, you need to download the previous year financial report, and fill in relevant previous year accounting numbers in the excel template to calculate prior year ratios. (You don't need to fill in all financial statement numbers for previous years) (30 marks) 2. Provide an analysis of the pros and cons of issuing bonds vs. issuing shares, and address the following issues: (35 marks) (1) What constitutes a sustainability bond? (2) Why is there a demand for sustainability bonds? (3) What advantages or disadvantages does issuing a bond have, compared to issuing more equity (please refer to the Bloomberg article in Exhibit 2)? 3. Analyze the accounting issues for the March 2021 quarterly report. Provide your recommendation and analyze the impact on the March 31, 2021 quarterly financial report. (30 marks) Note: An overall evaluation of the communication component of the report will be made. (5 marks) or prody e Camere Accu Bebed Bed Expre The best dell.com Arrasate Agir A A A Here M 17 6 days old Chade 15 O, water. Test, der boet The Teles www.FF Media when a declared by the decis make the Muda Hemed Accessible poplice, the played Teslimat dragasiyaomar Tag (Abed Tent Add chic Model Xprenticing of Maritis Thaanaa Total will be wel 3. Analyze the accounting issues for the March 2021 quarterly report. Provide your recommendation and analyze the impact on the March 31, 2021 quarterly financial report. (30 marks) Note: An overall evaluation of the communication component of the report will be made. (5 marks) U Exhibit 1: List of concerns prepared by the Controller of the company, including excerpts from his working papers (please note that all events in the case are fictitious and made up for the purpose of case analysis project Accounts Receivable and Bad Debt Expense The following is the schedule prepared by the controller to calculate the required allowance for doubtful accounts (in S000's): Accounts Receivable Aging March 31, 2021 December 31, 2020 $ $ $ $ Accounts % Allowance Accounts % Allowance Receivable Receivable Current 503 1.6 8 300 5 30-60 days 626 2.1 13 442 2.0 9 61-90 days 200 8.0 16 162 8.0 13 Over 90 days 220 15.0 33 140 15.0 21 Total 1,549 70 1,044 48 The working files indicate that aging of receivable approach was used in calculating bad debt expense. The aging was tested and large accounts were reviewed. Accounts were confirmed on a test basis, and no significant errors were found. Subsequent payments were also reviewed. On April 4, 2021, there was a newspaper article that Fast and Furious Company (FF), a customer of Tesla, declared bankruptcy due to a fire. The fire occurred on April 1". Tesla's books shows a balance owing from FF account of $145,000 as at March 31, 2021, of which $50,000 remained unpaid when it declared bankruptcy. You approached the Controller indicating why an adjustment was not made to the March financial statements. He explained that since FF went bankrupt after March 314, this adjustment will only be made on June's quarterly financial statements. Accounts Payable Accounts payable for previous periods included an accrdal of $180,000 related to a disputed payable to a supplier. The supplier initially sued Tesla for payment, and Tesla responded with a countersuit. The working file indicates that the dispute has been ongoing for about three years, and Tesla came close to going to court on a few occasions but the date was delayed due to procedural details. The CFO had worked diligently to reach a settlement. On the March 31 statements, Tesla reduced the accrual to $80,000, representing the actual settlement amount and the related legal costs. The $100,000 difference was taken into March's income. The file includes documents, signed by the CFO on behalf of Tesla, indicating that he finally paid the settlement amount out of court on April 25, 2021. Page 6 of 9 Lawsuit In January 2021, Tesla launched a patent infringement lawsuit against Advanced Motors Ltd. (Advanced). Tesla asserts that Advanced uses technology that is protected through the company's Model XL patent and is claiming damages of $50.0 million. A gain of $25 million was recorded in March 31st, 2021 financial statements because Tesla's in-house legal counsel believes that Tesla will win the lawsuit and be awarded damages of at least $25 million. Prepare a memo addressing Jaymond's request and concerns that includes the following: 1. Prepare an evaluation of the financial results of Tesla by completing the financial statements ratios worksheet contained in the template posted on Quercus. In addition, provide a visualization of trend analysis of the Debt-to-Equity ratio, P/E ratio and Return on Equity ratio over the past five years. To do the trend analysis, you need to download the previous year financial report, and fill in relevant previous year accounting numbers in the excel template to calculate prior year ratios. (You don't need to fill in all financial statement numbers for previous years) (30 marks) 2. Provide an analysis of the pros and cons of issuing bonds vs. issuing shares, and address the following issues: (35 marks) (1) What constitutes a sustainability bond? (2) Why is there a demand for sustainability bonds? (3) What advantages or disadvantages does issuing a bond have, compared to issuing more equity (please refer to the Bloomberg article in Exhibit 2)? 3. Analyze the accounting issues for the March 2021 quarterly report. Provide your recommendation and analyze the impact on the March 31, 2021 quarterly financial report. (30 marks) Note: An overall evaluation of the communication component of the report will be made