McGladrey conducted a financial audit of Subspecialty Centers of America, LLC (SCA). SCA is owned by Dr. Mark S. Weinberger, an ear, nose, and throat surgeon. The audit was for the year ending December 31, 2003. McGladrey issued its audit report in March 2004. The audit report indicated that SCA ’ s “ balance sheet presents fairly in all material respects to the financial position of SCA in conformity with generally accepted auditing standards. ” Citibank received the audit report and in June 2004 made a $1.4 million term loan to SCA. The term loan was a modification of a prior term loan that Citibank had made to SCA. Prior to 2004, Citibank had four outstanding loans to SCA: (1) a mortgage loan for its diagnostic surgery center; (2) a mortgage loan for its office condominium; (3) a revolving line of credit; and (4) a term loan. The 2004 term loan was an increase and an extension of the prior term loan. Dr. Weinberger took the $1.4 million and left for Europe. Dr. Weinberger was subsequently located residing in a tent in the Italian Alps and was brought back to the United States in 2010. Hundreds of malpractice suits were filed against him, and federal prosecutors charged him with multiple counts of health care fraud. Citibank brought suit to recover money it loaned SCA ($1.4 million term loan) from McGladrey on the grounds that it negligently audited Dr. Weinberger ’ s surgical practice. Citibank claims that it relied on McGladrey ’ s audit in making the $1.4 million term loan to SCA. Discuss whether Citibank would be able to recover and under what theories and standing. [ Citibank, N.A. v. McGladrey and Pullen, LLP , 953 N.E.2d 38 (Ill. App.)]
> List the revenues and costs that might be impacted by this outsourcing decision. The article will not list many, if any, of these revenues and costs; you should make reasonable guesses about what revenues and/or costs would be associated with the busines
> Why did the company decide to outsource (or is considering outsourcing)?
> Describe the company that is making the decision to outsource. What area of the business is the company looking to outsource, or did it already outsource?
> How can CVP techniques be used in supporting a company’s sustainability efforts? Conversely, how might CVP be a barrier to sustainability efforts?
> Rondell Pharmacy is considering switching to the use of robots to fill prescriptions that consist of oral solids or medications in pill form. The robots will assist the human pharma- cists and will reduce the number of human pharmacy workers needed. This
> Is the contribution margin ratio of a grocery store likely to be higher or lower than that of a plastics manufacturer? Explain the difference in cost structure between a grocery store and a plastics manufacturer. How does the cost structure difference im
> Why is it necessary to calculate a weighted-average contribution margin ratio for a multi- product company when calculating the breakeven point for that company? Why can’t all of the products’ contribution margin ratios just be added together and average
> What conditions must be met for cost-volume-profit analysis to be accurate?
> “Breakeven analysis isn’t very useful to a company because companies need to do more than break even to survive in the long run.” Explain why you agree or disagree with this statement.
> Why is managerial accounting more suitable for internal reporting than for financial accounting?
> The purchasing manager for Rockwell Hall Bags has been able to purchase the material for its signature handbags for $9 less per bag than in the prior year. Keeping everything else the same, what effect would this reduction in material cost have on the br
> Define breakeven point. Why is the breakeven point important to managers?
> Describe three ways that cost-volume-profit concepts could be used by a service organization.
> Describe four different ways cost-volume-profit analysis could be useful to management.
> Alston Jewelry had sales revenues last year of $2.4 million, while its breakeven point (in dollars) was $2.2 million. What was Alston Jewelry’s margin of safety in dollars? What does the term margin of safety mean? What can you discern about Alston Jewel
> Now decide how much you would like to make in before-tax operating income (target profit) in each of the upcoming five years. Calculate how many units you would need to sell in each of the upcoming years to meet these target profit levels.
> Calculate the margin of safety in units for each of the five years in your projection.
> Calculate how many units of your product you will need to sell to break even in each of the five years you have projected.
> Now classify all of the expenses you have listed as being either fixed or variable. For mixed expenses, separate the expense into the fixed component and the variable component.
> Make a list of all of the equipment you will need to make your product. Estimate the cost of each piece of equipment that you will need.
> What business trends are influencing managerial accounting today? How do these trends impact management accountants’ roles in the organization?
> What are the three main areas of management’s responsibility? How are these three areas interrelated? How does managerial accounting support each of the responsibility areas of managers?
> Mirage Investments Corp. (MIC) planned a tender offer for the shares of Gulf States International Corp. (GSIC). Archer, an officer of MIC, placed purchase orders for GSIC stock through the New York office of the Bahamian Bank (BB) prior to the announce-
> The Greenwich Bank & Trust Co. (GB&T) opened in 1998 and by 2008 had expanded to a total of four branches in the Greenwich, Connecticut, community of 62,000 residents. A competitor using the name Bank of Greenwich (BOG) opened in December 2006. GB&T ’ s
> Mrs. Downing was fitted for dentures by a dentist, Dr. Cook. After she received her dentures, Mrs. Downing began experiencing mouth pain that she attributed to Dr. Cook’s manufacture of dentures that did not fit her properly. Mrs. Downing filed suit agai
> Power & Telephone Supply Company (PTSC) put together a PowerPoint presentation for Dumont Telephone Company that showed the “ head-end ” system — a new phone system that would provide Dumont ’ s customers with new video features that Dumont was not curre
> Thomas Bell, a minor, went to work in the Pitts- burgh beauty parlor of Sam Pankas and agreed that when he left the employment, he would not work in or run a beauty parlor business within a 10-mile radius of downtown Pittsburgh for a period of two years.
> R-P Packaging manufactured cellophane wrapping material that was used by Kern ’ s Bakery in packaging its product. Kern ’ s decided to change its system for packaging cookies from a tied bread bag to a tray covered with printed cellophane wrapping. R-P t
> Bakker Brothers of Idaho agreed to buy Charles E. Graff ’ s 1989 onion seed crop. The contract required that the onion seeds have an 85 percent germination rate. Despite careful testing and advice from experts, Bakker Brothers could not get a germination
> Future Tech International, Inc., is a buyer and distributor of Samsung monitors and other computer products. In 1993, Future Tech determined that brand loyalty was important to customers, and it sought to market its own brand of computer pro- ducts. Futu
> Coppola, who collected coins, joined a coin club, First Coinvestors, Inc. The club would send coins to its members, who were to pay for them or return them within 10 days. What was the nature of the transaction? [First Coinvestors, Inc. v. Coppola, 388 N
> Willis Music Co. advertised a television set at $22.50 in the Sunday newspaper. Ehrlich ordered a set, but the company refused to deliver it on the grounds that the price in the newspaper ad was a mistake. Ehrlich sued the company. Was it liable? Why or
> Field executed a will. On her death, the will was found in her safe deposit box, but the part of it containing the fifth bequest had been torn from the will. This torn fragment was also found in the box. There was no evidence that anyone other than Field
> Using a bad check, B purchased a used automobile from a dealer. B then took the automobile to an auction at which the automobile was sold to a party who had no knowledge of its history. When B’s check was dishonored, the dealer brought suit against the p
> Paden signed an agreement dated May 28 to purchase the Murrays’ home. The Murrays accepted Paden’s offer the following day, and the sale closed on June 27. Paden and his family moved into the home on July 14, 1997. Paden had the home inspected prior to c
> Hicks, the president and manager of Intermountain Merchandising, wanted to sell the business to Montana Merchandising, Inc. To provide a basis for the transaction, he retained Bloomgren, an accountant, to conduct an audit of Intermountain. Bloomgren knew
> Around June 2005, PPI purchased three pallets of computer wafers from Omneon Video Graphics. PPI requested that Omneon ship the wafers directly to the City University of New York, the end purchaser of the goods. Omneon and PPI agreed that Omneon would sh
> D drew a check to the order of P. P took the check postdated. P knew that D was having financial difficulties and that the particular checking account on which this check was drawn had been frequently overdrawn. Do these circumstances prevent P from bein
> United Overseas, Ltd. (UOL), is a U.K. firm that purchases and sells manufacturers’ closeouts in Europe and the Middle East. UOL’s representative, Jay Knox, used stationery listing a UOL office in New York to solicit business from Revlon, Inc., in New Yo
> Cable News Network with its principal place of business in Atlanta, Georgia, is the owner of the trademark CNN in connection with providing news and information services to people worldwide through cable and satellite television networks, Web sites, and
> Suzanne Andres was injured when she fell from the balcony of her second-floor apartment in the Roswell-Windsor Village Apartments. Andres was leaning against the railing on the balcony when it gave out, and she and the railing fell to the ground. Andres
> CVS Pharmacy, Inc., entered into a contract with Dan Cake, a company in Portugal, for Dan Cake to ship tins of cookies for sale at CVS pharmacies. The cookies were originally supposed to be delivered on or before September 7, 2007. There were several del
> John C. Clark, using the alias Thomas Pecora, rented a 1994 Lexus from Alamo Rent-A-Car on December 21, 1994. Clark did not return the car and, using falsified signatures, obtained a California so-called quick title. Clark advertised the car for sale in
> Schock, the buyer, negotiated to purchase a mobile home that was owned by and located on the sellers ’ property. On April 15, 1985, Schock appeared at the Ronderos ’ (the sellers ’ ) home and paid them the agreed-on purchase price of $3,900. Shock receiv
> Brown Sales ordered goods from Eberhard Manufacturing Co. The contract contained no agreement about who would bear the risk of loss. There were no shipping terms. The seller placed the goods on board a common carrier with instructions to deliver the good
> Click2Boost, Inc. (C2B), entered into an Internet marketing agreement with the New York Times (NYT) on May 10, 2002, for C2B to solicit sub- scribers for home delivery of the New York Times newspaper through “ pop up ads ” at Internet Web sites with wh
> Triple H Construction Co. contracted with Hunter ’ s Run Stables, Inc., to erect a horse barn and riding arena on Hunter ’ sRun ’ s property in Big Flats, New York. Hunter ’ s Run got a guarantee in its contract with Triple H that “ such design with the
> Omni Trading issued two checks totaling $75,000 to Country Grain Elevators for grain it had purchased. Country Grain indorsed the checks over to the law firm of Carter & Grimsley as a retainer. Country Grain then collapsed as a business, and Omni stopped
> Logsdon, who had three children, disliked one of them without any reason. In his will, he left only a small amount to the child he disliked and gave the bulk of his estate to the remaining two. On his death, the disliked child claimed that the will was v
> Flora Hall went to Rent-A-Center in Milwaukee and signed an agreement to make monthly payments of $77.96 for 19 months in exchange for Rent- A-Center ’ s allowing her to have a Rent-A-Center washer and dryer in her home. In addition, the agreement requir
> U.S. Surgical manufactures medical surgical instruments and markets the instruments to hospitals. The packaging for U.S. Surgical ’ s disposable medical instruments is labeled “ for single use only. ” As an example, one label contains the following langu
> REMC furnished electricity to Helvey ’ s home. The voltage furnished was in excess of 135 volts and caused extensive damage to his 110-volt household appliances. Helvey sued REMC for breach of warranty. Helvey argued that providing electrical energy is n
> Charles leased a house from Donald for four years. The rent agreed on was $850 per month. After two years, Charles assigned his rights under the lease to Smith, who moved in and paid rent regularly for a year. Owing rent, Smith moved out sometime later w
> Elliot, an officer of Impact Marketing, drew six postdated checks on Impact’s account. The checks were payable to Bell for legal services to be subsequently performed for Impact. Financial Associates purchased them from Bell and collected on four of the
> LTV Aerospace Corp. manufactured all-terrain vehicles for use in Southeast Asia. LTV made an oral contract with Bateman under which Bateman would supply the packing cases needed for the vehicles ’ overseas shipment. Bateman made substantial beginnings in
> Valley Trout Farms ordered fish food from Rangen. Both parties were merchants. The invoice that was sent with the order stated that a specified charge — a percentage common in the industry — would be added to any unpaid bills. Valley Trout Farms did not
> During the remodeling of an apartment building, tenants had so much dust from the construction settle in their apartment that they experienced dam- age to their expensive sound and recording equipment. They had rented the very specialized and large apart
> The English publisher of a book called Cambridge gave a New York publisher permission to sell that book any place in the world except in England. The New York publisher made several bulk sales of the book to buyers who sold the book throughout the world,
> Potomac Leasing Co. leased an automatic telephone system to Vitality Centers. Claudene Cato signed the lease as guarantor of payments. When the rental was not paid, Potomac Leasing brought suit against Vitality and Cato. They raised the defense that the
> Vodra was employed as a salesperson and contracting agent for American Security Services. As part of his contract of employment, Vodra signed an agreement that for three years after leaving this employment, he would not solicit any customer of American.
> James Santelli was staying at a motel owned by Abu Rahmatullah for several months as he worked at a nearby construction project. Joseph Pryor had been previously employed at the motel as a general maintenance man. There was no criminal background check d
> Can check cashing companies be holders in due course? What arguments can you make for and against their holder-in-due-course status? [Dal-Tile Corp. v. Cash N’ Go, 487 S.E.2d 529 (Ga. App.)]
> All new employees of Circuit City Stores were required to sign a Dispute Resolution Agreement (DRA) mandating that employees submit all employment-related disputes to arbitration. Under the DRA Circuit City was not obligated to arbitrate its claims again
> Smith was employed as a salesman for Borden, Inc., which sold food products in 63 counties in Arkansas, 2 counties in Missouri, 2 counties in Oklahoma, and 1 county in Texas. Smith ’ s employment contract prohibited him from competing with Borden after l
> Justin Shaffer, while an employee of the Home Par- amount Pest Control Companies Inc., signed an employment agreement providing that: The Employee will not engage directly or indirectly or concern himself/herself in any manner whatso- ever in the carryin
> Iona wrote her will. The following year, she wrote another will that expressly revoked the earlier will. Later, while cleaning house, she came across the second will. She mistakenly thought that it was the first will and tore it up because the first will
> Siddle purchased a quantity of fireworks from Red Devil Fireworks Co. The sale was illegal, however, because Siddle did not have a license to make the purchase, which the seller knew because it had been so informed by the attorney general of the state. S
> The Minnesota adoption statute requires that any agency placing a child for adoption make a thorough investigation and not give a child to an applicant unless the placement is in the best interests of the child. Tibbetts applied to Crossroads, Inc., a pr
> A tenant leased an apartment in which so much noise emanated from surrounding apartments late at night and in the wee hours of the morning that he could not get much sleep. The tenant brought suit against the landlord, alleging that the landlord had brea
> For almost 13 years, Touche Ross had prepared the annual audit of Buttes Gas and Oil Co. Buttes wanted to obtain a loan from Dimensional Credit Corp. (DCC) and showed DCC its most recent annual audit. DCC made the loan on the basis of what it learned fro
> Ewing was employed by Presto-X-Co., a pest exterminator. His contract of employment specified that he would not solicit or attempt to solicit customers of Presto-X for two years after the termination of his employment. After working several years, his em
> The auditing firm of Timm, Schmidt & Co. pre- pared annual financial statements for Clintonville Fire Apparatus, Inc. (CFA). CFA showed these statements to Citizens State Bank and asked for loans. On the basis of the financial statements, Citizens loaned
> Eugene McCarthy left his position as director of sales for Nike’s Brand Jordan division in June 2003 to become vice president of U.S. footwear sales and merchandising at Reebok, one of Nike’s competitors. Nike sought a preliminary injunction to prevent M
> Aries Information Systems, Inc., develops and markets computer software specifically designed to meet the financial accounting and reporting requirements of such public bodies as school districts and county governments. One of Aries’s principal products
> Sutcliffe Banton, dba Nemard Construction, furnished labor and materials (valued at $162,895) for improving Vicky Deafeamkpor ’ s New York City residential property. She paid only $41,718, leaving $121,987 unpaid. Banton sued her and the jury awarded $90
> Yarde Metals, Inc., owned six season tickets to New England Patriots football games. Gillette Stadium, where the games are played, had insufficient men ’ s restrooms in use for football games at that time, which was the subject of numerous newspaper col
> Jane bought a string of pearls from Grantham Jewelers. Jane wrote a check for $1,760 to pay for the pearls. When Jane had the pearls appraised for insurance purposes, she learned from the appraiser that the pearls were fake. Jane stopped payment on the c
> Sandra Menefee sued Geographic Expeditions, Inc. (GeoEx), for the wrongful death of her son while on a GeoEx expedition up Mount Kilimanjaro. GeoEx moved to compel arbitration under the parties’ limitation of liability contract. GeoEx designed its arbi-
> Gerald “ Pat ” Arrington was diagnosed with a brain tumor. At the time of the diagnosis, he was married to Brenda Arrington, but they were separated pend- ing their divorce. Brenda and Pat had no children, but Pat had five children from a previous marria
> John Iwen sued U.S. West Direct because of a negligently constructed yellow pages advertisement. U.S. West Direct moved to stay litigation and compel arbitration under the yellow pages order form, which required advertisers to resolve all controversies t
> What are an accountant ’ s obligations if he or she knows a client is violating the terms of a contract with a third party?
> When are the parties to an illegal agreement in pari delicto?
> Jennifer Sanchez and her three children lived in a two-story townhome operated by CAA (the Cincinnati Community Action Agency). CAA is a non- profit entity that provides housing for single mothers in financial need. Sanchez requested maintenance on an ar
> Radio Station KSCS broadcast a popular music pro- gram. It announced that it would pay $25,000 to any listener who detected that it did not play three consecutive songs. Steve Jennings listened to and heard a program in which two songs were followed by a
> AUSA Life Insurance Company and others were institutional investors in the securities of JWP, Inc., a company that went belly up, resulting in nearly a 100 percent loss of their investments. Ernst & Young served as auditor for JWP from 1985 to 1992. Duri
> On the death of their mother, the children of Jane Smith gave their interests in their mother ’ s estate to their father in consideration of his payment of $1 to each of them and his promise to leave them the property on his death. The father died withou
> Kemp leased a gas filling station from Baehr. Kemp, who was heavily indebted to Penn-O-Tex Oil Corp., transferred to it his right to receive payments on all claims. When Baehr complained that the rent was not paid, he was assured by the corporation that
> Sears, Roebuck and Co. promised to give Forrer permanent employment. Forrer sold his farm at a loss to take the job. Shortly after beginning work, he was discharged by Sears, which claimed that the contract could be terminated at will. Forrer claimed tha
> The Aqua Drilling Company made a contract to drill a well for the Atlas Construction Company. It was expected that this would supply water for a home being constructed by Atlas. Aqua did not make any guarantee or warranty that water would be produced. Aq
> Diehr devised a computerized process for curing rubber that was based on a well-known mathematical formula related to the cure time, and he devised numerous other steps in his synthetic rubber-curing process. The patent examiner determined that because a
> While on a fishing trip, Tom Snyder met an elderly couple living in near-destitute conditions in a rural area of Texas. He returned to the area often, and he regularly purchased groceries for the couple and paid for their medical needs. Some two years la
> After an eleven-month struggle with esophageal cancer, Leonard R. Brener died on December 8, 2001, at age 85. He had never married. He had no children. He had a long and successful career as a stockbroker. The value of his estate approximated $8 million.
> Helen, age 17, wanted to buy a Harley-Davidson “Sportster” motorcycle. She did not have the funds to pay cash but persuaded the dealer to sell the cycle to her on credit. The dealer did so partly because Helen said that she was 22 and showed the dealer a
> Fourteen applicants for a city of Providence, Rhode Island, police academy training class each received from the city a letter stating that it was a “conditional offer of employment” subject to successful completion of medical and psychological exams. Th
> Calhoun/Johnson Company d/b/a Williams Lumber Company (Williams) sold building materials to Donald Miller d/b/a Millercraft Construction Company (Millercraft) on credit. Miller had signed a personal guaranty for the materials. Miller requested lien waive
> Medistar is a real estate development company spe- cializing in the development of medical facilities Dr. Schmidt, the team physician for the San Antonio Spurs basketball team, sought to develop “ The Texas Center for Athletes ” medical center next to th
> Charles Sanarwari retained Stan Gissel to prepare his income tax return for the year 2014. The parties agreed on a fee of $400. Charles had done a rough estimate based on last year’s return and believed he would owe the IRS approximately $2,000. When Sta
> Dale Dyer, who was employed by National By- Products, Inc., was seriously injured at work as the result of a job-related accident. He agreed to give up his right to sue the employer for damages in consideration of the employer ’ s giving him a lifetime j
> The certified public accounting partnership of James, Guinn, and Head prepared a certified audit report of four corporations, known as the Paschal Enterprises, with knowledge that their report would be used to induce Shatterproof Glass Corp. to lend mone
> William E. Story agreed to pay his nephew, William E. Story II, a large sum of money (roughly equivalent to $75,000 in 2016 dollars) “if he would refrain from drinking liquor, using tobacco, swearing, and playing cards or billiards for money until he sho
