Chapter 9 Assignments Part 1 ACCOUNTING

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Accounting

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Nov 24, 2024

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1 Chapter 9 Assignments Part 1 Alreen Sorathiya University of the Cumberlands Strategic Mgmt Accounting (BACC-532-B01) Dr. Margaret Combs 11/26/2023
2 Chapter 9 Assignments Part 1 P 9–4: MacGiver Brass MacGiver Brass is a brass plating firm with sales of $8 million and profits before taxes of $625,000. MacGiver has a loan outstanding at its local bank for working capital purposes. As the loan officer reviewing MacGiver’s loan application, you are charged with making a recommendation as to whether the $608,000 loan should be renewed for another year. Upon reviewing MacGiver’s most recent annual report, you find the following footnote: “Underabsorbed overhead of $462,000 was prorated to inventories (2/3) and cost of goods sold (1/3).” Required: a. How should you evaluate MacGiver’s annual report in light of this footnote? In particular, how does this footnote affect your recommendation regarding the loan? Sales =8 millions Profits before tax =625000 Loan 608000 462000 foot note valuation: inventories =308000 COGS =154000 the foot note recommends to renew the loan
3 b. In preparing for your meeting with MacGiver’s president and chief financial officer, what questions do you want to ask regarding this footnote? I will ask the financial officer whether they need the additional capital to generate more income than the interest or not?
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