Case 2 for Intermediate Accounting: Smith Appliance and Repair

Case 3 for Intermediate Accounting: SmartMart

Case 3: SmartMart Smart Mart company, a household appliances dealer, purchases its inventories (washers, dryers, dishwashers, refrigerators, cooking ranges, and trash compactors) from major suppliers.Smart Mart is one of three appliance dealers in Groveton, a community of 16,000.Smart Marthas consistently stated its inventory at the lower of cost (FIFO) market. Your accounting firm has done Smart Mart’s books and taxes for the past four years.Hollis Beason, who owns Smart Mart, phones you and says that he wants to use another method of accounting for the cash discounts the company takes when it pays its supplies promptly.He wants to know what is involved in changing inventory methods--from FIFO to LIFO.Write Beason a letter and explain the effects on both the balance sheet and the income statement of using LIFO inventory methods instead of the FIFO method over a substantial time period when purchase prices of household appliances are rising.Explain why these effects take place. Hollis Beason took over Smart Mart from his uncle, who opened Smart Mart when Hollis was in junior high.Hollis worked for his uncle until his uncle’s death eight years ago.Hollis has continued to run the company just the way his uncle left it, and the company has increased it net profits by 3%-5% per year.Hollis attended TTI and is an expert on appliance repair.However, his knowledge of business is limited. Thus, he is extremely sensitive about not having a college degree.He is easy-going but sensitive to any suggestion that he is “just a good ole boy.” One of the partners in your firm, Janice Klemm, reminds you that, in working with people like Beason, you should be careful to answer their questions but try (tactfully) to help them learn more about basic business principles they need to know.As Janice reminded you, “this is a small town:our client base expands or shrinks depending on word-of-mouth good will.People like Beason are the backbone of this community. How well we serve them is crucial to our success.” Write the letter report to Hollis Beason, Box 2635, Groveton, TX 77307. NOTE: You can also require students to present the same information to an individual with an entirely different profile.

Case 4 for Intermediate Accounting: An Ethical Dilemma

Case 4: An Ethical Dilemma You are a partner in public accounting firm of Giffey; Griffey & Company.One of your larger clients--Zebco, Ltd.--is a company that designs and produces small engines used in lawn mowers, lawn edgers, snowblowers, and similar types of equipment.Last year your client’s research and development division had a major breakthrough in small engine design.During the current year, your client continued its research and development efforts related to the new engine design in the hope of creating an innovative new automobile engine for small recreational vehicles.Even though this type of engine is not part of the normal design and production activities of your Zebco, the owner, Leland Gray,had every intention of producing small RVengines if the small-engine breakthrough could be successfully adapted to the small engine line. The R&D costs during this year for the RV engine project have been extremely large, almost double all small-engine research and development costs for the same period.Zebco’s management team has made it clear to you that they intend to capitalize the automobile engine research and development costs and then write them off to expense over several years.Zebco’sposition is that this approach will better match the research and development costs against revenues that may be earned from the RV engine project. During discussions with officials at Zebco, you know that your client feels very strongly that to record the RV engine research and development costs as an expense of the current year, which is the company’s usual practice with their small-engine research and development costs, would be entirely unfair because to do so would turn a relatively profitable year into a year in which the company would report its largest loss ever.In your client’s opinion, to report a substantial loss would be totally inconsistent with the fact that the design application to automobile engines would be the greatest positive event in company history.Zebco’s management feels so strongly about their position that they have told you they will engage a different CPA firm as their auditor if you will not agree to the cost capitalization plan. Zebco’s plan puts you in a difficult position because (1) it is one of your firm’s more important clients, producing audit fees in excess of $250,000 each year, and (2) your understanding is that generally accepted accounting principles require that research and development costs be expensed in the year in which they are incurred.What Zebco wants to do is unacceptable. Write a letter report to Jarrod M. Bruce, who Vice-President of Operations for Zebco.Explain the issues. Attempt to persuade him to your point of view on this matter--i.e., solve the ethical dilemma and keep Zebco as a customer.  Zebco’s address is 2120 Sam Houston, 200, Groveton, TX 77305.

Case 5 for Engineering Students: Bradley and Griffen Prosthetics

Case 5: Bradley and Griffen Prosthetics You are a design engineer with Bradley and Griffin, a company that designs prosthetic equipment.B&G was launched after World War I by Walter Bradley and Richard Griffin, who were classmates at MIT.Following World War I, both men saw the need for prosthetic devices, pooled their resources, and launched their company.Initially (1921-1940), the company developed and sold artificial legs and worked on the design of prosthetic devices that imitated natural movement and allowed amputees to work as normally as possible.Then, with the outbreak of World War II, the company began research on artificial hands.In the 1970’s, B&G invested heavily in artificial joint research and developed and sold artificial knees which were designed in response to this research.Walter Bradley III and Richard Griffin III are bioengineering graduates of MIT and UCLA who see the importance of prosthetic devices for an aging population. Recently, however, B & G has been interested in developing a total hip replacement package that can be used by older people who have arthritis and by athletes who have suffered irreparable hip injury. The company has done major development research in joint fusion and headless screw, in addition to external fixators for fractures. As senior design manager for B&G, you have been asked to write a reportthat explains the current materials that can be used in developing a hip replacement. In your report, you will do the following: describe the prosthesis consider environment consider biocompatibility describe fatigue describe loading describe possible problems, such as fracture and corrosion. Mr. Griffin asks you to write the report, which he will distribute to the Board of Directors of B&G.The board is composed of educated, successful members of the community.Three are doctors--one general practitioner and two orthopedists.Other board members include the owner of a large fitness center, a bank president, the superintendent of the local public school district, attorney; one accountant, and two retired professional athletes, three owners of local businesses. To design the report, write a memo of transmittal to Walter Bradley and Richard Griffin.The memo will be attached to the report, which will have a cover page.The report itself will begin with the report title, followed by an introduction.Add visual aids--drawings, tables, etc.--but remember that you are writing to non-engineers. Based on your engineering perspective, your readers will want to know if you think a prosthesis, based on what you have determined, is feasible. Hint:Be sure to check the World Wide Web under prosthetic devices.To begin, check Alta Vista and Yahoo--health--prosthetic devices and then Google. Be sure to document any sources you use from the web! See the table below for help with how to develop your report.

Possible Report Development Plans

Introduction	Introduction
Specifications	Recommendations
Evaluation Procedures for Each Specification	Specifications
Results of Evaluation	Evaluation Procedures for Each Specification
Conclusion	Results of the Evaluation
Recommended Materials for Club Shafts	Conclusion
Appendices--data	Appendices--data
References	References

Case 6 for Engineering Students: Bradley and Griffin Tractor Trailers

Case 6: Bradley and Griffin Tractor Trailers You are a design engineer with Bradley and Griffin, a company that designs tractor-trailers, such as 18-wheelers. B&G sells their designs to major trucking companies, such as Ford and Peterbilt. B&G was launched after World War I by Walter Bradley and Richard Griffin, who were classmates at MIT.Following World War I, both men saw that trucking would become a major industry and that truck rigs would need to become stronger but lighter. Thus, since the 1950’s, B&G has focused a substantial portion of their budget for materials research. In the 1980’s, however, with the threat of fuel shortage, the focus on strength with less weight became a major issue. Recently, however, B&G’s Board of Directors has been keenly interested in this problem.As a result of your research, you are ready to make a recommendation about the available substitute materials for manufacturing the drive shaft for the tractor-trailer.Your task is to prepare a report for distribution to the B&G 12-member Board of Directors, only two of which are engineers. (The remaining 10 represent various types of manufacturing, retailing, and bankingorganizations.) You goal is to explain what new materials are available so that the Board understands your research and recommendations. In your report, be sure to discuss the following: Determine the kind of loads and stresses that a drive shaft must experience. Consider appropriate mechanical and/or physical properties that would be required. Describe the type of the component would be required to experience. Describe the types of mechanical tests that would be required to insure your material performed suitably. Describe the possible manufacturing processes. Select alternative materials and offer reasons why they would be better or at least equal to the current choice of material used for drift shafts. Document the reasons for your selection. Make an effort to determine the economics of your selection--whether or not the material you will recommend is cost effective, as compared to the cost-effectiveness of what is now used in drift-shaft construction. To design the report, write a memo of transmittal to Walter Bradley and Richard Griffin. The memo will be attached to the report, which will have a cover page. The report itself will begin with the report title, followed by an introduction. Add visual aids--drawings, tables, etc.--but remember that you are writing to non-engineers.

Advanced Case Study for Students in Various Disciplines: The Wetlands Once you become confident in designing case studies, you may wish to build larger ones. The Wetlands Case, located at http://www.rice.edu/wetlands/ was developed by Dr. Linda Driskill at Rice University. The case, which can be used by a range of students from many disciplines, emerged from news stories. Dr. Driskill became familiar with the issues that comprise this case from news stories and contacted individuals mentioned in articles. She actually went to Oregon to collect documents and interview individuals involved in the situation. The site involves a real-life situation that began in the late1980s in Eugene, Oregon, when wetlands were discovered west of Eugene The EPA threatened to bar all development in 750 acres of the city's industrial expansion area and to fine companies that had accepted the city's tax incentives to build in an area that had some boot- sucking mud in winter but dried hard as tile in the summer. International companies, environmentalists, developers, regulators from local and national agencies, as well as state and local governments, were among the stakeholders in this case, which occurred between 1987 and 1998. Some of the communication assignments in the site include team assignments for oral presentations. Team One required Spectra-Physics managers in 1989 to explain their situation to their CEO at a California headquarters. The team could also write a report to the French holding company that had acquired the firm and understood little about US environmental regulation. Team Two is from the "wetheads," a group of planners, financial analysts, and scientists helping to build public consensus about what to do with the wetland. The team explains four scenarios for use of the wetlands to an open meeting that includes developers, land owners, and environmentalists in February, 1990. Team Three represents The Metro Partnership and gives a welcoming presentation at the Eugene airport to a site selection team from a French company, Rohr Industries, which was looking for a new site that would be a great financial boost to the city, spring 1990. Just ahead loomed an election in which voters would decide on a proposal to ban all nuclear materials in Eugene; an activist group had found out Rohr made parts for planes that can carry nuclear missiles and may demonstrate at the welcoming party. Team Four is responsible for briefing the governor of Oregon just before the opening of the first restored wetland. Senator Hatfield will attend, as will many local and county officials in Spring, 1995. The governor's predecessor was deeply embarrassed when information about the wetlands became public during his tour of Japan to promote investment in the west Eugene industrial area. Teams were responsible for preparing their class audiences for the presentation, explaining the way they have planned to use the physical locations as well as other strategic objectives of their presentations. The class saw the case unfold over time as the presentations were given, even though each student was responsible for only a portion of the whole case. Individual assignments ranged from a stakeholder analysis exercise to strategy memos, reports, and overheads for presentations. The benefit of the wetlands site is that as class members complete various assignments, they become aware of the complex implications of their decisions about what write and the importance of the many aspects of any communicative act. The site includes team assignments and individual assignments. The source materials include newspaper articles, reports, letters, memos, photos, brochures, interviews, maps, and other items. As Dr. Driskill recalls: "About three years after we put up the site, the City of Eugene began putting up all the subsequent materials relating to the wetlands area. By using the Rice University Wetlands site at http://www.rice.edu/wetlands/ in conjunction with the City of Eugene wetlands site at http://www.eugene-or.gov/portal/server.pt, instructors can mine a rich base of related materials. The Rice University West Eugene Wetlands site can be used in communication across the disciplines courses or courses that involve a wide range of majors, including engineering, biology, ecology, political science, journalism, public relations, management, international business. We invite you to visit our web site and, if you are interested, to allow us to work with you to adapt the site more successfully to your communication course requirements.” Dr. Driskill is Professor of English and Director of the Cain Project in Engineering and Professional Communications at Rice University.