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Why do changes in accounting principles require clarification? Is it the same clarification as for changes in accounting estimates? Please explain in detail.

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Why do changes in accounting principles require clarification? Is it the same clarification as for changes in accounting estimates? Please explain in detail.

Many analysts place more importance on the income statement than they do on the statement of cash flows. Do you think the problems at companies such as Enron would have been uncovered earlier if more emphasis was placed on the statement of cash flows? Why or why not?

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Many analysts place more importance on the income statement than they do on the statement of cash flows. Do you think the problems at companies such as Enron would have been uncovered earlier if more emphasis was placed on the statement of cash flows? Why or why not?

Anna is studying the annual reports of three different companies that her accounting group will use for its term project. She sees that two of the companies have made investments in the common stock of Ebay, Inc. What concerns her is that one company has reported the investment as a current asset, while the other company has reported its investment as a long term asset. Explain to Anna why it is permissible in certain circumstances for the same type of asset to be reported differently.

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1. Anna is studying the annual reports of three different companies that her accounting group will use for its term project. She sees that two of the companies have made investments in the common stock of Ebay, Inc. What concerns her is that one company has reported the investment as a current asset, while the other company has reported its investment as a long term asset. Explain to Anna why it is permissible in certain circumstances for the same type of asset to be reported differently.

2. The accounting terms depletion and depreciation describe basically the same thing.

Do you agree with the above statement? Explain why or why not.

Medical Associates is a large for profit group practice. Its dividends are expected to grow at a constant rate of 7% per year into the foreseeable future. The firm s last dividend (D0) was $2, and its current stock price is $23. The firm s beta coefficient is 1.6; the rate of return on 20 year T bonds currently is 9%; the expected rate of return is 13%. The firm s target capital structure calls for 50% debt financing, the interest rate required on the business s new debt is 10%, and its tax rate is 40%.

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Medical Associates is a large for profit group practice. Its dividends are expected to grow at a constant rate of 7% per year into the foreseeable future. The firm s last dividend (D0) was $2, and its current stock price is $23. The firm s beta coefficient is 1.6; the rate of return on 20 year T bonds currently is 9%; the expected rate of return is 13%. The firm s target capital structure calls for 50% debt financing, the interest rate required on the business s new debt is 10%, and its tax rate is 40%.

1. Calculate Medical Associates cost of equity estimate using the DCF method.

2. Calculate the cost of equity estimate using CAPM.

3. On the basis of your answers to #1 & #2, what is your final estimate for the firm s cost of equity?

4. Calculate the firm s estimate for corporate cost of capital.

Compare the equity method of accounting to the fair value method for equity securities. In what cases would you use each? How can these rules be manipulated to make an investment appear different than it is? Is that ethical?

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Compare the equity method of accounting to the fair value method for equity securities. In what cases would you use each? How can these rules be manipulated to make an investment appear different than it is? Is that ethical?

How has the Sarbanes Oxley Bill influenced reporting by governmental agencies and not for profit organizations?

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How has the Sarbanes Oxley Bill influenced reporting by governmental agencies and not for profit organizations?

Does the Public Company Accounting Oversight Board have authority to establish auditing standards for not for profits?

What specific steps might governmental agencies or not for profits take to comply with the requirements of the Sarbanes Oxley Bill?