AC499 Unit 9 Integrated Final Report Example

Eight Deliverables, One Report, Three Recommendations: A Unit 9 Capstone Integrated Final Report

[Student Name]

Purdue University Global

AC499: Bachelor's Capstone in Accounting

Unit 9 Integrated Final Report

[Instructor Name]

[Date]

Kettle Hollow Sauna Works, its officers and every figure are composite; the standards, statute, framework, code and textbooks cited are real; this is coursework analysis.

Recommendations

The board is asked to approve three actions. First, buy a second stave profiling line for $380,000 before the August peak, owned by the operations manager. Second, move seasonal temp enrollment and payroll card issue away from the production supervisor by July 15, 2027, at about $6,500 a year, owned by the controller. Third, adopt a policy requiring every officer to disclose family or financial interests in any supplier before the board votes on a contract with it, owned by the board chair.

The Year's Results

The case trial balance showed pretax income of $1,362,000. Five corrections reduced it by $190,760 to $1,171,240, a 14.0 percent reduction. Fourteen saunas shipped under destination terms and delivered in October were moved to next year; forty-six discontinued Cube saunas were written down to net realizable value; the warranty reserve was raised to $97,500; a new panel saw was depreciated for four months; and a $78,000 bonus earned during the year was accrued (Kieso et al., 2019). Sales are $11,469,600 and the gross margin is 37.7 percent.

Total income tax expense is $248,228, of which $227,123 is current and $21,105 deferred. Net income is $923,012. The balance sheet carries a net deferred tax liability of $12,285, the panel saw's liability netted against the warranty asset (Financial Accounting Standards Board, 2015).

The loan agreement measures fixed-charge coverage, with a 1.25 floor, on the results the company reports. On corrected figures the company remains in compliance, but with less room than the trial balance suggested, which is one reason the report declines a LIFO election this year.

The Second Profiling Line

Peak demand exceeds the existing line by about 800 stave sets a year. Milling them on a second line costs $970 a set in relevant cost plus $52,000 a year of new fixed costs, against $1,140 a set delivered from the outside mill. At the cost card's original labor rate, in-house milling saved $84,000 a year before tax. The control work in Unit 6 found the milling labor rate overstated by about $6.37 a set; at the corrected rate the saving is $89,093 a year (Datar & Rajan, 2021).

On an after-tax basis, with the first-year Section 179 deduction worth $79,800 and each year's savings taxed at the 21 percent rate, the line's net present value at 9 percent over ten years is $151,499 at the corrected rate and $125,676 at the original rate. Either way the line is worth buying. It continues to pay while extra peak volume stays above about 631 sets a year, against a forecast of 800.

The outside mill's reject rate was never supplied, so quality is treated as a qualitative factor. Should the mill's scrap turn out to be significant, buying would only look worse.

Tax Consequences

The panel saw bought this year and the second line next year are both expensed under Section 179, within its annual limit (Election to expense certain depreciable business assets, 26 U.S.C. § 179, 2018). The line's $380,000 deduction will reduce next year's federal tax by about $79,800. The discontinued model write-down qualifies for tax because the units were offered at the closeout price before year end, and the bonus is deductible because it was paid within two and a half months. LIFO would save about $20,244 this year but would also cut reported income and the covenant margin, so the report recommends revisiting it after the covenant is renegotiated.

The Payroll Control Gap

Seasonal hiring, timecard approval and card distribution all run through a single production supervisor. Tests of the August to December peak found $20,310 paid without support, 3.97 percent of a $512,000 temp payroll: pay after separation, two employee records paying into one card account, and overtime in weeks without extra output. The amount is immaterial to the statements, but it would grow by about 30 percent with a second shift, and it inflated the labor rate the costing decision used. The remediation separates enrollment, approval and card issue and adds a weekly match before funding (Committee of Sponsoring Organizations of the Treadway Commission, 2013). One matter has been referred for investigation, and this report draws no conclusion about it.

Every figure in this report was computed once, in the unit that owns it, and the corrected labor rate is the only number that changed after it was first submitted, which is why the agreement table lists that rate with both values and the reason it moved.

The Supplier Relationship

During the costing work, a request was made to add an unsupported quality contingency to the in-house option, which would have reversed the recommendation in favor of an outside mill owned by a relative of the person requesting it. The request was declined, the relationship has since been disclosed to the finance committee, and the analysis above is unchanged. The report names no one, because the matter is resolved; what remains is a governance gap, which the third recommendation closes in line with the members-in-business guidance on conflicts of interest (American Institute of Certified Public Accountants, 2014).

Risks to the Recommendations

The second line depends on peak demand staying above about 631 extra sets and on one cedar vendor that has just raised prices by nearly a fifth. A softer housing and outdoor-living market would weaken the first, and a second cedar source should be qualified within the year. The payroll fix depends on the office having capacity during the August peak, which is why it is costed at $6,500 a year rather than assumed to be free.

Implementation Timeline

The board vote is requested at the December meeting. If approved, the line is ordered in January, with a twelve-week lead time, installed in May and run in on summer volume before the August peak. The payroll changes begin with the human resources assistant's training in June and the first weekly match in the last week of July. The disclosure policy takes effect on adoption, and each officer signs a declaration at the next board meeting. The controller will report on all three at the March and September meetings.

Appendices

Appendix A holds the restated statements and the five adjustment entries. Appendix B holds the costing exhibits at both labor rates. Appendix C holds the tax reconciliation and deferred tax schedule. Appendix D holds the payroll test workpapers. Appendix E is the agreement table, listing fourteen figures used in more than one section, each beside its originating unit and the pages that repeat it.

References

American Institute of Certified Public Accountants. (2014). AICPA code of professional conduct. AICPA.

Committee of Sponsoring Organizations of the Treadway Commission. (2013). Internal control: Integrated framework. COSO.

Datar, S. M., & Rajan, M. V. (2021). Horngren's cost accounting: A managerial emphasis (17th ed.). Pearson.

Election to expense certain depreciable business assets, 26 U.S.C. § 179 (2018).

Financial Accounting Standards Board. (2015). Income taxes (Topic 740): Balance sheet classification of deferred taxes (Accounting Standards Update No. 2015-17). FASB.

Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate accounting (17th ed.). Wiley.