Download Enron and Worldcom Scandals: Summary, Response, and Two Companies' Financial Statements and more Assignments Financial Management in PDF only on Docsity! Assignment 3 1. Research about the Enron and Worldcom Scandals. Provide a brief summary in your own words. What is the Act that was passed in response to the Enron and Worldcom Scandals? Explain its benefits to companies. - Enron scandal, series of events that resulted in the bankruptcy of the U.S. energy, commodities, and services company Enron Corporation and the dissolution of Arthur Andersen LLP, which had been one of the largest auditing and accounting companies in the world. The collapse of Enron, which held more than $60 billion in assets, involved one of the biggest bankruptcy filings in the history of the United States, and it generated much debate as well as legislation designed to improve accounting standards and practices, with long-lasting repercussions in the financial world. The WorldCom scandal was one of the most shocking and widespread frauds to rock Wall Street in a generation. In 2001, WorldCom, one of the world's largest telecommunication companies and a core dividend-paying stock that many retirees held in their portfolios, attempted to falsely inflate the earnings on its profit and loss statement by nearly $4 billion. It did so by manipulating its financial data. - The Sarbanes-Oxley Act is a federal law that enacted a comprehensive reform of business financial practices. The act was passed in response to a number of corporate accounting scandals that occurred in the 2000–2002 period. This act, put into place in response to widespread fraud at Enron and WorldCom and other companies, set new standards for public accounting firms, corporate management, and corporate boards of directors. - Closing loopholes in accounting practices. - Strengthening corporate governance rules. - Increasing accountability and disclosure requirements of corporations, especially corporate executives, and corporations’ public accountants and auditors. - Increasing requirements for corporate transparency in reporting to shareholders and descriptions of financial transactions. 2. Say you are an investor and looking for two publicly listed companies, research and provide their Balance Sheet, Income Statement, Statement of Cash flows and Statement of stockholder’s equity. TEDDY FAB INC.
STATEMENT OF INCOME
Year Ended December 31, 2100
Revenues $ 1,000,000
Cost of goods sold 200,000
Gross profit 800,000
Operating expenses
Selling, general, and administrative expense 357,700
Interest expense 20,000
Depreciation and amortization expense 5,200
Operating income 417,100
Interest income 20,000
Net earings before taxes 437,100
Income tax expense 240,000
Net income 197,100
TEDDY FAB INC.
BALANCE SHEET
December 31, 2100
ASSETS LIABILITIES AND SHAREHOLDERS' EQUITY
Current assets Current liabilities
Cash and cash equivalents $ 100,000 Accounts payable $ 30,000
Accounts receivable 20,000 Notes payable 10,000
Inventory 15,000 Accrued expenses
Prepaid expense 4,000 Deferred revenue
Investments. 10,000 Total current liabilities
Total current assets 149,000
Long-term debt
Property and equipment
Land 24,300 Total abies,
Buildings and improvements 250,000
Equipment 50,000 ee
Less accumulated depreciation (5,000) Additional paid-in capital
Retained earnings
Other assets Treasury stock
Intangible assets 4,000
Less accumulated amortization (200) Total liabilities and shareholders’ equity
Total assets $ _472,100
