LOYOLA UNIVERSITY MARYLAND
SELLINGER SCHOOL OF BUSINESS AND MANAGEMENT
DEPARTMENT OF ACCOUNTING
ACCOUNTING INFORMATION FOR EXECUTIVE DECISION MAKING
MBA FELLOWS - MODULES I and II, 2011-2012
Professor: Jalal Soroosh, Ph.D., CMA
303 Sellinger Hall (Baltimore Campus)
(410) 617-2543; fax: (410) 617-2006; Home: (410) 252-7219
Office Hours: Saturdays: 1:30-2:30 p.m., Timonium Campus
Wed. 6:30-8:00 p.m., Timonium Campus
Other Times: By Appointment
I. Course Objective and Content
An introduction of financial and managerial accounting topics and the methodologies employed in the
preparation and interpretation of financial information for internal and external decision makers are
the overall objectives for this course. Accounting is considered to be the language of business. As
such, this course provides an understanding of an essential part of executive decision making process.
This course covers the following educational objectives:
a. Develop a knowledge of financial and managerial accounting -- preparation and
application (text, homework assignments, cases, class discussions).
b. Develop problem solving and analytical skills (homework assignments, class
discussions, cases, and internet projects).
c. Develop the ability to work with others (teamwork projects).
This course consists of two parts, financial accounting and managerial accounting. In part one, the
emphasis is on financial accounting. Financial accounting provides financial information primarily
for users outside the entity. Part two of the course focuses on managerial accounting, which provides
information primarily for the internal users of an entity.
Part one – Financial Accounting and Analysis
This part of the course is designed to introduce students to the following financial accounting subject
1. The accounting cycle
2. Accounting systems for merchandising concerns
3. Current assets and liabilities
4. Non-current assets and liabilities and owner's equity
5. Current issues
6. An introduction financial statement analysis
Part Two – Managerial Accounting (November - January)
The focus of this part of the course is development of information useful to management for decision
making regarding profit planning and control. It is designed to introduce students to the following
managerial accounting subject areas:
1. Job order costing
2. Process costing
3. Cost behavior
4. Cost-Volume-Profit (CVP) relationship
5. Absorption costing and variable costing
6. Activity-based costing
7. Profit planning
8. Standard costs and balanced scorecard
9. Segment reporting and decentralization
10. Relevant costs for decision making
11. Capital Budgeting
II. Required Materials
1. Financial Accounting, 15th Ed., by Williams, Haka, Bettner, and Carcello (McGraw Hill, 2011).
2. Managerial Accounting, 14th Edition, by Garison and Noreen (McGraw Hill, 2012).
3. The Mechanics of Financial Accounting (HBSP # 9-101-119).
4. Conceptual Framework for Financial Reporting (HBSP # 9-101-118).
5. Understanding Financial Reports, (Merrill Lynch), it is available under the course documents
III. Required Cases and Readings:
1. Boston Chicken (HBSP Case # 9-198-032).
2. Harnischfeger Corporation (HBSP Case # 9-186-160).
3. Tire City Inc., (HBSP Case # 9-297-091).
4. Salem Telephone Company, HBSP Case No. 9-104-086, June 7, 2004.
5. Johnson Beverage, Inc., UV 1033, February 3, 2009
6. Paul A. Dierks and Patel, Ajay, “What Is EVA, and How Can It Help Your Company?”
Management Accounting, (November 1997), PP. 52-58.
7. Using EVA at Outsource, Inc., Management Accounting, January 1997, PP. 56-59.
IV. Additional Readings:
1. Peter A. Karl, “Twenty Questions on Selection of a Legal Entity,” The CPA Journal,
(August,1999), PP. 40-45. (Available on line from the CPA Journal website).
2. Jack R. Fay, “What Form of Ownership Is Best?” The CPA Journal, (August 1998), PP. 47- 50.
(Available on line from the CPA Journal website).
3. Kaplan, Robert and Norton, David, “The Balanced Scorecard Measures that Drive
Performance (January-February 1992), pp. 71-79.
Class time will be devoted to lectures, coverage of exercises and problems, and analysis of cases. All
students are expected to have read and studied the materials thoroughly and have questions ready on
points not understood. Students are encouraged to participate in classroom discussions of materials
covered and how they might find it useful in job situations. Specifically, students' comments as to
how materials covered in this class relate to their work experience are encouraged.
VI. Residency program
There are two sessions (5 hours) in the residency devoted to this course. I will use our sessions in the
residency to introduce the foundation of accounting. During this period, we will review several
annual reports to become familiar with the format and the content of the three primary financial
statements, i.e., income statement, balance sheet, and cash flow statement and how these statements
are used by internal and external decision makers. I will also introduce the concept of accounting
cycle and the process used to prepare financial statements. A brief review of the accounting cycle is
presented in HBSP readings # 9-101-118 and 1-101-119. Those students who have an interest in
learning more about accounting cycle and the preparation of financial statements can refer to chapters
1-5 of the Financial Accounting textbook. Please note that chapters 1-5 are to provide a brief
overview of accounting cycle and they are not intended to provide a deep understanding of double
entry accounting. The objective of this course IS NOT to look at accounting from the preparer’s point
of view. The emphasis is on the users’ perspective. As such, you are only expected to gain a general
understanding of how accounting system works.
VII. Homework Assignments
To do well in this course, it is important that students work on as many exercises and problems as
possible. The exercises and problems assigned for this course in this syllabus are more than what we
will have time to go over in class. A selected group of exercises and problems will be reviewed in
class. You are, however, strongly encouraged to do all exercises and problems assigned and ask
questions about the ones that are not covered in class. Please note that the exercises and problems
assigned for a day are due on that day. The bolded exercises and problems with a (*) next to them
are optional team assignments. You can turn those assignments in for a total of 10 bonus
VIII. Case Analysis and Presentation:
There are seven cases assigned for this course. You are responsible to have read these cases before
each session and to be prepared to discuss them in class. You should submit one typewritten analysis
for each case. The case analysis should respond specifically to the case questions outlined at the end
of this syllabus. The report should be no longer than two pages of text (single spaced), with no more
than three pages of supporting exhibits. To maintain these limits, it is important that you focus on
answering the questions and avoid repeating the facts that have already been covered in the case. The
first six cases are team projects. The last case, “Healthy Dairy Products,” is an individual
X. Review Sessions: There will be several review sessions on Wednesday nights, as needed, to review
those exercises and problems that were not covered in class. These sessions start at 6:30 p.m. and end
at 8:00 p.m. in Timonium campus. The details for these sessions will be revised during the semester.
XII. HOMEWORK ASSIGNMENTS
Date Chapters/topics Exercises Problems/Cases
Th. Introduction to Accounting
Sept. 8, 2011 Recording Changes in Financial Position
1:00-5:00 p.m. Recommended readings: The Mechanics of Financial Accounting (HBSP # 9-101-119),
pp. 1-8, “Understanding Financial Reports.”
Chapter 1-5, Financial Accounting book (OPTIONAL)
Sat. Sept.10 Income Measurement
8:00-12:00 noon Recommended readings: A Conceptual Framework for Financial Reporting (HBSP # 9-101-118)
“Understanding Financial Reports.”
Chapters 1-5, Financial Accounting book (OPTIONAL) E5.3,8 Internet Assignment # 1
Time permitting, you can start working on Team project 1 (Majestic Caterers)
Sat. Sept.17 Exam I (chapters 1-5), Part I, Take Home Team Project 1, Majestic Caterers (20 points)
8:00 -10:30 a.m. Chapter 6 (Accg. for Merchandising Activities) E6.5,8*,11 P6.3A
Guide to Understanding Financial Reports
Chapter 7 (Accg. for Financial Assets) E7.1,9,10,14 P7.5A*
Sat. Sept. 24 Exam I, Part II, In class individual exam (20 points)
Chapter 8 (Accg. for Inventory and CGS) E8.1,6,8,9,13 P8.2A
Chapter 9 (Accg. For PP&E)
Understanding Financial Reports
Sat. Oct. 1 Chapter 9 (cont.) E9.8,11 P9.2A,6A
Team Project 2, Boston Chicken (20 points)
Exam II Projects are distributed
Saturday Chapter 10 (Accg. for Liabilities) E10.2,7,11,14 P10.4A
October 8 Appendix B (Application of Present Value) B.1,3,4
Chapter 11 (Accg. for Owners' Equity) E11.2,3,5,7,8,9,10 P11.3A
Saturday EXAM II (Chapters 6-10), 50 points
Oct. 15 Part I, Take home projects are due (30 points).
Part II, In class exam (20 points)
Chapter 11 (cont.) Internet Assignment # 2
Additional Readings # 1 and 2
Chapter 12 (Accg. for Special Equity Transaction)
Understanding Financial Reports
Sat. Oct. 22 Chapter 12 (cont.) E12.2,5,12 P12.3A*,7A,8A*
Internet Assignment # 3
Chapter 13 (Cash Flow Statement) E13.2,4,5,7 P13.6A
Internet Assignment # 4
Sat. Oct. 29 Chapter 14 (Intro. to Financial Statement Analysis)
Understanding limitation of financial accounting
Team Project 3, Harnischfeger Corporation (20 points)
Date Chapters/topics Exercises Problems/Cases
Sat. Nov. 5 Chapter 14 (cont.) E14.2,3,4 P14.1A*, 6A,9A*
Chapter 1 (Managerial Accounting)
Chapter 2 (Cost Terms and concepts), App. B E2.1,2,6,7,17
Sat. Nov. 12 Exam III, In class exam (Chapters 11-14), 20 points
Team Project 4, Tire City Co. is Due (20 points)
Chapter 2 (cont.) P2.18*,22
Chapter 3 (Job Order Costing), App. A E3.13,15
Sat. Nov. 19 Team Project 5, Salem Tel. Co. (20 points)
Chapter 3 (cont.) P3.24*, case3. 29
Chapter 4 (Process Costing), App B E4.2,3,4 ; E4.B1,B2 P4.14*
Chapter 7 (ABC), App A E7.2,3,4,5
Sat. Nov. 26 NO CLASS, Thanksgiving
Sat. Dec. 3 Team Project 6, Johnson Beverage, Inc., (20 points)
Chapter 7 (cont.) P7.19
Chapter 5 (Cost-Volume-Profit) E5.1,2,3,8,9,13,14
Chapter 6 (Variable Costing and Segment reporting)
Sat. Dec. 10 Exam IV (Chapters 1-4, and 7), in Class Exam (20 points)
Chapter 5 (cont.) P5.20, 26*
Chapter 6 (cont.) E6.1,9,10 P6.25, 6.26*
Chapter 10 (Standard Costs and variance)
Sat. Dec. 17 Chapter 10 (cont.) E10.1,2,3,5,6 P10.9*
Chapter 11 (Performance Measurement in Decentralized Organization and balanced Scorecard)
Required Reading # 7, What Is EVA, and How Can It Help Your Company?
Additional Reading # 3.
Sat. Jan . 7 Using EVA at Outsource, Inc. (in-class exercise, time permitting)
2012 Chapter 13 (Capital Budgeting Decision) E13.1,2,11,12 P13.28, 13C.4
Sat. Jan. 14 Exam V (Chapters 6,10.11, and 13), Part II, In-class exam (20 points)
Individual Project # 7, Healthy Dairy Products is due (20 points)
XIII. Internet Assignments:
Scavenger Hunt Project 1: For a publicly held company of your choice, answer the following
questions. You can either use the company’s web site, if it is available and has detailed financial
information, or you can use EDGAR database to find the information you need. The Electronic Data
Gathering, Analysis, and Retrieval System (EDGAR) contains corporate information filed with the
U.S. Securities and Exchange Commission (SEC). Then, select the company’s most recent form 10K
(an annual financial report filed with the SEC). You can access EDGAR by opening the following
Internet location: www.sec.gov/edgarhp.htm
Hint: From EDGAR Database, select Search for company fillings. Then select “Company or file
name…. “ option. Then type in your selected company’s name in the box. EDGAR database
includes a lot of financial and non-financial information. For beginners, it may be a bit cumbersome,
but informative to scroll through the database
Required: Give the following detail information about the company:
a. Name of the company.
b. Primary line of business.
c. Total annual revenues for the past two years. Have they gone up or down? How
much? Is the change significant? What was the cause?
d. Net annual income for the past two years. Have they gone up or down? How Much?
Was the change significant? What was the cause?
e. Earning Per Share for the past two years. Have they gone up or down? How much? Do
you consider those changes to be significant? Compare the changes in the EPS with the
changes in the companies’ stock prices. Are they consistent? Comment
f. Total assets for the past two years. Have they gone up or down? How much?
g. Based on this limited information, what is your assessment of this company.
2. For a company of your choice, give the following detail information about the company’s
Stockholders’ Equity as of the last balance sheet date.
a. Types of stocks
b. Par value, stated value of each stock
c. Number of shares authorized, issued, and outstanding
d. Total Stockholders’ Equity and its components
e. Book value per share –SHOW CALCULATIONS
f. Are there any “Other Comprehensive Income” items? What are they? Explain.
g. Do you see any changes in the stockholders’ equity of the company from last
3. For two publicly held companies of your choice, answer the following questions:
a. What were the companies’ EPS (basic and diluted) for the past three years?
b. Do you see any significant changes in each company’s EPS for the past three
c. Has the management of each company given any explanation about changes in the
company’s EPS? If so, what is it?
d. What are the P/e ratios for these companies? Comment.
4. Review the latest Statement of Cash Flows of a company of your choice and answer the
a. What was the increase (decrease) in cash for the period covered by the statement?
b. What were the cash flows from operating activities, investing activities, and financing
c. Was the operating activity a source or a use of cash? Explain
d. Was the investing activity a source or a use of cash? Explain
e. Was the financing activity a source or a use of cash? Explain
f. Are there any items on the company’s statement of cash flows that you do not
g. Based on the limited information you have, do you see any weaknesses or strength in
the company’s cash flows activities?
XIV. Case Analysis and Presentation:
1. Boston Chicken, Inc. (20 points)
Assess Boston Chicken’s business strategy. What are its critical success factors and risks?
What are the major accounting policies that have a significant impact on the company’s financial
statements? What are the financial statement consequences of these policy choices? What are the key
assumptions behind these policies? Are these assumptions justified given the company’s strategy and
prospects? Evaluate the company’s financial and operating performance given your concerns about
its accounting policies.
Assess Boston Chicken’s current condition and future potential given its business strategy, accounting
policies, and recent performance.
2. Harnischfeger Corporation (20 points)
Identify the accounting policy changes and accounting estimates that Harnischfeger made during
1984. Estimate the effect on the company’s 1984 reported profits.
What do you think are the motivations of Harnischfeger’s management in making these changes in its
financial reporting policies? Do you think that investors will see through these changes? Assess the
company’s future prospects given your insights from questions 1 and 2 and the company’s turnaround
3. Tire City, Inc. (20 points)
1. Evaluate Tire City’s past performance and current financial health. Do a quantitative analysis of
the company’s past financial performance.
2. Prepare pro forma income statement, balance sheet and cash flow statement for the company for
1996 and 1997.
a. Based on Mr. Martin’s sales predictions
b. Keep the same percentages as 1995.
c. Assume the company will borrow enough each year to have the desired ending cash
balance of 3% of each year’s sale.
d. Interest expense on the new borrowings is at 10%. Interest expense on the old loan
continues to decline at the same rate as 1993-1995.
3. Using your set of pro forma financial statements, assess the future financial health of Tire City as
of the end of 1997. Will Tire City be in a stronger or weaker financial condition two years from
4. What factors might influence the project’s and the company’s performance and, therefore,
repayment of the loan?
4. Salem Telephone Company (20 points)
Answer the questions outlined on pp. 3-4 of the case
5. Johnson Beverage, Inc. (20 points)
Answer the following questions:
a. Use the information in case Exhibit 1and 2 and other necessary data in the case on
activities and costs to develop an activities-based cost system for JBI to use to determine
customer profitability. Use this system to estimate customer profitability for Saver
Superstore, Oscar’s OddLots, Midwellen Supermarket, and Downtown Retail.
b. Compare the estimated costs you calculated using an activities-based cost system to the
estimated costs using the current system of allocating customer service costs. What caused
the different costing methods to produce different results? Which costing system provides
management of JBI with better information? Why?
c. What are the strategic implications of your analysis? What recommendations do you have
for the management of JBI?
6. Using EVA and MVA at Outsource, Inc. (in class exercise)
Using the following templates provided on next page, calculate OutSource’s EVA and MVA for
1995. Following is a list of the steps to be completed in calculating OSI’s EVA and MVA.
1. Review the balance sheet and income statement for 1995;
2. Review the footnotes to those statements;
3. Analyze the footnotes for information on equity equivalent adjustments;
4. Obtain information on the firm’s stock, debt and interest rates;
5. Determine equity equivalent amounts by analyzing the footnotes;
6. Calculate the firm’s weighted average cost of capital;
7. Complete the following templates to calculate the firm’s EVA Capital and EVA NOPAT.
8. Based on information obtained in steps 6 and 7, compute the firm’s total cost of capital;
9. Based on information obtained in steps 7 and 8, compute the firm’s EVA for 1995; You
now have all the information to compute the firm’s MVA for 1995.
EVA Capital using Financing Approach
Liabilities and Net Worth
Interest-Bearing Short-term debt $$$
Long-term Debt less current portion $$
Total Debt $$$
Deferred income taxes $$
LIFO reserve $$
Accm. Goodwill cost amortization $$
Accum. Software dev. Costs amortization $$
Software dev. Costs that have expensed $$
Total Equity Equivalents $$$
Preferred Stock $$
Common Stock $$
Additional Paid-in-Capital $$
Retained Earnings $$
Adjusted Shareholders' Equity $$$
EVA CAPITAL $$$$$
EVA NOPAT using Financing Approach
Income Available to Common $$$
Adjustments for EE:
Deferred Taxes $$
LIFO Reserve $$
Goodwill Amortization $$
Software Dev. Costs Amortization $$
Software Dev. Costs Expensed $$
Total Increase (Decrease) in EE $$$
Adjusted Income Available to Common $$$$
Adjustment for Interest expense after tax $$
EVA NOPAT $$$$$
HINT: You now should calculate the cost of capital and then EVA and MVA.
XV. Examination and the Grading Policy:
Students’ learning of the course content will be evaluated thorough class discussions, case analysis
and presentation, and exams. There will be five tests for this course. Tests will consist of any
combination of take-home and in class exams, multiple choice, cases, essay, and/or problem type
questions. They will cover items discussed in the text and material talked about in class. All students
are expected to take the tests as scheduled. In case a student cannot take a test on the date scheduled,
due to unanticipated events such as illness, the instructor should be informed as soon as possible to
arrange for a make up test. All other absences must be approved at least one week prior to the date of
the test. A student who misses a test without a good reason will receive a mark of zero for that test.
Your final grade will be determined based upon your accumulated point.
5 exams tests 130 Points
6 Required Team Projects (cases) 120 points
1 required individual case 20 points
4 required internet projects 10 points
Optional Team Projects - Bonus Points 10 Points
Total Points Available 290 points
About Your Instructor:
JALAL SOROOSH, Ph.D., CMA
Jalal Soroosh is a professor of accounting at Loyola University
Maryland. He received his Ph.D. in accounting from The University of
Mississippi and holds a Certificate in Management Accounting (CMA).
He served as KPMG Faculty Fellow at Loyola University Maryland for
two years. He was recognized as the Most Valued Professor by MBA
Fellows class of 2007. His teaching and research interests are primarily in
financial and managerial accounting. He has published numerous articles
in practitioners and academic journals such as the CPA Journal,
Management Accounting, Corporate Controller and the Journal of
Business and Economic Perspectives. His article in the July 2004 issue of
the CPA Journal received the 2004 MAX Black Outstanding Article
Award by the New York State Society of CPAs. He also has an extensive
teaching experience in various MBA/EMBA programs in China. Jalal
brings a good mix of teaching and work experience to the accounting
program at Loyola University Maryland. In addition to over twenty five
years of teaching accounting, he has a variety of practical experiences with
Arthur Andersen & Co., Coopers & Lybrand (PWC), C.W. Amos &
Company (RSM McGladrey), McCormick, Reznick Fedder & Silverman,