Abbott Corporation (AC) is a private company, producing plastic bags
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Free InquiryAbbott Corporation (AC) is a private company, producing plastic bags. It has a December 31 year-end and follows IFRS. John Lo is the CEO of the company.
It is now September 15, You, Jim Fraser, CPA, joined the company as CFO. On the first day of the office, surprised to learn that employees are unhappy with the enterprise resource planning (ERP) that was installed last July this year with $50,000 with 2 years useful life term. The ERP consists of a general ledger, inventory, accounts receivable, and an accounts payable module. Most employees are complaining that they need the training to work on the ERP, then they could produce the report as and when necessary. For the training, the consultant provided a budget of $50,000.
As part of your job, you meet with the President of the labor union who informed you that, last year the company implemented profit-sharing plan, where all the employees would receive a bonus based on the companies after-tax profit. As a result, you reviewed the annual financial statements and met with the controller of the company, and obtained the following information:
PC made an accrual for $350,000 against the construction of the plant, although the construction work did not start yet. The controller explained that up next year they would start the contracting process and have a plan to finish by the next year-end.
At the end of the day, you met with the CEO to give him an update about your day 1 experience and the CEO informed you that your role would be to give them the right indication as they are planning to issue an IPO within next two years and expand the business to the USA by obtaining 100% shares of ABC Corporation, based in New York.
Required:
Write a memo to the CEO outlining the issues facing Abbott Corporation. Include a discussion on the problems encountered with the ERP and their impact on the company. You should discuss the problems and suggestions relates to the profit-sharing plan.
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