In this assignment, you need to review and provide answers to the questions related to the financial summary of Aigrette, Inc. for the quarter.
This Week’s Scenario:
It’s Monday morning and time for the weekly management meeting. Mr. Morton goes over some personnel issues with the management group and he has you review the financial summary for the quarter. The meeting goes well, and as the other managers head back to their offices, Mr. Morton asks you to stay for a few minutes.
“I’m really pleased with your progress,” he says. “I think we are almost ready for the auditors. I was going through the notes Sofia left with me, and I found one last note that we need to address. Sofia said we would need to disclose some information about our segments. I guess she meant the two divisions we have. Anyway, she drafted the comments she thought we would need to include. You can look them over and see if they look okay.”
“Sounds good,” you respond as he hands you the note. “I’ll start on that this morning.”
“Great! Just send me a memo and a copy of any changes you think need to be made. One other thing,” he says. “At lunch the other day the auditors mentioned they would need to look at our quality of earnings. I just nodded, but I have no idea what they were talking about! How can earnings be anything but good?”
“I know exactly what they mean,” you respond. “I’ll be glad to explain it to you.”
“Oh, I don’t have time right now!” Mr. Morton exclaims. “Just put it in the memo.”
You head back to your office to read Sofia’s note.
I know the auditors will want some information about our divisions for the financial statements this year, so here they are. This should be all they need to know.
Aigrette, Inc. Division Discussion
Aigrette, Inc. operates two divisions—a car division and a sport utility division. The car division is our primary focus and generates about 75 percent of the net income of the company. The plant that produces cars is located in Hennepin, Illinois, and the SUV division is in Brownstown, Illinois. The SUV plant is smaller than the auto plant because it produces fewer vehicles.
This Week’s Tasks:
Your memo to Mr. Morton should be double-spaced and three- to four-pages long. It should also include a discussion of the required segment disclosures, along with an explanation and evaluation of Aigrette’s quality of earnings. Use the financial statements from last week for your discussion.