Chapter 12 Blog

Article from The Associated Press:

http://ap.google.com/article/ALeqM5g_Dkb4nllAY-82L6FpxvFkCZH3CgD9447IDO0



Summary

This article focuses on the global economic slowdown that broke out recently and its influence on the Japanese electronics market. Yen, the currency used in Japan has been rising significantly during the last few months and the sales of many major Japanese electronics company fell sharply. One of the leading companies, Sony Corp, has reported that its net profit has sank 72 percent for the July-September period. Because of the global economic slowdown, Yen tends to continue rising, which would cause earnings of these companies to become more vulnerable when the overseas profit in other currencies is converted back to Yen. Again, Sony Corp, which makes 80% of its profit overseas, is suffering this situation. Instead of earning profit, Toshiba, also one of the leading companies on the electronics market, has lost about 272 million dollars during the July-September period. Other companies such as Fujitsu, Canon, and Panasonic have also been reported to earn a much lower profit for the same period. Because of the out break of the recent global economic slowdown, these companies are continuing to expect a really low profit for the Christmas season.

Connection

The article is connected to the Journal and discount section of Chapter 12. As mentioned in the summary, since the sales of the companies decrease, the total sum of their sales journal would be much lower, and this would directly cause a decrease to the net profit. The decrease is even more significant when the overseas profit of the companies in dollars, euros and other currencies are converted back into Yen. This is because since the Yen is rising, the same amount of money in dollars or euros is worth less money in Yen compared to a few months ago. The rise of Yen also negatively affects the exporting of goods from Japan to other countries since wholesalers from other countries now have to pay more money of their currency to buy the same amount of goods. This way, to avoid a loss of profit, the Japanese companies will likely offer discounts to the overseas businesses to increase their sales as much as they can.

Reflection

As many of the people who pay attention to current events and the global financial status would have noticed, since the global economic slowdown had broke out early in September, Most of the major currencies around the world are falling, but this is not the case for the US dollar and the Japanese Yen. Insteading of falling, these two currencies are actually rising. This is mainly because Japan and the US have a strong economy and are not easily affected by the slowdown. The US dollar is at a good status, but the Yen seems to be out of control and rising too fast. This negatively affects the exporting of goods in Japan since overseas businesses would have to pay more money than they usually do to buy the same amount of goods. It also impacts the earnings of companies that make their profits overseas. Recent news reported that the Japanese government is actually use new business policies to control the rising of Yen, which is kind of ironic since in most other countries such as Canada, England and France, their government are doing everything they can to rise their fallen currencies. Most businesses around the world are hoping that the US dollar and the Yen could become stable because their rising creates serious unstability in both the economy and trade around the world.

Chapter 11 Blog

Article from TIME:http://www.time.com/time/world/article/0,8599,1844750,00.html

Summary
This article I read is about the tainted-milk scandal that broke out in China recently. China used to have the world's third largest dairy industry, but not anymore. More than 20 of the dairy companies in China have been found producing contaminated milk containing a banned chemical called Melamine. Adding this chemical to the dairy products can boost up the amount of protein in them. But on the other hand, melamine also causes kidney stones, a serious disease that can be fatal to infants. The scandal broke out when 4 infants were found dead, and more than 53,000 were found sick because of drinking the contaminated milk. Since then, milk consumption in China fell to the bottom. Many of the Chinese citizens are not willing to trust the quality of the milk in China anymore. Supermarkets and retailers clearing all contaminated dairy products off their shelf and their inventories. Contaminated dairy products imported from China are also found in other countries. The Chinese government arrested several people that are associated with producing the illegal products. Milk farmers seem to suffer the most because many dairy companies stop producing and therefore are not buying their milk. Their attempt to directly sell milk to citizen is also unsuccessful. They are now pouring away all the unsold milk left in their inventories and are facing the difficult decision of slaughtering the cattles.
Connection
I connect this article to the merchandise inventory section of Chapter 11. To the milk farmers, supermarkets and retailers, since the milk dairy products are banned and can not be sold, they are no longer profitable and would have to be thrown away. The cost of all the destroyed goods will have to be credited from the merchandise inventory account. The same amount will be debited from the loss of goods expense account. At the end of the accounting period, since the ending inventory account will be lower, the cost of goods sold amount will increase. But because the sales account remains the same, the gross profit will decrease when we subtract the cost of goods sold by the sales. Also, because there will be a large amount in the loss of goods expense, when we subtract the total expenses by the gross profit, the net income will decrease significantly.
Reflection
I have to admit that I was quite shocked when I read this article. It is really unmoral to make big profit by selling products that causes harm to one's health, especially when most of the victims are infants. The dairy companies should know that this scandal will eventually break out, and once it does, they will have face very serious consequences (At least all their earnings through illegal means will be confisticated). Therefore, I think that their "way" of trying to make BIG money is extremely foolish and selfish. Also, the Chinese government should really start inspecting the quality and content of food products more carefully. According to recent surveys after the incident, it seems that many Chinese citizens have completely lost faith in the dairy products produced in China. Some of them are even trying to buy milk from Taiwan, Hongkong, or even from other countries. The government should punish the criminals associated with the scandal hardly and at the same time, carry out actions to make citizens confident about the dairy products produced in China once again. All in all, the precondition for the dairy market in China to recover is that from now on, all dairy products produced in China must be checked to be healthy and most importantly, Melamine-free!