Accounting 12 - Chapter 11

Link: http://www.cnn.com/2008/WORLD/asiapcf/10/05/china.milk/index.html

Summary:
An event that occurred in Hong Kong, China, was candy filled high levels of melamine. Basically the article is about how the Hong Kong authorities on Sunday October 5, 2008 have announced that two recalled candy products made by British confectioners, Cadbury had high levels of melamine. What is melamine, you ask? Melamine is a white chemical crystalline compound (C3H6N6) used in making melamine resins, and to bolster apparent protein levels in diluted or poor-quality milk. Melamine has been recently been found in the Chinese-made milk products that have sickened nearly 53,000 children in China, killing four. So far, countries have banned the import of Chinese milk products, or anything that contains milk from China. Last week, Cadbury recalled all of its Chinese-made candy products after tests have shown they contained amounts of melamine. Spokesman Tony Bilsborough said they took the action because, "no level of melamine is appropriate". The test results of their products showed that their Dairy Milk Hazelnut Chocolate contained 25 times the acceptable 2.5 ppm (parts per million) amount of melamine, and their Dairy Milk Cookies Chocolate contained more than twice the legal limit of melamine. The same melamine has been used in milk a month ago in an attempt to sell more of it, and in order to fool quality checks. So far, authorities have arrested 40 people in connection with the scandal, including two brothers who could face the death penalty if convicted.

Connections:
The connections I made between the article and chapter 11 is Merchandise Returns and Allowances, and COGS. People who have found the product unsatisfactory or unhealthy in this case, can get a refund on the product that they bought which has to do with returns and allowances. With vast amounts of the useless candy, chocolate, and milk which will have to be included on the income statement as COGS (goods that are lost, broken, or stolen), the company will have a large amount of returns and allowances that they will have to give back to their customers, and because of the possible law suits that may occur, I predict Cadbury will go out of business.

Reflection:
Although the article talks a lot about how China has had melamine in two companies now (one in milk products, and one in candy products), the article or other news stories does not talk about any law suits that the people in China have against the companies. I think this is idiotic because if this happened in Canada two times within a month, the people in Canada would be outraged! The comparison I make between Canada's government and China's government is that Canada thinks lives are precious, and China's government thinks lives are not precious because of the gigantic population of people in China. If Canada or the United States were to make a move saying that what China is doing is wrong (which we will not), China would cut off all exports to Canada or the United States. When will China's government finally make a stop to the poor products the companies in China are making?