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Accounting Case Study
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Jennifer Said:Accounting- Case Study... Need help NOW.?
We Answered:a) The omission of inventory caused Cost Of Goods Sold to be overstated, Gross Profit and Net Income to be understated on the Income Statement. On the balance sheet, Assets (Inventory) and Equity (Retained Earnings) were both understated.
b) If the omission was not corrected and carried over (and the inventory count was correct in the following year), the effect on the Income Statement for that year would be exactly the opposite of those in part a). There would be no effect on the year-end Balance Sheet if the error was corrected.
Alice Said:Accounting Case Study - PLEASE HELP!?
We Answered:Short answer:
Organized crime operates under a cash basis--not an accrual basis. Junior is more likely to recognize the revenue on the day he is paid.
You can either use the percent-completion method or the completed-contract method. If I am to ignore the risks inherent to the business members, then the percent-completion would be my choice. For example, when 30% of the job is done in June, then 30% of the revenue for the entire job is recognized--whether the money is actually received or not does not matter for this method. So,
$20,000 x 30% = $6,000 recognized on June 30th
$20,000 x 70% = $14,000 - $6000 = $8,000 recognized July 31st
$20,000 x 90% = $18,000 - 14,000 = $4,000 recognized August 31st
$20,000 - $18,000 = $2,000 recognized September 30th.
The completed contract method means that the entire $20,000 would not be recognized until all work is done. So any payments received prior to the end would be unearned revenue (a liability--not equity).
One more note. Junior wouldn't recognize the revenue anyway since that would increase his taxes. We all know that a mobster wouldn't declare all this as income, so who are we kidding? Thanks for the hypothetical, though.
Casey Said:i want to eamil someone a case study i am not able to solve on accounting.. any help?
We Answered:fORGET tHEM
Mabel Said:Case Study bout Accounting!!! Help!!!?
We Answered:1. The $9,000 reduction in cash should be recorded with a debit to a loss account. If the owner agreed to buy the insurance for $2,000 but has not yet paid for it, debiting the Insurance asset and crediting the liability to the insurance company is correct. This assumes that the insurance is now in force. The insurance asset should be amortized over the term of the policy. If the invoice is just a price quote and the owner has not yet decided on which quote to accept, he should not record anything yet.
2. The donation of equipment is disposal of the asset and so the asset should be written off. The entry is to debit Donations as an expense, debit accumulated depreciation for the amount recorded in that account, and credit the cost of the equipment. The Donations account is debited the amount needed to balance the entry. However, in theory, the Donations account could be debited $4,000 and any difference in the entry recorded as a loss or gain, assuming that the book value of the equipment is more or less than the fair value.
3. This is a barter transaction and should be recorded as $1,000 of fee revenue and $1,000 of service expense.
Marshall Said:Intermediate Accounting Help - Case Study?
We Answered:It is in the paragraph on operating leases. I actually had to deal with this when the clarification came out...it was a real drag!
PS - I found this article just going a Yahoo search for "straight line lease accounting." There may be clearer sources for you out there if this doesn't do it for you.
Update 11/15/08 - this excerpt is from paragraph 2 of the link I provided:
"FASB Technical Bulletin (FTB) 85-3, Accounting for Operating Leases with Scheduled Rent Increases, in conjunction with the response to Question 1 of FTB 88-1, Issues Relating to Accounting for Leases, stipulate that rent expense for operating leases with rent-free periods or scheduled increases must be accounted for on a straight-line basis over the lease term, including the related holiday period, unless another systematic and rational method is more representative of the lessee’s pattern of use over time. This treatment assumes that the lessee takes possession of or controls the property at the inception of the lease. The SEC staff letter reaffirmed existing GAAP and emphasized the inclusion of the rent holiday within the lease term."
Basically, the company I used to work for began recognizing rent expense on the date operations began/rent due to landlord, which in this case is June 10th. We, as well as the rest of the industry, had been advised that we interpreted FTB 85-3 incorrectly. You MUST begin recognizing rent expense when possession is received, despite receiving a "rent holiday" from the landlord.
Vincent Said:Accounting Homework, Can anyone help me with the answer to this case study?
We Answered:See if you can get help here