Accounting and audit research project
Question # 00025991
Posted By:
Updated on: 09/15/2014 02:58 PM Due on: 09/30/2014
CASE #3
Lowland Appliances Stores offers customers purchasing its appliances separately priced (extended)
warranties. Lowland services these extended warranties. Its customers can receive no refunds for not
using these warranties, and, of course, Lowland must honor these contracts—regardless of any future
costs in doing so. Lowland also “tracks” the profits and losses these types of warranties generate by
appliance category—in order to help maintain a competitive price and costing structure.
How should Lowland recognize the revenues and expenses of such extended warranties?
CASE #5
On January1, year 1, Melvin Corporation promises to “unconditionally” transfer a building that cost
$100,000 (appraised recently at $300,000) to the Vivian Company on January 1, year 2, in exchange
for a boat that Vivian Company bought for $250,000. As of December 31, year 2, Melvin Corporation
still has not transferred title to the building, although Melvin Corporation has received title to the boat.
How should Vivian Company record these transactions?
How should Melvin Corporation record these transactions?
CASE #7
In order to help induce Jill Gregory to remain as president of the Reed Company, in year 2000 Reed
Company promises to pay Jill (or her estate) $200,000 per year for the next 15 years—even if she
leaves the company or dies. Reed Company wants to properly record this transaction as deferred
compensation, but is insure of how many years it should use to amortize this cost.
Over how many years should Reed Company amortize these payments?
Reed Company also purchased a “whole life” life insurance policy on Jill, naming the company as the
sole beneficiary.
Can Reed Company offset the cash surrender value of the life insurance policy against the deferred
compensation liability?
CASE #14
In year 1, Joe Josephs, CPA, reviewed Lander Company’s financial statements. However, in year 2, the
Lander Company hired Tom Holstrum, CPA, to audit its financial statements.
Should Tom meet with Joe?
Would Joe be considered a predecessor auditor?
Lowland Appliances Stores offers customers purchasing its appliances separately priced (extended)
warranties. Lowland services these extended warranties. Its customers can receive no refunds for not
using these warranties, and, of course, Lowland must honor these contracts—regardless of any future
costs in doing so. Lowland also “tracks” the profits and losses these types of warranties generate by
appliance category—in order to help maintain a competitive price and costing structure.
How should Lowland recognize the revenues and expenses of such extended warranties?
CASE #5
On January1, year 1, Melvin Corporation promises to “unconditionally” transfer a building that cost
$100,000 (appraised recently at $300,000) to the Vivian Company on January 1, year 2, in exchange
for a boat that Vivian Company bought for $250,000. As of December 31, year 2, Melvin Corporation
still has not transferred title to the building, although Melvin Corporation has received title to the boat.
How should Vivian Company record these transactions?
How should Melvin Corporation record these transactions?
CASE #7
In order to help induce Jill Gregory to remain as president of the Reed Company, in year 2000 Reed
Company promises to pay Jill (or her estate) $200,000 per year for the next 15 years—even if she
leaves the company or dies. Reed Company wants to properly record this transaction as deferred
compensation, but is insure of how many years it should use to amortize this cost.
Over how many years should Reed Company amortize these payments?
Reed Company also purchased a “whole life” life insurance policy on Jill, naming the company as the
sole beneficiary.
Can Reed Company offset the cash surrender value of the life insurance policy against the deferred
compensation liability?
CASE #14
In year 1, Joe Josephs, CPA, reviewed Lander Company’s financial statements. However, in year 2, the
Lander Company hired Tom Holstrum, CPA, to audit its financial statements.
Should Tom meet with Joe?
Would Joe be considered a predecessor auditor?
-
Rating:
/5
Solution: Accounting and audit research project