Trueblood Case 14-3: Coconut Telegraph

On July 1, a client paid CM2 $205,720 in advance for a year of consulting services.

ISSUE: Accounting for Fuzzy Dice Inc. acquisition of Tiny Tots Toys LLC related to decision (1) to use purchased facility to enter another business line or (2) renovate the facility to expand the current production.

1. Describe the impact the three proposed accounting methods (full revenue recognition, deferral of revenue, and partial revenue recognition) would have on the company’s financial statements: 1) at the time of the sale, and 2) in future periods.

Carolyn Isherwood, ID #21108433 Exam 05002400 1478 Angelus Hill Road, Hemet, CA 92545 isherwoo@fusion.gat.com • Cross-train all employees • • Revise the bonus incentive program Assign one project manager per client

605-25-25-3, Revenue Recognition-Multiple Element Arrangements-Recognition; separated contract with the same entity, near or at the same time are considerate as a package.

We have been retained as continuing auditors for Prairie Technology Partners (PTP) for the year ending December 31, 2011

3. On the basis of the responses to Question 1 and 2, what are the units of accounting in this arrangement?

iii. The three launch payments fit the before stated criteria of substantive payments. The contract signing payment and negotiation payment do fit the criteria because these payments are not proportionate to the vendor’s performance, do not relate solely to past performances, and are not “reasonable relative” to all of the deliverables and payment terms.

3.) . Should the February 1, 2012, agreement and the May 1, 2012, agreement be accounted for separately or as a single arrangement?

3. Should the February 1, 2012, agreement and the May 1, 2012, agreement be accounted for separately or as a single arrangement?

1. As of December 31, 2011, what amount, if any, of sales due should be recognized in eVade’s financial statements?

Pricing is a pertinent issue in procurement and acquisition in organizations. Consumers buying the commodities of an entity should get clarity on pricing related issues. There is uncertainty in Pro

The advance technology division manufactures, develops, and sells specialized manufacturing equipment to include installation services which is sold on a time and materials basis. Title is also passed upon delivery. The sales contract with Sandham Inc. included certain provisions that made the collectibility of sales proceeds uncertain due to the obligation that the equipment had to meet Sandham’s requirement of compatibility with manufactured equipment from other companies which Wareham could not replicate during testing at their facilities. This contract also provides customer acceptance provision that grants Sandham a full refund if the product was not accepted within 120 days. Due to high development and manufacturing costs, these factors increases the risk that the company will take a significant loss in revenue if the product is rejected. For XL Semi, the provision outlining the cost of installation services which can vary from 1% to 3% of the total arrangement fee ignores the

Now that the initial startup phase of our company is complete, our team of Analysts has determined what we have deemed reasonable costs, considering that our definition of “reasonable” aligns with yours. In order to defend our stance on what we feel is reasonable, we have considered the nature of costs, such as air travel for business meetings and the use of our high quality materials, by researching the market for affordable, high-quality materials and have put standards in place to keep air travel valid for these government contracts. With the understanding that although the nature of the cost may be considered acceptable, the amount of the cost may not meet standards when it comes to costs defined as “reasonable” (Murphy, John Edward; Guide to Contract Pricing, pg. 47). With this in mind, we continue to research the market to find adequate material at a much lower cost. We have used this data to create what we feel is a cost that would not and should not exceed what any prudent person would pay in a competitive business environment. We are aware of the competition and have made it a strong incentive of ours to save on costs for the items that we are providing to you. Allowability of our costs is guided by the 52 generally applicable cost principles that are based on specific laws and policies (Murphy, John Edward; Guide to Contract

3. Refer to the monthly sales forecasts given in the first Table. Assume that these amounts are realized and that the firm’s customers pay exactly as predicted.