...Capitalizing the Direct – Response Advertising Expenditures In capitalizing the direct-response advertising, the effectiveness of the advertising is directly related to the amount of sales. The accounting practice of revenue recognition at Polymedica includes an effective tracking system, tying the sale directly to the advertisement. To satisfy the requirements of linking customers and probable economic benefits to specific direct-response advertising, a means of documenting that response is required. The use of 800 numbers, coded order forms, coupons, or response cards; and a log of customers who made phone calls to a number appearing in an advertisement, linking those calls to the advertisement are examples of this. Thus, shows about the correlation between positioning an advertisement in a publication and the resulting audience responses. The system ensures a process of continued business (future economic benefit) which is further expensed as administrative costs. The repeat order process, as well as follow up with physicians and third party payers is required, but does not constitute further marketing. With direct-response advertising, the incremental direct costs of the advertising incurred are capitalized if the primary purpose of the advertising was to elicit sales to customers who specifically responded to the advertising and the advertising resulted in probable future benefits. This specifically was a pretty successful campaign, as the company increased its Medicare...
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...Running Head: [ Morgan - Capitalizing on Healthier Breakfasts ] Capitalizing on Kellogg’s Effort to Make Breakfast Healthier Andréica L. Morgan Post University BUS520.90: Competitive Intelligence William Robinson March 4, 2011 Summary of Analysis Kellogg Company, the leading producer of breakfast cereals, is focusing its sights on creating healthier versions of the products that have found their homes in the hearts of the American consumer. By using current interactive marketing technology, focusing on how to integrate more fruits and grains into their products, and expanding into new markets, they provide a high bar for our little company to shoot for. Our way to compete against their extensive advertising budget, well-known products, and extensive distribution channels will lie in focusing regionally in supplies, production, and marketplace. This will allow us to capitalize on missed opportunities for using byproducts of current manufacturing processes as part of a two-fold aim – first to get the most out of our resources and second to be greener. COMPETITOR ANALYSIS COMPONENTS COMPETITOR ANALYSIS COMPONENTS Current Capabilities Strengths (Kellogg Company, 2010) Our people Committed to excellence, passionate about achieving our goals, eagerly embracing new challenges Our strategy Focused and consistent, delivers sustainable and dependable performance Our business model Resilient and proven, relevant in all economies, drives long-term health of the...
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...The company chosen for this imperative paper on “Capitalizing on the Customer as an Asset” is The Pool Room Bar & Billiards out of Lawrence, Kansas. The Pool Room is a locally established, individually owned pool hall that was established in 1988. (4) The Pool Room Bar & Billiards is a “throwback to the pool halls of yore” and neighborhood bar located in the basement of the Hillcrest Shopping Center. (4) The pool hall is moderately priced, offering a “serviceable selection of beer and cocktails.” (4) In addition to cocktails and eight and nine ball pool tables, the establishment has a dance floor, shuffleboard, mega touch games, a couple slot machines, projection and big screen televisions, arcade games, darts, a jukebox and a back room available for rent that has a capacity of 200. (3) The bar has an active Facebook account that was just recently setup in February. (5) The bar currently hosts techno parties in the back room on Friday nights; a deejay featuring hip hop and nineties rock music with dancing on Saturday nights; American Pool Association (APA) pool leagues on Tuesday nights; poker on Friday, Saturday and Sunday nights; various music venues throughout the year ranging from local musicians to blue grass to rap to rock-n-roll; and nightly drink specials. (1) In past years, the bar has had other businesses set up within it ranging from a variety of restaurants to recently a brewery. (2) They also used to have nightly pool tournaments and pool leagues...
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...Applicable Laws: Please let me explain the difference between capitalization and expensing in business. Business expenses are divided into two categories, each of which is accounted for differently. Current expenses are those which keep a business running on a day-to-day basis. Current expenses are paid in the accounting period in which they are incurred. Capitalized expenses, however, relate to the purchase of capital assets or expenses related to the improvement of these assets. Capitalized expenses are not accounted for in the period in which they were purchased. These items are placed on the balance sheet as an asset and depreciated or amortized down in value on a monthly or yearly basis via a clearly defined depreciation method. Capitalizing operating expenses is logical for companies in situations where they acquire new assets with a long-term lifespan can spread out the cost over a specified period of time. For example: a business may spend large amounts of money for a machine for its building....
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...India’s population for the year 2011 has been marked as 1.21 billion. A huge one when compared to the other countries, except China, for sure. It has around 17.31% of the total world population and it wouldn’t surprise me if one out of every six person in the world is- an Indian. And if one ponders to the question- “what India is doing to stop it?” Then the answer is nothing but make the best use of it, or in other terms capitalising on its demographic advantage. The concern about the size of India’s population has been shown by the intelligent right from the beginning of the present century but active interest in the study of population became pronounced only with the launch of planning for economic and social development after independence. The First Five Year Plan, from the year 1951-56 duly recognized population as an important parameter which requires careful consideration i9n the planning of country’s development. It has been credited to the never-ending poverty, floating illiteracy and falling mortality rate. Though the overtly-populous country has been in the news continuously for a decade now, but it’s all for the right reasons, and especially for how it is taking on its economy to a higher level. India has more than 50% of its population under the age of 25, and around 65% of its population under the age of 35. With a whopping population growth rate, India will soon topple China, by the end of 2030. Since its Independence, India has grown almost...
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...2109 Virginia Slims: Capitalizing on the Essence of Women in a New Era of Equality Taking into consideration the versatility of a woman’s individuality, their need to gain their independence and feel empowered, and equating their struggles and triumphs during a new era of equality, the Phillip Morris Company launched one of the most successful cigarette campaigns in history geared towards the feminist movement that spanned over a 30 year period. This ingenious campaign not managed to interpret feminism into something to sell, but it paved the way for inverted feminine ideology while female consumer simultaneously became enslaved by the very tobacco company that sought to empower them. As the proportion of female smokers soared to 33%, tobacco companies began to see them as means to increase sales. One such company was the Phillip Morris Company. Riding high on a successful campaign strategy that catapulted Marlboro sales to the top, the company sought out the very advertising agency that had engineered that campaign, the Leo Burnett Agency, to conceptualize and market its women’s specific cigarette. The agency drew its inspiration based on the name Virginia (a previous acquisition of Phillip Morris known as Virginia Rounds), and the rising trend of smokers noted moving toward a longer cigarette it had in its arsenal, Silva Thins. Provided with the name, Virginia Slims, Burnett began to work his magic. The most unique part of the process had to be the means in which it was...
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...1 Assets - Effects of Capitalizing vs.Expensing EFFECTS OF CAPITALIZING VS. EXPENSING Expenses can be expensed as they are incurred, or they can be capitalized. A company is able to capitalize the cost of acquiring a resource only if the resource provides the company with a tangible benefit for more than one operating cycle. In this regard, these expenses represent an asset for the company and are recorded on the balance sheet. Effects of Capitalization on Key Figures The decision to capitalize or expense some items depends on management. As such, this choice will have an impact on a company's balance sheet, income statement and cash flow statement. It will also have an impact on a company's financial ratios. Here is what the decision will have an impact on: Net income - Capitalizing costs and depreciating them over time will show a smoother pattern of reported incomes. Expensing firms have higher variability in reported income. In terms of profitability, in the early years, a company that capitalizes costs will have a higher profitability than it would have had if it expensed them. In later years, the company that expenses costs will have a higher profitability than it would have had if it capitalized them. Stockholders' equity - Over a long time frame, the choice of expensing a cost or capitalizing it will have little effect on a shareholders' total equity. That said, expensing firms will have a lower stockholders' equity at first (less profit, thus smaller retained earnings)...
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...thinking about capitalizing an item that will provide future economic resources many published studies have approached the question in terms of measurability. The statements says: 44. The criterion of measurability would require that a resource not be recognized as an asset for accounting purposes unless at the time it is acquired or developed its future economic benefits can be identified and objectively measured. 45. Paragraphs 39-40 indicate that at the time most research and development costs are incurred the future benefits are at best uncertain. In other words, there is no indication that an economic resource has been created. Moreover, even if at some point in the progress of an individual research and development project the expectation of future benefits becomes sufficiently high to indicate that an economic resource has been created, the question remains whether that resource should be recognized as an asset for financial accounting purposes. Although future benefits from a particular research and development project may be foreseen, they generally cannot be measured with a reasonable degree of certainty…Research and development costs therefore fail to satisfy the suggested measurability test for accounting recognition as an asset. In other words, thinking about the capitalization of software development in regards to SFAS No. 2 and measurability, these costs should not be capitalized. However, I will say this in the defense of capitalizing, we can measure...
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...attention to it. I watched all about it on History channel this last weekend and even the clips and photo's that they show do not convince me that it is the #1 concern that society and the world should have. I personally believe that it is just "big business." And those who are capitalizing on it...know it! Now, I don't mind recycling and simple stuff like that, but I won't give up my candy apple red convertible GT and drive an ugly car loaded with batteries that looks like my sons shoes going down the highway! Do people really think we'll all turn into eco-friendly hells angels riding mopeds? .... Right... I'm glad someone finally asked me my thoughts about global warming! Personally, especially this time of year I think the heat could be turned up a little bit more! I have a hard time believing it is the "most urgent possible disaster that could hit us" any time soon and that we need to give our full attention to it. I watched all about it on History channel this last weekend and even the clips and photo's that they show do not convince me that it is the #1 concern that society and the world should have. I personally believe that it is just "big business." And those who are capitalizing on it...know it! Now, I don't mind recycling and simple stuff like that, but I won't give up my candy apple red convertible GT and drive an ugly car loaded with batteries that looks like my sons shoes going down the highway! Do people really think we'll all turn into eco-friendly...
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...Debate 8-3 Capitalization Versus Expense Present arguments for capitalizing all of the above costs. Your arguments should utilize the conceptual framework definitions and concepts. In order to figure out what kind of cost should be capitalizing or expense, we should know about the difference between capitalizing and expense. The word capitalizing means to record the amount of the item in a balance sheet rather in a income statement. However, the expense means the money spent or cost incurred in an organization that contributes to generate revenue, and expenses are summarized and accumulated in the income statement as subtraction from the income before measure income tax. The cost of the asset includes the initial cost and all other costs associated with maintaining the asset in operating condition. Wheter the cost should be capitalized or expense, we need to distinguish which situation should apply the exact one. When an organization “capitalize” an asset, then it need to make sure the asset has potential economic value that will profit the future periods, but if the organization” expense” an asset, it need to prove that the value of the asset has been used up in the current period and is reported on the income statement. There is a choice between capitalizing an expenditure, which means writing it off during the expected period of benefit and expensing the cost, meaning expensing it as incurred. All the cost incurred by Entre Preneur for founding his new site...
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...Client Understanding Certain aspects of accounting information need to be presented in a clear and concise format. Some topics that need to be addressed in preparing financial information on fixed assets and inventory are an essential element to accurate representation of financial information. Adjusting to lower cost of market inventory, capitalizing interest on building construction, recording of a gain or loss on an asset at the time of disposal, and adjusting goodwill for impairment will be the focus of this paper. Because of market fluctuations it is sometimes necessary to adjust inventory values. Some accountants believe that inventory should reflect current market value; however, current generally accepted accounting principles (GAAP) rules do not allow this method of inventory valuation. However, when inventories have a significant decline in value the LCM (Lower Cost of Market) rule for inventories organizations can use LCM rule. As stated in Chapter eight of Financial accounting theory and analysis: “Use of the LCM rule for inventories is consistent with the qualitative characteristics of accounting information contained in SFAC Number two and the definitions of assets and losses contained in SFAC Number six. This is, when the cost of inventory exceeds its expected benefit, a reduction of the inventory to its market value is a better measure of its expected future benefit.” The problem with the LCM rule is that it only applies to downward inventory...
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...for the asset. The price ceiling can be calculated price and subtract the competition cost and disposal cost. By using this formula, a more realistic valuation of the inventory can be recorded. The pricing floor can be calculate taking the sales price and subtracting the profit. Capitalizing Interest on Construction Approaches for Capitalizing Interest When a company decides to construct an asset, it is often necessary to procure outside debt financing. According to Kieso, Weygandt, and Warfield (2010) there are three approaches to capitalizing the interest incurred on such financing: interest is expensed rather than capitalized, capitalize all associated costs whether traceable or not, and capitalize only the directly traceable interest amounts (p. 491). The most appropriate approach depends on numerous factors. However, Schroeder, Clark, and Cathey (2011) suggest capitalizing only the actual interest costs directly related to the constructed asset is appropriate because the asset’s cost is neither overstated nor understated (p. 286). According to Generally Accepted Accounting Principles Generally Accepted Accounting Principles (GAAP) provides guidance on the required method for capitalizing interest. According to FASB ASC 835-20-05, the amount of interest to capitalize is based on the asset’s historical cost (2009)(IFRS 5). This means a firm can, and...
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...Please provide the requested information based on these following four areas: adjusting lower of cost or market on valuation, capitalizing interest on building construction, recording gain or loss on disposal of an asset, and adjusting goodwill for impairment. Following is a detailed explanation of each of these four areas and an explanation of their importance in fair value of a business. Lower of Cost or Market Lower of cost or market is one approach for inventory valuation that may be preferred by some companies. This methodology accounts for current assets to be valued at the current market rate or purchase price, whichever is lower. The theory behind this is if the value of inventory goes down, it is more than likely that the sale price of such inventory will go down as well (Schroeder, Clark, & Cathey, 2011). One identified issue with this practice is that it revalues assets based on losses on market value but the practice is not consistent with price increases. Schroeder, Clark, & Cathey went on to explain that when there is a sale of inventory "normal profits" are reported, and there is an understatement of expenses for the transaction. Unfortunately, this may cause confusion to external parties. Capitalizing Interests on Building Construction The next issue that needs clarification is whether or not the business is capitalizing interests on building construction. The best resource to share to explain this topic is a quote from FASB’s website...
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...ADMS 4520 Assignment # 2 Muhammad Choudhary Student # 211085552 Section C Haran Alagarajah Student# 211337797 Section A Handed into: Patricia Farrell Submitted on: October 2nd, 2013 Case: 2-1 To: Fabio & Fox Chartered Accountants Introduction: Wonder Amusements Limited (WAL) is a company that was incorporated as an amusement park and golf courses. Recently WAL invested into a sports franchise which has caused the relocation of parts of the business. Objective: A meeting with the chief executive officer (Leo Titan) has shed some light on possible accounting and audit practises that need to be looked at. There are notes that was taken during the meeting with Leo and observations which will be further analyzed. The appropriate reporting method used in the following analysis will be IFRS. Users/Stakeholders: There a many potential users of the financial statements prepared by WAL and they are: -Leo Titan – CEO, WAL - owners of, NSL - owners of, -Minority shareholders invested in WAL And NSL, Fabio and Fox accountants - they are audit partners, External users of the financial statements (such as potential investors), the government (many accounting issues that could violate standards). Analysis: First of all after the review of documents and as a result of various conversations there are a few issues that need to be addressed. The first issue is lenders to the arena are concerned that the arena could not generate special-use revenue and in turn risk...
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...ingeniously inventive, creative, and practical; inventiveness. The chapter starts out with the quote, “When people ask me ‘What is your competitive advantage?’ I say, ‘The quality of our engineers.’” This was stated by Mauricio Botelho, President and CEO of Embraer (A successful Brazilian aircraft manufacturer) from 1995 to 2007. John Engler, president of the National Association of Manufacturers, in 2005 said that the United States is and remains on being the world’s frontrunner in innovation. He emphasizes that other countries are advancing in technology as enthusiastically as we are and that therefore we cannot assume we are safely ahead of the world. Throughout the chapter we are shown how challengers have been investing in innovation by capitalizing in research and development. Some examples included are companies like ZTE, a Chinese telecom equipment maker that spent 12% of its $3 billion 2006 revenue on research and development. In accordance to VentureOne, Venture capitalists invested $1.89 billion in Chinese companies in 2006. In total, from 2005 to 2006 there was a 34% increase in investments in Chinese information technology firms. Governments are also becoming aware of how important innovation is when it comes to modernization. For example, the Russian President’s, Vladimir Putin, New Deal consisted of $1.1 billion reserved for grants to innovation in schools, teachers, and apprentices. China-based Suntech Power, one of the world best photo-voltaic cell manufacturers, has...
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