amount even if it is hard to estimate, (2) Raise the prices and do not record the estimated returns considering it would be immaterial, and (3) Revenue recognition should be deferred until the payment is made. We have searched FASB codification by using the key work “right of return”. In addition, we have researched Codification topics 605 Revenue Recognition. Four relevant hits have been found. FASB ASC 605-15-15-2 states that sales in which a product may be returned, whether as a matter of contract
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Furniture Ltd. (Barbor) provided a deposit of $9,000 which was recorded as revenue when it was received on December 13. Barbor was not billed until January 2. The order was not shipped until after the year end on January 2. The remaining balance owing was recorded in accounts receivable and sales. The inventory was excluded from the ending inventory count as well. The issue is whether this is the appropriate time to record the revenue or if another time is more appropriate. The other issue is that the balance
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include: recording revenue too soon; recording bogus revenue; boosting income using one-time or unsustainable activities; shifting current expenses to a later period; employing other techniques to hide expenses or losses; shifting current income to a later period and shifting future expenses to an earlier period. Recording Revenue Too Soon In order to shift revenue or gains in future-period to current period or to oversize bonuses and stock options, management may shift revenues or gains from future
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| | Revenues | Expenses | Net Income | January 1, 2010: | | | | | | | | | | Deliver iPhone to the customer | +500 (Cash) | | +500 (Deferred Revenue) | | | | | | | Remove iPhone from delivery | -350 (Inventory)+350 (Deferred Costs) | | | | | | | | | Total Impact on January 1, 2010 | +500 | | +500 | | | | | | | | | | | | | | | | | December 31, 2010: | | | | | | | | | | Recognize revenue of one year | | | -250 (Deferred Revenue) | |
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restated? Xerox is not accused of making up revenues or income, but for accelerating the recognition of revenue and income in order to meet Wall Street earnings expectations. In order to increase their revenue and income, Xerox employed different manipulation practices: They fraudulently accelerated the recognition of revenues by changing to “sales-type” lease accounting, by increasing the residual value of its leased equipment and by selling off revenue streams of lease portfolios. (SEC, 2002, para
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We have more understanding why it is important to recognize revenues and the different revenues that an accountant has to look for. It is very important to know this because as an accountant we will be accountable for any discrepancy. I also learned more about GAAP and how the rules apply to accounting. Some of us are still kind of confused of GAAP, but reading more about gives deeper understanding. Not following the rules and regulations of GAAP will cost your license and possible jail time. Some
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investigation by the Securities and Exchange Commission (SEC) for certain accounting practices, this case explores the Microsoft’s financial reporting strategy related to two policies through two accounting issues – software capitalization and revenue recognition. Analyzing the performance of its stock, annual income statement, balance sheets, cash flow and some other data, the company was found that it selects relatively conservative accounting methods. In addition, it discusses the issue of managing
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preparers to show revenue on company financial statements when it should not have been recognized. The two main criteria for revenue recognition are: 1) the seller must have substantially performed its obligations to the customer; and 2) the seller must have obtained an asset from the customer that it can reliably measure. If the asset is not cash, the seller must be reasonably certain of converting it into cash. Only when these two criteria are met can the entity then recognize revenue in their financial
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| Just For Feet, Inc | Common Size Income Statement | | 1996 | 1997 | 1998 | Net sales | 100.00% | 100.00% | 100.00% | Cost of sales | 57.54% | 58.46% | 58.38% | Gross profit | 42.46% | 41.54% | 41.62% | | | | | Other revenues | 0.23% | 0.23% | 0.17% | | | | | Operating expenses: | | | | Store operating | 27.04% | 29.18% | 30.01% |
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Growing Pains at Groupon As an undergraduate music major at Northwestern University, Andrew Mason eagerly sought a version of rock music that would fuse punk with the Beatles and Cat Stevens. Little did he imagine that within ten years he would be the CEO of one of history’s fastest growing businesses. After Northwestern and faded dreams of rock stardom, Mason, a self-taught computer programmer, was hired to write code by the Chicago firm InnerWorkings. InnerWorkings was founded in 2001 by Eric
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