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SEC Accounting and Auditing Enforcement Release (AAER) No. 108 specifies certain conditions or criteria that a bill and hold transaction of a public company should meet in order to qualify for revenue recognition. The AAER also specifies certain factors that should be considered in evaluating whether a bill and hold transaction meets the requirements for revenue recognition. AAER No. 108 state that a "bill and hold" transaction should meet the following conditions:•The risks of ownership must have passed to the buyer.•The customer must have made a fixed commitment to purchase the goods, preferably reflected in written documentation.•The buyer, not the seller, must request that the transaction be on a bill and hold basis, The buyer must have a substantial business purpose for ordering the goods on a bill and hold basis.•There must be a fixed schedule for delivery of the goods. The date for delivery must be reasonable and must be consistent with the buyer's business purpose (e.g., storage periods are customary in the industry).•The seller must not have retained any specific performance obligations such that the earning process is not complete.•The ordered goods must have been segregated from the seller's inventory and not be subject to being used to fill other orders.•The equipment must be complete and ready for shipment.Required:1.Discuss why a buyer may want to order on a bill and hold basis. Why might a seller want to classify an order as bill and hold if it does not meet the above criteria?2.Identify and discuss the reliability of the types of evidence an auditor would need to determine whether each condition cited above was met for a bill and hold transaction.
Prepare an income statement for the year 2007 starting with income from continuing operations before taxes. Compute earnings per share as it should be shown on the face of the income statement. Common shares outstanding for the year are 80,000 sha..
Aquafloat Corporation manufactures raft for us in swimming pools. The standard cost for material and labor is $89.20 per raft. Compute the following amounts. Indicate whether each variance is favorable or unfavorable.
A machine that originally cost $25,000 and was depreciated on a straight line basis has one year of its expected 5-year life remaining. Its current value is $12,000. The corporate tax rate is 34%.
At the end of 2011, Tatum Co. has accounts receivable of $700,000 and an allowance for doubtful accounts of $28,000. On January 24, 2012, it is learned that the company's receivable from Novinger Inc-Make the journal entries to record the payment.
Critique the benefits and drawbacks of proprietorships and partnerships as a form of business organization.
Williamson Group operates a chain of bookstores. A recent business expansion plan resulted in the opening of more than 25 new stores. The Upland store has one more feature that the Stowe store does not have-a small coffe shop.
On December 31, of the current year, a company's unadjusted trial balance revealed the following: Accounts receivable of $185,600; Sales Revenue of $1,280,000; (75% were on credit), and Allowance for Doubtful Accounts of $1,600 (credit balance). P..
Examine the concept of financial risk by answering the following questions: (a) How does the risk of a portfolio change as the number of assets in the portfolio increases?
Please discuss the value of the accounting cycle to a company including: Normal length of the cycle-Integration with required governmental reporting
List and describe four potential problems with a "traditional" overhead allocation system. List and describe four "red flags" that may indicate you should consider revising your overhead allocation system.
Accounting for Extractive Industries Production commences in Site One
What is the difference between a rule-based and principle-based system? Discuss the Global Reporting Initiative, its purpose, the standard setting process, the use of its reporting system, etc.
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