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Many companies sell products allowing their customers the right to return merchandise if they are not satisfied. Because the return of merchandise can retroactively negate the benefits of having made a sale, the seller must meet certain criteria before revenue is recognized in situations when the right of return exists. Generally accepted accounting principles list the criteria, the most critical of which is that the seller must be able to make reliable estimates of future returns. Required: Obtain the relevant authoritative literature on accounting for the right to return merchandise using FASB's Codification Research System. You might gain access at the FASB website (www.fasb.org), from your school library, or some other source. What factors do generally accepted accounting principle discuss that may impair the ability to make a reasonable estimate of returns? Cite the reference location regarding these factors. List the criteria that must be met before revenue can be recognized when the right of return exists. Using EDGAR (www.sec.gov) access the 10-K reports for the most recent fiscal year for Hewlett Packard Company and for Advanced Micro Devices, Inc. Search for the revenue recognition policy to determine when these two companies recognize revenue for product sales allowing customers the right of return. Using your answers to requirements 2 and 3, speculate as to why the two revenue recognition policies differ.
Prior to liquidating their partnership, Short and Bain had capital accounts of $18,000 and $73,000, respectively. The partnership assets were sold for $35,000. The partnership had no liabilities. Short and Bain share income and losses equally. Determ..
"Companies following international financial reporting standards must _______.
The original cost of the first machine was $200,000 and the original cost of the second was $140,000. The firm’s tax rate is 40%. Compute net investment for this project.
Ann, age 61, and Bob, age 62, have a large number of investments in common stock of publicly traded corporations, some municipal bonds, and a money market cash account worth several million dollars. In addition, they own a ranch in Texas that may ..
You are considering the following two mutually exclusive projects that will not be repeated. The required rate of return is 11.25% for project A and 10.75% for project B. Which project should you accept and why?
Based on the decision criteria below, should the proposed project be accepted or rejected? Why or why not? As accountants, you must do a Net present Value analysis, and make a recommendation to management. Compute the net cash inflow (cash receipts l..
They have agreed to pay your fee for a research memo discussing applicable section(s) of the Internal Revenue Code and applicable law explaining what is deductible and what is not deductible.
Generate a report showing the company's activity variances for April.
Should the 20%, 20%-50%, and over 50% levels of ownership be applied without exception as to the appropriate accounting treatment for stock investments? In other words, what other factors are considered in the determination of accounting treatment, a..
Evaluate the accounting strategy employed by management in respect of each key accounting policy and suggest/identify possible incentives behind the choice of strategy.
Describe the methods of revenue recognition and GAAP method of revenue recognition fulfills the needs of the International Financial Reporting System?
Locate the AICPA's Code of Professional Conduct. Assume that you are a CPA in public practice. Explain how tihis Code affects your practice. Be sure to cite the sections which you are referencing.
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