Dell Computers is a leader in the industry with over $56 billionin sales each year. A recent annual report for Dell contained thefollowing note:
Warranty We recordwarranty liabilities at the time of sale for the estimated coststhat may be incurred under its limited warranty. Factors thataffect our warranty liability include the number of installed unitscurrently under warranty, historical and anticipated rates ofwarranty claims on those units, and cost per claim to satisfy ourwarranty obligation. 1. Assume thatestimated warranty costs for 2014 were $500 million and that thewarranty work was performed during 2015. Describe the financialstatement effects for each year.
Walt Disney is a well-recognized brand in the entertainmentindustry with products ranging from broadcast media to parks andresorts. The following note is from a recent annual report:
RevenueRecognition For non-expiring,multi-day tickets to our theme parks, we recognize revenue over athree-year period based on estimated usage patterns which arederived from historical usage patterns. 2. Assume thatDisney collected $90 million in 2014 multi-day tickets that will beused in future years. For 2015, the company estimates that 60percent of the tickets will be used. Describe the financialstatement effects for each year.
Brunswick Corporation is a multinational company thatmanufactures and sells marine and recreational products. A recentannual report for Brunswick contained the followinginformation:
Litigation A jury awarded$44.4 million in damages in a suit brought by Independent BoatBuilders, Inc., a buying group of boat manufacturers and its 22members. Under the antitrust laws, the damage award has beentrebled, and the plaintiffs will be entitled to their attorneyâsfees and interest. The Company has filed an appealcontending the verdict was erroneous as a matter of law, both as toliability and damages. 3. How should Brunswickaccount for this litigation?
Halliburton is a major corporation involved in the entire lifecycle of oil and gas reserves, starting with exploration anddevelopment, moving through production, operations, maintenance,conversion, and refining to infrastructure and abandonment. Arecent annual report for the company stated the following:
EnvironmentalExpenditures Our accrued liabilities fromenvironmental matters were $50 million for the current year and $41million for the previous year. 4. In your own words, explainHalliburton's accounting policy for environmental expenditures.What is the justification for this policy?
Dell Computers is a leader in the industry with over $56 billionin sales each year. A recent annual report for Dell contained thefollowing note:
| Warranty | |||||||||||
| We recordwarranty liabilities at the time of sale for the estimated coststhat may be incurred under its limited warranty. Factors thataffect our warranty liability include the number of installed unitscurrently under warranty, historical and anticipated rates ofwarranty claims on those units, and cost per claim to satisfy ourwarranty obligation. | |||||||||||
| 1. Assume thatestimated warranty costs for 2014 were $500 million and that thewarranty work was performed during 2015. Describe the financialstatement effects for each year. | |||||||||||
Walt Disney is a well-recognized brand in the entertainmentindustry with products ranging from broadcast media to parks andresorts. The following note is from a recent annual report:
| RevenueRecognition | ||||||||||||||
| For non-expiring,multi-day tickets to our theme parks, we recognize revenue over athree-year period based on estimated usage patterns which arederived from historical usage patterns. | ||||||||||||||
| 2. Assume thatDisney collected $90 million in 2014 multi-day tickets that will beused in future years. For 2015, the company estimates that 60percent of the tickets will be used. Describe the financialstatement effects for each year. | ||||||||||||||
Brunswick Corporation is a multinational company thatmanufactures and sells marine and recreational products. A recentannual report for Brunswick contained the followinginformation:
| Litigation | ||||||||||||||
| A jury awarded$44.4 million in damages in a suit brought by Independent BoatBuilders, Inc., a buying group of boat manufacturers and its 22members. Under the antitrust laws, the damage award has beentrebled, and the plaintiffs will be entitled to their attorneyâsfees and interest. The Company has filed an appealcontending the verdict was erroneous as a matter of law, both as toliability and damages. | ||||||||||||||
| 3. How should Brunswickaccount for this litigation? | ||||||||||||||
Halliburton is a major corporation involved in the entire lifecycle of oil and gas reserves, starting with exploration anddevelopment, moving through production, operations, maintenance,conversion, and refining to infrastructure and abandonment. Arecent annual report for the company stated the following:
| EnvironmentalExpenditures | ||||||||||||
| Our accrued liabilities fromenvironmental matters were $50 million for the current year and $41million for the previous year. | ||||||||||||
| 4. In your own words, explainHalliburton's accounting policy for environmental expenditures.What is the justification for this policy? | ||||||||||||
