You are the owner of a lawn service company (LawnCo) thatprovides grounds and maintenance services to a range of corporatecustomers. Customers are expected to pay on the first of eachmonth, in advance of receiving services. One of your corporatecustomers is an eldercare facility whose grounds you havemaintained for many years. The customer has not paid for the lastthree months of services (from October to December 2017);nevertheless, to maintain a positive relationship, your companycontinued to provide mowing and weed control services to theeldercare facility during that time. Your company ceased providingservices in January 2018 and found out in that same month that theeldercare facility filed for bankruptcy in September. Your companynow believes that collection of missed payments is extremelyunlikely.
Your company has already issued financial statements to lendersfor the period ending 12/31/17, which reflected revenue and acorresponding account receivable related to this customer of$10,000 per month for services provided. Those financial statementsalso reflected the companyâs standard allowance (reserve) amount onreceivables, of 4% of sales. In total, your companyâs averagemonthly sales amount to $500,000.
Your ultimate goal is to evaluate whether receipt of thisinformation indicates you have a change in accountingestimate or whether the customerâs bankruptcy should result inthis event being considered an error in previously issuedfinancial statements.
Cite Codification references for each question and providedetailed calculations when necessary in order to receive fullcredit. As you perform your search for information, document yoursearch following the steps shown in Figure 2.5 on page 47. Attachyour Word search document as an Appendix to your responses.
a) Define the two options above, citing the Codification. Then,state arguments in favor of each alternative.
b) Next, describe the accounting treatment (as required by theCodification) for each alternative, then support your explanationswith draft general entries.
c) Finally, briefly state which treatment appears to be moreappropriate given the circumstances. If you must make anyassumptions in reaching this conclusion, state these.
Figure 2-5 on p.47 is
(Step 1) Browse to the topic you expect will be mostrelevant.
(Step 2) Be sure to check all sources of require reding withingthe topic.
(Step 3) Follow all leads (such as to other topics) that appearto be relevant. Sometimes a single accounting issue can involveconsideration of multiple Codification topics.
(Step 4) As you go along, copy any potentially relevant guidanceyou find into a Word document.
(Step 5) Finally, review the guidance you've collected and weedout (from your Word document) sources that appear to be lessrelevant.
I'd appreciate it if I can get some help for these homework.Thanks.
You are the owner of a lawn service company (LawnCo) thatprovides grounds and maintenance services to a range of corporatecustomers. Customers are expected to pay on the first of eachmonth, in advance of receiving services. One of your corporatecustomers is an eldercare facility whose grounds you havemaintained for many years. The customer has not paid for the lastthree months of services (from October to December 2017);nevertheless, to maintain a positive relationship, your companycontinued to provide mowing and weed control services to theeldercare facility during that time. Your company ceased providingservices in January 2018 and found out in that same month that theeldercare facility filed for bankruptcy in September. Your companynow believes that collection of missed payments is extremelyunlikely.
Your company has already issued financial statements to lendersfor the period ending 12/31/17, which reflected revenue and acorresponding account receivable related to this customer of$10,000 per month for services provided. Those financial statementsalso reflected the companyâs standard allowance (reserve) amount onreceivables, of 4% of sales. In total, your companyâs averagemonthly sales amount to $500,000.
Your ultimate goal is to evaluate whether receipt of thisinformation indicates you have a change in accountingestimate or whether the customerâs bankruptcy should result inthis event being considered an error in previously issuedfinancial statements.
Cite Codification references for each question and providedetailed calculations when necessary in order to receive fullcredit. As you perform your search for information, document yoursearch following the steps shown in Figure 2.5 on page 47. Attachyour Word search document as an Appendix to your responses.
a) Define the two options above, citing the Codification. Then,state arguments in favor of each alternative.
b) Next, describe the accounting treatment (as required by theCodification) for each alternative, then support your explanationswith draft general entries.
c) Finally, briefly state which treatment appears to be moreappropriate given the circumstances. If you must make anyassumptions in reaching this conclusion, state these.
Figure 2-5 on p.47 is
(Step 1) Browse to the topic you expect will be mostrelevant.
(Step 2) Be sure to check all sources of require reding withingthe topic.
(Step 3) Follow all leads (such as to other topics) that appearto be relevant. Sometimes a single accounting issue can involveconsideration of multiple Codification topics.
(Step 4) As you go along, copy any potentially relevant guidanceyou find into a Word document.
(Step 5) Finally, review the guidance you've collected and weedout (from your Word document) sources that appear to be lessrelevant.
I'd appreciate it if I can get some help for these homework.Thanks.
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