A large company has hired your friend. She tells you that her boss has asked customers to sign sales agreements just before year end indicating a sale has been made. The boss told customers that he will give them 30 days (well into the next year) to change their minds. If they do not change their minds they will quickly receive the merchandise. If they do change their minds he promised to cancel their orders, take merchandise back, and cancel the invoices. Your friend has been told by her boss to recognize the sales agreements as revenue this year. Your friend has concerns about recognizing revenue before the merchandise is shipped. She likes the company and wants to keep her job. What do you advise her to do?

A large company has hired your friend. She tells you that her boss has asked customers to sign sales agreements just before year end indicating a sale has been made. The boss told customers that he will give them 30 days (well into the next year) to change their minds. If they do not change their minds they will quickly receive the merchandise. If they do change their minds he promised to cancel their orders, take merchandise back, and cancel the invoices. Your friend has been told by her boss to recognize the sales agreements as revenue this year. Your friend has concerns about recognizing revenue before the merchandise is shipped. She likes the company and wants to keep her job. What do you advise her to do?

College Accounting (Book Only): A Career Approach

13th Edition

ISBN:9781337280570

Author:Scott, Cathy J.

Publisher:Scott, Cathy J.

Chapter4: Adjusting Entries And The Work Sheet

Section: Chapter Questions

Problem 4A: Your client is preparing financial statements to show the bank. You know that he has incurred a...

See similar textbooks

Similar questions

You are a summer intern working for a major professional services firm. During your lunch break each day, you and fellow intern, Bob, eat at a local sandwich shop. One day, Bob's girlfriend joins you for lunch. When the bill arrives, Bob pays with a company credit card and writes the meal off as a business expense. Bob and his girlfriend continue to be "treated" to lunch for a number of days. You know Bob is well aware of a recent memo that came down from management stating casual lunches are not valid business expenses. When you ask Bob about the charges, he replies, "Hey, we're interns. Those memos dont apply to us. We can expense anything we want." QUESTIONS: 1. Who are the relevant facts? 2. What Are the Ethical Issues? 3. Who Are the Primary Stakeholders? 4. What Are the Possible Alternatives? 5. What Are the Ethics of the Altermatives? 6. What Are the Practical Constraints? 7. What Actions Should Be Taken?
Would Qualifying an Indorsement Be Ethical? Suppose you have taken a promissory note for $3,500 payable in 12 months with interest at 10 percent as payment for some carpentry work you did for a friend. You have some reason to believe the maker of the note is in financial difficulty and may not be able to pay the note when it is due. You discuss with an elderly neighbor the possibility of her buying the note from you as an investment, and she agrees to buy it from you for $3,000. Would it be ethical for you to indorse the note with a qualified indorsement ("without recourse")?
Jane James owns an appliance store. She usually receives $50,000 worth ofappliances per month. She does not like to owe people money and alwayspays her bills on the day she receives the invoice. Someone told her thatif she delayed payment, she could actually increase her profit because themoney would be earning interest in her account. She went through her billsand found that she actually had an additional 10 days, on average, to payher invoices. She also found that she was earning 2 percent interest on themoney she had in her money market savings account.a. If she delayed payment by the 10 days, how much additional interest wouldshe earn for the year?b. Explain how this problem represents a disbursement float.
Lorenzo, the owner of a local poster shop, comes to you for help. While his shop has been breaking even for the past two years, it has not been able to generate a profit. For him to keep the shop open, he needs to earn at least $12,000 in operating income next year. You agree to help Lorenzo and ask him for some current information about his products' selling price and costs. You tell him you will work through some possible scenarios that might involve changing his sales price to generate the number of units sold needed to reach his target profit. Lorenzo shares the following information with you as you ponder different scenarios to help your client. Selling price $7.50 Cost for paper, per unit $0.70 Cost for printing, per unit $1.10 Cost for film, per unit $0.60 Staff salaries $48,000.00 Other operating costs $12,120.00 Using Lorenzo's data and proper Excel formulas, first, plan to get an understanding of Lorenzo's financial situation based on breakeven. Then look at…
You are working as a summer intern at a rapidly growing orgainc food distribution. Part of your responsibility is to assist in the accounts payable department. You notice that most of the bills are not paid with in discount period. The manager of the accounts payable sees the bills are organized by vendor, like the accounts payable ledger, and she is too busy to keep track of the discounts period. Besides, the owner has told her that The 1% and 2% discount available or not worth worrying about. 1. Explain to the owner why it is expensive not to take it advantage to cash discounts on credit purchases. suggest a way to file (organize) suppliers invoices so that they are paid with in the discount period.
You are working as a summer intern at a rapidly growing organic food distributor. Part of your responsibility is to assist in the accounts payable department. You notice that most bills from suppliers are not paid within the discount period. The manager of accounts payable says the bills are organized by vendor, like the accounts payable ledger, and she is too busy to keep track of the discount periods. Besides, the owner has told her that the 1% and 2% discounts available are not worth worrying about.
Lokalalo has plenty of customers, who because of the nature and price of the work these customers are typically given a month to pay for the work. At 31 August 2020, Lokalalo has $1,500,000 in accounts receivable. Lokalalo anticipates that 10% of their customers will default and not pay at all. You are a student studying BUS 114 and have been approached by Paulo Jr. the managing director to answer his following questions. What value will the accounts receivable (debtors) be recorded for in the balance sheet on 31 August and why?
Jane James owns an appliance store. She usually receives $50,000 worth of appliances per month. She doesn't like to owe people money and always pays her bills on the day she receives the invoice. Someone told her that if she delayed payment, she could actually increase her profit because the money would be earning interest in her account. She went through her bills and found that she actually had an additional 10 days, on average, to pay her invoices. She also found that she was earning 2 percent interest on the money she had in her money market savings account. If she delayed payment by the 10 days, how much additional interest would she earn for the year? Explain how this problem represents a disbursement float.
Two years ago the manager of a large department store purchased new bar code scanners costing $39,000. A salesperson recently tried to sell the manager a new computer-integrated checkout system for the store. Thenew system would save the store a substantial amount of money each year. The recently purchased scanners could be sold in the secondhand market for $19,000. The store manager refused to listen to the salesperson,saying, “I just bought those scanners. I can’t get rid of them until I get my money’s worth out of them.” (a) What type of cost is the cost of purchasing the old bar code scanners? (b) What common behavioral tendencyis the manager exhibiting?
You and your spouse have separate charge accounts at a local department store. When you tried to use your card last week, you were told that you were over your credit limit. This puzzled you because you had paid the entire account balance several weeks ago. When the monthly statements arrived yesterday, the error was clear. The store had credited your payment to your spouse's account. Your account was treated as over the limit, and the store charged you interest on the unpaid balance. You suspect that part of the problem is that you and your spouse use the same last name (Morales) and have similar first names (Carmen and Carmelo). Write a brief letter to the store requesting correction of your accounts and suggesting a way to identify your accounts so that this error does not happen again.
It is the last day of the month and fiscal year, your manager asks you to create an invoice for $10,000 (debiting Accounts Receivable and Crediting Sales) and send it to a specified customer. Normally invoices are sent to customers when products have been shipped or the service has been finished. You manager tells you that we will be shipping equipment and performing the setup services for this customer next month (as early as next week). How would the company’s financial statements (and the users of the financial statements) be affected if you record this entry?
You were recently hired to work in the controller's office of the Balboa Lumber Company. Your boss, Alfred Eagleton, took you to lunch during your first week and asked a favor. "Things have been a little slow lately, and we need to borrow a little cash to tide us over. Our inventory has been building up and the CFO wants to pledge the inventory as collateral for a short-term loan. But I have a better idea." Mr. Eagleton went on to describe his plan. "On July 1, 2021, the first day of the company's third quarter, we will sell $100,000 of inventory to the Harbaugh Corporation for $160,000. Harbaugh will pay us immediately and then we will agree to repurchase the merchandise in two months for $164,000. The $4,000 is Harbaugh's fee for holding the inventory and for providing financing. I already checked with Harbaugh's controller and he has agreed to the arrangement. Not only will we obtain the financing we need, but the third quarter's before-tax profits will be increased by $56,000, the…