Accounting Case: Buck's Dilemma Essay examples

853 WordsMar 8, 20144 Pages
ACTG 350: CASE 1 Buck’s Dilemma Overview As Buck’s Hunting Equipment, Inc. (Buck) has came to an exciting phase of growth and development, a new complexity involving the assignment and presentation of its borrowing and payment activity as it relates to the revolving line of credit extended has emerged. The report has been broken down into the following sections: 1. Assignment of Borrowing and Lending Activity: Presentation of cash flows from the revolving line of credit. 2. Recommendations for Presentation: the use of net or gross basis when reporting borrowing and payment activities. 3. Applications of the IFRS standards: IFRS standards that apply…show more content…
According to FASB, long-term financing activities on the SCF are normally reported on a gross basisiii. On the other hand, the use of a gross basis for reporting borrowing and payment in the financing activities section of the SCF is characterized by a simple summation of cash receipts less cash payments. Net basis is often used when debt turnover is quick and maturities are short (equal to or less than three months) as the extra information detailing cash receipts and payments is not pertinent to understanding the entity’s financing activitiesiv. All that being said, the recommended use of reporting bases for the three scenarios is stipulated below3. Scenario 1: According to the FASB, all debts of large amounts where turnover is quick that are due on demand are to be considered to qualify for net basis recording in the financing activities sectionv. As the agreement specifies that payment is due on demand, the turnover on the cash receipts from borrowing will be quicker (within three months). The line item on the statement of cash flows will be presented in the following manner on a net basis. Cash Receipts from Borrowing: $50,000,000 (Net: payments on cash receipts) Scenario 2: Although, Buck did pay back the total amount of the note signed in two months (qualifying for net basis presentation), Buck

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