Essay about Case Analysis

3281 Words14 Pages
Intermediate Accounting A Series of Revenue Recognition Research Cases Using the Codification Case One: Consumer Cleaning Products Corporation (CCPC) Case Two: Landline Corporation Case Three: Assembly Lines Incorporated (ALI) Submitted By Chen Chongxiao Sweta Shah Xiaoyun zhang Case One Requirement 1: The accounting issue in this case is how to account for the coupons which was introduced on Sep. 1 2009 for the new detergent Fresh & Bright Marketing campaign by a detergent manufacturer called Consumer Cleaning Products…show more content…
Requirement 3: According to FASB Codification 605-50-25-4, if the amount of future rebates or refunds can be reasonably and reliably estimated, the expected redemption rate should be taken into account when calculating the cost of sales incentives. Otherwise, a liability (or deferred revenue) should be recognized for the maximum potential amount of the refund or rebate. In this case, CCPC estimates that customers will redeem approximately 2 percent of the detergent coupons. We analyze the dollar amount of the effect of the coupons in the following two scenarios: | If there is sufficient evidence to support the 2% expected redemption rate | If there is NOT sufficient evidence to support the 2% expected redemption rate | Accrual of the coupons | Coupons to be redeemed=total coupons*expected redemption rate: 500,000*2%=10,000Total discounts= expected redeemed coupons*per coupon discount: 10,000*2=$20,000 | Maximum potential of refunds=total coupons*per coupon discount: 500,000*2=$1,000,000 | Requirement 4: FASB Codification 605-50-25-4 indicates that a vendor’s ability to make a reasonable and reliable estimate of future rebates or refunds may be impaired by the following factors: a. Relatively long periods in which a particular rebate or refund may be claimed. b. The absence of historical experience with similar types of sales incentive programs

More about Essay about Case Analysis

Open Document