Wonder Amusement Limited

1316 Words6 Pages
Wonder Amusements Limited Case Study (1) Fabio & Fox, CA Dear Partner, As per your request we have prepared a report regarding Wonder Amusements Limited (“WAL”) for your next meeting with its CEO Leo Titan. We have conducted a thorough analysis of the situation, and have identified a few issues. The issues we are discussing in this report are: appropriate GAAP for the company, the stakeholders and their needs, cost capitalization, revenue recognition, necessary disclosures, and risk factors pertaining to Leo's business proposals. The purpose…show more content…
However, this approach will be less helpful in predicting future cash flows. 3. Acquisition of another amusement park As an amusement park operator, it is clear to assume that WAL’s intention of acquiring the wound-up company’s assets was to move and operate them at the new location. Therefore, transportation cost ($350,000) and the other costs to get them up and running ($400,000 and $500,000) should be capitalized as part of acquired asset ($4.25 million). By the lower of cost or market valuation system rule, $4.25 million will be recorded for the purchase price. In addition, 0.60 million valuation difference needs to be accounted for using appropriate ASPE recommendations. This capitalization approach will lead to the same effects as the above two approaches toward stakeholders. 4. Sale of excess land ($24 million) Management wants the sale to be reported in fiscal 20X7. The deposit ($6,000,000) was received in May 2007 according to their sales agreement, so it should be reported in 20X7 as unearned revenue because WAL still possesses the land until February 20X8. Once the sale is complete in February 20X8, the income should be reported in fiscal 20X8. After the land is sold, the remaining balance becomes Accounts Receivable until realized. 5. Contingent profit on the sale of excess land ASPE recommends that note disclosure should include 1) the nature of the
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