Finerly Corporation sells cosmetics through a network of independent distributors. Finerly shipped cosmetics to its distributors and is considering whether it should record $300,000 of revenue upon shipment of a new line of cosmetics. Finerly expects the distributors to be able to sell the cosmetics, but is uncertain because it has little experience with selling cosmetics of this type. Finerly is committed to accepting the cosmetics back from the distributors if the cosmetics are not sold. How much revenue should Finerly recognize upon delivery to its distributors?
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Finerly Corporation sells cosmetics through a network of independent distributors. Finerly shipped cosmetics to its distributors and is considering whether it should record $300,000 of revenue upon shipment of a new line of cosmetics. Finerly expects the distributors to be able to sell the cosmetics, but is uncertain because it has little experience with selling cosmetics of this type. Finerly is committed to accepting the cosmetics back from the distributors if the cosmetics are not sold. How much revenue should Finerly recognize upon delivery to its distributors?
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- Fahey Company sells Stairmasters to a retailer, Physical Fitness, Inc., for $2,000,000. Fahey has a history of providing price concessions on this product if the retailer has difficulty selling the Stairmasters to customers. Fahey has experience with sales like these in the past and estimates that the maximum amount of price concessions is $300,000. Instructions a. Determine the amount of revenue that Fahey should recognize for the sale of Stairmasters to Physical Fitness, Inc. b. According to GAAP, in some situations, the amount of revenue recognized may be constrained. Explain how the accounting for the Stairmasters sales might be affected by the revenue constraint due to variable consideration or returns. c. Some believe that revenue recognition should be constrained by collectibility. Is such a view consistent with GAAP? Explain.Feinan Sports, Inc., manufactures sporting equipment, including weight-lifting gloves. A national sporting goods chain recently submitted a special order for 4,600 pairs of weight-lifting gloves. Feinan Sports was not operating at capacity and could use the extra business. Unfortunately, the orders offering price of 12.80 per pair was below the cost to produce them. The controller was opposed to taking a loss on the deal. However, the personnel manager argued in favor of accepting the order even though a loss would be incurred; it would avoid the problem of layoffs and would help maintain the community image of the company. The full cost to produce a pair of weight-lifting gloves is presented below. No variable selling or administrative expenses would be associated with the order. Non-unit-level activity costs are a small percentage of total costs and are therefore not considered. Required: 1. Assume that the company would accept the order only if it increased total profits. Should the company accept or reject the order? Provide supporting computations. 2. Suppose that Feinan Sports has negotiated with the potential customer, and has determined that it can substitute cheaper materials, reducing direct materials cost by 0.95 per unit. In addition, the companys engineers have found a way to reduce direct labor cost by 0.50 per unit. Should the company accept or reject the order? Provide supporting computations. 3. Consider the personnel managers concerns. Discuss the merits of accepting the order even if it decreases total profits.Posavek is a wholesale supplier of building supplies building contractors, hardware stores, and home-improvement centers in the Boston metropolitan area. Over the years, Posavek has expanded its operations to serve customers across the nation and now employs over 200 people as technical representatives, buyers, warehouse workers, and sales and office staff. Most recently, Posavek has experienced fierce competition from the large online discount stores. In addition, the company is suffering from operational inefficiencies related to its archaic information system. Posavek revenue cycle procedures are described in the following paragraphs. Revenue Cycle Posaveks sales department representatives receive orders via traditional mail, e-mail, telephone, and the occasional walk-in customer. Because Posavek is a wholesaler, the vast majority of its business is conducted on a credit basis. The process begins in the sales department, where the sales clerk enters the customers order into the centralized computer sales order system. The computer and file server are housed in Posaveks small data processing department. If the customer has done business with Posavek in the past, his or her data are already on file. If the customer is a first-time buyer, however, the clerk creates a new record in the customer account file. The system then creates a record of the transaction in the open sales order file. When the order is entered, an electronic copy of it is sent to the customers e-mail address as confirmation. A clerk in the warehouse department periodically reviews the open sales order file from a terminal and prints two copies of a stock release document for each new sale, which he uses to pick the items sold from the shelves. The warehouse clerk sends one copy of the stock release to the sales department and the second copy, along with the goods, to the shipping department. The warehouse clerk then updates the inventory subsidiary file to reflect the items and quantities shipped. Upon receipt of the stock release document, the sales clerk accesses the open sales order file from a terminal, closes the sales order, and files the stock release document in the sales department. The sales order system automatically posts these transactions to the sales, inventory control, and cost-of-goods-sold accounts in the general ledger file. Upon receipt of the goods and the stock release, the shipping department clerk prepares the goods for shipment to the customer. The clerk prepares three copies of the bill of lading. Two of these go with the goods to the carrier and the third, along with the stock release document, is filed in the shipping department. The billing department clerk reviews the closed sales orders from a terminal and prepares two copies of the sales invoice. One copy is mailed to the customer, and the other is filed in the billing department. The clerk then creates a new record in the accounts receivable subsidiary file. The sales order system automatically updates the accounts receivable control account in the general ledger file. CASH RECEIPTS PROCEDURES Mail room clerks open customer cash receipts, reviews the check and remittance advices for completeness, and prepares two copies of a remittance list. One copy is sent with the checks to the cash receipts department. The second copy of the remittance advices are sent to the billing department. When the cash receipts clerk receives the checks and remittance list, he verifies the checks received against those on the remittance list and signs the checks For Deposit Only. Once the checks are endorsed, he records the receipts in the cash receipts journal from his terminal. The clerk then fills out a deposit slip and deposits the checks in the bank. Upon receipt of the remittances, the billing department clerk records the amounts in the accounts receivable subsidiary ledger from the department terminal. The system automatically updates the AR control account in the general ledger Posavek has hired your public accounting firm to review its sales order procedures for internal control compliance and to make recommendations for changes. Required a. Create a data flow diagram of the current system. b. Create a system flowchart of the existing system. c. Analyze the physical internal control weaknesses in the system. d. (Optional) Prepare a system flowchart of a redesigned computer-based system that resolves the control weaknesses that you identified. Explain your solution.
- Andria Mullins, financial manager of Webster Electronics, has been asked by the firm's CEO, Fred Weygandt, to evaluate the company's inventory control techniques and to lead a discussion of the subject with the senior executives. Andria plans to use as an example one of Webster's "big ticket" items, a customized computer microchip which the firm uses in its laptop computer. Each chip costs Webster P200, and in addition it must pay its supplier a P1,000 fee on each order. Further, the minimum order size is 250 units; Webster's annual usage forecast is 5,000 units; and the annual carrying cost of this item is estimated to be 20 percent of the average inventory unit cost. Andria plans to begin her session with the senior executives by reviewing some basic inventory concepts, after which she will apply the EOQ model to Webster's microchip inventory. Question: Would the minimum order size of 250 units be the most beneficial quantity the company must order?Pearl Inc. sells storage structures of various sizes to homeowners and businesses.Respond to the requirements related to the following independent revenue arrangements for Pearl products and services. Pearl offers building R400, mainly to homeowners. Pearl will also install the building for the customer. The price for Pearl to deliver and install an R400 is $ 5,500. On a standalone basis, the building sells for $ 5,300 (cost $ 3,400), and Pearl estimates that the standalone selling price of the installation service (based on cost-plus estimation) is $ 500. (The selling of the building and the installation services are considered two performance obligations.) Pearl signed 15 contracts to deliver and install R400s on April 5, 2017. Customers paid the contract price in cash. The buildings were delivered and installed during May 2017. Prepare journal entries for Pearl for R400 in April and May 2017. (Round intermediate calculations to 6 decimal places, e.g. 1.246871 and final answers to…Big Tractor, Inc.'s best salesperson is Misty Hammond. Hammond's largest sales have been to Farmer's Cooperative, a customer she brought to the company. Another salesperson, Bob Blanchette has been told in confidence by his cousin (an employee of Farmer's Cooperative) that Farmer's Cooperative is experiencing financial difficulties and may not be able to pay Big Tractor Inc. what is owed. Both Hammond and Blanchette are being considered for a promotion to a new sales manager position. What are the ethical considerations that Bob Blanchette faces? What alternatives do you think he has?
- Feinan Sports, Inc., manufactures sporting equipment, including weight-lifting gloves. A national sporting goods chain recently submitted a special order for 4,600 pairs of weight-lifting gloves. Feinan Sports was not operating at capacity and could use the extra business. Unfortunately, the order’s offering price of $12.80 per pair was below the cost to produce them. The controller was opposed to taking a loss on the deal. However, the personnel manager argued in favor of accepting the order even though a loss would be incurred; it would avoid the problem of layoffs and would help maintain the community image of the company. The full cost to produce a pair of weight-lifting gloves is presented below. Direct materials $ 7.50Direct labor 3.90Variable overhead 1.60Fixed overhead 3.10Total $16.10 No variable selling or administrative expenses would be associated with the order. Non-unit- level activity costs are a small percentage of total costs and are therefore not considered.…Widget Corporation is the manufacturer of many popular children’s toys but have seen a great decrease in sales and the board of directors is worried that the business may no longer be viable. The board decides to aggressively sue other toy manufacturers that have likely been infringing on Widget’s intellectual property, enter into a joint venture with a another company to build a new factory to reduce costs, and make large and notable donations to children hospitals as part of a PR campaign to raise the corporation's image. Additionally, the board decides to start manufacturing medical equipment to make up for the projected shortfalls in budget, even though the corporation was formed to make toys. Some shareholders are upset and sue the board of directors. b) Would the ultra vires doctrine play a role in the shareholders suit again the board? Why or why not?Bubba’s Western Wear is a western hat retailer in Lubbock, Texas. Although Bubba’s carries numerous styles of western hats, each hat has approximately the same price and invoice (purchase) cost, as shown in the following table. Sales personnel receive a commission to encourage them to be more aggressive in their sales efforts. Currently, the Lubbock economy is really humming, and sales growth at Bubba’s has been great. The business is very competitive, however, and Bubba, the owner, has relied on his knowledgeable and courteous staff to attract and retain customers who otherwise might go to other western wear stores. Because of the rapid growth in sales, Bubba is also finding the management of certain aspects of the business more difficult, such as restocking inventory and hiring and training new salespeople. Sales price $ 80.00 Per unit variable expenses Purchase cost 26.50 Sales commissions 28.50 Total per unit variable costs $ 55.00 Total annual fixed expenses…
- Bubba’s Western Wear is a western hat retailer in Lubbock, Texas. Although Bubba’s carries numerous styles of western hats, each hat has approximately the same price and invoice (purchase) cost, as shown in the following table. Sales personnel receive a commission to encourage them to be more aggressive in their sales efforts. Currently, the Lubbock economy is really humming, and sales growth at Bubba’s has been great. The business is very competitive, however, and Bubba, the owner, has relied on his knowledgeable and courteous staff to attract and retain customers who otherwise might go to other western wear stores. Because of the rapid growth in sales, Bubba is also finding the management of certain aspects of the business more difficult, such as restocking inventory and hiring and training new salespeople. Sales price $ 80.00 Per unit variable expenses Purchase cost 26.50 Sales commissions 28.50 Total per unit variable costs $ 55.00 Total annual fixed expenses…Bubba’s Western Wear is a western hat retailer in Lubbock, Texas. Although Bubba’s carries numerous styles of western hats, each hat has approximately the same price and invoice (purchase) cost, as shown in the following table. Sales personnel receive a commission to encourage them to be more aggressive in their sales efforts. Currently, the Lubbock economy is really humming, and sales growth at Bubba’s has been great. The business is very competitive, however, and Bubba, the owner, has relied on his knowledgeable and courteous staff to attract and retain customers who otherwise might go to other western wear stores. Because of the rapid growth in sales, Bubba is also finding the management of certain aspects of the business more difficult, such as restocking inventory and hiring and training new salespeople. Sales price $ 80.00 Per unit variable expenses Purchase cost 26.50 Sales commissions 28.50 Total per unit variable costs $ 55.00 Total annual fixed expenses…Bubba’s Western Wear is a western hat retailer in Lubbock, Texas. Although Bubba’s carries numerous styles of western hats, each hat has approximately the same price and invoice (purchase) cost, as shown in the following table. Sales personnel receive a commission to encourage them to be more aggressive in their sales efforts. Currently, the Lubbock economy is really humming, and sales growth at Bubba’s has been great. The business is very competitive, however, and Bubba, the owner, has relied on his knowledgeable and courteous staff to attract and retain customers who otherwise might go to other western wear stores. Because of the rapid growth in sales, Bubba is also finding the management of certain aspects of the business more difficult, such as restocking inventory and hiring and training new salespeople. Sales price $ 80.00 Per unit variable expenses Purchase cost 26.50 Sales commissions 28.50 Total per unit variable costs $ 55.00 Total annual fixed expenses…