After the presentation of your report on the examination of the financial statements to the board of directors of Piper Publishing Company, one of the new directors expresses surprise that the income statement assumes that an equal proportion of the revenue is recognized with the publication of every issue of the company’s magazine. She feels that the “crucial event” in the process of earning revenue in the magazine business is the cash sale of the subscription. She says that she does not understand why most of the revenue cannot be “recognized” in the period of the cash sale. InstructionsDiscuss the propriety of timing the recognition of revenue in Piper Publishing Company’s accounts with:(a) The cash sale of the magazine subscription.(b) The publication of the magazine every month.(c) Over time, as the magazines are published and delivered to customers.

After the presentation of your report on the examination of the financial statements to the board of directors of Piper Publishing Company, one of the new directors expresses surprise that the income statement assumes that an equal proportion of the revenue is recognized with the publication of every issue of the company’s magazine. She feels that the “crucial event” in the process of earning revenue in the magazine business is the cash sale of the subscription. She says that she does not understand why most of the revenue cannot be “recognized” in the period of the cash sale. InstructionsDiscuss the propriety of timing the recognition of revenue in Piper Publishing Company’s accounts with:(a) The cash sale of the magazine subscription.(b) The publication of the magazine every month.(c) Over time, as the magazines are published and delivered to customers.

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter20: Corporations: Organization And Capital Stock

Section: Chapter Questions

Problem 1EC

See similar textbooks

Similar questions

Guthrie Company receives orders from customers and records revenue at that time, even though it has not yet delivered products or services to the customers. what accounting assumption violate and how it should be done? Because of inflation, Cross Company adjusts its financial statements each year to show the current purchasing power for all items.what accounting assumption violate and how it should be done? David Thomas combines his personal transactions and business transactions when he prepares his company’s financial statements so that he can tell how well he is doing on an “overall” basis.what accounting assumption violate and how it should be done? At the end of each year, Vann Company reports its economic resources on a liquidation basis even though it is likely to operate in the future. what accounting assumption violate and how it should be done?
An employee, Fred, working in the accounts office of a medium-sized company listed on the Nairobi Stock Exchange, was working late one evening during the week. He realized he had left his pen in the boardroom at an earlier meeting and, given its value, went upstairs to look for it. As he approached the door he heard the following discussion:‘Chief Executive: I am deeply concerned that if this fall in profit figures is disclosed in the next annual report, there will be sorts of problems with the shareholders. We may even lose a number of big investors.Non-executive director (also the cousin of the Chief Executive): (large sign) well, I suppose we could always find a way of making them look better.Chief Executive: How? I can’t see it at all.Non-executive director: Well, we could make them just slightly higher than last year’s figures by including the proceeds of sales of our toothbrush division.Chief Executive: But the sale doesn’t go through until October.Non executive director: No, but…
Tana Thorne is an accountant who aspires to become a partner in a public accounting company. Thorne is invited by Allnet Company's management to submit a proposal to audit Allnet's financial accounts. When considering the audit charge, Allnet's management offers a price range based on Allnet's reported earnings. The more the profit, the greater the audit fee payable to Thorne's business. What ethical considerations apply to this situation? Explain.
Colleen Fernandez, president of Rhino Enterprises, applied for a $175,000 loan from First Federal Bank. The bank requested financial statements from Rhino Enterprises as a basis for granting the loan. Colleen has told her accountant to provide the bank with a balance sheet. Colleen has decided to omit the other financial statements because there was a net loss during the past year. Given this scenario, share your thoughts on the following questions. Is Colleen behaving in a professional manner by omitting some of the financial statements? Why or Why not What impact could this omission have on the business or the bank, which is loaning the money?
You have just finished presenting a summary of this year's financial results to the board of directors. Included in your presentation was an income statement including both basic and diluted EPS figures. One of the board members comments that they understand basic EPS but has no clue what diluted EPS is. The board member actually wondered aloud whether this diluted EPS computation was part of some "full-employment for accountants" project. How would you further explain the concept of dilution and what diluted EPS is trying to measure to the uncertain board member?
Margaret is the manager of a medium-sized company. A few years ago, Margaret persuaded the owner to base a part of her compensation on the net income of the company. Each December she estimates year-end financial figures in anticipation of the bonus she will receive. If the bonus is not as high as she would like, she offers several recommendations to the accountant for year-end adjustments. One of her favorite recommendations is for the controller to reduce the estimate of doubtful accounts. What effect does lowering the estimate for doubtful accounts have on the income statement and balance sheet? What type of internal control(s) might be useful for this company in overseeing the manager's recommendation for accounting changes?
Margaret is the manager of a medium-size company. A few years ago, Margaret persuaded the owner to base a part of her compensation on the net income of the company. Each December she estimates year-end financial figures in anticipation of the bonus she will receive. If the bonus is not as high as she would like, she offers several recommendations to the accountant for year-end adjustments. One of her favorite recommendations is for the controller to reduce the estimate of doubtful accounts. What type of internal control(s) might be useful for this company in overseeing the manager's recommendation for accounting changes?
Assume that you are the controller of a business that provides legal services to clients. Suppose that the company has had a tough year, so the revenues have been lagging behind, based on previous years’ standards. What would you do if your boss (the chief executive officer [CEO] of the company) asked to reclassify a transaction to report loan proceeds of $150,000 as if the cash came from service fee revenue from clients instead. Would following the CEO’s advice impact the company’s accounting equation? How would reclassifying this one transaction change the outcome of the balance sheet, the income statement, and the statement of retained earnings? Would making this reclassification change the perception that users of the financial statements would have of the company’s current year success and future year potential? Write a memo, detailing your willingness (or not) to embrace this suggestion, giving reasons behind your decision. Remember to exercise diplomacy, even if you must dissent…
Richard has been a highly regarded employee of the Brier Corporation for almost 20 years. Her loyalty to the company is reflected in her dedication to her job as a general accounting clerk, from which she has not taken a vacation in almost 12 years. Because of her dedication and long tenure, she has acquired many related responsibilities, which have allowed Brier Corporation to reduce its workforce through attrition, control salary expenses and become more efficient and competitive. The following describes Richard's responsibilities. Richard receives copies of credit sales orders from the sales department. She accesses the AR subsidiary ledger from her office computer and records the AR from these documents. She then records the sale in the sales journal and posts the transactions to the general ledger accounts. Cash receipts in payment of customer AR come directly to her office. She records the cash receipts in the GL cash and AR accounts and updates the AR subsidiary ledger. She…
Richard has been a highly regarded employee of the Brier Corporation for almost 20 years. Her loyalty to the company is reflected in her dedication to her job as a general accounting clerk, from which she has not taken a vacation in almost 12 years. Because of her dedication and long tenure, she has acquired many related responsibilities, which have allowed Brier Corporation to reduce its workforce through attrition, control salary expenses and become more efficient and competitive. The following describes Richard's responsibilities. Richard receives copies of credit sales orders from the sales department. She accesses the AR subsidiary ledger from her office computer and records the AR from these documents. She then records the sale in the sales journal and posts the transactions to the general ledger accounts. Cash receipts in payment of customer AR come directly to her office. She records the cash receipts in the GL cash and AR accounts and updates the AR subsidiary ledger. She…
As the controller of Take No Prisoners Perfume Company, you discover a misstatement that overstated net income in the prior year’s financial statements. The misleading financial statements appear in the company’s annual report, which was issued to banks and other creditors less than a month ago. After much thought about the consequences of telling the president, Jeb Wilde, about this misstatement, you gather your courage to inform him. Jeb says, “Hey! What they don’t know won’t hurt them. But, just so we set the record straight, we’ll adjust this year’s financial statements for last year’s misstatement. We can absorb that misstatement better in this year than in last year anyway! Just don’t make such a mistake again.” Instructions Who are the stakeholders in this situation? What are the ethical issues in this situation? What would you do as a controller in this situation?
assume you are employed as the chief financial officer of a corporation and are responsible for preparation of the financial statements, including the adjusting process and preparation of the adjusted trial balance. the company is facing a slow year, and after your adjusting entries, the financial statements are accurately reflecting that fact. however, as you are discussing the matter with your boss, the chief executive officer (CEO), suggests that you have the power to make further adjustments to the statements, and that you should use that power to “adjust” the profits and equity into a stronger position so that investor confidence in the company’s prospects will be restored. you must write a short memo to the ceo, stating your intentions about what you can and/or will do to make the financial statements more appealing. you must be specific about any planned adjustments that could be made, assuming that normal period-end adjustments have already been reflected accurately in the…