DePaul University Accounting Codification and Cailor Corporation Thesis Paper Please look at attached document for all directions to complete this assignme

DePaul University Accounting Codification and Cailor Corporation Thesis Paper Please look at attached document for all directions to complete this assignment Access attached on a seperate doc DEPAUL UNIVERSITY
SCHOOL OF ACCOUNTANCY AND MIS
SAMPLE RESEARCH ASSIGNMENT
SUMMER, 2020
Instructions: For each of the 4 scenarios listed below you are to assume the role of the staff
accountant. For each situation you will research the issue in the codification, cut and paste the
guidance, apply the guidance to the scenario and if indicated prepare a journal entry. Each
company is privately held.
This assignment will be submitted in the folder “Accounting Research Assignment” under
Submissions on D2L. This assignment is due by 11:59 p.m., Sunday, June 28th, 2020.
1.
Cailor Corporation issued $50,000,000 5 year 9.5% bonds on May 15, 2020. The bonds will
be due on May 15, 2025. Cailor intends to use the proceeds of the bond issuance for
immediate purposes to purchase inventory/pay employees, rent and other current obligations
during the COVID 19 shut down. Cailor is preparing its May 31, 2020 Statement of Cash
Flows. The Controller said the company’s intention is to classify the proceeds as an
operating activity since the proceeds were used to fund current operations.
Accounting Issue: How should Cailor Corporation classify the proceeds in the May, 2020
Statement of Cash Flows?
a.
Codification Reference:
b. Guidance: (cut and paste the guidance)
c.
Your answer/interpretation of the guidance for how it applies to Cailor Corporation (i.e.
where should the proceeds be classified in the Statement of Cash Flows):
1
2.
Cailor Corporation is a private entity that has been in business for 1 year. Cailor sells
merchandise on credit to qualifying customers. For the year ending May 31. 2020 Cailor had
$1,500,000 of credit sales and an ending Accounts Receivable balance of $500,000. The
company president is insisting that they do not need to adjust for uncollectible receivables
since they can’t specifically identify which customers will not pay on their account. He
believes that they should wait to see which customers ultimately do not pay their bills. The
CFO has assigned you to research whether the company president is correct. Other companies
in the same industry/same customer base typically accrue 8% of all receivables as
uncollectible.
Accounting Issue: Is Cailor required to record uncollectible accounts receivable even if they
cannot specifically identify which customers will not pay on their account?
a.
Codification Reference:
b. Guidance: (cut and paste the guidance)
c. Your answer/interpretation of the guidance for how it applies to Cailor; should they record
for uncollectible accounts or wait until they ultimately determine which customers will not
pay?
d. If you determine that they should accrue for uncollectible accounts receivable record the
necessary journal entry. If no journal entry is required then simply indicate N/A.
2
3.
M International (“M”) and Walsh Inc. (“W ” a competitor of M ) have been engaged in longstanding litigation over a specific patent infringement matter. Below is a summary timeline
of specific events that have taken place related to this matter:
•
•
In May, 2019, M filed a claim against W for patent infringement. The case is scheduled
to be heard by a jury in May, 2020.
For the year ended March 31, 2020, attorneys for M advised the auditors that M and their
attorneys determined that a successful resolution of this matter was probable and
represented that the estimate of settlement would be a in the range of $15 million to $20
million, with $17 million being the most likely amount of settlement within the range. In
anticipation of the verdict, M recorded the gain contingency in the amount of $17 million
as of March 31, 2020. The journal entry recorded by M on March 31st was:
Lawsuit Receivable
$17 million
Gain on patent infringement claim $17 million
Accounting Issue: For the year ending March 31, 2020 financial statements what is the
correct accounting treatment for the lawsuit?
a. Codification Reference:
b. Guidance: (cut and paste the guidance)
c. Your answer/interpretation of the guidance for how it applies to M International:
(should they be able to record the gain or should they not record the gain?)
d. If you determine that they should not record the gain prepare the adjusting/correcting
journal entry. If their journal entry to record the gain was correct, simply indicate
N/A.
3
4.
You are the staff accountant at an outdoor adventure company called Smith’s Adventures.
Smith is in the process of registering their website with different internet search engines. The
website will be used to promote /advertise their services. Smith has paid a total of $25,000 for
registering their website. The CFO has assigned you to research/determine the correct
accounting treatment for this expenditure.
Accounting Issue: Should Smith’s Adventures capitalize or expense the $25,000 for website
registration?
a.
Reference:
b. Guidance: (cut and paste the guidance)
c.
Your answer/interpretation of the guidance for how it applies to Smith Snowboard
Adventures?
d. Prepare the journal entry to correctly record the expenditure for the website registration.
4
FASB Accounting Standards Codification
2019-20 FASB Academic Accounting Access
Login: .aaahq.org/ascLogin.cfm
Username: aaa51184
Password: m5N9ZXX

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