ABONG Rose AKENJI13200149Question 1Is the Enterprise

1. Describe the impact the three proposed accounting methods (full revenue recognition, deferral of revenue, and partial revenue recognition) would have on the company’s financial statements: 1) at the time of the sale, and 2) in future periods.

1. A company’s ending accounts receivable balance and the period’s advertising expense would be found on which financial statements, respectively

1. Is Coconut’s February 1, 2012, arrangement with Buffett within the scope of ASC 985-605?

Question 3: Describe and show the journal entries illustrating how the company accounts for the transfer of its accounts receivable to financial institutions. Is this accounting treatment reasonable? What are the key assumptions made under this approach? Do you agree with these assumptions?

2. The obligation to absorb losses of the entity and the right to receive profits from the entity that could be significant to the VIE.

The revenue recognition principle dictates that revenue is recognized in the period in which the cash is received.

• "Entity" means any legal, administrative, or fiduciary arrangement, organisational structure or other party (including a person) having the capacity to deploy scarce resources in order to achieve objectives; and

2. List the 4 criteria which the SEC decided was necessary to further clarify the basic revenue accounting concepts of “realized or realizable and earned”.

“Piercing the corporate viel” refers to the judicially imposed exception to this rule by which courts disregarded the separateness of the company and consider a shareholder responsible for the company’s action as if it were the shareholder’s own. A fundamental rule of corporate law is that shareholders in an organization are not liable for the obligations of the enterprise beyond the capital that they contribute in exchange for their shares.

ASC 605, Revenue Recognition, provides guidance for specific transaction revenue recognition and several matters related to activities which generate revenues. Some examples include the sale of products, services performed, and the gain or loss on conversions of nonmonetary assets to monetary assets. Revenue is recognized when it is realized or realizable and earned. In addition, the section provides information on (1) how the vendor will provide deliverables to the customer,(2) when to report revenue gross or net of certain amounts paid to others, (3) the accounting of credit given by a vendor to a customer, and (4) the use of the milestone method in arrangements that include research or development deliverables.

Current standards for revenue recognition are set forth under Concepts Statement No. 5, Recognition and Measurement in Financial Statements of Business Enterprises (which were codified in Subtopic 605-10,

Based on the decision of accrual vs. cash basis, describe when revenue would be recognized on the sale of inventory, and how the accrual reporting differs from cash basis.

Revenue represents the primary source of money received by the company from its customers for goods sold or services rendered by the company. As per the presented income statement, Vibrant Foods PLC revenue shows growth. By comparing Year 1 and Year 2, we can see that Vibrant Foods PLC had a better year in Year 2 than in Year 1. Specifically, the company had net sales of 4,075,522 in Year 2 compared to 3,288,908 in Year 1. In total, net sales for Vibrant Foods PLC increased by 786,614 between Year 1 and Year 2. The revenue growth over two years is 23.92%. Therefore the Company’s revenue shoed upward movement.

For the purposes of this assignment the relevant law is the Corporations Act 2001 (Cth) (either as the “Act” of the “CA”). From now on I will refer to it as the Act (Hinchy, McDermott 2008).

Variable Interest Entities—An entity that does not have sufficient equity to finance its activities without additional financial support, or in which the equity investors, as a group, do not have the characteristics of a controlling financial interest is a VIE. The determination as to whether an entity qualifies as a VIE depends on the facts and circumstances surrounding each entity and may require significant judgment. Our investment funds generally qualify as VIEs and are evaluated for consolidation under the VIE model.