Analysis of truck accident and subsequent stock

Assignment Help Financial Accounting

Reference no: EM131068744 , Length: word count:1500

Assignment- 'Biovail Corporation: Revenue recognition and FOB Sales Accounting'

Case Study Assignment Questions-

Question One -

(a) The following table provides a summary of the revenue recognition that would occur if the company Biovail implemented (i) 'free on board' (FOB) Biovail; or (ii) FOB destination. Justify the choice of timing selected for each cell in the table.

	FOB Biovail	FOB Destination
Ownership transfers:	Upon shipment from Biovail facility in Manitoba, Canada	Upon delivery to North Carolina facility of Distributor
Revenue is earned:	Upon shipment from Biovail	Upon delivery to North Carolina facility of Distributor
Assuming that there was no accident, the associated revenue would be earned:	30 September when the truck left Biovail's facility in Manitoba	Either very late on 1 October, or more likely 2 October given that North Carolina is more than 8 hours' drive away

(b) There was dissention between the Distributor and Biovail over when title to the shipment of Wellbutrin^R passed. Discuss why you think the disagreement occurred between Biovail and Distributor. (Hint: Your answer should be supported by reference to at least three academic research articles. Concentrate on the general results of the articles. You do not have to completely understand the econometric models.)

Question Two-

Following the truck accident, analysts from J.P. Morgan upheld their 'overweight' stock rating for Biovail. In fact, representatives from J.P. Morgan noted that (case study, p. 3):

'...its analysts had never argued with earlier claims that Biovail's accounting might have been aggressive. However, its analyst report concluded that Biovail's current accounting did not seem egregious and that the earnings impact of Wellbuetrin XL was completely transparent.'

Evaluate these comments from J.P. Morgan. (Hint: Your answer should evaluate earnings quality (i.e. aggressive accounting choices compared with egregious accounting choices) and be supported by reference to at least two academic research articles. Concentrate on the general results of the articles. You do not have to completely understand the econometric models).

Question Three-

Assume that Biovail plans to undertake a significant share issue in the near future and is considering either J.P. Morgan or Banc of America to handle this lucrative transaction.

Would you expect this to influence Mr Maris' analysis of the truck accident and subsequent stock recommendation? Justify your opinion discussing any ethical issues that may arise.

This fiancial reporting case study is designed to examine the specific application of case scenarios invovlving principally managerial incentives for financial statement management. the case will be used to examine your report writing skills , general accounting knowledge and ability to critically evaluate complex case scenarios.

1500 words.

8 references.

Attachment:- Biovail.rar

Reference no: EM131068744

Questions Cloud

An estimate of the gold deposits to alma garrett : 1. Seth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold mine in South Dakota. Dan Dority, the company's geologist, has just finished his analysis of the mine site. He has estimated that the mine would be productive for eight ye..

Describe the responsibilities of the front-line worker : Describe the responsibilities of the front-line worker in an organization that uses a management systems approach to safety and health. How do the responsibilities of his or her supervisor and higher management help him or her to succeed?

Should governments make reductions of public debt : Should governments make reductions of public debt and fiscal deficits their immediate priority - Should Monetary Policy Target a Level of Inflation higher than 2%?

What will be the ending occupancy rate : A property you are evaluating is located in a market with 8.75 million square feet of occupied space with a current vacancy rate of 4.2%. If there is no new construction delivered over the next year and net absorption is 2% for the year, what will be..

Analysis of truck accident and subsequent stock : ACCT7102 Individual Case Study Assignment- 'Biovail Corporation: Revenue recognition and FOB Sales Accounting'. Would you expect this to influence Mr Maris' analysis of the truck accident and subsequent stock recommendation? Justify your opinion di..

Assume that the returns from asset are normally distributed : Assume that the returns from an asset are normally distributed. The average annual return for this asset over a specific period was 17.1 percent and the standard deviation of those returns in this period was 41.7 percent. What is the approximate prob..

Which will be depreciated straight-line to zero : You are evaluating a project for your company. You estimate the sales price to be $520 per unit and sales volume to be 2,200 units in year 1; 3,200 units in year 2; and 1,700 units in year 3. The project has a three-year life. Variable costs amount t..

Explain profile in terms of networking concept : Explain profile in terms of networking concept? What is sneakernet?

Analyze the organizational structure and culture of company : Evaluate the effectiveness of your selected leader's performance, based on his or her ethical conduct and effective communication. Next, determine whether the chosen leader was successful in motivating and empowering his or her employees and gaini..

User Account

All Pages