Excello telecommunications has been profitable for many

Assignment Help Accounting Basics

Reference no: EM13592096

Write a 1,200- to 1,500-word paper explaining the legal aspects, financial standards involved, and ethicality of the Excello Telecommunications case. Your paper should include the following:

· Identify the legal issues involved-consider state and federal laws-and explain how they apply to the case.

· Determine the criteria by which Sarbanes-Oxley would apply to this case.

· Identify the specific financial reporting standards involved and explain how those standards were violated.

· Evaluate the financial reporting activity in terms of the AICPA Code of Professional Conduct.

· Determine the ethicality of the events within the case.

· Select the best alternative offered by the team. Defend your decision in terms of its legality, ethicality, and alignment with accounting standards.

Excello Telecommunications has been profitable for many years but recently has been faced with increased competition for its products by overseas manufacturers. For the first time in the company's history, it appears that earnings estimates will not be met. Top management is concerned about the effect on bonuses, stock options, and the share price of Excello stock. That is when Terry Reed, the CFO, learns of a transaction on December 20, 2010, that might solve the problem. On December 20, 2010, Excello sold $1.2 million of equipment to Data Equipment Systems. Typically, this type of transaction would be recorded as a sale on the date of shipment. However, the customer requested that Excello hold on to the product until January 11, 2011, because Data Equipment lacked the warehouse capacity to hold the product until then.

On December 30, Reed approaches the controller, Marty Fuller, to discuss the dilemma. Fuller explains the rules in accounting for sales where the goods are held for future delivery. Reed understands the rules, but tells Fuller he needs to come up with a creative way around the rules so that the $1.2 million can be recorded as revenue in 2010.

Fuller calls a meeting of the accounting department to discuss what can be done. He emphasizes two important points. First, the $1.2 million must be recorded in 2010. Second, whatever is decided it must be defensible from a GAAP point of view. The team comes up with the following alternatives:

1. Transfer the product to an off-site warehouse owned by Excello by December 31 and holds it until January 11 when it would be shipped to Data Equipment.

2. Transfer the product to Data Equipment by December 31 and agree that the customer could return it for a full refund after it arrives at Data Equipment's warehouse.

3. Offer Data Equipment a 10 percent discount to take the product by December 31.

Reference no: EM13592096

Questions Cloud

Fashion jeans inc sells two lines of jeans simple life and : fashion jeans inc. sells two lines of jeans simple life and fancy life. simple life sells for 85.00 a pair and fancy

Declared the annual 2011 10 per share dividend on preferred : elizabeth company reported the following amounts in the stockholders equity section of its december 31 2010 balance

Wenner furnace corp purchased machinery for 421290 on may 1 : wenner furnace corp. purchased machinery for 421290 on may 1 2012. it is estimated that it will have a useful life of

The common stock of warner inc is currently selling at 110 : the common stock of warner inc. is currently selling at 110 per share. the directors wish to reduce the share price and

Excello telecommunications has been profitable for many : write a 1200- to 1500-word paper explaining the legal aspects financial standards involved and ethicality of the

You are a manager of a large home improvement store what : you are a manager of a large home improvement store. what are the five factors that you believe are most critical to

Bailey company sells 25424 units at 1500 per unit variable : bailey company sells 25424 units at 15.00 per unit. variable costs are 8.00 per unit and fixed costs are 8.00. the

Oneill co has 296467 in accounts receivable on january 1 : oneill co. has 296467 in accounts receivable on january 1. budgeted sales for january are 835975. oneill expects to

If fastenalt does not have excess capacity to accept hanks : fastenalt is an industrial supply manufacturer that provides hvac specialty thermostats to manufacturers and retailers.

User Account

All Pages