Reference no: EM132155022

Please answer all the questions of this assignment.

The purpose of this assignment is to have you explain the accounting issues involved in a situation which arose in 1980s pop culture: Madonna’s contract with Pepsi. You are to use the terminology we discussed in class and your homework to analyze some of the issues raised by the article that was provided to you in class last Thursday. In the first paragraph, you should briefly describe the contract: Who were the parties? When did this occur? What were the terms of the contract? What was each party supposed to do as part of the contract? Also have a transition statement such as, “This contract raises several accounting issues…” so that the reader knows what will be coming in the next few paragraphs. In the second through fourth paragraphs, use accounting terminology to describe the issues using accounting terminology. For example:

1. What does the contract represent for each party? Is it an asset, liability, etc.?

2. Did Madonna and Pepsi each fulfill her/its respective promises?

What is each respective party’s promise called in accounting?

3. What are the accounting consequences/ramifications of what each party did in 1?

4. What journal entry could Madonna have booked on her G/L once the first commercial was completed? What entry could Pepsi have booked at the same time?

5. What occurred with regard to Madonna’s album sales as a result of the Pepsi ad? What could an accounting entry be to book her album sales?

In the final paragraph, summarize your work by noting the key concepts and the results. For example, you could begin by writing something akin to, “In conclusion, the TV commercial that Madonna made for Pepsi in 1989 did not result in the anticipated outcomes as noted contract between the two parties.” Then you could proceed to note why this is the case by briefly listing the key issues you brought up in the preceding paragraphs.