Thank you so much. Great work. I received full credit for my portion of this group assignment. Please continue to keep up the great work and help me as much as possible.
3. Look up the AICPAAudit & Accounting Guide Airlines, then look for the table of contents to this guide. Imagine that you’ve just been assigned to the audit of an airline. Name two chapters from this book that you might read (or skim) in advance of the engagement, and explain why you chose these
6. A cable network has just entered into an agreement granting it the right to show reruns of a hit TV series. In exchange for this right, the network must pay the TV show’s creators a fee each time the show airs
7. An online restaurant booking site sells a $100 meal voucher, good for $100 toward a meal at Randall’s Steakhouse, to a customer for $60. When the customer presents the voucher to Randall’s Steakhouse, the restaurant booking site must remit $50 to Randall’s, retaining $10
8. A company’s auditor is questioning the appropriateness of the company’s discount rate assumption, which it uses to measure its defined benefit pension obligation.
For each of the following sample scenarios (in questions 16–19),
identify one or more biases that could be at play, then explain.
16. A judge ruling in a securities fraud case found a corporation guilty of misleading investors because the com-pany’s disclosures predicted that a new drug would likely receive FDAapproval years before the actual approval came through. What bias may have been at play for the judge in reaching this ruling?
17. Growth rates in sales had slowed versus the prior year. A task force was convened that consisted of senior vice presidents from across the company, plus one executive vice president (the COO). The COO came to the meet-ing prepared to offer a solution. When she did, the group agreed it was the appropriate path forward and set in motion a plan to implement her recommendation.
18. Upon adoption of the new revenue standard, a company wrestled with a gross versus net accounting policy judg-ment and ultimately rationalized that it should likely continue its current position unless there was a compelling reason in the guidance to change
7. Locate Codification guidance describing how inventory should initially be measured, and present the excerpt in a guidance sandwich. Assume you are answering the question: Should inventory be measured initially at its market value or at cost?
8 . Read the following issue. Next, add an ellipsis to par. 15-2 to reflect the removal of any guidance not considered relevant to this issue. Issue: Presto Hospitality is researching the interaction between ASC 842 (Leases) and ASC 606 (Revenue). Presto wants to know whether it must evaluate ASC 606 for any contracts that it concludes are within the scope of leasing guidance. Presto reviews the following scope guidance in ASC 606-10: 15-2 An entity shall apply the guidance in this Topic to all contracts with customers, except the following:
a. Lease contracts within the scope of Topic 842, Leases.
b. Contracts within the scope of Topic 944, Financial Services—Insurance.
c. Financial instruments and other contractual rights or obligations within the scope of the following Topics:
1. Topic 310, Receivables
2. Topic 320, Investments—Debt and Equity Securities
2a. Topic 321, Investments—Equity Securities
3. Topic 323, Investments—Equity Method and Joint Ventures
4. Topic 325, Investments—Other
5. Topic 405, Liabilities
6. Topic 470, Debt
7. Topic 815, Derivatives and Hedging
8. Topic 825, Financial Instruments
9. Topic 860, Transfers and Servicing
d. Guarantees (other than product or service warranties) within the scope of Topic 460, Guarantees.
e. Nonmonetary exchanges between entities in the same line of business to facilitate sales to customers or potential customers. For example, this Topic would not apply to a contract between two oil compa-nies that agree to an exchange of oil to fulfill demand from their customers in different specified loca-tions on a timely basis. Topic 845 on nonmonetary transactions may apply to nonmonetary exchanges that are not within the scope of this Topic
4.5. Presto Hospitality—Revenue Recognition Assume Presto concludes that its concession agreement with Stadium Co. is not a lease. In that case, apply the five-step revenue process in ASC 606 to this arrangement. Assume you are evaluating appropriate revenue recognition for the contract and for individual transactions that will arise within the scope of the contract (for example, a sale of a hot dog to a customer in the stadium). Assume a hot dog retails for $6, of which Presto retains 50%.
4.6 Baseball Suites—Lease Evaluation The New York Yankees offer multiyear luxury suite licenses to customers, including 3-, 5-, and 10-year licenses. Customers who sign these license agreements have the right to use a specified suite in the stadium (say, suite no. 25) for the dates specified in the license agreement. Alternatively, customers with a more limited interest or budget can sign up for a partial season (a 20- or 41-game plan) where the customer can specify which games it wishes to view from the suite. While the customer is enjoying the suite, a third-party concessionaire (similar to Presto’s role) will provide premium food and beverage service to guests in the suite. Evaluate—is a suite license a lease? Assume a customer signs a 20-game license for specified games to occur within a single Major League Baseball season
4.7 Sales Commissions, Writing an Email Assume the New York Yankees pay its sales staff a 2% sales commission on each luxury suite license contract signed (such as by a corporate customer). Research whether this commission payment should be reported as an asset or an expense by the New York Yankees. Craft your response in the form of an email, and assume you’re responding to a question asked to you by the accounting manager for the Yankee
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