Accounting Assignment

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REPORT ON THE TREATMENT OF VARIOUS BUSINESS TRANSACTIONS

The first transaction in which KS got into contract with the canadian Hardball Association (CHA), the accounts recievable should be credited with $250,000. Since the probability of the bats not meeting the safety and performance standards are limited only a disclosure statement is needed. This would impact the financial statement as it would increase the profit attributable for the current year.

The second transaction in which KS delivered 2500 soft spike cleat to the The Shore Store. There is need for a provision for bad debt based on the historical occurences where 5% of the cleats were returned. Therefore the accounts recievable account can bedebited and a provision of 5% which is $5,000 can also be included in the financial statement.

For the contract with SportStore, there was an aggreement to supply 100,000 bats and only 45,000 had been supplied during the first yar. For the first year, the only significant financial transaction shall be the revenue recievable from the sale of the 45,000 bats at $55 which gives $2,475,000.

The amount incurred on design and development should be expensed for the current year at $155,000. Similarly the cost of each manufacture of $25 should be allocated to each bat.

The transaction to Q-Mart was valued at $50,000 for the year. However, there is a high probability of the company going bankrupt unless some strategic actions are put in place. The probability can be estimated to be above 50% and therefore a provision should be made for the entire value of the transaction. Writing off the $50,000 is therefore advisable and allowable according to GAAP

The purchase of a storage warehouse is a capital expenditure and therefore is not trading entry. Additionaly the cost of installation of an HVAC system is a capital improvements and thus cannot be expensed as repairs and maintainance. However, only the $7,500 used to replace the roof shingles is...