Intermediate Accounting Course Project

Intermediate Accounting II

Course Project

Note 1: Summary of Significant Accounting Principles

Nature of Business -- The nature of Jones Inc. business is to develop, manufacture, and sale infant safety products.

Use of Estimates -- The financial statements of Jones Inc. have been prepared in accordance with the generally accepted accounting principles of the Unites States and include estimated where necessary. Examples of items including in estimates are litigation costs, rebates, and inventory and accounts receivable exposures.

Revenue Recognition – Revenue from product sales is recognized when the sale occurs. Provisions for rebates, returns, and discounts are recognized in the period the sale occurs.

Litigation – Litigation costs are in accordance with the Financial Accounting Standards Board’s Contingencies ASC 450. The company must accrue the contingency when the event is probable and can be “reasonably estimated.” If the event is only reasonably possible, the company must still disclose this in the notes to the financial statements and describe the “nature of the contingency” and if possible the extent of the gain/loss.

Accounts Receivable – Accounts Receivables are charged off only when every attempt to collect the debt has been exhausted.

Inventory – Inventory costs are based on the FIFO (first-in, first out) method.

Prepayments – In the event an item is not in stock, a prepayment can be made to purchase the item to ensure availability. However, the expense is not recorded until the goods have been received by the customer.

Cash – Jones Inc.’s cash balance consists of currency, check, and credit card payments.

Transactions in Foreign Currency – Transactions made in foreign currency are converted to the US equivalent at the time of the transaction.

Earnings Per Share -- Earnings per share are calculated by dividing the net result by a weighted, average number of shares in the reporting period.

Note 2: Inventory

Inventory as of...