Autumn Leaves

Toronto Autumn Leaves

• Brand new business: since starting fresh, use GAAP

• We want net income to be maximized as I get a bonus

• Only limited to 3 things

• Year end is December 31 (not reasonable – pick in off season)

Playing first game in Compost Heap, we get a minimum of $10,000 or more

- Can accrue at end of month, can be booked as December revenue and adjust when the actual amount comes in. (Can’t just use cash basis for GAAP)

Neek Inc.: We get 10% of gross sales per month, wait and put in an estimate and then adjust when you get actual amount. During the year, we can use cash basis, but at the end of the year, get it right.

- Must make one assumption: Issue – is the $600,000 being paid in advance or in arrears?

- If paid at end of period = revenue

- If paid in advance of period = unearned revenue

- Thus, must state in answer, if x, then must do y, etc. visa versa

Wayne Gretzsky: In past tense = he’s been paid.

- If asset, it could be an intangible or deferred charge and depreciate it per 1 year because we’ve already got some season tickets buyer from his signing

- He may not every play so we likely shouldn’t depreciate it longer than that 1 year if we capitalize it (it’s the real only benefit we know about)

- Or: we can say it’s a signing bonus and expense it all right away

- But under GAAP it’s not likely we depreciate bonus over the 3 years, which is what you would do to max NI

- Describe all options and pick the best one and defend it