Craig’s Crocodiles, Inc.

Craig’s Crocodiles, Inc.

CASE #1

June 16, 2011

[Group Names]

DATE: January 8, 2009

TO: Nikita La Femme, V.P. of Operations and Harry Dim, Staff Accountant, Craig’s Crocodiles Inc.

FROM: Team 1: Tri Duong, Andrew Gamble, Belona Gvargezzobalan, Khanh Nguyen, Craig Stevens, Dean Scott, Grace Shirvani,

RE: Evaluation of the accounting and legal issues for Craig’s Crocodiles Inc.

We have evaluated the accounting and legal issues arising from the expansion of your business. Feel free to contact us for any other questions or information.

Executive Committee:

Head of Contacts: Dean Scott:

18111 Nordhoff Street, Northridge, CA-91330

Office: 818-521-2354

Fax: 818-867-5309

dean.scott.5@my.csun.edu

Assistant: Tri Duong

18111 Nordhoff Street, Northridge, CA-91330

Office: 818-324-5282

Fax: 818-233-2284

tri.duong.497@my.csun.edu

Executive Summary

Purpose: To explore and analyze Craig's Crocodiles’ different accounting options for how and when they should treat their revenue. In addition, this report will also analyze the potential legal liability Craig’s Crocodiles is accountable for after breaking their lease agreement with Pauly Property Management Services.

Background: Craig’s Crocodiles was established on January 1st, 2008 as a company that catches crocodiles and sells them as pets. After their first year of business, Craig’s Crocodiles is looking to expand. This means that the company will need to prepare income statements to show their past and projected profits in order to qualify for loans. In addition, Craig’s Crocodiles will also need to break their office and warehouse lease early in order to have more room for the expanded business.

Accounting Analysis: Selling crocodiles as pets is a unique business model that has never been done before and therefore there is no established standard to follow for when revenues should be declared. Craig’s Crocodiles has three options as to when they should declare...