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Essay / Research Paper Abstract
This 5 page paper looks at a case study supplied by the student. Frantek are a company that had a contract to sell computer boards, but they have not been able to meet their contractual obligations. The buyer re-negotiates some more favorable terms for Frantek. The paper looks at the impact on accounting issues such as revenue recognition, inventory valuation and accounting for liabilities. The bibliography cites 3 sources.
Page Count:
5 pages (~225 words per page)
File: TS14_TEfrantek.rtf
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Unformatted sample text from the term paper:
need to be considered in terms of the way that revenues will be accounted for, as Conte are agreeing to purchase the outstanding board, but instead of paying cash for
them they will be reducing the loan made to Fanteck by that amount, there are some potential liabilities as Conte may require Frantek to undertake some further work to the
board, replacing the chips, with Frantek bearing the cost of the remedial work. This is occurring at a time when the company also needs to consider the way in which
they will value the inventory. In addition to this there was a financial penalty clause if Frantek failed to deliver 100,000 boards, which has occurred and in addition to this
there is also the a payment due from Conte to Frankel of $2 million which also requires some consideration under accounting for revenue. The issue of revenue is
relevant in terms of the way that the revenue will be recognized for the royalties, which the new agreement states will still be paid; there is also the revenue for
the board which Conte has committed to buying, but with the revenues being used to reduce the loan that Conte made to Frantek. The way that revenue is recognized
in a relativity simply concept and is found in FASB Statement of Financial Accounting Concepts No.5 (Briner, 2001). This states that the revenue can only be recognized when the transaction
that create the revenue takes place and when two criteria are satisfied; that the revenue is either realized or realizable and the revenue is earned. Revenue is classified as realized
when the payment is actually received for the service of goods supplied, and it is usually classified as realizable when there is a promise of the payment being made for
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