A Series of Revenue Recognition Research
Cases Using the Codification
Case One: Consumer Cleaning Products Corporation (CCPC) Case Two: Landline Corporation Case Three: Assembly Lines Incorporated (ALI)
Chen Chongxiao Sweta Shah Xiaoyun zhang
Requirement 1: The accounting issue in this case is how to account for the coupons which was introduced on Sep. 1 2009 for the new detergent Fresh & Bright Marketing campaign by a detergent manufacturer called Consumer Cleaning Products …show more content…
Requirement 5: This matter should be discussed under two circumstances as follows:
a. If CCPC cannot support the 2% redemption rate to be reasonable and reliable, no matter what the expected redemption rate is (2% or 2.5%), CCPC should recognize the maximum potential amount of $1million as we discussed in requirement 4.
b. On the other hand, if the 2% redemption rate were justified, CCPC would originally recognize $20,000. CCPS should consider the increase of redemption rate as a change in accounting estimate. Because according to FASB Codification 605-50-25-12, changes in the estimated amount of cash rebates or refunds and retroactive changes by a vendor to a previous offer (an increase or a decrease in the rebate amount that is applied retroactively) are changes in estimate that shall be recognized using a cumulative catch-up adjustment. That is, the customer would adjust the cumulative balance of its rebate recognized to the revised cumulative estimate immediately. Therefore, the 0.5% difference (2.5%-2%) which is $5000 (500,000*0.5%*2) that should