answer all the question

Using the information we learned about capital assets, answer the following questions about the week 12 case: 1. What is the issue in this case? 2. What are the relevant accounting rules? Are there different alternatives in ASPE or IFRS? 3. Identify alternatives? Are there different ways the accounting issue can be addressed? (try and identify at least two) 4. Evaluate each alternative. What would happen to net income with each alternative (would it be higher, lower, no impact?). Are there any other considerations about each alternative? 5. Analyze all of this information. Based on all the information you gathered in 1 - 4 - is one option more compelling than another? Why? 6. Conclude. Come to a clear conclusion on which alternative you are recommending. 7. Consider implications. Advise on any implications. Can you give advice on an implementation plan? SHORT CASES IN FINANCIAL ACCOUNTING 151 paper. Our intent in presenting these tools and analyses is not to suggest that they are the only suitable approach to case analysis, but rather we aim to reduce the preparation time and uncertainty involved in teaching with cases at this level for the first time. EXHIBIT 1 Components of Accounting Case Analyses 1. Identify the issue Determine whether different accounting methods exist to account for an item (such as recognizing revenue now vs. recognizing revenue in the future) 2. Identify the relevant accounting rules What method or methods do the accounting rules recommend? 3. Identify alternatives Determine an initial position on how the item could be accounted for, and then determine a counterposition. 4. Identify support for each alternative Identify specific facts of the case that support one alternative and other facts that support the other alternative. 5. Analyze all of the information After identifying facts supporting each alternative, consider how persuasive each fact is, are some arguments more important than others! 6. Conclude Choose the alternative with the strongest, most persuasive support. 7. Consider implications How does your accounting choice affect the financial results and the financial statement users? CASE MATERIALS Case 1Revenue Recognition at the Theater Bob Jansen, the theater manager of Simply Riveting Shows (SRS), is excited about the company's upcoming theatrical season. The company will open with a new show next month in a newly renovated theater. SRS fully expects to see a large increase in ticket sales over the previous year. In light of this expected increase in demand, SRS decided to make the opening week tickets nonrefundable, except in 152 ACCOUNTING PERSPECTIVES / PERSPECTIVES COMPTABLES the unlikely event the show is cancelled. So far, 1.800 tickets of the theater's 2.000 seats for cach night of the opening week have been sold to enthusiastic fans at $25 per ticket, generating a cash inflow of $315,000 (1.800 tickets x S25/ticket x 7 shows = 5315.000). Only a small proportion of tickets for the first week are yet to be sold ($35,000 - 200 tickets x 525 ticket x 7 shows). Bob expects to sell out eas- ily, he says there's only a remote risk that SRS will sell the currently unsold tickets at a discount Although Bob is excited, he also is worried about the ongoing labor dispute with several supporting actors. These actors are threatening to go on strike if they do not receive a 15 percent increase in pay. Bob knows that SRS is offering an increase of only 5 percent, and it's unclear whether the supporting actors are willing to accept less than 15 percent. Because these actors are supporting cast and not the headliners. SRS could replace them, but it is difficult for Bob to estimate at what cost. At least Bob feels good that he has locked in the lead cast, having already paid them in advance for the opening week of performances. He has also paid rent for the theater for the first week of shows. Bob shuddered as he remembered the "Great Disaster of last season, when a full week of shows was unexpectedly cancelled after a nearby water main break, cutting off water supply to the theater until it could be repaired. Shaking off those thoughts, Bob enters your office. He confidently tells you, the financial manager, that you can safely record the ticket sales for opening week as revenue in this month's income statement, which will help offset the expenses already incurred for payroll and rent. He mentions that the bank will be happy to see that SRS is turning a profit because it has expressed concern about SRS's financial per- formance after the difficulties of the previous year. As a new employee, you are eager to please Bob and your superiors. But you also realize that Bob is an artist, not an accountant; and as the accountant, you must decide how to record the ticket sales. Requirements 1. Identify the applicable accounting standards, assuming that SRS uses Interna- tional Financial Reporting Standards (IFRS). 2. Using IFRS as a guide, prepare an analysis of the relevant points of the case and provide a decision about how SRS should account for its ticket sales. Case 2Renovation Costs at the Golf Course Assume today is June 25, 2014. Tony Harper is the manager at Moose Ridge Golf Resort (MRGR). Moose Ridge is an 18-hole golf course located north of Saska- toon and near a popular lake. Currently, the course is undergoing renovations. The renovations are expected to increase the benefits to be derived from the course over its life. Tony remembers that the last set of renovations was completed in 2008 and successfully increased the number of club members by 20 percent, and MRGR has had increased revenues from pre-2008 levels ever since AP Vol. 13 No. 2 - PC vol. 13, n 2 (2014) SHORT CASES IN FINANCIAL ACCOUNTING 153 The total budgeted cost of the renovations is SIO million. MRGR's board of directors has approved, and its management has purchased the materials needed for the renovations. The other major cost of the project is labor time. Ten new employees have been hired to form the renovation team. Labor costs of $250,000 have been incurred since the project began. Although the team is supposed to spend 100 percent of its time on renovations, Tony has witnessed team members performing routine maintenance activities such as mowing the grounds, weeding gardens throughout the course, and unloading the supply trucks for the golf lounge employees. Tony has overheard many regular golfers in the golfers lounge talking excit- edly about the renovation, but Tony is unsure whether the renovations will sub- stantially increase revenue. The board of directors rejected a proposed price increase, and Tony thinks this could limit MRGR's future revenues. He remembers when the neighboring golf course was renovated in 2013, and his friend, also the pro shop manager, was disappointed that revenues stayed fairly consistent with revenues prior to the renovation. On the other hand, Tony knows that MRGR's renovations are more extensive than those completed by the competing golf course, so perhaps MRGR's revenues are more likely to increase. Not only that, but the renovations are all the regulars can talk about. Tony has heard more than once that the regular golfers plan on bringing to the course friends and family who have never golfod at MRGR before. Tony has relayed this information to you. MRGR'S controller. You have recorded all renovations costs as expenses, but with quarter-end approaching and after hearing Tony's comments, you decide to take another look to determine whether the costs are correctly recorded as expenses. Requirements 1. Identify the applicable accounting standards, assuming that MRGR uses Inter- national Financial Reporting Standards (IFRS). 2. Using IFRS as a guide, prepare an analysis of the relevant points of the case and provide a decision about how MRGR should account for its renovation costs. Case 3-Signing Bonus and Related Costs for Professional Athletes Assume today is July 6, 2014. On June 28, 2014. Edmonton's NHL team acquired Wayne Pletzky from New York. To transfer Wayne's playing rights from New York to Edmonton, Edmonton traded its rights to three of its existing players and two future draft picks. Despite this high cost, Wayne will instantly make Edmon- ton's team more competitive. The team's general manager, Frank Klassen, is cer- tain that the trade will bring more fans and more money) to the team's home games. AP Vol 13 No.2 - PC vol. 13, n 2 (2014) . Using the information we learned about capital assets, answer the following questions about the week 12 case: 1. What is the issue in this case? 2. What are the relevant accounting rules? Are there different alternatives in ASPE or IFRS? 3. Identify alternatives? Are there different ways the accounting issue can be addressed? (try and identify at least two) 4. Evaluate each alternative. What would happen to net income with each alternative (would it be higher, lower, no impact?). Are there any other considerations about each alternative? 5. Analyze all of this information. Based on all the information you gathered in 1 - 4 - is one option more compelling than another? Why? 6. Conclude. Come to a clear conclusion on which alternative you are recommending. 7. Consider implications. Advise on any implications. Can you give advice on an implementation plan? SHORT CASES IN FINANCIAL ACCOUNTING 151 paper. Our intent in presenting these tools and analyses is not to suggest that they are the only suitable approach to case analysis, but rather we aim to reduce the preparation time and uncertainty involved in teaching with cases at this level for the first time. EXHIBIT 1 Components of Accounting Case Analyses 1. Identify the issue Determine whether different accounting methods exist to account for an item (such as recognizing revenue now vs. recognizing revenue in the future) 2. Identify the relevant accounting rules What method or methods do the accounting rules recommend? 3. Identify alternatives Determine an initial position on how the item could be accounted for, and then determine a counterposition. 4. Identify support for each alternative Identify specific facts of the case that support one alternative and other facts that support the other alternative. 5. Analyze all of the information After identifying facts supporting each alternative, consider how persuasive each fact is, are some arguments more important than others! 6. Conclude Choose the alternative with the strongest, most persuasive support. 7. Consider implications How does your accounting choice affect the financial results and the financial statement users? CASE MATERIALS Case 1Revenue Recognition at the Theater Bob Jansen, the theater manager of Simply Riveting Shows (SRS), is excited about the company's upcoming theatrical season. The company will open with a new show next month in a newly renovated theater. SRS fully expects to see a large increase in ticket sales over the previous year. In light of this expected increase in demand, SRS decided to make the opening week tickets nonrefundable, except in 152 ACCOUNTING PERSPECTIVES / PERSPECTIVES COMPTABLES the unlikely event the show is cancelled. So far, 1.800 tickets of the theater's 2.000 seats for cach night of the opening week have been sold to enthusiastic fans at $25 per ticket, generating a cash inflow of $315,000 (1.800 tickets x S25/ticket x 7 shows = 5315.000). Only a small proportion of tickets for the first week are yet to be sold ($35,000 - 200 tickets x 525 ticket x 7 shows). Bob expects to sell out eas- ily, he says there's only a remote risk that SRS will sell the currently unsold tickets at a discount Although Bob is excited, he also is worried about the ongoing labor dispute with several supporting actors. These actors are threatening to go on strike if they do not receive a 15 percent increase in pay. Bob knows that SRS is offering an increase of only 5 percent, and it's unclear whether the supporting actors are willing to accept less than 15 percent. Because these actors are supporting cast and not the headliners. SRS could replace them, but it is difficult for Bob to estimate at what cost. At least Bob feels good that he has locked in the lead cast, having already paid them in advance for the opening week of performances. He has also paid rent for the theater for the first week of shows. Bob shuddered as he remembered the "Great Disaster of last season, when a full week of shows was unexpectedly cancelled after a nearby water main break, cutting off water supply to the theater until it could be repaired. Shaking off those thoughts, Bob enters your office. He confidently tells you, the financial manager, that you can safely record the ticket sales for opening week as revenue in this month's income statement, which will help offset the expenses already incurred for payroll and rent. He mentions that the bank will be happy to see that SRS is turning a profit because it has expressed concern about SRS's financial per- formance after the difficulties of the previous year. As a new employee, you are eager to please Bob and your superiors. But you also realize that Bob is an artist, not an accountant; and as the accountant, you must decide how to record the ticket sales. Requirements 1. Identify the applicable accounting standards, assuming that SRS uses Interna- tional Financial Reporting Standards (IFRS). 2. Using IFRS as a guide, prepare an analysis of the relevant points of the case and provide a decision about how SRS should account for its ticket sales. Case 2Renovation Costs at the Golf Course Assume today is June 25, 2014. Tony Harper is the manager at Moose Ridge Golf Resort (MRGR). Moose Ridge is an 18-hole golf course located north of Saska- toon and near a popular lake. Currently, the course is undergoing renovations. The renovations are expected to increase the benefits to be derived from the course over its life. Tony remembers that the last set of renovations was completed in 2008 and successfully increased the number of club members by 20 percent, and MRGR has had increased revenues from pre-2008 levels ever since AP Vol. 13 No. 2 - PC vol. 13, n 2 (2014) SHORT CASES IN FINANCIAL ACCOUNTING 153 The total budgeted cost of the renovations is SIO million. MRGR's board of directors has approved, and its management has purchased the materials needed for the renovations. The other major cost of the project is labor time. Ten new employees have been hired to form the renovation team. Labor costs of $250,000 have been incurred since the project began. Although the team is supposed to spend 100 percent of its time on renovations, Tony has witnessed team members performing routine maintenance activities such as mowing the grounds, weeding gardens throughout the course, and unloading the supply trucks for the golf lounge employees. Tony has overheard many regular golfers in the golfers lounge talking excit- edly about the renovation, but Tony is unsure whether the renovations will sub- stantially increase revenue. The board of directors rejected a proposed price increase, and Tony thinks this could limit MRGR's future revenues. He remembers when the neighboring golf course was renovated in 2013, and his friend, also the pro shop manager, was disappointed that revenues stayed fairly consistent with revenues prior to the renovation. On the other hand, Tony knows that MRGR's renovations are more extensive than those completed by the competing golf course, so perhaps MRGR's revenues are more likely to increase. Not only that, but the renovations are all the regulars can talk about. Tony has heard more than once that the regular golfers plan on bringing to the course friends and family who have never golfod at MRGR before. Tony has relayed this information to you. MRGR'S controller. You have recorded all renovations costs as expenses, but with quarter-end approaching and after hearing Tony's comments, you decide to take another look to determine whether the costs are correctly recorded as expenses. Requirements 1. Identify the applicable accounting standards, assuming that MRGR uses Inter- national Financial Reporting Standards (IFRS). 2. Using IFRS as a guide, prepare an analysis of the relevant points of the case and provide a decision about how MRGR should account for its renovation costs. Case 3-Signing Bonus and Related Costs for Professional Athletes Assume today is July 6, 2014. On June 28, 2014. Edmonton's NHL team acquired Wayne Pletzky from New York. To transfer Wayne's playing rights from New York to Edmonton, Edmonton traded its rights to three of its existing players and two future draft picks. Despite this high cost, Wayne will instantly make Edmon- ton's team more competitive. The team's general manager, Frank Klassen, is cer- tain that the trade will bring more fans and more money) to the team's home games. AP Vol 13 No.2 - PC vol. 13, n 2 (2014)