Brief Case Assignment #2

Requirement:

Read the background info below. Assume the role of a CPA who has been asked by your client (the controller of Clarkson Outdoors, Inc.) to provide some accounting guidance for shipping and handling charges for internet sales.

Use your available research resources (GAAP codification, textbook) to research the accounting questions asked by the controller.

Prepare a brief (no more than one - page) memo to the controller that addresses, in your own words, the alternatives the controller must considers when making the decision to add a shipping and/or handling charge to customers that purchase online. Cite the appropriate accounting standards to support any alternatives you present to the client. Conclude with your recommendation to the controller.

Grade:

This is a basic writing assignment that should take no more than one hour to complete. You will receive full points based on (1) providing a recommendation based on sound accounting practices, (2) clarity and organization and (3) grammar and spelling.

Case Background:

Your client, Clarkson Outdoors, Inc. is a wholesale merchandising business that sells outdoor furniture. The companys average monthly sales revenue is $250,000 representing approximately 5,000 inventory items sold. Due to rising fuel costs and the gen eral rising costs of processing orders, including returns, the controller is considering adding a charge for shipping and or handling costs on products sold through its website. What is the authoritative guidance for reporting these costs? The controller has one specific question about whether the company must pass through to the customer the exact charge the company would incur or whether it can assess charges based on some reasonable rate or schedule.