The purpose of this case is to introduce you to the information available in the codification and
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Question:
The purpose of this case is to introduce you to the information available in the codification and to learn to access basic concept statements and codification information and references. You need to use the inline citation format and the letter format described in the documentation supplied in the course.
Case Overview:
Your firm, Fusilier, Ide, Star, & Haddock, CPAs FISH was recently hired by Orange Tech Incorporated OTI one of the largest computertechnology manufacturersretailers in the world, to perform the audit for OTI. The company had the following information that is pertinent to this case.
OTIs offices are located at Tech Street, Gulfport, MS
OTI has a fiscal year end FYE of August The Fiscal Year is September August xx
OTI had shares of common stock outstanding at the beginning of FYE xx
The following events occurred during this past fiscal year.
On October shares of common stock were issued for cash.
At the beginning of the fiscal year there were shares of convertible preferred stock outstanding. Each preferred stock is convertible into shares of common stock. The preferred stock has a semiannual dividend rate of $ paid on December and June On February holders converted of the preferred stock shares to common stock shares
On June shares of common stock were issued for cash.
On July an additional shares of common stock were issued for cash.
FYE xx Income Loss from Continuing Operations Net Income Loss
Quarter SepNov $ $
Quarter DecFeb $a $
Quarter MarMay $ $
Quarter JunAug $ $
Total for the Year $ $
a OTI had a $ loss on discontinued operations net of tax in Quarter
As a Senior Auditor for FISH CPAs, you have reviewed the calculations that OTI used to calculate Earnings Per Share EPS The calculations are as follows:
Income Shares EPS for the period
$
$
$ $
$ $
$ $
$
b $
b
Upon your review, you noted that there is only one EPS shown and you are almost certain that these calculations are not correct. You discussed your concern with the Chief Financial Officer CFO of OTI, Bailey Lee. Bailey feels that the calculation is correct but has asked you to evaluate the calculations based on the data given above and determine if there are any errors. You have agreed to do this. You also stated that you would provide information on how EPS should be shown on the FYE Income Statement and any necessary Disclosures that OTI is required to make.
Required:
The FISH CPAs office is located at: Beach Boulevard, Biloxi, MS
Draft a letter the date of the letter is the actual day you write the letter addressed to Bailey Lee, OTI CFO, evaluating OTIs EPS calculations and disclosures and the correct reporting on the FYE financial statements. Include a discussion and specific recommendations of how OTI should calculate and report the information noted above. You should include specific guidance Include in your discussion specific and complete references to accounting pronouncements that you used to formulate the basis of your recommendation. You need to go to the FASB Codification site for your research of this case. You should NOT include codification with an S in the numbering. This is SEC guidance, which is good, but should not be the basis of your recommendations. The format should follow the example document and the length of the paper should be pages, not including the conclusion ie pages is NOT pages
Related Book For
Intermediate Accounting
ISBN: 978-0077400163
6th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson
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