You are the financial accountant at Windows Inc. (WI), a private company reporting under ASPE. You are
Question:
You are the financial accountant at Windows Inc. (WI), a private company reporting under ASPE. You are preparing for your upcoming June 30, 2021 year-end. Management has a bonus based on income and they are nervous that may not meet the target this year. It is June 25, 2021, and the sales and procurement managers are excited as they have just completed a deal with Furniture Co (FC). Windows Inc was in need of new office furniture and approached Furniture Co.(FC). FC is completing a massive renovation of its stores and had suggested that they provide furniture to FC in exchange for WI providing their windows. All deliveries have now been made with WI sending windows with an inventory cost of $52,000 and WI receiving all furniture from FC. The managers are excited that they got a great deal as they had seen the list prices of the furniture received totalling $100,000. The sales manager said, “Wow, we just made a profit of $48,000 and we didn’t have to pay any cash for the new furniture!” In a normal transaction of this size and for this inventory, WI would normally sell the windows sent to FC for $88,000. The finance director has asked you to review the transaction and prepare a memo to her on how this transaction should be accounted for.RequiredPrepare the memo to the finance director.
Accounting Principles
ISBN: 978-1119048473
7th Canadian Edition Volume 2
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak