ACC 201-03, Spring 2013
Writing Assignment - 10% of Final Grade
CaseJoanna Richards owns DVD-Online, Inc. DVD-Online is in its second year of business and has a December 31 yearend. The company is Web-based, offering DVD rentals to online customers for a fixed monthly fee. For $30 per month, a customer receives DVDs each month, one at a time as the previous one is returned. No matter how many DVDs a customer uses, the fee is fixed at $30 per month. Customers sign a contract for a year, so DVD-Online recognizes $360 sales revenue each time a customer signs up for the service.
Although DVD-Online is not publicly traded, Joanna does put the company’s financial statements on the company’s Web page for customers to see. She is also planning to send the financial statements to a new vendor that has lower pricing for bulk purchases. Further, the business is growing rapidly and Joanna needs to secure a loan from the bank. She knows that the company needs to show a positive net income to secure the loan.
The following transactions occurred in December:
· On December 20th a customer purchased 10 one-year service contracts as gifts for family members. The customer selected for the service to begin January 1st and went ahead and paid $3,600 to cover a full year of service for each contract. Joanna was excited to receive the cash and recorded the sales revenue on December 20th.
· Joanna purchased $10,000 of new DVD inventory on December 15th with 30 day terms for payment. She has begun promoting the new arrivals on the company’s website, but does not record the new DVD’s in her accounting records since she has not yet paid for the DVD’s.
· Joanna employs one administrative assistant, two sales people, and a web-site developer. She pays them on the 5th of each month for working the prior month. She does not record their salaries until she pays the employees.
Joanna has heard about GAAP, but she does not see any reason to follow these accounting principles.
Questions for Essay Response:
1. A stakeholder of a company is defined as any party interested in the operations of a business, including owners, lenders, employees, suppliers, customers, and government agencies. Who would you select as the three most important stakeholders of DVD-Online? Why?
2. Explain how DVD-Online would account for December transactions if it did follow US GAAP and what impact, if any, each transaction would have on net income if recorded following US GAAP.
3. Do you think Joanna should use US GAAP? Why or why not?
4. Do you think Joanna has any incentive and/or pressure to record the transactions as described above versus recording them using US GAAP? Explain.
5. What are
the ethical issues in this case and what is the appropriate course of action? Explain.
Grading
The writing assignment is worth 10% of your final grade. The assignment will be graded equally on two components; content and writing. Half of the writing assignment grade will be based on how well you answer the questions in your own words and half of the grade will be based on your writing (grammar, spelling, sentence structure, etc). Any information contained in your essay that is incorrect will result in points being deducted so be sure your responses are appropriate. Be sure to address all of the questions. The grading rubric that will be used is as follows:
1. Appropriately identifies stakeholders and properly explains selections.
Poor________ Fair________ Good________ Very Good________ Excellent________
(2 points) (4 points) (6 points) (8 points) (10 points)
2. Correctly explains how DVD-Online would account for the December transactions under US GAAP and the effect (if any) to net income.
Poor________ Fair________ Good________ Very Good________ Excellent________
(2 points) (4 points) (6 points) (8 points) (10 points)
3. Addresses question 3 and provides an appropriate explanation.
Poor________ Fair________ Good________ Very Good________ Excellent________
(2 points) (4 points) (6 points) (8 points) (10 points)
4. Addresses question 4 above and provides an appropriate supporting explanation.
Poor________ Fair________ Good________ Very Good________ Excellent________
(2 points) (4 points) (6 points) (8 points) (10 points)
5. Addresses question 5 above and provides an appropriate supporting explanation.
Poor________ Fair________ Good________ Very Good________ Excellent________
(2 points) (4 points) (6 points) (8 points) (10 points)
6. Quality of Writing. This includes grammar, spelling, and the ability to write the essay in a coherent, concise, and effective manner.
Poor________ Fair________ Good________ Very Good________ Excellent________
(10 points) (20 points) (30 points) (40 points) (50 points)
Tips for doing well on the assignment:
1. Your response should be professional, fact-based, and unemotional.
2. Proofread your essay! I cannot stress this enough.
3. Have someone else proofread your essay, preferably someone who has not read the assigned article so they can determine whether everything is properly explained.
4. I encourage you to use UNCG resources such as the writing center http://www.uncg.edu/eng/writingcenter/ to help you with your writing or to proofread your essay.
5. Make sure your spelling and grammar are correct.
6. Avoid using clichés (i.e. “Honesty is the best policy”) and exaggerations in your writing and try not to make any judgments of character (i.e. “Jane Smith is a very unethical person”).
7. Do not use citations. Use your own words to answer the questions.
8. It is YOUR responsibility to ensure that your essay is successfully submitted through SafeAssign and that you submit the correct, final version of your essay. Email submissions will not be accepted.
9. Any disputes regarding essay grading must be submitted to me in writing for consideration.
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