FASB ASC Case #2A(1)

FASB ASC Case #2A(1) - • All references to the FASB...

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FASB A CCOUNTING S TANDARDS C ODIFICATION C ASE #2 You are a staff accountant at the Red Hen Company, which produces, processes, and sells fresh eggs. The estimated useful life of a hen flock is approximately two years. After two years, the flock is slaughtered and sold to soup companies. The company is in the process of preparing its year-end financial statements. The controller and the chief financial officer (CFO) disagree on how to report the company’s egg-laying flock on the balance sheet. The controller considers the company’s operating cycle to be two-years and wants to present the cost of the egg-producing flock as inventory in the current asset section of the balance sheet. He feels that the hens are goods awaiting sale. The CFO thinks that the flock should be classified as property, plant, and equipment because the hens are used in the production of product – the eggs. Answer the following questions. When completing your answers, you should consider the following:
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Unformatted text preview: • All references to the FASB Accounting Standards Codification must be properly cited. • Appropriate organization, style, and grammar must be used. • The case must be completed in groups of 3 to 4 students. 1. What is the name and number of the topic that addresses the accounting for agricultural production activities in the FASB Accounting Standards Codification? 2. Which entities must apply the guidance contained in this topic? Which entities are specifically exempted from the guidance in this topic? Would the guidance in this topic apply to Red Hen Company? Explain. 3. What type of animal does the topic consider the egg-laying flock to be? Explain. 4. How should the Red Hen Company report its flock of egg-laying hens on the balance sheet? 5. Would your answer to Question 4 be the same if the company instead raised dairy cows for the production of milk? Explain....
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This note was uploaded on 12/14/2011 for the course MGT 268 taught by Professor Paragkosalge during the Spring '08 term at Grand Valley State.

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