Case 16-2: The Cable Guys Accounting Essay

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Question 1



The answer is yes when it comes to this question and the reason is built on US GAAP (Segment 605), it is right for CoAx to recognize revenue related to Transaction 1 previous to the date on which CableCo acquires transfer of the 1,000 feet that involves the 18 AWG coaxial cable. However, this takes place because of the succeeding reasons:



Now for every para 37 of IASB 605, it appears that this case is equal to the bill and holds arrangements. It makes the point that an entity will need to be able to figure out when it has pleased its performance duty to move a brand by assessing when the customer can seize control of that brand. If some contracts, control is moved either when the merchandise is delivered to the client's website or when the brand is distributed which rest on the terms contract. Nevertheless, for some contracts, a client could obtain rule of a product although the product still is in physical control of the individual. In particular cases, the client can guide the use of and get all the long-lasting advantages from the brand even though it has chosen not to exercise its opportunity to take physical control of that marketplace. Thus, the entity is not capable in any way to regulate the brand. As a replacement, the entity proposes custodial services to the customer that involves the assets of a client.

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That is why, Coax in this case, is only functioning as a custodian and control have previously been transported to CableCo. Additional, risks of possession of the cable have passed to CableCo. Furthermore, CoAx does not have added performance responsibilities with respect to the cable bought by CableCo. Therefore, it is proper to recognize income.

Question Two



IASB 605 makes the point that where the terms of delivery are free on board delivery point, is saying that the proper title to the product permits to the client upon delivery of the possessions to the carrier. Now, the customer reaches control of the merchandise at the point of offering the goods to the transporter if at all possible. Even though the customer does not have the physical ownership of the commodities, it has the official title and can thus sell the brand to another party if it wants. Likewise, the entity which is the seller is prevented from marketing those goods to a different party.



For this reason, in this case, it is proper to categorize proceeds upon transport of the supply to the delivery service although the delivery service is a 100% less significant of CoAx. What's more, it is interesting to know that….....

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