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Johnson and Johnson (J&J) is a public company with a calendar year end. J&J manufactures

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Question;Access::www.aaahq.orgOnLefthandMenu:enterAcademicAccountingAccessFASBCodificationStudentaccess:UsernameAAA51268PasswordzZ8Fq3WYourpapershouldhaveyournameandAccounting401asthecoversheet.1)2)3)4)5)6)TimesNewRomanfont,12pointDoublespacing.1inchsideandtopmargins.3pagesoftext.Referencestothestandardsmustbecompleteinordertobegradedascorrect.GrammaticallycorrectJohnson and Johnson (J&J) is a public company with a calendar year end. J&J manufacturestoothpaste that is ultimately purchased and used by consumers. The supply chain consists ofthe following:J&J sells its toothpaste to a wholesaler,Wholesaler sells the toothpaste to a retailer, andRetailer sells the toothpaste to a consumer.J&J launches a new toothpaste, Shiny Teeth, on September 1, 2012. In connection with thislaunch, J&J developed a comprehensive marketing campaign. Part of the campaign involvesreleasing approximately 500,000 coupons in Sunday newspapers in locations in which the newtoothpaste will be sold. When a consumer redeems the coupon upon purchasing the productfrom a retailer, the price charged is reduced by $1. This retailer sends the coupon to aclearinghouse. J&J reimburses the retailer for the discount provided to the customer.J&J discontinues the coupons for this product on October 1, 2012. The coupons expire onOctober 1, 2013. J&J has not offered coupons on toothpaste before, nor have they offeredcoupons with a one-year expiration period. They have, however, offered coupons with a sixmonth expiration date on other products. These coupons had a 1.5 percent redemption rate.J&J estimates that approximately 2 percent of the toothpaste coupons will be redeemed bycustomers prior to the expiration date. However, J&J does not have any data on theredemption rate for coupons offered on toothpaste. J&J has sold and recognized revenue forover $2,000,000 of Shiny Teeth into the supply chain by September 30, 2012.J&J is considering how it should account for the Shiny Teeth coupon drop that took place onOctober 1, 2012. In doing so, J&J asks for your help. Prepare a memo addressing thefollowing questions. Base your analysis of these questions on the relevant authoritativeliterature and discuss the support in that literature for your conclusions. Be sure to cite therelevant components of the Condification in your discussions. Citations are not required forjournal entries.1. What are the accounting issue(s) and the relevant components of the authoritativeliterature?2. When should J&J recognize the effects of the Shiny Teeth coupon drop on its financialstatements?3. What is the dollar amount of the effect of Shiny Teeth coupon drop on J&Js financialstatements?4. What would constitute sufficient evidence to support J&Js expected redemption rateof 2 percent?5. What are the accounting implications if J&Js estimated redemption rate changes to 1.5percent at a later point in time?6. How should the effects of the Shiny Teeth coupon drop be reflected in the incomestatement?7. What are the necessary journal entries?

 

Paper#38883 | Written in 18-Jul-2015

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