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Required:Read the attached case. Assume you are auditing Runway Discount. The partner of your engagement teamasked you to prepare a...

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Required: Read the attached case. Assume you are auditing Runway Discount. The partner of your engagement team asked you to prepare a memo that addresses the questions at the end of the case. Your memo should thoroughly and concisely address the questions, including your opinion, and valid arguments to support your opinion. All conclusions and recommendations in your memo should be properly supported. The memo should be a maximum of the 2 pages. Supporting documents in addition to the 2 page memo are permitted, i.e. the memo itself cannot exceed 2 pages, but appendices can be attached in addition to the memo. You may do the research part of the assignment with other people. However, the writing needs to be your own. If I suspect that your writing is similar to another person?s writing, I will give failing grades to both. I will no t give the benefit of the doubt. The FASB Codification website should be used to find appropriate guidance. The login address for the FASB Codification website is http://aaahq.org/ascLogin.cfm and the username and password for NMSU;students are as follows;Username - AAA53028 Password ? MmUe39Z Additionally, the following website will be useful for IFRS standards: http://www.iasplus.com/en/standards Hint: Focus on the following pronouncements;ASC 605-50 Revenue Recognition: Customer Payments and Incentives (ASC 605-50) IAS 18, Revenue (IAS 18) IFRIC Interpretation 13, Customer Loyalty Programmes (IFRIC 13);Grading Criteria: The memo will be evaluated in the following areas;Critical Thinking: The memo will be evaluated on the memo?s ability to draw meaningful conclusions and recommendations that are supported by valid arguments. (5 pts.);Writing Skills: The memo will be evaluated on the quality of the writing and the ability of the memo to communicate clearly (i.e. the report should be written clearly and concisely, and be free of spelling and grammatical errors). (10 pts.);Overall Quality: The memo will be evaluated on its overall effectiveness in presenting your analysis and conclusions. (5 pts.) Case 13-01 Refer-a-Friend Program;Runway Discount (?Runway? or the ?Company?) is a privately held online retailer that sells discounted high-end fashion. In an effort to increase its sales and customer base, Runway implemented a customer referral marketing campaign (the ?Refer-a-Friend Program?) whereby existing customers can refer friends to Runway and receive a $25 credit towards the purchase of future merchandise. The terms of the program are as follows: Runway offers existing customers (the ?Existing Customer?) a $25 credit (the ?$25 Referral Credit?) if the Existing Customer refers a friend (the ?New Customer?) to Runway?s Web site and the New Customer purchases merchandise from Runway. After a purchase is made by the New Customer, the Existing Customer receives a $25 credit to be applied to a future purchase from Runway. The $25 Referral Credit represents the fair value of the cost Runway would pay to acquire a new customer from an unrelated third party or marketing firm who is not a purchaser of its products. The program is open to all of Runway?s customers and does not need to be combined with any initial or existing purchases.;Required;1. How should the $25 Referral Credit be recorded in Runway?s Income Statement;? as a reduction of revenue or as a marketing expense? 2. When would Runway record the $25 Referral Credit? What are the entries Runway would record when the $25 Referral Credit is earned;by the Existing Customer?;What are the entries Runway would record when the $25 Referral Credit is redeemed against a $100 purchase made by the Existing Customer?;3. Runway is planning to adopt IFRSs in the near future. What is the relevant accounting guidance they would follow under IFRSs?

 

Paper#76568 | Written in 18-Jul-2015

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