In A Minimum Of 5 To 7 Sentences, Summarize The Background O

Question

In A Minimum Of 5 To 7 Sentences Summarize The Background Of The Case In this case, Marvin Corporation committed to transferring a building to Valerie Corporation unconditionally on March 1, Year 2. The building had an original cost of $125,000 and an appraised value of $175,000 at the time of agreement. The transfer was scheduled to occur after the agreement date, and as of December 31, Year 2, Marvin had not yet transferred the title of the building. Meanwhile, Marvin received a vehicle valued at $140,000, which was recently purchased, as part of this exchange arrangement. The case revolves around how both companies should record these transactions in their accounting records, given the delay in transferring the building's title and the receipt of the vehicle. Assumptions include that the transaction is intended as a sale and that the organizations follow standard accounting principles for revenue recognition and asset recognition. The key issue is determining the appropriate accounting treatment for the building and vehicle at this stage under relevant accounting standards, such as ASC 606 and ASC 845, which govern revenue recognition and nonmonetary exchanges.

Dr. Jack HW Helper · Accepted Answer

The case involving Marvin Corporation and Valerie Corporation presents a complex scenario of accounting for long-term asset exchanges that are scheduled but not yet completed. According to accounting standards, particularly the Financial Accounting Standards Board (FASB) guidelines under ASC 606, revenue recognition is contingent upon the transfer of control of the promised goods or services, which, in this case, is the building for Valerie. Since the title has not been transferred as of December 31, Year 2, Marvin should not recognize revenue for this transaction yet. Instead, Marvin might record the receipt of the vehicle as a receivable or an asset, recognizing it at its fair value, which is close to its purchase price of $140,000. For Valerie, the transaction represents a nonmonetary exchange, and standard practice under ASC 845 suggests recognizing the building at its fair value at the earlier of the date it is available for use or the date of disposal. Since the title has not been transferred yet, Valerie should record the building at its fair value, likely the appraised value of $175,000, assuming control is deemed to have transferred. The disagreement or delay in transfer underscores the importance of timing in asset recognition and the application of control-based revenue recognition principles. This case emphasizes the need for clear documentation and adherence to accounting standards to properly reflect these transactions in the financial statements of both companies. References Financial Accounting Standards Board (FASB). (2020). ASC 606, Revenue from Contracts with Customers. Retrieved from https://asc.fasb.org Financial Accounting Standards Board (FASB). (2021). ASC 845, Nonmonetary Transactions. Retrieved from https://asc.fasb.org Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2022). Intermediate Accounting (16th ed.). Wiley. Lara, E., & Riahi-Belkaoui, A. (2018). Accounting Standards and the Recognition of Nonmonetary Transactions. Journal

In A Minimum Of 5 To 7 Sentences Summarize The Background Of The Case

Paper For Above instruction

References

Related Assignments