Can someone help me with an executive summary on the following it has to be less than a page Thank you Question 1 As of December 31, 2011, what amount, if any, of sales taxes due should be recognized in eVade's financial statements Which alternative is a more appropriate solution According to FASB regulations regarding Accounting for Uncertainty in Income Taxes, Paragraph B18, every business is accountable in compliance, self assessment, and self reporting Depending on the type of business, a company needs to understand the tax rates imposed by IRS To solve the eVade case, it is essential to evaluate and consider accounting standards regarding Loss Contingencies 450 20 25 2 A loss contingency arises from past events, which could potentially create a liability The way this obligation is recognized on financial statements depends on the classification of the loss contingency Contingent liability is categorized as probable, reasonably possible, or remote Regularly, the probability of loss indicates the reporting approach To record an obligation in the current period, the even must be probable, more than 50 likely to happen, and the amount of loss can be reasonably estimated In our example, due to State X's recent court ruling to introduce the economic nexus, eVade faces a potential sale nexus tax accountable to State X It is stated that eVade does not have a brick and mortar store presence in State X Moreover, the organization never recorded any tax sales or never reported interest and penalties expenses from 2011, when the company began its operations in this state State X's total amount of obligations, eVade, estimated to be $50 million in sales tax, $6 million in interest, and $4 million in penalties for five years operating in State X It is important to note that the company identifies the risk of detention as not to be probable Therefore, according to FASB 450 20 25 2, 450 20 25 4, and 450 20 25 5, the chance of validating the event will occur is less than probable and more than remote It can be concluded that there is no need to record anything in the Balance Sheet even though eVade made an exact estimate Nevertheless, the firm must disclose suitable footnotes concerning this loss contingency and the amount of $60 million, including the $50 million in sale tax plus $4 million in penalties, plus $6 in interest Question 2 What effect, if any, does eVade's decision to participate in the tax amnesty program have on the amount recognized as of March 31, 2012 Which alternative is a more appropriate solution As the situation displays, State X decides on offering a tax amnesty program to anyone having a tax liability Usually, the states would enact a tax amnesty program to collect the problematic revenue On the other hand, it is an excellent opportunity for organizations to pay fewer taxes on previous tax liability and avoid penalties On March 15, 2012, eVade decided to participate in this tax amnesty, which will allow paying by 50 less in tax fees and avoiding penalties and interests Hence, following 250 10 50 9 and 250 10 50 11 standards, the company must recognize the amount of liability of $25 million in the financial statements on March 31, 2012 Based on previous standards, this loss will be reflected in the financial statements for 2012, but it will not be reflected in the financial statements in 2011 Journal entry for March 15, 2012 Accounts Payable 25 million Sales Tax liability 25 million Question 3 What amounts should be recognized in the financial statements for the $25 million payment on June 15, 2012 It is crucial to address the revenue recognition principle 606 10 55 49, which refers to recognizing the liability of eVade on the financial statement due to being noncompliant to State X tax laws As mentioned in question 2, the financial statements for 2011 will remain unchanged, and the $25 million payment will be recorded as an entry to the 2012 financial statement If the amount is recognized as a liability in March, this payment will extinguish this liability and will not have any additional income statement entry Journal entry for June 15, 2012 Sales Tax liability 25 million Cash 25 million

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Can someone help me with an executive summary on the following  it has to be less than a page  Thank you  Question 1  As of December 31, 2011, what amount, if any, of sales taxes due should be recognized in eVade's financial statements  Which alternative is a more appropriate solution  According to FASB regulations regarding Accounting for Uncertainty in Income Taxes, Paragraph B18, every business is accountable in  compliance, self assessment, and self reporting   Depending on the type of business, a company needs to understand the tax rates imposed by IRS  To solve the eVade case, it is essential to evaluate and consider accounting standards regarding Loss Contingencies 450 20 25 2  A loss contingency arises from past events, which could potentially create a liability  The way this obligation is recognized on financial statements depends on the classification of the loss contingency  Contingent liability is categorized as probable, reasonably possible, or remote  Regularly, the probability of loss indicates the reporting approach  To record an obligation in the current period, the even must be probable, more than 50  likely to happen, and the amount of loss can be reasonably estimated  In our example, due to State X's recent court ruling to introduce the economic nexus,  eVade  faces a potential sale nexus tax accountable to State X  It is stated that  eVade  does not have a brick and mortar store presence in State X  Moreover, the organization never recorded any tax sales or never reported interest and penalties expenses from 2011, when the company began its operations in this state  State X's total amount of obligations,  eVade,  estimated to be $50 million in sales tax, $6 million in interest, and $4 million in penalties for five years operating in State X  It is important to note that the company identifies the risk of detention as not to be probable  Therefore, according to FASB 450 20 25 2, 450 20 25 4, and 450 20 25 5, the chance of validating the event will occur is less than probable and more than remote  It can be concluded that there is no need to record anything in the Balance Sheet even though  eVade  made an exact estimate  Nevertheless, the firm must disclose suitable footnotes concerning this loss contingency and the amount of $60 million, including the $50 million in sale tax plus $4 million in penalties, plus $6 in interest  Question 2  What effect, if any, does eVade's decision to participate in the tax amnesty program have on the amount recognized as of March 31, 2012  Which alternative is a more appropriate solution  As the situation displays, State X decides on offering a tax amnesty program to anyone having a tax liability  Usually, the states would enact a tax amnesty program to collect the problematic revenue  On the other hand, it is an excellent opportunity for organizations to pay fewer taxes on previous tax liability and avoid penalties  On March 15, 2012,  eVade  decided to participate in this tax amnesty, which will allow paying by 50  less in tax fees and avoiding penalties and interests  Hence, following 250 10 50 9 and 250 10 50 11 standards, the company must recognize the amount of liability of $25 million in the financial statements on March 31, 2012  Based on previous standards, this loss will be reflected in the financial statements for 2012, but it will not be reflected in the financial statements in 2011  Journal entry for March 15, 2012  Accounts Payable 25 million Sales Tax liability 25 million Question 3  What amounts should be recognized in the financial statements for the $25 million payment on June 15, 2012  It is crucial to address the revenue recognition principle 606 10 55 49, which refers to recognizing the liability of  eVade  on the financial statement due to being noncompliant to State X tax laws  As mentioned in question 2, the financial statements for 2011 will remain unchanged, and the $25 million payment will be recorded as an entry to the 2012 financial statement  If the amount is recognized as a liability in March, this payment will extinguish this liability and will not have any additional income statement entry  Journal entry for June 15, 2012  Sales Tax liability 25 million Cash 25 million

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Managerial Economics Foundations of Business Analysis and Strategy

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Managerial Economics Foundations of Business Analysis and Strategy

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