just solve exhibit 2 (product analysis)

rest just for reference

thank you

EXHIBIT II - ANALYSIS OF NEW PRODUCT LAUNCH PRODUCT DESCRIPTION: FD700001 (launched July 2, 2021) UNIT PRICE: $65.00 UNITS SOLD: 10,250 The company provides customers with a one-year parts and labour warranty for this new product. Prior to the launch of the product engineers estimate the warranty costs in the first year of the product launch would be 15% of the selling price. From the launch date, actual parts and labour totalled $32,500 which has been recorded in selling expenses on the Statement of Comprehensive Income. When the product is sold, customers have the opportunity to purchase an optional warranty that extends the original one-year warranty by two years. To provide an incentive for customers to purchase the extended warranty, the FD700001 combined with the extended warranty sells for $70.00. Within 30 days of the expiration of the initial one-year warranty, customers have the option of purchasing the extended warranty as a standalone purchase for $15.00. The strategy appears to have been successful as customers purchasing 9,200 units of the FD700001 to December 31, 2021 elected to purchase the bundled product and extended warranty. The revenue for these bundled sales has been recognized in the financial statements. STANDARD FAUCET CORP. You, Mario Saunders CPA, recently joined Standard Faucet Corp. (SFC), a publicly accountable entity as Accounting Manager. It is February 15, 2022 and you are reviewing the December 31, 2021 year-end working papers prepared by Sarah Jones who recently enrolled in the CPA Ontario Professional Education Program. She has a strong bookkeeping background but has admitted to uncertainty around complex accounting issues. The external auditors will be commencing their audit in a couple of weeks. As you review Sarah's work, you know that adjusting entries may be required but you also want this to be a teaching opportunity. In a future meeting with Sarah when you review the adjusting entries, you also want to provide her with background and support for the adjusting entries you recommend. The first tab in Sarah's working papers is Accounts Receivable. She previously met with the Credit Department to assess collection issues. She mentioned to you that, based on the results of her discussion, the Allowance for Expected Credit Losses appears reasonable. Included in this section is a proposal (Exhibit 1) to factor the Accounts Receivable. Sarah's left a note in the file asking for your help in determining the journal entry that would be recorded in the event that one of the two factoring proposals is accepted. In the last section of the working papers on Accounts Receivable is a summary Sarah has been asked to prepare (Exhibit II) for a new product that was launched early in July 2021 in the Faucet Division. When examining the Inventory section, you observe that Sarah has prepared a separate analysis of the Digit Division's inventory. This area of the business has been attracting the attention of the Board of Directors due to poor performance. Sarah has completed an analysis of the major inventory components assessing the inventory cost and estimated Net Realizable Value (Exhibit II) but she is not sure if any journal entries will be needed. While considering the Digit Division, you also flip to the Fixed Asset section where Sarah has prepared a listing of the division's equipment. As part of the review conducted by the Board, an analysis has been prepared of the expected sales of the division and the estimated fair value of the equipment (Exhibit IV). All of the equipment is part of a continuous operation used to manufacture the products sold by the Digital Division While examining the rest of the fixed asset working papers, you notice a memo from the President (Exhibit V) regarding an accounting option he has heard about while attending a recent seminar. What caught Mario's attention was the President's statement regarding Head Office land. The final section to be reviewed was the investment section. During 2019, the company was successful in a patent infringement case with the Court awarding damages to SFC in the amount of $7,500,000. With mnany has made investments detailed in Exhibit VI. EXHIBITI-FACTORING OF RECEIVABLES Growth Strategy Financial Corp. (GSFC) has made an offer to SFC to purchase (factor) 80% of the good receivables. GSFC has defined good receivables as those customer balances 90 days or less. GSFC has reviewed the aged Accounts Receivable and has determined that the balance of good Accounts Receivables is $720,000. The factoring proposal made by GSFC is two-fold. The factoring can be with recourse or without recourse. The details of the proposals are as follows: i. Proposal A - Without Recourse SFC will transfer 80% of the good Accounts Receivables to GSFC with GSFC having the contractual rights to receive the customer payments directly. SFC will receive 82% of the value of the transferred Accounts Receivable and SFC will have no continuing interest in the transferred Accounts Receivable. II. Proposal B - With Recourse SFC will transfer 80% of the good Accounts Receivable to GSFC with GSFC collecting the accounts. GSFC will assess a charge of 9.0% of the transferred Accounts Receivable and will also reserve an amount equal to 5.25% to cover probable adjustments payable to customers. It is estimated that the fair value of the recourse obligation would be 10% of the transferred Accounts Receivable. REQUIRED Prepare a memo to Sarah based on your review of the working papers she has provided. EXHIBIT II - ANALYSIS OF NEW PRODUCT LAUNCH PRODUCT DESCRIPTION: FD700001 (launched July 2, 2021) UNIT PRICE: $65.00 UNITS SOLD: 10,250 The company provides customers with a one-year parts and labour warranty for this new product. Prior to the launch of the product engineers estimate the warranty costs in the first year of the product launch would be 15% of the selling price. From the launch date, actual parts and labour totalled $32,500 which has been recorded in selling expenses on the Statement of Comprehensive Income. When the product is sold, customers have the opportunity to purchase an optional warranty that extends the original one-year warranty by two years. To provide an incentive for customers to purchase the extended warranty, the FD700001 combined with the extended warranty sells for $70.00. Within 30 days of the expiration of the initial one-year warranty, customers have the option of purchasing the extended warranty as a standalone purchase for $15.00. The strategy appears to have been successful as customers purchasing 9,200 units of the FD700001 to December 31, 2021 elected to purchase the bundled product and extended warranty. The revenue for these bundled sales has been recognized in the financial statements. STANDARD FAUCET CORP. You, Mario Saunders CPA, recently joined Standard Faucet Corp. (SFC), a publicly accountable entity as Accounting Manager. It is February 15, 2022 and you are reviewing the December 31, 2021 year-end working papers prepared by Sarah Jones who recently enrolled in the CPA Ontario Professional Education Program. She has a strong bookkeeping background but has admitted to uncertainty around complex accounting issues. The external auditors will be commencing their audit in a couple of weeks. As you review Sarah's work, you know that adjusting entries may be required but you also want this to be a teaching opportunity. In a future meeting with Sarah when you review the adjusting entries, you also want to provide her with background and support for the adjusting entries you recommend. The first tab in Sarah's working papers is Accounts Receivable. She previously met with the Credit Department to assess collection issues. She mentioned to you that, based on the results of her discussion, the Allowance for Expected Credit Losses appears reasonable. Included in this section is a proposal (Exhibit 1) to factor the Accounts Receivable. Sarah's left a note in the file asking for your help in determining the journal entry that would be recorded in the event that one of the two factoring proposals is accepted. In the last section of the working papers on Accounts Receivable is a summary Sarah has been asked to prepare (Exhibit II) for a new product that was launched early in July 2021 in the Faucet Division. When examining the Inventory section, you observe that Sarah has prepared a separate analysis of the Digit Division's inventory. This area of the business has been attracting the attention of the Board of Directors due to poor performance. Sarah has completed an analysis of the major inventory components assessing the inventory cost and estimated Net Realizable Value (Exhibit II) but she is not sure if any journal entries will be needed. While considering the Digit Division, you also flip to the Fixed Asset section where Sarah has prepared a listing of the division's equipment. As part of the review conducted by the Board, an analysis has been prepared of the expected sales of the division and the estimated fair value of the equipment (Exhibit IV). All of the equipment is part of a continuous operation used to manufacture the products sold by the Digital Division While examining the rest of the fixed asset working papers, you notice a memo from the President (Exhibit V) regarding an accounting option he has heard about while attending a recent seminar. What caught Mario's attention was the President's statement regarding Head Office land. The final section to be reviewed was the investment section. During 2019, the company was successful in a patent infringement case with the Court awarding damages to SFC in the amount of $7,500,000. With mnany has made investments detailed in Exhibit VI. EXHIBITI-FACTORING OF RECEIVABLES Growth Strategy Financial Corp. (GSFC) has made an offer to SFC to purchase (factor) 80% of the good receivables. GSFC has defined good receivables as those customer balances 90 days or less. GSFC has reviewed the aged Accounts Receivable and has determined that the balance of good Accounts Receivables is $720,000. The factoring proposal made by GSFC is two-fold. The factoring can be with recourse or without recourse. The details of the proposals are as follows: i. Proposal A - Without Recourse SFC will transfer 80% of the good Accounts Receivables to GSFC with GSFC having the contractual rights to receive the customer payments directly. SFC will receive 82% of the value of the transferred Accounts Receivable and SFC will have no continuing interest in the transferred Accounts Receivable. II. Proposal B - With Recourse SFC will transfer 80% of the good Accounts Receivable to GSFC with GSFC collecting the accounts. GSFC will assess a charge of 9.0% of the transferred Accounts Receivable and will also reserve an amount equal to 5.25% to cover probable adjustments payable to customers. It is estimated that the fair value of the recourse obligation would be 10% of the transferred Accounts Receivable. REQUIRED Prepare a memo to Sarah based on your review of the working papers she has provided