please the attachment ... you will find the question and also you will find the sloution for it ... please try to revise the the answer . it is due on 23 September 2011 thanks 
It is due on Friday 23 at 12 pm Research Memo You are assisting the engagement partner with the audit of Conglomention, Inc , a new client. The partner has reviews the financial statements of the company and commenced field work in the performance of an audit . He asks you to research the following two issue and to provide a memo for his use. He asks you clearly document . the foundations for your advice Conglomention, Inc offers customers purchasing its appliances separately priced (extended) warranties. Lowland services these extended warranties. Its customers can receive no refunds for not using these warranties, and, of course, Lowland must honor these contractsregardless of any future costs in doing so. It also \"tracks\" the profits and losses these types of warranties generate by appliance categoryin order to help maintain a competitive price and costing structures. How should Lowland recognize the revenues and ?expenses of such extended warranties Conglomention has construction subsidiary which build various commercial structures such as gymnasiums, hotel and strip mall. The company building a hotel for speculative purposes. That is, the Company has not yet found a buyer for the hotel, but expects to do so within a few months. Conglomention ,who expects to spend about another two years to complete construction of the hotel, asks his accountant if interest and property taxes associated with this construction site should be capitalized or expensed. At ?what rate of interest should Herb use, if any, to capitalize any interest costs In good form, please present the requested advice along with your key words search, .the databases used, and accounting authorities used to support your conclusions See the solution manual : Please do not try to do the same solution manual .. try to use your own words ..... If you use the same solution it considered cheating ... I bring : the solution to help you so you do not need to have time to figure the solutions Conglomention offers customers purchasing its appliances separately priced (extended) warranties. Lowland services these extended warranties. Its customers can receive no refunds for not using these warranties, and, of course, Lowland must honor these contractsregardless of any future costs in doing so. It also \"tracks\" the profits and losses these types of warranties generate by appliance categoryin order to help maintain a competitive price and costing structures. How should conglomention recognize the revenues ?and expenses of such extended warranties Problem Identification: How should a company recognize revenues and expenses associated with separately priced, extended warranties? Such .contracts generally are (potential) loss contingencies Keywords: Loss contingency; non-refundable Conclusion: Per 605-20-25-3, such extended warranties constitute \"product maintenance contracts,\" where Lowland agrees to perform certain agreedupon services to these products for a specific time period. As such, it should recognize revenue on a straight-line basis over the contract period, unless sufficient historical evidence indicates a superior alternative method of doing so. Lowland should also \"match\" any related costs in the same time period as the associated revenues. Moreover, Lowland should recognize a loss on such contracts that have an expected net cumulative loss over the remaining contract periods. Further information on this topic also appears in 450-20-053 and 460-10-25-5; FASB Concepts Statement No. 5, pars. 83 and 84; and .FASB Concepts Statement No. 6, par.197 Conglomention Construction Company is building a hotel for speculative purposes. That is, the Company has not yet found a buyer for the hotel, but expects to do so within a few months. Conglomention , who expects to spend about another two years to complete construction of the hotel, asks his accountant if interest and property taxes associated with this construction site should be capitalized or expensed. At what rate of interest should Herb use, if ?any, to capitalize any interest costs Problem Identification: Should property taxes and interest during construction of a hotel be capitalized or expensed? What rate of interest should be used to capitalize any interest costs? Does the fact that no present buyer for the project does not exists ?affects he results derived .Keywords: Property taxes; interest: capitalization; construction Conclusion: Per 720-30-45-3, property taxes paid for property under development for use or sale can be capitalized but is usually treated as a period expense. Assets constructed for sale are considered qualifying assets for interest capitalization per 835-20-15-5. Per 835-20-30-3 through 30-4, Herb should use a rate of interest that can be \"directly\" associated with the project under construction. Or a weighted average of rates applicable to other debt that Conglomention has incurred (even if it .(were associated with other projects Conglomention Inc. Memo September, 23rd 2011 To: The Engagement Partner From: Kris CC: Date: September 23, 2011 Re: Auditing Issues Conglomention Inc. Memo September, 23rd 2011 To: The Engagement Partner From: Kris CC: Date: September 23, 2011 Re: Auditing Issues Conglomention Inc. Memo September, 23rd 2011 To: The Engagement Partner From: Kris CC: Date: September 23, 2011 Re: Auditing Issues
