Respond to the following prompts. Please type using a word processing program and bring a printed

copy to class. Write much or as little as you feel necessary to answer each question to the best of your

ability. You may use all available resources to complete case - e.g., lecture slides, notes, your book,

and the Accounting Standards Codification. Collaboration with others in your group is allowed to the

extent that it is helpful. How you work together is up to you - however, I encourage everyone in the

group to take at least some part for every question. Please turn in only one finished assignment for each

group.

assignments electronically.

Use appropriate citations where relevant and according to your professional judgment. For questions

requiring use of the codification, please use the following style:

1) Cite the ASC down to the Paragraph. For example, (ASC 330-10-05-01)

2) Copy-paste the paragraph you cite from the codification into the word document. This is

what I demonstrated in class.

3) Interpret the codification paragraph into 'plain English' as best you can. In other words, how

would you explain the appropriate accounting treatment to a colleague, boss, or business

partner who has a basic understanding of accounting? You may (and are encouraged to) use

debits and credits or t-accounts to illustrate the accounting if appropriate.

For grading, I will focus primarily on the interpretation and communication of the content in the

codification section(s). Avoid citing the textbook and do not expect that repeating what can be found in

your textbook will earn you full credit. I expect to see you contribute something new and interesting to

the accounting for a given topic.

Question 1 (20 points):

After working for an accounting firm for several years, you end up joining a manufacturer of

electronic components that go into a variety of consumer products. Because the electronic

components require specialized raw materials, including rare earth metals, the firm places

noncancelable orders with its primary suppliers up to two years ahead of time at a set price and

amount. However, due to turmoil in the world economy, the price of these metals has suddenly

fluctuated dramatically. You are concerned you may need to account for this situation. Determine

the appropriate accounting for all possible circumstances, citing ASC where appropriate.