Ribbitt is a small company that operates in Florida by marketing grow-a-frog kits to large toy stores and discount retailers. Each grow-a-frog kit contains a small plastic aquarium tank, gravel, a plastic plant, and a coupon redeemable for one live tadpole. A large inventory of tadpoles are kept on had at all times. To ensure a ready supply of tadpoles, one thousand adult frogs are kept on hand. The reproductive life of an adult frog is about nine months. At that time, the frogs are harvested and sold to J. Lafittes Fine Froglegs. Both the adult frogs and tadpoles were classified as inventory on Ribbitts financial statements. Recently, through selective breeding, the reproductive life of the adult frogs has been extended to three years.

1.How is the new life of the frogs handled? The frogs were (presumably) viable inventory for nine months, meaning that some frogs may have been carried as inventory on GAAP prepared financial statements. The frogs economic life has been extended to three years: Is a restatement necessary?

2.How is the revenue realization on the sale of frogs (for frog legs) handled?