Your client, Swanson Products, Inc., is a specialty retailer offering a broad assortment

of brand name electronics and household appliances. Swanson owns and operates

retail stores in all $50$ states in the U$.$S$.$ and also operates an e$-$commerce sales platform

for its products.

Swanson$$s retail store activities in its fiscal year ended December $31,2022$ and

throughout $2023$ to date have been dramatically impacted by lingering effects of the

pandemic including higher labor costs, lower traffic in certain urban areas and recent

large increases in interest costs. While e$-$commerce activity has been strong, Swanson

has experienced overall lower sales activity and related cash flow challenges which they

expect will continue in the coming months.

Swanson has developed a strategy that will require it to consolidate certain store

locations in cities where they have multiple locations and to consider renegotiating the

terms of leases for certain other stores. The store closings will result in the early

termination of certain store leases and the lease renegotiation of the remaining leases

will change Swanson$$s future lease commitments.

Related, as Swanson adapts to the reduced number of stores and lower customer traffic

in other remaining stores, it will be forced to considering a variety of options for retail

employees including both voluntary and involuntary terminations, temporary furloughs,

and reduced work schedules.

Swanson management has asked you to help them understand the financial reporting

implications under U$.$S$.$ Generally Accepted Accounting Principles of two aspects of its

plan using the FASB Codification. In your counsel to Swanson $,$ you should create an

Accounting Issues Memo REQUIRED $2)$ Retail employee furlough$/$termination activities:

Background: Swanson expects to use a combination of employee furloughs

$($temporary layoffs$)$ and voluntary and involuntary employee terminations as cost

saving techniques in the months ahead. The details of Swanson$$s plan consist of:

$-$ Termination of $1,500$ full$-$time retail store employees. On December $1$st$,$

Swanson will offer a one$-$time voluntary termination award of $$5,000($up to

$1,500$ employees$)$ to employees who choose to accept the offer. The amount will

be paid on December $31$st$,$ the termination date. At December $31$st$.,$ employees

who will be involuntarily terminated $($to reach the target of $1,500$ terminations$)$

will receive an involuntary termination benefit of $$2,600.$

$-$ Furloughs of $3$ months will be required for $2,000$ of the remaining full$-$time retail

store employees. Furloughs will be in effect as of December $31$st

$.$ During the

furlough time, employees will continue to receive medical benefit coverage but

will not be required to work and accordingly, will not receive compensation.

Employees may choose to be paid for any unused and previously accrued

vacation and sick time as they begin their furlough. Swanson anticipates that

most furloughed employees will choose this payout option which will allow

employees to receive, on average, one month of pay during their furlough.

$-$ All other retail store employees will either be reassigned to work on activities

relating to the e$-$commerce business or operate on a reduced retail work

schedule for an anticipated $3$ month period beginning January $1$st

$.$

Issue s : Swanson is asking you to determine the appropriate accounting treatment

for each of the above employee approaches. In providing insight to Swanson, you

should also describe how and when your proposed accounting treatment will affect

both balance sheets and income statements in $2023$ and $2024.$

In writing your memo, remember that you are advising a client on how these situations

impact their financial statements. You are not being asked to make recommendations

on the actions Swanson should take, but simply to provide accounting insights. You

should be sure that you are adding value by providing them thorough insights on both

the accounting issues raised and how their financial reports will be impacted by the

issues $.$ The use of journal entries to illustrate the accounting is also encouraged $($as

mentioned in the general case guidelines$).$