Excello Telecommunication
Excello Telecommunication
Donna Snead
ETH/376
Susan Paris
Monday 23, 2015
Excello Telecommunication had seen many years of profitable sales. But, then in 2010 Excello had seen a drop of sales due to competition of their product by overseas manufactures. With all the years that this company had been in business they were now faced with the fact that their earnings estimates were not going to be met. There were many executive managers that were worried about the kind of effect this would have on the company bonuses, stock options, and the share prices of Excello's stock.
Mr. Terry Reed, the CFO of Excello Telecommunication learned of an elaborate opportunity or transaction that could possibly save the company, this consisted of selling some of their products to another company. Then on December 20, 2010 Excello sold $1.2 million of products to Data Equipment Systems. With this type of sales transaction it could only be recorded when the shipment occurred. Then Data Equipment through Excello a curve ball on this transaction. Data Equipment System wanted Excello Telecommunication to hold the product til January 11, 2011, because Date Equipment did not have the warehouse space to hold the shipment of the product at that time.
On December 30, 2010 Mr. Reed approached the controller Marty Fuller with his concerns about this dilemma. Marty Fuller tells Mr. Reed there are rules and regulation on accounting for sales of goods that are held for a later delivery date. The Rules and Regulations could differ according to which method was being used. Marty Fuller, assumed that they used the accrual method being this is the method that most corporation use. This meant that the income had to be reported in the year it was earned. Reed says he is fully aware of the rules and regulation, he tells Fuller he needs to come up with a way around those Rules, so that the $1.2 million sale can be posted as revenue for 2010. Mr Reed calls for a meeting of the accounting department to
Donna Snead
ETH/376
Susan Paris
Monday 23, 2015
Excello Telecommunication had seen many years of profitable sales. But, then in 2010 Excello had seen a drop of sales due to competition of their product by overseas manufactures. With all the years that this company had been in business they were now faced with the fact that their earnings estimates were not going to be met. There were many executive managers that were worried about the kind of effect this would have on the company bonuses, stock options, and the share prices of Excello's stock.
Mr. Terry Reed, the CFO of Excello Telecommunication learned of an elaborate opportunity or transaction that could possibly save the company, this consisted of selling some of their products to another company. Then on December 20, 2010 Excello sold $1.2 million of products to Data Equipment Systems. With this type of sales transaction it could only be recorded when the shipment occurred. Then Data Equipment through Excello a curve ball on this transaction. Data Equipment System wanted Excello Telecommunication to hold the product til January 11, 2011, because Date Equipment did not have the warehouse space to hold the shipment of the product at that time.
On December 30, 2010 Mr. Reed approached the controller Marty Fuller with his concerns about this dilemma. Marty Fuller tells Mr. Reed there are rules and regulation on accounting for sales of goods that are held for a later delivery date. The Rules and Regulations could differ according to which method was being used. Marty Fuller, assumed that they used the accrual method being this is the method that most corporation use. This meant that the income had to be reported in the year it was earned. Reed says he is fully aware of the rules and regulation, he tells Fuller he needs to come up with a way around those Rules, so that the $1.2 million sale can be posted as revenue for 2010. Mr Reed calls for a meeting of the accounting department to