Memo 9: the general accounting office (as it was called then; now it is called the government accountability office) prepared a report which showed that during 1997 through 2001, many publicly owned companies restated their financial statements. one of the frequent causes of restatements is that companies recognize revenue which they were not entitled to recognize. a. when should an entity recognize revenue? b. does it matter if the seller warranties what was sold? if so, what is the appropriate accounting treatment? c. does it matter if what is being sold must be accepted by the purchaser? d. does it matter if the seller must provide something else (upgrades, additional products, etc.) after the original delivery? if so, what is the app

The gilbert instrument corporation is considering replacing the wood steamer it currently uses to shape guitar sides. the steamer has 6 years of remaining life. if kept, the steamer will have depreciaiton expenses of $650 for five years and $325 for the sixthyear. its current book value is $3,575, and it can be sold on an internet auction site for$4,150 at this time. if the old steamer is not replaced, it can be sold for $800 at the endof its useful life. gilbert is considering purchasing the side steamer 3000, a higher-end steamer, whichcosts $12,000 and has an estimated useful life of 6 years with an estimated salvage value of$1,500. this steamer falls into the macrs 5-year class, so the applicable depreciationrates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. the new steamer is fasterand allows for an output expansion, so sales would rise by $2,000 per year; the newmachine's much greater efficiency would reduce operating expenses by $1,900 per year. to support the greater sales, the new machine would require that inventories increase by$2,900, but accounts payable would simultaneously increase by $700. gilbert's marginalfederal-plus-state tax rate is 40%, and its wacc is 15%.a. should it replace the old steamer? b. npv of replace = $2,083.51