Excello Company Essay

 Excello Telecommunications
(from Ethical Obligations and Decision Making in Accounting:   textual matter and Cases, 2
nd
Edition by Steven M.  
Mintz and Roselyn E. Morris)
Excello Telecommunications has been profitable for many years plainly recently has been faced with
increased competition for its returns by overseas manufacturers.  For the first time in the companys
history, it appears that earnings estimates willing not be met.  Top management is concerned virtually the
effect on bonuses, stock options, and the share price of Excello stock.  That is when terrycloth Reed, the CFO,
learns of a transaction on declination 20, 2010, that might straighten out the problem.  On declination 20, 2010,
Excello sold $1.2 million of equipment to Data Equipment Systems.  Typically, this suit of transaction
would be recorded as a sale on the date of shipment.  However, the customer requested that Excello
hold on to the product until January 11, 2011, because Data Equipment lacked the warehouse capacity
to hold the product until then.   
On December 30, Reed approaches the controller, Marty Fuller, to discuss the dilemma.  Fuller explains
the rules in account statement for gross sales where the goods are held for future delivery.  Reed understands the
rules, but tells Fuller he needs to come up with a creative authority around the rules so that the $1.



2 million
can be recorded as revenue in 2010.   
Fuller calls a meeting of the accounting department to discuss what can be done.  He emphasizes two
consequential pointednesss.  First, the $1.2 million must be recorded in 2010.  Second, some(prenominal) is decided it must
be defensible from a GAAP point of view. The team comes up with the following alternatives:
1. conduct the product to an slay?site warehouse owned by Excello by December 31 and hold it
until January 11 when it would be shipped to Data Equipment.
2. Transfer the product to Data Equipment by December 31 and obtain that the customer could
return it for a full refund afterward it arrives at Data Equipments warehouse
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