Question

Privately owned BlueScreen Corporation is primarily a retailer of computer equipment for individuals and small business. The effective cost of computer equipment and peripherals, at both the retail and manufacturing levels, has been declining rapidly for many years and shows every sign of continuing that decline. The company also develops software intended for small business applications—that is, for companies with up to 500 employees. The software is sold in BlueScreen’s own stores as well as through the company website. However, most sales come through general software distributors (e.g., download.com). For sales through the distributors, purchasers can obtain a 30-day limited-feature trial by paying an initial fee equal to 10% of the retail price of the software. If the customer decides to buy after 30 days, the trial fee is credited to the total cost of the purchase. On average, about two-thirds of the trials result in final purchase. Software development is a continuous process, including updates of existing software. Some of BlueScreen’s accounting issues are as follows:

1. What inventory methods should be used for retail merchandise in its stores and warehouses.

2. How the software development cost should be accounted for.

3. How the company should account for tangible capital assets, such as the warehouse building (which it owns), stores (which are leased), and store fixtures.

4. All of the company’s personnel—retail, managerial, and software development—are sent annually to professional development programs to keep their skills at the cutting edge of performance. The company spends many millions of dollars on these programs every year. Assume that software development costs are eligible for capitalization.

5. The company opens an average of 20 new stores every year. About five stores are closed every year.

Required: Using the chart below, indicate the accounting policies the company should choose for each of these issues under each of three different primary financial reporting objectives:

ue	Earnings Maximization	Cash Flow Prediction	Earnings Minimization
1.	New: capitalize and amortize	Expense	Expense
2.	New: capitalize and amortize	Operating	Expense
3.	Buildings: straight line	SL or accelerated	Accelerated depreciation
	Leases: operating	Operating	Capital lease
	Fixtures: straight line	SL or accelerated	Accelerated depreciation
4.	Defer and amortize	Amortize by unit-of-sale	Expense
5.	Average cost with LCM	FIFO with LCM	FIFO with LCM
	Closed: expense–report below operating earnings	Expense–report as operating expense	Expense–report as operating expense

This is what i have now i dont know if its right

Answer 1

	Earnings Maximization	Cash Flow Prediction	Earnings Minimization
1.	FIFO.computer equipment business is a fast moving consumer goods and hence if valued as per FIFO will give a more realistic image	Operating Expense	Expenses i.e. Stock
2.	Operating Expense for the Standardized Software. However if its custom built software it shall be capitalized to the cost of Asset.	Investing Expense if Asset and Operating Expense if the same is stock.	Investing Expense if Asset and Operating Expense if the same is stock.
3.	Buildings: Historical Cost	Financing Expense	Accelerated depreciation or SLM depends upon depreciation expense. High Depreciation means more expenditure and can accordingly reduce profits as per books.
	Leases: Operating	Investing Expense	Capital lease
	Fixtures: Capitalize to Asset	Financing Expense	Accelerated depreciation or SLM
4.	Capitalize and amortize	Amortize by unit-of-sale	Expense
5.	Average cost	FIFO	FIFO
	For units closed: Report below operating earnings as Expense	Report as Operating Expense	Report as Operating Expense

To show better revenue results

1. What inventory methods should be used for retail merchandise in its stores and warehouses?

FIFO

2. How the software development cost should be accounted for?

Operating Expense for the Standardized Software. However if its custom built software it shall be capitalized to the cost of Asset.

3. How the company should account for tangible capital assets, such as the warehouse building (which it owns), stores (which are leased), and store fixtures.

Buildings: straight line

Leases: operating

Fixtures: straight line

4. All of the company’s personnel—retail, managerial, and software development—are sent annually to professional development programs to keep their skills at the cutting edge of performance. The company spends many millions of dollars on these programs every year. Assume that software development costs are eligible for capitalization.

Defer and amortize