Issue : The question tries to access the number of events or transactions which could have made by the Aguamaint Inc’s management before the end of the year 20X2. With regard to allocating allowances for doubtful accounts, there is the need of determining the essence of the book keeping policy. In the case of prepaid insurance, the issue is to determine whether the company should capitalize or expense these expenses as an asset.
The issue regarding the license agreement surrounds the need of scrutinizing they are incorporated in these costs and their useful life. This is in line with the need of determining the number of shares, their par value, their approval, and the nature of their transaction. The issue surrounding maintenance contracts entails reviewing the maintenance contract, determining the nature of the accounts receivables, those who paid them on time and the number of the clients who woes the company. The issues regarding new customer contracts is the disclosure of any information concerning it with its potential investors and determining how tax benefit NOL will be carried forward.
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Rule : For doubtful accounts, allowance should only be made if the all the accounting conditions are met. For prepaid expenses, they will have to be capitalized as assets because they items paid in advance which offer value with time. The rationale for license agreement entails evaluating how they are to be amortized. The rule governing the shares of stock used for exchanging license agreement requires Aguamaint Inc. to disclose them it in their financial information so as to offer a clear understanding of the transactions made.
Maintenance contracts require to be regarded as single client whose transactions amounts to at least 10% of all the transactions made by the company. The rationale for expenses requires that all expenses to be accounted for along with income or revenue within that time frame. The rule governing contracts with new customers is aimed at ensuring that the entity has disclosed both quantitative and qualitative information so as to enable users of financial statement its relevance.
