Ribbitt is a small company that operates in Florida by marketing grow-a-frog kits to large toy st… Assignment Help

  

Ribbitt is a small company that operates in Florida by marketinggrow-a-frog kits to large toy stores and discount retailers. Eachgrow-a-frog kit contains a small plastic aquarium tank, gravel, aplastic plant, and a coupon redeemable for one live tadpole. Alarge inventory of tadpoles are kept on had at all times. To ensurea ready supply of tadpoles, one thousand adult frogs are kept onhand. The reproductive life of an adult frog is about nine months.At that time, the frogs are harvested and sold to J. Lafitte’s FineFroglegs. Both the adult frogs and tadpoles were classified asinventory on Ribbitt’s financial statements. Recently, throughselective breeding, the reproductive life of the adult frogs hasbeen extended to three years.The problems in this exercise that are mostly “valuation”problems:1.How should the coupons be accounted for?Does the company record a liability for “one tadpole” each timea sale is made?Does the company estimate a liability at year end for “tadpolesnot yet claimed?”2.How is the “large inventory of tadpoles valued?What is the cost of “producing” the tadpoles?3.How is the inventory of frogs valued?Are the frogs purchased or raised from the tadpoles?What is the cost of raising the frogs from tadpoles?Is there a need to “value” the frogs at year end if the lifecycle is nine months?Other problems:1.How is the “new” life of the frogs handled?The frogs were (presumably) viable inventory for nine months,meaning that some frogs may have been carried as inventory on GAAPprepared financial statements.The frogs economic life has been extended to three years: Is arestatement necessary?2.How is the revenue realization on the sale of frogs (for froglegs) handled?

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