Jax Seafood Inc. An Instructional Case on Accounting for Inventory Transactions among Related Parties

• In Event: SESSION 2B: Teaching Approaches

Abstract

Jax Frozen Fish and its wholly-owned subsidiary Juneau Supply Company purchase, process and sell fish to restaurants and other retail outlets in Washington and surrounding inland states. Jax has entered an agreement with Condor Enterprises to transport the fish from Alaska to Jax’s facility in Washington. Students must identify the various financial reporting issues which include the impact of the agreement between Jax and Condor on revenue recognition. Specifically, students must determine whether Jax’s arrangement with Condor is a product financing arrangement, whether the purchases and sales on inventory should be considered a single exchange transaction, and whether the events should be considered intercompany transactions. After identifying relevant GAAP, students must consider the GAAP hierarchy in recommending resolution of the issues. Finally, students address the required journal entries and disclosures.

Author

• Harriet Lynn Stallworth, Appalachian State University