Case (Project Sell Soon Inc)
Sell Soon Inc.
This case is about a company called Sell Soon Inc. this is a manufacturing
company that operates two widget manufacturing facilities in the United States.
One is located in New Orleans Louisiana and the other facility is located in
Houston Texas. The company is going through restructuring and one part of the
restructuring plan is the disposition of the Houston division through consolidation.
When the restructuring is complete all of the Sell Soon Ink’s manufacturing will be
done from the New Orleans facility. The Houston facility currently has a book value
of $ 20 million and it has a fair market value of $ 25 million. Sell Soon Inc expects
to incur two million dollars to dispose the Houston facility and combine the
manufacturing work into one location. The two million dollar cost is broken down in
two parts that is one million dollar will be spent before the disposal and the
combination of the two facilities takes place and the rest is allocated as selling
cost of the Houston facility. The selling costs will be incurred only if the sale of the
Houston manufacturing division goes through. Therefore, the accounting issue in
this case is that how should Sell Soon Inc account for the one million dollars it will
be spending before disposing the Houston facility and given the company expects
that there will be a gain on this disposal.
Sell Soon Inc. should account for the one million dollar cost of disposal by
capitalizing the cost. According to EITF issue No. 90-8 “Costs should be
capitalized if the costs are incurred in preparing for sale that property currently
held for sale.” So, in this case we are told in the case that “held for sale” criteria in
paragraph 30 of FASB statement No. 144 are met. In order to dispose the Houston
facility Sell Soon Inc.Case (Project Sell Soon Inc)
Sell Soon Inc.
This case is about a company called Sell Soon Inc. this is a manufacturing
company that operates two widget manufacturing facilities in the United States.
One is located in New Orleans Louisiana and the other facility is located in
Houston Texas. The company is going through restructuring and one part of the
restructuring plan is the disposition of the Houston division through consolidation.
When the restructuring is complete all of the Sell Soon Ink’s manufacturing will be
done from the New Orleans facility. The Houston facility currently has a book value
