Accounting Theory and the Case of Frantek, Inc.

Paper Summary:

In the case of Frantek, Inc., a manufacturer of microcomputer parts, and Conte Technologies, a buy of same, the issue is how to measure and recognize valuation of assets and liabilities in order to provide a proper accounting at year's end for Frantek, relevant to an amended agreement between Frantek and Conte for parts supplied by Frantek to Conte. This paper first lays out the basic facts of this case and discusses general accounting principles which will impact the path that Frantek takes and then presents a general recommendation concerning how Frantek ought to recognize revenues, valuate inventories, and valuate and classify liabilities. Issues of the Case Frantek agreed to provide 100,000 boards over a 12-month period to Conte at a stipulated price per board, with provision for penalties for failure to perform.

From the Paper:

In the case of Frantek, Inc., a manufacturer of microcomputer parts, and Conte Technologies, a buy of same, the issue is how to measure and recognize valuation of assets and liabilities in order to provide a proper accounting at year's end for Frantek, relevant to an amended agreement between Frantek and Conte for parts supplied by Frantek to Conte. After laying out the basic facts of the case and discussing general accounting principles which impact the path taken, a general recommendation will be made concerning how Frantek ought to recognize revenues, valuate inventories, and valuate and classify liabilities. Issues of the Case Frantek agreed to provide 100,000 boards over a 12-month period to Conte at a stipulated price per board, with provision for penalties for failure to perform.

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