Utilize The Sun (UTS) is a business that contracts to develop, construct, and operate solar power plants.

Chapter 2 Questions: Goal - Practice applying the research process steps to a case (30 points) Case Facts Utilize The Sun ("UTS") is a business that contracts to develop, construct, and operate solar power plants. UTS entered into a contract to support the Blue Skies solar power plant. According to contract terms, UTS is responsible for the day-to-day operations of Blue Skies as well as for general maintenance and repairs. Blue Skies expects UTS to provide routine maintenance for continued operation of the plant and respond to equipment breakdowns and failures by providing immediate repairs. In addition, the terms of the contract require UTS to procure necessary materials to operate, maintain, and repair the plant. To comply with this requirement, UTS must maintain a certain level of materials and supplies (the "spare parts") at all times. On a regular basis, UTS reviews a listing provided by Blue Skies of recommended spare parts for various components of the solar power plant and procures the necessary parts. Vendors deliver the parts to UTS along with a complete listing describing the quantity and cost of the parts provided. UTS maintains this listing, uses it to track expected usage of the spare parts, and to determine their expected useful lives. The spare parts consist of customized and generic parts that vary in cost, procurement time, expected usage (i.e., emergency replacement, standard replacement), and expected useful life UTS uses the composite depreciation method for substantially all of the plant, and it expenses all major plant maintenance. Case Question: How should UTS classify the spare parts that it expects to use within one year: as inventory or as a prepaid / other current asset? Specific requirements follow on the next page. Case Requirements: Follow and document all the research process steps from Chapter 2 as you work towards an answer to the Case Question (which you will provide in Step 6 below) Steps from Chapter 2: 1. Understand the facts / background of the transaction. (6 points) Who are the parties to the transaction and why are they entering into it? b. What are the cash flows associated with the transaction, from UTS's perspective? c. What questions, if any, might you like to ask about this transaction'? 2. What is one researchable question related to this problem, based on the information you have? (Do not restate the bolded "case question" on the previous page.) (2 points) 3. Stop and think: what accounting treatment will likely be appropriate, based on your accounting knowledge? Explain your intuition prior to searching the Codification. (3 points 4. Search potentially relevant sources of guidance, documenting your process (i.e., show the path searched or search terms you used to find each piece of guidance) and copying and pasting guidance into a Word document. Include this Word file as an Appendix rather than in the body of your response. (5 points) 5. Using the accounting guidance you found in Step 4.. Provide definitions for the two alternatives (inventory vs. prepaid / other current asset), citing the Codification. (4 points) a. b. State arguments for and against each alternative, documenting how the accounting guidance for each alternative does or doesn't fit with the case facts.* (8 points) 6. Finally, briefly state your conclusion regarding which accounting treatment appears to be more appropriate given the circumstances. If you must make any assumptions in reaching this conclusion, state these. (2 points)* * Optional tips for 5(b), if you are struggling with what to sav: You may include in this section, if desired, questions that you would ask the client to help you match the case circumstances to the accounting guidance Industry-specific guidance within the Codification (including industries other than the solar industry) may help to expand your arguments. If you use industry-specific guidance, document your search for this guidance as part of your Step 4 Appendix . * Chapter 2 Questions: Goal - Practice applying the research process steps to a case (30 points) Case Facts Utilize The Sun ("UTS") is a business that contracts to develop, construct, and operate solar power plants. UTS entered into a contract to support the Blue Skies solar power plant. According to contract terms, UTS is responsible for the day-to-day operations of Blue Skies as well as for general maintenance and repairs. Blue Skies expects UTS to provide routine maintenance for continued operation of the plant and respond to equipment breakdowns and failures by providing immediate repairs. In addition, the terms of the contract require UTS to procure necessary materials to operate, maintain, and repair the plant. To comply with this requirement, UTS must maintain a certain level of materials and supplies (the "spare parts") at all times. On a regular basis, UTS reviews a listing provided by Blue Skies of recommended spare parts for various components of the solar power plant and procures the necessary parts. Vendors deliver the parts to UTS along with a complete listing describing the quantity and cost of the parts provided. UTS maintains this listing, uses it to track expected usage of the spare parts, and to determine their expected useful lives. The spare parts consist of customized and generic parts that vary in cost, procurement time, expected usage (i.e., emergency replacement, standard replacement), and expected useful life UTS uses the composite depreciation method for substantially all of the plant, and it expenses all major plant maintenance. Case Question: How should UTS classify the spare parts that it expects to use within one year: as inventory or as a prepaid / other current asset? Specific requirements follow on the next page. Case Requirements: Follow and document all the research process steps from Chapter 2 as you work towards an answer to the Case Question (which you will provide in Step 6 below) Steps from Chapter 2: 1. Understand the facts / background of the transaction. (6 points) Who are the parties to the transaction and why are they entering into it? b. What are the cash flows associated with the transaction, from UTS's perspective? c. What questions, if any, might you like to ask about this transaction'? 2. What is one researchable question related to this problem, based on the information you have? (Do not restate the bolded "case question" on the previous page.) (2 points) 3. Stop and think: what accounting treatment will likely be appropriate, based on your accounting knowledge? Explain your intuition prior to searching the Codification. (3 points 4. Search potentially relevant sources of guidance, documenting your process (i.e., show the path searched or search terms you used to find each piece of guidance) and copying and pasting guidance into a Word document. Include this Word file as an Appendix rather than in the body of your response. (5 points) 5. Using the accounting guidance you found in Step 4.. Provide definitions for the two alternatives (inventory vs. prepaid / other current asset), citing the Codification. (4 points) a. b. State arguments for and against each alternative, documenting how the accounting guidance for each alternative does or doesn't fit with the case facts.* (8 points) 6. Finally, briefly state your conclusion regarding which accounting treatment appears to be more appropriate given the circumstances. If you must make any assumptions in reaching this conclusion, state these. (2 points)* * Optional tips for 5(b), if you are struggling with what to sav: You may include in this section, if desired, questions that you would ask the client to help you match the case circumstances to the accounting guidance Industry-specific guidance within the Codification (including industries other than the solar industry) may help to expand your arguments. If you use industry-specific guidance, document your search for this guidance as part of your Step 4 Appendix . *