Manufactured Homes: Accounting Policies, Evaluation and Current and Future Financial Position

Accounting Policies         Manufactured Homes (MH) uses the instalment gross sales regularity for recognizing revenue. Using this episode sales method assumes that the client believably will non default and in that respect is slender stake for the smart direct. As bullion is supposed to come in, revenues atomic number 18 matched with expenses. However, if the customer defaults, then there are many time to come expenses that cannot be matched with corresponding revenue. The companionship usually sold its installment contracts to unrelated financial sanctuarys and was liable for payments to the financial institution if the customer defaulted. Thus, MH bore risk for the houses it sold. MH supercharged its customers a serving above the trade rate, and the financial institution paid MH a portion of the differential between the verbalize interest rate and the market rate. Therefore, interest income was a plumb important part of MHs business. MH s et up a proviso for losses on reference book sales account establish on historical performance. The company said that since its customers needed these houses, they would go especially hard because these houses were their aboriginal residences and supported this with repossession rate that were such(prenominal) lower than the industry average. However, this expertness fuck off been a little short sighted.

MH did realize that there was a declining economy looming in the future, but we are not veritable if the company agnise its beneficial effect. This declining economy office sire interest rate down, allowing people to choose conventional syndicates instead of mobile homes. Furthermore, a bad economy would maneuver ! little money invested in mobile homes from people who wanted a second home used for vacations. This poorer economy could also signal problems for the installment sales method, as some people might lose their jobs and not be able to pay for their homes. Repossession rates would increase, and Manufactured Homes might be... If you want to get a full essay, order it on our website: OrderEssay.net

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