In 2013, the Accountant at Star Incorporated, a National Time-Share

question 27

Essay

In 2013, the accountant at Star Incorporated, a national time-share company, focused on an internal sales report that illustrates the sales projections to ensure the sales representatives achieve their goals in 2013; however, the report was not prepared in accordance with GAAP. The accountant observed that the total sales produced by the sales representatives in 2012 were $250,000,000. The accountant is in the process of establishing the new 2013 sales goals for the sales representatives and the accountant is concerned about the new sales goals in 2013 since the economy is slow and many individuals and groups are not purchasing time-share condos.
Is the accountant a management accountant or a financial accountant? What concept concerns the accountant when the new sales goals are revealed to the sales representatives and administrative staff? Why?

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Definitions:

Cost Of Capital

The rate of return that a company must earn on its project investments to maintain its market value and attract investors.

Average Rate

Usually refers to the mean value of a set of rates or percentages over a specified period or set of conditions.

Salvage Value

The estimated resale value of an asset at the end of its useful life.

Internal Rate

Often refers to the internal rate of return (IRR), a metric used in capital budgeting to estimate the profitability of potential investments.