This paper discusses a fictional case. A newly hired staff accountant, Marisa Martin, is employed by Calypso Communication, Inc. (CC). CC is an e-commerce firm offering both business-to-business services and on-line auctions. Marisa is asked to apply some recently implemented accounting and tax rules concerning e-commerce transactions. In this case, Marisa is asked to research and make recommendations on three issues surrounding the measurement of earnings for e-commerce firms:
1. Expensing versus capitalizing web site development costs;
2. Auction sites fees – amortization versus recognizing all at once; 3. Barter transactions – when is the fair market value known?
Marisa must also consider the rules in determining the federal income tax liability and discuss professional implications surrounding the issues presented. In addition, Marisa must face an ethical dilemma that does not have an easy solution. This case would be appropriate for use in an intermediate accounting, advanced accounting or tax course at the undergraduate level or a graduate financial accounting course.
Tracy S. Manly
University of Tulsa
Tulsa, Oklahoma USA
Robert J. Walsh
Marist College
Poughkeepsie, New York USA
Constance A. McKnight
Arkansas Tech University
Russellville, Arkansas USA