Royal Collection Inc.
The case is focused on Royal Collections, a maker of Royal memorabilia and collectibles. The company subcontracts manufacture of its merchandise and markets the products on cable TV and through other means of addressing a broad public. Students create a basic set of financial statements based on production, sales, cost and other data. A series of accounting policy issues emerge as the case unfolds, including issues of revenue recognition, provision for returns, cost flow assumptions and other matters. Students develop a simple balance sheet, income statement and cash reconciliation. Class discussion can also address the relatively high volume of related party transactions, and students can consider the nature of the business as a whole and whether it is a going concern.