9
many purchase agreements had been signed in each year since 1986
that had not been fulfilled by delivery of a house kit (open
agreements) by July 28, 1990. Gross calculated the percentage of
purchase agreements signed in each year that had been fulfilled
by the delivery of a house kit (closed agreements) by July 28,
1990. Gross then applied these percentages to the number of
agreements open on July 28, 1990, to project the number of
contracts that would close within 4 years. Gross estimated that
293 of the 515 contracts open on that date (57 percent) would
never close.
c. Eagle's Accounting for Deposits
Eagle did not maintain a separate bank account for the
deposits. Eagle deposited them in its general operating account
and used them to pay its current expenses.
Eagle first included customer deposits in income based on
the 1990 study for its tax year ending July 28, 1990. For its
tax year ending July 28, 1990, Eagle included in income 57
percent of all unapplied customer deposits at the end of that
year.2 Eagle recorded the 43 percent of customer deposits which
it had not reported as income as a liability.3
2 Unapplied deposits are deposits for houses for which Eagle
did not receive all of the purchase price in that year.
3 Eagle recorded the amount of its unapplied deposits in a
liability account. Eagle reported unapplied deposits in income
(continued...)
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