Baywatch International is a hypothetical company that manufactures figure‐enhancement products—a rapidly growing industry that is featured frequently in Fortune and on CNNfn. The executives at Baywatch are making financial‐reporting decisions pertaining to the company's receivables, inventories, loss contingencies, and capital asset depreciation. These decisions require technical knowledge of fundamental topics covered in introductory financial accounting courses, as well as an appreciation for relationships among financial‐reporting, business, and user decisions. Consideration of the implications for financial statement analysis, earnings management, and financial‐reporting ethics also is encouraged.

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