JET DIRECT AVIATION

DEPOSIT

BACKGROUND

JetDirect to provide aircraft management services for McKessons corporate

airplanes.

McKesson provided a deposit , which was replenished as JetDirect paid the

vendors.

In 2009, McKesson learned that JetDirect had not been paying McKessons
vendors . So, McKesson terminated the contract.

JetDirect failed to return McKesson deposit and subsequently filed for

bankruptcy.

McKesson then filed suit seeking the return of the $1.2M of McKessons money
that JetDirect failed to return.

The case went to trial against Campbell in January 2014 and the jury found that
Campbell had deprived McKesson of its property without McKessons consent
and without legal justification (conversion) and awarded McKesson
$1,476,584.00.

Campbell appealed this verdict and the appellate court reversed.

ACCOUNTING GUIDANCE

ASC 450-20-25 : Contingent gains should not be recognized prior to when they
are realized. As the settlement was in discussion and both parties had not yet
reached an agreement (in 2009), recording a contingent gain is not
permissible.

Remaining A/R Calculation

APPENDIX

SAP Journal Entry #1

Note: From the $1.8M deposit, $467K was expensed relating to

January and February 2009. ($1.3M remaining)

SAP Journal Entry #2

[A]

[B]

Note: Out of the $1.3M sitting in the deposit:

[A] - Additional Jan/Feb of $ 60K expensed to Company 9000.
[B] - Write-off of $250k, with the remaining $1,023,480 recorded as a receivable.