INTERMEDIATE ACCOUNTING(LL)-W/2 ACCESS
9th Edition
ISBN: 9781260180657
Author: SPICELAND
Publisher: MCG
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Chapter 13, Problem 13.17E
(1)
To determine
Contingent liability is one form of liability that arises based on a particular outcome of a specific event. They are possible obligation that might arise or might not arise based on the future events. It is otherwise called as probable liability or eventual liability. Following are examples of contingencies:
- Income tax disputes
- Discounted notes receivable
- Lawsuits
- Debt guarantees
- Failure to follow government regulations
To report: Contingent loss (liability)
(2)
To determine
To report: Loss in the income statement
(3)
To determine
To report: Liability in
(4)
To determine
To prepare:
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A
Each of the following situations is independent:
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CD
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1. Change in estimated useful life and residualvalue. Company XYZ purchases equipment on 1 January 20x6 for
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$
42,000 The company uses the straight line method of depreciation, taking a full year's depreciation in the year
5 of acquisition. The equipment has an estimated residual value of
$8,000.00 and an estimated useful life of
4 years. In 20x7, the company decides that the machine really has an origional total life of
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7 a residual value of
$ 7,000.00
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How much is the depreciation expense for 20x7?
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11 Solution:
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18 2. Retrospective change in accounting policy. A private company changes its method of accounting for long term
19 construction contracts from the percentage of completion method (PC) to the compelted contract method (CC) in 20x7.
20 The years affected by the change, and incomes under both methods, appear below (ignore income tax)
21
22 Year
23 20x5
24…
E 10-9
Acquisition cost;
noninterest-bearing
note
LO3
On January 1, 2013, Byner Company purchased a used tractor. Byner paid $5,000 down and signed a
noninterest-bearing note requiring $25,000 to be paid on December 31, 2015. The fair value of the tractor is not
determinable. An interest rate of 10% properly reflects the time value of money for this type of loan agreement.
The company's financial year-end is December 31.
Required:
1. Prepare the journal entry to record the acquisition of the tractor. Round computations to the nearest dollar.
2. How much interest expense will the company include in its 2013 and 2014 income statements for this note?
3. What is the amount of the liability the company will report in its 2013 and 2014 statements of financial
position for this note?
Problem 4-6 (IAA)
Baron Company is involved with several situations about
contingencies. The fiscal year ends December 31, 2022 and
the financial statements are issued on March 31, 2023.
On March 1, 2023, the city government is in the process of
investigating possible chemical leaks at Baron Company's
facilities but has not proposed a deficiency assessment.
Management believed an assessment is reasonably
possible and if an assessment is made an unfavorable
settlement of up to P4,000,000 is reasonably possible.
Baron Company is the plaintiff in a P3,000,000 lawsuit
filed against Faye Company for damages due to lost profit
from rejected contracts and for unpaid accounts receivable.
The case is in final appeal and legal counsel advised that it
is probable that Baron Company will prevail and be
awarded P2,500,000.
In July 2022, the provincial government filed suit against
Baron Company seeking civil penalties and injunctive
relief for violation of environmental law regulating
hazardous…
Chapter 13 Solutions
INTERMEDIATE ACCOUNTING(LL)-W/2 ACCESS
Ch. 13 - What are the essential characteristics of...Ch. 13 - Prob. 13.2QCh. 13 - Bronson Distributors owes a supplier 100,000 on...Ch. 13 - Bank loans often are arranged under existing lines...Ch. 13 - Prob. 13.5QCh. 13 - Prob. 13.6QCh. 13 - Salaries of 5,000 have been earned by employees by...Ch. 13 - Prob. 13.8QCh. 13 - Prob. 13.9QCh. 13 - Prob. 13.10Q
Ch. 13 - Prob. 13.11QCh. 13 - Prob. 13.12QCh. 13 - Long-term obligations usually are reclassified and...Ch. 13 - How do IFRS and U.S. GAAP differ with respect to...Ch. 13 - Prob. 13.15QCh. 13 - Prob. 13.16QCh. 13 - Prob. 13.17QCh. 13 - Prob. 13.18QCh. 13 - Suppose the analysis of a loss contingency...Ch. 13 - Prob. 13.20QCh. 13 - Distinguish between the accounting treatment of a...Ch. 13 - At December 31, the end of the reporting period,...Ch. 13 - After the end of the reporting period, a...Ch. 13 - Prob. 13.24QCh. 13 - Prob. 13.25QCh. 13 - Prob. 13.26QCh. 13 - Prob. 13.27QCh. 13 - Prob. 13.28QCh. 13 - Bank loan; accrued interest LO132 On October 1,...Ch. 13 - Non-interest-bearing note; accrued interest LO132...Ch. 13 - Determining accrued interest LO132 On July1,...Ch. 13 - Commercial paper LO132 Branch Corporation issued...Ch. 13 - Non-interest-bearing note; effective interest rate...Ch. 13 - Prob. 13.6BECh. 13 - Advance collection LO133 In Lizzie Shoes...Ch. 13 - Sales tax LO133 DuringDecember, Rainey Equipment...Ch. 13 - Classifying debt LO134 Consider the following...Ch. 13 - Prob. 13.10BECh. 13 - Prob. 13.11BECh. 13 - Prob. 13.12BECh. 13 - Prob. 13.13BECh. 13 - Contingency LO135, LO136 Skill Hardware is the...Ch. 13 - Contingency LO135, LO136 Bell International can...Ch. 13 - Prob. 13.16BECh. 13 - Prob. 13.17BECh. 13 - Unasserted assessment LO135, LO136 At March 13,...Ch. 13 - Bank loan; accrued interest LO132 On November 1,...Ch. 13 - Determining accrued interest in various situations...Ch. 13 - Short-term notes LO132 The following selected...Ch. 13 - Paid future absences LO133 JWS Transport Companys...Ch. 13 - Paid future absences LO133 On January 1, 2018,...Ch. 13 - Prob. 13.6ECh. 13 - Customer deposits LO133 Diversified...Ch. 13 - Prob. 13.8ECh. 13 - Prob. 13.9ECh. 13 - FASB codification research LO133, LO134, LO135...Ch. 13 - Current noncurrent classification of debt; Sprint...Ch. 13 - Prob. 13.12ECh. 13 - Current noncurrent classification of debt LO131,...Ch. 13 - Prob. 13.14ECh. 13 - Warranties LO135, LO136 Cupola Awning Corporation...Ch. 13 - Extended warranties LO135, LO136 Carnes...Ch. 13 - Prob. 13.17ECh. 13 - Impairment of accounts receivable LO135, LO136...Ch. 13 - Prob. 13.19ECh. 13 - Various transactions involving contingencies ...Ch. 13 - Prob. 13.21ECh. 13 - Prob. 13.22ECh. 13 - Disclosures of liabilities Indicate (by letter)...Ch. 13 - Warranty expense; change in estimate LO135, LO136...Ch. 13 - Change in accounting estimate LO133 The...Ch. 13 - Contingency; Dow Chemical Company disclosure ...Ch. 13 - Payroll-related liabilities Appendix Lee...Ch. 13 - Prob. 13.1PCh. 13 - Prob. 13.2PCh. 13 - Current noncurrent classification of debt LO131,...Ch. 13 - Various liabilities LO131 through LO134 The...Ch. 13 - Bonus compensation; algebra LO133 Sometimes...Ch. 13 - Various contingencies LO135, LO136 Eastern...Ch. 13 - Prob. 13.7PCh. 13 - Expected cash flow approach; product recall LO136...Ch. 13 - Subsequent events LO136 Lincoln Chemicals became...Ch. 13 - Subsequent events; classification of debt; loss...Ch. 13 - Prob. 13.11PCh. 13 - Various liabilities; balance sheet classification;...Ch. 13 - Payroll-related liabilities Appendix Alamar...Ch. 13 - Prob. 13.1BYPCh. 13 - Prob. 13.3BYPCh. 13 - Prob. 13.4BYPCh. 13 - Prob. 13.5BYPCh. 13 - Prob. 13.7BYPCh. 13 - Prob. 13.8BYPCh. 13 - Judgment Case 139 Loss contingency and full...Ch. 13 - Prob. 13.10BYPCh. 13 - Prob. 13.12BYPCh. 13 - Prob. 13.13BYPCh. 13 - Prob. 13.14BYPCh. 13 - Prob. 13.15BYPCh. 13 - Prob. 13.16BYPCh. 13 - Prob. 13.18BYPCh. 13 - Real World Case 1319 Contingencies LO135 Real...Ch. 13 - Real World Case 1320 Contingencies and Subsequent...Ch. 13 - Prob. 1CCTCCh. 13 - Prob. 1CCIFRS
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