INTERMEDIATE ACCOUNTING RMU 9TH EDITION
9th Edition
ISBN: 9781260998726
Author: SPICELAND
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
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:
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
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…
PROBLEM 14 (Adapted)Mimi Company has been having difficulty obtaining necessary raw materials for its manufacturing process. The company, therefore, signed a long-term noncancelable purchase commitment with its largest supplier of this raw material on Jun3 30, 2020, at an agreed price of P800,000. On December31, 2020, the raw material had declined in price to P720,000.
Required:1. Assuming that on March 31, 2021, Mimi Company purchases the raw materials. During this time, the market price of the raw materials is P810,000? P780,000? P690,000?
Chapter 13 Solutions
INTERMEDIATE ACCOUNTING RMU 9TH EDITION
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
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Pls answer number 13 with solutions In 20x1, EXHAUSTIVE COMPLETE Co. received a court order requiring the cleanup of environmental damages caused by one of EXHAUSTIVE’s factory. EXHAUSTIVE has no other realistic alternative but to comply with the court order. Other entities have incurred around ₱60M for similar cleanup; however, EXHAUSTIVE’s best estimate of the cost of cleanup is ₱80M. How much is the provision to be recognized? a. 60M c. 70M b. 80M d. 0arrow_forwardExercise 11-24 (Algo) Change in principle; change in depreciation methods [LO11-2, 11-6] Alteran Corporation purchased office equipment for $2.2 million at the beginning of 2022. The equipment is being depreciated over a 10-year life using the double-declining-balance method. The residual value is expected to be $700,000. At the beginning of 2024 (two years later), Alteran decided to change to the straight-line depreciation method for this equipment. Required: Prepare the journal entry to record depreciation for the year ended December 31, 2024. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Enter your answers in whole dollars. View transaction list View journal entry worksheet Event 1 No 1 General Journal Depreciation expense Accumulated depreciation Debit Credit Tecnalarrow_forwardPROBLEM 14 (Adapted)Mimi Company has been having difficulty obtaining necessary raw materials for its manufacturing process. The company, therefore, signed a long-term noncancelable purchase commitment with its largest supplier of this raw material on Jun3 30, 2020, at an agreed price of P800,000. On December 31, 2020, the raw material had declined in price to P720,000. Required:1. What entry would you make on December 31, 2020, to recognize these facts?2. Assuming that on March 31, 2021, Mimi Company purchases the raw materials. During this time, the market price of the raw materials is P810,000? P780,000? P690,000?arrow_forward
- QUESTION 5 P19.5A (Pg. 19-37) P19.5A (LO 3) Empire Company is a manufacturer of smart phones. Its controller resigned in October 2020. An inexperienced assistant accountant has prepared the following income statement for the month of October 2020. Prepare a cost of goods manufactured schedule and a correct income statement. Empire Company Income Statement For the Month Ended October 31, 2020 Sales revenue $780,000 Less: Operating expenses Raw materials purchases $264,000 Empire Company Income Statement For the Month Ended October 31, 2020 Direct labor cost Advertising expense 190,000 90,000 Selling and administrative salaries Rent on factory facilities Depreciation on sales equipment Depreciation on factory equipment Indirect labor cost Utilities expense 75,000 60,000 45,000 31,000 28,000 12,000 Insurance expense 8,000 803,000 Net loss $(23,000) Prior to October 2020, the company had been profitable every month. The company's president is concerned about the accuracy of the income…arrow_forwardExercise 11-23 (Algo) Change in estimate; useful life and residual value of equipment [LO11-2, 11-5] [The following information applies to the questions displayed below.] Wardell Company purchased a mainframe on January 1, 2019, at a cost of $43,000. The computer was depreciated using the straight-line method over an estimated five-year life with an estimated residual value of $10,000. On January 1, 2021, the estimate of useful life was changed to a total of 10 years, and the estimate of residual value was changed to $1,600. Exercise 11-23 (Algo) Part 2 2. Prepare the year-end journal entry for depreciation in 2021. Assume that the company uses the sum-of-the-years' -digits method instead of the straight-line method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Round your final answers to nearest whole dollar.) View transaction list Journal entry worksheet < 1 Record depreciation…arrow_forwardQuestion 40 of 50 View Policies -12 !!! Current Attempt in Progress Cullumber Co. uses straight-line depreciation. Cullumber Co. purchased machinery that cost $3050000 on January 4, 2019. The entire cost was recorded as an expense. The machinery has a 9-year life and a $205000 residual value. The error was discovered on December 20, 2021. Ignore income tax considerations. Before the correction was made, and before the books were closed on December 31, 2021, retained earnings was understated byarrow_forward
- Problem 32-5 (AICPA Adapted) purchase, the patent was valid for 15 years. On January 1, 2020, Arabian Company purchased a patent for a new consumer product for P900,000. At the time of However, the patent's useful life was estimated to be only 10 rears due to the competitive nature of the product. On December 31, 2023, the product was permanently withdrawn from sale under governmental order because of a potential health hazard in the product. Required: 1. Prepare journal entry to record the patent acquisition. 2. Prepare journal entry to record the amortization of the patent for 2023. 3. Prepare journal entry to record the writeoff of the patent on December 31, 2023.arrow_forwardE 11-15 Double-declining-balance method; switch to straight lineLO11-2,LO11-6 On January 2, 2024, the Jackson Company purchased equipment to be used in its manufacturing process. The equipment has an estimated life of eight years and an estimated residual value of $30,625. The expenditures made to acquire the asset were as follows: Purchase price Freight charges Installation charges $154,000 2,000 4,000 Jackson's policy is to use the double-declining-balance (DDB) method of depreciation in the early years of the equipment's life and then switch to straight line halfway through the equipment's life. Required: 1. Calculate depreciation for each year of the asset's eight-year life. 2. Are changes in depreciation methods accounted for retrospectively or prospectively?arrow_forwardPrevention costs: Total prevention costs Appraisal costs Total appraisal costs Internal failure costs: Total internal failure costs External failure costs: Total external failure costs Total quality cost Florex Company Quality Cost Report Last Year Amount (in Percent of thousands) Sales 0 0 0 0 0.00 0.00 0.00 0.00 This Year Amount (in thousands) 0 0 0 0 Percent of Sales 0.00 0.00 0.00 0.00arrow_forward
- Question 3What is the proper solution for this problem? B. On August 1, 2021, the board of directors of LL Co. voted to approve the disposal of one of its B division.The sale is expected to occur in June of next year. The B division's revenue and expenses for the period from January 1 to July 31 amounted to P14,000,000 and P10,000,000, respectively. For the period from August 1 to December 31, B Division's revenue amounted to P5,000,000 while expenses totaled P4,500,000. The carrying amount of B Division's net assets on December 31, 2021 was P21,000,000 and the fair value less cost of disposal was P25,000,000. The sale contract requires the company to pay termination cost of affected employees in the amount of P1,200,000 to be paid on September 30, 2022. The income tax rate is 30%. Required:25 – 27. Determine the income (loss) net of tax from discontinued operation.arrow_forwardFIN 6020 v20f Taylor Toy Corp Ch 11 (11-9) Taylor Toy Corp. is considering the replacement of it injection molding machine. It is 2 years old but new technology has it considering the newest model. The old (current) machine was acquired 2 years ago and is being depreciated on a straight line basis over 8 years (6 years remaining).The annual depreciation expense is $350 per year, and its current book value is $2,100. It can be sold for $2,500 today. If the machine is not replaced, it is expected to be sold for $500 at the end of its remaining life (6 yrs). The new, replacement machine will cost $8,000. It is expected to be used for 6 years, and is expected to be sold for $800 then. It will be depreciated using MACRS (5-year class with 2 year convention). The new machine is expected to support an increase in sales by $1,000 per year, and with its improved electrical efficiency, it should reduce operating expenses by $1,500 per year. Inventories will need to increase by $2,000 and Account…arrow_forwardProblem 8No Control Mining purchased land on February 1, 2019, at a cost of P1,250,000. It estimated that a total of 60,000 tons of mineral was available for mining. After it has removed all the mineral resources, the company will be required to restore the property to its previous state because of strict environmental protection laws. It estimates the fair value of this restoration obligation at P90,000. It believes it will be able to sell the property afterwards for P100,000. It incurred developmental costs of P200,000 before it was able to do any mining. In 2019, resources removed totaled 30,000 tons. The company sold 24,000 tons.RequiredCompute the following information for 2019.a. Per unit mineral cost.b. Total material cost of December 31, 2019, inventory.c. Total materials cost in cost of goods sold at December 31, 2019.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
