INTERMEDIATE ACCOUNTING(LL)-W/2 ACCESS
9th Edition
ISBN: 9781260180657
Author: SPICELAND
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 13, Problem 13.20BYP
Real World Case 13–20
Contingencies and Subsequent events
• LO13–5, LO13–6
Real World Financials
The following events are indicated in note 15 of J. Crew’s 10-K annual report for the fiscal year ended January 29, 2011, and its 10-K was filed on March 21, 2011.
Acquisition
On November 23, 2010, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Chinos Holdings, Inc., a Delaware corporation (“Parent”). . . . At a special meeting of shareholders held in March 1, 2011, our shareholders voted to approve the Acquisition, and Parent acquired us on March 7, 2011 through a reverse subsidiary merger with J. Crew Group, Inc. being the surviving company. . . .
Litigation
In connection with the Acquisition, between November 24, 2010 and December 16, 2010, sixteen purported class action complaints were filed against some or all of the following: the Company, certain officers of the Company, members of the Company’s Board of Directors, Holdings, the Issuer, TPG, TPG Fund VI and LGP. The plaintiffs in each of these complaints allege, among other things, (1) that certain officers of the Company and members of the Company’s Board breached their fiduciary duties to the Company’s public stockholders by authorizing the Acquisition for inadequate consideration and pursuant to an inadequate process, and (2) that the Company, TPG and LGP aided and abetted the other defendants’ alleged breaches of fiduciary duty. The purported class action complaints sought, among other things, an order enjoining the consummation of the Acquisition or an order rescinding the Acquisition and an award of compensatory damages. Although the Company, the Company’s Board, TPG, and LGP have entered into a memorandum of understanding to settle the actions filed in Delaware, they believe that the claims asserted in that action, as well as the claims asserted in New York and Federally, are without merit and intend to defend against the actions vigorously. The Company has notified its insurers of the actions and believes that any and all costs, expenses, and/or losses associated with the lawsuits are covered by its applicable insurance policies. The Company has recorded a reserve for litigation settlement of $10 million in the consolidated financial statements as of and for the fiscal year ended January 29, 2011.
Required:
1. Is the acquisition a subsequent event? What are J. Crew’s responsibilities in its financial statements with respect to disclosing it?
2. With respect to litigation:
a. Has J. Crew recorded any
b. Do you believe that there is some amount associated with the litigation that J. Crew considers to be probable and reasonably estimable? What about reasonably possible, or probable but not reasonably estimable? Explain your reasoning.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
52
The Board of Directors of MAT Corporation is planning to make a big acquisition in the next fiscal year. The company hired a merger and acquisition (M&A) consultant to conduct a financial feasibility study using what-if analysis. The consultant and the company’s financial analyst have developed the following data table for the four top target companies from the pre-final list.
Item
Target Co. 1
Target Co. 2
Target Co. 3
Target Co. 4
EPS
$2
$10
$5
$3
Mkt Price
$40
$100
$75
$63
Based on the data table, which of the following target companies is the most expensive company to acquire using the price/earnings (P/E) ratio as the criteria?
Group of answer choices
Target Co. 4
Target Co. 2
Target Co. 1
Target Co. 3
10
10
Exercise 1-23 (Static) Reporting Income LO 1-5
On July 1, 20x2, Alan Enterprises merged with Terry Corporation through an exchange of stock and the subsequent liquidation of
Terry, Alan issued 200,000 shares of its stock to effect the combination. The book values of Terry's assets and liabilities were equal to
their fair values at the date of combination, and the value of the shares exchanged was equal to Cherry's book value. Information
relating to income for the companies is as follows:
Net Income
Alan Enterprises
Terry Corporation
20x1
$4,460,000
1,300,000
Net income
Eamings per share
Alan Enterprises had 1,000,000 shares of stock outstanding prior to the combination. Remember that when calculating earnings per
share (EPS) for the year of the combination, the shares issued in the combination were not outstanding for the entire year
2001
January 1-June 10, 20x2
$2,500,000
492.000
Required:
Compute the net income and earnings-per-share amounts that would be reported in Alan's…
Editing
31
4
Question 3
E16.12 (LO 3) (Issuance, Exercise, and Forfeiture of Share Options) On January 1, 2022,
Magilla SA granted share options to officers and key employees for the purchase of 20,000 of the
company's C10 par ordinary shares at €25 per share. The options were exercisable by grantees still
in the employ of the company within a 5-year period, beginning January 1, 2024, and ending
December 31, 2028. The service period for this award is 2 years. Assume that the fair value option-
pricing model determines total compensation expense to be €400,00o.
On April 1, 2023, 3,000 options were forfeited when the employees resigned from the company.
The market price of the ordinary shares was C35 per share on this date.
On March 31, 2024, 12,000 options were exercised when the market price of the ordinary shares
was C40 per share.
Instructions
Prenare iournal entries ton record issuance of the share options, forfeiture of the share options,
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
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
- PROBLEM 4 – 7 Worship Company purchased 70% ownership of Faithful Company on January 1, 2019, at underlying book value. While each company has its own sales forces and independent product lines, there are substantial inter-corporate sales of inventory each period. The following inter- corporate sales occurred during 2019 and 2020: Cost of Unsold at Product Selling Price End of the Year Year Sold to Outsiders Year Seller Sold Виуer Faithful Со. Worship 2019 Co. Faithful Co. P896,000 P1,280,000 P200,000 2020 Worship Со. Faithful Со. 2020 P624,000 P960,000 P100,000 2021 Worship 2020 Co. P700,000 P910,000 P104,000 2021 The following data summarized the results of their financial operations for the year ended, December 31, 2020: Worship Company Faithful Company P4,150,000 1,920,000 920,000 456,000 70,000 P1,880,000 550,000 310,000 300,000 Sales Gross Profit Operating Expenses Ending Inventories Dividend from affiliate Dividend from non-affiliate 60,000 Required: 1. The Consolidated Sales…arrow_forwardQ7 Business Combination Q7.1 Jerry Ltd has received an attractive takeover offer for its business from Tom Ltd. This offer was accepted by the shareholders of Jerry Ltd. The purchase agreement negotiated by Tom Ltd and Jerry Ltd was for Tom Ltd to take over all the assets of Jerry Ltd (except cash) on 1 July 2021. The purchase consideration consisted of the following: • 2 shares in Tom Ltd for every 5 shares in Jerry Ltd. Jerry Ltd had one million shares outstanding. The market value of Tom Ltd.'s shares was $2.20 at the transfer date. Share price of Jerry Ltd was $0.50 at the transfer date. Share issue expenses paid were $1,000.. Tom Ltd to pay sufficient cash to Jerry Ltd to settle its liabilities. A piece of vacant land valued at $500,000 (currently recorded at $350,000) in Tom's books was to be transferred to Jerry Ltd as part settlement of the purchase consideration. The Balance sheet of Tom Ltd and Jerry Ltd on 1 July 2021 is as follows: Tom Ltd Jerry Ltd Assets Land 1,300,000…arrow_forward1 2 10 3 4 5 Matthew Investment in Lindman 6 Amortization 7 8 9 11 12 A 18 19 20 Matthew Incorporated ownership in Lindman Lindman 2024 Income Lindman 2024 Dividends Lindman Inventory Sales to Matthew 2023 Inventory Sale 2024 Inventory Sale B Matthew, Incorporated owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the investee's operation and decision making. On January 1, 2024, the balance in the Investment in Lindman account is $335,000. Amortization associated with this acquisition is $9,000 per year. In 2024, Lindman earns an income of $90,000 and declares cash dividends of $30,000. Previously, in 2023, Lindman had sold inventory costing $24,000 to Matthew for $40,000. Matthew consumed all but 25 percent of this merchandise during 2023 and used the rest during 2024. Lindman sold additional inventory costing $28,000 to Matthew for $50,000 in 2024. Matthew did not consume 40 percent of these 2024 purchases from Lindman until…arrow_forward
- AVAD PROBLEM 31 Cobarrubias Corporation had the following investment at FVTPL at the beginning of the current year: Fair Value ABC Corporation, 10,000 shares (originally cost P1,000,000). JKL Company, 20,000 shares (originally cost P500,000) - P1,200,000 450,000 During the current year, the following transactions occurred: Feb. 28 ABC Corporation declared a 3-for-2 share split. JKL Company declared a 20% share dividend. The market value of JKL Company on this date is P3.00. Apr 31 June 30 Sold 5,000 shares of JKL Company for P100,000, less brokers fee of P1,000. July 31 Sold 5,000 shares of ABC Corporation for P135. Sept 30 Received share rights to purchase one share of ABC Corporation for P100 per share. The company should tender five rights for every share acquired. The market price of ABC Corporation shares on this date is P140. Oct. 31 Exercise all the share rights from ABC Corporation. Dec. 31 The market value of the portfolio: ABC Corporation – P155 per share JKL Company - P36…arrow_forwardE 13-20 Various transactions involving contingencies LO13-5, LO13-6 The following selected transactions relate to contingencies of Classical Tool Makers, Inc., which began operations in July 2021. Classical's fiscal year ends on December 31. Financial statements are issued in April 2022. Required: Prepare the year-end entries for any amounts that should be recorded as a result of each of these contingencies and indicate whether a disclosure note is indicated. 1. Classical's products carry a one-year warranty against manufacturer's defects. Based on previous experience, warranty costs are expected to approximate 4% of sales. Sales were $2 million (all credit) for 2021. Actual warranty expenditures were $30,800 and were recorded as warranty expense when incurred. 2. Although no customer accounts have been shown to be uncollectible, Classical estimates that 2% of credit sales will eventually prove uncollectible.arrow_forwardExercise 12-20 (Algo) Equity method; purchase; Investee Income; dividends [LO12-6] As a long-term investment at the beginning of the 2024 fiscal year, Florists International purchased 25% of Nursery Supplies Incorporated's 20 million shares for $61 million. The fair value and book value of the shares were the same at that time. During the year, Nursery Supplies earned net income of $44 million and distributed cash dividends of $1.40 per share. At the end of the year, the fair value of the shares is $57 million. Required: Prepare the appropriate journal entries from the purchase through the end of the year. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answer in millions, (i.e., 10,000,000 should be entered as 10). No 1 Transactions 1 Investment revenue Cash Answer is not complete. General Journal ** Debit 61,000,000 Credit 61,000,000arrow_forward
- Exercise 12-20 (Algo) Equity method; purchase; investee income; dividends [LO12-6] As a long-term investment at the beginning of the 2024 fiscal year, Florists International purchased 20% of Nursery Supplies Incorporated's 20 million shares for $69 million. The fair value and book value of the shares were the same at that time. During the year, Nursery Supplies earned net income of $40 million and distributed cash dividends of $1.50 per share. At the end of the year, the fair value of the shares is $65 million. L Required: Prepare the appropriate journal entries from the purchase through the end of the year. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions, (i.e., 10,000,000 should be entered 10). View transaction list Journal entry worksheet 1 2 3 Record the inve Note: Enter debits b Transactions No journal entry required Cash Fair value adjustment Gain on investment (NI) Debit Prev…arrow_forwardExercise 12-20 (Algo) Equity method; purchase; investee income; dividends [LO12-6] As a long-term investment at the beginning of the 2024 fiscal year, Florists International purchased 25% of Nursery Supplies Incorporated's 8 million shares for $62 million. The fair value and book value of the shares were the same at that time. During the year, Nursery Supplies earned net income of $48 million and distributed cash dividends of $2.50 per share. At the end of the year, the fair value of the shares is $58 million. Required: Prepare the appropriate journal entries from the purchase through the end of the year. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions, (i.e., 10,000,000 should be entered as 10). No 1 2 3 4 Transactions 1 2 3 4 X Answer is not complete. General Journal Gain on investment (NI) X Cash Cash Debit 62✔ 12✔ 20 x 2 x Credit 62 12✔ 20 x 2 xarrow_forwardEXERCISE 12 METRO is going to merge with MEDEC, with METRO as the surviving firm. It is agreed that the exchange ratio is 1:2 Metro (RM *000) Medec(RM 000) Assets Current assets 50 70 Fixed assets 650 700 180 250 Liabilities and Equities Current liabilities Long term debt Common stock (RM1 par) Capital surplus Retained earnings 30 10 140 60 400 80 50 80 30 250 700 Earnings available to common stockholders Common Dividends 100 130 100 50 Addition to Retained Earnings 50 30 SITI RAHAYU BELI/FPP/UITM SABAH Page 25 Prepare a post merger financial position for METRO using the pooling of interest method.arrow_forward
- PROBLEM VII On July 1, 2019, Eya Company acquired 700,000 shares of Agas Company at a price of P13 per share. Eya estimated that the price paid include P1.50 premium in order to gain control over Agas. On this date, the fair values of Agas' identifiable assets and liabilities and their carrying values are given below: Book Value P2,000,000 9,000,000 P3,000,000 5,000,000 3,000,000 Fair Value P2,000,000 11,000,000 Current assets Property, plant and equipment Liabilities Ordinary shares, P5 par Retained earnings 1. Determine the amount of goodwill.arrow_forward2 3 4 5 6789E 01 10 11 RCC. Inc. has offered $870 million cash for all of the common stock in Universal Corporation. Based on recent market information, Universal is worth $730 million as an independent operation. For the merger to make economic sense for RCC, what would the minimum estimated present value of the enhancements from the merger have to be? MV as an independent operation Min. amount of synergies to justify the offer price Offer price ($m)arrow_forward17:50 M b b • Assignment 2- BBA Assignment 2 Consolidated Statement of financial position Johnson PLC acquires 80 percent of Steven PLC for $2,080,000 on January 1, 2020. The book values of Steven PLC's assets and liabilities are equal to the fair values which equals $2,500,000. Steven PLC reports net income of $500,000 during the year. Dividends of $200,000 are declared by Steven PLC on December 5. These dividends are to be paid next year. The balance sheets of Johnson PLC and Steven PLC at December 31, 2020 are as follows: Johnson PLC Fair Value 300,000 390,000 Johnson PLC Steven PLC Вook Value 300,000 400,000 80,000 200,000 Cash Accounts receivable, net Dividend's receivable Equipment-net 1,000,000 Building-net Land 160,000 160,000 -0- | 1,200,000 2,500,000 1,800,000 800,000 1,000,000 1,400,000 -0- 2,000,000 1,600,000 Investment in David PLC Total Assets Accounts payable ? 7,780,000 500,000 8,670,000 500,000 3,480,000 80,000 Dividends payable Notes payable Capital stock Retained…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Financial & Managerial AccountingAccountingISBN:9781285866307Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Financial & Managerial Accounting
Accounting
ISBN:9781285866307
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Accounting for Finance and Operating Leases | U.S. GAAP CPA Exams; Author: Maxwell CPA Review;https://www.youtube.com/watch?v=iMSaxzIqH9s;License: Standard Youtube License