Loose Leaf Intermediate Accounting
9th Edition
ISBN: 9781260029901
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 13, Problem 13.9BYP
Judgment Case 13–9
Loss contingency and full disclosure
• LO13–5, LO13–6
In the March 2019 meeting of Valleck Corporation’s board of directors, a question arose as to the way a possible obligation should be disclosed in the forthcoming financial statements for the year ended December 31. A veteran board member brought to the meeting a draft of a disclosure note that had been prepared by the controller’s office for inclusion in the annual report. Here is the note:
On May 9, 2018, the United States Environmental Protection Agency (EPA) issued a Notice of Violation (NOV) to Valleck alleging violations of the Clean Air Act. Subsequently, in June 2018, the EPA commenced a civil action with respect to the foregoing violation seeking civil penalties of approximately $853,000. The EPA alleges that Valleck exceeded applicable volatile organic substance emission limits. The Company estimates that the cost to achieve compliance will be $190,000; in addition the Company expects to settle the EPA lawsuit for a civil penalty of $205,000 which will be paid in 2019.
“Where did we get the $205,000 figure?” he asked. On being informed that this is the amount negotiated last month by company attorneys with the EPA, the director inquires, “Aren’t we supposed to report a liability for that in addition to the note?”
Required:
Explain whether Valleck should report a liability in addition to the note. Why or why not? For full disclosure, should anything be added to the disclosure note itself?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Question 12 of 20
View Policies
When a company amends a pension plan, for accounting purposes, prior service costs should be
O recorded in other comprehensive income (PSC).
O reported as an expense in the period the plan is amended.
O amortized in accordance with procedures used for income tax purposes.
O treated as a prior period adjustment because no future periods are benefited.
Prublem 22 08
On March 5, 2021, you were hired by widhwas inc. a closcly held compary, a af member of its nenly created intemal auditing department. while revieming the companys recordo for 2019 and 2020, you divco-er that ne odjustnents have yet been made for the folloning itema.
Themme
1.
2.
3.
4.
Interest income of s14,400 was nat acorued a the End of 2019. I naa recorded when received in February 2020.
A camputer cneting s3,700 uar. mepaneat wtar pureraa: ar luly 1, 3015. epasted ta hav 4-yanr ite eth no ralvnge valun. Tha company typicaly urar traight-ina depreatian for all fhant ate.
kescarch and development coss of $30,300 ne e incured car y in 2019. They nere capitaliaed and were to be amortued over a year period. Amortization of s10,100 was recurded for 20:9 and $10,100 for 2020.
On Ianunry 3, 3010, wildhama ianced a huidn; for 5 yeaT at a martinty rartal at sa,nen. On that data, the sompany paid the fallong amnunte, which uera penead wihen pard.
Senunty depsee
First month's…
17
Item 17
Item 17
Which of the following is a net asset category reported by not-for-profit entities?
Multiple Choice
Unrestricted net assets.
Net assets with donor restrictions.
Temporarily restricted net assets.
Net investment in capital assets.
18
Item 18
Item 18
Which of the following would typically not be included in the introductory section of a comprehensive annual financial report?
Multiple Choice
Title and contents page.
Letter of transmittal.
A description of the government.
Summary of the government's current financial position and results of financial activities.
Chapter 13 Solutions
Loose Leaf Intermediate Accounting
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
- Contingent liabilities Altria Group, Inc., has more than 12 pages dedicated to describing contingent liabilities in the notes to recent financial statements. These pages include extensive descriptions of multiple contingent liabilities. Use the Internet to research Altria Group, Inc., at www.altria.com. a. What are the major business units of Altria Group? b. Based on your understanding of this company, why would Altria Group require more than 12 pages of contingency disclosure?arrow_forwardQuestion 5 of 20 View Policies -/1 ||| In the calculation of pension expense recognized for a period by an employer sponsoring a defined benefit pension plan, which components will not be included? O Interest cost on the projected benefit obligation. O Excess of accumulated benefit obligation over the fair value of the plan assets. O Actuarial present value of benefits attributed by the pension benefit formula to employee service during that period. O Amortization of the unrecognized net obligation (and loss or cost) or unrecognized net asset (and gain) existing at the date of transition. ...arrow_forward11:42 MO A * l 19 ull 49% ALLOWABLE DED... ACTIVITY A • During 2018 AwW company incurred the following expenses related to the travel of its officers and employees: • Foreign travel of officers and employees ( Plane ticket, Meals and Lodging : for attending training and seminars P 1,500,000 • Domestic travel of employees related to business 400,000 •Travel expenses of the spouse of the vice president • of finance 125,000 • Required: Compute the allowable deduction for travel expenses ACTIVITY B • During 2020 the total net amount paid for salaried and wages amounted to P 16,000,000 after the following deduction: • SSS employees contributions • PAG IBIG contributions • Philhealth employee contribution • Withholding tax • In addition the Lotus Company its manager P 600.000 cash as fringe benefits P 800,000 300,000 160,000 540,000 • Required : Compute the allowable salary deduction АCTIVITY C •Mr. Marco Gamboa widow with three qualified dependent children; Anica 19. Andrew is 17 and Kris…arrow_forward
- R S4 OH2 Required Information Nevertheless The FASB requires that income statement recognition of gains and losses from cither source be delayed Politically acceptable approach 0:00 /6:56 720p 1x CC Knowledge Check 01 Calder Company has a defined benefit pension plan. Pension-related data for the current calendar year are shown below: 12 years Average remaining service period of active employees Net gain, January 1 PBO, January 1 Plan assets, January 1 009 1,930,000 What is the amount of the amortization of the net loss or gain that should be included as a component of pension expense for the current year? Amortization of net gain Next > %24 F6 F4 F5 F3 F2 %23 8. 9 L 1. H.arrow_forwardOMA gate With Confidence LOMA 281 Module 4 Exam English 1 of 10 The Axford Company provides a group retirement plan for its eligible employees. This plan, which satisfies the requirements of the Employee Retirement Income Security Act (ERISA), uses a vesting schedule in which new employees have no vested interest in the employer's contributions until they have been employed by Axford for three years, at which time they become 100 percent vested. This information indicates that Axford's group retirement plan uses a vesting schedule known as a O step vesting schedule graded vesting schedule O Keogh vesting schedule O cliff vesting schedule Previous Question 1 77°F Mostly clear Next Question ● Q Search Assessment progress: OL A EN INTarrow_forward7 What will a contingency note contain? Review Later A circumstance where a company may have a liability A disclosure of future contracts to be performed A disclosure of all future commitments of the company A set of criteria required to be able to recognize revenuearrow_forward
- Question 8 of 18 The category "trade receivables" includes Select the correct response: none of these advances to officers and employees income tax refunds receivable. claims against insurance companies for casualties sustained < Previousarrow_forwardPROBLEM 26-29 Contingencies a eurrod ed how should this be reported? The choices are: During 2021, Smith Company filed suit against West Company seeking damages for patent infringement. In Smith's December 31, 2021 financial statements, 000 X129 Accrue and disclose b. Disclose only C. Accrue only d. Neither accrue nor disclose moteo D o1 a. enuines EV sbive pio uoqm olanM 2shaW LBOBIEW Se 3I MOLA Assume the following independent cases: bauoa bas 1. It is virtually certain that Smith would be successful against West for an estimated amount of P1,500,000. 2. It is probable that Smith would be successful against West for an estimated amount of P1,500,000. 3. It is probable that Smith would be successful against West for an estimated amount of P1,500,000. Before the financial statement was issued, Smith was awarded P1,000,000 and received full payment thereof. 4. It is probable that Smith would be successful against West for an estimated amount of P1,500,000. After the financial statement…arrow_forwardO 1 75% AT&T LTE 11:52 AM Exit 56 9. Which of the following is NOT a direct action that can be taken by shareholders? Voting to remove the management team Submitting shareholder resolutions directing the board to take specific actions Withholding votes for the board of directors candidates Initiating a proxy contest 10. Which of the following statements is FALSE?arrow_forward
- Question 17: Which of these is NOT a regulation set forth within ERISA? Answer: A. Employees must be provided with pertinent retirement plan information. В. Employers are required to offer retirement plans. C. Fiduciaries of the retirement plan may be held accountable for breaches of responsibility. D. There are specific timeframes over which retirement plan benefits become nonforfeitable.arrow_forwardal ing the cerns ssage CASES FOR ANALYSIS wor Case 7-1 incisione dovolment ant esinspo by blow wat (1910 The Oracle of Omaha Speaks About Board Members YOY 100W 200odonW Warren Buffett, the chairman and CEO of Berkshire Hathaway, published his annual letter to shareholders on February 22, 2020. The letter discussed how Berkshire Hathaway's business fared throughout 2019 and addressed a number of topics, including corporate governance. In the fol- lowing excerpt, Buffett described the qualities of a meddai yosh good director: pisan I'd like you to know that almost all of the directors I have met over the years have been decent, likable and intelligent. They dressed well, made good neighbors and Bur 76 airil to anot udi sahesh oy oy ndow april baloobs fiet were fine citizens.... Nevertheless, many of these good souls are people whom I would never have chosen to handle money or business matters. It simply was not their game. They, in turn, would never have asked me for help in removing a…arrow_forwardQuestion 17 S1: Employee-sponsored retirement plans can be categorized into two: current service cost and projected benefit obligation. S2: Liabilities pertains to the settlements which resulted in an outflow of resources embodying economic benefits. S3: PAS 19, provides that only the unvested past service costs shall be recognized as expense immediately. one statement is true two of the statements are true all statements are false all statements are truearrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage Learning
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Financial & Managerial AccountingAccountingISBN:9781285866307Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Accounting (Text Only)AccountingISBN:9781285743615Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Financial & Managerial AccountingAccountingISBN:9781337119207Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Corporate Financial AccountingAccountingISBN:9781337398169Author:Carl Warren, Jeff JonesPublisher:Cengage Learning
Survey of Accounting (Accounting I)
Accounting
ISBN:9781305961883
Author:Carl Warren
Publisher:Cengage Learning
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Financial & Managerial Accounting
Accounting
ISBN:9781285866307
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Accounting (Text Only)
Accounting
ISBN:9781285743615
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Financial & Managerial Accounting
Accounting
ISBN:9781337119207
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Corporate Financial Accounting
Accounting
ISBN:9781337398169
Author:Carl Warren, Jeff Jones
Publisher:Cengage Learning
Accounts Receivable and Accounts Payable; Author: The Finance Storyteller;https://www.youtube.com/watch?v=x_aUWbQa878;License: Standard Youtube License