Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Question
Chapter 9, Problem 22E
To determine

Discuss the accounting treatment for the given situation of Incorporation BT for the year 2019.

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Chapter 9 Solutions

Intermediate Accounting: Reporting And Analysis

Ch. 9 - Prob. 11GICh. 9 - How should long-term debt that is callable by a...Ch. 9 - Prob. 13GICh. 9 - Prob. 14GICh. 9 - Prob. 15GICh. 9 - Prob. 16GICh. 9 - Prob. 17GICh. 9 - Prob. 18GICh. 9 - Prob. 19GICh. 9 - Prob. 20GICh. 9 - Prob. 21GICh. 9 - Prob. 22GICh. 9 - Prob. 23GICh. 9 - Prob. 24GICh. 9 - Prob. 25GICh. 9 - Prob. 26GICh. 9 - Prob. 27GICh. 9 - Prob. 28GICh. 9 - The balance in Ashwood Companys accounts payable...Ch. 9 - On September 1, 2019, a company borrowed cash and...Ch. 9 - When a company receives a deposit from a customer...Ch. 9 - Bronson Apparel Inc. operates a retail store and...Ch. 9 - Prob. 5MCCh. 9 - Prob. 6MCCh. 9 - Prob. 7MCCh. 9 - Prob. 8MCCh. 9 - Prob. 9MCCh. 9 - Prob. 10MCCh. 9 - Rescue Sequences LLC purchased inventory by...Ch. 9 - Use the same information in RE9-1 except that the...Ch. 9 - Cee Co.s fiscal year begins April 1. At the...Ch. 9 - Prob. 4RECh. 9 - Prob. 5RECh. 9 - Smith Company is required to charge customers an...Ch. 9 - Wallace Corporation summarizes the following...Ch. 9 - Borat Company gives annual bonuses after the end...Ch. 9 - Prob. 9RECh. 9 - Prob. 10RECh. 9 - After years of experience, Dilcort Company...Ch. 9 - Prob. 1ECh. 9 - Notes Payable On December 1, 2019, Insto Photo...Ch. 9 - Non-Interest-Bearing Notes Payable On November 16,...Ch. 9 - Discounting of Notes Payable On October 30, 2019,...Ch. 9 - Disclosure of Debt On May 1, 2019, Ramden Company...Ch. 9 - Short-Term Debt Expected to Be Refinanced On...Ch. 9 - Short-Term Debt Expected to Be Refinanced On...Ch. 9 - Refundable Deposits Party Warehouse Inc. rents a...Ch. 9 - Prob. 9ECh. 9 - Property Taxes Family Practice Associates has an...Ch. 9 - Prob. 11ECh. 9 - Prob. 12ECh. 9 - Prob. 13ECh. 9 - Prob. 14ECh. 9 - Prob. 15ECh. 9 - Prob. 16ECh. 9 - Prob. 17ECh. 9 - Prob. 18ECh. 9 - Prob. 19ECh. 9 - Prob. 20ECh. 9 - Cash Rebates On January 1, 2020, Fro-Yo Inc. began...Ch. 9 - Prob. 22ECh. 9 - Prob. 1PCh. 9 - Notes Payable and Effective Interest On November...Ch. 9 - Trade Note Transactions Adjusto Corporation (which...Ch. 9 - Prob. 4PCh. 9 - Short-Term Debt Expected to Be Refinanced On...Ch. 9 - Non-Interest-Bearing Note Payable: Present Value...Ch. 9 - Prob. 7PCh. 9 - Prob. 8PCh. 9 - Payroll and Payroll Taxes Bailey Dry Cleaners has...Ch. 9 - Bonus Obligation and Income Tax Expense James...Ch. 9 - Prob. 11PCh. 9 - Contingencies Fallon Company, a toy manufacturer...Ch. 9 - Prob. 13PCh. 9 - Assurance-Type Warranty Clean-All Inc. sells...Ch. 9 - Prob. 15PCh. 9 - Premium Obligation Yummy Cereal Company is...Ch. 9 - Comprehensive Selected transactions of Lizard Lick...Ch. 9 - Comprehensive Selected transactions of Shadrach...Ch. 9 - Prob. 1CCh. 9 - Prob. 2CCh. 9 - Prob. 3CCh. 9 - Pending Damage Suit Disclosure On December 15,...Ch. 9 - Various Contingency Issues Skinner Company has the...Ch. 9 - Prob. 6CCh. 9 - Prob. 7CCh. 9 - Prob. 8CCh. 9 - Prob. 10C
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  • Contingencies Fallon Company, a toy manufacturer that also operates several retail outlets, is preparing its December 31, 2019, financial statements. It has identified the following legal situations that may qualify as contingencies: A customer is suing the company for 800,000 in damages because her child was injured in November 2019 while riding an escalator that stopped suddenly in one of its stores. The child was hurt when he tripped and fell while walking down an escalator that was going up. Legal counsel feels that the child is partially at fault, but that it is probable that the lawsuit will be settled for between SO,000 and 100,000, with 80,000 being the most likely amount. Fallon has discovered that a skateboard it began manufacturing and selling in 2019 has defective bearings, sometimes causing a wheel to fall off. Fallon has issued a recall notice in newspapers and magazines in which it offers to replace the bearings. It estimates a cost of 200,000 for these repairs. No lawsuits have been filed for injury claims, although the company feels that there is a reasonable possibility that claims may total as high as 2 million. Fallon has an incinerator behind one of its retail outlets which is used to burn cardboard boxes received in shipments of inventory from suppliers. The state environmental protection agency filed suit against the company in August 2019 for air pollution. Fallon expects to stop using the incinerator and begin recycling. However, its lawyers believe that it is probable that a fine of between 40,000 and 60,000 will be levied against the company, although they cannot predict the exact amount. In early 2019, Fallon signed a contract with a computer vendor to install state of the art cash registers in all of its retail outlets. Because of the vendors inability to acquire sufficient cash registers, the vendor canceled the contract. Fallon has filed a breach of contract suit against the vendor, claiming 300,000 in damages. The companys lawyers expect that it will settle the suit out of court for 150,000. Required: Next Level For each situation, prepare the journal entry (if any) on December 31, 2019, to record the information for Fallon, and explain your reasoning. If no journal entry is recorded, explain how the information would be disclosed in Fallons 2019 annual report. How would your answers change if Fallon used IFRS?
    Deferred Tax Asset and Valuation Account Zeta Corporation reported taxable income for 2019 of 200,000. The enacted tax rate for 2019 is 40%. During 2019, Zeta became the defendant in a lawsuit. The lawsuit has not been resolved at the end of the period, but Zetas lawyers believe that it is probable that the company will be held liable. The legal office estimated that the amount of loss will IK 80,000. AS a result, the lawsuit has been recognized as a contingent liability. However, the legal obligation is not deductible for tax purposes during 2019. The lawsuit represents the only difference between financial income and taxable income for the year. Required: 1. Assume that Zeta Corporation has been quite profitable in past periods and expects to continue that pattern in the future. Record a journal entry to recognize tax expense, tax payable, and deferred tax for 2019. 2. Assume that there is substantial doubt about whether Zeta Corporation will be profitable in future periods. As a result, the company believes that one-half of the future deduction for legal costs will not be realized. Record a journal entry to recognize tax expense, tax payable, and deferred tax for the year. 3. Next Level Explain what circumstances require that a valuation allowance account should be utilized when deferred tax is recognized. How should that account be presented on the financial statements? 4. Prepare your answer to Requirement 2 assuming that Zeta prepares financial statements according to IFRS.
    Pending Damage Suit Disclosure On December 15, 2019, a truck driver for Cork Transfer Company negligently rounded a curve that was also a bridge covering several local merchant shops. The truck jumped the guardrail and fell 30 feet onto one of the shops, causing highly flammable chemicals in the truck to explode. Although by February 22, 2020 (the date on which Corks financial statements for 2019 are issued), no claims had been filed against Cork, the companys legal counsel believes it is probable that some will be filed in the future. However, counsel does not believe it can reasonably estimate the amount of these potential claims. Required: Explain the accounting treatment, if any, Cork should give the contingent loss occurring from the wreck in the December 31, 2019, financial statements.
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