Acc 422 Week 5 Wileyplus Assignment

ACC 422 WEEK 5 WILEYPLUS ASSIGNMENT

http://www.homeworkproviders.com/shop/acc-422-week-5/ E13-13 (Contingencies) Presented below are three independent situations. Answer the question at the end of each situation.

1. During 2010, Maverick Inc. became involved in a tax dispute with the IRS. Maverick’s attorneys

have indicated that they believe it is probable that Maverick will lose this dispute. They

also believe that Maverick will have to pay the IRS between $800,000 and $1,400,000. After

the 2010 financial statements were issued, the case was settled with the IRS for $1,200,000.

What amount, if any, should be reported as a liability for this contingency as of December 31,

2010?

2. On October 1, 2010, Holmgren Chemical was identified as a potentially responsible party by the

Environmental Protection Agency. Holmgren’s management along with its counsel have concluded

that it is probable that Holmgren will be responsible for damages, and a reasonable estimate of

these damages is $6,000,000. Holmgren’s insurance policy of $9,000,000 has a deductible clause

of $500,000. How should Holmgren Chemical report this information in its financial statements at

December 31, 2010?

3. Shinobi Inc. had a manufacturing plant in Darfur, which was destroyed in the civil war. It is not

certain who will compensate Shinobi for this destruction, but Shinobi has been assured by governmental officials that it will receive a definite amount for this plant. The amount of the compensation will be less than the fair value of the plant, but more than its book value. How should the

contingency be reported in the financial statements of Shinobi Inc.?

P13-9 (Premium Entries and Financial Statement Presentation) Sycamore Candy Companyoffers a CD single as a premium for every five candy bar wrappers presented by customers together with $2.50. The candy bars are sold by the company to distributors for 30 cents each. The purchase price of each CD to the company is $2.25; in...