Acc 422 week 5 individual

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The pack of ACC 422 Week 5 Idividual comprises:
Assignments from the Text
a. Prepare solutions to the following exercises from the text:
Chapter 13: E13-1, E13-7, E13-11, E13-13
b. Prepare a response to the following Question
Business - Accounting
ACC 422 All Week 5 Assignments - Individual WileyPlus
Assignment
Includes:
Week 5 Discussion questions 1, 2, 3, 4
Week 5 Learning team assignment
Week 5 Learning Team Problem Presentation
Week 5 Individual WileyPlus assignment as described below:
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.

2. 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 Company offers 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 addition it costs
50 cents to mail each CD. The results of the premium plan for
the years 2010 and 2011 are as follows. (All purchases and

3. sales are for cash.)
2010 2011
CDs purchased 250,000 330,000
Candy bars sold 2,895,400 2,743,600
Wrappers redeemed 1,200,000 1,500,000
2010 wrappers expected to be redeemed in 2011 290,000
2011 wrappers expected to be redeemed in 2012 350,000
Instructions
(a) Prepare the journal entries that should be made in 2010
and 2011 to record the transactions related
to the premium plan of the Sycamore Candy Company.
(b) Indicate the account names, amounts, and classifications
of the items related to the premium plan
that would appear on the balance sheet and the income
statement at the end of 2010 and 2011.
*E14-21 (Term Modification without Gain—Debtor’s Entries)
On December 31, 2010, the American Bank enters into a debt
restructuring agreement with Barkley Company, which is now
experiencing financial trouble. The bank agrees to restructure
a 12%, issued at par, $3,000,000 note receivable by
the following modifications:
1. Reducing the principal obligation from $3,000,000 to
$2,400,000.
2. Extending the maturity date from December 31, 2010, to
January 1, 2014.
3. Reducing the interest rate from 12% to 10%.
Barkley pays interest at the end of each year. On January 1,
2014, Barkley Company pays $2,400,000 in cash to Firstar
Bank.
Instructions
(a) Will the gain recorded by Barkley be equal to the loss

4. recorded by American Bank under the debt
restructuring?
(b) Can Barkley Company record a gain under the term
modification mentioned above? Explain.
(c) Assuming that the interest rate Barkley should use to
compute interest expense in future periods
is 1.4276%, prepare the interest payment schedule of the
note for Barkley Company after the debt
restructuring.
(d) Prepare the interest payment entry for Barkley Company
on December 31, 2012.
(e) What entry should Barkley make on January 1, 2014?
E21-7 (Lessee-Lessor Entries, Sales-Type Lease) On January 1,
2011, Palmer Company leased equipment to Woods
Corporation. The following information pertains to this lease.
1. The term of the noncancelable lease is 6 years, with no
renewal option. The equipment reverts to
the lessor at the termination of the lease.
2. Equal rental payments are due on January 1 of each year,
beginning in 2011.
3. The fair value of the equipment on January 1, 2011, is
$200,000, and its cost is $150,000.
4. The equipment has an economic life of 8 years, with an
unguaranteed residual value of $10,000.
Woods depreciates all of its equipment on a straight-line
basis.
5. Palmer sets the annual rental to ensure an 11% rate of
return. Woods’s incremental borrowing rate
is 12%, and the implicit rate of the lessor is unknown.
6. Collectibility of lease payments is reasonably predictable,
and no important uncertainties surround

5. the amount of costs yet to be incurred by the lessor.
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