ch13AdditionalAnswers

ch13AdditionalAnswers - CHAPTER 13 Current Liabilities and...

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CHAPTER 13 Current Liabilities and Contingencies EXERCISE 13-2 (a) Sept. 1 Purchases. ............................................. 50,000 Accounts Payable. ....................... 50,000 Oct. 1 Accounts Payable. ................................ 50,000 Notes Payable. ............................. 50,000 Oct. 1 Cash. ....................................................... ................................................................ 75,000 Discount on Notes Payable. ................. 6,000 Notes Payable. ............................. 81,000 (b) Dec. 31 Interest Expense. .................................. 1,000 Interest Payable ($50,000 X 8% X 3/12). .............. 1,000 Dec. 31 Interest Expense. .................................. 1,500 Discount on Notes Payable ($6,000 X 3/12). .......................... 1,500
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EXERCISE 13-2 (Continued) (c) 1. Note payable. ................................. $50,000 Interest payable. ............................ 1,000 $51,000 2. Note payable. ................................. $81,000 Less discount ($6,000 – $1,500). . 4,500 $76,500 EXERCISE 13-13 (1) The FASB requires that, when some amount within the range of ex- pected loss appears at the time to be a better estimate than any other amount within the range, that amount is accrued. When no amount within the range is a better estimate than any other amount, the dollar amount at the low end of the range is accrued and the dollar amount at the high end of the range is disclosed. In this case, therefore, Maverick Inc. would report a liability of $800,000 at December 31, 2010. (2) The loss should be accrued for $6,000,000. The potential insurance recovery is a gain contingency—it is not recorded until received. According to FASB ASC 410-30-35-8, claims for recoveries may be recorded if the recovery is deemed probable. (3) This is a gain contingency because the amount to be received will be in excess of the book value of the plant. Gain contingencies are not recorded and are disclosed only when the probabilities are high that a gain contingency will become reality.
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EXERCISE 13-14 (a) Depot. .................................................................... 600,000 Cash. ............................................................ 600,000 Depot. .................................................................... 39,087 Asset Retirement Obligation. .................... 39,087 (b) Depreciation Expense. ......................................... 60,000 Accumulated Depreciation. ....................... 60,000 Depreciation Expense. ......................................... 3,909 Accumulated Depreciation. ....................... 3,909* Interest Expense. .................................................. 2,345 Asset Retirement Obligation. .................... 2,345** *$39,087/10. **$39,087 X .06.
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This note was uploaded on 04/14/2010 for the course TOBIN 630 taught by Professor Alan during the Fall '10 term at Adams State University.

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ch13AdditionalAnswers - CHAPTER 13 Current Liabilities and...

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