intermediate accounting ifrs, chapter 13, computational

b

Vista newspapers sold 4,000 of annual subscriptions at $125 each on September 1. How much unearned revenue will exist as of December 31? a. $0. b. $333,333. c. $166,667. d. $500,000.

b

Tender Foot Inc. is involved in litigation regarding a faulty product sold in a prior year. The company has consulted with its attorney and determined that it is possible that they may lose the case. The attorneys estimated that there is a 40% chance of losing. If this is the case, their attorney estimated that the amount of any payment would be $500,000. What is the required journal entry as a result of this litigation? a. Debit Litigation Expense for $500,000 and credit Litigation liability for $500,000. b. No journal entry is required. c. Debit Litigation Expense for $200,000 and credit Litigation Liability for $200,000. d. Debit Litigation Expense for $300,000 and credit Litigation Liability for $300,000.

c

Electronics4U manufactures high-end whole home electronic systems. The company provides a one-year warranty for all products sold. The company estimates that the warranty cost is $200 per unit sold and reported a liability for estimated warranty costs $6.5 million at the beginning of this year. If during the current year, the company sold 50,000 units for a total of $243 million and paid warranty claims of $7,500,000 on current and prior year sales, what amount of liability would the company report on its statement of financial position at the end of the current year? a. $2,500,000. b. $3,500,000. c. $9,000,000. d. $10,000,000.

d

A company buys an oil rig for $1,000,000 on January 1, 2010. The life of the rig is 10 years and the expected cost to dismantle the rig at the end of 10 years is $200,000 (present value at 10% is $77,110). 10% is an appropriate interest rate for this company. What expense should be recorded for 2010 as a result of these events? a. Depreciation expense of $120,000 b. Depreciation expense of $100,000 and interest expense of $7,711 c. Depreciation expense of $100,000 and interest expense of $20,000 d. Depreciation expense of $107,711 and interest expense of $7,711

d

A company buys an oil rig for $2,000,000 on January 1, 2010. The life of the rig is 10 years and the expected cost to dismantle the rig at the end of 10 years is $400,000 (present value at 10% is $154,220). 10% is an appropriate interest rate for this company. What expense should be recorded for 2010 as a result of these events? a. Depreciation expense of $240,000 b. Depreciation expense of $200,000 and interest expense of $15,422 c. Depreciation expense of $200,000 and interest expense of $40,000 d. Depreciation expense of $215,422 and interest expense of $15,422

c

A company gives each of its 50 employees (assume they were all employed continuously through 2010 and 2011) 12 days of vacation a year if they are employed at the end of the year. The vacation accumulates and may be taken starting January 1 of the next year. The employees work 8 hours per day. In 2010, they made $14 per hour and in 2011 they made $16 per hour. During 2011, they took an average of 9 days of vacation each. The company's policy is to record the liability existing at the end of each year at the wage rate for that year. What amount of vacation liability would be reflected on the 2010 and 2011 balance sheets, respectively? a. $67,200; $93,600 b. $76,800; $96,000 c. $67,200; $96,000 d. $76,800; $93,600

c

A company gives each of its 50 employees (assume they were all employed continuously through 2010 and 2011) 12 days of vacation a year if they are employed at the end of the year. The vacation accumulates and may be taken starting January 1 of the next year. The employees work 8 hours per day. In 2010, they made $17.50 per hour and in 2011 they made $20 per hour. During 2011, they took an average of 9 days of vacation each. The company's policy is to record the liability existing at the end of each year at the wage rate for that year. What amount of vacation liability would be reflected on the 2010 and 2011 balance sheets, respectively? a. $84,000; $117,000 b. $96,000; $120,000 c. $84,000; $120,000 d. $96,000; $117,000

b

A company offers a cash rebate of $1 on each $4 package of batteries sold during 2010. Historically, 10% of customers mail in the rebate form. During 2010, 6,000,000 packages of batteries are sold, and 210,000 $1 rebates are mailed to customers. What is the rebate expense and liability, respectively, shown on the 2010 financial statements dated December 31? a. $600,000; $600,000 b. $600,000; $390,000 c. $390,000; $390,000 d. $210,000; $390,000

b

A company offers a cash rebate of $1 on each $4 package of light bulbs sold during 2010. Historically, 10% of customers mail in the rebate form. During 2010, 4,000,000 packages of light bulbs are sold, and 140,000 $1 rebates are mailed to customers. What is the rebate expense and liability, respectively, shown on the 2010 financial statements dated December 31? a. $400,000; $400,000 b. $400,000; $260,000 c. $260,000; $260,000 d. $140,000; $260,000

c

Blitz Corporation, a manufacturer of cleaning products, is preparing annual financial statements at December 31, 2011. Because of a recently proven health hazard in one of its cleaning products, the U.K. government has clearly indicated its intentional of having Blitz recall all cans of this paint sold in the last three months. The management of Ortiz estimates that this recall would cost £5,800,000. What accounting recognition, if any, should be accorded this situation? a. No recognition. b. Note disclosure only. c. Expense of £5,800,000 and liability of £5,800,000. d. Expense of £5,800,000, and retained earnings restriction of ₤5,800,000.

a

CalCount provides its employees two weeks of paid vacation per year. As of December 31, 65 employees have earned two weeks of vacation time to be taken the following year. If the average weekly salary for these employees is $950, what is the required journal entry? a. Debit Wages Expense for $123,500 and credit Vacation Wages Payable for $123,500. b. No journal entry required. c. Debit Vacation Wages Payable for $123,000 and credit Wages Expense for $123,000. d. Debit Wages Expense for $61,750 and credit Vacation Wages Payable for $61,750.

d

CalCount pays a weekly payroll of $85,000 that includes federal taxes withheld of $12,700, FICA taxes withheld of $7,890, and pension withholdings of $9,000. What is the effect of assets and liabilities from this transaction? a. Assets decrease $85,000 and liabilities do not change. b. Assets decrease $64,410 and liabilities increase $20,590. c. Assets decrease $64,410 and liabilities decrease $20,590. d. Assets decrease $55,410 and liabilities increase $29,590.

b

Collier borrowed $175,000 on October 1 and is required to pay $180,000 on March 1. What amount is the note payable recorded at on October 1 and how much interest is recognized from October 1 to December 31? a. $175,000 and $0. b. $175,000 and $3,000. c. $180,000 and $0. d. $175,000 and $5,000.

d

During 2010, Stabler Co. introduced a new line of machines that carry a three-year warranty against manufacturer's defects. Based on industry experience, warranty costs are estimated at 2% of sales in the year of sale, 4% in the year after sale, and 6% in the second year after sale. Sales and actual warranty expenditures for the first three-year period were as follows: Sales Actual Warranty Expenditures 2010 $400,000 $ 6,000 2011 1,000,000 30,000 2012 1,400,000 90,000 Total $2,800,000 $126,000 What amount should Stabler report as a liability at December 31, 2012? a. $0 b. $10,000 c. $136,000 d. $210,000

d

During 2010, Vanpelt Co. introduced a new line of machines that carry a three-year warranty against manufacturer's defects. Based on industry experience, warranty costs are estimated at 2% of sales in the year of sale, 4% in the year after sale, and 6% in the second year after sale. Sales and actual warranty expenditures for the first three-year period were as follows: Sales Actual Warranty Expenditures 2010 $ 600,000 $ 9,000 2011 1,500,000 45,000 2012 2,100,000 135,000 Total $4,200,000 $189,000 What amount should Vanpelt report as a liability at December 31, 2012? a. $0 b. $15,000 c. $204,000 d. $315,000

a

Ermler Corporation has $1,800,000 of short-term debt it expects to retire with proceeds from the sale of 60,000 ordinary shares. If the shares are sold for $20 per share subsequent to the statement of financial position date, but before the statement of financial position is issued, what amount of short-term debt could be excluded from current liabilities? a. $1,200,000 b. $1,800,000 c. $600,000 d. $0

b

LeMay Frosted Flakes Company offers its customers a pottery cereal bowl if they send in 4 boxtops from LeMay Frosted Flakes boxes and $1.00. The company estimates that 60% of the boxtops will be redeemed. In 2010, the company sold 500,000 boxes of Frosted Flakes and customers redeemed 220,000 boxtops receiving 55,000 bowls. If the bowls cost LeMay Company $2.50 each, how much liability for outstanding premiums should be recorded at the end of 2010? a. $20,000 b. $30,000 c. $50,000 d. $70,000

b

Fuller Food Company distributes to consumers coupons which may be presented (on or before a stated expiration date) to grocers for discounts on certain products of Fuller. The grocers are reimbursed when they send the coupons to Fuller. In Fuller's experience, 50% of such coupons are redeemed, and generally one month elapses between the date a grocer receives a coupon from a consumer and the date Fuller receives it. During 2010 Fuller issued two separate series of coupons as follows: Issued On 1/1/10 7/1/10 Total Value $375,000 540,000 Consumer Expiration Date 6/30/10 12/31/10 Amount Disbursed as of 12/31/10: $177,000 225,000 The only journal entries to date recorded debits to coupon expense and credits to cash of $536,000. The December 31, 2010 statement of financial position should include a liability for unredeemed coupons of a. $0. b. $45,000. c. $93,000. d. $270,000.

b

Glaus Corp. signed a three-month, zero-interest-bearing $152,205 note on November 1, 2010 for the purchase of $150,000 of inventory. The adjusting entry made at December 31, 2010 will include a a. debit to Note Payable for $735. b. debit to Interest Expense for $1,470. c. credit to Note Payable for $735. d. credit to Interest Expense for $1,470.

b

Hatcher Corporation sold 10,500 dishwashers for £1,100 each during 2011. The dishwashers are under warranty for one year following the sale. Maintenance on the dishwashers during the warranty period averages £90 each. Actual warranty costs incurred during 2011 for units sold that year were £296,000. The statement of financial position at year end will report a related liability of: a. $296,000. b. $649,000. c. $945,000. d. $1,030,900.

a

In 2010, Payton Corporation began selling a new line of products that carry a two-year warranty against defects. Based upon past experience with other products, the estimated warranty costs related to dollar sales are as follows: First year of warranty 2% Second year of warranty 5% Sales and actual warranty expenditures for 2010 and 2011 are presented below: 2010 2011 Sales $300,000 $400,000 Actual warranty expenditures 10,000 20,000 What is the estimated warranty liability at the end of 2011? a. $19,000. b. $29,000. c. $49,000. d. $8,000.

a

Jenkins Corporation has $2,500,000 of short-term debt it expects to retire with proceeds from the sale of 75,000 ordinary shares. If the shares are sold for $20 per share subsequent to the statement of financial position date, but before the statement of financial position is issued, what amount of short-term debt could be excluded from current liabilities? a. $1,500,000 b. $2,500,000 c. $1,000,000 d. $0

d

Mott Co. includes one coupon in each bag of dog food it sells. In return for eight coupons, customers receive a leash. The leashes cost Mott $2.00 each. Mott estimates that 40 percent of the coupons will be redeemed. Data for 2010 and 2011 are as follows: 2010 2011 Bags of dog food sold 500,000 600,000 Leashes purchased 18,000 22,000 Coupons redeemed 120,000 150,000 The estimated premium liability at December 31, 2010 is a. $7,500. b. $10,000. c. $17,500. d. $20,000.

d

Mott Co. includes one coupon in each bag of dog food it sells. In return for eight coupons, customers receive a leash. The leashes cost Mott $2.00 each. Mott estimates that 40 percent of the coupons will be redeemed. Data for 2010 and 2011 are as follows: 2010 2011 Bags of dog food sold 500,000 600,000 Leashes purchased 18,000 22,000 Coupons redeemed 120,000 150,000 The estimated premium liability at December 31, 2011 is a. $11,250. b. $21,250. c. $22,500. d. $42,500.

d

Mott Co. includes one coupon in each bag of dog food it sells. In return for eight coupons, customers receive a leash. The leashes cost Mott $2.00 each. Mott estimates that 40 percent of the coupons will be redeemed. Data for 2010 and 2011 are as follows: 2010 2011 Bags of dog food sold 500,000 600,000 Leashes purchased 18,000 22,000 Coupons redeemed 120,000 150,000 The premium expense for 2010 is a. $25,000. b. $30,000. c. $35,000. d. $50,000.

d

Nance Company estimates its annual warranty expense as 4% of annual net sales. The following data relate to the calendar year 2010: Net sales $1,500,000 Warranty liability account Balance, Dec. 31, 2010 $10,000 debit before adjustment Balance, Dec. 31, 2010 50,000 credit after adjustment Which one of the following entries was made to record the 2010 estimated warranty expense? a. Warranty Expense 60,000 Retained Earnings (prior- period adjustment) 10,000 Warranty Liability 50,000 b. Warranty Expense 50,000 Retained Earnings (prior- period adjustment) 10,000 Warranty Liability 60,000 c. Warranty Expense 40,000 Warranty Liability 40,000 d. Warranty Expense 60,000 Warranty Liability 60,000

a

Nandina Inc. offers a cash rebate of Rs50 on each Rs200 package of biscuits sold during the last three months of 2011. Historically, 30% of the company's customers mail in the rebate form. During the last three months of 2011, 5,500,000 packages of biscuits are sold, and 1,050,000 Rs50 rebates are mailed to customers. What is the rebate expense and liability, respectively, shown on the company's 2011 financial statements? a. Rs82,500,000; Rs30,000,000 b. Rs82,500,000; Rs82,500,000 c. Rs825,000; Rs525,000 d. Rs$8,250,000; Rs3,250,000

d

On December 31, 2010, Irey Co. has $2,000,000 of short-term notes payable due on February 14, 2011. On January 10, 2011, Irey arranged a line of credit with County Bank which allows Irey to borrow up to $1,500,000 at one percent above the prime rate for three years. On February 2, 2011, Irey borrowed $1,200,000 from County Bank and used $500,000 additional cash to liquidate $1,700,000 of the short-term notes payable. The amount of the short-term notes payable that should be reported as current liabilities on the December 31, 2010 statement of financial position which is issued on March 5, 2011 is a. $0. b. $300,000. c. $500,000. d. $800,000.

b

On February 10, 2010, after issuance of its financial statements for 2009, House Company entered into a financing agreement with Lebo Bank, allowing House Company to borrow up to $4,000,000 at any time through 2012. Amounts borrowed under the agreement bear interest at 2% above the bank's prime interest rate and mature two years from the date of loan. House Company presently has $1,500,000 of notes payable with First National Bank maturing March 15, 2010. The company intends to borrow $2,500,000 under the agreement with Lebo and liquidate the notes payable to First National. The agreement with Lebo also requires House to maintain a working capital level of $6,000,000 and prohibits the payment of dividends on ordinary shares without prior approval by Lebo Bank. From the above information only, the total short-term debt of House Company as of the December 31, 2010 statement of financial position date is a. $0. b. $1,500,000. c. $2,000,000. d. $4,000,000.

d

On January 3, 2010, Boyer Corp. owned a machine that had cost $200,000. The accumulated depreciation was $120,000, estimated salvage value was $12,000, and fair value was $320,000. On January 4, 2010, this machine was irreparably damaged by Pine Corp. and became worthless. In October 2010, a court awarded damages of $320,000 against Pine in favor of Boyer. At December 31, 2010, the final outcome of this case was awaiting appeal and was, therefore, uncertain. However, in the opinion of Boyer's attorney, Pine's appeal will be denied. At December 31, 2010, what amount should Boyer accrue for this contingent asset? a. $320,000. b. $260,000. c. $200,000. d. $0.

d

On June 20, Ying Company purchased goods from Chee-Chow Company for HK$30,000, terms 2/10, n/30. The invoice was paid on June 27. The company uses a perpetual inventory system and records purchases gross. The June 27 journal entry to record payment of the account would include: a. a credit to Cash for HK$30,000. b. a credit to Purchases Discounts for HK$600. c. a debit to Accounts Payable for HK$29,400. d. a credit to Inventory for HK$600.

b

On June 20, Ying Company purchased goods from Chee-Chow Company for HK$30,000, terms 2/10, n/30. The invoice was paid on June On December 31, 2011, Frye Co. has £4,000,000 of short-term notes payable due on February 28, 2012. On December 23, 2011, Frye arranged a line of credit with County Bank which allows Frye to borrow up to £3,500,000 at one percent above the prime rate for three years. On February 2, 2007, Frye borrowed £2,500,000 from County Bank and used £500,000 additional cash to liquidate £3,000,000 of the short-term notes payable. The amount of the short-term notes payable that should be reported as current liabilities on the December 31, 2011 statement of financial position which is issued on March 15, 2012 is a. $0. b. $500,000. c. $1,000,000. d. $4,000,000.

a

On September 1, Hydra purchased $9,500 of inventory items on credit with the terms 1/15, net 30, FOB destination. Freight charges were $200. Payment for the purchase was made on September 18. Assuming Hydra uses the perpetual inventory system and the net method of accounting for purchase discounts, what amount is recorded as accounts payable from this purchase? a. $9,405. b. $9,605. c. $9,700. d. $9,500.

c

On September 30, Yang Company signed a HK$150,000, one-year zero-interest-bearing note at First Solvent Bank. Yang's borrowing rate on such obligations is 12% (.89286 present value factor). The September 30 journal entry to record issuance of the note would include: a. a debit to Cash for HK$150,000. b. a debit to Notes Receivable for HK$150,000. c. a credit to Notes Payable for HK$133,929. d. a debit to Interest Expense for HK$16,071.

b

Palmer Frosted Flakes Company offers its customers a pottery cereal bowl if they send in 3 boxtops from Palmer Frosted Flakes boxes and $1.00. The company estimates that 60% of the boxtops will be redeemed. In 2010, the company sold 675,000 boxes of Frosted Flakes and customers redeemed 330,000 boxtops receiving 110,000 bowls. If the bowls cost Palmer Company $2.50 each, how much liability for outstanding premiums should be recorded at the end of 2010? a. $25,000 b. $37,500 c. $62,500 d. $87,500

c

Presented below is information available for Morton Company. Current Assets Inventories $110,000 Prepaid expenses 30,000 Accounts receivable 61,000 Short-term investments 75,000 Cash 4,000 Total current assets $280,000 Total current liabilities are $120,000. The acid-test ratio for Morton is a. 2.33 to 1. b. 2.08 to 1. c. 1.17 to 1. d. .54 to 1.

d

Purchase Retailer made cash sales during the month of October of $132,600. The sales are subject to a 6% sales tax that was also collected. Which of the following would be included in the summary journal entry to reflect the sale transactions? a. Debit Cash for $132,600. b. Credit Sales Tax Payable for $7,506. c. Credit Sales for $125,094. d. Credit Sales Tax Payable for $7,956.

c

Purest owes $1 million that is due on February 28. The company borrows $800,000 on February 25 (5-year note) and uses the proceeds to pay down the $1 million note and uses other cash to pay the balance. How much of the $1 million note is classified as long-term in the December 31 financial statements? a. $1,000,000. b. $0. c. $800,000. d. $200,000.

d

Recycle Exploration is involved with innovative approaches to finding energy reserves. Recycle recently built a facility to extract natural gas at a cost of $15 million. However, Recycle is also legally responsible to remove the facility at the end of its useful life of twenty years. This cost is estimated to be $21 million (the present value of which is $8 million). What is the journal entry required to record the environmental liability? a. No journal entry required. b. Debit Natural Gas Facility for $21,000,000 and credit Environmental Liability for $21,000,000 c. Debit Natural Gas Facility for $6,000,000 and credit Environmental Liability for $6,000,000. d. Debit Natural Gas Facility for $8,000,000 and credit Environmental Liability for $8,000,000.

a

Rendina Inc. offers a cash rebate of Rs50 on each Rs200 package of biscuits sold during the last three months of 2011. Historically, 30% of the company's customers mail in the rebate form. During the last three months of 2011, 7,700,000 packages of biscuits are sold, and 1,470,000 Rs50 rebates are mailed to customers. What is the rebate expense and liability, respectively, shown on the company's 2011 financial statements? a. Rs115,500,000; Rs42,000,000. b. Rs115,500,000; Rs115,500,000. c. Rs1,155,000; Rs735,000. d. Rs$11,550,000; Rs4,550,000.

b

Seamus Corporation sold 10,500 trash compactors for £550 each during 2011. The trash compactors are under warranty for one year following the sale. Maintenance on the trash compactors during the warranty period averages £45 each. Actual warranty costs incurred during 2011 for units sold that year were £148,000. The statement of financial position at year end will report a related liability of: a. $148,000. b. $324,500. c. $472,500. d. $515,450.

d

Sodium Inc. borrowed $175,000 on April 1. The note requires interest at 12% and principal to be paid in one year. How much interest is recognized for the period from April 1 to December 31? a. $0. b. $21,000. c. $5,250. d. $15,750.

b

Stine Co. is a retail store operating in a state with a 6% retail sales tax. The retailer may keep 2% of the sales tax collected. Stine Co. records the sales tax in the Sales account. The amount recorded in the Sales account during May was $148,400. The amount of sales taxes (to the nearest dollar) for May is a. $8,726. b. $8,400. c. $8,904. d. $9,438.

b

Stine Co. is a retail store operating in a state with a 6% retail sales tax. The retailer may keep 2% of the sales tax collected. Stine Co. records the sales tax in the Sales account. The amount recorded in the Sales account during May was $148,400. The amount of sales taxes payable (to the nearest dollar) to the state for the month of May is a. $8,551. b. $8,232. c. $8,726. d. $9,249.

d

The effective interest on a 12-month, zero-interest-bearing note payable of $300,000, discounted at the bank at 10% is a. 10.87%. b. 10%. c. 9.09%. d. 11.11%.

b

Valencia Corporation has the following liabilities at December 31, 2011: 8.9% note payable issued November 1, 2011, maturing October 31, 2012 €1,150,000 7.25% note payable issued August 1, 2011, payable in twelve equal annual installments of $90,000 beginning August 1, 2012 1,080,000 Valencia's December 31, 2011 financial statements were issued on March 19, 2012. On January 23, 2012, the entire €1,150,000 balance of the 8.9% note was refinanced by issuance of a long-term obligation payable in a lump sum. In addition, on December 29, 2011, Valencia consummated a non-cancelable agreement with the lender to refinance the 7.25%, €1,080,000 note on a long-term basis, on readily determinable terms that have not yet been implemented. On the December 31, 2011 statement of financial position, the amount of these notes payable that Valencia should classify as short-term obligations is a. $0. b. $1,080,000. c. $1,150,000. d. $2,230,000.

d

Vargas Company has 35 employees who work 8-hour days and are paid hourly. On January 1, 2010, the company began a program of granting its employees 10 days of paid vacation each year. Vacation days earned in 2010 may first be taken on January 1, 2011. Information relative to these employees is as follows: Year: 2010 2011 2012 Hourly Wages: $25.80 27.00 28.50 Vacation Days Earned by Each Employee: 10 10 10 Vacation Days Used by Each Employee: 0 8 10 Vargas has chosen to accrue the liability for compensated absences at the current rates of pay in effect when the compensated time is earned. What is the amount of expense relative to compensated absences that should be reported on Vargas's income statement for 2010? a. $0. b. $68,880. c. $75,600. d. $72,240.

a

Vargas Company has 35 employees who work 8-hour days and are paid hourly. On January 1, 2010, the company began a program of granting its employees 10 days of paid vacation each year. Vacation days earned in 2010 may first be taken on January 1, 2011. Information relative to these employees is as follows: Year: 2010 2011 2012 Hourly Wages: $25.80 27.00 28.50 Vacation Days Earned by Each Employee: 10 10 10 Vacation Days Used by Each Employee: 0 8 10 Vargas has chosen to accrue the liability for compensated absences at the current rates of pay in effect when the compensated time is earned. What is the amount of the accrued liability for compensated absences that should be reported at December 31, 2012? a. $94,920. b. $90,720. c. $79,800. d. $95,760.

c

Vopat, Inc., is a retail store operating in a state with a 5% retail sales tax. The state law provides that the retail sales tax collected during the month must be remitted to the state during the following month. If the amount collected is remitted to the state on or before the twentieth of the following month, the retailer may keep 3% of the sales tax collected. On April 10, 2010, Vopat remitted $81,480 tax to the state tax division for March 2010 retail sales. What was Vopat 's March 2010 retail sales subject to sales tax? a. $1,629,600. b. $1,596,000. c. $1,680,000. d. $1,645,000.

d

Warranty4U provides extended service contracts on electronic equipment sold through major retailers. The standard contract is for three years. During the current year, Warranty4U provided 21,000 such warranty contracts at an average price of $81 each. Related to these contracts, the company spent $200,000 servicing the contracts during the current year and expects to spend $1,050,000 more in the future. What is the net profit that the company will recognize in the current year related to these contracts? a. $451,000. b. $1,501,000. c. $150,333. d. $367,000.

b

Winter Co. is being sued for illness caused to local residents as a result of negligence on the company's part in permitting the local residents to be exposed to highly toxic chemicals from its plant. Winter's lawyer states that it is probable that Winter will lose the suit and be found liable for a judgment costing Winter anywhere from $1,200,000 to $6,000,000. However, the lawyer states that the most probable cost is $3,600,000. As a result of the above facts, Winter should accrue a. a loss contingency of $1,200,000 and disclose an additional contingency of up to $4,800,000. b. a loss contingency of $3,600,000 and disclose an additional contingency of up to $2,400,000. c. a loss contingency of $3,600,000 but not disclose any additional contingency. d. no loss contingency but disclose a contingency of $1,200,000 to $6,000,000.

a

Ziegler Company self insures its property for fire and storm damage. If the company were to obtain insurance on the property, it would cost them $1,000,000 per year. The company estimates that on average it will incur losses of $800,000 per year. During 2010, $350,000 worth of losses were sustained. How much total expense and/or loss should be recognized by Ziegler Company for 2010? a. $350,000 in losses and no insurance expense b. $350,000 in losses and $450,000 in insurance expense c. $0 in losses and $800,000 in insurance expense d. $0 in losses and $1,000,000 in insurance expense