Ask Question, Ask an Expert

+61-413 786 465

info@mywordsolution.com

Ask Financial Accounting Expert

Eastern Chemical Company is involved with several situations that could lead to contingencies. Each is described below.

a. During 2017, Eastern became involved in a tax dispute with the IRS. Eastern’s attorneys have indicated that they believe it is probable that Eastern will lose this dispute. They also believe that Eastern will have to pay the IRS between $900,000 and $1,400,000. After the 2017 financial statements were issued, the case was settled with the IRS for $1,200,000.

b. On October 1, 2017, Eastern was identified as a potentially responsible party by the Environmental Protection Agency. Eastern’s management along with its counsel have concluded that it is probable that Eastern will be responsible for damages, and a reasonable estimate of these damages is $5,000,000. Eastern’s insurance policy of $9,000,000 has a deductible clause of $500,000.

c. Eastern had a manufacturing plant in Egypt, which was destroyed during the recent Arab uprising. It is not certain who will compensate Eastern for this destruction, but Eastern has been assured by governmental officials that it will receive a definite amount for this plant.

List The amount of the compensation will be less than the fair value of the plant, but more than its book value. Required

1. For each of the three situations, how should the contingency be reported in the financial statements of Eastern?

2. Prepare any necessary journal entries and disclosure notes.

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M91973256

Have any Question?


Related Questions in Financial Accounting

Budgets and managerial responsibilitythis module explores

Budgets and Managerial Responsibility This module explores budgets and the benefits of creating budgets. In recent years, many organizations faced one of the hardest economic conditions with the recession. Many organizat ...

At the start of 2013 shasta corporation has 15000

At the start of 2013, Shasta Corporation has 15,000 outstanding shares of preferred stock, each with a $60 par value and a cumulative 7% annual dividend. The company also has 28,000 shares of common stock outstanding wit ...

Exercise 1 copying formatting and calculating sums and

EXERCISE 1: COPYING, FORMATTING, AND CALCULATING SUMS AND AVERAGES Let's assume that Groth Donut Company has three stores, only one of which is shown at the top of the sheet titled "p = r-­-e". The revenue and expenses f ...

Assignment -part a -background saturn petcare australia and

Assignment - Part A - Background: Saturn Petcare Australia and New Zealand is Australia's largest manufacturer of pet care products. Saturn have been part of the Australian and New Zealand pet care landscape since openin ...

Asset retirement obligation changes in estimate versus

Asset Retirement Obligation, Changes in Estimate versus Errors, Writing an Issues Memo Facts: Mega¬Corp's corporate headquarters, built in 1970, has asbestos in its insulation. The Company's financial statements reflect ...

Corporate accounting assignment -assessment task -select

Corporate Accounting Assignment - Assessment task - Select two public limited companies listed on the Australian Securities Exchange (ASX) that are in the same industry. Go to the website of your selected companies. Then ...

Assessment 1develop complex spreadsheetsthis is an

Assessment 1 Develop Complex Spreadsheets This is an assessment that may be worked on in study time and as homework. Assessment presentation should be completed in a manner that is appropriate to professional business re ...

Accounting financial assignment -question - in recent years

Accounting Financial Assignment - Question - In recent years a number of companies have gone into liquidation (been 'wound up') because they have not been able to meet their liabilities when they fell due. In Australia, ...

Oil services corp reports the following eps data in its

Oil Services Corp. reports the following EPS data in its 2017 annual report (in million except per share data). Net income $1,827 Earnings per share: Basic $1.56 Diluted $1.54 Weighted average shares outstanding: Basic 1 ...

What has been strides position on dividend payouts in the

What has been Strides' position on dividend payouts in the past (pattern, relationship with earnings, etc.)? What factors affected its dividend policy?

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As