Reference no: EM131290035
Determine the appropriate means of reporting each situation.
In a memo to the audit manager, Mitch Riley, explain your reasoning. Include any necessary journal entries and drafts of appropriate disclosure notes.
In the March 2014 meeting of Valleck Corporation’s board of directors, a question arose as to the way a possible obligation should be disclosed in the forthcoming financial statements for the year ended December 31. A veteran board member brought to the meeting a draft of a disclosure note that had been prepared by the controller’s office for inclusion in the annual report.
Here is the note:
On May 9, 2013, the United States Environmental Protection Agency (EPA) issued a Notice of Violation (NOV) to Valleck alleging violations of the Clean Air Act. Subsequently, in June 2013 the EPA commenced a civil action with respect to the foregoing violation seeking civil penalties of approximately $853,000. The EPA alleges that Valleck exceeded applicable volatile organic substance emission limits. The Company estimates that the cost to achieve compliance will be $190,000; in addition, the Company expects to settle the EPA lawsuit for a civil penalty of $205,000 which will be paid in 2014.
“Where did we get the $205,000 figure?” he asked. On being informed that this is the amount negotiated last month by company attorneys with the EPA, the director inquires, “Aren’t we supposed to report a liability for that in addition to the note?
Explain whether Valleck should report a liability in addition to the note. Why or why not? For full disclosure should anything be added to the disclosure note itself?
|
Build or buy and service-level agreements
: Suppose, as a Chief Information Officer (CIO), you were asked to provide the organization with time-entry system for the employees. Examine the options to insource or outsource the system to be developed.
|
|
Restaurant managers started complaining about the amount
: After a few days in operation, restaurant managers started complaining about the amount of time they were spending unlocking the registers.
|
|
What is the estimate for allowance for doubtful accounts
: Rock Company, who handles its credit losses w/ the allowance method, analyzed its accounts receivable balance at Dec. 31, 2013 and arrived at the aged balances listed below, along w/ the percentage that is estimated to be uncollected: What is the est..
|
|
Explain relevant and irrelevant costs
: Explain an avoidable cost, and provide an example of a decision that involves avoidable costs. Also explain relevant and irrelevant costs, and how are they compared to avoidable costs. Are they the same, or do they differ?
|
|
Journal entries and drafts of appropriate disclosure notes
: In a memo to the audit manager, Mitch Riley, explain your reasoning. Include any necessary journal entries and drafts of appropriate disclosure notes. In the March 2014 meeting of Valleck Corporation’s board of directors, a question arose as to the w..
|
|
Compute the amortization cost for the year
: Sharpie Corporation has a global workforce of 400 employees. There was a recent negotiation for a pension plan with an effective date of January 1, 2015. The amount of prior service cost for the new pension plan is $4,823,000. The agreement was to fu..
|
|
Defined benefit pension plan-compute pension expense
: The City of Austin has a defined benefit pension plan. The Projected Benefit Obligation on January 1, 2015 is $10,000,000. This was based on a 10% discount rate. The fair value of the pension fund (plan assets) on January 1, 2015 is $10,400,000. The ..
|
|
What is the authoritative literature addressing revenue
: Employees at your compabny disagree about the accounting for sales returns. The sales manager believes thta granting more generous return provisions can give the company a competitive edge and increase sales revenue. What is the authoritative literat..
|
|
Treated as qualifying stock redemption
: Indigo Corporation wants to transfer cash of $150,000 or property worth $150,000 to one of its shareholders, Linda, in a redemption transaction that will be treated as a qualifying stock redemption. If Indigo distributes property, the corporation wil..
|