1) Juan Co. has two ongoing lawsuits and is in the process of preparing its financial statements. In one of the lawsuits against Juan, the lawyers indicate that it is probable that a loss estimated to be 1,000,000 will be resolved soon. In the second lawsuit, Juan has sued a former vendor for 500,000 for defective goods. The lawyers believe that it is probable that this suit will be settled for that amount in Juan’s favor in the near future. The controller for Juan has accrued the loss on the first lawsuit. He/she also believes that the “gain” on the second lawsuit can be recognized in the financial statements. Is the Controller correct about the accounting for the second lawsuit?
2) During the year Samantha Co. repurchased 100 shares of its common stock and subsequently resold those shares at an amount that was $7.00 per share greater than the price paid for the shares. Tell the controller of Samantha Co. how she should treat the gain on the sale of the stock?
3) Louis corp. has six segments(A,B,C,D,E,F). three of the segments(A,B,C) were determined to be “reportable segments” during 2009. During 2010, segments A,B,C,D each met one of the three”10% tests. In its footnotes to the 2010 financial statements. Louis must show comparative segment information for both 2010 and 2009. The controller of Louis Co. is unsure which segments he is supposed to now report given the results of the 10% tests. In the 2010 footnotes, tell him the following (1) which segments must be reported separately for 2010. And (2) which segments must be reported for the 2009 comparative information.
4) Allen co. is a multinational company. During December 2010, the company redeemed its outstanding bonds payable with a carrying amount of $1.000,000 by paying $940,000 in cash. Provide the controller with the journal entry for this transaction and the guidance concerning the treatment of the difference between the carrying amount of the bonds and the amount paid