Diversified Semiconductors sells perishable electronic components. Some must be shipped and stored in reusable protective containers. Customers pay a deposit for each container received. The deposit is equal to the container's cost. They receive a refund when the container is returned. During 2018, deposits collected on containers shipped were $914,000. Deposits are forfeited if containers are not returned within 18 months. Containers held by customers at January 1, 2018, represented deposits of $564,000. In 2018, $829,000 was refunded and deposits forfeited were $35,500. Required: 1. Prepare the appropriate journal entries for the deposits received and returned during 2018. 2. Determine the liability for refundable deposits to be reported on the December 31, 2018, balance sheet.

2.

CircuitTown commenced a gift card program in January 2018 and sold $15,350 of gift cards in January, $17,950 in February, and $20,950 in March of 2018 before discontinuing further gift card sales. During 2018, gift card redemptions were $8,700 for the January gift cards sold, $4,650 for the February cards, and $6,300 for the March cards. CircuitTown considers gift cards to be "broken" (not redeemable) 10 months after sale. Required: 1. How much revenue will CircuitTown recognize with respect to January gift card sales during 2018? 2. Prepare journal entries to record the sale of January gift cards, redemption of gift cards (ignore sales tax), and breakage (expiration) of gift cards. 3. How much revenue will CircuitTown recognize with respect to March gift card sales during 2018? 4. What liability for deferred revenue associated with gift card sales would CircuitTown show as of December 31, 2018?

3.Cupola Awning Corporation introduced a new line of commercial awnings in 2018 that carry a two-year warranty against manufacturer's defects. Based on their experience with previous product introductions, warranty costs are expected to approximate 2% of sales. Sales and actual warranty expenditures for the first year of selling the product were:

Sales	Actual Warranty Expenditures
$5,920,000	$61,250

Required: 1. Does this situation represent a loss contingency? 2. Prepare journal entries that summarize sales of the awnings (assume all credit sales) and any aspects of the warranty that should be recorded during 2018. 3. What amount should Cupola report as a liability at December 31, 2018?

4. Sound Audio manufactures and sells audio equipment for automobiles. Engineers notified management in December 2018 of a circuit flaw in an amplifier that poses a potential fire hazard. An intense investigation indicated that a product recall is virtually certain, estimated to cost the company $9.0 million. The fiscal year ends on December 31. Required: 1. Should this loss contingency be accrued & disclosed, only disclosed, or neither? 2. What loss, if any, should Sound Audio report in its 2018 income statement? 3. What liability, if any, should Sound Audio report in its 2018 balance sheet? 4. any journal entry needed.

5. The Manda Panda Company uses the allowance method to account for bad debts. At the beginning of 2018, the allowance account had a credit balance of $83,200. Credit sales for 2018 totaled $2,890,000 and the year-end accounts receivable balance was $592,500. During this year, $79,500 in receivables were determined to be uncollectible. Manda Panda anticipates that 2% of all credit sales will ultimately become uncollectible. The fiscal year ends on December 31. Required: 1. Does this situation describe a loss contingency? 2. What is the bad debt expense that Manda Panda should report in its 2018 income statement? 3. Prepare the appropriate journal entry to record the contingency. 4. Complete the table below to calculate the net realizable value Manda Panda should report in its 2018 balance sheet?

6. The following selected circumstances relate to pending lawsuits for Erismus, Inc. Erismus's fiscal year ends on December 31. Financial statements are issued in March 2019. Erismus prepares its financial statements according to U.S. GAAP. Required: Indicate the amount Erismus would record as an asset, liability, or not accrued in the following circumstances. 1. Erismus is defending against a lawsuit. Erismus's management believes the company has a slightly worse than 50/50 chance of eventually prevailing in court, and that if it loses, the judgment will be $1,440,000. 2. Erismus is defending against a lawsuit. Erismus's management believes it is probable that the company will lose in court. If it loses, management believes that damages could fall anywhere in the range of $2,740,000 to $5,480,000, with any damage in that range equally likely. 3. Erismus is defending against a lawsuit. Erismus's management believes it is probable that the company will lose in court. If it loses, management believes that damages will eventually be $5,150,000, with a present value of $3,605,000. 4. Erismus is a plaintiff in a lawsuit. Erismus's management believes it is probable that the company eventually will prevail in court, and that if it prevails, the judgment will be $1,440,000. 5. Erismus is a plaintiff in a lawsuit. Erismus's management believes it is virtually certain that the company eventually will prevail in court, and that if it prevails, the judgment will be $510,000.