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CPA FAR Simulation Bank Task SU 12 - Contingencies

CPA FAR Simulation Bank Task SU 12 - Contingencies Edge co., a toy rnanufacturer, is in the process Of preparing its financial statements for the year ended December 31 , Year g. Edge expects to issue its Year 8 financial statenwnts on March l, Year 9. For each item, two responses are required. Select from the option lists provided the appropriate adjustnwnt amount, if any, and whether additional disclosure is required, either on the face of or in the notes for each financial statement below. Each choice may be used once, nwre than once, or not at all. If no adjustment is necessary, select 'NO entry required" in the Adjusted amount column and continue to the Additional disclosure required column. Information I _ On December 15, Year 8, Edge guaranteed a bank loan of SIOO.OOO for its president's personal use, The probability is rente that a loss will be incurred. and the fair value of thc guarantee is 2. On December , Year S, Of directors voted to discontinue the operations Ot its computer games division and sell all of the division's assets. The division was sold on February 15, Year 9. On December 31. Year 8, Edge estimated that losses from 'l'*rationsv net of tax. for the period January l, Year 9, through February 15. Year 9. would be S400,OOO and that the gain from the sale Of the divisior* assets, net Of tax, would be S250.OOO. These estimates were materially correct. 3_ On January 5, Year 9, a warehouse containing a substantial portion Of Edges inventory was destroyed by fire. Edge exrwcts to recover the entire loss, except for a deductible, from insurance. 4. On January 24, Year 9, inventory purchased FOB shipping point from a foreign country was detained at that country& border because of political unrest. The shipment is valued at S 150,000. attorneys have stated that it is probable that Edge Will be able to obtain the shipment 5. On January 30, Year 9, Edge issued S 10 million bonds at a premium of SSOO,OOO. 6. On February 4, Year 8, the IRS assessed Edge an additional S400,000 for the Year 4 tax year. Edge's tax attorneys and tax accountants have stated that it is likely that the JRS will agree to a settlement M" usted amount Additk.nal disclosure