31, year 1, and mature on December 31, year 11. Interest will be paid
semiannually on June 30 and December 31. In Wall’s September 30,
year 2 balance sheet, the amount of accrued interest expense should
be
31. Which of the following statements is true?
32. For a troubled debt restructuring involving only modification of
terms, it is appropriate for a debtor to recognize a gain when the
carrying amount of the debt
33. Tone Company is the defendant in a lawsuit filed by Witt in year
1 disputing the validity of a copyright held by Tone. At December 31,
year 1, Tone determined that Witt would probably be successful
against Tone for an estimated amount of $400,000. Appropriately, a
$400,000 loss was accrued by a charge to income for the year ended
December 31, year 1. On December 15, year 2, Tone and Witt agreed
to a settlement providing for cash payment of $250,000 by Tone to
Witt, and transfer of Tone’s copyright to Witt. The carrying amount
of the copyright on Tone’s accounting records was $60,000 at
December 15, year 2. What would be the effect of the settlement on
Tone’s income before income tax in year 2?
34. Blake Foods Corporation mails coupons to consumers which may
be presented by a stated expiration date at retail food stores to obtain
discounts on certain Blake products. Retailers are reimbursed for the
face value of coupons redeemed, plus 10% of coupon value as
compensation for handling costs. Blake honors requests for coupon
redemption by retailers received up to 3 months after the consumer
expiration date. In Blake’s experience, 60% of the coupons issued
ultimately are redeemed. Information with respect to the two separate
series of coupons issued by Blake during year 1 is as follows:
35. What amount should Blake report as a liability for unredeemed
coupons at December 31, year 1?