| Course | ACC-2020 Intermediate Accounting II |
|---|---|
| Module | Module 1 |
| Paper type | Written Assignment 1: investments, current liabilities and contingencies |
| Length | About 681 words, 5 pages |
| Format | APA 7 student paper |
| School | Thomas Edison State University |
| Program | Bachelor of Science in Business Administration |
| Updated | October 2026 |
Free sample paper for ACC 2020 Module 1
Barnegat Marine Supply, Inc.: Investment Classifications, Year-End Liabilities and Two Lawsuits
Student Name
Bachelor of Science in Business Administration, Thomas Edison State University
ACC-2020: Intermediate Accounting II
Mentor Name
Month Day, Year
Barnegat Marine Supply, Inc.: Investment Classifications, Year-End Liabilities and Two Lawsuits
Introduction
Barnegat Marine Supply, Inc. sells engine parts, trailers and hardware to marinas and boat owners from a warehouse in Ocean County, New Jersey. Its books close each December 31, and these problems use the 2025 year. The problems below follow the module's order: investments first, then the obligations due within a year, then the uncertain obligations that may or may not become liabilities.
Part A: Investments
1. In 2025 Barnegat bought $200,000 of state bonds at par. At December 31 their fair value was $194,000. The reporting depends on management's intent:
Barnegat intends to hold the bonds until they mature in 2030 and has the ability to do so, so held to maturity is appropriate and the decline is disclosed but not recorded. If the decline reflected credit problems rather than interest rates, an allowance for expected credit losses would be needed even at amortized cost.
2. On January 2, 2025, Barnegat paid $450,000 for 30% of Cape May Canvas Co., which makes boat covers. Owning 20% to 50% normally gives significant influence, so Barnegat uses the equity method. Cape May earned $180,000 and paid $60,000 of dividends in 2025.
Dividends are a return of the investment, not income, because Barnegat already recorded its share of the earnings. If Cape May had reported a loss, Barnegat would reduce the investment by its 30% share, and if the purchase price had exceeded 30% of Cape May's book value, part of the excess would be amortized against investment income over the lives of the underlying assets. A small holding without influence, say 2% of Cape May, would instead be marked to market each year, with the change running through net income (Financial Accounting Standards Board [FASB], 2016).
| Classification | Balance sheet amount | Treatment of the $6,000 decline |
|---|---|---|
| Held to maturity | $200,000 at amortized cost | Not recognized |
| Available for sale | $194,000 at fair value | Unrealized loss in other comprehensive income |
| Trading | $194,000 at fair value | Unrealized loss in net income |
| Equity method entry | Amount | |
| Investment income: 30% of $180,000 | $54,000 | |
| Dividends received reduce the investment: 30% of $60,000 | (18,000) | |
| Carrying amount at December 31: $450,000 + $54,000 minus $18,000 | $486,000 |
Part B: Current Liabilities
3. On October 1, Barnegat borrowed $120,000 from its bank on a six-month, 6% note. At year end, interest of $120,000 x 6% x 3/12 = $1,800 is accrued: debit Interest Expense, credit Interest Payable.
4. December showroom receipts of $106,625 included New Jersey sales tax of 6.625%. Sales are $106,625 / 1.06625 = $100,000, and the $6,625 of tax is a liability owed to the state, not revenue.
5. Barnegat gives a two-year assurance warranty on trailers and estimates repair costs at 3% of trailer sales. Trailer sales in 2025 were $2,000,000.
The expense is recognized in the year of sale, matching the cost to the revenue it supports, even though the repairs come later.
| Warranty liability | Amount |
|---|---|
| Balance, January 1 | $18,000 |
| Warranty expense: 3% x $2,000,000 | 60,000 |
| Repairs performed during 2025 | (22,000) |
| Balance, December 31 | $56,000 |
Part C: Contingencies
6. A customer was injured when a trailer hitch sold by Barnegat failed. Counsel considers a loss probable and estimates it between $150,000 and $400,000, with no amount in the range more likely than another. Under U.S. GAAP, Barnegat accrues the low end, $150,000, and discloses the range up to $400,000. A company reporting under international standards would measure the provision at the midpoint, $275,000, a difference worth noting for comparisons.
7. Barnegat has sued a supplier for shipping corroded propellers and expects to recover about $90,000. Gain contingencies are not recorded until realized, and the disclosure must avoid suggesting the gain is certain. This asymmetry reflects conservatism: users are hurt more by an overstated asset than by an understated one.
Barth (1994) showed that bank stock prices tracked the market value of the banks' securities portfolios more closely than their book cost, one reason the standards now carry trading and available-for-sale holdings at market while leaving debt held to maturity at amortized cost (Spiceland et al., 2020).
References
Barth, M. E. (1994). Fair value accounting: Evidence from investment securities and the market valuation of banks. The Accounting Review, 69(1), 1-25.
Financial Accounting Standards Board. (2016). Financial instruments, overall (Subtopic 825-10): Recognition and measurement of financial assets and financial liabilities (Accounting Standards Update No. 2016-01).
Spiceland, J. D., Nelson, M. W., & Thomas, W. B. (2020). Intermediate accounting (10th ed.). McGraw-Hill Education.
What the ACC 2020 Module 1 instructions ask for
The second intermediate course keeps the same homework rhythm: one mentor-graded set of chapter-end exercises and problems per module, six in all. Number each answer the way the textbook numbers it, keep exercises ahead of problems, and lay out every computation; a Word or Excel file headed with your name, the course and the term is what the syllabus suggests. Written Assignment 1 covers Module 1: investments, current liabilities and contingencies. Expect items on debt and equity security classifications, the equity method, notes payable and accrued interest, sales and payroll taxes, warranties and the recognition and disclosure of contingencies. The problems here are original practice in that style.
How this ACC 2020 Module 1 example is built
The assignment is organized in three labeled parts that follow the module. Part A shows one bond purchase under all three debt classifications in a table and then picks the right one for the facts, and it carries a 30% investment through the equity method with each step shown. Part B works three common current liabilities, each with a short calculation and the entry or result. Part C applies the contingency rules to a probable loss with a range and to a gain contingency, and notes the international difference. Each answer ends with a sentence explaining the principle behind it, and a closing research link explains why investments moved toward fair value.
Where the marks sit in the ACC 2020 Module 1 rubric
Homework is worth a third of the ACC-2020 grade across six sets, and the syllabus makes complete working a condition of full credit on each. On this assignment they check the treatment of value changes under each security classification, equity method income and dividend entries, interest accrued for the right months, sales tax separated from revenue and warranty expense matched to the year of sale. For contingencies, they look for the right recognition threshold and amount, including the low end of a range under U.S. GAAP. Clear explanations of why each treatment applies earn credit beyond the arithmetic and prepare you for the proctored exams. Mentors also notice whether each answer names the rule it applies, since that habit carries into the exam questions.
Common ACC 2020 Module 1 mistakes, and how to avoid them
Students often credit dividends from an equity method investee to income, which double counts earnings already recognized. Others compute sales tax as 6.625% of total receipts rather than dividing receipts by one plus the rate. In warranty problems, keep expense and repair payments separate; the expense is an estimate, the repairs reduce the liability. Before booking a lawsuit loss, confirm both that it is probable and that it can be estimated; if counsel gives a range with no likeliest point, the bottom of the range is what U.S. GAAP records. Never record a gain contingency. Label each item with its textbook number. A writer can take your assigned investment and liability items and solve them this way, free the first time.
Write yours, or have the desk draft it
This paper is an original model document written by our desk, not a submitted student paper and not an official Thomas Edison State University document. Read it for the moves, then write your own to the instructions in your classroom. If you want one built to your exact prompt and rubric, the first custom sample is free and arrives in 24 to 48 hours.
More ACC 2020 and Bachelor of Science in Business Administration sample papers
- ACC 2020 Module 2: Bonds, Notes and Income Taxes Assignment
- ACC 2020 Module 3: Leases Written Assignment
- ACC 2020 Module 4: Pensions and Shareholders' Equity Assignment
- ACC 2020 Module 5: Stock Options, EPS and Accounting Changes Assignment
- ACC 2020 Module 6: Statement of Cash Flows and Derivatives Assignment
- ACC 1020 Module 6: Capital Budgeting Homework
- BUS 1010 Module 5: Marketing Written Assignment
- FIN 3010 Module 3: Stock Valuation Problems
- MKT 2010 Module 1: Customer-Oriented Strategy Assignment
ACC 2020 Module 1 questions, answered
Where can I find a free ACC 2020 Module 1 sample paper?
Written Assignment 1 for Intermediate Accounting II is printed here: debt security classifications, the equity method, accrued interest, sales tax, a warranty liability and two contingencies, all worked in full.
How are dividends treated under the equity method?
As a cut in the investment account, not as revenue, since the investor booked its slice of the investee's profit when that profit was earned.
What amount is accrued for a probable loss with a range?
Under U.S. GAAP, the best estimate in the range, or the minimum if no amount is more likely, with the range disclosed.
Are gain contingencies recorded?
Not until the gain is actually realized. Gain contingencies are not recognized until realized, and disclosures must avoid implying that the gain is likely.
Where do unrealized losses on available-for-sale debt securities go?
Into other comprehensive income, net of tax, until the securities are sold or an expected credit loss is recognized.