| Course | AC301 Intermediate Accounting II |
|---|---|
| Unit | Unit 1 |
| Paper type | Discussion board post |
| Length | About 510 words, 2 pages double-spaced |
| Format | APA 7 discussion post |
| School | Purdue University Global |
| Program | BS in Accounting |
| Updated | October 2026 |
Free sample paper for AC301 Unit 1
One Lawsuit Accrued, One Disclosed, One Ignored: A Unit 1 Post on Loss Contingencies at a Hot Tub Maker
AC301 · Unit 1 Discussion
Posted by [Student Name]
Kettleby Spas, its dealer, competitor and customer are composite; the standards and textbook cited are real.
Initial Post
Kettleby sold 140 spas to a dealer in Ohio during the year, and 22 of them developed cracks in the acrylic shell within months. The dealer has sued for refunds, lost sales and damage to its reputation. Kettleby's outside counsel says a loss is probable and puts it somewhere between $200,000 and $500,000, but will not name any figure inside that range as more likely than the others.
Under the contingency standard, Kettleby must record a loss once it is probable that the obligation already exists and a reasonable figure for it is available; a claim that is only reasonably possible goes into the notes, and a remote one is left out (Financial Accounting Standards Board, 1975). Here is how the three claims sort:
1. Dealer suit over cracked shells: probable; range $200,000 to $500,000 with no best estimate; accrue $200,000 and disclose the possible additional $300,000.
2. Competitor's patent claim on the jet nozzle: reasonably possible; no reliable estimate; disclose the nature of the claim and say an estimate cannot be made.
3. Customer complaint about a heater, raised once and never pursued: remote; no accrual and no disclosure.
When counsel can give a range but cannot say that any figure in it is likelier than the rest, the minimum of the range is accrued, so Kettleby records $200,000 and tells readers in the notes that the loss could reach $500,000.
That minimum comes from an interpretation the FASB issued a year after the original standard (Financial Accounting Standards Board, 1976). Some classmates may see the minimum as too cautious, since accruing the low end can understate the loss. The disclosure of the full range is what keeps the reader from being misled. International standards would record the midpoint of a range where each outcome is equally likely, so the same lawsuit could show $350,000 under IFRS (Kieso et al., 2019).
Kettleby has also filed a counterclaim against the shell supplier, arguing the acrylic sheets were defective. Even if counsel thinks it will win, that is a gain contingency, and it stays off the statements until it is realized.
Question for classmates: if the accrual and the note together tell readers the loss may be $500,000, does it matter much which figure goes on the balance sheet, or would you rather see the midpoint?
Reply to Marcus
Marcus, your example of an environmental cleanup is a good contrast, because there the company usually has an engineering study, so one figure in the range is often more likely than the others and that figure, not the minimum, is accrued. Kettleby has nothing similar for a lawsuit. Would you treat a settlement offer from the dealer as the best estimate if one arrived before the statements were issued?
References
Financial Accounting Standards Board. (1975). Accounting for contingencies (Statement of Financial Accounting Standards No. 5). https://www.fasb.org
Financial Accounting Standards Board. (1976). Reasonable estimation of the amount of a loss: An interpretation of FASB Statement No. 5 (FASB Interpretation No. 14). https://www.fasb.org
Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate accounting (17th ed.). Wiley.
The Purdue Global AC301 Unit 1 instructions
Unit 1 of AC301 opens the course with contingencies, and the board prompt gives a company facing several uncertain claims or asks students to build one. Explain the three likelihood tiers in your own words, then place each claim in one of them with a reason. For any claim that is probable, say whether a reasonable estimate exists and what is recorded. Where counsel offers only a range, state which amount is accrued and what the note adds. Separate loss contingencies from gain contingencies, since the second kind is not recognized before it is realized. A short numbered list keeps three or four claims readable. Many sections also ask how international standards differ, and one sentence on the midpoint rule answers that. Finish with a question classmates can test. Replies should change a fact, such as a settlement offer, and follow its effect.
How this AC301 Unit 1 example is built
The sample opens with the dealer's suit: 140 spas sold, 22 cracked, and counsel's range with no better figure inside it. A paragraph sets out the three tiers under the 1975 contingency standard. A numbered list then sorts the dealer suit, the patent claim and the heater complaint, each with its tier, estimate and treatment. The highlighted sentence states the minimum-of-range rule and its disclosure. A paragraph credits the 1976 interpretation for that rule and contrasts the IFRS midpoint, which would record $350,000 for the same suit. Kettleby's counterclaim against the acrylic supplier is treated as a gain contingency and left off the statements. The post asks whether the recorded figure matters when the note shows the full range. A reply contrasts an environmental cleanup, where a study usually supplies a best estimate, and raises a settlement offer as a subsequent event.
Reading the AC301 Unit 1 grading rubric
In AC301 discussion grading, most of the points rest on placing each claim in the right tier and reaching the right treatment. A correct tier without a reason earns partial credit. The range rule is a frequent scoring point: the post must say why the minimum is accrued and what disclosure accompanies it. Recognizing that gain contingencies stay off the statements shows command of conservatism in the standard. Citing the 1975 statement and the 1976 interpretation, rather than only the textbook, strengthens the authority of the post. A comparison with IFRS adds depth that instructors often reward. The closing question earns credit when classmates can answer it from the facts given. Replies score when they change a fact and trace the result. Purdue Global deadlines apply to both posts, and APA 7 references complete a strong submission.
AC301 Unit 1 help from the desk
Contingency posts often treat probable as anything above an even chance, when the standard means likely to occur. Students also accrue the midpoint of a range out of habit, or accrue nothing because counsel would not name a figure. Some disclose remote claims, which adds clutter readers do not need. Gain contingencies, such as a counterclaim, are sometimes recorded as receivables. Others forget that a probable loss with no estimate still needs a note explaining that an estimate cannot be made. Posts that list the tiers from the textbook without a company read as summaries. A reply that simply seconds the post earns little. If your section's prompt involves product recalls, environmental cleanup or guarantees instead of lawsuits, our writers can sort those claims the same way and draft the post around them.
Get an AC301 Unit 1 example written to your instructions
Share the scenario your AC301 section set for Unit 1 along with the rubric and whatever companies or claims the instructions supply; the builder and its three claims are then replaced with those facts, however many there are. Expect the first custom sample at no cost in 24-48h, which leaves time before replies to classmates are due. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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AC301 Unit 1 questions, answered
What counts as probable under the contingency rules?
The standard describes it as likely to occur, and in practice many firms read that as a high threshold, well above an even chance. Reasonably possible covers the ground between probable and remote. AC301 problems usually state the likelihood outright, often through a lawyer's letter, and the sample takes the classification from the facts rather than inventing a percentage.
Why is the bottom of the range accrued instead of the most likely figure?
When the facts name a best estimate within the range, that figure is accrued. Only when every amount in the range is equally likely does US GAAP direct the minimum, with the possible additional loss disclosed. In this case counsel names no better figure, so 200,000 is recorded and the note states that the loss could reach 500,000.
Where can I find a free AC301 Unit 1 sample paper?
This page holds a complete AC301 Unit 1 discussion board post sorting three claims against a composite hot tub maker by likelihood, with a reply to a classmate, three annotations and citations of the contingency standard, its interpretation and the textbook.
Why is the heater complaint left out of the AC301 Unit 1 post?
The buyer raised it once and never pursued it, so a loss is remote. Remote claims need neither an accrual nor a note, and listing them would only distract readers.
How would IFRS treat the dealer suit in the AC301 Unit 1 sample?
Where every amount in a range is equally likely, the international standard records the midpoint. Kettleby would show $350,000 instead of the $200,000 minimum used under US GAAP.