| Course | AC501 Financial Accounting and Reporting |
|---|---|
| Unit | Unit 9 |
| Paper type | Disclosure note draft |
| Length | About 440 words, 4 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | MS in Accounting |
| Updated | October 2026 |
Free sample paper for AC501 Unit 9
Thirty-Eight Options, No Lots on the Balance Sheet: A Unit 9 Disclosure Note Draft on Land Banking
[Student Name]
Purdue University Global
AC501: Financial Accounting and Reporting
Unit 9 Disclosure Note Draft
[Instructor Name]
[Date]
The homebuilder, its land-banking partners and every figure are composite; the standards cited are real.
Note 7. Variable Interest Entities and Land Option Contracts
Arrangements. The Company controls homebuilding lots through option contracts with third-party land-banking entities, which buy and hold land and sell finished lots to the Company on a schedule. At December 31, 2026, the Company held 38 option contracts covering 1,940 lots, with an aggregate remaining purchase price of $186,400,000. The contracts are secured by nonrefundable deposits of $22,400,000, about 12 percent of the remaining price. The Company has no obligation to buy any lot; if it does not exercise an option, its loss is limited to the deposit and any pre-acquisition costs it has spent.
Consolidation judgment. The land-banking entities are variable interest entities, because their equity at risk is not sufficient to finance their activities without the Company's deposits. The Company's deposits are variable interests. The Company is not the primary beneficiary of any of these entities, because the decisions that drive their results are not the Company's to make: the land-banking entities decide which land to buy, how to finance it and whether to sell lots to others, and the Company's rights are limited to buying lots on agreed terms (Financial Accounting Standards Board, 2009). The Company therefore does not consolidate them. The Company reassesses this conclusion whenever the terms of a contract change (Financial Accounting Standards Board, 2015).
Maximum exposure to loss.
1. Nonrefundable deposits, included in land deposits: $22,400,000.
2. Pre-acquisition costs capitalized, included in land deposits: $3,100,000.
3. Maximum exposure to loss: $25,500,000.
The Company's maximum loss is what it has already paid, $25.5 million, not the $186.4 million it would pay if it exercised every option, because walking away costs only the deposit and the costs already spent.
Judgments and changes. Determining whether the Company is the primary beneficiary requires judgment about which activities most affect each entity's performance and who directs them. No entity was consolidated or deconsolidated during 2026.
Write-offs. During 2026 the Company wrote off $1,380,000 of deposits and pre-acquisition costs on three contracts it no longer expects to exercise, after slower sales in two submarkets. The write-offs are included in cost of sales.
Other. Deposits are reviewed each quarter for recoverability against current sales pace in each submarket. The Company has not provided financial support to any land-banking entity beyond its contractual deposits and does not guarantee their debt.
References
Financial Accounting Standards Board. (2009). Amendments to FASB Interpretation No. 46(R) (Statement of Financial Accounting Standards No. 167). FASB.
Financial Accounting Standards Board. (2015). Consolidation (Topic 810): Amendments to the consolidation analysis (Accounting Standards Update No. 2015-02). FASB.
The Purdue Global AC501 Unit 9 instructions
The ninth AC501 unit asks you to draft a disclosure note as it would appear in the financial statements. Use a note heading and the entity's own voice. Describe the arrangements in plain terms, with the counts and amounts a reader needs. State the key judgment and its basis, such as why an entity is or is not consolidated, using the language of the applicable guidance. Present quantitative information in a simple table, especially maximum exposure to loss. Report changes during the period, such as write-offs. Note any support provided beyond contractual terms. Keep the note concise and readable by an investor who has never seen the workpapers, and make sure every figure in the text agrees with the table. Avoid quoting the guidance at length; the note should state conclusions and their basis, not the research behind them. Cite the consolidation guidance and amendments that govern the judgment in APA 7.
How this AC501 Unit 9 example is built
The sample note is headed Variable Interest Entities and Land Option Contracts. The arrangements paragraph gives 38 contracts, 1,940 lots, $186,400,000 of remaining price and $22,400,000 of deposits, about 12 percent. The consolidation paragraph explains that the entities lack sufficient equity at risk, that the deposits are variable interests, and that the land-banking entities, not the builder, make the decisions that drive their results. A table totals deposits and $3,100,000 of pre-acquisition costs to a $25,500,000 maximum exposure. The highlighted sentence distinguishes exposure from commitment. Short paragraphs follow on judgments, $1,380,000 of write-offs, quarterly recoverability review and the absence of further support.
AC501 Unit 9 rubric: what earns full points
Disclosure drafts in AC501 are graded on accuracy, completeness and readability. Points go to notes that describe the arrangement plainly, state the consolidation judgment with its correct basis and present maximum exposure clearly. Graders check that exposure is measured as what the entity could actually lose, not the total commitment. The rubric rewards reporting changes during the period and stating whether support beyond contracts was given. Notes that read like workpapers, or that hide the judgment in technical phrasing, lose points. Correct use of the guidance's terms, figures that agree everywhere they appear, a length an investor will actually read and APA 7 citations to the governing standards complete a strong submission.
AC501 Unit 9 help from the desk
Common Unit 9 problems include writing the note as an essay about consolidation rather than as a note an investor would read. Maximum exposure is stated as the full purchase price. The primary beneficiary judgment is asserted without saying who directs the significant activities. Write-offs and reassessments are left out. Figures in the table do not match the text. The note grows long with guidance quotations a reader does not need. If your section assigned a different judgment, such as a lease or a revenue policy, our writers can draft the note in the same shape around your facts.
Get an AC501 Unit 9 example written to your instructions
Send the treatment your earlier unit chose, its supporting figures, and the Unit 9 prompt with its rubric. The note drafted for you explains the arrangement plainly, states the judgment with its reasons, ties every figure to a statement caption and maps each requirement to the sentence meeting it. No fee for the first sample; 24-48h is typical. 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.
More AC501 papers and MS in Accounting samples
- AC501 Unit 1: Standards Audience Discussion
- AC501 Unit 2: Standard Setting Due Process Brief
- AC501 Unit 3: Exposure Draft Comment Letter
- AC501 Unit 4: GAAP Research Memo
- AC501 Unit 5: Liability Recognition Analysis
- AC501 Unit 6: Fair Value vs Amortized Cost Comparison
- AC501 Unit 7: Revenue Arrangement Analysis
- AC501 Unit 8: Principal vs Agent Seminar Reflection
- AC501 Unit 10: Reporting Position Paper
AC501 Unit 9 questions, answered
Why does a note matter when the entities are not consolidated?
Because nonconsolidation keeps 186,400,000 of lot purchases off the balance sheet, and a reader deserves to know what exposure remains. The note supplies the maximum loss, how it was determined and the judgment behind the conclusion. Without it, the treatment would be defensible but unreadable, which is the distinction this unit is built around.
What if the builder were the primary beneficiary?
Then it would consolidate the land-banking entities, bringing their land and financing onto its balance sheet, and the note would describe the consolidated amounts and any restrictions on them instead. The sample's cover memo mentions this alternative because a reviewer will ask which facts separate the two outcomes, chiefly who directs development and sale decisions.
Can the note draft cover a different treatment from my earlier units?
Yes. Any judgment-heavy treatment benefits from the same shape: the arrangement in plain terms, the judgment and its reasons, figures tied to captions, consequences in income. A revenue policy, a lease term assessment or a going concern evaluation would follow the same order. Send whichever treatment your course has carried forward.
Where can I find a free AC501 Unit 9 sample paper?
This page holds a full AC501 Unit 9 disclosure note draft for a composite homebuilder's land option contracts, with the arrangements, the consolidation judgment, a maximum exposure table, write-offs and APA 7 references.
Why is the maximum exposure $25.5 million rather than $186.4 million?
Because the builder is not obligated to buy any lot. If it walks away, it loses only its $22,400,000 of deposits and $3,100,000 of pre-acquisition costs; the remaining purchase price is paid only if it exercises an option.