| Course | ACC 318 Intermediate Accounting II |
|---|---|
| Module | Module 1 |
| Paper type | undergraduate discussion post on loss contingencies |
| Length | About 380 words, 3 pages |
| Format | APA 7 student paper |
| School | Southern New Hampshire University |
| Program | BS Accounting |
| Updated | October 2026 |
Free sample paper for ACC 318 Module 1
Module One Discussion
Probable, Possible or Remote?
At year end, a composite chain of eighteen indoor trampoline parks in Texas and Oklahoma had two problems its owners would rather not see in print. A parent had sued for $1.2 million after a nine-year-old broke a leg on a dodgeball court. And a city fire inspector had cited the Round Rock park for exits blocked by stacked foam blocks during a holiday rush.
GAAP sorts uncertain losses by likelihood and then asks whether the amount can be estimated. A loss is accrued only if it is probable that a liability existed at the balance sheet date and the amount can be reasonably estimated; if it is reasonably possible, it is disclosed; if it is remote, generally nothing is required (Financial Accounting Standards Board, 1975).
The fire-code citation is straightforward. The violation occurred before year end, the city's schedule of penalties puts the fine near $40,000 and the company does not plan to contest it. Both conditions are met, so $40,000 goes on the books now as an expense and a current liability. Because fines are not deductible, it also creates no tax benefit, which Project One will need to handle.
The lawsuit is harder. The company's lawyers say the child's family signed the park's waiver, but Texas courts have sometimes refused to enforce waivers signed for minors, so they judge a loss reasonably possible, not probable. They estimate a range of $150,000 to $400,000 if the case is lost. Since the loss is not probable, nothing is accrued, but the notes must describe the claim and the possible range (Kieso et al., 2019). The company's $250,000 insurance deductible matters for cash planning, but it does not change the accounting test.
The owners worry that disclosing a range in the notes hands the plaintiff a negotiating number. That concern is real. Hennes (2014) found that companies often disclose less about litigation than the standard seems to require, especially when cases are ongoing. But a lender reading statements with no mention of a $1.2 million claim would be misled, and that is the outcome the disclosure rule exists to prevent.
For classmates: if the company's lawyer refused to give any range in writing, what would you put in the note, and would you accept that refusal?
References
Financial Accounting Standards Board. (1975). Accounting for contingencies (Statement of Financial Accounting Standards No. 5). Author.
Hennes, K. M. (2014). Disclosure of contingent legal liabilities. Journal of Accounting and Public Policy, 33(1), 32-50. https://doi.org/10.1016/j.jaccpubpol.2013.10.005
Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate accounting (17th ed.). Wiley.
What the ACC 318 Module 1 instructions ask for
The opening discussion in ACC 318 often asks how companies account for loss contingencies, such as lawsuits, guarantees, warranties or environmental claims. Plan on three or four paragraphs that cite the textbook and the standard itself, then replies to two or more classmates. Strong posts take a specific situation and walk through the two tests: how likely the loss is, using the categories probable, reasonably possible and remote, and whether the amount can be reasonably estimated. Then state the accounting result, accrue, disclose or neither, and explain what the note would say. Many prompts also ask about the tension between full disclosure and a company's legal position, which rewards a balanced view.
How this ACC 318 Module 1 discussion example is built
The post opens with two matters at a trampoline park chain. A parent has sued for $1.2 million after a child broke a leg on a dodgeball court, and the company's lawyers judge a loss reasonably possible but not probable, with a range of $150,000 to $400,000 and a $250,000 insurance deductible. Separately, a city inspector cited one park for blocked exits, and the company expects a fine near $40,000. The post concludes the fine is probable and estimable, so it is accrued, while the lawsuit is disclosed but not accrued. It cites the FASB standard, the textbook and Hennes's research on litigation disclosure, and asks classmates how they would handle a lawyer's reluctance to put a range in writing.
Where the ACC 318 Module 1 rubric puts the points
Graders of the ACC 318 contingency discussion usually look for correct use of the probable, reasonably possible and remote categories, correct linkage of each category to accrual or disclosure, a specific example and proper citation of the standard and textbook. The strongest posts explain how the range of loss affects the amount accrued, recognize the role of insurance and legal counsel, and acknowledge the disclosure dilemma without dodging the rule. Graders deduct for posts that accrue reasonably possible losses, that confuse gain and loss contingencies, or that never state a conclusion. Replies that test a classmate's probability judgment or note a missing disclosure earn participation credit.
ACC 318 Module 1 help: the mistakes that cost points
Points tend to slip in this discussion when a post restates the three categories without applying them, accrues a loss that is only reasonably possible, or forgets that when a range is estimable and no amount in it is more likely, the minimum of the range is accrued. Some students also treat insurance recoveries as automatically offsetting the loss, which GAAP does not allow unless recovery is probable. If your prompt involves a product warranty, an environmental cleanup or a guarantee of another company's debt, the same two tests carry over, and we can work them on your facts. Keep the conclusion short and specific: say what is recorded, what is disclosed and why.
Get ACC 318 Module 1 written to your instructions
Send the ACC 318 Module 1 prompt and any facts it gives about the claim or obligation. The post will apply the contingency categories, decide whether to accrue, disclose or do nothing, and explain the judgment, closing with a question for classmates. Your first paper is on the house, normally within two days. The paper above is an original model document written by our desk, not a submitted student paper and not an official Southern New Hampshire University document.
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ACC 318 Module 1 questions, answered
Where can I find a free ACC 318 Module 1 Discussion sample?
This page includes the full ACC 318 Module 1 post applying the contingency rules to a park injury lawsuit and a fire-code fine.
When must a loss contingency be accrued?
When it is probable that a liability has been incurred at the balance sheet date and the amount can be reasonably estimated.
What happens if a loss is only reasonably possible?
It is not accrued, but the nature of the contingency and an estimate of the possible loss or range, or a statement that no estimate can be made, is disclosed in the notes.
Which amount is accrued when only a range can be estimated?
The best estimate within the range. If no amount in the range is better than any other, the minimum of the range is accrued.
Are gain contingencies recorded?
No. Gain contingencies are not recognized until realized, though they may be disclosed carefully to avoid misleading users.