Dungannon Enterprises Ltd sells a specialty part that is

used #1207

Dungannon Enterprises Ltd. sells a specialty part that is used in widescreen televisions and
provides the ultimate in screen clarity. To promote sales of its product, Dungannon launched a
program with some of its smaller customers. In exchange for making Dungannon their exclusive
supplier, Dungannon guarantees these customers to their creditors so that Dungannon will
assume the customers' long-term debt in the event of non-payment to the creditors. In addition
to charging for parts, Dungannon also charges a fee to customers who take the guarantee
program, and bases the fee on the time frame that the guarantee covers, which is typically three
years. In the current fiscal year, these fees amounted to $30,000 for the three-year coverage
period.

Six months before Dungannon's fiscal year end, one of its customers, Hutter Corp., began to
experience financial difficulties and missed two months of mortgage payments. Hutter's lender
then called on Dungannon to make the mortgage payments. At its fiscal year end on December
31, 2014, Dungannon had recorded a receivable of $15,000 related to the payments made by
Dungannon on Hutter's behalf. Hutter owes the lender an additional $30,000 at this point. The
lender is contemplating putting a lien on Hutter's assets that were pledged as collateral for the
loans but the collateral involves rights on development of new state-of-the-art three-dimensional
television technology that is still unproven. Dungannon follows ASPE.

Instructions

(a) Prepare all required journal entries and adjusting entries on Dungannon's books to
recognize the transactions and events described above.

(b) Identify any disclosures that must be made as a result of this information and prepare the
note disclosure for Dungannon for the period ended December 31, 2014.

Dungannon Enterprises Ltd sells a specialty part that is used

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