Accy 493 Intel Case Preparation Questions Doogar

1. Consider the following dates in the evolution of the Pentiu Chip flaw during 1994!
"une 3#! Intel has discovered the flaw
$cto%er 31! Dr. &icely has posted the inforation a%out the flaw and started an
Internet discussion group.
&ov '( Coverage in )lectrical )ngineering *ies+ C&&+ &ew ,or- *ies
and .oston /lo%e has started
Dec 1'! I.0 announces that it will not ship any ore flawed Pentiu
chips.
At any of these dates+ did Intel have a contingent lia%ility1 2hat definition of contingent
lia%ility are you using1 If you have access to 3A4 &o. (+ did Intel have a contingent
lia%ility under 3A4 &o. (1
'. At the end of the Dece%er 15 eeting+ what should Intel anageent do1 4hould
they e6pand their Pentiu chip replaceent progra %y 7i8 covering ore individuals9
7ii8 providing or paying for soe or all of the 7non:chip8 incidental costs of replacing the
defective chips1
3. Independent of your answer in ;uestion '+ assue that in Dece%er 1994+ Intel<s
anageent decided to e6pand its progra %y offering to supply a replaceent chip to
all purchasers of a defective Pentiu chip+ regardless of how they use it. Intel will
provide a new chip free of charge+ %ut will not pay for any other costs. )stiate the cost.
=ow should it %e accounted for1
4. =ow would your answer change if Intel also offered to pay for the la%or and direct
incidental costs 7in addition to offering to supply a new chip8 to all individuals1
(. After the Dece%er 15 eeting how should Intel<s anageent counicate its
decision to financial ar-ets1 4hould Intel file a for >:?1
@. $n Dece%er '#+ 1994+ A,B corporation has a cheical spill in a field adCacent to
their factory. *hey copleted and paid cash for the iediate clean up prior to their
Dece%er 31 year end. =owever they have consulted with an environental engineering
fir that indicated that there is a 9#D chance that A,B will have to perfor a further
clean up in si6 onths. *he cost of such a clean up would ost li-ely %e E1##+###. If
the weather is perfect during the clean up+ it could cost as little as E9(+###. $n the other
hand+ there is a sall chance that soil containation could spread+ increasing the costs to
E1(#+###. 4hould A,B recogniFe a lia%ility in their 1994 financial stateents1
Assuing they do+ what aount should %e recogniFed1 =ow would A,B account for
this lia%ility1 2hat ipact would the su%se;uent cash payent have if the lia%ility were
settled for the aount accrued1 If the actual clean up costs were ore or less than was
accrued in 19941