Question

1. A contingent liability is:

1.             always a specific amount.
2.             an obligation arising from the purchase of goods or services on credit.
3.             an obligation not requiring a future payment.
4.             a potential obligation that depends on a future event.

2. On January 1, Weldon Weston Co. purchased equipment for $250,000. It has an estimated useful life of five years and its residual value is $25,000. The company has a calendar year-end. Using the straight-line method, depreciation expense for the first year of its life equals:

3. Fwp Co. issued $100,000, 10-year bonds on January 1, 2013. The stated rate of interest on the bonds is 10% payable annually on 12/31. Provide the requested information for the bonds immediately after issuance (January 1, 2013) under each of the three independent scenarios described below :

Answer 1

Solution

1. A Contingent Liability is - D. a potential obligation that depends on a future event.

2. Equipment Value = $ 250,000

Useful Life = 5 Years

Residual Value = $ 25,000

Depreciation (Straight Line Method) = (Equipment Value - Residual Value) / Useful Life

= $ (250000-25000)/5

= $ 225000/5

= $ 45000

Depreciation on First Year = $ 45,000

3. (This question does not contains the instructions. Please re-upload the complete problem.)