Question

WILL RATE:

You have been asked to determine whether each of the following items is a liability of Vinci Company on December 31, 2018.

1.         The cash outlay expected to be made on January 7, 2019, to purchase equipment on that date.

2.         The amount expected to be needed to provide warranty services to customers for products sold before the end of 2018.

3.         The expected cash outlay for employee wages that will be earned during 2019.

4.         The obligation to provide future issues of a monthly newsletter for which subscriptions were prepaid during 2018.

5.         The obligation to provide merchandise to a customer who submitted a prepaid order on December 10, 2018.

6.         The obligation to fill orders expected to be made by regular customers during 2019.

7.         An obligation to distribute shares of Vinci’s own common stock to Vinci’s stockholders as a result of a 10% stock dividend declared on December 15, 2008, and distributable on January 10, 2019.

8.         The obligation that may be required to settle a lawsuit against Vinci Company that is pending on December 31, 2018. Vinci’s attorneys expect to win the case.

9.         The obligation to retire at maturity $100,000, 12%, 10-year bonds issued at par value on December 31, 2018. (Interest on the bonds is to be paid annually, beginning on December 31, 2019.)

10.      The obligation to pay $120,000 interest ($100,000 X 12% X 10 years) on the bonds in [9] above.

11.      The burden associated with having earned a poor credit reputation during 2018.

12.      The obligation to provide office space to a tenant who paid six months of rent in advance on December 31, 2018.

Answer 1

1. Not a liability
Since cash is to be paid for equipment to be purchased at later date, no liability will be recorded

2. It is a liability
Since as per matching concept, expense is provided for warranty for goods sold during the year.

3. Not a liability
Since wages are to be accrued in 2019 only

4. It is a liability
Since it is unearned revenue

5. It is a liability
Since it is advance received

As per HOMEWORKLIB RULES we are supposed to answer 4 parts, i have answered 5, so kindly post other questions separately