Question

/47 Chapter 10 Liabilities 482 Critical Thinking Cases Listed are seve publicly cwnod corporations and a liability that regularly appears in cach om 10-10 tion's balance shect Wells Fargo & Coopany (banking): Deposits-- interest bearing b. The New York Times Company (newspaper publisher): Unexpired subscriptions The Hollywood Park Companies (horse racing): Outstanding mutuel tickets American Greetings (greeting cards and gift wrap products manufacturer): Sales retu Wausau Paper Mills Company (paper manufacturer): Current maturities of long-term i f. Club Med., Inc. (resorts): Amounts received for future vacations g Apple Computer, Inc. (computer manufacturer): Accrued marketing and distribution h. General Motors Corporation (automobile manufacturer): obligation for postrei benefits ASE 10.1 he Nature of Liabilities a. C. d. e. Instructions Briefly explain what you believe to be the nature of each of these liabilities, including bow liability arose and the manner in which it is likely to be discharged. In the past, Abbott Labs had two hond icenantetndina.aitsden batleina characteristics po, provanry speclic exam -5. L010-6, LO10-7 Briefly explain what you believe to be nature of each of these liabilities How do the liabilities affect the financial statements of the organization?

Answer 1

Name of the Publicly owned corporation	Wells Fargo & Company	The New York Times Company	The Hollywood Park Companies	American Greetings	Wausau Paper Mills Company	Club Med., Inc.	Apple Computer, Inc.	General Motors Corporation
Industry	Banking	Newspaper publisher	Horse racing	Greeting cards and gift wrap products manufacturer	Paper manufacturer	Resorts	Computer manufacturer	Automobile manufacturer
Frequently occurring liability on BS	Deposits- interest bearing	Unexpired subscriptions	Outstanding mutuel tickets	Sales returns	Current maturities of long term debt	Amounts received for future vacations	Accrued marketing and distribution	Obligations for post retirement benefits
Nature of the liability	Amounts deposited by customers in their accounts that bear an interest.	Subscription amounts paid by customers in advance for a certain period for which newspapers are yet to be delivered.	Tickets have been purchased by customers for future horse racing events.	Customers return the cards/wraps if it is not up to their liking for as per their customization (quality, design etc.) requirements leading to a refund liability.	Borrowings made for expansion/working capital at an interest.	Advance money taken from customers for prospective bookings of their resorts at future dates.	The incorporation is known to be a pioneer in marketing and promotional strategies. It is the outstanding cost incurred but yet to be paid to vendors by the marketing department.	The company is a global MNC with a lot of employees on its payroll. It provides for the statutory post retirement benefits for such employees.
Source of the liability	When customer makes a deposit into his interest bearing account.	When customer takes a pre-paid subscription for newspapers.	When tickets have been purchased and amount paid in advance by customers for future horse racing events.	When customers places a request for return and refund for the orders placed by them.	When money was borrowed to support expansion activities or working capital with a recurring interest obligation till maturity of the debt.	When customers paid in advance for future bookings.	Marketing and distribution cost incurred on projects but yet to be paid to vendors.	When the employees of the company have become eligible for the post retirement benefits on fulfillment of statutory conditions.
Manner of discharge of liability	Withdrawal of deposits by the customer.	When the company delivers the newspapers for the subscribed period.	On actual occurrence of the horse racing event.	Replacement of the same order or refund of amount paid.	On repayment of principal on maturity date.	When customers take the actual vacation in the resorts on the given dates.	When the payment is made to the vendors to whom such cost is due.	When the employee resigns from the company or retires.
Effect of liability on the Organization's financial statements	Interest on deposits form a major part of any bank's expenses. The bank makes a profit this interest expense is lower than the interest charged by it on the loans that it extends to customers.	The liability will be amortized over the remaining period of the subscription.	The revenue can be recognized only once the company hosts the horse racing event. Till then, it will continue to be shown under liability as an advance.	This liability not only increases outflow for refunds but also increases operational cost in the form of customer care and delivery cost for pick up and replacement (if any).	It will improve the Debt to equity ratio on maturity of the long term debt.	The revenue can be recognized only once the company's obligations are fulfilled. Till then, it will continue to be shown under liability as an advance.	It will continue to be shown under a current liability till it is paid after the standard credit period extended by vendors has expired.	The liability will continue to appear on the Balance Sheet until the time it is paid (when the employee resigns/retires).