a.What are three categories of contingent liabilities | |||
1) | Probable Contengiency | The liability is probable in occurrence, and an estimate is available. | |
2) | Reasonable Possible | The liability is possible, but an estimate is not available | |
3) | Remote | Liability is not recorded or disclosed | |
b. For each item above, determine the correct accounting treatment. Prepare any required journal entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) | |||
- Record the warranty expense for event 1. | Amt in Millions | ||
Warranty expense | 3.5 | ||
Estimated warranty liability | 3.5 | ||
- Record the fines associated with the violations of environmental laws for event 2. | |||
No Entry | |||
- Record the current year losses for property damage in event 3. | |||
No Entry |
The following three independent sets of facts relate to contingent liabilities 1. In November of ...
value 16.66 points T. The following three independent sets of facts relate to contingent liabilities: manufactured during the past two years. A flaw in the battery cable was discovered and the recall provides for of the defective cables. The estimated cost of this recall is $2 million 2. The EPA has notified a company of violations of s waste. These certain there will be cost associated with the cleanup, but cannot estimate the amount. The cleanup cost could be as...
Need to figure out part b. The following three independent sets of facts relate to contingent liabilities: 1. In November of the current year, an automobile manufacturing company recalled all pickup trucks manufactured during the past two years. A flaw in the battery cable was discovered and the recall provides for replacement of the defective cables. The estimated cost of this recall is $2.3 million. 2. The EPA has notified a company of violations of environmental laws relating to hazardous...
1. In November of the current year, an automobile manufacturing company recalled all pickup trucks manufactured during the past two years. Aflaw in the battery cable was discovered and the recall provides for replacement of the defective cables. The estimated cost of this recall is $2.1 million. 2 The EPA has notified a company of violations of environmental laws relating to hazardous waste. These actions seek cleanup costs. penalties, and damages to property. The company is reasonably certain there will...
The ink-jet printing division of Environmental Printing has grown tremendously in recent years. Assume the following transactions related to the ink-jet division occur during the year ended December 31, 2021. Environmental Printing is being sued for $10.1 million by Addamax. Plaintiff alleges that the defendants formed an unlawful joint venture and drove it out of business. The case is expected to go to trial later this year. The likelihood of payment is reasonably possible. Environmental Printing is the plaintiff...
The following three independent sets of facts relate to (1) the possible accrual or (2) the possible disclosure by other means of a loss contingency. Situation I A company offers a 1-year assurance-type warranty for the product that it manufactures. A history of warranty claims has been compiled and the probable amount of claims related to sales for a given period can be determined. Situation II Subsequent to the date of a set of financial statements, but prior to the...
The following items pertain to possible provisions: A company uses a part manufactured in Germany in its automobile manufacturing plant. There has been a concern about the failure of this part in cars manufactured in Germany. No failures have occurred to date in Canada. The company decided to do a voluntary recall of all cars manufactured with this part. The recall is 40% complete and has cost $1,220,000 to date. A company self-insures for floods. That is, it pays no...
The following selected transactions relate to contingencies of Classical Tool Makers, Inc., which began operations in July 2021. Classical's fiscal year ends on December 31. Financial statements are issued in April 2022. 1. Classical's products carry a one-year warranty against manufacturer's defects. Based on previous experience, warranty costs are expected to approximate 3% of sales. Sales were $2.3 million (all credit) for 2021. Actual warranty expenditures were $20,100 and were recorded as warranty expense when incurred. 2. Although no customer...
During the current year, Merkley Company disposed of three different assets. On January 1 of the current year, prior to their disposal, the accounts reflected the following: OriginalResidual Estimated Depreciation Value 3,000 6 years Life Asset Machine A Machine B MachineC Cost straight line) 12,000 (4 years) 4,000 10 years 45,600 (8 years) 6,700 16 years 51,975 (12 ycars) 21,000 61,000 76,000 The machines were disposed of in the following ways: a. Machine A: Sold on January 1 for $8,500...
Required information (The following information applies to the questions displayed below.) A company designs and sells high-end stereo equipment for auto and home use. Engineers notified management in December Year of a circuit flaw in an amplifier that poses a potential fire hazard. Further investigation indicates that a product recall is probable, estimated to cost the company $2.2 million. The fiscal year ends on December 31 Required: 1. Should this contingent liability be reported, disclosed in a note only, or...
On November 1, Year 1, a company borrows $40,000 cash from Community Savings and Loan. The company signs a three-month, 6% note payable. Interest is payable at maturity. The company's year-end is December 31. Required: 1.-3. Record the necessary entries in the Journal Entry Worksheet below. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet Record the adjusting entry for interest. Note: Enter debits...