Problem

Interpreting an actual company’s contingent liabilities [5-10 min]Farley Motors, Inc., a m...

Interpreting an actual company’s contingent liabilities [5-10 min]

Farley Motors, Inc., a motorcycle manufacturer, included the following note (adapted) in its annual report:

Requirements

1. Why are these contingent (versus actual) liabilities?


2. How can a contingent liability become an actual liability for Farley Motors? What are the limits to the company’s product liabilities in the United States?

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Solutions For Problems in Chapter 10