12 ABCD 12.4 ) The following items have to be considered in finalising the financial statements of Q, a limited liability company: The company gives warranties on its products. The company's statistics show that about 376 or sales give rise to a warranty claim. 1 he company has guaranteed the overdraft of another company, The likelihood of a liability arising under the guarantee is assessed as possible. According to IAS 37 Provisions, Contingent Liabilities and Contingent assets, what is the correct action to be taken in the financial statements for these items? Create a provision Disclose by note only No action 1 1, 2 1

12 ABCD 12.4 ) The following items have to be considered in finalising the financial statements of Q, a limited liability company: The company gives warranties on its products. The company's statistics show that about 376 or sales give rise to a warranty claim. 1 he company has guaranteed the overdraft of another company, The likelihood of a liability arising under the guarantee is assessed as possible. According to IAS 37 Provisions, Contingent Liabilities and Contingent assets, what is the correct action to be taken in the financial statements for these items? Create a provision Disclose by note only No action 1 1, 2 1

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter8: Current And Contingent Liabilities

Section: Chapter Questions

Problem 54BE: Contingent Liabilities Many companies provide warranties with their products. Such warranties...

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(Disclosures, Conditional and Contingent Liabilities) Presented below are three independent situations.Situation 1: A company offers a one-year warranty for the product that it manufactures. A history of warranty claims has been compiled, and the probable amounts of claims related to sales for a given period can be determined.Situation 2: Subsequent to the date of a set of financial statements but prior to the issuance of the financial statements, a company enters into a contract that will probably result in a significant loss to the company. The amount of the loss can be reasonably estimated.Situation 3: A company has adopted a policy of recording self-insurance for any possible losses resulting from injury to others by the company’s vehicles. The premium for an insurance policy for the same risk from an independent insurance company would have an annual cost of $4,000. During the period covered by the financial statements, there were no accidents involving the company’s vehicles that…
Read CA13-6 "Warranties and Loss Contingencies". Read the two situations about Benson company and Constantine Company and answer the related questions in the instructions. CA13-6. (Warranties and Loss Contingencies) The following two independent situations involve loss contingencies. Part 1: Benson Company sells two products, Grey and Yellow. Each carries a 1-year warranty. 1.Product Grey—Product warranty costs, based on past experience, will normally be 1% of sales. 2.Product Yellow—Product warranty costs cannot be reasonably estimated because this is a new product line. However, the chief engineer believes that product warranty costs are likely to be incurred. Instructions How should Benson report the estimated product warranty costs for each of the two types of merchandise above? Discuss the rationale for your answer. Do not discuss disclosures that should be made in Benson's financial statements or notes. Part 2: Constantine Company is being sued for $4,000,000 for an injury…
Read CA13-6 "Warranties and Loss Contingencies". Read the two situations about Benson company and Constantine Company and answer the related questions in the instructions. CA13-6. (Warranties and Loss Contingencies) The following two independent situations involve loss contingencies. Part 1: Benson Company sells two products, Grey and Yellow. Each carries a 1-year warranty. 1.Product Grey—Product warranty costs, based on past experience, will normally be 1% of sales. 2.Product Yellow—Product warranty costs cannot be reasonably estimated because this is a new product line. However, the chief engineer believes that product warranty costs are likely to be incurred. Instructions How should Benson report the estimated product warranty costs for each of the two types of merchandise above? Discuss the rationale for your answer. Do not discuss disclosures that should be made in Benson's financial statements or notes. read CA13-6 "Warranties and Loss Contingencies". Read the two…
Question 1: What is the correct amount of accounts payable to be presented in the statement of financial position? Question 2: The amount of contingent liability to be disclosed relating to the lawsuit from the employees is? Question 3: How much is the correct balance of the warranty liabilities account as of December 31, 2021? Question 4: The journal entry to correct the initial carrying value of the 10% bonds payable would include a credit to interest expense amounting to? Question 5: How much is the carrying value of the 10% bonds payable at the end of December 31, 2021?
1. Statement 1: The expected profit from a sales type warranty that covers several years should all be recognized in the period the warranty is sold. Statement 2: The cause for litigation must have occurred on or before the date of the financial statements to report a liability in the financial statements. a. Only statement 1 is correct b. Only statement 2 is correct c. Both statements are correct d. Both statements are incorrect. 2. Statement 1: Contingent liabilities are not reported in the financial statements but may be disclosed in the notes to the financial statements if the likelihood of an unfavorable outcome is possible. Statement 2: Contingent assets are not reported in the statement of financial position. a. Only statement 1 is correct b. Only statement 2 is correct c. Both statements are correct d. Both statements are incorrect. 3. Accounting for product warranty costs under an assurance-type warranty a. charges an expense account when the seller performs in…
You have recorded a revolving line of credit on your company’s financial statements due within the next ten (10) months as a long-term liability. The board of directors of the company has asked you to explain why you have done so. The company has been in default with its loan covenants, but prior to the issuance of the financial statements, the bank granted a waiver. 1. What criteria should be met prior to reflecting this loan as a long-term liability? (Find in the codification what makes this a long-term debt and is this correct? Find out the circumstances in which we would have to reclassify this as a long-term liability)
Contingent Liabilities Many companies provide warranties with their products. Such warranties typically guarantee the repair or replacement of defective goods for some specified period of time following the sale. Required: CONCEPTUAL CONNECTION Why do most warranties require companies to make a journal entry to record a liability for future warranty costs?
(Warranties and Loss Contingencies) The following two independent situations involve loss contingencies.Part 1: Benson Company sells two products, Grey and Yellow. Each carries a 1-year warranty.1. Product Grey—Product warranty costs, based on past experience, will normally be 1% of sales.2. Product Yellow—Product warranty costs cannot be reasonably estimated because this is a new product line. However, thechief engineer believes that product warranty costs are likely to be incurred. InstructionsHow should Benson report the estimated product warranty costs for each of the two types of merchandise above? Discuss the rationale for your answer. Do not discuss disclosures that should be made in Benson’s financial statements or notes. Part 2: Constantine Company is being sued for $4,000,000 for an injury caused to a child as a result of alleged negligence while the child was visiting the Constantine Company plant in March 2017. The suit was filed in July 2017. Constantine’s lawyer states…
True or False with explanation The formula for simple interest is: Interest = Principle x Days outstanding x Time Financial liabilities deliver cash. A current liability is one that is due to be settled within 12 months after the reporting period. Interest on a $10,000, 4% note that is outstanding for 3 months would be $100. A warranty obligation is a type of non-financial liability. With the revenue approach to warranties, unearned revenue is used. A company that uses the expense approach to warranties should never make an accrual of estimated warranty work. When a short-term note is repaid, a debit includes Notes Payable. A liability is considered to be an asset.
Negotiable certificates of deposita) are bearer instruments because their holders earn the interest and principal at maturity.b) typically have a maturity of one to four months.c) are usually denominated at $100,000.d) are all of the above.e) are only A and B of the above.
9. Which of the following items would be excluded from current liabilities? Group of answer choices a. Normal accounts payable which had been assigned by the creditor to a finance company. b. Long-term debt callable within one year or less because the debtor violated a debt provision. c. A short-term debt which at the discretion of the entity can be rolled over at least twelve months after the balance sheet date. d. A long-term liability callable or due on demand by the creditor even though the creditor have given no indication that the debt will be called.
Pls answer this question with solutions. A manufacturer gives warranties at the time of sale to purchasers of its product. Under the terms of the contract of sale, the manufacturer undertakes to make good, by repair or replacement, manufacturing defects that become apparent within one year from the date of sale. On the basis of experience, it is probable (i.e., more likely than not) that there will be some claims under the warranties. Sales of ₱40 million were made evenly throughout 20X1. At December 31, 20x1 the expenditures for warranty repairs and replacements for the product sold in 20x1 are expected to be made 50% in 20x1 and 50% in 20x2. Assume for simplicity that all the 20x2 outflows of economic benefits related to the warranty repairs and replacements take place on June 30, 20x2. Experience indicates that 95% of products sold require no warranty repairs; 3% of products sold require minor repairs costing 10% of the sale price; and 2% of products sold require major…