! 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 1 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 $3.1 million. The fiscal year ends on December 31. Required: 1. Should this contingent liability be reported, disclosed in a note only, or neither? This contingent liability should be
Q: Consultants notified management of Goo Goo Baby Products that a crib toy poses a potential health…
A: Given information is: Consultants notified management of Goo Goo Baby Products that a crib toy poses…
Q: GINGERBREAD Company is involved in a litigation regarding a faulty product sold in a prior year. The…
A: Introduction:- A contingent liability is may occur in the future. it should be recorded in books of…
Q: TWENTYFIRST Corporation a manufacturer of cleaning products is preparing annual financial statements…
A: If the contingent liability is likely to occur and the amount can be reasonably estimated, the same…
Q: Top Sound International designs and sells high-end stereo equipment for auto and home use. Engineers…
A: The question is related to Provisions and Contingent Liabilities.
Q: XYZ Corp. is a manufacturer of generators. The domestic market for this products is currently not…
A:
Q: Accounting Ethics Case Sunrise Pools, Inc., is being sued by the crescent club for negligence when…
A: Identify the ethical problem which is faced by the vice president of finance if he follows the…
Q: What is the required journal entry as a result of this litigation? * a. Debit Litigation Expense…
A: Solution:- Given, Kelly Inc. is involved in litigation regarding a faulty product sold in a prior…
Q: Top Sound International designs and sells high-end stereo equipment for auto and home use. Engineers…
A:
Q: Several months ago, Ayers Industries Inc. experienced a hazardous materials spill at one of its…
A: Journal entry: It is prepared to record the financial and non financial transaction of the business…
Q: Several months ago, Ayers Industries Inc. experienced a hazardous materials spill at one of its…
A: The question is based on the concept of Financial Accounting.
Q: 22. Assume that a manufacturing corporation has (1) good quality control, (2) a one-year operating…
A: Current liabilities are those obligations or liabilities which are to be paid within one year of…
Q: What amount should be reported as accrued liability on December 31, 2023? What amount should…
A: 1. As the Grapes Company became aware in December 2023 that Engineering flaw in the product poses a…
Q: Coronado Industries, a manufacturer of household paints, is preparing annual financial statements at…
A: Financial statements are the reports prepared by an entity in order to make a disclosure of entity's…
Q: A Company trades in home appliances in Sohar. The Company is facing a claim for OMR. 50,000 from a…
A: Assets: It is a resource that will generate future benefits and revenue for the company. It include…
Q: On Nov. 25, 2017, an explosion occurred at Stefan company causing extensive property damage to area…
A: Liability is the amount which the business owes to creditors of the company. While as, contingent…
Q: A company spills chemicals onto Russian land, causing damage that will cost $7million to clean.…
A: There is no environmental legislation but the company has clear green policies on its website…
Q: In March year 2, an explosion occurred at Nilo Co.'s plant, causing damage to area properties. By…
A: Given Information: Reasonable estimate of the damages - $3,000,000 Comprehensive public…
Q: You are the independent auditor engaged to audit Broady Corporation’s December 31, 2022, financial…
A: Contingent Liability It is important to made provisions of contingent liability is important for the…
Q: nment has clearly indicated its intention of having the company recall all cans of this paint sold…
A: Accounting standards (AS) are the rules as well as guidelines which help in preparing or making of…
Q: clista Inc., a bicycle manufacturer, is preparing its financial statements for December 31, 2020.…
A: The following transaction is journalized for Ciclista bicycle manufacturer.
Q: Tender Foot, Inc., is involved in litigation regarding a faulty product sold in a prior year. The…
A: A contingent liability refers to the liabilities that may be incurred depending upon the occurrence…
Q: c) A writ was lodged in the Supreme Court in the week after year-end claiming damages for illness…
A: c) Even though it is a subsequent event, the chances of winning the case have to be seen. Here the…
Q: On January 1, 2008, Elyssa Company purchased a patent for a new consumer for a new consumer product…
A: This question deals with the IAS 38 "Intangible asset" As per IAS 38, intangible asset needs to…
Q: Mama Mo Na Tita Ko Corporation, a manufacturer of cleaning products, is preparing annual financial…
A: Elements of the financial statements include expenses and revenues, assets and obligations, equities…
Q: 3) The client purchased raw material that was received just before year-end. The purchase was…
A: An independent Auditor's Report seems to be an authorized opinion made by an external or internal…
Q: Required information [The following information applies to the questions displayed below.] A company…
A: When any product cost is more than the sales price will be known as the loss and this will be…
Q: Motorola is a world leader in the development of cellular phone technology. During the year, the…
A: Given case is: Motorola is a world leader in the development of cellular phone technology. During…
Q: The following selected circumstances relate to pending lawsuits for Erismus, Inc. Erismus’s fiscal…
A: Contingent Liability: Contingent liability refers to any potential liability that can occur…
Q: Sound Audio manufactures and sells audio equipment for automobiles. Engineers notified management in…
A:
Q: ! Required information [The following information applies to the questions displayed below.] A…
A: Liability is the amount of loss estimated to cost the company from recalling the units.
Q: Waterway Shoes Foot Inc. is involved in litigation regarding a faulty product sold in a prior year.…
A: Liability is the present obligation that arises from past events and provisions are the probable…
Q: Anthony Company sells cars. In 2018, the entity sold 1,000 units before discovering a significant…
A: A contingent liability is a libility that may occur depending on the…
Q: ABC Inc. has is being sued by a customer. The plaintiff (customer) claims $50,000 for product…
A: ABC Inc. has is being sued by the customer for product deficiencies = $50000 Lawyer of the company…
Q: Contingent liabilitiesSeveral months ago, Ayers Industries Inc. experienced a hazardous materials…
A: Contingent liabilities are those liabilities for which it is not sure that whether these needs to be…
Q: Authors Academic Press faces three potential contingency situations, described below. Authors’…
A: Solution:- Introduction:- A contingent liability is a probable event. It may or may not be incurred…
Q: A truck owned and operated by Ward Company was involved in an accident with an auto driven by…
A: Provision is a liability where the amount or timing is uncertain. As per the standards, provision is…
Q: Write double entry? On 7 November 2021 there was a fire in the warehouse, in which inventory valued…
A: When there is a loss of goods by fire, an expense account is debited named loss by fire account and…
Q: Caplan Pharma, Inc., recently was sued by a competitor for possible infringement of the competitor’s…
A: Cost Accounting Standards: The cost accounting standards are the standards set by a board which is…
Q: Sound Audio manufactures and sells audio equipment for automobiles. Engineers notified management…
A: 1. The loss due to the flawed product is a contingency and must be estimated probably and…
Q: The following items pertain to possible provisions: A company self-insures for floods. That is, it…
A: Indication of whether a liability is recorded or not and the amount of liability.
Q: Contingent Liabilities Several months ago, Ayers Industries Inc. experienced a hazardous materials…
A: SOLUTION- A JOURNAL IS A COMPANY'S OFFICIAL BOOK IN WHICH TRANSACTIONS ARE RECORDED IN CHRONOLOGICAL…
Q: Sound Audio manufactures and sells audio equipment for automobiles. Engineers notified management in…
A: 1. The loss due to the flawed product is a contingency and must be estimated probably and…
Q: Top Sound International designs and sells high-end stereo equipment for auto and home use. Engineers…
A: 1 ) Contingent liability is a liability that happen to occur on happening of an event or incident .A…
Q: Required information [The following information applies to the questions displayed below.] Top Sound…
A: Contingent liability: This is an uncertain obligation which might be incurred on a future date as a…
Q: Your company operates a theme park, which has the latest rides and an annual attendance of over 10…
A: Here discuss about the claim settlement process and account treatment which are included with the…
Q: ABC Corporation a manufacturer of cleaning products is preparing annual financial statements at…
A: The question is related to the Accounting Treatement of recall cost.
Q: Newton Company is involved in litigation regarding a faulty The entity has consulted with an…
A: Litigation expenses: The amount of charges incurred by the defending party while involving in a…
Q: GINGERBREAD Company is involved in a litigation regarding a faulty product sold in a prior year. The…
A: SOLUTION- EXPLANATION- THE EVENT RELATED TO CONTINGENT OBLIGATION IS NOT PROBABLE .IT MEANS THAT…
Step by step
Solved in 2 steps
- Sound Audio manufactures and sells audio equipment for automobiles. Engineers notified management in December 2021 of a circuit flaw in an amplifier that poses a potential fire hazard. An intense investigation indicated that a product recall is virtually certain, estimated to cost the company $8.0 million. The fiscal year ends on December 31. Required: Should this loss contingency be accrued, only disclosed, or neither? What loss, if any, should Sound Audio report in its 2021 income statement? What liability, if any, should Sound Audio report in its 2021 balance sheet? 1 Loss contingency _______________________ 2 Loss _________ million 3 Liability _________ million Prepare any journal entry needed. Journal entry worksheet Record the liability on product recall. Transaction General Journal Debit Credit 1…Sound Audio manufactures and sells audio equipment for automobiles. Engineers notified management in December 2021 of a circuit flaw in an amplifier that poses a potential fire hazard. An intense investigation indicated that a product recall is virtually certain, estimated to cost the company $10.5 million. The fiscal year ends on December 31.Required:1. Should this loss contingency be accrued, only disclosed, or neither?2. What loss, if any, should Sound Audio report in its 2021 income statement?3. What liability, if any, should Sound Audio report in its 2021 balance sheet?4. Prepare any journal entry needed.Sound Audio manufactures and sells audio equipment for automobiles. Engineers notified management in December 2024 of a circuit flaw in an amplifier that poses a potential fire hazard. An intense investigation indicated that a product recall is virtually certain, estimated to cost the company $2 million. The fiscal year ends on December 31. Required: Should this loss contingency be accrued, only disclosed, or neither? What loss, if any, should Sound Audio report in its 2024 income statement? What liability, if any, should Sound Audio report in its 2024 balance sheet? Prepare any journal entry needed.
- Sound Audio manufactures and sells audio equipment for automobiles. Engineers notified management in December 2021 of a circuit flaw in an amplifier that poses a potential fire hazard. An intense investigation indicated that a product recall is virtually certain, estimated to cost the company $2 million. The fiscal year ends on December 31.Required:1. Should this loss contingency be accrued, only disclosed, or neither? Explain.2. What loss, if any, should Sound Audio report in its 2021 income statement?3. What liability, if any, should Sound Audio report in its 2021 balance sheet?4. Prepare any journal entry needed.3) The client purchased raw material that was received just before year-end. The purchase was recorded based on its estimated value. The invoice was not received until February 5, 2021, and the cost was substantially different than was estimated4) On February 15, 2021, the civil court decided that Client Company must pay compensation loss due to defect product sold to their customer. lawsuits started in court since June 20205) On February 20, 2021, a major of client customer which has large amount of outstanding A/R suddenly fill for bankruptcy6) On April 1, 2021 fire rage accident destroy client warehouse and the loss were materialQuestions:a. Indicate type 1 subsequent event, type 2 subsequent event, or not subsequent event. What kinds of action, client need to do? Adjust, disclose, or no need to do adjust/disclose for every point form 1) to 6). Provide the reason why it should be adjusted or disclose or neither. (30%)b. What effect on auditors’ independent report if client refused…On January 15, 2021, an explosion occurred at the Aizel Company plant causing extensive property damage to area buildings. By March 1, 2022, no claims hand been asserted against the entity but management and counsel concluded that it is likely that claims will be asserted and that it is reasonably possible that the entity will be responsible for damages. Management believed that P1,250,000 would be a reasonable estimate of the liability. The entity's P5,000,000 comprehensive public liability policy has a P250.000 deductible clause. The financial statements for 2021 were issued on March 31, 2022. What amount of loss from lawsuit should be reported in the income statement for 2021?
- The following items pertain to possible provisions: A company self-insures for floods. That is, it pays no insurance but is liable to replace assets lost through flood damage. No losses have been incurred this year, but there have been $195,000 of losses in most other years, and the company is concerned that there might well be $485,000 of losses next year, evening out the pattern. A company offers a three-year guarantee over parts and labour for products sold to ensure that parts work as expected. There were no payments this year, and only 5% of products sold this year are expected to need repairs in the next year. The cost of this work would be in the range of $125,000. A company has been sued by a customer for $1,130,000. The customer slipped on ice coming out of the store and claims the store did not put salt down or clear the stairs properly. The company’s lawyer has indicated that there is a 10% chance that the company will lose the lawsuit based on past history. The company,…Mama Mo Na Tita Ko Corporation, a manufacturer of cleaning products, is preparing annual financial statements at December 31, 2022. Because of a recently proven health hazard in one of its cleaning products, the government has clearly indicated its intention of having the company recall all cans of this paint sold in the last three months. The management estimates that this recall would cost P800,000. What accounting recognition, if any, should be accorded this situation? Statement 1: Recognize expense of P800,000 and liability of P5,800,000. Statement 2: Disclosed P800,000 as contingent liability in the notes to financial statement. Both statements are correct Both statements are incorrect Only statement 2 is correct Only statement 1 is correctOn Nov. 25, 2017, an explosion occurred at Stefan company causing extensive property damage to area buildings. By March 10, 2018, claims had been asserted against the entity. The management and counsel concluded that it is probable that the entity would be responsible for damages, and that 3,500,000 is a reasonable estimate of the liability. Stefan’s 10,000,000 comprehensive public policy has a 500,000 deductible clause. The financial statements were issued on March 31, 2018. What amount of liability from lawsuit should be reported on December 31, 2017?
- Consider the following situations and determine (1) which type of liability should be recognized (specific account), and (2) how much should be recognized in the current period (year). A. A business depreciates a building with a book value of $12,000, using straight-line depreciation, no salvage value, and a remaining useful life of six years. B. An organization has a line of credit with a supplier. The company purchases $35,500 worth of inventory on credit. Terms of purchase are 3/20, n/60. C. An employee earns $1,000 in pay and the employer withholds $46 for federal income tax. D. A customer pays $4,000 in advance for legal services. The lawyer has previously recognized 30% of the services as revenue. The remainder is outstanding.Pending Damage Suit Disclosure On December 15, 2019, a truck driver for Cork Transfer Company negligently rounded a curve that was also a bridge covering several local merchant shops. The truck jumped the guardrail and fell 30 feet onto one of the shops, causing highly flammable chemicals in the truck to explode. Although by February 22, 2020 (the date on which Corks financial statements for 2019 are issued), no claims had been filed against Cork, the companys legal counsel believes it is probable that some will be filed in the future. However, counsel does not believe it can reasonably estimate the amount of these potential claims. Required: Explain the accounting treatment, if any, Cork should give the contingent loss occurring from the wreck in the December 31, 2019, financial statements.Consider the following situations and determine (1) which type of liability should be recognized (specific account), and (2) how much should be recognized in the current period (year). A business depreciates a building with a book value of $12,000, using straight-line depreciation, no salvage value, and a remaining useful life of six years. An organization has a line of credit with a supplier. The company purchases $35,500 worth of inventory on credit. Terms of purchase are 3/20, n/60. An employee earns $1,000 in pay and the employer withholds $46 for federal income tax. A customer pays $4,000 in advance for legal services. The lawyer has previously recognized 30% of the services as revenue. The remainder is outstanding.