61 Which of the following should be disclosed in the financial statements as a contingentliability? *The entity has accepted a liability prior to the year -end for unfair dismissal of an employee and is to paydamages.O The entity has received a letter from a supplier complaining about a past unpaid invoice.O The entity is involved in a legal case, which it may possibly lose, although this is not probable.O The entity has not yet paid certain claims under sales warranties.

Contingent liability shall be always disclosed in footnotes of the financial statements. It is a…

Answered: Which of the following should be…

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter4: Balance Sheet: Presenting And Analyzing Resources And Financing

Section: Chapter Questions

Problem 9Q

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A certain contingent liability was evaluated at year-end, and considered to have a reasonable possibility of becoming an actual liability. If the accountant decided not to report it in the notes to the financial statement, what effect would this have on the financial reporting of the company? A The liabilities on the balance sheet would be understated B The information about the item would be inadequately disclosed in the notes C The net income of the company would be understated D There would be no effect
An entity has made an error in the balance sheet. During the current year, a bond has been classified as a non-current liability rather than recording it as a current liability. However, the entity will amend this error in the next financial year (Amend as a current liability). Explain how the employees/managers will impact on this error?
The following legal claims exist for a company. Identify the accounting treatment for each claim as either(a) a liability that is recorded or (b) an item described in notes to its financial statements. The company faces a probable loss on a pending lawsuit; the amount is not reasonably estimable.
Darren Company becomes aware of a lawsuit after the date of the financial statements, but before they are issued. A loss and related liability should be reported in the financial statements if the amount can be reasonably estimated, an unfavorable outcome is highly probable, and the court will decide the case within one year. the Darren Company admits guilt. the cause for action occurred during the accounting period covered by the financial statements. the damages appear to be material.
If a company registered with the SEC justifies a change in accounting method as preferable under the circumstances, and the circumstances change, can that company switch back to its prior method of accounting before the change? Why or why not?
(Fundamentals of Revenue Recognition) Respond to the questions related to the following statements.1. A wholly unperformed contract is one in which the company has neither transferred the promised goods or services to the customer nor received, or become entitled to receive, any consideration. Why are these contracts not recorded in the accounts?2. Performance obligations are the unit of account for purposes of applying the revenue recognition standard and therefore determine when and how revenue is recognized. Is this statement correct?3. Elaina Company contracts with a customer and provides the customer with an option to purchase additional goods for free or at a discount. Should Elaina Company account for this option?4. The transaction price is generally not adjusted to reflect the customer’s credit risk, meaning the risk that the customer will not pay the amount to which the entity is entitled to under the contract. Comment on this statement.
All lawsuits in which a company has been named a defendant should be either disclosed in the company's notes to the financial statements, or recognized as a liability on its balance sheet. Group starts True or False
Which is a valid statement regarding recognition of liabilities? a. A non-interest bearing note is initially recognized at face value. b. A provision should not be recognized for future operating losses. c. For accumulating compensated absences, an entity should recognize the expense and related liability during the period the absences are incurred by the employees. d. The estimated future costs of supplying awards for customer loyalty program shall be recognized as an expense in the period the award credits are availed of by customers.
When a contingency comes into existence after the company’s fiscal year-end, why does a liability cannot be accrued?
The following items represent various types of liabilities. Identify if the following independent situations should be (a) recorded in the financial statements, (b) disclosed in a footnote in the financial statements, or (c) neither. ______ 1. A manufacturing company is sued for alleged product liability. The company’s attorney does not feel that the suit will result in liability to the company, but a loss is possible. If adversely adjudicated, the liability would be material. ______ 2. Alpha has sold products to Sparkle Jewelers, a retailer that sold the products to customers. The manufacturer’s warranty offers replacement of the product if it is found to be defective within 90 days of the sale to the consumer. Historically, 0.06% of the products are returned for replacement. ______ 3. A customer has filed a lawsuit for a minor amount against Sparkle Jewelers. Sparkle’s attorneys have reviewed the case and have found that many similar cases have never been awarded to the plaintiff.
If either party fails to perform their contractual obligations according to the contract terms, it will usually result in a breach of contract. The scope and nature of an auditor's contractual obligation to a client ordinarily is established in the: Select one: a. Corporations Act 2001. b. Management letter. c. Client’s constitution. d. Engagement letter.
The following legal claims exist for a company. Identify the accounting treatment for each claim as either(a) a liability that is recorded or (b) an item described in notes to its financial statements. The company (defendant) estimates that a pending lawsuit could result in damages of $500,000; it is reasonably possible that the plaintiff will win the case.

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Which of the following should be disclosed in the financial statements as a contingent liability? * O The entity has accepted a liability prior to the year -end for unfair dismissal of an employee and is to pay