EP HORNGREN'S FINAN.+MGRL.ACCT.-ACCESS
7th Edition
ISBN: 9780136516309
Author: MILLER-NOBLES
Publisher: PEARSON CO
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Question
Chapter 11, Problem 14RQ
To determine
- Remote
- Reasonably possible
- Probable
To identify: The reporting place of “Reasonably possible contingent liability”.
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According to FASB, when should a company journalize a contingent liability?
A.
Do not journalize the contingent liability under any circumstances.
B.
Journalize the contingent liability, even though you will probably win the lawsuit.
C.
Journalize the contingent liability only if the amount can be estimated and the probability of loss is reasonably possible.
D.
Journalize the contingent liability if it is probable that the loss will occur, and the amount of the loss can be reasonably estimated.
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A company is required to report a liability on its balance sheet when it expects to lose a lawsuit and the amount of the expected loss can be reasonably estimated (FASB) Conversely, a company is prohibited from reporting a receivable in its balance sheet when it expected to win a lawsuit even though that is probable and the amount of the expected gain can be reasonably estimated.
Does the expected loss meet the definition of a liability found in the conceptual framework? Explain
Does the expected gain meet the definition of an asset found in the conceptual framework? Explain
Why do you think accountants treat these seemingly similar situations differently? Explain
Huprey Co. is the defendant in the following legal claims. For each of the following claims, indicatewhether Huprey should (a) record a liability, (b) disclose in notes, or (c) have no disclosure. It is reasonably possible that Huprey will lose a pending lawsuit. The loss cannot be estimated.
Chapter 11 Solutions
EP HORNGREN'S FINAN.+MGRL.ACCT.-ACCESS
Ch. 11 - On January 1, 2016, a business borrowed 18,000 on...Ch. 11 - A company sells 180,000 (selling price) of goods...Ch. 11 - Prob. 3QCCh. 11 - Prob. 4QCCh. 11 - Prob. 5QCCh. 11 - Prob. 7QCCh. 11 - Vega Company expects to pay a 4% bonus on net...Ch. 11 - Prob. 9QCCh. 11 - Prob. 10QCCh. 11 - Prob. 1RQ
Ch. 11 - What is a current liability? Provide some examples...Ch. 11 - How is sales tax recorded? Is it considered an...Ch. 11 - How do unearned revenues arise?Ch. 11 - What do short-term notes payable represent?Ch. 11 - Coltrane Company has a 5,000 note payable that is...Ch. 11 - Prob. 7RQCh. 11 - Prob. 8RQCh. 11 - Prob. 9RQCh. 11 - Prob. 10RQCh. 11 - What are the two main controls for payroll?...Ch. 11 - When do businesses record warranty expense, and...Ch. 11 - Prob. 13RQCh. 11 - Prob. 14RQCh. 11 - Prob. 15RQ
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Dwayne Company, a manufacturer of viagra has had a lawsuit filed against it by Vic Incorporated, another manufacturer of viagra. The suit alleges patent right PROBLEM 26-28 Contingencies infringements by Dwayne Company and asks for compensatory damages. For the following likely situations, determine how Dwayne Company should report the information concerning the lawsuit. The choices are: a. Accrue and disclose b. Disclose only Accrue only d. Neither accrue nor disclose combrere 1000 iM 000,000,S9 С. 000 Assume the following independent cases: 1. Dwayne Company's legal counsel estimates that the infringement case may result in a loss of P2,000,000 but considers the likelihood of losing the case as remote. 2. Dwayne Company's legal counsel is convinced that the likelihood of losing the case is probable, the potential amount of the loss is estimated to be no P2,300,000. 3. Dwayne Company's legal counsel estimates that the infringement case may bad result in a loss of P2,400,000 but…arrow_forwardYour business may be at risk if: Select one: a. All of these b. An important contract does not technically exist due to flaws in its creation c. An important contract is not properly designed or legally "created" d. You cannot enlist the help of the courts to enforce an important contract because it does not actually exist in law e. You have no legal recourse because you have no contract with a business which decides to abandon its deal with your company.arrow_forwardAlthough Andersen’s conviction was overturned, do you believe that its employees acted in an ethical manner?arrow_forward
- At one time, it was felt that liability insurance would undermine the tort system, which has as its central theorem the concept that the individual responsible for injuring another should be made to pay for that injury. Do you think the existence of liability insurance causes one to be less careful than he or she might otherwise be?arrow_forwardHow might your answers to the breach of contract litigation and the industrial espionage litigation change if Greenlaw used IFRS? Complete the statement below with regard to the breach-of-contract litigation. If an unfavorable outcome is probable and there exists a range of estimates with no amount in the range more likely than any other amount in the range, IFRS require that ___ of the range be used to measure the liability. Complete the statement below with regard to the industrial espionage litigation. With regard to the industrial espionage litigation, under IFRS Greenlaw would record a debit to ___ in the amount of ___ and a credit to .arrow_forwardNecessary: (a) In the given situation, who took the larger risk: Khaled Assadi or Kyle Lagow. (a) Explain your reasoning by referring to (a). (c) Discuss if GE Energy's claimed conduct is more unethical than Countryside Financial's conduct.arrow_forward
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