19th Edition

ISBN: 9781947172685

Author: OpenStax

Publisher: OpenStax College

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Textbook Question

Chapter 12, Problem 8EB

Following is the unadjusted trial balance for Pens Unlimited on December 31, 2017.

Chapter 12, Problem 8EB, Following is the unadjusted trial balance for Pens Unlimited on December 31, 2017. You are also

You are also given the following supplemental information: A pending lawsuit, claiming $4,200 in damages, is considered likely to favor the plaintiff and can be reasonably estimated. Pens Unlimited believes a customer may win a lawsuit for $5,000 in damages, but the outcome is only reasonably possible to occur. Pens Unlimited records warranty estimates on the basis of 2% of annual sales revenue.

A. Using the unadjusted trial balance and supplemental information for Pens Unlimited, construct an income statement for the year ended December 31, 2017. Pay particular attention to expenses resulting from contingencies.

B. Construct a balance sheet, for December 31, 2017, from the given unadjusted trial balance, supplemental information, and income statement for Pens Unlimited. Pay particular attention to contingent liabilities.

C. Prepare any necessary contingent liability note disclosures for Pens Unlimited. Only give one to three sentences for each contingency note disclosure.

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

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Chapter 12, Problem 7EB

Chapter 12, Problem 9EB

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Chapter 12 Solutions

Principles of Accounting Volume 1

Ch. 12 - Which of the following is not considered a current...Ch. 12 - A company regularly purchases materials from a...Ch. 12 - The following is selected financial data from...Ch. 12 - A ski company takes out a $400,000 loan from a...Ch. 12 - Nido Co. has a standing agreement with a supplier...Ch. 12 - A client pays cash in advance for a magazine...Ch. 12 - Lime Co. incurs a $4,000 note with equal principal...Ch. 12 - Which of the following best describes a contingent...Ch. 12 - Blake Department Store sells television sets with...Ch. 12 - What accounts are used to record a contingent...

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