Cornerstones of Financial Accounting
4th Edition
ISBN: 9781337690881
Author: Jay Rich, Jeff Jones
Publisher: Cengage Learning
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Chapter 8, Problem 55BE
To determine
Concept introduction:
A contingent liability is a future liability that is dependent upon happening or not happening of an uncertain future event. For example: Amount to be paid if the case running in the court is lost. A contingent liability should be recorded in the financial statement if it is probable and its reasonable amount can estimated, otherwise it should be disclosed in the notes to the financial statement.
To indicate:
The recording of the contingent liability.
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We discussed contingent liabilities in class.
Describe the conditions for when a contingent liability must be recorded through a journal entry, when it should be disclosed in the footnotes and when neither a journal entry nor disclosure is required?
Assume that Mojito Corporation is sued by Dulcinea, Inc. for $1,000,000. Mojito’s attorneys believe that it is probable that the company will lose the suit and have to pay between $300,000 and $400,000 to Dulcinea. Based on your answer to a, what should Mojito do?
Suits for damages totaling P8,000,000 are pending against Freddy. The company lawyers advised that losses on such suits are not probable. However, company policy has mandated authorization that provision be made in the accounts for any possible loss up to P5,000,000. The suit was settled in 2021 and payment of P7,000,000 was made.
Required: Prepare the entry to record the contingent liability
Swell Company has a lawsuit pending from a customer claiming damages of $100,000. Swell’s attorney advises that the likelihood the customer will win is remote. GAAP requires at a minimum that this contingent liability be
a. disclosed in the footnotes.
b. disclosed in the footnotes, with ranges of potential loss.
c. recorded as a journal entry, as well as disclosed in the footnotes.
d. No disclosure is required.
Chapter 8 Solutions
Cornerstones of Financial Accounting
Ch. 8 - Prob. 1DQCh. 8 - Prob. 2DQCh. 8 - Prob. 3DQCh. 8 - Prob. 4DQCh. 8 - Prob. 5DQCh. 8 - Prob. 6DQCh. 8 - Prob. 7DQCh. 8 - Prob. 8DQCh. 8 - Prob. 9DQCh. 8 - Prob. 10DQ
Ch. 8 - Prob. 11DQCh. 8 - Prob. 12DQCh. 8 - Prob. 13DQCh. 8 - Prob. 14DQCh. 8 - Prob. 15DQCh. 8 - Prob. 16DQCh. 8 - Prob. 17DQCh. 8 - Prob. 18DQCh. 8 - Prob. 19DQCh. 8 - Prob. 20DQCh. 8 - Prob. 1MCQCh. 8 - Prob. 2MCQCh. 8 - Prob. 3MCQCh. 8 - Refer to the information for Kinsella Seed above....Ch. 8 - Prob. 5MCQCh. 8 - Prob. 6MCQCh. 8 - Prob. 7MCQCh. 8 - Prob. 8MCQCh. 8 - Prob. 9MCQCh. 8 - When a credit is made to federal income taxes...Ch. 8 - Prob. 11MCQCh. 8 - Prob. 12MCQCh. 8 - Prob. 13MCQCh. 8 - Prob. 14MCQCh. 8 - Prob. 15MCQCh. 8 - Prob. 16MCQCh. 8 - Prob. 17MCQCh. 8 - Which of the following transactions would cause...Ch. 8 - Issuing Notes Payable On June 30, Carmean Inc....Ch. 8 - Notes Payable Rogers Machinery Company borrowed...Ch. 8 - Prob. 21CECh. 8 - Accrued Interest On March 1, the Garner...Ch. 8 - Prob. 23CECh. 8 - Prob. 24CECh. 8 - Sales Tax Cobb Baseball Bats sold 45 bats for $50...Ch. 8 - Payroll Taxes Hernandez Builders has a gross...Ch. 8 - Prob. 27CECh. 8 - Prob. 28CECh. 8 - Unearned Sales Revenue Brand Landscaping offers a...Ch. 8 - Prob. 30CECh. 8 - Prob. 31CECh. 8 - Prob. 32CECh. 8 - Liquidity Ratios NWAs financial statements contain...Ch. 8 - Prob. 34CECh. 8 - Accounts Payable On May 18, Stanton Electronics...Ch. 8 - Accounts and Notes Payable On February 15, Barbour...Ch. 8 - Issuing Notes Payable On September 30, Bello...Ch. 8 - Notes Payable Renchen Company, which manufactures...Ch. 8 - Accrued Interest On July 1, Brimley Company issued...Ch. 8 - Accrued Interest On May 1, the Garnett Corporation...Ch. 8 - Accrued Property Taxes Annual property taxes...Ch. 8 - Accrued Income Taxes Nolan Inc. had taxable income...Ch. 8 - Prob. 43BECh. 8 - Accrued Wages A company employs a part-time staff...Ch. 8 - Prob. 45BECh. 8 - Prob. 46BECh. 8 - Prob. 47BECh. 8 - Prob. 48BECh. 8 - Payroll Taxes Sids Grocery Store has 100 employees...Ch. 8 - Prob. 50BECh. 8 - Payroll Taxes Its the Tooth Dental works to...Ch. 8 - Unearned Sales Revenue Curtiss Carpet Cleaning...Ch. 8 - Unearned Rent Revenue Mannion Property Management...Ch. 8 - Contingent Liabilities Many companies provide...Ch. 8 - Prob. 55BECh. 8 - Prob. 56BECh. 8 - Prob. 57BECh. 8 - Liquidity Ratios JRLs financial statements contain...Ch. 8 - Prob. 59BECh. 8 - Prob. 60ECh. 8 - Recording Various Liabilities Glenview Hardware...Ch. 8 - Recording Various Liabilities Plymouth Electronics...Ch. 8 - Reporting Liabilities Morton Electronics had the...Ch. 8 - Accounts Payable Sleek Ride, a company providing...Ch. 8 - Accrued Liabilities Charger Inc. had the following...Ch. 8 - Accrued Liabilities Thornwood Tile had the...Ch. 8 - Prob. 67ECh. 8 - Payroll Accounting and Discussion of Labor Costs...Ch. 8 - Unearned Revenue Jennifers Landscaping Services...Ch. 8 - Prob. 70ECh. 8 - Warranties Eds Athletics sells bicycles and other...Ch. 8 - Ratio Analysis Intel Corporation provided the...Ch. 8 - Payable Transactions Richmond Company engaged in...Ch. 8 - Payroll Accounting Jet Enterprises has the...Ch. 8 - Note Payable and Accrued Interest Fairbome Company...Ch. 8 - Prob. 76APSACh. 8 - Prob. 77APSACh. 8 - Prob. 78APSACh. 8 - Prob. 79APSACh. 8 - Ratio Analysis Consider the following information...Ch. 8 - Payable Transactions Daniels Company engaged in...Ch. 8 - Payroll Accounting McLaughlin Manufacturing has...Ch. 8 - Note Payable and Accrued Interest Ellsworth...Ch. 8 - Prob. 76BPSBCh. 8 - Prob. 77BPSBCh. 8 - Prob. 78BPSBCh. 8 - Prob. 79BPSBCh. 8 - Ratio Analysis Consider the following information...Ch. 8 - Prob. 81.1CCh. 8 - Prob. 81.2CCh. 8 - Prob. 81.3CCh. 8 - Prob. 82.1CCh. 8 - Prob. 82.2CCh. 8 - Prob. 82.3CCh. 8 - Prob. 83.1CCh. 8 - Prob. 83.2CCh. 8 - Prob. 83.3CCh. 8 - Prob. 83.4CCh. 8 - Prob. 83.5CCh. 8 - Prob. 83.6CCh. 8 - Prob. 83.7CCh. 8 - Prob. 83.8CCh. 8 - Prob. 83.9CCh. 8 - Prob. 84.1CCh. 8 - Prob. 84.2CCh. 8 - Prob. 84.3CCh. 8 - Prob. 84.4CCh. 8 - Prob. 84.5CCh. 8 - Comparative Analysis: Under Armour, Inc., versus...Ch. 8 - Prob. 84.7CCh. 8 - Prob. 84.8CCh. 8 - Prob. 85.1CCh. 8 - Prob. 85.2CCh. 8 - Prob. 85.3C
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