BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

Solutions

Chapter
Section
BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
1 views

CONTINUING PROBLEM: FRONT ROW ENTERTAINMENT

Front Row has the following selected balances at the February 28, 2020:

Chapter 8, Problem 85.3C, CONTINUING PROBLEM: FRONT ROW ENTERTAINMENT Front Row has the following selected balances at the

The following information is not reflected in these balances:

a. On February 28, 2020, Front Row accepted delivery of $5,325 of live-performance DVDs from the supplier. Front Row has not yet paid the supplier.

b. On February 1, Front Row purchased $8,000 of equipment for its Chicago Music House venue by issuing a 1-year note payable bearing 10% interest. Front Row has not made any journal entries related to this transaction and should accrue for this at month’s end. ( Note: Round any calculations to the nearest dollar.)

c. Front Row collected $3,745 of advance ticket sales related to an upcoming concert. This price included 7% state sales tax.

d. Amanda Wilson was paid $2,000 in wages to update and monitor the online fan communities. Federal and state unemployment taxes are $16 and $108, respectively. All of Amanda’s wages are subject to Social Security and Medicare at the normal rates. In addition, $375 of federal income taxes were withheld. ( Note: Round any calculations to the nearest dollar.)

In addition, several individuals were injured during a concert in February when they pushed past security and rushed the stage. A personal injury lawsuit was filed against Front Row in the amount of $250,000. After investigating the incident and consultation with legal counsel, it was determined that the likelihood of a judgment against Front Row is remote.

Required:

How should this contingent event be recorded?

To determine

Introduction:

A liability whose time and amount is dependent on a future event is referred to as a contingent liability.

To explain:

Recording of contingent liability.

Explanation

A contingent liability is recorded when:

  1. The future event on which it is dependent is probable.
  2. The amount of contingency can be estimated.

If the future event is not probable or the estimate of contingency cannot be derived then it is not recorded as a contingent liability in the financial statements and can be recorded in the footnotes.

In case of lawsuit, if the judgment of the case is not probable then the company won’t show it is a contingency in balance sheet nor in the footnotes...

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

What are the disadvantages of a partnership?

Foundations of Business (MindTap Course List)

List and describe three popular job-finding Web sites.

Principles of Information Systems (MindTap Course List)

What are the three goals of green computing?

Fundamentals of Information Systems

What is sparse data? Give an example.

Database Systems: Design, Implementation, & Management

What are the tendencies of a force?

Engineering Fundamentals: An Introduction to Engineering (MindTap Course List)

How is knurling different from other lathe operations?

Precision Machining Technology (MindTap Course List)

Explain how a job seeker might use a career planning website. List examples of popular career planning websites...

Enhanced Discovering Computers 2017 (Shelly Cashman Series) (MindTap Course List)

Which terminal emulation protocol is similar to RDP but is open source?

Network+ Guide to Networks (MindTap Course List)