Contingent liability is a likely obligation dependent on future events arising out of past transactions, such as a liability on account of a lawsuit depending on the outcome of the lawsuit. Accounting for contingent liability is based on the estimated future obligation if the event occurs. The entry to record the contingent liability based on the given separate situations.

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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.

Chapter 11, Problem 17E

To determine

Concept Introduction: Contingent liability is a likely obligation dependent on future events arising out of past transactions, such as a liability on account of a lawsuit depending on the outcome of the lawsuit. Accounting for contingent liability is based on the estimated future obligation if the event occurs. The entry to record the contingent liability based on the given separate situations.

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An item that is not a contingent liability is: A. premium offer to customers for labels or box tops. B. accommodation endorsement on customer note. C. additional compensation that may be payable on a dispute now being arbitrated. D. note receivable discounted. A loss contingency that should be accrued is: A. note receivable discounted. B. pending lawsuit C. tax in dispute D. estimated claim under a service warranty on new products sold.

Which of the following statements is incorrect? A A bank providing a loan to the entity is not a related party transaction. An entity should neither accrue nor disclose when it cosigned a mortgage note on the home of its president B guaranteeing the indebtedness in the event that the president should default. The entity considers the likelihood to default to be remote. Post-employment benefit is part of the compensation of key management personnel. An entity is not required to disclose if it has a common director with another entity.

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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.

Chapter 11, Problem 17E

To determine

Concept Introduction: Contingent liability is a likely obligation dependent on future events arising out of past transactions, such as a liability on account of a lawsuit depending on the outcome of the lawsuit. Accounting for contingent liability is based on the estimated future obligation if the event occurs. The entry to record the contingent liability based on the given separate situations.

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Answer 3

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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.

Chapter 11, Problem 17E

To determine

Concept Introduction: Contingent liability is a likely obligation dependent on future events arising out of past transactions, such as a liability on account of a lawsuit depending on the outcome of the lawsuit. Accounting for contingent liability is based on the estimated future obligation if the event occurs. The entry to record the contingent liability based on the given separate situations.

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Answer 4

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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.

Chapter 11, Problem 17E

To determine