HORNGREN'S FINANCIAL & MANGERIAL ACCOUNT
7th Edition
ISBN: 9780136505273
Author: MILLER-NOBLES
Publisher: PEARSON
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Chapter 11, Problem 9QC
To determine
- Remote
- Reasonably possible
- Probable
To identify: The correct reporting place of contingent liability.
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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
disclosed in the footnotes.
disclosed in the footnotes, with ranges of the potential loss.
recorded as a journal entry, as well as disclosed in the footnotes.
No disclosure is required.
Axel Brick Company has a lawsuit pending from a customer claiming $100,000 in damages. Axel's attorney advises the likelihood the customer will win the lawsuit is reasonably probable. GAAP requires at a minimum that this contingent liability be...
A. Disclosed in a note to the financial statements
B. Record as a liability on the balance sheet
C. Record as an expense on the income statement
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?
Chapter 11 Solutions
HORNGREN'S FINANCIAL & MANGERIAL ACCOUNT
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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- Dwane Johnson owes Verizon Wireless $1100. Johnson offers Verizon $500 in lieu of the original $1000 debt and Verizon accepts. Settling a claim by the debtor offering to pay less than the creditor claims to be owed is an example of A. Fraudulent Misrepresentation B. an accord and satisfaction. C.promissory estoppel. D. a release. Give correct answer with proper explanationsarrow_forwardAXE Co. is the defendant in a lawsuit. AXE reasonably estimates that this pending lawsuit will result in damages of $99,000. It is probable that AXE will lose the case. What should AXE do? a. Record a liability c. Have no disclosure b. Disclose in notesarrow_forwardWilhelm Company prepares its financial statements according to International Accounting Standards (IFRS). It recently estimated that it has a 55 percent chance of losing a lawsuit. Assuming Wilhelm can reliably estimate the amount it would pay if it loses the lawsuit, it should. a. Accrue a liability for the lawsuit. b. Disclose the matter in the notes to the financial statements but not accrue a liability for the lawsuit. c. Make no mention of the lawsuit in the financial statements or notes. d. None of the above.arrow_forward
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