Financial Statements: Financial statements are condensed summary of transactions communicated in the form of reports for the purpose of decision making. The financial statements reports, and shows the financial status of the business. The financial statements consist of the balance sheet, income statement, statement of retained earnings , and the cash flow statement. Liabilities: Liabilities are referred to as the obligations of the business towards the creditors for operating the business. Liabilities may be short-term or long-term depending upon the time duration in which it is paid back to the creditors. Liabilities are classified in to current liabilities and long-term liabilities. Current liabilities are those liabilities which need to be paid within a year. Long-term liabilities are those liabilities that have longer maturity period. To provide: Four components of T’s current liabilities.

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Answer 1

Question

Chapter 13, Problem 1CCTC

(1)(a)

To determine

Financial Statements: Financial statements are condensed summary of transactions communicated in the form of reports for the purpose of decision making. The financial statements reports, and shows the financial status of the business. The financial statements consist of the balance sheet, income statement, statement of retained earnings, and the cash flow statement.

Liabilities: Liabilities are referred to as the obligations of the business towards the creditors for operating the business. Liabilities may be short-term or long-term depending upon the time duration in which it is paid back to the creditors. Liabilities are classified in to current liabilities and long-term liabilities. Current liabilities are those liabilities which need to be paid within a year. Long-term liabilities are those liabilities that have longer maturity period.

To provide: Four components of T’s current liabilities.

b.

To determine

Whether current assets are sufficient to cover current liabilities.

c.

To determine

To provide: Reason for company avoiding low current ratio.

(2)(a)

To determine

To find out: Change in gift card liability between January 30, 2016 and January 31, 2015.

b.

To determine

Effect on the gift card liability due to given circumstances.

(3)(a)

To determine

The approach for accruing losses for litigation claims associated with the data breach.

b.

To determine

To prepare: Journal entry to record T’s recognition of new expenses associated with the data breach litigation for the fiscal year ended January 30, 2016.

c.

To determine

To prepare: Journal entry to record T’s reduction of its liability associated with the data breach litigation for the fiscal year ended January 30, 2016.

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E 13-20 Various transactions involving contingencies LO13-5, LO13-6 The following selected transactions relate to contingencies of Classical Tool Makers, Inc., which began operations in July 2021. Classical's fiscal year ends on December 31. Financial statements are issued in April 2022. Required: Prepare the year-end entries for any amounts that should be recorded as a result of each of these contingencies and indicate whether a disclosure note is indicated. 1. Classical's products carry a one-year warranty against manufacturer's defects. Based on previous experience, warranty costs are expected to approximate 4% of sales. Sales were $2 million (all credit) for 2021. Actual warranty expenditures were $30,800 and were recorded as warranty expense when incurred. 2. Although no customer accounts have been shown to be uncollectible, Classical estimates that 2% of credit sales will eventually prove uncollectible.

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Answer 2

Question

Chapter 13, Problem 1CCTC

(1)(a)

To determine

Financial Statements: Financial statements are condensed summary of transactions communicated in the form of reports for the purpose of decision making. The financial statements reports, and shows the financial status of the business. The financial statements consist of the balance sheet, income statement, statement of retained earnings, and the cash flow statement.

Liabilities: Liabilities are referred to as the obligations of the business towards the creditors for operating the business. Liabilities may be short-term or long-term depending upon the time duration in which it is paid back to the creditors. Liabilities are classified in to current liabilities and long-term liabilities. Current liabilities are those liabilities which need to be paid within a year. Long-term liabilities are those liabilities that have longer maturity period.

To provide: Four components of T’s current liabilities.

b.

To determine

Whether current assets are sufficient to cover current liabilities.

c.

To determine

To provide: Reason for company avoiding low current ratio.

(2)(a)

To determine

To find out: Change in gift card liability between January 30, 2016 and January 31, 2015.

b.

To determine

Effect on the gift card liability due to given circumstances.

(3)(a)

To determine

The approach for accruing losses for litigation claims associated with the data breach.

b.

To determine

To prepare: Journal entry to record T’s recognition of new expenses associated with the data breach litigation for the fiscal year ended January 30, 2016.

c.

To determine

To prepare: Journal entry to record T’s reduction of its liability associated with the data breach litigation for the fiscal year ended January 30, 2016.

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Answer 3

Question

Chapter 13, Problem 1CCTC

(1)(a)

To determine

Financial Statements: Financial statements are condensed summary of transactions communicated in the form of reports for the purpose of decision making. The financial statements reports, and shows the financial status of the business. The financial statements consist of the balance sheet, income statement, statement of retained earnings, and the cash flow statement.

Liabilities: Liabilities are referred to as the obligations of the business towards the creditors for operating the business. Liabilities may be short-term or long-term depending upon the time duration in which it is paid back to the creditors. Liabilities are classified in to current liabilities and long-term liabilities. Current liabilities are those liabilities which need to be paid within a year. Long-term liabilities are those liabilities that have longer maturity period.

To provide: Four components of T’s current liabilities.

b.

To determine

Whether current assets are sufficient to cover current liabilities.

c.

To determine

To provide: Reason for company avoiding low current ratio.

(2)(a)

To determine

To find out: Change in gift card liability between January 30, 2016 and January 31, 2015.

b.

To determine

Effect on the gift card liability due to given circumstances.

(3)(a)

To determine

The approach for accruing losses for litigation claims associated with the data breach.

b.

To determine

To prepare: Journal entry to record T’s recognition of new expenses associated with the data breach litigation for the fiscal year ended January 30, 2016.

c.

To determine

To prepare: Journal entry to record T’s reduction of its liability associated with the data breach litigation for the fiscal year ended January 30, 2016.

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Answer 4

Question

Chapter 13, Problem 1CCTC

(1)(a)

To determine

Financial Statements: Financial statements are condensed summary of transactions communicated in the form of reports for the purpose of decision making. The financial statements reports, and shows the financial status of the business. The financial statements consist of the balance sheet, income statement, statement of retained earnings, and the cash flow statement.

Liabilities: Liabilities are referred to as the obligations of the business towards the creditors for operating the business. Liabilities may be short-term or long-term depending upon the time duration in which it is paid back to the creditors. Liabilities are classified in to current liabilities and long-term liabilities. Current liabilities are those liabilities which need to be paid within a year. Long-term liabilities are those liabilities that have longer maturity period.

To provide: Four components of T’s current liabilities.

b.

To determine

Whether current assets are sufficient to cover current liabilities.

c.

To determine

To provide: Reason for company avoiding low current ratio.

(2)(a)

To determine

To find out: Change in gift card liability between January 30, 2016 and January 31, 2015.

b.

To determine

Effect on the gift card liability due to given circumstances.

(3)(a)

To determine

The approach for accruing losses for litigation claims associated with the data breach.

b.

To determine

To prepare: Journal entry to record T’s recognition of new expenses associated with the data breach litigation for the fiscal year ended January 30, 2016.

c.

To determine

To prepare: Journal entry to record T’s reduction of its liability associated with the data breach litigation for the fiscal year ended January 30, 2016.

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Answer 5

Chapter 13, Problem 1CCTC

(1)(a)

To determine

Financial Statements: Financial statements are condensed summary of transactions communicated in the form of reports for the purpose of decision making. The financial statements reports, and shows the financial status of the business. The financial statements consist of the balance sheet, income statement, statement of retained earnings, and the cash flow statement.

Liabilities: Liabilities are referred to as the obligations of the business towards the creditors for operating the business. Liabilities may be short-term or long-term depending upon the time duration in which it is paid back to the creditors. Liabilities are classified in to current liabilities and long-term liabilities. Current liabilities are those liabilities which need to be paid within a year. Long-term liabilities are those liabilities that have longer maturity period.

To provide: Four components of T’s current liabilities.

b.

To determine

Whether current assets are sufficient to cover current liabilities.

c.

To determine

To provide: Reason for company avoiding low current ratio.

(2)(a)

To determine

To find out: Change in gift card liability between January 30, 2016 and January 31, 2015.

b.

To determine

Effect on the gift card liability due to given circumstances.

(3)(a)

To determine

The approach for accruing losses for litigation claims associated with the data breach.

b.

To determine

To prepare: Journal entry to record T’s recognition of new expenses associated with the data breach litigation for the fiscal year ended January 30, 2016.

c.

To determine

To prepare: Journal entry to record T’s reduction of its liability associated with the data breach litigation for the fiscal year ended January 30, 2016.

Answer 6

Chapter 13, Problem 1CCTC

(1)(a)

To determine

Financial Statements: Financial statements are condensed summary of transactions communicated in the form of reports for the purpose of decision making. The financial statements reports, and shows the financial status of the business. The financial statements consist of the balance sheet, income statement, statement of retained earnings, and the cash flow statement.

Liabilities: Liabilities are referred to as the obligations of the business towards the creditors for operating the business. Liabilities may be short-term or long-term depending upon the time duration in which it is paid back to the creditors. Liabilities are classified in to current liabilities and long-term liabilities. Current liabilities are those liabilities which need to be paid within a year. Long-term liabilities are those liabilities that have longer maturity period.

To provide: Four components of T’s current liabilities.

Answer 7

Chapter 13, Problem 1CCTC

(1)(a)

To determine

Financial Statements: Financial statements are condensed summary of transactions communicated in the form of reports for the purpose of decision making. The financial statements reports, and shows the financial status of the business. The financial statements consist of the balance sheet, income statement, statement of retained earnings, and the cash flow statement.

Liabilities: Liabilities are referred to as the obligations of the business towards the creditors for operating the business. Liabilities may be short-term or long-term depending upon the time duration in which it is paid back to the creditors. Liabilities are classified in to current liabilities and long-term liabilities. Current liabilities are those liabilities which need to be paid within a year. Long-term liabilities are those liabilities that have longer maturity period.

To provide: Four components of T’s current liabilities.

Answer 8

b.

To determine

Whether current assets are sufficient to cover current liabilities.

Answer 9

b.

To determine

Whether current assets are sufficient to cover current liabilities.

Answer 10

c.

To determine

To provide: Reason for company avoiding low current ratio.

Answer 11

c.

To determine

To provide: Reason for company avoiding low current ratio.

Answer 12

(2)(a)

To determine

To find out: Change in gift card liability between January 30, 2016 and January 31, 2015.

Answer 13

(2)(a)

To determine

To find out: Change in gift card liability between January 30, 2016 and January 31, 2015.

Answer 14

b.

To determine

Effect on the gift card liability due to given circumstances.

Answer 15

b.

To determine

Effect on the gift card liability due to given circumstances.

Answer 16

(3)(a)

To determine

The approach for accruing losses for litigation claims associated with the data breach.

Answer 17

(3)(a)

To determine

The approach for accruing losses for litigation claims associated with the data breach.

Answer 18

b.

To determine

To prepare: Journal entry to record T’s recognition of new expenses associated with the data breach litigation for the fiscal year ended January 30, 2016.

Answer 19

b.

To determine

To prepare: Journal entry to record T’s recognition of new expenses associated with the data breach litigation for the fiscal year ended January 30, 2016.

Answer 20

c.

To determine

To prepare: Journal entry to record T’s reduction of its liability associated with the data breach litigation for the fiscal year ended January 30, 2016.

Answer 21

c.

To determine

To prepare: Journal entry to record T’s reduction of its liability associated with the data breach litigation for the fiscal year ended January 30, 2016.

Answer 22

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Answer 23

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Answer 24

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Answer 25

Ch. 13 - What are the essential characteristics of...Ch. 13 - Prob. 13.2Q Ch. 13 - Bronson Distributors owes a supplier 100,000 on...Ch. 13 - Bank loans often are arranged under existing lines...Ch. 13 - Prob. 13.5Q Ch. 13 - Prob. 13.6Q Ch. 13 - Salaries of 5,000 have been earned by employees by...Ch. 13 - Prob. 13.8Q Ch. 13 - Prob. 13.9Q Ch. 13 - Prob. 13.10Q

Solution Summary: The author explains that financial statements are condensed summary of transactions communicated in the form of reports for the purpose of decision making.

Concept explainers

Whether current assets are sufficient to cover current liabilities.

To provide: Reason for company avoiding low current ratio.

To find out: Change in gift card liability between January 30, 2016 and January 31, 2015.

Effect on the gift card liability due to given circumstances.

The approach for accruing losses for litigation claims associated with the data breach.

To prepare: Journal entry to record T’s recognition of new expenses associated with the data breach litigation for the fiscal year ended January 30, 2016.

To prepare: Journal entry to record T’s reduction of its liability associated with the data breach litigation for the fiscal year ended January 30, 2016.

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Chapter 13 Solutions