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MyLab Accounting with Pearson eText -- Access Card -- for Financial Accounting
12th Edition
ISBN: 9780134727677
Author: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.
Publisher: PEARSON
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Question
Chapter 8, Problem 8.56EIC
1.
To determine
The reason for not disclosing the contingent liability by Company.
2.
To determine
To Identify: The parties involved in the decision and the potential consequences to each.
3. a
To determine
To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints
3. b
To determine
To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints
3. c
To determine
To Analyze: The issue of whether to report contingent liabilities from lawsuits from the following standpoints
4.
To determine
The impact of future changes in accounting standards, both at the U.S. level and the international level, likely have on the issue of disclosure of loss contingencies.
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Students have asked these similar questions
A company is required to report a liability on its balance sheet when it expects to lose a lawsuit and the amount of the expected loss can be reasonably estimated (FASB) Conversely, a company is prohibited from reporting a receivable in its balance sheet when it expected to win a lawsuit even though that is probable and the amount of the expected gain can be reasonably estimated.
Does the expected loss meet the definition of a liability found in the conceptual framework? Explain
Does the expected gain meet the definition of an asset found in the conceptual framework? Explain
Why do you think accountants treat these seemingly similar situations differently? Explain
1. Define and briefly discuss a loss
contingency.
2. What are the similarities and differences of
the accounting treatment and financial
statement reporting of a loss contingency
between U.S. GAAP and IFRS?
3. As a manager, would you like to report a
debt as a current or non-current liability if you
had a choice? Explain. And under what kind of
circumstances could a short-term obligation
be reported as a non-current liability?
2. Which is a valid statement
regarding recognition of
liabilities? *
a. A non-interest bearing note is
initially recognized at face value.
b. A provision should not be
O recognized for future operating
losses.
c. For accumulating compensated
absences, an entity should
recognize the expense and related
liability during the period the
absences are incurred by the
employees.
d. The estimated future costs of
supplying awards for customer
loyalty program shall be recognized
as an expense in the period the
award credits are availed of by
customers.
Chapter 8 Solutions
MyLab Accounting with Pearson eText -- Access Card -- for Financial Accounting
Ch. 8 - All of the following are reported as current...Ch. 8 - Prob. 2QCCh. 8 - Prob. 3QCCh. 8 - What is accounts payable turnover? a.Purchases on...Ch. 8 - Prob. 5QCCh. 8 - Nicholas Corporation accrues the interest expense...Ch. 8 - Phoebe Corporation signed a six-month note payable...Ch. 8 - Prob. 8QCCh. 8 - Backpack Co. was organized to sell a single...Ch. 8 - Prob. 10QC
Ch. 8 - Potential liabilities that depend on future events...Ch. 8 - A contingent liability should be recorded in the...Ch. 8 - Prob. 8.1ECCh. 8 - Prob. 8.1SCh. 8 - Prob. 8.2SCh. 8 - Prob. 8.3SCh. 8 - Prob. 8.4SCh. 8 - (Learning Objective 3: Account for a short-term...Ch. 8 - Prob. 8.6SCh. 8 - (Learning Objective 4: Report warranties in the...Ch. 8 - (Learning Objective 4: Account for accrued...Ch. 8 - (Learning Objective 5: Interpret a companys...Ch. 8 - Prob. 8.10AECh. 8 - Prob. 8.11AECh. 8 - LO 3 (Learning Objective 3: Purchase inventory,...Ch. 8 - (Learning Objective 3: Record note payable...Ch. 8 - (Learning Objective 3: Account for a short-term...Ch. 8 - Prob. 8.15AECh. 8 - Prob. 8.16AECh. 8 - Prob. 8.17AECh. 8 - Prob. 8.18AECh. 8 - Prob. 8.19AECh. 8 - Prob. 8.20BECh. 8 - Prob. 8.21BECh. 8 - LO 3 (Learning Objective 3: Purchase inventory,...Ch. 8 - Prob. 8.23BECh. 8 - Prob. 8.24BECh. 8 - Prob. 8.25BECh. 8 - Prob. 8.26BECh. 8 - Prob. 8.27BECh. 8 - (Learning Objectives 1, 2, 3, 4: Report current...Ch. 8 - Prob. 8.29BECh. 8 - Prob. 8.30QCh. 8 - For the purpose of classifying liabilities as...Ch. 8 - Prob. 8.32QCh. 8 - Prob. 8.33QCh. 8 - Prob. 8.34QCh. 8 - Prob. 8.35QCh. 8 - Prob. 8.36QCh. 8 - Prob. 8.37QCh. 8 - Prob. 8.38QCh. 8 - Prob. 8.39QCh. 8 - Prob. 8.40QCh. 8 - Prob. 8.41QCh. 8 - Prob. 8.42QCh. 8 - Prob. 8.43QCh. 8 - Group A LO 1, 2, 3, 4 (Learning Objective 1, 2, 3,...Ch. 8 - Prob. 8.45APCh. 8 - LO 1, 2, 3, 4 (Learning Objectives 1, 2, 3, 4:...Ch. 8 - LO 4, 5 (Learning Objectives 4, 5: Account for...Ch. 8 - Group B LO 1, 2, 3, 4 (Learning Objectives 1, 2,...Ch. 8 - Prob. 8.49BPCh. 8 - Prob. 8.50BPCh. 8 - Prob. 8.51BPCh. 8 - Prob. 8.52CEPCh. 8 - Prob. 8.53SCCh. 8 - Prob. 8.54DCCh. 8 - Prob. 8.55DCCh. 8 - Prob. 8.56EICCh. 8 - Prob. 1FFCh. 8 - Prob. 1GP
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- According to FASB, when should a company journalize a contingent liability? A. Do not journalize the contingent liability under any circumstances. B. Journalize the contingent liability, even though you will probably win the lawsuit. C. Journalize the contingent liability only if the amount can be estimated and the probability of loss is reasonably possible. D. Journalize the contingent liability if it is probable that the loss will occur, and the amount of the loss can be reasonably estimated. thanks for help appareciated it rajtir harrow_forwardThe following items represent various types of liabilities. Identify if the following independent situations should be (a) recorded in the financial statements, (b) disclosed in a footnote in the financial statements, or (c) neither. ______ 1. A manufacturing company is sued for alleged product liability. The company’s attorney does not feel that the suit will result in liability to the company, but a loss is possible. If adversely adjudicated, the liability would be material. ______ 2. Alpha has sold products to Sparkle Jewelers, a retailer that sold the products to customers. The manufacturer’s warranty offers replacement of the product if it is found to be defective within 90 days of the sale to the consumer. Historically, 0.06% of the products are returned for replacement. ______ 3. A customer has filed a lawsuit for a minor amount against Sparkle Jewelers. Sparkle’s attorneys have reviewed the case and have found that many similar cases have never been awarded to the plaintiff.arrow_forwardWhich of the following statements is incorrect? O a. If the occurrence of the obligation is in doubt, there is no need to account for the liability. O b. A liability is a present obligation, arising from past transaction, which probably has to be paid. O c. Damages awarded by court against the business may be ignored because it will be appealed. O d. A liability has to be accounted for at the best reliable estimate even if the amount is not certain.arrow_forward
- Please explain in detail. . Unsecured creditors: have rights to be paid amounts owed, but the rights may have to be enforced through the courts face significant risk, and accordingly unsecured credit is very unusual have no rights in the event that the debtor defaults only have the recourse of severing business ties with the defaulting debtorarrow_forwardA firm decides to sell a pool of receivables to a factor with recourse (i.e. the firm selling the receivables must make payment to the buyer of the receivables in the event that the party that originally owes the money does not pay). Under Current U.S. GAAP, which of the following statements is (are) true: A. The firm selling the receivables is prohibited from reporting any Gain or Loss on the sale. B. Any cash received from such a transaction must be reported in the Financing Section of the Statement of Cash Flows. C. Both Statements A & B are true. D. None of the above statements are true.arrow_forwardEconomic consequences of accounting standard-setting means:a. standard-setters must give fi rst priority to ensuring that companies do not suffer any adverseeffect as a result of a new standard.b. standard-setters must ensure that no new costs are incurred when a new standard is issued.c. the objective of financial reporting should be politically motivated to ensure acceptance by thegeneral public.d. accounting standards can have detrimental impacts on the wealth levels of the providers of financialinformation.arrow_forward
- What is a contingency? Why are contingencies important to users of financial statements? What are the criteria for recording contingencies? Should companies record a liability for threatened litigation? Why or why not?arrow_forwardThe accounting assumption or principle of __________________ is being violated if a company that is a party to major litigation that it may lose decides not to include the information in its financial statements because of the risk of it having a negative impact on the company’s share price. a. Going concern. b. Historical cost. c. Expense recognition. d. Full disclosure.arrow_forward4. It is an event that creates a legal or constructive obligation that results in an enterprise having no realistic alternatives to settling that obligation. a. Main event b. Obligating event c. Subsequent event d. Accountable event 5. A contingent liability a. Is commonly associated with operating loss carry-forwards b. Has the most probable value of zero but may require payment if a given future event occurs. c. Definitely exists as a liability but its amount or due date is indeterminate d. Is not disclosed in the financial statements 6. Which of the following contingencies should be generally recognized on the balance sheet when the occurrence of the contingent event is probable and its amount can be reasonably estimated a. NO - gain; NO - loss b. YES - gain; YES - loss c. YES - gain; NO - loss d. NO - gain; YES - lossarrow_forward
- Deciding to trade in financial products because of access to non-material non-public information. A.Would ve regarded as engaging in information-based manipulation. B.Is unacceptable conduct as it will breach CFA standards. C.Would likely be a breach of the Corporations Act in Australia. D.Is a acceptable as it would be consistent with the use of mosaic theory. In accordance with CFA standard I(B) members must: A.May accept gifts or bonuses from clients while exercising professional judgement to ensure independence and objectivity is not threatened. B.Always accept gifts or bonuses from clients. C.Never accept gifts or bonuses from clients. D.Accept gifts not only if it is in the member of employ’s interest to do so.arrow_forwardEconomic consequences of accounting standard-setting means: a. standard-setters must give first priority to ensuring that companies do not suffer any adverse effect as a result of a new standard. b. standard-setters must ensure that no new costs are incurred when a new standard is issued. c. the objective of financial reporting should be politically motivated to ensure acceptance by the general public. d. accounting standards can have detrimental impacts on the wealth levels of the providers of financial information.arrow_forwardWhich of the following is NOT a contingent liability? a. Pending law suit for property damage b. Product warranty c. Discounted note receivable d. Pending law suit for slanderarrow_forward
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