Question

In: Accounting

Analyzing Contingencies and Assessing Liabilities The following independent situations represent various types of liabilities. Analyze each...

Analyzing Contingencies and Assessing Liabilities

The following independent situations represent various types of liabilities. Analyze each situation and indicate which of the following is the proper accounting treatment for each company: (1) record in accounts, (2) disclose in a financial statement footnote, or (3) neither record nor disclose.

a. A stockholder has filed a lawsuit against Clinch Corporation. Clinch’s attorneys have reviewed the facts of the case. Their review revealed that similar lawsuits have never resulted in a cash award and it is highly unlikely that this lawsuit will either.

b. Foster Company signed a 60-day, 10% note when it purchased (and received) items from another company.

c. The Department of Environment Protection notifies Shevlin Company that a state where it has a plant is filing a lawsuit for groundwater pollution against Shevlin and another company that has a plant adjacent to Shevlin’s plant. Test results have not identified the exact source of the pollution. Shevlin’s manufacturing process often produces by-products that can pollute ground

d. Sloan Company manufactured and sold products to a retailer that sold the products to consumers. The Sloan Company warranty offers replacement of the product if it is found to be defective within 90 days of the sale to the consumer. Historically, 1.2% of the products are returned for replacement.

Solutions

Expert Solution

Please Give Review Also

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

Analyzing Contingent and Other Liabilities The following independent situations represent various types of liabilities. Analyze each...
Analyzing Contingent and Other Liabilities The following independent situations represent various types of liabilities. Analyze each situation and indicate which of the following is the proper accounting treatment for the company: (a) record a liability on the balance sheet, (b) disclose the liability in a financial statement footnote, or (c) neither record nor disclose any liability. A stockholder has filed a lawsuit against Windsor Corporation. Windsor's attorneys have reviewed the facts of the case. Their review revealed that similar lawsuits...
Analyzing Contingent and Other Liabilities The following independent situations represent various types of liabilities. Analyze each...
Analyzing Contingent and Other Liabilities The following independent situations represent various types of liabilities. Analyze each situation and indicate which of the following is the proper accounting treatment for the company: (a) record a liability on the balance sheet, (b) disclose the liability in a financial statement footnote, (c) neither record nor disclose any liabilities. 1) A stockholder has filed a lawsuit against Windsor Corporation. Clinch's attorneys have reviewed the facts of the case. Their review revealed that similar lawsuits...
(Warranties and Loss Contingencies) The following two independent situations involve loss contingencies. Part 1: Benson Company...
(Warranties and Loss Contingencies) The following two independent situations involve loss contingencies. Part 1: Benson Company sells two products, Grey and Yellow. Each carries a 1-year warranty. 1.Product Grey—Product warranty costs, based on past experience, will normally be 1% of sales. 2.Product Yellow—Product warranty costs cannot be reasonably estimated because this is a new product line. However, the chief engineer believes that product warranty costs are likely to be incurred How should Benson report the estimated product warranty costs for...
Analyze the following independent situations. Required: For each situation, state the likelihood of a future event...
Analyze the following independent situations. Required: For each situation, state the likelihood of a future event and state how the contingency will be reported. Company A estimates it will have to pay $85,000 in warranty repairs next year. Company B is being sued by a customer. Company B's attorneys feel that this is a frivolous lawsuit and there is very little chance that the customer will win. Company C co- signed a note payable for Company D. Company D is...
The following are independent situations. Analyze each situation and provide your assessment of the potential resolution...
The following are independent situations. Analyze each situation and provide your assessment of the potential resolution of each scenario, including potential liability for the auditor. The audit firm, Smith and Jones, LLP, received a subpoena for its documentation related to the audit of Sanders Corporation’s financial statements. The firm has refused to respond, alleging that the documentation is considered privileged communication between the firm and its client. John Doe, CPA is a defendant in a lawsuit alleging that Doe should...
The following items represent various material contingencies of Luge Co. at December 31, Year 5, and...
The following items represent various material contingencies of Luge Co. at December 31, Year 5, and events subsequent to December 31, Year 5, but prior to the issuance of the Year 5 financial statements. For each item, select from the option list provided the correct reporting requirement. Each choice may be used once, more than once, or not at all. a) Disclosure Only b) Accrual and Disclosure c) Neither accrual nor disclosure d) Accrual of the minimum amount of range...
Each of the following are independent situations. For each of the situations, use the 5-step process...
Each of the following are independent situations. For each of the situations, use the 5-step process to determine when revenue can be recognized by indicating for each of the situations: 1. If a contract exists 2. The performance obligations in the contract 3. The transaction price in the contract 4. How the transaction price is allocated to the performance obligations. 5. When revenue is recognized Situation A: Freddy Flyer books travel on an airline on June 2, 2027. He pays...
Analyzing and Determining the Amount of a Liability For each of the following situations, indicate the...
Analyzing and Determining the Amount of a Liability For each of the following situations, indicate the liability amount, if any, which is reported on the balance sheet of Hirst, Inc., at December 31, 2018. a. Hirst owes $110,000 at year-end 2018 for its inventory purchases. b. Hirst agreed to purchase a $28,000 drill press in January 2019. c. During November and December of 2018, Hirst sold products to a firm with a 90-day warranty against product failure. Estimated 2019 costs...
The following situations are independent of each other and related to the activities and events of...
The following situations are independent of each other and related to the activities and events of Global Berhad in the year 2018. The financial year end for the company is 31 December. (i) In the past, the company expensed borrowing costs on construction of its factory. The company has changed its policy this year and now capitalises as it is incurred. In 2017 accounts, borrowing costs expensed was RM2,500,000 and this year’s borrowing costs incurred was RM3,800,000. The factory is...
Compute 2018 taxable income in each of the following independent situations.
Compute 2018 taxable income in each of the following independent situations.a. Drew and Meg, ages 40 and 41, respectively, are married and file a joint return. In addition to four dependent children, they have AGI of $125,000 and itemized deductions of $27,000.b. Sybil, age 40, is single and supports her dependent parents, who live with her. Sybil also supports her grandfather, who lives in a nursing home. She has AGI of $80,000 and itemized deductions of $8,000.c. Scott, age 49,...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT