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In: Accounting

The Total Liabilities for Ozium Corporation as of the Balance Sheet date of December 31, 2020...

The Total Liabilities for Ozium Corporation as of the
Balance Sheet date of December 31, 2020 are:
Salaries & Wages Payable         5,500
Long-Term Debt    300,000 ($250,000 is due for payment in 2021)
Notes Payable    750,000 ($250,000 is due for payment after December 31, 2021)
Unearned Revenue      16,500
Accounts Payable      25,000
In addition, the company is involve in two lawsuits
that are expected to be closed by March 31, 2021.
The first lawsuit is for $150,000 and the lawyers
predicts this to be reasonable possible. The other
lawsuit is for $350,000 and the lawyer predicts this
to be Probable and can be reasonably estimated.
What is the total Current Liabilities?

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Expert Solution

Calculation of Current Liability
Particulars $
Salaries & Wages Payable 5500
Long-Term Debt 250000 (Note-1)
Notes Payable 500000 (Note-2)
Unearned Revenue 16500
Accounts Payable 25000
Lawsuit 350000 (Note-3)
Total 1147000
Note-1: Laibilities which are expected to be setteled with in one year are considered as cureent liability hence $250000 is considered as current liability.
Note-2: $250000 are expected to be setteled after one year that's why considered as Non Current liability.
Note-3: Record a contingent liability when it is probable that a loss will occur, and you can reasonably estimate the amount of the loss.
Note-4 : Disclose the existence of a contingent liability in the notes accompanying the financial statements if the liability is reasonably possible but not probable, or if the liability is probable, but you cannot estimate the amount. “Reasonably possible” means that the chance of the event occurring is more than remote but less than likely.That's why lawsuit of $150000 is not included in current liability.

ekkarill92 answered 2 years ago
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