Contingent liability : It is a potential liability of a company that depends on a future event. It is the result of an uncertain event. For paying a contingent liability, some event should happen in the future. The recording of contingent liability is based on the following likelihoods of the event occur in future: Remote Reasonably possible Probable To state : the major business units of Incorporation A.

Question

Want to see the full answer?

Answer 1

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 10, Problem 10.5CP

a)

To determine

Contingent liability: It is a potential liability of a company that depends on a future event. It is the result of an uncertain event. For paying a contingent liability, some event should happen in the future. The recording of contingent liability is based on the following likelihoods of the event occur in future:

Remote

Reasonably possible

Probable

To state: the major business units of Incorporation A.

b)

To determine

To explain: the reason for Incorporation A requiring so many pages of contingency liabilities.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Visit the website of the US Securities and Exchange Commission (SEC) https://www.sec.gov/edgar/searchedgar/companysearch.html Search for the latest Form 10-K for a company you would like to analyze. Submit a short memo that A. Includes the name of the company you have chosen.B. Review the company’s end-of-period Balance Sheet to determine the following: Total assets Total liabilities Total equity C. Compare beginning and ending Assets totals and discuss the amount of change.D. Compare beginning and ending Liabilities totals and discuss the amount of change.E. Compare beginning and ending Equity totals and discuss the amount of change. Please provide a link to the company’s Form 10-K to allow accurate verification of your answers.

Analysis of Financial StatementsThere was a bit of concern about one of Big Rock’s newer entities – Big Rock PavingCompany. Management wants you to review the two financial statements below and giveyour analysis of the company’s performance.Big Rock Paving CompanyAssetsLiabilitiesCurrent Assets: Current Liabilities:Cash 500,000 Accounts Payable 700,000Accounts Receivable 300,000 Notes Payable 500,000Inventory 800,000Total Current Assets 1,300,000 Total Current Liabilities 1,200,000Fixed Assets: Owners’ Equity:Property, Plant & Equipment 2,200,000 Common Stock ($1 Par) 600,000Less: Accumulated Depreciation 600,000 Capital Surplus 100,000Net Fixed Assets 1,600,000 Retained Earnings 100,000Total Assets 2,900,000 Total Owners’ Equity 800,000Total Liabilities and Owners’Equity2,900,000Big Rock Paving CompanyIncome Statement for Year Ending December 31, 2021Sales 3,400,000Less: Cost of Goods Sold 2,700,000Less: Administrative Expenses 700,000Less Depreciation 682,000Earnings Before…

Match the following terms or phrases in (a–g) with the explanations in 1–8. Terms or phrases may be used more than once. Question 11 options: Current assets/Current liabilities Probable likelihood and estimable liability Measures the “instant” debt-paying ability of a company Current assets – Current liabilities (Cash + Temporary investments + Accounts receivable)/Current liabilities Cash + Temporary investments + Accounts receivable Probable likelihood of a liability but cannot be estimated Remote contingent liability Reasonably possible likelihood of a liability 1. Current ratio 2. Working capital 3. Quick assets 4. Quick ratio 5. Record an accrual and disclose in the notes to the financial statements 6. Disclose only in notes to financial statements 7. No disclosure needed in notes to financial statements

Answer 2

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 10, Problem 10.5CP

a)

To determine

Contingent liability: It is a potential liability of a company that depends on a future event. It is the result of an uncertain event. For paying a contingent liability, some event should happen in the future. The recording of contingent liability is based on the following likelihoods of the event occur in future:

Remote

Reasonably possible

Probable

To state: the major business units of Incorporation A.

b)

To determine

To explain: the reason for Incorporation A requiring so many pages of contingency liabilities.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 10, Problem 10.5CP

a)

To determine

Contingent liability: It is a potential liability of a company that depends on a future event. It is the result of an uncertain event. For paying a contingent liability, some event should happen in the future. The recording of contingent liability is based on the following likelihoods of the event occur in future:

Remote

Reasonably possible

Probable

To state: the major business units of Incorporation A.

b)

To determine

To explain: the reason for Incorporation A requiring so many pages of contingency liabilities.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 10, Problem 10.5CP

a)

To determine

Contingent liability: It is a potential liability of a company that depends on a future event. It is the result of an uncertain event. For paying a contingent liability, some event should happen in the future. The recording of contingent liability is based on the following likelihoods of the event occur in future:

Remote

Reasonably possible

Probable

To state: the major business units of Incorporation A.

b)

To determine

To explain: the reason for Incorporation A requiring so many pages of contingency liabilities.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 10, Problem 10.5CP

a)

To determine

Contingent liability: It is a potential liability of a company that depends on a future event. It is the result of an uncertain event. For paying a contingent liability, some event should happen in the future. The recording of contingent liability is based on the following likelihoods of the event occur in future:

Remote

Reasonably possible

Probable

To state: the major business units of Incorporation A.

b)

To determine

To explain: the reason for Incorporation A requiring so many pages of contingency liabilities.

Answer 6

Chapter 10, Problem 10.5CP

a)

To determine

Contingent liability: It is a potential liability of a company that depends on a future event. It is the result of an uncertain event. For paying a contingent liability, some event should happen in the future. The recording of contingent liability is based on the following likelihoods of the event occur in future:

Remote

Reasonably possible

Probable

To state: the major business units of Incorporation A.

Answer 7

Chapter 10, Problem 10.5CP

a)

To determine

Contingent liability: It is a potential liability of a company that depends on a future event. It is the result of an uncertain event. For paying a contingent liability, some event should happen in the future. The recording of contingent liability is based on the following likelihoods of the event occur in future:

Remote

Reasonably possible

Probable

To state: the major business units of Incorporation A.

Answer 8

b)

To determine

To explain: the reason for Incorporation A requiring so many pages of contingency liabilities.

Answer 9

b)

To determine

To explain: the reason for Incorporation A requiring so many pages of contingency liabilities.

Answer 10

Expert Solution & Answer

Answer 11

Expert Solution & Answer

Answer 12

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 13

Ch. 10 - Does a discounted note payable provide credit...Ch. 10 - Employees are subject to taxes withheld from their...Ch. 10 - Prob. 3DQ Ch. 10 - Prob. 4DQ Ch. 10 - Prob. 5DQ Ch. 10 - Prob. 6DQ Ch. 10 - To match revenues and expenses properly, should...Ch. 10 - Prob. 8DQ Ch. 10 - When should the liability associated with a...Ch. 10 - Prob. 10DQ

Solution Summary: The author explains that Incorporation A manufactures and distributes tobacco products and has more than 100 pending cases.

Concept explainers

To explain: the reason for Incorporation A requiring so many pages of contingency liabilities.

Want to see the full answer?

Chapter 10 Solutions