17Due to an unknown product defect, a company must recall its product and reimburse its customers. It was determined this event is probable, and the amount can be reasonably estimated, but the companycannot determine the exact date these payments will be made.How should the company account for this obligation?Record the amount as an increase to an asset account and increase to a liability account.Only disclose the amount as the date of payment is not set.Do not record or disclose this obligation.Record the amount as an increase to an expense account and an increase to a liability account.

Thus, when a company is aware of a probable obligation-its having to recall some of its defective…

Answered: 17 Due to an unknown product defect, a…

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter4: Balance Sheet: Presenting And Analyzing Resources And Financing

Section: Chapter Questions

Problem 9Q

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46
36. In the following liabilities, the payee is known, however, the amount may have to be estimated. Which is the exception? a. provision for restructuring costs b. provision for decommissioning costs c. provision for staff bonus d. liability on customer loyalty credits
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.
Financial Accounting = 5 marks How should a company account for returns of defective products under a lifetime warranty program? a) Record as contingent liability only b) Recognize provision based on historical return patterns c) Wait until actual returns occur d) Create a deferred revenue account
61
does a cancellation of a service affect the companys balance sheet or book value?
15 One of the following is not a transaction deemed sale and is therefore not subject to VAT. Which is it? Group of answer choices Distribution or transfer to creditors of goods or properties of a VAT-registered person in payment of debt. Transfer, use or consumption not in the ordinary course of business of goods or properties originally intended for sale or for use in the course of business. Consignment of goods if actual sale is not made within 30 days following the date such goods were consigned. Distribution or transfer to stockholders or investors of goods or properties as share in the profits of a VAT-registered person.
Which of the following statement/s are incorrect?I. An enterprise should not recognize a contingent liabilityII. The amount recognized as a provision should be the best estimate of the expenditure required to settle the present obligation at the end of the reporting period.III. A provision is a liability of certain timing and amount.IV. Accruals are liabilities to pay for goods or services that have been received or supplied but have not been paid. I and IV only III only I, II and IV II and IV only
The 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.
Which of the following statements regarding liabilities is false? Multiple Choice A liability is a probable future payment of assets or services that a company is presently obligated to make as a result of past transactions or events. Potential future wages to be paid to employees should be recorded as liabilities. Long-term liabilities are obligations due after one year, or the company’s operating cycle if longer. Liabilities are classified as either current or long term. Liabilities can involve uncertainty in whom to pay.
Which of the following statements are true? а. Revenue should be generally recognized when the company satisfies the performance obligation. O b. Revenue should be generally recognized when cash is received. С. Revenue should be generally recognized when production is completed. O d. Revenue should be generally recognized when the warranty expires.
7 What will a contingency note contain? Review Later A circumstance where a company may have a liability A disclosure of future contracts to be performed A disclosure of all future commitments of the company A set of criteria required to be able to recognize revenue

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