On December 31, 20x1, EXCEL Company recognized the following provisions:Dec. 31, 20x1 Warranty expense200,000Dec. 31, 20x1Estimated warranty obligationProbable loss on litigationEstimated liability on pending litigation400,000200,000400,000In 20x2, EXCEL incurred $260,000 in discharging its warranty obligation and settled the pending lawsuit forP360,000. How much is the net effect of the settlements of the provisions on profit or loss in 20x2?a. 20,000 increasec. 60,000 decreaseb. 20,000 decreased. 0

The warranty expenses are related to the expenses incurred to discharge the warranty related to the…

On December 31, 20x1, EXCEL Company recognized the following provisions: Dec. 31, 20x1 Warranty expense 200,000 Dec. 31, 20x1 Estimated warranty obligation Probable loss on litigation 400,000 Estimated liability on pending litigation 200,000 400,000 In 20x2, EXCEL incurred $260,000 in discharging its warranty obligation and settled the pending lawsuit for $360,000. How much is the net effect of the settlements of the provisions on profit or loss in 20x2? a. 20,000 increase c. 60,000 decrease b. 20,000 decrease d. 0

On December 31, 20x1, EXCEL Company recognized the following provisions: Dec. 31, 20x1 Warranty expense 200,000 Dec. 31, 20x1 Estimated warranty obligation Probable loss on litigation 400,000 Estimated liability on pending litigation 200,000 400,000 In 20x2, EXCEL incurred $260,000 in discharging its warranty obligation and settled the pending lawsuit for $360,000. How much is the net effect of the settlements of the provisions on profit or loss in 20x2? a. 20,000 increase c. 60,000 decrease b. 20,000 decrease d. 0

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

On December 31, 20x1, EXCEL Company recognized the following provisions:
Dec. 31, 20x1 Warranty expense
200,000
Dec. 31, 20x1
Estimated warranty obligation
Probable loss on litigation
Estimated liability on pending litigation
400,000
200,000
400,000
In 20x2, EXCEL incurred $260,000 in discharging its warranty obligation and settled the pending lawsuit for
P360,000. How much is the net effect of the settlements of the provisions on profit or loss in 20x2?
a. 20,000 increase
c. 60,000 decrease
b. 20,000 decrease
d. 0

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