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Question:67 During 2014, Leucothea Co. became involved in a legal dispute with a supplier. At December 31, 2014, Leucothea's legal advisor believed that an unfavorable outcome was probable. A reasonable estimate of resulting monetary damages is $100,000, but could be as much as $200,000. Leucothea has legal liability insurance coverage that limits their loss to $80,000. After the 2014 financial statements were issued, Leucothea agreed to settle the case for $125,000. What amount of accrued liability should Leucothea have reported in its December 31, 2014 balance sheet? The December 31, 2016 (pre-closing) adjusted trial balance for Sunshine Enterprises follows. Calculate the total current liabilities. Account Title Debits Credits Accounts payable 90,000 Accounts receivable Accumulated depreciation - equipment 1,70,000 2,60,000 Capital stock 4,90,000 Cash 26,000 Cost of goods sold 4,80,000 Depreciation expense 60,000 Equipment 7,00,000 Interest expense 4,000 Inventory 1,50,000 Note payable (due in six months) 60,000 Rent expense Retained earnings 30,000 62,000 Salaries and wages payable Sales revenue 8,000 7,70,000 Salaries expense 1,20,000 TOTALS 17,40,000 17,40,000

Question:67 During 2014, Leucothea Co. became involved in a legal dispute with a supplier. At December 31, 2014, Leucothea's legal advisor believed that an unfavorable outcome was probable. A reasonable estimate of resulting monetary damages is $100,000, but could be as much as $200,000. Leucothea has legal liability insurance coverage that limits their loss to $80,000. After the 2014 financial statements were issued, Leucothea agreed to settle the case for $125,000. What amount of accrued liability should Leucothea have reported in its December 31, 2014 balance sheet? The December 31, 2016 (pre-closing) adjusted trial balance for Sunshine Enterprises follows. Calculate the total current liabilities. Account Title Debits Credits Accounts payable 90,000 Accounts receivable Accumulated depreciation - equipment 1,70,000 2,60,000 Capital stock 4,90,000 Cash 26,000 Cost of goods sold 4,80,000 Depreciation expense 60,000 Equipment 7,00,000 Interest expense 4,000 Inventory 1,50,000 Note payable (due in six months) 60,000 Rent expense Retained earnings 30,000 62,000 Salaries and wages payable Sales revenue 8,000 7,70,000 Salaries expense 1,20,000 TOTALS 17,40,000 17,40,000

Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter8: Current And Contingent Liabilities
Section: Chapter Questions
Problem 13MCQ
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Question:67 During 2014, Leucothea Co. became involved in a legal dispute with a supplier. At December 31, 2014, Leucothea's legal advisor believed that an unfavorable outcome was probable. A reasonable estimate of resulting monetary damages is $100,000, but could be as much as $200,000. Leucothea has legal liability insurance coverage that limits their loss to $80,000. After the 2014 financial statements were issued, Leucothea agreed to settle the case for $125,000. What amount of accrued liability should Leucothea have reported in its December 31, 2014 balance sheet? The December 31, 2016 (pre-closing) adjusted trial balance for Sunshine Enterprises follows. Calculate the total current liabilities. Account Title Debits Credits Accounts payable 90,000 Accounts receivable Accumulated depreciation - equipment 1,70,000 2,60,000 Capital stock 4,90,000 Cash 26,000 Cost of goods sold 4,80,000 Depreciation expense 60,000 Equipment 7,00,000 Interest expense 4,000 Inventory 1,50,000 Note payable (due in six months) 60,000 Rent expense Retained earnings 30,000 62,000 Salaries and wages payable Sales revenue 8,000 7,70,000 Salaries expense 1,20,000 TOTALS 17,40,000 17,40,000
Transcribed Image Text:Question:67 During 2014, Leucothea Co. became involved in a legal dispute with a supplier. At December 31, 2014, Leucothea's legal advisor believed that an unfavorable outcome was probable. A reasonable estimate of resulting monetary damages is $100,000, but could be as much as $200,000. Leucothea has legal liability insurance coverage that limits their loss to $80,000. After the 2014 financial statements were issued, Leucothea agreed to settle the case for $125,000. What amount of accrued liability should Leucothea have reported in its December 31, 2014 balance sheet? The December 31, 2016 (pre-closing) adjusted trial balance for Sunshine Enterprises follows. Calculate the total current liabilities. Account Title Debits Credits Accounts payable 90,000 Accounts receivable Accumulated depreciation - equipment 1,70,000 2,60,000 Capital stock 4,90,000 Cash 26,000 Cost of goods sold 4,80,000 Depreciation expense 60,000 Equipment 7,00,000 Interest expense 4,000 Inventory 1,50,000 Note payable (due in six months) 60,000 Rent expense Retained earnings 30,000 62,000 Salaries and wages payable Sales revenue 8,000 7,70,000 Salaries expense 1,20,000 TOTALS 17,40,000 17,40,000
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