Required information[The following information applies to the questions displayed below.]Top Sound International designs and sells high-end stereo equipment for auto and home use. Engineers notifiedmanagement in December 2018 of a circuit flaw in an amplifier that poses a potential fire hazard. Further investigationindicates that a product recall is probable, estimated to cost the company $2.7 million. The fiscal year ends on December31.Required:1. Should this contingent liability be reported, disclosed in a note only, or neither?ReportedDisclosed in a note onlyNeither

Contingent liability: This is an uncertain obligation which might be incurred on a future date as a…

Answered: Required information [The following…

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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The Laura Company has the following errors on its books as of December 31, 2020. The books for 2020 have not yet been closed. a. In 2020, fully depreciated equipment (with no residual value) that originally cost $8,000 was sold for $700 as scrap. The company credited the $700 proceeds to Equipment. b. On January 1, 2019, the company recorded the purchase of equipment in exchange for a three-year, noninterest-bearing note payable in the amount of $10,000. Interest rates were then 8%, but no recognition was made of this fact. The present value of $1 at 8% for three periods is 0.7938. (Ignore depreciation.) Required: Prepare journal entries to correct these errors at December 31, 2020. Ignore income taxes.
Bridgeport Machinery Co. manufactures equipment to a very high standard of quality; however, it must still provide a warranty for each unit sold, and there are instances where the machines do require repair after they have been put into use. Bridgeport started in business in 2023, and as the controller, you are trying to determine whether to use the assurance-type or service-type warranty approach to measure the warranty obligation. You would like to show the company president how this choice would affect the financial statements for 2023, and advise him of the better choice, keeping in mind that the service-type approach is consistent with IFRS, and that there are plans to take Bridgeport public in a few years. You have determined that sales on account for the year were 1,040 units, with a selling price of $2,700 each. Ignore any cost of goods sold. The warranty is for two years, and the estimated warranty cost averages $180 per machine. Actual costs of servicing warranties for the…
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In 2025, Culver determined that a competitor's product would make the New Age Piano obsolete and the patent worthless by December 31, 2026. Prepare all journal entries required in 2025 and 2026. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry before credit entry.) Date Account Titles and Explanation Debit Credit
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