What makes product warranties considered as contingent liabilities? Also, what Generally Accepted Accounting Principle supports how accountants record contingent liabilities?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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What makes product warranties considered as contingent liabilities?

Also, what Generally Accepted Accounting Principle supports how accountants record contingent liabilities?

QUESTION 1
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Would you rather borrow $10,000 by issuing (a) a 90-day, 15 percent note or (b) a 90-day, discounted note discounted at 15 percent?
Why or why not?
Explain your answer based on what you have read about discounted notes.
For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac).
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田田田网
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I would choose to borrow the $10,000. Becasue, if you did the 15 precent note it would be discounted by 15% and you wouldn't get the full ammount. You would would have to do $10,000/ 15% interest rate 90 days / 360 days = $375.
You would be cutting yourself short on money by only receiving $9625 instead of the full amoount of $10,000 and the intrest still coming out to be $375 either way you go about it.
84 WORDS POWERED BY TINY
Transcribed Image Text:QUESTION 1 4 points Saved Would you rather borrow $10,000 by issuing (a) a 90-day, 15 percent note or (b) a 90-day, discounted note discounted at 15 percent? Why or why not? Explain your answer based on what you have read about discounted notes. For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). B I Paragraph A V I. x' X2 8 +, ABC V Arial 10pt 田田田网 <> Ť (1) I would choose to borrow the $10,000. Becasue, if you did the 15 precent note it would be discounted by 15% and you wouldn't get the full ammount. You would would have to do $10,000/ 15% interest rate 90 days / 360 days = $375. You would be cutting yourself short on money by only receiving $9625 instead of the full amoount of $10,000 and the intrest still coming out to be $375 either way you go about it. 84 WORDS POWERED BY TINY
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