What makes product warranties considered as contingent liabilities?Also, what Generally Accepted Accounting Principle supports how accountants record contingent liabilities? QUESTION 14 pointsSavedWould 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).BIParagraphA VI.x' X2 8+,ABC VArial10pt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

Contingent Liability is a liabilty that may arise in outcome of future uncertain amount.

Answered: What makes product warranties…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

What makes product warranties considered as contingent liabilities?

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

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

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Consumer Purchasing Strategies and Legal Protection

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions