Contingent liability : It is a potential liability of a company that depends on a future event. It is the result of an uncertain event. For paying a contingent liability, some event should happen in the future. To Explain : The accounting for contingent liabilities.

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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.

Chapter 11, Problem 11.1CTCA

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Contingent liability: It is a potential liability of a company that depends on a future event. It is the result of an uncertain event. For paying a contingent liability, some event should happen in the future.

To Explain: The accounting for contingent liabilities.

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Fairfield Company's payroll costs for the most recent month are summarized here: Item Hourly labor unges Description 920 hours $27 per hour 190 hours for Job 101 340 hours for Job 102 Factory supervision Production engineer Factory Janitorial work Selling, general, and administrative salaries Total payroll costs Required: 390 hours for Job 103 Total Cost $ 5,130 9,180 10,530 $ 24,840 4,350 7,100 1,200 8,800 $ 46,298 1. & 2. Prepare the journal entries for payroll and to apply manufacturing overhead to production. The company applies manufacturing overhead to products at a predetermined rate of $54 per direct labor hour Note: If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. View transaction list Journal entry worksheet A B Record Fairfield Company's payroll costs to be paid at a later date. Note Enter debits before credits. S.No Date 1 Account Title Debit Credit

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L.L. Bean operates two factories that produce its popular Bean boots (also known as "duck boots") in its home state of Maine. Since L.L. Bean prides itself on manufacturing its boots in Maine and not outsourcing, backorders for its boots can be high. In 2014, L.L. Bean sold about 450,000 pairs of the boots. At one point during 2014, it had a backorder level of about 100,000 pairs of boots. L.L. Bean can manufacture about 2,200 pairs of its duck boots each day with its factories running 24/7. In 2015, L.L. Bean expects to sell more than 500,000 pairs of its duck boots. As of late November 2015, the backorder quantity for Bean Boots was estimated to be about 50,000 pairs. Question: Now assume that 5% of the L.L. Bean boots are returned by customers for various reasons. L. Bean has a 100% refund policy for returns, no matter what the reason. What would the journal entry be to accrue L.L. Bean's sales returns for this one pair of boots?

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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.

Chapter 11, Problem 11.1CTCA

To determine

Contingent liability: It is a potential liability of a company that depends on a future event. It is the result of an uncertain event. For paying a contingent liability, some event should happen in the future.

To Explain: The accounting for contingent liabilities.

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Answer 3

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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.

Chapter 11, Problem 11.1CTCA

To determine

Contingent liability: It is a potential liability of a company that depends on a future event. It is the result of an uncertain event. For paying a contingent liability, some event should happen in the future.

To Explain: The accounting for contingent liabilities.

Expert Solution & Answer

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Answer 4

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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.

Chapter 11, Problem 11.1CTCA

To determine

Contingent liability: It is a potential liability of a company that depends on a future event. It is the result of an uncertain event. For paying a contingent liability, some event should happen in the future.

To Explain: The accounting for contingent liabilities.

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Answer 5

Chapter 11, Problem 11.1CTCA

To determine

Contingent liability: It is a potential liability of a company that depends on a future event. It is the result of an uncertain event. For paying a contingent liability, some event should happen in the future.

To Explain: The accounting for contingent liabilities.

Answer 6

Chapter 11, Problem 11.1CTCA

To determine

Contingent liability: It is a potential liability of a company that depends on a future event. It is the result of an uncertain event. For paying a contingent liability, some event should happen in the future.

To Explain: The accounting for contingent liabilities.

Answer 7

Chapter 11, Problem 11.1CTCA

To determine

Contingent liability: It is a potential liability of a company that depends on a future event. It is the result of an uncertain event. For paying a contingent liability, some event should happen in the future.

To Explain: The accounting for contingent liabilities.

Answer 8

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Answer 11

Ch. 11 - Prob. 1QC Ch. 11 - On January 1, 2016, a business borrowed 18,000 on...Ch. 11 - A company sells 180,000 (selling price) of goods...Ch. 11 - Prob. 4QC Ch. 11 - Prob. 5QC Ch. 11 - Prob. 6QC Ch. 11 - Prob. 7QC Ch. 11 - Vega Company expects to pay a 4% bonus on net...Ch. 11 - Prob. 9QC Ch. 11 - Prob. 10QC

Contingent liability : It is a potential liability of a company that depends on a future event. It is the result of an uncertain event. For paying a contingent liability, some event should happen in the future. To Explain : The accounting for contingent liabilities.

Solution Summary: The author explains the accounting for contingent liabilities based on the likelihoods of the event occurring in the future.

Concept explainers

Contingent liability: It is a potential liability of a company that depends on a future event. It is the result of an uncertain event. For paying a contingent liability, some event should happen in the future.

To Explain: The accounting for contingent liabilities.

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Chapter 11 Solutions

Contingent liability : It is a potential liability of a company that depends on a future event. It is the result of an uncertain event. For paying a contingent liability, some event should happen in the future. To Explain : The accounting for contingent liabilities.

Solution Summary: The author explains the accounting for contingent liabilities based on the likelihoods of the event occurring in the future.

Concept explainers

Contingent liability: It is a potential liability of a company that depends on a future event. It is the result of an uncertain event. For paying a contingent liability, some event should happen in the future. To Explain: The accounting for contingent liabilities.

Want to see the full answer?

Chapter 11 Solutions

Contingent liability: It is a potential liability of a company that depends on a future event. It is the result of an uncertain event. For paying a contingent liability, some event should happen in the future.

To Explain: The accounting for contingent liabilities.